The Unions and Detroit–Not the Problem?

John Tamny’s piece in Forbes, July 21, 2013, entitled “The Unions Didn’t Bankrupt Detroit, But Great American Cars Did,” provides an interesting take on the issue, using Silicon Valley as a contrast.

Tamny spends time recounting the damage done to Detroit by a free floating currency and the recent auto bailouts,

The weak dollar made the Big Three uncompetitive, and the bailouts simply added gasoline to the fire.

…having been saved by a federal government that never hands out billions for free, they’re now a creature of a meddling Washington, D.C. …and a dying union movement.

Tamny then discusses how easy it has become to make good cars, in his words ‘yesterday’s innovation.’

…because they’re yesterday’s innovation the profits in the space aren’t sufficient to attract talent or investment.

…why produce what anyone can?  If anyone can produce something , the margins are naturally going to be small.  Cars today fall into the ‘anyone can produce them’ category, and the fact that they do explains Detroit’s demise more than anything else.

He then draws a contrast to Silicon Valley,

When Apple Inc. puts out ads about how its goods are ‘designed’ in California,’ the tech giant is speaking volumes about Detroit’s problems.

…Silicon Valley would be destitute too if its companies used limited U.S. labor to manufacture computers that anyone can make.

Finally,

…Detroit is bankrupt because its biggest employers still manufacture–as opposed to simply design–cars that anyone can make.

 

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