Jun 4 2009, 3:45PM
Ronald Reagan And General Motors
I find it genuinely interesting that Republicans are able to describe
Obama's General Motors bankruptcy plan into the most unAmerican thing
since France. The idea of the government owning a large car
manufacturer is not extremely appetizing, but it's hardly the first
time the government has staged a major intervention on behalf of the automotive industry. And the
last time, as far as I can tell, was under Ronald Reagan.
It
doesn't get mentioned much, but in 1981 the Reagan Administration asked
Japanese automakers to impose a "voluntary export restraint" (VER),
which capped at 1.68 million the number of cars Japan could send to the
United States each year. Reportedly, this was under threat of an
outright tariff, but the VER accomplished just about the same thing.
Prices of Japanese cars went up, which allowed American manufacturers
to raise their prices too. (This was great for the protected industry
-- in the short run -- and bad for the American consumer.)
In
the long run it led to foreign manufacturers building a lot of plants
in the US, since cars manufactured here were exempt from the VER. From
the Federal Reserve Bank of Chicago (pdf):
"Having agreed to limit the level of vehicle exports to the U.S., the
major Japanese automakers all started producing vehicles in North
America. That development resulted in a rather dramatic shift in
production by the foreign carmakers from overseas to North America." So when you think dramatic market interventions that fundamentally changed the face and stability of the American car industry, please, don't forget Ronald Reagan.
Image from Wikimedia Commons
Beats me why conservatives all venerate Reagan so much!
The really bad budget deficits started during his administration. Despite the free market rhetoric, you have actions like this in the car industry. And despite all the talk of cutting the size of government, it just grew.
If Chrysler had failed way back when, perhaps there would have been union reforms in the auto industry. If GM had slowly shrunk and workers had found new jobs, we wouldn't be in the situation we are now, where it's either bail out half the industry or watch a whole region suffer mass unemployment.
So yeah, Reagan was a disaster. You don't have to convince me of that...
I think I missed this from a few days ago ... I'm pleasantly surprised!
Huh? Pushing trade restrictions is similar to actually *owning* a car company? Really?
Jeebus.
The thing is, Conor Clarke could actually have made an intelligent point - that Reagan helped Chrysler with loan guarantees - rather than this strange idea that trade restrictions (and voluntary ones at that!) are somehow equivalent to outright nationalization.
Boy, you're getting on my case a lot recently. Ouch!
Anyway, no one is saying they're equivalent. The point is that the government has intervened in the automobile market plenty of times, to varying degrees, under both democrats and republicans. The notion that the Republicans are for "letting car companies stand and fall based on their success in the free market" while the democrats are for nationalizing every cracker company across theland is crazy.
And that voluntary stuff is mostly a euphemism.
Conor