Carrier and the Commonwealth

I was asked by Fortune to contribute a piece about Trump’s Carrier deal. They had gotten a lot of people criticizing it and were looking for someone who would give a different perspective. I think many of the criticisms are valid in a sense, but miss the larger context. So I wrote the piece which is now online. Here’s an excerpt:

Alexis de Tocqueville pointed out that one of the keys to America’s unique success was its sense of enlightened self-interest. Americans worked and competed hard for themselves, their families, and their businesses, but they understood that a purely selfish mindset was self-destructive in the long term. Tocqueville observed inDemocracy in America, “Each American knows when to sacrifice some of his private interests to save the rest; we [the French] want to save everything, and often we lose it all.

Businessmen once understood this link between national, local, and personal success. The men of the Commercial Club of Chicago who commissioned Daniel Burnham to create his famed 1909 plan for that city had personal fortunes deeply tied to Chicago. They needed the city as a whole to succeed for them to succeed. Likewise, General Motors CEO Charles Erwin Wilson once famously said, “For years I thought what was good for our country was good for General Motors, and vice versa.” He understood that his company’s fortune and America’s were intertwined: GM couldn’t make any money if no one could afford to buy its cars.

…

As these restrictions were lifted, these businesses left enlightened self-interest behind in favor of quarterly profits. They forgot their community in favor of global capital. Their business models evolved to delink profits and executive compensation from broad-based American prosperity. They could take a portfolio view of local communities and even countries. It was all very economically efficient. These firms and their managers could thrive even while much of America fell into ruin. Or so they thought.

Click through to read the whole thing.

Some people were a bit critical, saying, “Why not say this when Obama bailed out the auto industry?” or “Why is it only good when Trump does it?” In fact, I’ve actually written on this theme before.

Back in November 2008, shortly after Obama’s election, I posted a piece in which I criticized the auto companies’ management and came out in favor of a federally backed restructuring of the auto industry. While I am critical of some aspects of how Obama handled this, the idea of bailing out the car companies was something I was on record as supporting before it happened. Here are some excerpts from that:

Even if you assume a lot of this [auto company management behavior] is exaggerated for effect or outright BS, I’ve heard so many similar type things from people who’ve been associated with the auto industry that there must be a kernel of truth in it somewhere. I lead with this because it is so common to blame the UAW and its $73/hour or some such wage packages for the problems facing the Big Three. And indeed in the modern era that is not sustainable. But there has been particularly little focus on the management excesses of the auto industry, and the corporate cultures of those companies, and by analogy that of Detroit.

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I’ve seen estimates that 2-3 million jobs could be lost and that chaos would ensue if the auto makers went bankrupt. That’s probably true if GM, Ford, and Chrysler just waltz down to the court house and file. But it is not the case if they have a government sponsored, pre-packaged bankruptcy.

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Even so, we can’t lose track of the fact that there are real human beings, labor and management, with real trauma in their lives. Even if they are at least partially to blame for the mess they are in, that doesn’t mean they deserve what they are getting. It’s like a Greek tragedy: the suffering is disproportionate to the crime. And there but for the grace of God go you and I. I also work in a restructuring industry, and may yet join the auto workers in their pain.

The stories you hear in the Detroit papers are heartbreaking. One that really stuck with me was about people losing their life’s possessions when they couldn’t pay the rental fees on storage lockers. People who had already lost their homes to foreclosure put their possessions in storage, only to lose them too as the storage companies auctioned them to pay the bills. I’m not an emotional guy, but this makes me sick to my stomach. I don’t know about you, but I don’t think this should be happening in a country like America. People who made decisions in good faith, who showed up to work every day, who did the right things to care for their families, shouldn’t be left to lose everything because of the action of economic forces they can’t understand or control. Not in America. That’s why we absolutely need a federal safety net program here. Michigan alone can’t fund this.

I probably anticipated more of a bite the bullet approach than actually happened (which is one reason restructuring is still ongoing), and my views have probably changed somewhat in eight years, but clearly the same general themes are present.

Where I would take issue with Trump, is in the idea of “bringing the jobs back” as the theme. This sort of nostalgia for a bygone idyllic era that never really was is powerful in the Midwest. It’s very backwards looking and based on a language of resentment. I can understand why the appeal to this works rhetorically, but as an actual policy goal it’s not realistic. The ship has already sailed too far to return to the harbor. That doesn’t mean we should double down on the status quo, but we’ll have to chart a different path forward to the future, not roll back the clock. (Fortunately, Trump’s working class supporters seem realistic on this point and don’t expect him to literally do every single thing he said).

This perhaps explains why I’m more positive on intervention to save existing jobs than to try to lure new ones. That and the difference in the price tags. It’s one thing to try to preserve actually existing businesses already woven into the fabric of the community, but it’s another to try to speculatively create something new. I’m not under any illusion that we’ll get rid of economic incentives, but it does seem excessive to me to spend, say, $750 million (corruptly, as it appears to have turned out) to lure a solar panel factory to Buffalo. I’m ok with the idea of spending a billion dollars of state money in Buffalo, but there have to be better ways to do it. (Mayor Stephanie Miner of Syracuse said if she had a billion, she’d spend three fourths of it to fix her city’s water pipes – a prescient pledge made prior to the Flint debacle).

It’s also the case that we need to be willing to face the unpleasant reality that many communities are poorly positioned for the future economy. That doesn’t mean abandoning them, but we do have to level with them. And those communities, not just the federal government, also need to be willing to make some changes.

But all that doesn’t mean that simply pushing forward with more of what we’ve already been doing is a viable option. Trump understood that, and beyond the politics of it, the Carrier deal was a symbol that he intends to pursue a new direction.

Update: In line with these themes, a commenter pointed me at this recent blog post by South Bend mayor Pete Buttigieg.

Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

Photo: By Carrier Corporation (http://www.teamworkmarinesxm.com/) [Public domain], via Wikimedia Commons