Topic: General

Not Your Father’s Auto Industry

If you’re tempted to believe the proliferating rhetoric about America’s withering automobile industry, please listen to Dan Griswold’s Cato podcast today or read the paper he and I wrote on the subject before deciding to drink the Kool-Aid.

The declining fortunes of American icons Ford and GM have inspired numerous commentaries about the demise of the U.S. automobile industry. But the top 10 selling cars and top 10 selling light trucks in the United States are all made in America. U.S. output of motor vehicles and parts was also 68 percent higher in 2005 than in 1993, which compares favorably with overall manufacturing output growth of 56 percent over the same period.

How can that be, you might ask, when Ford and GM lost a combined $16.7 billion in 2005 and together plan to eliminate more than 60,000 jobs in the next few years?

Well, this isn’t your father’s automobile industry.

The days when the “Big Three” and the U.S. auto industry were synonymous, and when seeing a foreign car on the street prompted rubbernecking are long gone. Today Honda, Toyota, and Nissan (and other Japanese, German, and Korean companies) are all important and growing players in the U.S. auto industry.

Since the early 1980s, Japanese—followed by German and Korean—automakers have been building production facilities in America. These companies, which employ American workers, pay local and federal taxes, and buy most of their parts and materials from other U.S. suppliers, are every bit as much a part of the domestic auto industry as the Big Three (or “Big Two and a Half,” now that Chrysler is just a division of Daimler-Chrysler). While the Big 2.5 still dominate U.S. production, the foreign-owned share continues to rise, approaching one-third of total domestic production today.

That’s great news for U.S. consumers, whose choices are no longer constrained by the high-priced, low-quality offerings of what was once a domestic oligopoly. Since 1993, the general price level in the United States has risen 38.2 percent, but the price level of a new vehicle has increased by only 4.1 percent.

Certainly, the shifting industry landscape has produced winners and losers within the United States. Most of the foreign nameplate plants have been built in the American South, or otherwise outside of the rust belt states (with a few notable exceptions). But none of these plants, save one (a joint venture involving GM), employ unionized workers, and their market shares have been increasing. Of course, there’s much more to this changing picture than the fact that one group is unionized and the other isn’t, but it is an interesting fact, no?

The state of Michigan has by far been the biggest loser in this transformation. The state has seen a large decline in jobs (and tax revenues), and the auto industry promises to be the marquis issue in this fall’s governor’s race. The Republican nominee, Dick DeVos, recently lambasted the Bush administration for not doing more to arrest the decline of Michigan’s auto producers. Unfortunately, that’s par for the course for Republicans of late, who increasingly seem to have never met a bailout they didn’t like.

The government has no business interfering in the marketplace—particularly one that is working so well for the vast majority of Americans. But if there is any action the Bush administration can and should take—which would incidentally help U.S. auto producers—it would be to revoke some or all of the 160 antidumping measures in place against 21 different types of steel products from 32 different countries. U.S. government intervention on behalf of the domestic steel industry has created a dangerously concentrated market, and without adequate steel imports, steel producers can and have run roughshod over their customers, including the auto producers.

Ultimately, the decisions that brought successful foreign nameplate auto producers to invest in U.S. facilities, as opposed to exporting from production platforms abroad, are based on a variety of factors that are subject to change. Market considerations like transportation costs, labor and materials costs, access to transportation, and access to materials all ultimately contribute to such investment decisions. When access to raw materials is hampered, and thus more costly (as it is with steel in the United States), the benefits of the other considerations are mitigated.

Today, U.S. prices for corrosion-resistant steel (the primary component used in auto bodies) are $100 per ton higher in the United States than in Europe, and $200 per ton higher than in China. At some point, the price differentials will render production of autos abroad for export to the United States more cost-efficient than investment in the United States. If Honda, Toyota, Nissan (and for that matter, Ford and GM) reach that conclusion, then we’ll be witnessing a genuine crisis in the U.S. automobile industry.

Tierney Goes Dutch

John Tierney wrote his Saturday New York Times column from Amsterdam, where he found that contrary to what U.S. drug warriors would have us believe, lenient Dutch drug policy hasn’t wrought the end of Dutch society.

I do think, however, that libertarians should hesitate before citing the Dutch as a model. Last year, I attended a forum at the Dutch embassy on drug policy in the Netherlands. I was underwhelmed.

