Henry Ford's adoption of mass-production techniques to produce the Model T was soon emulated by other U.S. automobile companies and helped to propel automobile manufacturing into a controlling position in the U.S. economy.
From the end of World War Two through the 1970s, the U.S. automobile market was almost entirely dominated by domestic manufacturers. GM, Ford, Chrysler, and American Motors were the big four, but other domestic manufacturers included Kaiser Motors, which made automobiles at Willow Run, Michigan, United States, from 1945 to 1953, and the Hudson Motor Car Company, which made automobiles in Detroit, Michigan, from 1909 to 1954, and then merged with Nash-Kelvinator.
The singular importance of General Motors to the American economy during that era was epitomized in the misstated quotation from former GM Chairman, Charles Wilson, "What's good for General Motors is good for America." And, to a very great extent, that misstated quote did reflect the American reality: Millions of Americans employed by the automobile manufacturing industry, by virtue of the wages and benefits they received, were able to become prosperous members of the American middle class, educate their children, and enjoy good retirements.
Equally important, during that era the American automobile industry performed a critical function as a lever industry. As demand for domestic automobiles increased, that demand, in turn, stimulated the aggregate demand as secondary and tertiary sectors of the economy such as domestic manufacturers of glass, rubber, steel, plastic and precision machine parts became profitable and increasingly employed more workers at better wages. Hence, when President John Kennedy proposed a middle class tax cut in his administration, which the Congress enacted, it had an immediate stimulative effect as middle income recipients went out and purchased American automobiles and, as a consequence, the multiplier effect of those purchases reverberated throughout the American economy.
At the end of the Vietnam era, from 1971-1973, U.S. automobile profits began to decline and that trend continued thereafter. By 1998, the market share of the three remaining U.S. automobile makers had declined to 70% and by 2008, the domestic share of the automobile market held by remaining three American automobile manufacturers was reduced to 53%. In fact, just a year before the current economic meltdown began in 2008, Japan exported $41.3 billion in automobiles to the U.S., and Japanese cars represented 77% of all automobiles that the U.S. imported from Pacific-Rim countries in 2009.
In an article by CNN Money senior writer in 2009 entitled "Support The U.S. Economy. Buy American," Peter Valdes-Dapena quoted Thomas Klier, an economist with the Federal Reserve Bank of Chicago who wrote extensively on the auto industry: When it comes to longer term benefits, a lot of activity happens in the country in which the company's world headquarters is domiciled." Klier further observed that buying a Ford or General Motors car was still preferable for the American economy and for American workers, even if the particular vehicle was built in Mexico, Canada or Korea since American car companies made more cars and employed more workers in the United States than did automakers based in other countries.
Klier explained that, for example, even though the purchase of a Toyota Camry may, in the short term, support an American worker on an assembly line in Kentucky or elsewhere in the U.S., the critical, highly-paid research and development functions were performed in Japan, while the profits were repatriated and re-invested in the home country to the detriment of the American economy.
In that article, Valdes-Dapena also quoted Martin Zimmerman, a University of Michigan economist and a former executive with Ford Motor Co., who emphasized that Ford and GM use more American-made parts in their cars. In the aggregate, U.S. manufacturers still use more U.S. content than Japanese importers." Unspoken in that interview was any acknowledgment that almost of the foreign automobile manufacturers who have opened plants in the U.S. have done so in "right-to-work " states where it is virtually impossible for employees to unionize and collectively-bargain; as a consequence, their wages and benefits are consistently lower than those received by UAW employees.
The increased appetite of American consumers for foreign manufactured goods, especially "big-ticket" items exemplified by the purchase of foreign-made automobiles, contributes to the growing trade deficit in the U.S., but also to the continued high-rates of unemployment among American workers. Long before the effects of the great recession began to manifest themselves in 2008, the shedding of jobs in the American manufacturing sector, the increasing corporate downsizing and their de-industrialization of the economy contributed to the problem of growing structural unemployment.
