By Kevin D. Williamson
Thursday, December 12, 2019
Detroit’s success was a very complicated story. Its
failure is a simpler one.
How did Detroit become the “Motor City” at the center of
the U.S. automotive business? It wasn’t obvious that it would be: At the end of
the 19th century, more than 100 automobile companies were organized in the
United States, most of them in New England and Ohio. But Michigan won out
because it had a hugely important advantage in one natural resource: smart
people.
Ask a half-dozen car guys why Detroit beat out the rest,
and you’ll get a half-dozen answers: Maybe because Henry Ford and Ransom Olds
lived in Michigan, or maybe because Standard Oil helped to lift the
gasoline-powered Michigan manufacturers over competitors in Cleveland and
Boston, which leaned toward steam and electric power. (Electric cars —
imagine that.) But one of the main reasons Detroit became the Motor City is
that it already was a motor city: Before it was a powerhouse in the
automobile business, it was an important center for manufacturing marine
engines (as was Cleveland), and as such was home to a work force with skills
relevant to building automobiles — metalworkers, mechanics, engineers,
machinists, experienced laborers. The most useful kind of intelligence resides
in particular people and in particular intellectual communities, whether those
are theoretical physicists or construction workers. That kind of intelligence
cannot be boxed up and redistributed like surplus cheese. It is where it is,
and it is there because of organic developments that cannot be managed.
Henry Ford offered good wages and an intelligently
organized production process, but he didn’t exnihilate those skilled workers
into existence; he just hired them. The larger and more complex the
intellectual ecosystem of Detroit became, the greater the advantage provided by
its workforce was — and the more it became a magnet for the best workers.
And Henry Ford wouldn’t have got very far without them.
(I will here offer the obligatory periodic reminder that
the story about Henry Ford’s bootstrapping the automobile market into existence
by paying his workers enough to afford his products is a myth, pure folk
economics.)
Henry Ford’s problems are our problems still. North
Carolina is the Detroit of the American upholstered-furniture industry, and its
biggest problem right now is finding skilled workers to man the industry’s
factories. A program set up by furniture manufacturers and a local community
college is training up new workers as fast as it can, but that is not fast
enough: “The good news is we can graduate 150 people a year,” one furniture
executive told the Wall Street Journal. “The bad news is that the
industry needs 800 to 1,000 people.” Another recruiter described hiring an
upholsterer through a temp agency as “winning the lottery.”
And yet millions of Americans somehow manage to languish
in persistent joblessness.
The story is familiar, with businesses ranging from the
literally old-timey (mechanical-watch manufacturers) to the high-tech (chemical
companies) complaining loud and long that they cannot fill their openings, that
highly skilled, reliable labor is impossible to find. Old-fashioned business
strategies such as (radical idea!) substantially raising wages are not always
effective. (Keep trying, guys; it worked for Henry Ford — eventually.)
Industry groups have put together training and apprenticeship programs such as
the one for furniture-makers in North Carolina, where a $600, eleven-month
course prepares workers for jobs that can pay in excess of $75,000 a year. The
Institute of Swiss Watchmaking operates training programs in Fort Worth, Texas,
along with Hong Kong and Shanghai. For those on shorter timelines, there are
still a bunch of oil-and-gas companies that will pay you to get a commercial
driver’s license and then hire you when you do.
If the demand-side story is familiar, then so are the
excuses from the potential supply side. If you’ve followed the intramural
debate on the right between the classical free-market conservatives and the new
right-wing anti-capitalists, then you’ve heard this before: “I want a good job,
but I don’t want to move to one of those awful, expensive, godless coastal
metros to get it.” “Okay, but there are lots of jobs to be had in lots of other
places that aren’t Palo Alto.” “But I don’t want to invest four years in
college and go into debt to do it.” “Okay, there are jobs to be had in West
Texas gas fields and North Carolina furniture factories and all sorts of other
places that don’t require a four-year degree.” “But. . . .”