The Dutch treat drug use a little like the way the public health crazies in this country would like to treat obesity. That means there is freedom to ingest some illicit drugs, but with massive government intervention, oversight, and a panoply of PR campaigns and state-funded treatment, and very little in the way of holding users responsible for using drugs, well, responsibly.

At the forum I attended, Dutch officials were quick to correct any misunderstanding Americans might have that Dutch citizens are actually given any real freedom over what they put into their bodies. The Dutch government, they assured us, loathes and despises marijuana every bit as much as the American government. They just prefered to steer the Dutch people away from it with propaganda and heavy regulation.

That’s certainly a step up from no-knock raids, mandatory minimums, and confidential informants. But it’s still a far cry from a government that treats its citizens as adults capable of making their own decisions about intoxicants.

Rants vs. Reason

I have received hundreds of incoming emails in response to my articles suggesting that federal civilian workers are overcompensated (see here and here).

Many emails have been rants claiming that I’m an idiot or don’t know what I’m talking about. Very few of those opposed to my arguments expressed any interest or curiosity in the actual underlying government data.

Some emails have been supportive. Here are two that suggest reasons why federal pay has been growing much more quickly than private pay.

This one came from a federal worker in Maryland:

I thoroughly enjoyed reading your 13 August opinion piece in the Washington Post–thanks!! As a senior military officer in a command that employs a large number of civilians, I have become increasingly frustrated at the excesses of the civil service system. Not only have the salaries gone up through the cost of living increases, we’re also paying more because of little control on promotions which has resulted in significant “grade creep.” Until your article, however, I continued to hear the confusing mantra that our civil servants were underpaid. I am grateful because you have provided me with some ammunition for my next command personnel discussion.

Here’s another from a retired federal worker in Virginia:

I would like to offer what I think are contributing explanations for the problem of excessive pay and benefits among the members of the Federal workforce.

First, the most salient explanation for overgrading in the Federal civil service is the conflict of interest posed by having the personnel function embedded within each Federal agency. Directors of personnel of Federal agencies report directly to their respective agency heads, all of whom have a vested interest in having as high a graded workforce as possible. Reporting to the directors of personnel are specialists called position classifiers. To be cynical about it, the responsibility of the classifiers is to write job descriptions that justify whatever grade levels that their respective managements want the jobs under them to have. In short, classifiers are wordsmiths who rationalize with contrived language raising position grades, almost never lowering grades. The result is that, over time, Federal job grades (and often titles) bear little relation to the real duties and responsibilities of the jobs to which they are applied. (Classifiers are a kind of inside joke among Federal employees.)

The remedy, it is obvious, is to take the personnel function out of the agencies and place it solely in an independent agency responsible to the White House, at least indirectly. Once that is accomplished, all the jobs in the Federal workforce should be reclassified and given realistic and appropriate grade/pay levels.

Read more public comments on my arguments here, here, and here.

Geography Teacher Rapped in Flag Kerfuffle

From today’s Best of the Web:

“A Jefferson County [Colo.] geography teacher was placed on paid administrative leave on the second day of school for hanging several flags from other countries in his classroom,” Denver’s KMGH-TV reports.

The school district placed Eric Hamlin, a teacher at Carmody Middle School, “on administrative leave for insubordination, citing a Colorado law that makes it illegal to display foreign flags permanently in schools… . The school’s principal escorted Hamlin out of class Wednesday morning after he refused to remove the flags of China and Mexico.”

A district spokesman tells the station: “Under state law, foreign flags can only be in the classroom because it’s tied to the curriculum.” And what subject does Hamlin teach?

Uh, world geography.

Hat tip to James Taronto – who, interestingly enough, shares the name of the Canadian capital.

[Editor’s note: Though he spells “humor” without a second “u,” Andrew Coulson was born and raised in Canada. He is aware that the nation’s capital is Ottawa, and that its Prime Minister is not Tim Hortons.]

