December 19, 2008

Dramatic Collapse of the American Auto Industry

After the American Century

]Update: In 1212 I can look back and see that the Obama Administration did save GM and Chrysler. Not only that, but GMis once again the world's largest car maker. No thanks to the Republicans, however, who were ready to let Detroit die. However, this piece accurately reflects the apprehension and gloom that was widespread in the autumn of 2008.]

It is a dramatic story, the collapse of what used to be the core of American industry. A century ago the automobile industry was rapidly growing in Detroit, with many of the most dynamic companies long since forgotten. The Reo, the Hudson, and the Packard are long gone now. Yet what emerged by 1930 was not quite a monopoly but what came to be called "The Big Three" - beside which remained a few small fry another thirty years, such as Studebaker and Nash Rambler. But the Big Three seemed the stuff of industrial immortality - dominating the US market and expanding into foreign lands as well.

Curiously, the relative strength of the three is inversely related to their age. Walter Chrysler's company is the youngest, though that is not why it is now the weakest. General Motors came about as the merger of five automakers and surpassed the older Ford Motor Company (founded in 1903) to become the world's largest car company, a position it retained for decades.

This is not the place to analyze the gradual decline and fall of all three companies, which would take volumes. But none can doubt that these companies lost their technological edge, with many improvements coming from Europe and Japan. The latter particularly excelled at superior productive systems, requiring fewer workers to produce cars, and offering automobiles with far fewer production mistakes as well.

Yet the current malaise of the industry is also related to its poor leadership on environmental matters. Detroit executives have continually resisted pressures to raise the average miles per gallon of their fleet, and sought ways to escape legal requirements in this area altogether, notably by selling ordinary households SUVs and trucks. In the 1980s and 1990s, a time when less than 3% of all Americans are farmers, the sale of gas-guzzling trucks shot up. Meanwhile, Honda, Toyota, and other foreign producers not only produced more efficient cars, but they began to do so inside the United States.

As a result, where once American lawmakers would rally to support Detroit, today no one has much appetite for the job. Southern lawmakers often have a European or Japanese automobile plant in their state, and they also are typically keen on the idea of free market capitalism. Subsidies are not their way. Environmentalists are disgusted with Detroit's foot-dragging on pollution and car efficiency. The great middle class may be sympathetic to the plight of the workers, but they often own foreign cars themselves, and they suspect that the automobile magnates have made their own problem. Conservatives generally do not want to help the car companies unless they negotiate much less advantageous deals with labor. (In fact, the major cost of making cars is not labor, but this point is lost in most debate.)

Support for the automobile companies is strongest in the states where the jobs will disappear if they collapse entirely - Michigan, Ohio, Indiana, Illinois, and certain districts where assembly plants are located. But so far this local support has not been enough, and no clear plan has yet been developed to save the Big Three.

Worst of all, it is not easy to fix the problems these manufacturers face. It takes years to get from the blueprint of a new model to a factory producing it and a team of mechanics ready to service it. But the Big Three do not have years. GM and Chrysler are almost bankrupt now, and the billions they need will not come from banks. Ford is a little better off, and says it does not need federal money immediately. But the other two do, and even though they have closed down their plants for up a month at Christmas, their debt keeps increasing, because of all the retired autoworkers whose pensions must be paid, because corporate debt must be serviced, and because even non-productive factories have heating bills, insurance, and other fixed costs that keep running.

Meanwhile, the few consumers who are visiting automotive showrooms rightfully worry about purchasing any American car. What good is a guarantee if the company dies? Where are spare parts going to come from, if the manufacturer ceases to exist? This problem is going to get worse before it can conceivably get better. Yet with three million jobs on the line, the collapse of the car industry is just not an acceptable option for either state or national government.

The fate of the automobile companies is a close parallel to the fate of the "American century." We seem suddenly to be entering the afterlife of a once powerful economy.

December 16, 2008

How Bush Finally United the Iraqis

After the American Century

An Iraqi journalist has become famous because he took off his shoes and threw them at President Bush. This appears to have been a spontaneous action, or at least not thought out in advance. Had he really wanted to hit Bush with his shoes, he should have stood on one side, near the front, and waited until the president was looking the other direction. And he should not have shouted until the shoe was in the vicinity of the commander-in.chief's head. However, judging by the video. this appears to have been an emotional outburst, not a premeditated attack. Throwing a shoe is a traditional Iraqi way to insult a person, so the action makes more sense in that nation than it would in Europe or the US.

I do not find this incident surprising. Bush's mistaken and unnecessary invasion of Iraq has led to the deaths of huge numbers of civilians, perhaps 30 times as many as died in 9/11. This could make someone angry. Muntader al-Zaidi, the journalist, a 28 year old correspondent for Al Baghdadia, an Iraqi television station, was only a few rows away from Mr. Bush, when he slung his shoes, and shouted in Arabic: “This is a gift from the Iraqis; this is the farewell kiss, you dog!” He then threw the other shoe, shouting, "“This is from the widows, the orphans and those who were killed in Iraq!” Security police immediately subdued and arrested him. It appears that he was also beaten, which was hardly necessary.

Bush showed quick reactions and some agility in avoiding the flying shoes. But he will not be able to avoid being nailed by historians, even if his Administration did manage to lose (destroy?) large numbers of documents related to the invasion of Iraq.

The great majority of Iraqis, while divided by religion and much else, have embraced Muntader al-Zaidi's action, in a rare moment of unity. In any popularity contest, he is a "shoe in." Millions of Arabs all over the Middle East seem delighted with the idea of throwing shoes at President Bush, and the journalist has been widely praised for his courage. Is it possible that Bush has now united the Iraqi people in support of free speech and democracy?

December 11, 2008

What We Can Expect

After the American Century

We have all now heard about the Governor of Illinois trying to sell Obama's Senate seat to the highest bidder. Such an event is the perfect deflation device, bringing us back down to earth. The economy may be in meltdown mode and the world in peril from global warming, but politicians do not therefore become virtuous. No one thinks Obama has anything directly to do with this sorry mess, and indeed the FBI tapes reveal the Governor complaining that he could not get anything from the president-elect.

Nevertheless, as the United States confronts a major economic crisis, it would be nice if one sensed a corresponding urgent desire to do the right thing in the political class. But recall the venality of Congress just a few months back, when it attached billions of dollars of pork to the financial bailout package - and this was just before an election when the country was paying attention.

Obama has been around Chicago politics and Washington politics long enough to know that getting real change will not come easy. The vested interests will try to oppose reform of the medical system, pollution restrictions, and higher energy standards to make houses and cars more efficient. Obama has moved rapidly to name his Cabinet and make other key appointments, and they appear almost uniformly to be both bright and experienced. Even the don of the Republican insiders, Henry Kissinger, has praised the steam that is being assembled.

This team is more centrist than many of Obama's supporters might have liked, but politics is the art of the possible. In this crisis, one senses that more may be possible than normally would be the case. Much depends on how skillfully the Obama presidency sequences its legislative proposals. Ideally they will begin with the ideas that are hardest to oppose and build momentum. Ideally, they will not try to overwhelm the Republicans, but make a show of working with them, cajoling support from moderates on the other side of the aisle. If they get some major legislation through quickly with bipartisan support, then it might turn into a new version of Roosevelt's famous 100 days in the first months of his first administration. Press reports about Obama's history reading suggests that this is his scenario. Yet however beautiful the plan and however fine the team to carry it out, venal politicians like the Governor of Illinois can obstruct and unexpected events such as a foreign policy crisis can derail the Obama Express.

I temper my hopes with these realizations, but remain confidant that at the least we will have a president who is intelligent and knows the Constitution. We can with confidence expect that the Guantanamo prison will close, that the government will not systematically lie to the public about foreign policy, that vast troves of government documents in the form of White House emails will not again be lost, that the White House will not engage in political vendettas, that Civil Rights laws will be enforced, that Supreme Court nominees will be competent, and that pollution will be reduced. For the last eight years we could expect none of these things.

December 06, 2008

After the American Century's First Birthday

After the American Century

Now that the Obama presidential team is all but assembled, it is time to take stock. One year ago no one imagined that either Obama or McCain would be nominated. A month after the election, Obama has become a familiar beacon of hope to the American people and others around the world. We are in difficult times, and we hope his team will be able to deal with the many problems in inherits from the dysfunctional Bush Administration. I will continue to comment on events as they unfold.

This Blog has now existed a few days less than one year, and it has been far more interesting to me than I anticipated. In fact, I have written 133 blogs, and these have been read in 61 countries by thousands of people. But in the course of the year I have also found that the largest number of these readers - more than half - come from Denmark. The next largest group are in the United States. It is not surprising to anyone who surfs the net, that half of all site visitors come by for less than 10 seconds. But the geography of these casual visits is interesting: 75% of those from the US fall into that category. In contrast, just 25% of Danish (and Norwegian, Swedish, and German) visitors drop in for such a short time. 75% of them stay much longer and evidently are reading more of what appears here. Based on these statistics, provided by Google, in the future I will regard readers in northern Europe as my primary audience, and hope that those from North America (hello Canadian readers!) will be interested in such a viewpoint.

I should also add that I have been pleased with the occasional feedback, both in person and on line, and promise to continue this enterprise in 2009.

At this busy season, I am about to rush off to day of rehearsing, singing, and partying afterwards, and hope this finds you all similarly busy with Christmas.