Economic reality is finally catching up with the big American automakers and their suppliers, as noted by Thomas Bray in Wednesday’s Detroit News:
Around Detroit, the bankruptcy of giant auto parts maker Delphi Corp. is seen as a precursor of what’s in store for the entire American auto industry. More fundamentally, it confirms the bankruptcy of the industrial welfare state.
The powers of denial ensure it may be some time before our politicians, unions and even corporate leaders catch up to that fact. Exhibit A was the knee-jerk rant by Gov. Jennifer Granholm, who pronounced herself “angry” at Delphi. She then went on to blame the usual catalog of left-wing villains: “globalization,” “outsourcing,” “upper management,” “lack of support from Washington for the industries that made our country great” and “so-called free trade.”
Oh yes, and not enough government spending on health care.
I must pause here to note that Governor Granholm seems to be of two minds on the issue of globalization. Sure, international trade and investment are great when German and Japanese corporations partner to open a new engine plant in your state, or when you go on a trade mission to Japan in order to urge Japanese companies to outsource their jobs to… (ahem) …”invest in Michigan.” But when Delphi feels the heat of international competition? Well, that’s another story.
But I’ve gotten off-topic. Returning to Bray’s article, we see that all of the reasons listed by Granholm for Delphi’s struggles lose their punch when faced with cold, hard reality:
But no amount of foot-stamping is likely to change facts. Among them: Delphi’s 33,000 unionized workers in the United States, like those of General Motors, Ford and Chrysler, still earn far above the national average in wages and benefits long after it was clear that this was no longer sustainable.
Bray closes with an observation that we would do well to take to heart:
Globalization isn’t the enemy. It’s simply the messenger, exposing the rotten structure of the industrial welfare state for what it is, a lumbering dinosaur that can’t see 20 feet ahead of itself. Like the broader welfare state, to which it is so closely tied through labor, tax and other laws, the industrial welfare state of the 20th century is badly overdue for a rethinking.
Related: Suspension of Davis-Bacon Act in hurricaine-ravaged areas leads to higher wages for workers.