Seizures for SWAT

TheNewspaper.com reports that several towns in South Texas are ratcheting up money and property seizures from motorists:

In the South Texas city of San Juan, population 26,200, police have begun seizing ever greater amounts by taking both cash and vehicles from motorists. In 2005, officers collected $4400. This year, however, the force has collected $67,000. Pharr, with a population of 47,000, collected $422,000 last year. McAllen, a bigger city with 106,000 residents, collected $484,000. A federal appeals court ruling this week concluded that driving with a large amount of cash is sufficient justification for police to confiscate it, even if there is no evidence that a crime has been committed.

Guess what these towns are apparently doing with the money?

On a related note, a number of cities and towns across the country have apparently been given between $100,000 and $200,000 in Homeland Security funding to purchase armored personnel carriers for their SWAT teams. If I remember correctly, the Department of Homeland Security was supposed to be a government agency charged with fighting terrorism and responding to natural disasters.

I suppose it’s possible that places like Lake Canyon, Idaho, Eau Claire, Wisconsin, and Tuscaloosa, Alabama are high-risk terror targets. But my guess is that their new federally-funded military-grade toys will primarily be used for routine enforcement of drug laws. This quote from an official in Eau Claire seems to confirm my suspicions:

An armored truck isn’t necessary for all situations where SWAT teams are used, Matysik said.

“But because it’s available, we’ll probably use it just to be cautious,” he said.

The militarization of domestic policing continues.

More Contempt for Private Property

The New Hampshire Supreme Court has upheld yet another outrageous seizure of private property. From a editorial in the Manchester Union-Leader condemning the ruling:

The state Supreme Court ruled on Tuesday that the government can keep and destroy more than 500 CDs taken from Michael Cohen, owner of Pitchfork Records in Concord, in 2003 even though the state failed to prove that a single disk was illegal.

Cohen was arrested for attempting to sell bootleg recordings. But the police case collapsed when it turned out that most of the recordings were made legally. Police dropped six of the seven charges, and Cohen went to trial on one charge. He beat it after the judge concluded that the recording was legal.

However, the police refused to return Cohen’s CDs. In the state Supreme Court’s Tuesday ruling, Chief Justice John Broderick, writing for the majority, reasoned so poorly that it appeared as if he’d made up his mind ahead of time.

[…]

The majority concedes that no crime or illegal act was proven, but allows the confiscation anyway by concluding that a crime might have been committed. The majority used words such as “apparently,” “likely” and “would have” to describe the alleged illegal activity.

It should go without saying that speculation by a few judges that a crime might have been committed is a frightening basis for taking someone’s property.

Nearly all of the outrages we write about at Cato – foreiture cases, the Kelo case, no-knock and paramilitary raids, and the smoking bans David Boaz blogged about earlier –are the result of the wholesale disintegration of respect for property rights in America. A country that truly believes in private property wouldn’t allow government agents to seize and keep it without due process. Nor would it allow government agents to break down doors to private homes in the middle of the night to enforce consensual crimes – some 40,000 times per year. Nor would it allow the state to take the property of one citizen and give it to another, for purpses of increasing the tax base. Nor would it allow the state to tell a private business owner whom he can and can’t serve, and what terms, in the interest of controlling the private behavior of his customers.

It isn’t surprising that these violations of property rights spill over into violations of personal and economic freedom. Property rights are the very foundation of our civil liberties. A government that’s quick to restrict what its citizens can do with their private property won’t hesitate to restrict, for example, free speech (see campaign finance “reform”). A government that refuses to recognize a man’s property in his own body (re: drug prohibition) won’t hesitate to those laws by confiscating actual, physical property without due process.

The founders of course understood the fundamental connection between private property and civil liberties. James Madison was particularly eloquent on the point:

This term in its particular application means “that dominion which one man claims and exercises over the external things of the world, in exclusion of every other individual.”

In its larger and juster meaning, it embraces every thing to which a man may attach a value and have a right; and which leaves to every one else the like advantage.

[…]

In a word, as a man is said to have a right to his property, he may be equally said to have a property in his rights.

Where an excess of power prevails, property of no sort is duly respected. No man is safe in his opinions, his person, his faculties, or his possessions.

[…]

If the United States mean to obtain or deserve the full praise due to wise and just governments, they will equally respect the rights of property, and the property in rights: they will rival the government that most sacredly guards the former; and by repelling its example in violating the latter, will make themselves a pattern to that and all other governments.

When government has no respect for our rights of property, we oughtn’t be surprised when, likewise, it fails to respect our property in our rights.