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Why Isn't Detroit A Paradise?

Because long ago, it (and other parts of the upper midwest) embraced Obamanian policies. If things go the wrong way tomorrow, the nation will be Detroit writ large.

[Update a while later]

This reminds me of a post I wrote about the rise and fall of General Motors a while ago. As I noted there, my dad was a GM exec, and I grew up in southeast Michigan (well, to the degree that I've grown up at all...). In 1973, about the time I graduated from high school, we were deep in a recession (a real one--not what the people whining about today's economy are describing, with 20+ percent unemployment in Flint), and the golden era was over, never to really return to what it had been.


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Bozoer Rebbe wrote:

Detroit was the canary in the coal mine back in the 1970s, but the economic growth due to Reagan's tax cuts and the internet boom during the Clinton years masked the creeping decay. Highly profitable minivans, SUVs and pickups allowed the Big 3 to survive the reckoning, but meanwhile the American manufacturing base was allowed to disappear. We were said to be turning to a "service economy" or an "information economy", and industries where people could make a decent living doing industrial work started going away. Consumer electronics, shoes, apparel, the list is endless.

The machine tool industry is a sad example. Machine tools are the lathes, mills and other CNC machining devices used to make parts and other machines. They are a vital part of any country's industrial infrastructure.

First, the companies in the business of molding plastic parts started folding in the face of price competition from China and other lost cost countries. Still, for a while, the companies who were making molds and the companies selling them the machines to make those molds were hanging on. Companies would design parts, have molds machined here in the US and then ship the molds to China for production. Then the Chinese part suppliers started quoting prices that included free molds.

The machine tool industry went away by large fractions a year, 20%, 30%.

That's just one industry among many.

As long as consumer prices have been cheap and it wasn't their job that was going away, Americans have ignored the disappearance of our industrial base. If the domestic auto industry fails, though, the cascade effect will be unavoidable for most Americans. One in 14 Americans works directly or indirectly for the auto industry. I'm not just talking about supplying car parts. General Motors has the largest installed base of personal computers of any business in the world. They have supercomputers at the Warren tech center, and if there's a technology or industry, it's probably used in designing and building cars: electronics, IT, materials science, that list is almost endless as well.

Those industries that remain in the US will be significantly harmed by the collapse of GM and Chrysler. That will erode America's technological edge in terms of military and intelligence hardware.

While I'm voting for McCain, I don't think either candidate or party has a coherent industrial policy that recognizes the economic and strategic value of a healthy manufacturing and industrial base.

DensityDuck wrote:

This loss of industrial base has actually had a significant effect on the defense industry--we very nearly were unable to build the F-35 because the company making the CNC tool went out of business halfway through the job.

There was another program I was on that had ordered a large CNC mill for a somewhat more classified purpose. The manufacturer for that one didn't just go out of business--they got bought out by the Chinese. And hoo boy, the shit hit the fan. We had guys fly out overnight and REMOVE the hard drives from every computer in that company, stack them in a box, and shred the lot.

MU789 wrote:

Reminds me of the newspaper and network news business - slowly bleeding readers and viewers until they are hollowed out operations. A digital rustbelt.

MG wrote:


Let's not use passive voice.. as in "was allowed".

Environmental regulations helped make the cost of manufacturing increase. Union short-sightedness, too. And finally, technology has removed much of the "touch work" that skilled tradesman used to do.

And the last of those 3 has had the largest impact.

Jerry in Detroit wrote:

Let's not forget that much of this is self inflicted. I remember speaking to a Ford Engineer in the late 70s saying that Ford should compete with Honda before they gained a foothold. The answer? "Oh, they can have small cars. We don't make money on them anyway."

kurt9 wrote:

If the big 3 automakers go away, is it not possible that entrepreneurs will start new car companies? Before you start talking about capital costs, do keep in mind the example of Eclipse Aviation, a start-up that manufactures jet airplanes. Also, Delorean could have made it if it were not for the early 80's recession.

Rand Simberg wrote:

Presumably, if any company goes into bankruptcy, it gets restructured, with new management and new labor contracts, which would go a long way toward creating a new competitive American auto company. Except under an Obama administration, where it will probably be nationalized to preserve the union contracts.

Carl Pham wrote:

Er, do we really want to keep basic car manufacturing? When a technology becomes mature, profit margins get very tight from competition -- which is easy because the tech is well-known -- and companies start to compete on stuff like reliability and low cost, which favors labor that is not particularly well-educated and cheap.

If you want high-paying and interesting jobs, the thing to do is stay on the cutting edge of technology. Others find it hard to compete with you, you're selling more in the luxury gotta-have-it wow-cool new idea market than in the gimlet-eyed what's the value per unit price, to the nearest penny, market. You're also more protected against the vagaries of the international price of the dollar. If stuff is only made here, because no one else can do it, then you're not worried about the exchange rate totally sinking you through no fault of your own.

So...maybe America should just let the basic car market do what it's going to do. Focus on innovative stuff, instead. Within the car industry, I'm less concerned that GM can't make an econobox to compete with the Koreans than that a breakthrough innovation like the hybrid drive didn't come out of Detroit.

It's true that might mean a contraction of the overall size of the auto industry. If you're not making the bulk of the world's cars, your auto industry is going to be smaller. But maybe that's OK. I have a feeling America will prosper more as the world's R&D shop than as its basic factory.

Frankly, I wish we would, for example, stop looking at the enormous size and profitability of our healthcare sector as some sort of "problem" that needs to be fixed, and realize how amazingly sweet this sets us up for 21st century competitivity. The amount of innovation and invention in the American healthcare field utterly dwarfs anywhere else in the world, in part because the silly Europeans (with the only educational system that could have kept up) castrated their own industries by semi-socializing them in the interest of "fairness" and low cost. Just imagine in a world steadily growing richer, and wanting to live longer, what will sell in the next century. What else but better health, longer lives?

All those newly-wealthy Chinese entrepreneurs, making money off of emerging Chinese car factories, or Indian offshore contract programming moguls -- what are they going to spend their money on, if not living longer and healthier lives? Where are they going to spend that money? If trends keep up, if we don't cut our own legs out from underneath us by starving the most innovative industry we've got, they'll be spending that money on American products and services, the best in the world, the only way to eke out an extra 10 years with a crappy heart, or beat this or that type of cancer. Longer and healthier lives is the ultimate luxury good, for which you can charge the fattest of profit margins, because the demand is pretty much unlimited. I'd definitely rather be selling cancer cures than economy automobiles.

sjv wrote:

we were deep in a recession (a real one--not what the people whining about today's economy are describing, with 20+ percent unemployment in Flint)

Amen, brother. I was in New Orleans for the Oil Bust of the 80's, when oil dropped below $10/barrel. Never seen anything like it since. Unless you are old enough to remember the 30's (a rapidly vanishing group), most people have no idea what a real depression looks like. And it ain't even close to what people are screaming about now.

But if the gubmint really screws it up, it could get that way.

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This page contains a single entry by Rand Simberg published on November 3, 2008 4:42 AM.

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