Protectionism vs. Globalization
This time the rental company gave us Pontiac Grand Prix. We spent an entire week driving it and never stopped wondering, “How – but seriously, how – could a capitalist, free-market country produce this atrocity?” My husband put it simply: “A firm that made this should go out of business.” Everything was wrong with our rental car. In fact, I am hard-pressed to name anything that was right about it. The doors didn’t close well; the design was awkward; the motor had all the energy of an octogenarian, and the trunk curved under, which made it a magnet for the mud flying from under the wheels yet rendered it inaccessible to the cleaning powers of rain. Every time I tried to take a bag out of the trunk I ended up covered in dirt because the son-of-a-bitch didn’t open easily either. And this is by far not the complete list of our car’s “benefits”.

We spent the previous vacation at the wheels of a Buick — with similar results. Recently my Toyota needed some body work and the insurance company provided another rental car—a Ford. It was brand-spanking-new and not too bad. In fact, compared to all the Buicks and Pontiacs I had the displeasure to drive over the years, it could pass for a Mercedes. Still, it couldn’t even be compared to a Toyota, a Honda, or even a Mazda.

The analysts name the gas prices and the credit crunch as the main problems of the American automakers. On one hand it’s true. GM, Chrysler, and Ford all bet on gas-guzzling monsters, the mechanical equivalents of our gluttonous, obese population. Now all of a sudden nobody wants to buy these “cuties.” Also, the credit branches of these companies that loaned money to the potential buyers and made profits even during the tough times are now suffering from the banking crisis. Yet I would argue that these are not the main problems of our car manufacturers. Let’s face it: American cars, as a rule, are “uncool.” They are popular in those areas of the country that voted for John McCain — home to a significant minority of the American population, and a much poorer minority at that.

Take, for example, a Cadillac. It’s a good car, in all respects, but it costs like a Lexus. I don’t know anybody who, having enough money for a Lexus, would buy a Cadillac. The only exceptions are bling-addicted rappers and people who remember the original Great Depression. Frankly, to me and my relatively young friends, a Cadillac looks like a coffin on wheels. The modern and elegant Lexus, on the other hand, is very popular among the up-and-coming young and middle-aged professionals in the coastal areas of the country (where most of them live). Those of us who need a cheaper car go for a Hyundai or a small Toyota. The ones who can afford a more expensive model invariably choose a Lexus, an Infinity, or an upscale German model.

America does make nice trucks and all-terrain vehicles, but filling those up is ruinous to our wallets, and people are slowly coming to the realization that in most areas of the country, you simply don’t need them. Chrysler has invented the minivan, but has since fallen behind in the quality department — the best-selling minivans are made by the Japanese. The American factories are extremely inflexible making it hard for them to “switch” from one model to another, to stop producing huge cars and start cranking out the small, economic ones. Many people think the issue is our high salaries. Nonsense. In the last couple of decades the Japanese automakers have built numerous auto-making plants in the US, in places like Mississippi. Most Toyotas and Hondas are produced right here, on the American soil. The issue is not the location but in how the business is organized and run.

Carthage must be destroyed. This country has no place for three clumsy car-making behemoths, bailout or no bailout. Chrysler is likely to be the first one to go — it’s already on its last breath. It will either go bankrupt or be absorbed by the General Motors. The others are holding on primarily because of their overseas operations. Sooner or later GM and Ford will have to either die a not-so-peaceful death or kick out the unions that are suffocating them and learn to adapt to the world markets. For now the mere thought of it is sacrilege to many Americans and our political leaders. We have to save the national automotive industry! Let’s throw them a lifeline! Detroit will die without a bit fat orange tire to cling on to in the turbulent waters of today’s economy.

Let’s leave the pathetic Detroit car makers alone for a minute and talk about beer. Do you remember the outcry when Belgians bought our Budweiser a couple of months ago? Carramba! What is the world coming to? Stop this insane deal immediately! America is being sold out to the highest bidder! I read all this and could hardly believe my eyes. What millennium is this again? What happened to the principles of free market? American companies are buying corporations around the world all the time—why can’t Europeans buy an American business? Oh, but Busch is one of the symbols of St. Louis; the city is not the same without it; it’s our culture, etc, etc.

Fifteen years ago the country was filled with video rental shops. They were on every other street corner. Another omnipresent business was film development. Our family preferred a mail-order company — we sent them our films and within days received the photographs. Everybody was shooting pictures with analog cameras back then and had to use the outside services to develop the films. Do I have to tell you what happened to these businesses and the video rental places? A more interesting question is whatever happened to thousands upon thousands of people who worked for them. The answer is simple—they found other jobs. The Internet and digital technologies re-distributed the workforce. And it didn’t affect us much—before the country went into this latest recession the unemployment hovered below 5%. The jobs leave one industry and go to another one.

If you think the Internet had a unique influence on our economy, think again. At the end of the 19th century and the beginning of the 20th the country was crisscrossed by railway tracks. People built entire cities around railway stations, moved their families there and opened new businesses. Some made fortunes off the railways. The industry fed hundreds of thousands, if not millions. Slowly but surely the United States turned from a railway country into an automobile one. The cities were deserted; people moved out; companies went bankrupt. It was hard — nobody is trying to diminish the suffering of those involved (maybe the government should have bailed them out). Still, sooner or later the overwhelming majority swam back to the surface and found new jobs and new places to live. In the end, this great country won.