As a result, the number of men between the ages of twenty-five to sixty-four who were available for work, but were no longer employed, increased during the past generation. Research shows that, between 1975 and 2002, the real earnings of males with only a high school education decreased by 13 percent while the earnings of high school dropouts decreased by 23 percent. Further, in 2008, 28 percent of black men of working age reported that they were unable to find work. But the largest decline in labor force participation occurred among workers who possessed either a bachelor's degree or a graduate-level degree. Hence, the argument that better education is the key to economic advancement has been disproved by the data.
The General Theory of John Maynard was a rigorous effort to explain the dynamics of a modern, industrialized capitalist economy from a macro-economic perspective. His economic theory emphasized the importance of achieving equilibrium in the markets and the necessity of an ever-expanding, consumer-driven population of employed workers to stimulate the aggregate demand in advanced industrial, capitalist economies. When the consumption function is depressed, as during the Great Depression or now, Keynes recommended pump-priming by the government--the expenditure of public monies through monetary policy--in order to create conditions approximating full-employment.
However, from a macro-economic perspective, when an increasing share of purchased goods are manufactured abroad, pump-priming has a significantly reduced stimulative effect on the demand side. Thus, when President Obama's stimulus package was enacted although it provided, Republican myth-makers notwithstanding, an undeniable and measurable stimulus, that effect was reduced because consumers continued to purchase foreign-made automobiles and other consumer goods manufactured abroad. The effect of their purchases was to stimulate the economies of Japan, China, South Korea, and Germany.
The lesson is very clear and is based upon solid principles of economics. If we care about the American economy, ourselves, our children and our grandchildren, we need to be at least as nationalistic as the Chinese, the Japanese, the South Koreans and the Germans: Buy an American car and help to restore the promise of America. For each American-made car purchased, seven to ten well-paying jobs are created.
We are all in this together. The quality of American automobiles has now reached parity with - and in many cases exceeds - that of the overseas competitors . The continued purchase of luxury cars such as Jaguars, BMWs and Lexuses by the few winners in this increasingly unequal economy is a sad testimony to their self-indulgence and indifference to the plight of their fellow citizens who are still suffering because of the excesses of the financial world and the pursuit of short-term profits, all else be damned, by American corporations and their shareholders who seem to be incapable of grasping the long-term implications of their anti-social behavior.
From the end of World War Two through the 1970s, the U.S. automobile market was almost entirely dominated by domestic manufacturers. GM, Ford, Chrysler, and American Motors were the big four, but other domestic manufacturers included Kaiser Motors, which made automobiles at Willow Run, Michigan, United States, from 1945 to 1953, and the Hudson Motor Car Company, which made automobiles in Detroit, Michigan, from 1909 to 1954, and then merged with Nash-Kelvinator.
The singular importance of General Motors to the American economy during that era was epitomized in the misstated quotation from former GM Chairman, Charles Wilson, "What's good for General Motors is good for America." And, to a very great extent, that misstated quote did reflect the American reality: Millions of Americans employed by the automobile manufacturing industry, by virtue of the wages and benefits they received, were able to become prosperous members of the American middle class, educate their children, and enjoy good retirements.
Equally important, during that era the American automobile industry performed a critical function as a lever industry. As demand for domestic automobiles increased, that demand, in turn, stimulated the aggregate demand as secondary and tertiary sectors of the economy such as domestic manufacturers of glass, rubber, steel, plastic and precision machine parts became profitable and increasingly employed more workers at better wages. Hence, when President John Kennedy proposed a middle class tax cut in his administration, which the Congress enacted, it had an immediate stimulative effect as middle income recipients went out and purchased American automobiles and, as a consequence, the multiplier effect of those purchases reverberated throughout the American economy.
At the end of the Vietnam era, from 1971-1973, U.S. automobile profits began to decline and that trend continued thereafter. By 1998, the market share of the three remaining U.S. automobile makers had declined to 70% and by 2008, the domestic share of the automobile market held by remaining three American automobile manufacturers was reduced to 53%. In fact, just a year before the current economic meltdown began in 2008, Japan exported $41.3 billion in automobiles to the U.S., and Japanese cars represented 77% of all automobiles that the U.S. imported from Pacific-Rim countries in 2009.
