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Driven Into Exile
August 17, 2001

In the 1950's, GM Chairman "Engine Charlie" Wilson said, "What's good for GM is good for America - and vice versa." At the time, it was true. The American auto industry employed more workers, consumed more raw materials, and generated more tax dollars than any other. Detroit was synonymous with industrial integrity, and stylish American cars were the envy of the world. That was then.

Back when Henry Ford started rolling Model Ts off the assembly line in 1913, he set his workers' minimum wage at an unprecedented $5 per day because he wanted his employees to afford the cars they were building. But that loyalty did not long outlive him. Today, at a Detroit press conference, Mr. Ford's company will announce 5,000 job cuts - 10% of its U.S. workforce - fresh off signing $98 million deal to open passenger car production in China. And Ford's not alone. Already this year, Daimler-Chrysler has cut 26,000 positions, and GM has hinted at a 10% cut of its salaried workforce and 15% reduction of contract jobs. All share a common denominator. While their former American employees line up for unemployment checks, foreign workers are filing into shiny new factories.

"The goal in the very near future is to have 50% of our capacity outside of North America," General Motors VP Mark Hogan said 1997. His company and its American counterparts are well on their way to granting that wish. As U.S. tax, labor, and health regulations swell and import controls tumble in the name of global free trade, overseas markets become irresistibly alluring. And what allegiance should an American company bear a government that smothers it with production standards while throwing open its borders to unchecked competitors? American automakers are answering with their feet. Last one out of Detroit, turn out the lights.

There's a lesson here, though we'll likely learn it too late. Consider Japan. That nation's rise from the ruins of war to 30% dominance of the American auto market wasn't due to a superior product. U.S. companies had long produced excellent economy cars, but couldn't dig out from domestic regulation to challenge a competitor reaping huge rebates from a government devoted to undoing us. Neither was the "Japanese miracle" a triumph of free trade as theirs was a market so committed to its closed door policy that no foreign company could build a plant until the 1980s. Instead, credit for Japan's conquest belongs, per usual, to a formula America invented: textbook economic nationalism -- the will of a government to defend a strategic industry with fair tax and trade policies.

Were Americans just appetites - consumers in search of the best deal - we might not mind that ships enter our harbors full and leave empty. But we are citizens of a country with a history of strength, and rather than blaming the exiled companies forced to pack in or ship out, we should question the policies that have squandered our birthright.

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