Detroit, the Big Three and the Middle Class

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Economy: Taxpayers are being told that the middle class itself may be in peril if they don't bail out the auto industry. Look behind that tall claim and you'll find a liberal creation myth.

As the fate of General Motors, Chrysler and maybe Ford continues to hang in the balance, we hear increasingly dire talk about what might ensue if any of these companies has to seek protection under bankruptcy laws.

These companies would fold, millions of jobs would be lost, and America would lose a national-security linchpin. To top it all off, the survival of the middle class may be at stake, or so we're told.

Michigan's senior senator, Carl Levin, acknowledged on National Public Radio earlier this month that taxpayers may be reluctant to bail out Detroit. But he added: "I think everybody wants the middle class to survive, and the manufacturing centers of this country — wherever they are — have been a great source of the middle class to this country."

Fellow Senate Michigander Debbie Stabenow has said: "To fundamentally have a middle class in this country, we need to support the people who started the middle class: the automakers."

Both Levin and Stabenow may be taking a cue from UAW President Ron Gettelfinger, who has told union delegates that "the real issue is the backbone of America — an industry that does more for the economy than any other industry and, quite frankly, made the middle class what it is today."

Did Detroit really do all that? If so, then America had no middle class to speak of until the early 20th century.

Most historians would find that idea strange, but it springs from a view of history that seems widely held in the labor movement and the Democratic Party. This is the theory that unions essentially created the modern middle class in the mid-20th century by boosting the wages and benefits of millions of manufacturing workers.

You might call this the liberals' Middle Class Creation Myth. The auto industry is central to that tale not because of its bosses but because of the UAW, whose lavish contracts set the standard for the rest of organized labor. So all the talk today about saving the auto industry in order to save the middle class is really about preserving those union contracts.

The Big Three could survive and maybe even thrive by cutting their wage and benefit costs to the levels enjoyed by Toyota, Honda and other foreign companies that make cars in the U.S. Bankruptcy protection (or a similar government-supervised process) would release Detroit from its current UAW contracts and enable it to speed up the process, now far too slow, of closing that labor-cost gap.

We doubt if that is what Stabenow and Levin want. It's certainly not what Gettelfinger would want. But it's what Detroit needs to become competitive again. It's also what autoworkers need if they want to keep their jobs for the long term.

History teaches a couple of lessons here. One is that, as the labor movement boasts, wages and benefits did indeed rise in the late 1940s and 1950s, when private-sector unions were at their maximum strength.

But another lesson is that American industry had unusual advantages during that time, when Europe and Japan were still rebuilding and offered no serious competition. It was a phase that could not last, and unions could not stem the drain of jobs out of the U.S. manufacturing sector.

No fact makes this point better than the UAW's own dramatic shrinkage, from 1.5 million members in 1979 to fewer than half a million today. Such is the downside to a strategy of raising wages through collective muscle. When labor gets priced to a point where a machine can do a job more cheaply than a worker, the worker is out of a job.

So there has to be a better way to build an enduring middle class. In fact, there is. Long before the UAW was founded or the first car rolled off the assembly line, Americans were working their way into the middle class through education and individual initiative. Many have made that move up by way of Detroit. But Detroit is only one of myriad routes that the enterprising can choose.

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