In an article by CNN Money senior writer in 2009 entitled "Support The U.S. Economy. Buy American," Peter Valdes-Dapena quoted Thomas Klier, an economist with the Federal Reserve Bank of Chicago who wrote extensively on the auto industry: When it comes to longer term benefits, a lot of activity happens in the country in which the company's world headquarters is domiciled." Klier further observed that buying a Ford or General Motors car was still preferable for the American economy and for American workers, even if the particular vehicle was built in Mexico, Canada or Korea since American car companies made more cars and employed more workers in the United States than did automakers based in other countries.
Klier explained that, for example, even though the purchase of a Toyota Camry may, in the short term, support an American worker on an assembly line in Kentucky or elsewhere in the U.S., the critical, highly-paid research and development functions were performed in Japan, while the profits were repatriated and re-invested in the home country to the detriment of the American economy.
In that article, Valdes-Dapena also quoted Martin Zimmerman, a University of Michigan economist and a former executive with Ford Motor Co., who emphasized that Ford and GM use more American-made parts in their cars. In the aggregate, U.S. manufacturers still use more U.S. content than Japanese importers." Unspoken in that interview was any acknowledgment that almost of the foreign automobile manufacturers who have opened plants in the U.S. have done so in "right-to-work " states where it is virtually impossible for employees to unionize and collectively-bargain; as a consequence, their wages and benefits are consistently lower than those received by UAW employees.
The increased appetite of American consumers for foreign manufactured goods, especially "big-ticket" items exemplified by the purchase of foreign-made automobiles, contributes to the growing trade deficit in the U.S., but also to the continued high-rates of unemployment among American workers. Long before the effects of the great recession began to manifest themselves in 2008, the shedding of jobs in the American manufacturing sector, the increasing corporate downsizing and their de-industrialization of the economy contributed to the problem of growing structural unemployment.
As a result, the number of men between the ages of twenty-five to sixty-four who were available for work, but were no longer employed, increased during the past generation. Research shows that, between 1975 and 2002, the real earnings of males with only a high school education decreased by 13 percent while the earnings of high school dropouts decreased by 23 percent. Further, in 2008, 28 percent of black men of working age reported that they were unable to find work. But the largest decline in labor force participation occurred among workers who possessed either a bachelor's degree or a graduate-level degree. Hence, the argument that better education is the key to economic advancement has been disproved by the data.
The General Theory of John Maynard was a rigorous effort to explain the dynamics of a modern, industrialized capitalist economy from a macro-economic perspective. His economic theory emphasized the importance of achieving equilibrium in the markets and the necessity of an ever-expanding, consumer-driven population of employed workers to stimulate the aggregate demand in advanced industrial, capitalist economies. When the consumption function is depressed, as during the Great Depression or now, Keynes recommended pump-priming by the government--the expenditure of public monies through monetary policy--in order to create conditions approximating full-employment.
However, from a macro-economic perspective, when an increasing share of purchased goods are manufactured abroad, pump-priming has a significantly reduced stimulative effect on the demand side. Thus, when President Obama's stimulus package was enacted although it provided, Republican myth-makers notwithstanding, an undeniable and measurable stimulus, that effect was reduced because consumers continued to purchase foreign-made automobiles and other consumer goods manufactured abroad. The effect of their purchases was to stimulate the economies of Japan, China, South Korea, and Germany.
The lesson is very clear and is based upon solid principles of economics. If we care about the American economy, ourselves, our children and our grandchildren, we need to be at least as nationalistic as the Chinese, the Japanese, the South Koreans and the Germans: Buy an American car and help to restore the promise of America. For each American-made car purchased, seven to ten well-paying jobs are created.
We are all in this together. The quality of American automobiles has now reached parity with - and in many cases exceeds - that of the overseas competitors . The continued purchase of luxury cars such as Jaguars, BMWs and Lexuses by the few winners in this increasingly unequal economy is a sad testimony to their self-indulgence and indifference to the plight of their fellow citizens who are still suffering because of the excesses of the financial world and the pursuit of short-term profits, all else be damned, by American corporations and their shareholders who seem to be incapable of grasping the long-term implications of their anti-social behavior.