There’s always another “but.”
Furniture-factory recruiters tell the Wall Street
Journal that potential workers sometimes turn their noses up at their
training programs because there is no guarantee that demand for workers will be
as strong years in the future as it is today. Factories trying to recruit
Millennials also have discovered that starting the workday at 6:30 a.m. is an
obstacle. The usual thumbsuckers offer the usual thumbsucking excuses. A
cynical man might wonder what exactly would get these folks to take the job —
an iron rice bowl?
There’s a reason so many of the complaints we hear about
China are characterized not by horror at the brutality of the Chinese regime
but by frank envy of its command-and-control powers.
Tom Friedman calls it being “China for a day.” Marco
Rubio calls it “industrial policy.”
***
If you are willing to consider the full, mind-bending
complexity of the U.S. economy, then Elizabeth Warren’s “You Didn’t Build That!” argument
becomes, in a sense, Leonard Read’s argument in “I, Pencil.” Everything touches
everything else, and burdens are shared in complicated ways. Senator Warren’s
story is an attempt to create a compelling moral narrative for managerial
progressivism, the dusty intellectual antique installed firmly in the center of
her brain. But while her political conclusions do not necessarily follow from
the facts, she isn’t wrong about the facts themselves. Entrepreneurship does
not happen in a vacuum, and nobody seriously thinks it does.
(Senator Warren leans heavily on an old politician’s
trick: Arguing with positions that nobody really supports; in this, she is a
lot like our friends on the new anti-capitalist right, who believe they have a
patent on the idea that there is life beyond the market.)
Consider the early days of the automotive industry: When
Alexander Winton drove from Cleveland to New York City to promote his new
automobile, the trip took nine days and was thought to be such a feat that he
was greeted by a million people upon arriving in Manhattan. The roads were, as
Winton put it, “outrageous.” A few years later, an enthusiast in another Winton
automobile made the first coast-to-coast automobile road trip in the United
States, from San Francisco to New York. As Ken Burns tells the story:
At the time, there were only 150
miles of paved roads in the entire U.S., all of them within city limits. There
were no gas stations (although general stores in some towns sold gasoline for
farm equipment) and no road maps as we know them today. Most Americans doubted
that the automobile had much of a future except as a rich man’s toy for driving
around town.
Libertarians have two good jokes, the first of which is
the lamentation, “But who will build the
roads?” uttered after anybody suggests the slightest reduction or reform
in any government program. (The other one is the Libertarian party.) The actual
story of the roads is, as most things are, more complicated than our political
discourse allows for. The Constitution invests the federal government with the
power to build postal roads, and using core federal obligations as a pretext
for road-building and other infrastructure projects is a time-honored American
tradition. Alma, Ark., and Tucumcari, N.M., are linked by a gigantic federal
freeway thanks to the “Dwight D. Eisenhower National System of Interstate and Defense
Highways.”
But the first paved intercity road in the United States
was a privately built and privately operated turnpike connecting Philadelphia
with Lancaster. (Old-school Gladwyne types still refer to U.S. 30 as “the
Pike.”) The vast network of municipal and intercity roads in the United States
was in fact built by a very complex combination of public and private efforts:
Think about the road-building efforts themselves, but also all the things that
went into making them possible. You might have a federal highway project
carried out by a private contractor, who buys asphalt from another privately
owned firm that relies on engineers and chemists trained at public schools,
which were funded by taxes on private businesses, which relied on. . . . You
get the picture.
Many of the most effective public-works projects have
followed the practice of relying heavily on public funding and administration
and private-sector execution of the work itself. That doesn’t always work, and
it has obvious drawbacks — the inevitable corruption and waste in the
contracting process, one of the seldom-considered scandals of the war
mobilization in the 1940s — but it also offers an alternative to the
characteristic problems of monopolistic public-sector bureaucracies such as
government schools.
