The Corner

Dismal Science

A reader comments on my previous:

John — Much as I hate government subsidies and corporate welfare and despite the mismanagement at GM & Chrysler (and to a lesser extent, Ford), we may not have a choice. Unlike Wall Street, this is the real economy, where actual things are manufactured and sold. An implosion of the domestic auto industry could take us to the edge of a financial depression.

We’re not just talking about engineers and assembly line workers being unemployed. GM spends $85 billion a year on components, and billions more on other equipment and services. It has the largest installed base of personal computers of any company in the world and the Warren Tech Center has supercomputers that are the envy of many governments around the world. If GM folds, it won’t just take down their automotive suppliers, it will hit companies like Microsoft, Dell, Cisco and Autodesk (publishers of CAD software), and hit them hard. As the collapse of the Detroit car companies cascades and ripples through the economy, we could see unemployment reach 15 percent or more. All those folks saying to hell with Detroit have no idea how much their own jobs may be imperiled.

Just about anything concerning manufacturing is involved in building cars. Materials science (including advanced composites), electronics, textiles, coatings, chemicals, you name it, it’s used in making cars. Let those go and we simply won’t have any manufacturing base. Without a solid manufacturing base, we can’t be a functioning country, let alone a superpower. Are we going to buy tanks from China?

One reason why the collapse of the domestic auto industry is such a threat to the general economy is because we haven’t had any kind of industrial policy for the past 40 years or so and we’ve allowed a whole raft of industries to disappear in the face of foreign competition, which also shows the weakness of our trade policies, since most of our trading partners don’t exactly play fairly. Perhaps, had we not let industries producing shoes, apparel, textiles, consumer electronics, appliances, machine tools, etc. diminish or disappear, losing the auto industry wouldn’t be as big of a threat to the general economy, but the loss of those industries has already hollowed out the US manufacturing base and the remnant can’t sustain the hit from a collapse of the Big 3.

Many people bought into the illusion that a service economy or information economy could be adequate substitutes for smokestack industries. The rise of the environmental religion and its opposition to industry and capitalism added to that illusion.

Now we’re paying the piper.

Yet the British experience suggests that government support does nothing but postpone the Dies Irae. This looks to me like a problem with no solution. On the one hand, my reader is right: we can’t make a living as a nation by taking in each other’s washing. We need to make stuff, grow stuff, and pull stuff out of the ground. On the other hand, the free traders also have an un-arguable point: that the path of economic autarky leads to North Korea (where it is called “juche“).

These were the newspaper headlines of Britain from the 1960s to the 1980s. I remeber it well, all the arguments to and fro. The last big ruction was the Miner’s Strike of 1984-5. I come from coal-mining people, and there were some bitter family arguments about the strike, with most standing for the miners. Mrs. Thatcher’s logic seemed unanswerable to me, though. (One of my aunts took to calling me “the TTT,” for “Terrible Tory Twit.”) If you have tens of thousands of men digging coal out of the ground at X dollars a ton, when you can buy the same stuff from Poland at 0.3 dollars a ton, then those men are toiling in futility, and doing their nation no favors.

And yet, there’s the question I once asked in an NRO column:  “What is the next term in the series:  farm, factory, office, …?”  Answer came there none.

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