This unique economic flexibility and relative mobility of the population has historically been the Great American Advantage. The incredible people of this country were always ready to rid themselves of the old and build the new — infrastructures, industries, cities, technologies. The biggest economy of the world was never sclerotic like those in Western Europe — it was nimble and forever young. The flexibility kept us afloat for decades, if not centuries; without it we would tank faster than Titanic.

Nevertheless, now we are ready to sell our Great American Advantage in exchange for protectionism. The politicians cannot see the forest behind the trees and are more concerned about the car makers of Detroit and the steelworkers of Pittsburgh than about the economic climate in the country. Their speeches remind me those I heard as a child in the Soviet Union. We used to make fun of these slogans:

Our coal mining industry is the most coal mining in the world!
Long live our exemplary coal mining industry!
Let’s not let the imperialist pigs grab our brave coal-mining industry with their dirty paws!

Somehow I thought I had left those days and those slogans far behind…

I knew President Bush would disappoint me long before the war in Iraq or the economic crisis. In March of 2002, after screaming louder than any of his predecessors about the virtues of free markets and globalization, he placed stiff tariffs on most steel produced outside this country. Our steelworkers had complained — they couldn’t handle the competition. If you can’t handle the competition you go out of business. But nooooo—how could they? Our “most metallurgic in the world” steelworkers tend to live in the swing states, the ones politicians are dying to please. Oh, and everyone felt bad for the steelworkers—what if they lose their jobs? Bush sniffed, dabbed the corners of his eyes, and taxed the foreign competition.

The steelworkers got a temporary reprieve. It won’t last because the well-paying, blue-collar jobs are streaming out of the country—the economy is transforming from industrial to the service - and technology-oriented one. This trend cannot be stopped just like the highways will not turn back into railways. (By the way, the tariffs have since been abolished.) But let’s assume for the sake of the argument that a hundred or so politicians and a few thousand steelworkers have gained something in this situation. The problem is, everybody else lost. Do you know how many things, from furniture to toys, have steel parts? Do you know how many things are crafted using the instruments made of steel? And all of us, the entire country of three hundred millions, were paying more for these items. The countries whose goods we tax don’t take it lying down either — they raise tariffs on our products in return. As a result, we pay more for thousands of imports.

I have something to say to those who worry about the fate of unemployed workers and dying cities. No unemployed American has it nearly as bad as a sweatshop laborer in Vietnam or an average farmer in Africa. Globalization helps these people — it lifts entire countries out of penury and misery. In my humble opinion, empathy should be based on humanism rather than patriotism. Sympathize with people because they are people, not because they are Americans. The unemployed steelworkers of Pennsylvania, not to mention the engineers of Chrysler, will find other gainful employment in this country. In the worst case scenario, they’ll move to another state and receive additional job training—most likely paid for by either the government of the previous employer. The factory workers and farmers in poor countries have nowhere to go. As long as they can’t breathe under our tariffs, they’ll remain in abject misery. But we tax them and tax them and tax them, because their products are cheaper and we forever fear our jobs will “fly” overseas.

When we do open our markets, the problems tend to take care of themselves. Does anyone remember the panic in the IT world in 2001? All the programming jobs were moving to India, and our own poor computer specialists were going to end up sweeping the floors. Now, barely seven years later, the IT companies in the US can’t find enough workers. The IT industry is one of the few not terribly affected by the latest crisis. Those looking for a job receive multiple offers despite the fact that nobody taxed Indian computer programmers. The reasons are many, but the primary one is the rapid growth of the IT-related salaries in India. Globalization pulled this industry onto the world stage and paying the Indian programmers peanuts was no longer an option. They are still making three or four times less than we do, but these “three-four times” are no longer covering the expenses of running crucial IT projects from the other side of the world, when the time difference is twelve hours and the airplane tickets cost thousands. Some IT jobs are still going to India but there are plenty to go around.

If we lift the metallurgists and farmers of the world out of poverty the results will be similar. Transporting goods is very expensive, especially now. When a farmer is making cents, transporting his produce across the world makes sense; as soon as he starts making dollars, buying the locally grown produce suddenly makes much more sense. The economists have calculated the exact rates a long time ago — when workers live on another continent and make more than 1/4 to 1/5 of our salaries (it depends on the industry of course), the benefits of buying from them are reduced to nothing.

Protectionism is a closed loop, a tortured path to nowhere that harms almost everybody and helps only a small group of people — temporarily. But it won’t go away because, as we used to say in Russia, our own shirts are closest to our bodies. We don’t give a damn about Chinese or Bengalese workers. The American Industry is the most American industry in the world, and nobody wants to make temporary sacrifices for a common, long-term good even if it eventually benefits our children and the entire planet. Xenophobia, fear, and greed rule the world, and no economic theory will change this fact.

I have no illusions when it comes to politicians. I keep waiting for at least one of them—of those who know a thing or two about economics—to grow a spine, and act accordingly. We desperately need somebody to do what needs to be done, not what’s popular at the moment or what will win more votes. Dream on....

The Big Three of Detroit have to go, at least in their present form. They’ll either completely change their ways—on their own, without anybody’s help — or perish. God save us if we bail them out. It would mean one thing: the Great American Advantage is dead.