It’s quite fashionable today to blame the unions for many of America’s economic woes. However, the unions did not bankrupt United Airlines, Delta, Continental, Northwest, TWA, or US Air. Nor did they cause the collapse of Pan Am, Eastern, or Braniff. Southwest, the most profitable airline, is highly unionized while Delta is the least unionized of the major airlines. Labor also did not bankrupt K-Mart or close Home Base and The Good Guys. Blame competition and the failure of management.
Don’t fault the UAW for the recent 30,000 job cuts and 12 plant closings by GM. Nor is it responsible for the 75,000 GM layoffs and 21 shuttered facilities in 1997. The union also did not hand out 75,000 pink slips and close 11 factories in 1986. No, the auto workers are not responsible for the 40 year decline in GM.
Yes, the auto workers are overpaid, have Cadillac class medical coverage (even for retirees), and retirement plans most of us can only dream of. And yes, we caution ourselves against buying cars manufactured on Mondays, Fridays, the opening day of hunting season, and even the first year of production.
However, the real onus is on management, the highly overpaid executives, for creating and tolerating these practices, and more critically, for not producing cars Americans want to buy.
There is nothing wrong with GM that selling more cars wouldn’t solve, but GM does not produce the cars we wish to buy. One-quarter of the vehicles sold in California are Toyotas.
Cars are sold on design, price, quality, mileage, safety, and functionality. When is the last time GM produced a “must-have” car that we rushed to buy? Decades of high-priced, low quality, and poorly designed GM vehicles have no cachet in the marketplace. Ford had the Mustang, Taurus, and Explorer while Chrysler markets the 300. GM gave us the Aztek, Catera, Chevette, Cimarron, Citation, Corvair, Nova, and Vega,
Those of us who are children of the 60”s remember the teachings of John Kenneth Galbraith and Charles Reich that the great American corporations were immune to competition, could administer prices, and ignore consumers. The Japanese, Germans and Koreans did not read their books.
GM captured over 60% of the domestic market at its peak in the 1960’s and had highly profitable operations in Australia, Canada, Europe and Mexico. Today, its domestic share is down to 26% and it is hemorrhaging money overseas. No, the UAW has not killed Detroit. It took four decades of colossal mismanagement to blow a near monopoly. Only gross incompetence could turn Cadillac, the standard of luxury cars, into an also-run behind Lexus, Mercedes and BMW. Only gross mismanagement could shut down Oldsmobile, a brand which was the third largest selling brand with over a million vehicles sold in 1986.
Once GM became a near monopoly, it created a massive bureaucracy stifling innovation. It became, and remains, a follower rather than a leader. Three major vehicles types were created in the past 60 years: SUV’s (Willys Jeep), Pony cars (Ford Mustang), and minivans (Chrysler). Both the Mustang and minivan were creations of Lee Iaccoca. The New Millenium has witnessed hybrids by Honda and Toyota. GM lagged in developing front wheel drive vehicles. It never caught up in minivans, and no longer produces cars to compete with the Mustang.
GM introduced a revolutionary new car, the Saturn, to great acclaim two decades ago, and then proceeded to starve it of new products. Saturn has consistently lost money for GM as the brand has languished in the marketplace.
Charles E. Wilson, the President of GM, stated to the Senate fifty years ago that “What’s good for the country is good for General Motors, and what’s good for General Motors is good for the country.” GM has adhered to the second half of the quote in the face of revolutionary changes in the auto industry, two Arab oil embargoes in the 1970’s, and the onslaught of Japanese cars. Pollution control, safety, and fuel mileage became major concerns. GM did not, could not, change; it stubbornly clinger to the flawed business model that said it knew best what was best for America. It never learnt how to build well designed, quality small cars, and surrendered the mid-size market to Accords and Camrys.
Indeed, fifteen years ago GM quietly disinvested in automobiles to concentrate on large trucks and SUV’s – truly a Faustian bargain. At some point the Japanese would build full size pickups and large SUV’s while the price of gas was certain to rise, thereby imperiling GM’s cash flow. It also squandered billions of its scarce capital in Fiat and Saab. (Of course, Ford has poured $10 billion into Jaguar, but that’s another story.) GM has relied on rebates and fleet sales to car rental companies to sell cars. The rebate costs per vehicle exceed its medical expenses per car sold.
The greatest edge GM had was economies of scale. Whatever its added costs for medical and retirement were more than offset by production efficiencies. Its per vehicle costs for advertising, tools and dyes, and overhead gave it a profit margin greater than any competitor. Only four decades of poor management could squander this cost advantage by producing cars Americans did not want to buy.
Tuesday, September 11, 2007
Monday, September 10, 2007
Bush's Legacy
This will be the blog of a conservative law professsor. My first offering is on the legacy of Bush
THE LEGACY OF GEORGE W. BUSH
The defeat of the Immigration Reform Plan couples with the assumed stalemate in Iraq has resulted in pundits widely proclaiming the failed presidency of the Bush Administration. George W. Bush, R.I.P.
