Sunday, February 08, 2009

Swiss watches, Italian shoes, French wine, and American cars

The TARP auto industry bailout has less to do with the U.S. economy than with America as a mindset. Economically, the auto industry got a big bailout already, on January 1, 1980, when the law allowing 401(k) accounts went into effect, providing a new way for U.S. corporations to fund worker retirements. As corporations phased in 401(k) plans, they phased out the old pension plans, which they said burdened them when competing against foreign manufacturers.

Apparently, at least as for the auto industry, it wasn’t enough. In December 2008, the big three begged Congress for more help, and after a round of ceremonial debate, a generous bailout of $24.9 billion was granted. But why? Any economic hit to the U.S. economy from the collapse of the big three would have been short term.

Just how would the demise of the big three impact the economy? The suffering of employees, extending down the supply chain, would be very real, as it would be in the wake of any large corporate demise. But the bigger picture would be anything but dire.

If the big three automakers perished, their best engineers, business managers, sales reps and other key employees would start new ventures. Entrepreneurs would fill the void with new car companies—built on new technologies, new production methods, and new distribution channels. And venture capital, not government bailout money. And if there was a shortage of private seed money, the government could provide. If government funding is the proper way to stimulate nascent industry, as is presumed by the recent bailout, why should the public sector favor proven losers, why not seed upstarts?

Economics cannot be the reason for the auto bailout. Market resiliency would fill the gap left by the big three in a heartbeat. So why invest $billions to prop up industrial dinosaurs?

As Tevye would explain, “Tradition!”

GM, Chrysler and Ford are no longer essentially manufacturing businesses. Sure, they slap together a few chassis, which nobody wants, but that’s incidental to their real role, which is cultural. They are organs of the collective psyche. Manufacturing cars is part of America’s identity. Psychologically, the big three are mythic players in America’s field of dreams.

And the auto executives know this. They know that their enterprise is part of the American mythos. The U.S. auto industry is so much a part of the identity of the United States that auto executives know they are immune to the disciplines of the market, that sentimentality will trump reason. Like the monopoly of professional baseball, the big three auto makers are vouchsafed their tri-opoloy by national sentiment. Nothing to do with economics. They are saved into perpetuity by a collective nostalgic pining for America’s manufacturing glory days. Making cars is as much our national pastime as pitching fastballs. And Detroit occupies as cherished a place in Americana as does Yankee Stadium.

Other countries have had centuries to incorporate their native crafts into their national identities. With technology speed-up, the United States has done it in less than a century. Just as the Swiss have their watches, the Italians their shoes, the French their wines, Americans have their big honkin’ cars.

The United States’ frontier sensibility has succumbed to domestication. We have joined the old world. We navigate by quaintness.


  1. A rather humorous take on the stimulus package has grain of truth in it: nearly nothing is uniquely american now.

  2. Very good article on the US car industry :)