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Can We Transform the Auto-Industrial Society?

The cataclysm of the American automobile industry has been an odd combination, so far, of immediate and historical anxieties. The government loan of $13.4 billion to General Motors and Chrysler in December 2008 was presented by the outgoing administration as an unsolicited gift, lest a “disorderly liquidation of American auto companies” should “leave the next President to confront the demise of a major American industry in his first days of office.” It was restricted explicitly to the very short term: “The firms must use these funds to become financially viable…. In the event that firms have not attained viability by March 31, 2009, the loan will be called.”1

But there are also intimations of the deep past and the distant future. The present and impending disorder of the automobile companies is a reminder, even more than the decline of the housing and banking industries, of the desolation of the Great Depression. It is a reminder, too, of economic history, or of the rise and decline of industrial destinies. When the listing of the “Fortune 500” began in 1955, General Motors was the largest American corporation, and it was one of the three largest, measured in revenues, every year until 2007.2 GM was the “largest industrial corporation in the world,” in its own description of 1989, and it was engaged, at the time, in “the most massive reindustrialization program ever attempted.”3 It was an incarnation of American economic change, as a GM vice-president suggested during the earlier automotive crisis of 1973: “To say that a company that has successfully grown over a period of 65 years—a period marked by two world wars and a major economic depression—will suddenly be unable to adapt to the changing challenge…flies in the face of common sense”; it “denies history.”4

The distant future, in these frightening times, includes the prospect of a low-carbon economy. According to the energy plan outlined by the Obama-Biden campaign, overall US emissions of carbon dioxide and other greenhouse gases will by 2050 have been reduced by 80 percent, from more than twenty tons per person per year in 1990 to some 2.6 tons per person.5 Cars and light trucks now account for about 20 percent of US greenhouse gas emissions, or more than four tons per person per year, and more than 40 percent of US oil consumption.6 “The UAW shares the growing national concern about climate change,” the president of the United Auto Workers union told a congressional committee in 2007; even the president of GM said that “GM is willing to engage in discussions on carbon constraints on the US economy.”7

The initial challenge for the new administration, like the earliest work of the New Deal, in Edmund Wilson’s description, is likely to consist in “the stocktaking of the country’s resources, the inquiry into the condition of the people and the development of some equitable plan for enabling the people at large to get the benefit of these resources.”8 In a stocktaking of recent economic history, and of the thirty-year experiment in market ideology that began with the Thatcher and Reagan revolutions of the 1970s, the evolution of the automobile industry, of energy use in transportation, and of American land use has led to a peculiarly bitter destiny.

The US has become more unequal since 1979, in income and amenities. It is less industrial, with only 9.6 percent of people employed in manufacturing in 2007, compared to 20.4 percent in 1979; more open to imports of goods and services, with imports accounting for 17.2 percent of GDP in 2007, compared to 9.9 percent in 1979; and more capitalist, with 7.5 percent of people employed in the private sector members of unions, compared to 21.2 percent in 1979. It is more feckless, with savings accounting for 0.6 percent of personal income in 2007, compared to 8.9 percent in 1979.9 In what Lawrence H. Summers has called the “new age of markets,” it is also a richer country, of “market-led growth” in information and (until 2007) in financial services.10

The automobile industry has been one of the losers in the new American economy. US consumers spent less on new automobiles in 2007 than they spent on “brokerage charges and investment counselling”; in 1979, they had spent ten times as much.11 In 1979, the share of the auto industry in US GDP was more than twice that of the securities and information services industries together; in 2007, it had been reduced to less than a quarter of their share.12 By 2007, even the expansion in sales of “light-duty trucks,” including SUVs, which was one of the main marketing successes of the American automobile companies—“It has a refrigerator. And many other ways to chill” was the headline of a center-spread advertisement for the Ford Flex in TheNew Yorker, at the worst of the crisis of December 2008—had come to an end.13 In March 2008, General Motors and Ford were together worth about 5 percent of the value of the oil company Exxon.14

