Friday, October 21, 2005

 

Who Lost Delphi?

One of the longest standing and most bedeviling debates among political economists is whether democracy leads to development, development leads to democracy, or neither. There is evidence for all of these positions. Japan, Korea, Taiwan, and Thailand have all grown economically and have transitioned, albeit slowly, to more democratic forms of government. On the other hand, countries like China and Singapore appear to have reached an equilibrium that allows illiberal, single-party governments to co-exist with tremendous economic expansion. Then there are the many non-democracies that have no growth and democracies that lag behind economically.

It is interesting to note that nowhere in this debate is the question asked whether democracy hinders economic growth. But if Brian Dickerson is right (Free Press 10/14/05) and the increasingly cantankerous exchange between democrats and republicans over who is responsible for Delphi corporation’s bankruptcy is a “glimpse of ’06,” then democracy, at least the partisan way we practice it, may not be helping Michigan compete.

The problem is, both parties have it wrong. The GOP’s contention that Michigan’s focus should be on Indiana and not India and that Governor Granholm should do more to protect jobs is shortsighted and unrealistic. At the same time, the Democrat’s obsession that globalization is ravaging Michigan jobs is pointless and irresponsible.

Yet both parties also have it right. Democrats correctly point out our low-educated work force reduces incentives for Delphi and companies like it to stay. At the same time, a republican focus on reducing organized labor’s stranglehold on market incentives is vital.

The reality is that globalization and market forces are much more powerful than partisan politics. As Singapore, Malaysia, and Thailand have all learned, competing with China and India on low wages alone is a losing battle. But if, on the other hand, you can’t compete for high-skill manufacturing jobs, then you’re just stuck in a structural vice, the handle on which globalization is continuously tightening.

Rather than working so hard to lay blame at each other’s feet as a way to promote future electoral fortunes, democrats and republicans must cooperate with business, labor, and academic leaders to find ways to create market incentives for firms to not only to stay in Michigan, but also to upgrade their operations technologically. Steps must simultaneously be taken to absorb some of the pain for those who lose low-wage jobs due to market-induced transitions while they are being re-trained for new economic activities.

Powerful forces are reshaping the economic landscape. To survive and thrive in this new environment might require that we also reshape the political landscape. Otherwise, it won’t matter who gets elected.


Comments:
I guess I'm still not quite clear on just what it is you are proposing, concretely, other than a) improving education, and b) busting unions.

Exactly what "market incentives" need to be created?

By the way, improved education will cost money. How will that be paid for?
 
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