NEIL ROSEKRANS
Staff Writer
Americans live in an instant gratification society that focuses on the here and now. We choose to go out Friday night instead of studying. We drink one more beer because we “know our tolerance.” We opt for the super-size at McDonald’s because it’s only 39 cents more. However, life is a culmination of decisions based on trade-offs and our decisions today can come back to bite us on our super-sized rears further down the line.
I sat in on a political science class at a community college in Orange County a couple weeks ago and the topic was the U.S. decision to partner with and protect corrupt individuals in Sudan to obtain information on bin Laden’s whereabouts. Not surprisingly, very few students supported the administration’s tactics. Most students fled to the moral high ground claiming that the United States should never partner with the bad guys.
I see it differently. It’s reminiscent of the movie “Training Day” in which Denzel Washington explained to Ethan Hawke that sometimes in order to nab the big crooks you have to cut deals with the smaller players.
As the saying goes, politics makes for strange bedfellows. We should be grateful that President Roosevelt partnered with Stalin during World War II. The administration knew that Stalin was a brutal dictator, but Roosevelt recognized that the United States and Great Britain could not defeat Nazi Germany unless they had the support of Stalin’s Red Army. The problems with the Soviet Union, of course, were magnified after Hitler’s defeat, but the United States correctly recognized the greater threat to the world’s stability.
Reality sometimes forces us to make short-term concessions in order to gain long-term benefits, but the potential detriment of opting for the short-term benefit must be considered.
Let’s turn our attention to labor unions in the United States. A union’s success is generally based on its ability to boost the pay rate and benefits of its members. However, the long-term implications of increased wages seldom receive much attention from union leaders. For example, John L. Lewis, the union head of the United Mine Workers from 1925 to 1960, was very successful in gaining higher wages for his union’s members. At the same time, however, an economist labeled Lewis as the world’s greatest oil salesman because the resulting higher prices in coal forced many users of coal to shift to oil consumption instead. The migration to oil, of course, led to decreased employment in the coal industry. Unemployment in the coal industry transformed so many prominent mining communities into ghost towns. What was the value of increased wages in the short run if it only meant no jobs in the future?
Accordingly after World War II, an American middle class surfaced and the economy surged. Car manufactures such as General Motors must have believed that trees grew to the sky and that the growth in the economy would never burn out. However, increased globalization and free trade has altered the competitive landscape in which Detroit’s workers compete.
The benefits of globalization leave you with more cash in your wallet to upgrade your freedom fries at McDonald’s, but it is causing the American automobile industry to pay for its past exuberance.
American automobile manufacturers, with no help from the United Automobile Workers’ union, have been made obsolete by the huge legacy costs of health care and pensions for retired employees, and rising health care costs for current employees. Today, GM has 2.5 retirees on its books for every current employee. You can bet that cost is factored into the price of your Buick Rendezvous.
Competitors abroad such as Toyota and Honda are not saddled with such costs and are more competitive in the world market.
Further, what will happen once China enters the automobile export market? It is much closer than you may think. In 2003, at a Shanghai automobile show, GM was surprised to find that a $9,000 small family van it was unveiling had an exact replica, priced at $6,000, at a Chinese manufacturer’s exhibit just down the row.
The abundance of cheap labor and lax labor laws overseas has made it apparent that manufacturing is not America’s comparative advantage in international trade.
The question at hand is whether the federal government will continue to bail the automobile industry out of bankruptcy. Politicians are conscious of public opinion and choosing to allow such large and obsolete domestic industries to dissolve will not reflect well by their constituents at the polls. But the long-term ramifications of such policies are a grossly inefficient use of our resources.
America will remain a competitor in the world market if it can strategically move its resources into industries in which it can still compete.
So don’t say I didn’t warn you the next time you are wondering why your rear end doesn’t fit into those jeans the way they once did.
03-23-2006