Editorial: Between the Lines – Wall Street Journal Goes Jenkins Jr. Crazy

by Michael Martineck

October 22nd, 2008 12:47 PM

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editorial between the lines wall street journal goes jenkins jr crazy

The Wall Street Journal’s Business World by Holman W. Jenkins Jr. exemplifies the dangers of always looking at the course through the same binoculars. His “Uncle Sam Goes Car Crazy” (WJS Oct. 22, 2008) rant is an attempt to view Detroit’s troubles through Government is Bad glasses, filtering out all other reasons for the slide. He’s wrong, and in a dangerous way.

We can start where we agree: The American automotive industry is cart wheeling into the stands, parts are flying off and people are scared. Jenkins and I part ways mid-tumble. He believes Detroit has “accrued an almost incalculable baggage of government intervention, which explains why more intervention is needed today.” A traditional free-market loyalist, when there’s trouble, Jenkins’ finger points to big government first, automatically and without much input from rest of the body, it would seem.

First, Jenkins blames GM, Chrysler and Ford’s labor inflexibility on the Prohibition-era Wagner Act, claiming the Government makes automakers dole-out higher compensation than the market dictates. I’ll crack open a 70-year-old bottle of rye and toast laws that never change. Salut.

Labor contracts over the last few years have actually added second and third tier employees, mitigating the effect of Wagner. Not that it should have mattered. The labor laws in Germany are even more stringent and their Big 3 seem to be surviving. (Not that any car maker is raking it in a the moment, but Porsche/Volkswagen, BMW and Mercedes are nowhere near putting their respective bellies up.)

Second, Jenkins bemoans the 50s franchising laws, which certainly add to Detroit’s problems, but wouldn’t if they were moving vehicles, which they’re not. Ironically, if The Big 2.8 had not fended off the government’s attempts to raise fuel efficiency standards for a generation, dealers might have more competitive products to push right now. They’d all be selling more cars and trucks. The number of outlets matters, but to a lesser extent.

Next up, off-shoring vehicle construction, as in Detroit doesn’t do enough. I’m not entirely sure whose job Jenkins is trying to save with this argument; it’s not Joe the Tool and Die guy. Jenkins believes that saving American car manufactures means making cars someplace else. I just assume buy an American made truck, despite the Toyota badge on the tail, but that implies the tack is valid in the first place. Anyway, The Big 2.8 build plenty of cars in other countries. Fuel and safety dictates haven’t hampered that effort in the slightest. In fact, due to a limpid dollar, building in good ‘ole US of A hasn’t been this attractive in years.

Lastly, Jenkins states that American companies build better cars overseas and can’t bring them here, again because of an ignorant, intrusive federal government. I’m gathering he’s never been to a Saturn lot. Maybe he’s still confused by the fact that his Ford Focus doesn’t corner like the one he rented in Glasgow. A choice Ford made all on it’s own.

Yes, there are differences in standards from nation to nation. The differences, themselves, do not prevent a world car. The European Ford Focus is built on the Mazda 3 – Volvo 30, 40, 50 platform, that runs nicely on American highways. Its one of the many things Allan Mullaly noticed when he took charge of Ford. He’s been trying to slim and unify ever since. AND he’s not breaking any laws in the process.

Strangely enough, Jenkins misses the Big Kahuna: mandatory health care. GM, Chrysler and Ford have to offer it to their workers, and It costs them a fortune, adding thousands of dollars to the cost of every Trailblazer, Explorer and Durango rusting on the lot. And, you know, helping people survive cancer, heart disease and other ailments along the way.

A national, single-payer health care system would alleviate these costs and level the field Americans play on against Japan, Germany and Korea, as the Chinese stretch out on the side lines. “Socialized Medicine” is beyond Jenkins’ scope, though, regardless of how good it looks as applied to this industry. Government is never the answer in Business World.