But the auto-industrial society, with its distinctive organization of American space, cities, highways, social entitlement, and energy use, has continued to flourish. Some 90 percent of Americans drove to work in 2007, 76 percent of them alone. Less than 5 percent went to work by public transportation. The people who used public transportation were much more likely than other Americans to be black or poor; they were more likely to be women than men; most of them lived in New York, Washington, D.C., and Chicago. The states in which population has increased most rapidly—Utah, Arizona, Texas, Nevada —have low population densities, and low rates of public transportation use.15

The relative decline of public transport has been attributed to the very long-term preferences of Americans for being alone in cars, or for being free to go anywhere and at any time, or for living without other people in close proximity; to investments in the interstate highway system; and to the enduring patterns of American zoning and land use. But 80 percent of the US population still lives in metropolitan areas, and some 30 percent in the densely populated city centers. The pattern of land use in the expanding cities of the South and West—which have had the most rapid population growth, with very few people per square kilometer—was itself established over the period that has elapsed since the energy crisis of the 1970s. It is a consequence of prices as well as preferences, and of the changing distribution of public expenditure, or public partiality.

The “financial viability” of the automobile industry, which is the condition to be evaluated by March 31 under the terms of the government loan, will be the outcome, in these circumstances, of a disorienting jumble of short-term and long-term expectations. The various bailouts of the industry that were discussed in December identified viability, or sustainability, with two main changes: a reduction in labor costs, including the costs of contractual obligations such as health care benefits and pensions for retired workers and their families, and a promise by the auto companies to invest in smaller and more fuel-efficient vehicles.

The environmental promise was only hinted at in the Bush administration statement at the time the $13.4 billion loan was announced, which said that “firms must comply with applicable Federal fuel efficiency and emissions requirements.” The incoming administration has been a little more explicit in its statements about what is described as the “new, hybrid economy,” the “challenge [of] building more efficient cars,” and the “commercialization of plugin hybrids.”16 The reference is apparently to the prospect of “a nationwide fleet of plugin hybrids” that Al Gore looked forward to shortly after the election. This was to be an American plan of auto-industrial expansion, adjusted to use electricity from solar or wind or geothermal farms in (or connected to) every neighborhood. It would, in Gore’s description, be a boon for “America’s automobile industry” and an electrification of the “Southwestern deserts,” in response to the “electrifying redemption” of Obama’s election.17

But a bailout that includes no more than a commitment to fuel efficiency, or to electric vehicles, without increasing investment in public transportation and in the substitution of information for transportation, would be a denial of the Obama administration’s commitments to respond to climate change. For the idyll of plug-in hybrids is also the promise of a high-energy, low-carbon society, in which the auto-industrial organization of space, or of transport-intensive growth, is set in concrete for another generation, or longer. It is frightening in relation to the US, and a dystopia in relation to the world. A new, hybrid economy for the world, at present US rates of 0.8 cars and trucks per person, would include a universewide fleet of a billion hybrid vehicles in China and a further billion in India; an asphalt Asia of more than four hundred cars per square mile.

An enduring bailout, or a new deal for Detroit, would be different. It would be an investment in ending the auto-industrial society of the late twentieth century. This would involve innovation in public transportation, and in the infrastructure that would enable people to work at home or close to home. It would engage the information industries in making public transport more convenient, more enticing, and more secure. It would be open to the sorts of improvements that have been suggested in the expansion of rail and bus transportation in China, Japan, and France, for example, and in India by the information technology services companies.18 It would be an investment, even, in the old promise of “automotive” freedom, of owning a car but not having to use it, and of being able to go anywhere at any time, in Asia as in America. The improved public transport would be used for routine travel, such as the “work, school, and medical/dental trips” on which public transit use is already concentrated, according to the National Household Travel Survey. The new hybrid vehicles, in a post-auto-industrial society, would be available for the other trips that the survey describes as “family, personal,” or “social, recreation, eat meal.”19

Some of the components of this sort of new deal were already familiar in the 1970s, and others were described in the Obama-Biden campaign’s plans for a “National Infrastructure Reinvestment Bank.”20 There are, according to the American Public Transportation Association, seven hundred programs of investment in public transportation, by 216 transit systems, which are ready to be started within ninety days.21 The amazing increases in productivity associated with the new information industries are energy-efficient, in the sense of having invented substitutes for traditional ways of going to work, going shopping, going to the movies, and going to doctors’ appointments; they are not yet opportunities for everyone in America, including the old and the poor and the people who live inside the poorest parts of cities, outside the online universe.

