3 Responses to “Detroit, model for future US?”

1. Aki_Izayoi
   December 27th, 2009 at 10:33 pm

   

   The video isn’t anything novel or thought provoking: it is just presents the well-known fact about the decay in Detroit juxtaposed with right-wing, pro-market commentary.

   Why is the libertarian-conservative explanation superior to that of — let’s say — the Economic Policy Institute? Why not blame globalization or a strong dollar instead of “left-wing policies”? What about intranational competition in the “right to work” states? And if the unions were politicalically powerful as video alledges, why didn’t tariffs on foreign autos get enacted to cover the $1,200 difference? My point is simple: the problems of Detriot are extrinsic, not intrinsic (and not due to a dereliction of free-market principles) as the video alledges. The video hasn’t refuted any other alternative hypotheses because it so desperately wants to denigrate left-wing policies (in general): for instance maybe the policies failed because there is a lack of social capital, or that politicians in the US (on both sides of the political spectrum) are too short-sided while politicians in other countries have longer time horizons.

   And Airbus is a good model of company that survived even though it hadn’t made a profit for more than two decades because the state funded them.

   Well, it is the same in Sweden for the unemployment benefits: instead of job banks, they get “labor market political activities.” This actually has a positive effect since it reduces the supply of labor by tying up some of the labor force (about 3%) in pointless activities. In France, it is well-known that they have six weeks of paid vacation, and European countries have a high rate of compensation PER HOUR worked. But those country haven’t collapsed.

   Well, despite that, I am not going make any policy recommendations because the US is incompatible for socialism. Consider my previous remarks a defense for European leftism, not American leftism.

2. Mike
   December 27th, 2009 at 11:01 pm

   

   Aki, it’s pretty clear what did in the US auto companies: unions, and the politicians they support. The wages and benefits are simply too high, especially for the crappy cars Detroit turns out, which sell at the lower end of the price range. The US does have tariffs on imported autos: 25% on Japanese cars. I’m not sure about the breakdown on other countries, though all cars are subject to at least some tariffs.

   I’ve driven dozens and dozens of different cars, and when faced with a choice at a rental agency, I always pick an import, any import, over a domestic clunker. Those factories are not being put to their best use, and it is the government that keeps the assets out of productive hands.

3. Aki_Izayoi
   December 28th, 2009 at 2:45 am

   

   To clarify the Airbus example: their government intervention only worked because they had a long term time horizon. I pointed it out to show that government can guide successful business. The analogy to GM is vague, but, it is unlikely that the US government is competent enough to manage them.

   I tried to google the 25% figure, but I got the figure for trucks:

   “Japan itself already has no tariffs on passengers cars, trucks and parts, and although the United States, its major export market, also imposes no duties on cars, it has a tariff of 25 percent on trucks.

   The European Union, however, where member country Germany is the world’s biggest auto exporter, imposes duties of around 10 percent on passenger vehicles, 22 percent on trucks and five percent on parts. ”

   http://edition.cnn.com/2002/BUSINESS/asia/09/12/japan.cars/index.html

   I do not know about the labor cost differentials on US cars, but apparently the aforementioned source said $1,200 and I heard before that it costs more for health care than steel to make US cars.