“The only thing wrong with corporate longevity,’ Jenkins writes, “are the legal encrustations that accumulate.” To which I say: build better cars and customers will buy them.

There are times when you’ve got to put the binoculars down and take in the full course. Even when you may not like what you see. Laissez faire is a fine ideology; it should never be confining. There are times when other strategies need apply, like… now (for example). One of the world’s foremost authorities on business issues got it wrong four out of four. I expect better of the Journal. With industry leaders getting this kind of advice through their headsets, it’s no wonder the American automotive industry’s spinning off the track.

Michael Martineck

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SLLTTAC on Oct 26, 2008

Fascinating discussion, but so much to read. Arguments based on statistics are always arguable, unless the data are gathered and analyzed in exactly the same way. Anecdotal information is often good to rely on, but always hard to generalize. Canada and Sweden have single-payer health insurance; both nations are considering major changes. Canada may allow private health insurance. The Canadian system is excellent if a patient can wait long enough. Canadians may wait a long time for care that Americans get quickly. The American system is not comprehensive, but fast. How many Americans lack health insurance is open to debate. GM, Ford, and Chrysler gambled, prospered for a long time, and now are failing. Why should the taxpayers reward incompetence, whether Wall Street or Detroit? If you know that your business will be bailed out by Uncle Sam, then you would keeping on making the same follies, no matter what. A decade ago the Federal Reserve saved Wall Street when a major fund failed. That sent a loud and clear signal that companies would be saved from their own "irrational exuberance."

