What's Good for GM
Holstein, William J., Chief Executive (U.S.)
I asked an economist a simple question recently: "Would it make any difference to Hie U.S. economy if General Motors and Ford were to go out of husiAness?" He said, "No." He is an apostle of free market ideology, and judging from President Bush's own statement (see cover story, page 30), this is the prevalent view in the land. This view holds that, because new entrants such as Toyota and Hyundai are building new plants, a job that disappears in Michigan reappears in Alabama. There's no net loss in national economic terms. We shouldn't care that GM and Ford both now have junk bond status.
That argument doesn't work for me. Don't get me wrong-I believe in the power of markets. But there are times when a nation's leadership must lean against market pressures. What if "market forces" dictated that Michigan and Ohio should cease to exist as manufacturing areas and just slide into the Great Lakes? Clearly, that's not an acceptable outcome in human, social or political terms.
An important element of this debate is the quality of the economic activity conducted by U.S.-based manufacturers as opposed to mat of the transplants. Unbeknownst to most economists, there is an entire set of issues to consider:
* Are the assembly jobs in the domestics vs. the transplants really equivalent? The pay scale and benefits packages offered by the domestics arc much higher. J.T. Battenberg of Delphi has put that total package at $130,000 a year per worker. We can argue about whether they let their costs get out of control. But the fact remains that a job on the line in Alabama, at $60,000 or $70,000, doesn't pump as much money into the economy as one in Michigan. …