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What's Good for General Motors Is... Never Mind

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Created 05/13/2009 - 9:29am

Is the Obama administration saving General Motors or is it saving auto industry jobs in the U.S.? Is it saving GM as an American brand or GM as an American manufacturer?

These aren't academic questions. General Motors, which has been buttressed by $15.2 billion in loans from taxpayers with more to come, has been circulating a plan [2] for its recovery which envisions it doubling the number of cars that it builds in China, Korea and Mexico and sells in the U.S. According to a United Auto Workers analysis, GM projects opening the equivalent of four plants abroad to build cars for the U.S. market, while closing more than that here at home.

Labor costs in those countries are far lower. While paying a U.S. autoworker with benefits cost about $54 an hour (before the massive concessions), a South Korean worker earns about $22 an hour, a Mexican worker earns less than $10 an hour and some Chinese workers can earn as little as $3 an hour. This may make sense for GM's bottom line, but it makes no sense for American taxpayers.

Although GM is an American brand, it is a global manufacturer. What's good for GM is no longer necessarily good for America.

This isn't the first time the administration's efforts to rescue the U.S. economy have run into the reality of globalization. The furor over the bonuses paid to AIG executives distracted from the real scandal: that $93 billion in taxpayer money was funneled not simply to Goldman Sachs, which is bad enough, but to a parade of Europe's leading banks--Germany's Deutsche Bank, France's Societe Generale, UK's Barclays. No explanation was made on why U.S. taxpayers had to pick up the entire tab.

Knowing that the U.S. can't afford to lift the entire global economy, Obama went to the G-20 meetings intent on getting Europeans to adopt bold deficit-financed recovery plans like that of the U.S. But, led by the Germans, the Europeans pretty much stiffed the president they so admire. That left the U.S. to do the lifting, and rack up the debts, dangerously weakening the recovery effort.

Saving good jobs in America can't be done simply by rescuing GM or Chrysler. The Europeans get this. The Italians provided $1.7 billion in aid to Fiat, on the condition that the plants stay open in Italy. France loaned $8.5 billion to its big three automakers, but again with pledges to retain jobs in France.

The U.S., however, is the champion and the protector of the global market. Americans have served as the consumers of last resort for the world. We've largely spurned industrial policy--other than that associated with the military industrial complex, agribusiness and finance. We've followed--from Reagan to Rubin--a high-dollar policy that made imported goods a bargain and U.S. exports expensive. We've allowed our global corporations and banks to define our trade policy, while borrowing $2 billion a day to cover record trade deficits. As William Greider summarizes [3], we've assumed that aiding multinationals in the global economy served the national interest. "That is how America became a debtor nation with its steadily weakening industrial base and stagnant wages. That condition became the predicate that led to financial crisis."

Now those days are over. Our trading partners must be put on notice that the old order isn't coming back. The U.S. can no longer afford to borrow unsustainable amounts to buy stuff made abroad with the jobs our companies have moved there. We need to lower the dollar and balance our trade. We need to build things in America once more.

Saving GM won't work without broader changes. Export-led countries like Germany and China must be challenged to generate internal demand (the Chinese have done far more of this than our European allies) to help reverse the global downturn and as a first step to a new and sustainable growth model. Taxpayer dollars should be conditioned on the maintenance of good jobs here--rather than subsidize their export abroad. We should be leading, as Obama has done, global efforts to help developing nations recover and lift their own standards in the process.

Demanding that taxpayer dollars go to save jobs here will be denounced as protectionist. But it is squandering billions in public monies on companies that then move jobs abroad that will fuel a protectionist fury.

Save General Motors or save an auto industry and jobs in America? The president and the Congress have to decide. It ain't necessarily the same thing.

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Robert L. Borosage is the president of the Institute for America's Future and co-director of its sister organization, the Campaign for America's Future. The organizations were launched by 100 prominent Americans to challenge the rightward drift (more...)

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