The complexity of real-world economic relationships is
the point of “I, Pencil,” Read’s famous essay, which illustrates that even
something as straightforward, ubiquitous, and cheap as a No. 2 pencil relies on
a vast network of industrial processes, specialized knowledge, trade, etc. so
vast as to be well beyond the comprehension of any single organization, much
less any individual. That’s the miracle: Nobody knows how to make a pencil, but
we have plenty of them, anyway. Read took this as an argument against
central planning, and he might be reasonably criticized for minimizing the role
of the public sector; Senator Warren takes the same entangling relationships as
an argument for more central planning, even though she occasionally
remembers to make a rhetorical gesture in the direction of capitalism. Read was
basically right and Warren is basically wrong, but Warren’s distortion of the
underlying principle does not diminish the importance of public-sector and
non-market institutions in the ecosystem of Readian economic complexity.
The complicated truth is that Henry Ford (and every other
entrepreneur) drafted behind both public-sector and private-sector investments
that preceded him and his own innovations. The marine-engine business helped
lay the foundations for the subsequent success of Detroit’s automotive
industry, but so did roads and schools and the like. There’s a word for that: civilization.
Isaac Newton was not the only one who stood on the shoulders of giants. All of
us do. (And not just giants: Nobody invented the automobile or the
internal-combustion engine. There were thousands and thousands of contributors
to that subtle and spectacular evolution.)
If it seems like we have drifted a long way from the
original point about the role of the work force in the entrepreneurial process,
we haven’t.
***
The current argument about the future of capitalism is
about a lot of different things, some of which are only tangentially related to
one another. Some of these considerations are matters of narrow political
self-interest: Senator Rubio et al. have discovered that there is some juice in
Trumpian neo-mercantilism and believe, with good reason, that there is even a
little cross-partisan appeal to it. They have failed to articulate a set of
policies or meaningful principles to go along with that hunch, but if President
Trump has shown Republicans anything, it is that policies and principles are
optional for a working majority of right-leaning voters, who can be had at the
price of some vague grumbling about the national interest and intellectually
dishonest claptrap about how “market fundamentalists on the right want more
record-setting days in the stock market above all else,” as Senator Rubio put it.
I will reiterate here two things: The first is that
Senator Rubio is engaged in a political fight to the death with a straw man,
and that so far the fullest expression of his conception of the national
interest in economic policy is subsidies for politically connected sugar
producers in Florida. In politics, vague principles rarely stand up to specific
demands from specific constituents.
On the wider cultural front, the fight about the future
of capitalism is in no small part a matter of status competition, less a
question of economic development than of how we talk about economic issues.
Practitioners of resentment politics wish to reduce the prestige of cultural
rivals, and so we have the strange spectacle of our so-called nationalists
abominating the actual centers of American power, prestige, and influence:
Silicon Valley, Wall Street, the Ivy League, Hollywood, etc.
Both Warren-style progressives and right-wing critics
such as my friend Michael Brendan Dougherty seek to undermine the heroic
account of entrepreneurship and corporate success traditionally put forward by
apologists for capitalism. For these critics, the professional and financial
elites represent a morally corrupt class that needs to be taken down a peg —
those of you who have followed this conversation for a while will remember that
Dougherty’s famous thought experiment about Garbutt, N.Y., had conservatives
advancing the interests of “a typical coke-sniffer in Westport” and his in-laws
down the road in Darien. Their argument is at heart about social status,
holding that the finance workers in Fairfield County and the multinational
firms that employ them deserve less admiration, as do the start-up founders and
venture capitalists on the opposite coast, which is why it is important that they
be cocaine enthusiasts or sexual deviants or whatever for purposes of political
narrative if not in real life, where the coastal elites practice the bourgeois
values (stable marriages and thrift and relative sobriety and all that) to a
remarkable extent.
