Convergences

Anti-Industrial Policy

H.R. 2743, the Automobile Dealer Economic Rights Restoration Act of 2009, has 230 co-sponsors. The CRS summary:

 Prohibits an automobile manufacturer (manufacturer) in which the federal government has an ownership interest, or which receives loans from the federal government, from depriving an automobile dealer (dealer) of its economic rights. Requires the manufacturer to honor those rights as they existed for Chrysler LLC and General Motors Corporation dealers prior to the commencement of the bankruptcy cases of each corporation, including dealer rights to recourse under state law.

Requires the appropriate manufacturer to restore the franchise agreement between the dealers and Chrysler LLC or General Motors that was in effect prior to the commencement of their respective bankruptcy cases, and to take assignment of such agreements.

One of the companies' problems is an antiquated dealer network, long protected by state laws, that siphons money from both consumers and manufacturers.

The information revolution, the Internet, and the rise of overnight delivery have created a desperate need to re-structure, something that would readily occur by private contract absent the meddling of governments. So Congress is announcing that wherever the power of the Federal Government extends, no such industrial restructuring will occur.

Perhaps Congress did not read GE CEO Jeff Immelt's column yesterday on the importance of our industrial base. It certainly has not read my piece on the coming crack-up of the Special Interest State.

The Downside of Federalism

Professor Bainbridge comments on a dimension of the auto industry problem that usually gets overlooked. While people rail about union contracts, bad management, and constricted creativity,  another top problem is:

An antiquated distribution system cemented into place by state franchise laws that insulate dealers from any real changes. GM needs a radically new distribution system involving fewer dealers, just in time inventory practices, and considerably greater use of on-line sales. State franchise laws protecting dealers, BTW, are a big part of the reason GM can’t shed brands. Killing a brand simply gets too complicated when you’ve got hundreds of dealers protected by 50 different sets of laws. In a bankruptcy reorganization, it will be much easier to kill a brand despite dealer opposition.

There is a lot of high-falutin’ theory about states as “laboratories of democracy,” but it is also true that states can be captured by special interests more easily than the nation, especially when benefits of the fix can be captured by in-staters and the costs dished off onto others.

The tort system suffers from this, where certain states specialize in granting outrageous awards that must be paid by out-state customers.

Similar issues arouse in Wyeth v. Levine, which raises the threat of a single state imposing a law that establishes a nation-wide standard of practice that contravenes the decision of the FDA. 

Ozymandias, Productivity & Preemption

Chicago Boyz has a lament for the American Midwest:

In 1950, America produced 51% of the GNP for the entire world. Of that production, roughly 70% took place in the eight states surrounding the Great Lakes: Minnesota, Wisconsin, Illinois, Indiana, Michigan, Ohio, Pennsylvania, and New York. 

The productive capability of this small area of earth staggers the imagination. Virtually everything that rebuilt the industrial bases of Europe and Japan came from those eight states. Cars, planes, electronics, machine tools, consumer goods, generators, concrete - any conceivable item manufactured by industrial humanity poured out this tiny region and enriched the world. The region shone with widespread prosperity. People migrated from the South and West to work in these Herculean engines of industry. 

The wealth, power and economic dominance of the region at the time cannot be overstated. Nothing like it has existed in human history. 

Yet, a mere 30 years later, by 1980, we called that area the “rustbelt” and it became synonymous with joblessness, collapsing cities, high crime, failing schools and general hopelessness. 

It goes on to discuss the policies, mostly government-imposed, that prevented the area from adapting to changing economic and international circumstances.

Any connection between this and yesterday's post on using the tort system to preempt FDA risk assessments for pharmaceuticals is strictly non-coincidental.

When I was a lad, Shelley's great poem was a staple of the curriculum. Perhaps it should be reinstated.

I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shatter'd visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamp'd on these lifeless things,
The hand that mock'd them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!"
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.