Tuesday, September 2, 2008


(Week 6 - Tuesday, Sept. 2)

On this Labor Day week of 2008, it would be well to reflect on what happened to Flint, Michigan. This small city northwest of Detroit was for many years the site of one of General Motor's largest production complexes. It was here in 1936-'37 that what came to be known as the "Flint Sit-Down Strike" transformed the United Automobile Workers from a collection of isolated locals on the fringes of the industry into a major union, which, in turn, led to the unionization of the auto industry in the U.S.

The number of people employed by GM in Flint fell from a high of 80,000 in 1978 to about 8,000 today. We should pause to ask, what has been the cause of such a steep decline? Many reasons have been offered, but almost all boil down to a supposed "lack of competitiveness" on the part of American industry, and by implication, the American worker. This is a tragic misinterpretation of what is essentially a monetary problem, and the industrial laborer, the country, and indeed the world is paying a terrible price for it.

In his classic film "Roger and Me," Michael Moore pursued the CEO of GM, Roger Smith, to try to find out why his corporation was closing auto plants in Flint, and reopening them in seemingly illogical places like, say, the desert in Mexico. He never did successfully corner Mr. Smith for an answer, but we can assume that the rationale would have had something to do with "competitiveness." Let us take a look at which location is really more "competitive" from the stand point of the physical and human realities involved, leaving monetary considerations aside for the moment.

To begin our reckoning, let us note that to move the site of production, the factories that had already been constructed over generations and at great cost in Flint would have to be disposed of and rebuilt in Mexico. What is more, those plants are located in Flint for good reason. They are within reach, via the greatest inland waterways in the world, of the vast iron ore deposits of northern Michigan and Minnesota. They have convenient access to the high-quality coal deposits of Appalachia via a well-developed rail system. They are in proximity to a bountiful fresh water supply. Flint's factories are located in mature communities with good roads, housing, medical facilities, schools, utility infrastructure, and all manner of amenities. They are interlinked with a well-developed network of suppliers and services that have grown up over the years as adjuncts to the auto industry.

The desert in Mexico is clearly lacking in all of these. If one were to make a listing of the tangible features of the Flint-vs.-the-Mexican siting, one would find that virtually all of the advantages are squarely in the Flint column. The only plus I can see for a Mexican location is perhaps a limited potential for assembly for local Mexican consumption, but even that is dubious. In any case, what reason could one offer for forcing Upper Midwest residents to buy their vehicles from Mexico?

But, we are scolded by pundits and politicians, American workers can no longer "compete." We need to take a closer look at this. The workforce at the Michigan plants is already well qualified for the job by training, experience and cultural tradition. I know that Mexicans are fine and hard-working people as well, and are fully capable of learning and performing the same jobs as those in Flint, but I have worked in the American workplace all my life, including a number of factories (one staffed almost entirely by immigrant Mexicans), and Americans labor well and hard also. There is not much to choose from when comparing the fitness of respective populations.

This begs the question, "Given the overwhelming preponderance of bona fide advantages embodied in the Michigan option, why can a factory in Flint 'not compete' with one in Guadalajara?" The answer is deceptively obvious and simple; the worker in Michigan gets paid in dollars, while the one in Mexico collects his wages in pesos.

But, I hear it argued, the peso is worth less than the dollar. Says who? Where is there written some universal law that dictates such things? Currencies are abstract human creations controlled by the banking system. They would find their own reasonable levels relative to each other if they were not forced out of such equity by the insatiable need to feed the "interest" bubble now almost universally attached to all currencies.

The notion that there is some natural disequilibrium in the exchange ratio between the dollar and the peso that impels economic actions which are in such stark contradiction to any sensible assessment of physical and human realities as there were in Flint, ought to be a huge blinking red light to alert us to precisely where the problem lies. The root is with the currencies themselves. The problem is traceable to the creation and issuance of "debt"-based currency by a private banking system, and the ensconcing of the dollar as the privileged "reserve currency" for the world.

We will continue our look into the lessons of Flint, Michigan in tomorrow's column.

Richard Kotlarz

The complete set of columns from this series is posted at the following websites: