Friday, June 12, 2009

Detroit, In Retrospect

The Economist reminds us of what, exactly, we have lost with the gradual collpase of the US automobile industry:

At the height of its success, GM was proof of capitalism’s ability to deliver the American dream to the average Joe. Young men could walk onto the assembly line fresh from high school and live a life that was the envy of most of the world. 

They earned enough to support a wife and family; the company provided them with top-notch medical care; they could retire with full benefits after just 30 years of work. In the mid-1950s Detroit had the highest median income and the highest rate of home-ownership of any American city.

Kids with a high-school education earning enough to support a family, buy a house, and retire their 40s?  In retrospect, does that sound sustainable? 


Anonymous said...

no, not sustainable. it kind of harks to the adage "if it sounds too good to be true. . . ."

PS (PSanafter-thought) said...

It was true and could still be true if the management wasn't earning 100 - 250 times what the workers are making. And if they weren't competing against foreign car makers, even the "foreign" car makers which actually manufacture the cars on US soil. Those have been reported to pay about the same as Detroit, but without nearly the benefits that Detroit paid. They also didn't contribute to help the US government after 911 like the Detroit companies did.

A good many companies have cut way way back on pay and benefits, but the few at the top earn more and more. Then the workers still want what they could buy before, so they end up shopping at stores that get most of the good from China, etc. So more workers lose their jobs. [Wal-mart made a 20% mark up when they sold American goods; They make 80% off of Chinese goods.]

All these CEOs have forgotten that the workers have to have wages high enough to buy what is manufactured.

What is too good to be true is squeezing the workers but still expecting them to have buying power.

Ron Amundson said...

In 1956, a minimum wage worker would need to work 1500-2000 hours to buy a new car. Thus putting used cars, well in the range of affordability, even for a teenager. In 2009, 1500-2000 hours sets a range of $10K-$14K, which is in the ball park for any number of new cars.

Sales volumes, prior to the crash, despite import market share, were 2-5X greater than they were in the 50's.

There are tons of factors, which led to Detroit's downfall, but employee wages, and affordability of cars while slightly contributory, are far from the problems they are made out to be.

Anonymous said...

ps's comments are very salient for one with a belief in the benevolence of a free market system. historically and presently the human & environmental abuses of this system are evident. both legislation & unionization have interceded & yet here they come again! not legislators, not unions & not ceo's have proven their benevolence.

looking globally at others with a successful automobile industry we see that indeed there is a firm measure of governmental control resulting in a more satisfactory employee / employer relationship as well as a modicum of respect for the environment as well as product qualiity.

china has become a fervent player in the global market continuing at the expense of its human rights and product satisfaction (think toothpaste or milk for starters).

perhaps our current elected government will be able to redirect our thinking away from blaming the fat cat ceo's & guide us on a path of benevolent government intervention (which of course is touted by some as the dreaded "s" word). we are indeed in a global market and hoping that those ceo's begin to care about workers, product safety & quality, and the environment is at best an innocent dream (think tobacco industry). so with partial recall of charles schultz's words, "we have met the enemy & it us".

Father said...

Actually, those were Walt Kelly's words:

But still, we take your point. I'm not really sure you and PS disagree about more than the fine details.

PS (PSanafter-thought) said...

I'm glad that the environmental issues and worker issues were mentioned in one of the comments. I live in a very pro-union area. It became that way because of the hard work conditions of the iron miners, etc. Of course, the "land was raped" to get the ore, if one wants to look at it that way. But this ore also helped the US win WWII.

I sometimes wonder about the stuff we get from overseas. Are there decent conditions for the workers? What about pollution? For example, I frequently buy a certain type of fabric that is made in Indonesia and India. I've seen pictures of the process. I don't see respirator masks on the workers. But when a person wants to dye fabric in their home here, the books all warm about the dangers of inhaling the dye powders.

I guess that Americans are very willing to pay as little as possible for what they buy as long as the workers and the environmental issues are NIMBY. [not in my back yard.]

Anonymous said...

walt kelly huh. thanks for the correction.