Sorry to sound too rosy. This isn’t a rosy situation but it also isn’t dooms-day. So manufacturing PCs is done in other countries? Why? Because manufacturing PCs requires little skill and low wages. But the question is, where is the real growth?

Market-oriented knowledge-intensive service revenues grew almost 2 times the annual rate of other services between 1986-2005. The US in 2005 provided about 40% of the global share in this sector. US also holds 35% of the global share of high-technology _manufactured_ goods, second only to “Asia.” Not bad to be just behind a continent, and still the leading country, with Japan in second.

Check out this website for the fact check: http://www.nsf.gov/statistics/seind08/c6/c6s2.htm

I think you’re right about any new supply shift going to the South and foreign auto makers being anti-union. Two things, either unions will realize that foreign auto makers don’t treat their workers so badly or else more people in the south will find better employment.

This leaves your last point, that auto-workers in the industrial mid-west are screwed. I agree. A temporary social net as some suggested is one option to help these families, and/or another is to allow for chapter 11 to restructure the firms so that they are profitable. I just happened to see a donklephant post about the benefits Japanese automakers earn from their government, which adds more food for thought. Perhaps the US government should invest more in things that the Japanese government is willing to like R&D and health care. But, I still think, emotions aside of course, that a restructuring followed by government aid in certain areas such as R&D and health care might not be bad (government providing DIP financing?)

I am not blind to the difficulties many families will face. But in the words of Stiglitz:

What needs to be done is to help the automakers get a fresh start and allow them to focus on producing good cars rather than trying to juggle their books to meet past obligations. The US car industry will not be shut down, but it does need to be restructured…

I believe we are still a world leader in high-tech products ranging from personal computers to bio-medical engineered gadgetry, research and development, and the financial industry (even though we ran into this misstep, everyone else is taking a hit too, and I am pretty sure we still have comparative advantage over most of the rest of the world).

You do know that almost nothing is done in terms of manufacturing of PCs in the United States, don’t you? And every one of those industries is busy trying to see how much they can send overseas where labor is cheap. The bean counters rule, not the engineers. I suggest that you read Dilbert and realize that large numbers of his strips come from suggestions by his readers based on their real world experiences.

As far as your hopes for current employees of the Big 3 getting jobs with the foreign automakers, that might happen for some of them who work in American plants in the South but the foreign manufacturers will never leave the shelter of the “Right to Work” states and their deep cultural hatred of organized labor. So the workers outside of the South are screwed if they can’t afford to relocate. And it is very far from a sure thing that they would survive bankruptcy. I have not gotten an answer from any conservative who screams about bankruptcy when I ask them where the DIP financing for a standard Chapter 11 would come from. Do you have any idea where it would come from?

And so if conservatives were to get their way and the Big 3 go under and all the attendant jobs are lost everywhere in the web that they support are any of the people who tsk tsk the idea and use the words like “regrettably” going to go look those families in the eye and try to feed them some cock and bull story about it really being for the best? We’re talking plant workers in the assembly plants and the parts plants. Kill the parts plants just by letting GM and Chrysler go under and they’ll almost certainly take Ford down with them. The truck drivers that deliver vehicles lose their jobs as do the dealership employees all across the country like the salesmen, the secretaries, the accountants, the IT people, the folks whose restaurant or convenience store depends on the nearby plant for profitability and any other peripheral casualties I might not be remembering. This is why 3 million jobs lost is not necessarily an exaggeration. When you add that to the already massive job losses (Look at U6, which is currently 12.5% rather than the more often quoted U3 number which still hasn’t reached 7% if you want an idea how bad things really are.) we have it would be entirely possible that a tipping point could be reached that would cause even more job loss. I wonder how many people would remain so cavalier about other people’s livelihoods then.

I believe we are still a world leader in high-tech products ranging from personal computers to bio-medical engineered gadgetry, research and development, and the financial industry (even though we ran into this misstep, everyone else is taking a hit too, and I am pretty sure we still have comparative advantage over most of the rest of the world).

Jason,

I like the idea of a little social net, as long as it does not become a permanent fixture of our economy, as many of the New Deal programs have.