At the same time, the same critics argue that we should
have more sympathy for those who are stuck in economically stagnant and
socially backward communities and who do not wish to leave them. Dougherty
presents this explicitly as a sympathy deficit on the part of the capitalism
camp: “Any investments he made in himself previously are for naught. People
rooted in their home towns? That sentimentalism is for effete readers of Edmund
Burke. Join the hyper-mobile world.”
Though the protectionism put forward by the likes of
Trump and Rubio is couched in the language of national interest, it is the
opposite of that: Americans as a whole would be better off with lower food
prices, but a small handful of Americans is much better off with higher prices
secured by the policies supported by Rubio and other like-minded politicians.
Americans as a whole are much better off when markets are allowed to allocate
resources efficiently, but there is a vast and politically significant
archipelago of communities that would prefer that certain inefficiencies be
preserved, because their livings are tied to those inefficiencies and their
communities have been built atop them. Detroit in 1960 was on top of the world
— it was the highest-income city in the United States. Detroit would have been
very comfortable if it could have been frozen in time, economically, in that
moment. And a very wide array of politicians and activists, from local union
leaders to President Ronald Reagan, took extraordinary steps to try to preserve
the position of the U.S. automotive industry, with the disastrous consequences
that you can see in front of you in Detroit today.
The things that gave Detroit its critical advantages in
the early 20th century were not things that could be planned out in advance by
super-intelligent philosopher-kings in the bureaucracies. Creating a
marine-engine industry that would help to prepare the workforce for an
automotive industry that would not exist until decades in the future is not the
kind of plan that mere mortals can conceptualize or execute. If you had tried
to explain to the best and most forward-looking thinkers of Detroit’s golden
years that China and India would soon enough be significant high-tech
competitors, they would have laughed at you. Also, if you’d told them that one
of the biggest and most valuable U.S. companies in 2019 would be an electronic
bulletin board where you can go to denounce your aunt as a hate-monger,
they would have been perplexed, as, indeed, some of us are. Remember that many
of the best minds of the time believed that the automobile would be a passing
fad.
Conservatives like to laugh at Paul Krugman, revisiting
his long-ago prediction that the Internet would prove no more economically
significant than the fax machine, but nobody is really very good at predicting
the future of economic developments at any meaningful level of detail. Go spend
some time around private-equity investors and see how they come by their
billions: They are smart, but they are not superhuman, and they do not have any
special insight into long-term economic trends — they do a tremendous amount of
grunt-work discovering and creating value in ordinary companies and complex
deals, inch-worming their way through. That’s how a lot of wealth gets built.
That’s the real world. And Senator Rubio scoffs at it as fiddling with
“financial flows detached from real production,” as though factories just built
themselves.
***
You couldn’t have planned Detroit’s success. But you
could have avoided its catastrophic failure. Detroit was not done in by lack of
clever industrial policy or by shortage of some other species of cleverness. It
was done in by corrupt and ineffective government and a local political culture
that went from bad to worse to much worse to Coleman Young. They tried to save
Detroit with tariffs and failed. They could have saved it with safe streets and
functional schools and the hundred thousand other tiny needful things that good
governments do well.
Good government — including a steady, stable, predictable
policy environment — multiplies the value of labor, just as training and
capital do. That is why investment capital around the world for years has
flowed largely to well-governed countries, most of them liberal democracies,
with the largest recipients of foreign direct investment being the United
States and the European Union. (China, the important exception to that rule, is
not well-governed; it is governed brutally but predictably, an ugly but useful
reminder that stability has economic value, too.) There are many places that
businesses could go in search of low wages and a loose regulatory environment,
but you aren’t driving a car made in Haiti or using a computer built in
Burundi. Investors aren’t putting a lot of money into factories in Yemen or Afghanistan.
And that is what is so irritating about Senator Rubio’s
new push for “industrial policy.” Is the U.S. government really performing its
core duties so well, so ably, so competently that we need to add to them with
additional duties that demand a kind of competence it does not have and cannot
acquire?