A bailout organized around urban and public infrastructure would be inclusive, in that it would provide opportunities for the people who have had the fewest chances in the new economy of the last thirty years, and who have suffered most from the new inequality of income, wealth, and amenities. It would include poor people in “nonmetropolitan” counties, for whom the costs of having no access to public transportation are extraordinarily high; and the rapidly increasing population of the “oldest old,” many of them living in cities that have been built, almost anew, since the 1970s, with little or no public transportation.22

The inequality of income has been made worse, over the past generation, by the inequality of urban amenities. African-Americans who use public transit spend more than a third longer waiting for buses and trains than white transit users; they spend the same amount of time traveling, but travel for shorter distances; African-American men between the ages of twenty-five and forty-four spend even more time than white or Hispanic men in cars: 107 minutes a day.23 These inequalities would be further exacerbated by the increase in the costs of driving that is an unavoidable consequence of policies to reduce carbon emissions. The poorest fifth of Americans spend 31 percent of their income on transport, compared to 21 percent for the second poorest, 17 percent for the third poorest, 15 percent for the fourth poorest, and 10 percent for the richest Americans.24

Investment in the infrastructure of a post-auto-industrial society would provide some compensation for the regressive effects of a carbon tax (or of the increase in prices that would result from a “cap and trade” scheme, as industries passed on the costs of compliance to consumers). It would be an investment in the technologies that are used by poor people, including buses, bus stops, and information about the departures of buses and transit vans. The innovations in information technology that could so dramatically improve public or collective transportation could be used first in the centers of cities: buses with free wi-fi, for example, or with free computers; better information about connections between buses and trains; or a program of scheduling journeys in which all patients with hospital or doctors’ appointments could be collected at home, in electric or hybrid vehicles. Public policy would enhance one of the resources in which people who are poor and black are richer than other Americans: the resource of living in densely populated and information-rich cities.

The automobile industry, and its employees and retired employees, could be part of a bailout of this sort; they could be a source of plug-in hybrids, bus engines, new ideas for assisting deprived urban communities (like so many of the cities of Michigan and Ohio), and long-forgotten projects of public transportation. The condition for continuing support would be a lasting commitment to innovation in low-CO2 vehicles, and also in the public transport and urban projects with which the auto companies were once so involved. Even General Motors, in the earlier crisis of the 1970s, described itself as “a total transportation organization.”25 In 1973, the GM vice-president who was so concerned about the denial of history announced not only a program of expansion of “facilities for smaller cars,” but “a new Transportation Systems Division, which will coordinate, intensify and enlarge our activities in urban and public mass transportation.”26

President Obama is expected to appoint a “car czar” to “assess” the plans of the auto companies.27 There is an oddly archaic sense about the appointment; a reminder of the energy czars of the 1970s or the drug czars of the 1980s, or the “state beer ‘czar,’” in 1933, whom the Oxford English Dictionary identifies as the first in this imposing succession. But if the person appointed is to be more than an expert on predicting the fluctuations of financial markets, then his or her responsibilities should include initiating a process of review of the long-term future of the industry, and of the long and unhappy history of government regulation of cars, buses, and the cities in which they are used.

The crisis of the automobile industry presents a seriously difficult set of problems for the new administration. These problems have to do with the connections between short-term and long-term economic policies, policies concerned with the economy, the environment, and energy, and policies that influence the very long-term relationship between the state and markets (as the policies of the New Deal of the 1930s did, for at least two generations).