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Geeber on Oct 27, 2008
psharjinian: I’m sorry, but you’re making stuff up at this point. Other than longevity, infant mortality, cost-per-head and such, what metrics do you have that show the superior functioning of private health-care for people who aren’t already well-off. You're changing the question asked. Originally, you claimed that nationalized health care was better for everyone. Now you are trying to limit it by saying that private health care is better for "people aren't already well-off." Which is an entirely different assertion. Now, all of a sudden, we are apparently only talking about health care for the poor. 50merc has done a pretty good job of debunking the infant mortality statistics. The key is the definition of "infant mortality". I delve into this further below. Plus, as I explained before, when you compare survival after diagnosis of a serious condition, the U.S. scores quite well compared to countries with nationalized medicine. psharjinian: I can cite UN/WHO stats, though I’m sure you’ll consider them “leftist falsifications” because the facts they present don’t support your ideology. Anyone who has studied this problem knows that you can't take those statistics at face value. Different countries use different criteria for various subjects. And, yes, WHO has a definite agenda, and if you don't believe otherwise, YOU are either blinded by ideology, or just fell off the turnip truck. psharjinian: Because there are gaps in government coverage in some countries, Canada being one. But I thought that nationalized care was perfect. If it is perfect, there is no need for private insurance, which is supposedly so awful that no one in their right mind would ever shell out hard-earned money to buy it. What actually happens in the real world seems to suggest otherwise... psharjinian: And this is Canada, which is between the American and European models in terms of covered services. Funny, but my 95-year-old grandmother's private insurance pays for BOTH her perscription drug care and dentist visits. This may, of course, be why it is more expensive than the coverage provided through the national plans. psharjinian: * Americans pay more per capita and as a % of GDP, but get much less. Add in what Americans pay privately, both at the group/corporate level and personally, and it’s worse. You're contradicting yourself here. You just said that we pay more but get less, but above, in the same post you wrote this sentence: Because there are gaps in government coverage in some countries, Canada being one. If there are gaps in coverage (of a nationalized plan), it's no wonder that the cost is supposedly less than the American plan. phsarjinian: * American life expectancy and infant mortality are at second-world levels, and the American poor and lower-middle class are much, much worse off because they have no effective coverage. American life expectancy for a child born in 2006 stands at over 78 years, which is hardly at a "second-world" level. (The world leader is Japan at 83 years old, and that is probably attributable to a low-fat diet and good health habits as much as anything else.) The differences between the U.S. and many other first-world nations is mere months, and can be attributed to the large number of immigrants from third-world nations, not to mention bad habits (diet, lack of exercise). If you were complaining about bad eating habits and lack of exercise among Americans, you'd be on to something. Plus, as I explained above, when researchers studied the U.S. as a whole, the longest-lived people were not necessarily those with the best insurance coverage. Also note that the U.S. DOES have nationalized care for the poor - Medicaid, and most states also have programs to provide insurance coverage for the poor. Regarding the infant mortality rates, these figures are skewed by the definition of infant mortality in different countries. The CIA basically took each country at its word on these results. Which means that different definitions can skew the results and make one country look better or worse, depending on how infant mortality is actually defined. The United States is a world leader in an odd category — the percentage of infants who die on before they are even a day old. Why? Because the United States also easily has the most intensive system of emergency intervention to keep low birth weight and premature infants alive in the world. The United States is, for example, one of only a handful countries that keeps detailed statistics on early fetal mortality — the survival rate of infants who are born as early as the 20th week of gestation. How does this skew the statistics? Because in the United States if an infant is born weighing only 400 grams and not breathing, a doctor will likely spend lot of time and money trying to revive that infant. If the infant does not survive — and the mortality rate for such infants is in excess of 50 percent — that sequence of events will be recorded as a live birth and then a death. In many countries, however, (including many European countries) such severe medical intervention would not be attempted and, moreover, regardless of whether or not it was, this would be recorded as a fetal death rather than a live birth. That infant would never show up in infant mortality statistics. psharjinian:* The American system is a competitive disadvantage for American corporations operating domestically; it’s a push-factor for outsourcing and/or relocating, which further decimates the ability of the lower- and middle-class to acquire adequate care. Really? Do those factories in Alabama, Kentucky, Mississippi, Ohio and Tennessee owned and operated by Honda, Nissan, Toyota and Hyundai exist only in my imagination? Why did Mercedes and BMW open plants in Alabama and South Carolina, respectively, to build vehicles, despite the availability of nationalized health care in their home country? Why is VW considering the same move? Please note that the location of plants in the U.S. instead of Germany and Japan represent outsourcing for those respective companies and countries. Why did GM close down its St. Therese plant when those workers were covered by the Canadian system? Why didn't it move production from an American plant, where it is responsible for the providing the coverage to workers, to the Canadian one, where they would be covered by the nationalized system? Again, what is happening in the real world does not appear to support your contention, at least as it applies to the automobile industry. psharjinian: I’ve been to Cuba several times. It’s not great, but the Cuban poor are far better off than their American equivalents, and their health care system is, and this is salient, open and accessible to all citizens in a way the American system is not. If this is so, why aren't the poor in America - or, at least, Florida - risking their lives in boats to flee to Cuba? psharjinian: It cannot offer the advanced technological services the American system allows rich people to avail themselves of, but it offers the basic care, free of charge, to anyone who needs it. I and several members of my family have benefited from advanced technological screening and treatment services. I didn't realize that we are among the rich, but we must be, because, according to your post, only the well-to-do can afford to "avail" themselves to these services. Who knew? psharjinian: Do note that the gynaecological/natal system is, interestingly, probably the most advanced and certainly the most throughout the developing world, and is better than more than a few developed ones, the US and Canada included. Nutrition and developmental care for mothers and infants shames what Canada offers, let alone the travesty that is the American system. What you are witnessing is a country pouring its limited resources into one area of care. It's the same as the old East German method of pouring time, money and resources into producing Olympic-grade athletes. It worked - East Germany won lots of medals (although at a relatively high human cost to the athletes, as they were also drugged to improve their performance). I doubt that anyone would say that the total East German sports system or even the East German education system was better than that of West Germany or the U.S. And do you really believe that the typical American middle-class or upper-middle class woman receives worse OB-GYN care than a Cuban woman?

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