...always the victor over those who try to make it stand still. Writing in the Wall Street Journal, Michael Barone diagnoses the downfall of General Motors as the demise, not of a company, but of a system that included not only the Big Three automakers and the United Auto Workers, but a vision of how the postwar economy should develop:

The success of the Big Three and the UAW seemed a fit symbol of America's postwar economic dynamism. In fact, this was an economy characterized not by dynamism but by stasis, to use Virginia Postrel's term in "The Future and Its Enemies." New Deal legislation had been designed not for economic growth but for protection from the downward spiral of deflation. Those laws, not least by encouraging unions, strove to prop up wages and prices and to provide security to workers and existing firms. Keynesian economics was employed to flatten out the business cycle as much as possible and to reduce unemployment.

By the mid-1960s, it was generally agreed that this system worked and would continue indefinitely. The Big Three could always make money by rolling out the big cars families needed to go up north each summer. As John Kenneth Galbraith then argued, auto makers could induce consumers to buy as many cars as they wanted to sell by clever advertising. UAW workers could always look forward to ever-increasing wages and benefits. The big demand in the 1970 contract negotiations was retirement for auto workers in their early 50s. The confrontational labor-management politics of the 1940s and 1950s was replaced by consensus, as Henry Ford II joined Reuther in endorsing LBJ in 1964.

But history had other ideas. Thankfully, the spur of international competition and the inherent dynamism of the American economy have resulted in a "vastly faster growing economy and many more opportunities than provided by the European welfare states."

Posted by John at 03:13 PM  |    |