The challenge that the outgoing administration presented to the Obama administration, of evaluating the “financial viability” of the automobile companies by March 31, is a vivid illustration. The evaluations of financial markets have a fickle relationship to the “fundamental values” of economic assets (as Lawrence Summers suggested many years ago), and their fluctuations are even more pronounced in times of economic and financial crisis (or “poor macro newsflow,” in the investment industry’s expression).28 They are especially fickle when the values in question, for example of General Motors, are likely to be determined by a combination of short-term and very long-term expectations, including expectations about how serious the Obama administration is in its projected reductions of US energy consumption and CO2 emissions by 2050. Rational expectations about the future of General Motors are expectations about future government policy, and about the place of a future automobile industry in a very different economy, with different sources of energy, and different ways of living in cities.

The crisis of the automobile industry also poses deep questions about the relationship between money, expertise, and political influence. One of the intended consequences of the free market ideology of the 1970s and 1980s was a loss of confidence in government, or at least in nonmilitary government. The environmental regulation of the automobile industry since 1975 has been a dismal case study in government failure, of which the rise of the SUV is only the most visible example.29 So too, since the energy crisis of the early 1970s, was the continuing expansion in US energy consumption in transportation.

One of the early outcomes of the economic crisis of 2008 has been a substantial reduction in the competitiveness of the financial services industry, and an increase in its political power; it has become an oligopoly of corporations that are too big to fail. General Motors is already too big to fail; I hope so, because of the consequences that its failure, or bankruptcy, would have in Michigan, Ohio, and elsewhere, and for the hundreds of thousands of people who were in a position, years ago, to negotiate reasonable wages and reasonable benefits. But a new, improved General Motors, or a General Motors–Toyota super-corporation, could be “viable” in the evaluation of financial markets, and also a monstrous leviathan of political influence. “Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters,” Adam Smith wrote of the British Parliament in the 1760s, and the counselors of the US Congress, as of successive US administrations, have been the “masters” of the automobile industry.30 This is a failure of government, and it is also a market failure, or a failure of markets to exist.

A new deal in which the bailout of the automobile industry was one component of a program of investment in the transformation of the auto-industrial society would connect economic, environmental, and energy policies. It would be a commitment to current as well as capital expenditures; to a Transportation Security Agency, for example, composed not only of people who search passengers in airports but of people who drive electric buses in inner cities. Like the “Economic Security” programs of the New Deal of the 1930s, a new New Deal would be an effort to change the distant future of the United States—in this case the future use of space—by government expenditure and more open regulation.31 But something of this is going to happen in any case, because of the increase in federal government expenditure that has already been promised —the macro-economic stimulus —and the decrease in state and local government expenditure that is one of the few predictable consequences of economic depression, as income and sales tax revenues fall. For Obama, who is the most metropolitan, as well as the most cosmopolitan, of all modern American presidents, the next generation could begin, for once, with the urgent economic crisis of now.

—January 29, 2009

  1. 1

    The emphasis is in the original. “President Bush Discusses Administration’s Plan to Assist Automakers” and “Fact Sheet: Financing Assistance to Facilitate the Restructuring of Auto Manufacturers to Attain Financial Viability,” December 19, 2008, available at z22.whitehouse.gov/news/releases/2008/12/20081219.html.

  2. 2

    Fortune 500, available at money.cnn.com/magazines/fortune/fortune500_archive/full/1955.

  3. 3

    General Motors Annual Report 1989, p. 5.

  4. 4

    Anthony De Lorenzo, “In Defense of the Automobile Industry,” Letters to the Editor, The New York Times, December 19, 1973.