Exiled,

I agree with you on the bailout. As in we shouldn’t do it. But let’s not forget about US protectionist policies. We are still pumping massive amounts of subsidies into our agriculture where developing countries have a comparative advantage, effectively killing their export sector to the United States. In addition, during the Uruguay round of trade talks we opened their economies to manufactured US goods, creating a net export deficit that ended up being detrimental to most developing economies.

Kranky,

Letting the Big 3 go bankrupt will, in foreseeable future, only result in a restructuring. It will force them to become competitive enterprises. All autoworkers will likely not be out of the job, though some regrettably will. Suppose the Big 3, or 1 or 2 of them, do actually fail. Well, the demand for cars will still exist and since foreign car companies have begun manufacturing cars in the US since it is cheaper to do so, one could imagine auto workers finding employment with Toyota or Suburu or some other foreign car company as they expand their manufacturing to fill up some of the Big 3’s market share. That may be entirely too rosy of a picture, as it will surely be a very painful time for many, which is why Jason’s suggestion for a social net could prove very important.

We’re stuck competing with the rest of the world. So the question is difficult and the answers are few. Retraining sounds nice in the abstract, but retraining to do what? What advantages do those Americans who have few special in-demand skills bring to the table compared to lower cost workers from countries with both lower standards of living and also lower COSTS of living?

In large part because we ALL have so few good, concrete, specific answers to this basic question, I support some policy that fosters sustaining our domestic auto industry. In some substantial form about whose nature I am flexible. For one, cars are something most Americans need. For another, they can be expensive to import, which provides at least one advantage to domestic production. For yet another, if our domestic industry collapses, we’re stuck importing something that we buy lots and lots of. Or at least buying from companies with little interest in our nation aside from what we can pay for a car.

Do these companies deserve to be bailed out? Again? Probably not, at least not for their own sake. And the workers conspired through their unions to get paid far more than anything resembling a fair market would have paid. So sympathy ought to be limited their as well.

But sadly, I believe the Eastwood philosophy applies here: deserve’s got nothing to do with it.

If you want to help the workers, then help the workers DIRECTLY.

Let the actions of the corporation leaders run to their natural end – which is failure.

Why not create a Income-based Jobseeker’s Allowance like they have in the UK – it will likely cost MUCH LESS then throwing more money at an unknown problem. I would rather have hundreds of thousands of citizens on the dole for ten years working to retrain and rebuild on a fresh slate then stick some money at their failed bosses and leaders and hope it solves some sort of temporary problem.

The fact is, the auto industry has done NOTHING to earn our empathy, and cowards behind their workers when they willfully disregarded the market and the economy for decades.

Do not let good money follow bad.

Let’s go on to see how many democratic state reps also voted for subsidies to foreign auto makers who agreed to provide jobs to state residents by building local auto plants.

The inconvenient truth is that this is not nearly the partisan issue that dishonest democratic partisans want to make this out to be.This is every bit as much an issue of economic viability and global positioning as it is an issue of partisan economic ideology.

I have no clue where the democratic party stands on this, or what they think their over-riding principle is here.

As I said yesterday, there’s a significant difference between tax subsidies to encourage business development, which leads to increased tax revenue in the end, and simply handing money to three failing companies on the promise that they’ll reform.

What’s absurd is the idea that the government should put money it doesn’t have up in order prop up three dinosaur companies who haven’t proven any willingness to do what it takes to compete (and at this point the words coming out of the mouths of the CEO’s and the UAW fatcats are meaningless to me, they had their chance).

As the months go on, it’s becoming clear that the TARP bailout hasn’t accomplished what Paulson & Co claimed it would, for that reason alone we should think twice before doing this again.

Wow! Here, here to P. Buchanan. I knew there was something about that hot air, over inflated, balloon head that I liked. And he’s not one who you’d expect to easily side with the auto industry, seeing how he built his reputation on the safety belt battle. Good for him to tell it like it is.

Well stated post as well, Justin. You’ve got my sentiment spot on and in a few concise words at that, especially to the point of who the competition is and what side the southern Senate Republicans are coming down on; the Asians. Go figure that irony!

What really pisses me off, though, is the way they are trashing the domestic Auto Manufacturers as though they’re still makin the same cars they made in the 80’s. Don’t they remember the old rust bucket Datsuns, Toyota Tercels, and VW Busses, Suburu’s, Pintos… Oops! That one’s ours, sorry bout that, no, really, SORRY BOUT THAT ONE.