In “Downsizing Detroit: Motown’s Lament” (Views, November), Greg Kaza provides an insight into the bleak future for unskilled workers in one American city. Unskilled workers in many other American cities face that same future. The problems of the inner city, however, can only be worsened by restricting trade or by creating government-sponsored “Renaissance Zones.”
Rather than being caused by free trade, Detroit’s problems were actually the result of tariffs and quotas. The Big Three automakers churned out increasingly inferior products during the 1970’s and early 80’s while enjoying a protected market. Consumers became fed up and searched for quality, finding it in Japanese and European imports. With a relaxation in import duties came competition that Detroit was not used to facing. The Big Three had to shape up or lose the market. Today, American companies are again building quality cars. Can anyone doubt that the revitalization of the industry is a result of competition from abroad? There is no better incentive than the potential loss of a substantial market share.
Still, those who have been displaced in this process present a very real problem. But the key to improving their situation is to allow markets to work rather than creating welfare disincentives to relocate or retrain. “Renaissance Zones” or “enterprise zones” at best redistribute income from one set of individuals, the taxpayers, to another set of individuals, the politically connected, while government takes a hefty broker’s fee. The only people who are “empowered” are government employees who hand out favors at public expense while patting themselves on the back for “solving” inner-city problems.
Unskilled workers face a bleak future in the inner city because of a lack of sufficient capital investment due to oppressive local government taxes and regulations. Look around any metropolitan area, and you will see government agencies sprout up virtually overnight. There is a local regulatory board for practically every activity under the sun. The government crowds out private investment, and that which isn’t crowded out is often regulated out of existence. Through their micro-management of the local economy, these local NAFTA-like agencies stifle the economic life of every American city. Since the unskilled are usually the last hired and the first fired, they feel the brunt of it.
“Motown’s Lament” is heard by unskilled workers across America. Their economic future will brighten only when the welfare-regulatory schemes of government are dismantled and private capital formation and trade are allowed to flourish.
Pilot Hill, CA
Mr. Kaza Replies:
Mr. Winterrowd stood for Congress in California in 1998 on the Libertarian Party ticket. Libertarians are skeptical of tax-free “enterprise” or “Renaissance” zones. But interestingly, their platform advocates “complete and unilateral withdrawal from all international trade agreements including the General Agreement on Trade and Tariffs (GATT) and the North American Free Trade Agreement (NAFTA).” They also oppose right-to-work laws.
The Libertarians propose radical economic deregulation, including abolition of all licensing and zoning laws and repeal of the minimum wage to create capital investment and job growth in depressed urban areas. Good luck, Mr. Winterrowd, getting such a program through a legislative body. Mr. Winterrowd received three percent of the vote in his congressional bid. Real-world politics is the art of the possible.
The Libertarian argument, applied to Detroit’s automobile industry, is generally more sophisticated than the one presented here by Mr. Winterrowd. The Libertarians contend that the Japanese essentially received a cross-subsidy, courtesy of the U.S. taxpayer, in the post- World War II era. The U.S. government defended Japan, placing it under its nuclear umbrella, while spending up to six percent of our Gross National Product on national defense. By contrast, the Japanese spent a mere one percent on defense, which allowed them to invest capital at a higher rate into domestic industries such as auto and steel. Bv the late 1970’s, this cross-subsidy contributed to the emergence of Japanese auto companies which could successfully compete with Detroit. Twenty years ago, the sophisticated Libertarians used this line of reasoning to advocate massive cuts in U.S. defense spending. The cleverest Libertarians have always focused on “war as the health of the state,” and have applied their critique to the impact that U.S. foreign policy has had on the domestic economy. One example: The inflation generated by the Vietnam War distorted prices and capital investment in the American manufacturing sector up through the early 1980’s, when deflation occurred.
Mr. Winterrowd is correct to note “the bleak future” faced by “unskilled workers” in cities like Detroit. But his argument that “the Big Three automakers churned out increasingly inferior products during the 1970’s and early 80’s” is less convincing. Take one product: the internal combustion engine. Vice President Al Gore may attack it, but the internal combustion engine is truly one of the great entrepreneurial achievements of the 20th century. The slant-six, built by Chrysler in metro Detroit during the period referred to by Mr. Winterrowd, is perhaps the greatest engine ever mass produced by the American auto industry. Even the most virulent free trader who ignores the underlying cause of Detroit’s demise would be hard-pressed to cite one Japanese engine matching the slant-six.