The truth is something closer to the opposite: The U.S.
government is in many cases a force for instability and non-confidence in our
national economic life. Peter Navarro’s position as Trump’s China hand is as
ridiculously implausible as Hunter Biden’s role on the board of Burisma, but
there he is, whispering into the president’s ear. Senator Rubio is no less
implausible in his belief that he has eagle eyes to detect subtle national
interests in complex economic affairs of which he has no substantial first-hand
knowledge. His problem isn’t stupidity — it’s hubris.
A nation as rich as ours can afford a great deal of
stupidity, but hubris is expensive.
Senator Rubio represents a government that has shown
little competence in the small and ordinary things. It cannot even manage to
follow its own ordinary processes for creating budgets or appropriating funds,
instead lurching from season to season with a series of “emergency” measures in
a state of never-ending crisis. You might think that that would be the cause of
some modesty and circumspection in Washington. You would be wrong.
Rather than monkeying around with things that are beyond
his ken and outside of the credible operating capacity of the U.S. government,
Senator Rubio should be seeing to some of the things that might actually make a
difference. The U.S. government is on a catastrophic fiscal course that will,
without reform, eventually result in a ruinous debt crisis the likes of which
the world has never seen. (We’ve seen fiscal crises in Canada and Argentina,
but the U.S. economy represents nearly a quarter of the world’s economic
output.) We have entitlement programs that are in need of reform, decaying and
archaic infrastructure under federal purview, serious K–12 educational problems
entangled with federal policy, a tax code in great need of simplification, a
series of worldwide military engagements that have failed or are on the verge
of failing, enormous deficits, an out-of-control presidency and administrative
state, etc., all of it under the responsibility of a federal apparatus that
cannot even produce an accurate count of how many programs it administers.
Senator Rubio and his colleagues are like fast-food workers who haven’t yet mastered
the drive-thru but demand a seat on the board of the company: They are not
doing a very good job with the responsibilities they already have.
And many of those are responsibilities that cannot be
taken on by anybody else: If the United States is to have an immigration system
characterized by intelligence and decency, or a federal criminal-justice system
characterized by justice, then the federal government is the instrument that is
going to bring that about. These tasks cannot be delegated to the Chamber of
Commerce or the Rotary Club. But rather than see to these, and other authentic
federal responsibilities, Senator Rubio would spend his days micromanaging the
world’s mining markets lest the sneaky Chi-Comms hoard all
the ytterbium.
(Seriously.)
What was true for Detroit is true for the United States
as a whole. The first step toward success in government is avoiding failure,
and what emerges from the complicated story of Detroit’s success and the
relatively simple story of its failure is not that government must master
economic complexity and put it in harness but rather that government must do a
lot of relatively simple things well. Detroit did not need a Thomas Jefferson
or a Mohandas Gandhi or another great political philosopher with a world-changing
idea — it needed someone to fix the potholes, balance the books, keep order on
the streets, see to the schools, and keep the city agencies orderly and honest
and effective. Without that, all of Detroit’s productive capital — physical,
financial, and human — was devalued and ultimately dispersed.
Detroit’s fall happened hard and fast. As the poet said,
Goin’ down slow ain’t the only way to go. Deride “financial flows detached from
real production” all you like, but if you want workers to have jobs, then you
need enterprises to employ them. If you want enterprises to employ them, then
you need investment. And if you want investment, then you need good government
and a stable, predictable policy environment, not Senator Rubio freelancing
around the economy like a kid trying to play chess without even knowing how the
horsey-thingies move.
The U.S. economy is a vastly complex system with
countless variables. Here’s a puzzle with only three variables: 1. There are
about 5.7 million unemployed people in the United States right now. 2. We have
thousands and thousands of jobs going unfilled because employers cannot find
workers to fill them. 3. We spend about $10 billion a week on unemployment
benefits.
Sort that out and the ytterbium will take care of itself.
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