Bad management is bad management... bad history is bad history

Economist Dean Baker points out that the Washington Post is scapegoating workers again...

Do You Hate Unions and Working Class People? You Can Write for the Washington Post. No Knowledge Necessary!

The Washington Post showed yet again why it is known as "Fox on 15th Street." It ran a column today that blamed the United Auto Workers for the bankruptcy of Chrysler and GM. So what if Toyota has managed to profitably run a plant in California represented by the UAW for more than two decades? So what if wages of unionized autoworkers in profitable car companies in Europe and Japan are the same or higher than in the United States? So what if the proximate cause of the bankruptcy was incompetent economic management in Washington and an explosion of incompetence and greed on Wall Street?

At the Washington Post, the line is blame the unionized auto workers -- after all, they earn $57,000 a year. Except of course by the calculation in this column. Richard K. Bank, a man with no obvious qualification other than his dislike of unions told Post readers that the G.M., Ford, and Chrysler have labor costs of close to $110 an hour. The would come to $220,000 a year for a full-time worker. Of course, this has no basis in reality, but it helps advance the anti-union case, so it's good enough to get in the Washington Post.

Its also useful to point out that Toyota has had a huge amount of protectionism thrown their way by the government of Japan for them to become competative to begin with, as noted by Ha-Joon Chang in his book Bad Samaritans:

Once upon a time, the leading car maker of a developing country exported its first passenger cars to the US.  Up to that day, the little company had only made shoddy products--poor copies of quality items made by richer countries.  The car was nothing too sophisticated--just a cheap subcompact (one could have called it 'four wheels and an ashtray').  But it was a big moment for the country and its exporters felt proud.

Unfortunately, the product failed.  Most thought the little car looked lousy and savvy buyers were reluctant to spend serious money on a family car that came from a place where only second-rate products were made.  The car had to be withdrawn from the US market.  This disaster led to a major debate among the country's citizens.

Many argued that the company should have stuck to its original business of making simple textile machinery.  After all, the country's biggest export item was silk.  If the company should have stuck to its original business of making simple textile machinery.  After all, the country's biggest export was silk.  If the company could not make good cars after 25 years of trying, there was no future for it.  The government had given the car maker every opportunity to succeed.  It had ensured high profits for it at home through high tariffs and draconian controls on foreign investment in the car industry.  Fewer than ten years ago, it even gave public money to save the company from imminent bankruptcy.  So, the critics argued, foreign cars should now be let in freely and foreign car makers, who had been kicked out 20 year before, allowed to set up shop again.

Others disagreed.  They argued that no country had got anywhere without developing 'serious' industries like automobile production.  They just needed more time to make cars that appealed to everyone.

The year was 1958 and the country was, in fact, Japan.  The company was Toyota, and the car was called the Toyopet.  Toyota started out as a manufacturer of textile machinery (Toyoda Automatic Loom) and moved into car production in 1933  The Japanses government kicked out General Motors and Ford in 1939 and bailed out Toyota with money from the central bank (Bank of Japan) in 1949. Today, Japanese cars are considered as 'natural' as Scottish salmon or French wine, but fewer than 50 years ago, most people, including many Japanses, thought the Japanese car industry simply shoud not exist.  (p19-20)

The biggest problem I have with "leave it to the market" types is they lack an examples of major industrialized nations that have used the hands off approach that they hold in such high regard. There is a reason why we aren't still exploiting our comparative advantage in the fur trade--and personally i'm glad about that. Small Government "Capitalism" isn't viable because its not going to happen in modern industrialised nations--in fact its not even how we industrialized to begin with.  Many of them pine away to live in the agrarian economies of yore--which is a personal preference; or use theoretical arguments that are logically coherent in the abstract--which is fine for the Ivory Tower of academia.

But what matters is the real world, hard working Americans deserve an economy that works for them; our entrepreneurs deserve an economy that empowers them.  We need to be competing with the other industrialised nations of the world, we need to be focused on the future--using revisionist histories and academic theories isn't the way to create a strong, dynamic, competitive economy.

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