A little history will throw cold water on this instant analysis. Almost every President since FDR has similarly “failed.”
Of the 11 post-Roosevelt Presidents, only five (Ike, Nixon, Reagan, Clinton, and Bush II) were elected to two four year terms. All had second term malaise. Of these, Nixon resigned and Clinton was impeached. Neither Ike nor Clinton, as with LBJ, saw their Vice Presidents elected as their successor to the Presidency. Ike and Bush II both lost Republican Congresses, Clinton said goodbye to a Democratic Congress, and Reagan a Republican Senate.
Ford, Carter, and Bush I were defeated for reelection, while Truman and LBJ dropped their reelection bids. Just as Bush II is plagued by Iraq, Truman was hurt by Korea and LBJ and Nixon dragged down by Vietnam. The American public lacks patience with seemingly interminable wars without visible progress.
The difference between success and failure is often very thin. For example, had General Sherman not fortuitously won a major battle shortly before the 1864 election, President Lincoln would surely have lost reelection and probably gone down in history as a failure. The North, led by President McClellan, may have sued for peace. The platform of the Democratic Party declared the war a failure.
Nixon’s Watergate resignation was ultimately brought about by Deep Throat, the Deputy Director of the FBI, W. Mark Felt, who was upset about being passed over as J. Edgar Hoover’s successor. His revenge was to bring down a President, and unleash three decades of blind partisanship, special prosecutors, and calls for impeachment.
Truman (North Korea’s invasion of South Korea), Ike (Gary Francis Powers and the U2), JFK (Bay of Pigs), Carter (Soviet invasion of Afghanistan), Reagan (Iran-Contra), Bush I (Saddam Hussein invasion of Kuwait), Clinton (bombing a civilian factory) and Bush II (Hussein and WMD) all had intelligence/CIA failures. Carter, Reagan, Bush I, Clinton, and Bush II successively experienced the ferocity of Islamic fundamentalism.
Every President since Truman has had problems with Fidel Castro and Cuba. Elian Gonzalez probably elected Bush II President.
Ike, LBJ, Nixon, Ford, Carter, Reagan, Bush I and Bush II combated economic problems during their administrations, including recessions, inflation, and stagflation. No President has been able to control the ever burgeoning farm subsidies. Bush I and now Bush II have had major banking crises in their administrations.
Humans being human, scandals will occur. Truman, Ike, LBJ, Nixon, Carter, Reagan, Clinton, and Bush II all witnessed major scandals, some self-inflicted, in their administrations.
I’ve said little about JFK because he was not in office long enough to judge, and the charisma of Camelot still blinds us. JFK most likely would have been reelected, but Vietnam would have become the deciding point of his second term.
What history tells us is that every Presidency has successes and failures, legislative victories and defeats, and foreign policy accomplishments and disappointments. Every Presidency has its ups and downs, but only with the passage of time can we objectively assess historical figures.
Bush’s political failures in the second term were the result of willing to expend political capital on the difficult issues of social security and immigration. History will tell us in decades that Bush was right to tackle both. Neither status quo is sustainable for America. While social security reform failed, Bush successfully introduced measures to temper the rise in Medicaid.
Katrina was a collective failure of government at all levels. Since legally the initial response to a natural disaster is state and local, most onuses should fall on the Democratic Governor of Louisiana (who is not running for reelection) and the Democratic Mayor of New Orleans.
Iraq is a different story, but as with immigration reform, the effort is based upon a core set of beliefs rather than the polls. Bush’s legacy may well be defined by the outcome- not in Iraq- but in the Mideast, and that we will not know for decades.
The fundamental problem in Iraq is the Peace Dividend. The United States at the end of the Cold War, as it has after every major war, substantially downsized the military. The Pentagon lacks the troop size today to fight a long sustained ground war.
Conversely, the substantial military cutbacks initiated by Bush I and carried through by Clinton resulted in Clinton balancing the budget.
As we mull over his supposed failures, we forget the tremendous successes. First are the tax cuts which are fueling a solidly based economic boom. Second is the liberation of Afghanistan. Even if Iraq turns out unsuccessful, let us not forget that Libya gave up its WMD program. And it appears that North Korea is closing down its nuclear reactor. Faith based initiatives have survived challenges, and the Supreme Court has become conservative. “No Child Left Behind” has brought a degree of accountability to public education, and the Medicare Act of 2003 with its prescription drug coverage is resulting in lower prescription drug prices to an ageing population.
A similar list of successes exists for every President. For example, Truman, Ike, and LBJ all fostered tremendous civil rights progress for minorities – a fight which still continues.
Everything else will be moot if Bush’s missile defense program results in shooting down a nuclear tipped missile fired at the United States. Bush’s (and Reagan’s) legacy will be secured.