  5. 5

    See the summary of the Obama- Biden energy policy—”implement an economywide capandtrade program to reduce greenhouse gas emissions 80 percent by 2050,” available at change.gov/agenda/energy_and_environment _agenda and “Barack Obama and Joe Biden on the Environment,” on the reduction of “80 percent below 1990 levels by 2050,” available at www.barack obama.com/pdf/issues/EnvironmentFactSheet.pdf. Estimates for US greenhouse gas emissions in 1990 are available in US Environmental Protection Agency, The 2008 Inventory of US Greenhouse Gas Emissions and Sinks, 1990–2006, Table 2-1, April 15, 2008, available at www.epa.gov/climatechange/emissions/usinventoryreport.html. The objective of US emissions of 2.6 tons per person per year is very close to the worldwide average of 2.5 tons in 2050 suggested in Nicholas Stern, “The Economics of Climate Change,” American Economic Review, Vol. 98, No. 2 (May 2008), pp. 1–37.

  6. 6

    Passenger cars and light trucks accounted for 1,237 gigatons of greenhouse gas emissions in 2006, or 17.5 percent of a national total of 7,054 gigatons, and 20 percent of the national total of 6,170 gigatons net of “sinks.” Tables ES-7 and A-100, in Inventory of US Greenhouse Gas Emissions and Sinks, 1990–2006, available at www.epa.gov/climatechange/emissions/downloads/08_Annex_1-7.pdf. US motor gasoline consumption, in 2007, “reached a record high of 9.29 million barrels a day,” or 45 percent of total US petroleum products consumption of 20.7 millions barrel a day. See www.eia.doe.gov/neic/infosheets/petroleumproductsconsumption.html, accessed on December 30, 2008.

  7. 7

    Testimony of Ron Gettelfinger, president of the United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), “Climate Change and Energy Security: Perspectives from the Auto Industry,” before the Subcommittee on Energy and Air Quality and the Committee on Energy and Commerce, United States House of Representatives, March 14, 2007, available at www.UAW.org/news/07/031407UAWtestimony.pdf. Statement of Rick Wagoner, May 9, 2007, available at http://www.GM.com/corporate/responsibility/environment/news/2007/USCAP_050907.jsp.

  8. 8

    Washington: Glimpses of the New Deal,” in Edmund Wilson, The American Earthquake (Octagon Books, 1971), p. 537. “There are probably as many as 66 per cent of the population either entirely or partly out of work,” Wilson wrote of Detroit in 1931, where even the new cars “wait here without hope.” “Detroit Motors,” in The American Earthquake, pp. 232, 247.

  9. 9

    Gross-Domestic-Product-by-Industry Accounts, FullTime and PartTime Employees by Industry, available at www.bea.gov/industry/gpotables/gpo_action.cfm; National Income and Product Accounts Tables 1.1.5, Gross Domestic Product, and 2.1, Personal Income and Its Disposition, available at www.bea.gov/national/nipaweb, accessed on December 30, 2008; Barry T. Hirsch and David A. Macpherson, “Union Membership, Coverage, Density, and Employment Among Private Sector Workers, 1973–2007,” available atwww.unionstats.com, accessed on December 28, 2008.

  10. 10

    Lawrence H. Summers, “The New Wealth of Nations: Lessons from the 1990s,” Bulletin of the American Academy of Arts and Sciences, Vol. 53, No. 2 (November–December, 1999), pp. 26–35.

  11. 11

    National Income and Product Accounts Table 2.5.5, Personal Consumption Expenditures by Type of Expenditure, available at www.bea.gov/national/nipaweb, accessed on December 29, 2008. Consumer expenditure on “other motor vehicles,” mostly light trucks or SUVs, was by 2007 more than twice as large as expenditure on automobiles.

  12. 12

    Figures for Value Added by Industry as a Percentage of Gross Domestic Product for the Motor Vehicle; Securities, Commodity Contracts, and Investments; Information and Data Processing Services; and Computer Systems Design and Related Services industries, available at www.bea.gov/industry/gpotables/gpo_action.cfm, accessed on January 17, 2009.

  13. 13

    Table 1021, New Motor Vehicle Sales in Statistical Abstract of the United States 2009, available at www.census.gov/compendia/statab.

  14. 14

    Market value on March 28, 2008; see money.cnn.com/magazines/fortune/fortune500/2008/full_list/, accessed on December 31, 2008.

