Buy stuff you don't want to save Detroit

If he loses his pension, it's because you wouldn't buy an SUV

Is the American consumer to blame for Detroit's woes?

In a column featured in Monday's Detroit Free Press, Stephen Schiavi, a graduate of the University of Detroit and a retired teacher, says that Americans' unwillingness to buy gas-guzzling American-made SUVs and trucks is the equivalent of stabbing the Detroit blue-collar worker in the back.

His column mostly seems to be based on his experiences in a return visit to Detroit for a wedding, where he met several retired workers who were worried that their former employers wouldn't be able to meet their pension commitments. His concern for these folks' future is admirable, but his analysis of the problem is – to put it mildly – unadulterated protectionist nonsense.

The crux of his argument is this (emphasis mine):

In our quest to find cheap labor elsewhere, we have supported other countries becoming more productive, and that has advanced them economically. Therefore, we helped to implement the decline of our own economy.

A common affliction

Though he graduated from a good university, Mr Schiavi is quite clearly no economist. He suffers from a common affliction, however: believing that economic growth in one country necessarily corresponds to economic downturns in another.

The facts, of course, belie the problems of his argument. The US economy has been clipping along at a pace faster than developing economies like Poland, where GM, Ford, and associated manufacturing companies like Delphi have made significant investments over recent years. Most importantly, both economies were growing at a healthy rate of over five percent simultaneously. Poland's gain (for example) did not correspond to the US' loss.

Referring to American carmakers' problems with funding their pension commitments, Mr Schiavi notes, "This is not happening to the foreign automakers." Indeed. One of the biggest reasons for this difference is the fact that foreign auto makers moved more quickly to offset growing labor costs by moving production to countries outside their home market. I hope that he wouldn't deny American carmakers the opportunity to do likewise and remain competitive long enough to pay off those pensions.

Mea culpa

Admittedly, the US economy's growth took a dip this month that few were expecting. Could this have come as a result of Americans not buying enough Detroit cars?

As Detroit thrived, so, too, did America. Not anymore. As Detroit now suffers, so do we. Any industry associated with the manufacture, or lack thereof, of American cars and automobile equipment or accessories, will also suffer.

It's true enough that industries solely associated with the manufacture of American cars would take a hit due to the woes of Detroit's big car manufacturers, but few such industries exist. Let's please remember that car companies which we generally call "foreign" such as Toyota or Honda, actually produce many cars in America. As a result, the smart auto-parts producers have diversified their client base, and make products for "foreign" and domestic cars alike. Though their "American" clients may be buying less, their "foreign" clients are buying more. The Americans that these companies employ have secure jobs.

The figurative finger

Which brings us to another problem with Mr Schiavi's argument: By buying a Toyota or a Honda, American consumers are actually supporting American (though admittedly, not Detroit) workers. If by buying a Honda made in Alabama is showing the Detroit worker that "we don’t care about each other anymore," then isn't someone who buys a Ford Fusion – as his daughter plans to do – giving a figurative finger to that poor Alabama worker? What is a patriotic American-job supporting protectionist to do?

(Indeed, it seems from cursory research that Honda has an emissions lab in Ann Arbor, Michigan. What would happen to the high-tech jobs there – just the sort Michigan needs, by the way – if Americans were to stop buying Hondas?!)

No regrets

Mr. Shiavi trumpets that ever since being berated by Detroiters for driving a Honda, he has turned to American brands, specifically Ford, and has “never regretted” his purchase of an F-150. He implores others to do the same.

But the Ford F-150 is a gas-guzzler that damages the environment and is expensive to drive. Being retired, Mr Schiavi probably doesn't have to worry about commuting to work, nor driving the kids to school or soccer practice. That he chooses to spend more on gas is fine, but should he expect tight-budgeted families to take on a hugely expensive purchase in order to "support the Detroit worker"? Should he expect environmentally- conscious families to contribute to global warming in order to "respond to others' problems"?

In fact, the money these families save on things like gas when they buy "foreign" does not disappear. It is spent elsewhere – even on other American-based industries. It went, perhaps, towards buying a home computer – something which would have contributed to the recent boom in America's computer industry. Maybe it went towards buying more healthy locally-grown vegetables. Maybe it went towards a cafe latte from Starbucks, or Florida orange juice. Maybe it was invested in a local small business.

What goes around

By buying cheaper – or more efficient – goods, Americans earn more money to spend elsewhere and support different sectors of the economy. When American companies move jobs to Poland, it gives Poles a better opportunity to buy American goods – like the Opel make of GM cars here, which is becoming increasingly popular. Ford and GM planned poorly and produced products of little use to the American economy. Americans quite rightly invested their money better. Ford and GM have suffered for their mistakes, and let’s pray they’ve learned their lesson. Detroit will live on, the Detroit worker will live on.

As for the retirees who are caught in the crossfire, better to invest in better pension guarantee schemes and promoting private investment, than to throw our money away carelessly in the pursuit of a romantic economically patriotic ideal which hamstrings us from investing in something that would actually improve our lives.