Because of unfair trade and an overvalued dollar, America lost the so-called incumbent's advantage -- its historic position of productivity leadership based on being first into the business -- in the early 1980s. Thereafter Detroit needed not only a fair world market but lower wage rates than its main foreign competitors to have any chance of fighting back. Its pleas for a lower dollar have gone unheard, in part at least because members of the American elite wanted to enjoy the benefits of a high dollar when they travel abroad. The result is the desperately weakened industry we see today.
All this is well understood in foreign capitals, particularly in those of the major East Asian nations. So, yes, the American car industry's fate reflects in large measure American incompetence -- but the main source of this incompetence has not been the engineers of Detroit but the commentators of New York and Washington.
I would only add that the principal benefits of an overvalued dollar (a winnah!) had less to do with travelling abroad and more to do with the bounty of seignorage, the benefits of which rarely flow more than 50kms inland.
Posts