THE LEGACY OF GEORGE W. BUSH
The defeat of the Immigration Reform Plan couples with the assumed stalemate in Iraq has resulted in pundits widely proclaiming the failed presidency of the Bush Administration. George W. Bush, R.I.P.
A little history will throw cold water on this instant analysis. Almost every President since FDR has similarly “failed.”
Of the 11 post-Roosevelt Presidents, only five (Ike, Nixon, Reagan, Clinton, and Bush II) were elected to two four year terms. All had second term malaise. Of these, Nixon resigned and Clinton was impeached. Neither Ike nor Clinton, as with LBJ, saw their Vice Presidents elected as their successor to the Presidency. Ike and Bush II both lost Republican Congresses, Clinton said goodbye to a Democratic Congress, and Reagan a Republican Senate.
Ford, Carter, and Bush I were defeated for reelection, while Truman and LBJ dropped their reelection bids. Just as Bush II is plagued by Iraq, Truman was hurt by Korea and LBJ and Nixon dragged down by Vietnam. The American public lacks patience with seemingly interminable wars without visible progress.
The difference between success and failure is often very thin. For example, had General Sherman not fortuitously won a major battle shortly before the 1864 election, President Lincoln would surely have lost reelection and probably gone down in history as a failure. The North, led by President McClellan, may have sued for peace. The platform of the Democratic Party declared the war a failure.
Nixon’s Watergate resignation was ultimately brought about by Deep Throat, the Deputy Director of the FBI, W. Mark Felt, who was upset about being passed over as J. Edgar Hoover’s successor. His revenge was to bring down a President, and unleash three decades of blind partisanship, special prosecutors, and calls for impeachment.
Truman (North Korea’s invasion of South Korea), Ike (Gary Francis Powers and the U2), JFK (Bay of Pigs), Carter (Soviet invasion of Afghanistan), Reagan (Iran-Contra), Bush I (Saddam Hussein invasion of Kuwait), Clinton (bombing a civilian factory) and Bush II (Hussein and WMD) all had intelligence/CIA failures. Carter, Reagan, Bush I, Clinton, and Bush II successively experienced the ferocity of Islamic fundamentalism.
Every President since Truman has had problems with Fidel Castro and Cuba. Elian Gonzalez probably elected Bush II President.
Ike, LBJ, Nixon, Ford, Carter, Reagan, Bush I and Bush II combated economic problems during their administrations, including recessions, inflation, and stagflation. No President has been able to control the ever burgeoning farm subsidies. Bush I and now Bush II have had major banking crises in their administrations.
Humans being human, scandals will occur. Truman, Ike, LBJ, Nixon, Carter, Reagan, Clinton, and Bush II all witnessed major scandals, some self-inflicted, in their administrations.
I’ve said little about JFK because he was not in office long enough to judge, and the charisma of Camelot still blinds us. JFK most likely would have been reelected, but Vietnam would have become the deciding point of his second term.
What history tells us is that every Presidency has successes and failures, legislative victories and defeats, and foreign policy accomplishments and disappointments. Every Presidency has its ups and downs, but only with the passage of time can we objectively assess historical figures.
Bush’s political failures in the second term were the result of willing to expend political capital on the difficult issues of social security and immigration. History will tell us in decades that Bush was right to tackle both. Neither status quo is sustainable for America. While social security reform failed, Bush successfully introduced measures to temper the rise in Medicaid.
Katrina was a collective failure of government at all levels. Since legally the initial response to a natural disaster is state and local, most onuses should fall on the Democratic Governor of Louisiana (who is not running for reelection) and the Democratic Mayor of New Orleans.
Iraq is a different story, but as with immigration reform, the effort is based upon a core set of beliefs rather than the polls. Bush’s legacy may well be defined by the outcome- not in Iraq- but in the Mideast, and that we will not know for decades.
The fundamental problem in Iraq is the Peace Dividend. The United States at the end of the Cold War, as it has after every major war, substantially downsized the military. The Pentagon lacks the troop size today to fight a long sustained ground war.
Conversely, the substantial military cutbacks initiated by Bush I and carried through by Clinton resulted in Clinton balancing the budget.
As we mull over his supposed failures, we forget the tremendous successes. First are the tax cuts which are fueling a solidly based economic boom. Second is the liberation of Afghanistan. Even if Iraq turns out unsuccessful, let us not forget that Libya gave up its WMD program. And it appears that North Korea is closing down its nuclear reactor. Faith based initiatives have survived challenges, and the Supreme Court has become conservative. “No Child Left Behind” has brought a degree of accountability to public education, and the Medicare Act of 2003 with its prescription drug coverage is resulting in lower prescription drug prices to an ageing population.
A similar list of successes exists for every President. For example, Truman, Ike, and LBJ all fostered tremendous civil rights progress for minorities – a fight which still continues.
Everything else will be moot if Bush’s missile defense program results in shooting down a nuclear tipped missile fired at the United States. Bush’s (and Reagan’s) legacy will be secured.
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