  15. 15

    Urban Transit Ridership by State and Transit Mode: 2005, available at www.bts.gov/publications/state_transportation_statistics/state_transportation_statistics_2007/html/table_04_04.html; Table 1077, Transit Ridership in Selected Urbanized Areas: 2005, in Statistical Abstract of the United States 2009, available at www.census.gov/compendia/statab.

  16. 16

    Statements of December 16, 2008, and December 19, 2008, available at change.gov/newsroom/entry/the_energy_and_environment_team/ and change.gov/newsroom/entry/more_members_of_the_economic_team/; Obama-Biden Economic Agenda, available at change.gov/pages/economy_agenda.

  17. 17

    Al Gore, “The Climate for Change,” The New York Times, November 9, 2008.

  18. 18

    See Nandan Nilekani, Imagining India: Ideas for the New Century (New Delhi: Penguin, 2008), pp. 233–257.

  19. 19

    Center for Urban Transportation Research, University of South Florida, Tampa, “Public Transit in America: Results from the 2001 National Household Travel Survey,” BC137-48, September 2005, pp. 50–51.

  20. 20

    See change.gov/pages/economy_agen da. On the “National Infrastructure Bank,” see Everett Ehrlich and Felix G. Rohatyn, “A New Bank to Save Our Infrastructure,” The New York Review, October 9, 2008.

  21. 21

    See www.apta.com/media/releases/081218_new_vision.cfm.

  22. 22

    Frank B. Hobbs, US Census Bureau, “The Elderly Population,” available at www.census.gov/population/www/pop-profile/elderpop.html.

  23. 23

    Public Transit in America: Results from the 2001 National Household Travel Survey,” p. 31; US Department of Transportation, Federal Highway Administration, “NPTS Brief: Mobility and the Melting Pot,” January 2006, pp. 2, 4.

  24. 24

    Quintiles of income before taxes: Average annual expenditures and characteristics, Consumer Expenditure Survey, 2007.

  25. 25

    It was a “producer of hardware that will meet the needs of any federal, state, or local transportation system that is planned.” Quoted in Emma Rothschild, “The Great Transpo Expo,” The New York Review, July 20, 1972; and see also my book Paradise Lost: The Decline of the Auto-Industrial Age (Random House, 1973), and “GM in Trouble I. THE VEGA,” The New York Review, February 25, 1971, “GM in More Trouble,” The New York Review, March 23, 1972, “What Is the ‘Energy Crisis’?,” The New York Review, July 19, 1973, and “Running Out of Gas,” The New York Review, November 1, 1973.

  26. 26

    Anthony De Lorenzo, “In Defense of the Automobile Industry,” Letters to the Editor, The New York Times, December 19, 1973. The letter was in response to two articles I had written in The New York Times in November 1973.

  27. 27

    Bill Vlasic, “Wagoner Says G.M. Is Working on an Overhaul Tied to the Bailout,” The New York Times, January 13, 2009.

  28. 28

    Lawrence H. Summers, “Does the Stock Market Rationally Reflect Fundamental Values?,” The Journal of Finance, Vol. 41, No. 3 (July 1986), pp. 591–601; Lawrence H. Summers and Victoria P. Summers, “When Financial Markets Work Too Well: A Cautious Case for a Securities Transactions Tax,” Journal of Financial Services Research, Vol. 3 (1989), pp. 261–286.

  29. 29

    On the “SUV loophole,” by which light trucks and “off the road” vehicles, even if used in large part by passengers and on roads, were subject to much more permissive rules than passenger cars, see Center for Biological Diversity v. National Highway Traffic Safety Administration, United States Court of Appeals for the Ninth Circuit, No. 06-71891, November 15, 2007.

  30. 30

    Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, edited by R.H. Campbell and A.S. Skinner (Oxford University Press, 1976), p. 157.

  31. 31

    See Arthur M. Schlesinger Jr., The Coming of the New Deal (Houghton Mifflin, 1958), pp. 304–315.

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