Regular readers should not worry about the title too much — I am not turning against democracy or trying to ape Henry Adams. What I do think is that democracy as it tends to be defined in modern American government has become a major problem, and a serious contributor to the current economic crisis.
Specifically, it seems to me that the increasing debility of American business institutions partly stems from the permeability and responsiveness of American government. That is to say, in our system, it appears to be a little too easy to get the concerns and interests of various constituent groups a hearing in the halls of government. Wealthy campaign contributors and corporations may jump to the front of the line, but the most powerful argument for any lawmaker is jobs back in their state or district. Maximizing employment in his or her constituency is nearly every legislator’s top priority, which in practice means protecting and promoting the perceived interests of the major industries in that constituency. This is the door that interest group and corporate lobbyists use most effectively to gain influence over senators and representatives, but it is also very close to what most lawmakers see as their most basic democratic mission: being their constituents’ advocate before the government, especially their constituents’ businesses and employers. This is also why so many former lawmakers have few qualms about becoming lobbyists for industries they once legislated on: the two jobs are really not that different. As political scientists have found, and any significant amount of contact with congressional offices will tell you, “constituent service” is the one thing that even the worst legislators tend to be pretty good at, if they survive for any length of time.
In the case of the U.S. automobile industry, both the companies and their workers have received all too effective representation over the past four decades. The Big Three automakers have become addicted to political protection from market forces that have been signaling them for many years to build smaller, more fuel-efficient, more reliable cars. (See this capsule history of CAFE standards from Pew for specific examples.) GM, Ford, and Chrysler avoided mandates to make any of the necessary changes as quickly or thoroughly as they should have by relying on their friends in Congress and the executive branch to block or blunt every new law or regulation that came along. This process operated even at the state and local level, and not just on environmental matters, as today’s NYT piece on the dying out of American car dealerships showed:
Car dealers are not entirely blameless for their fate. Auto analysts say they did not push Detroit hard enough to build better-quality, more efficient cars. They note that the dealers lobbied hard in state capitals for laws to protect their franchises from the Detroit manufacturers who wanted to limit their numbers and determine their locations.
Mr. Thomas lays some blame on the unions that drove hard bargains with the automakers, some on a news media that “glorified” imports, and some on the Big Three for being “slow to react to the market and what the public wanted,” especially when gas prices rose in recent years.
In other words, a certain kind of “democracy” (and “federalism,” for that matter) limited the possible changes to the automakers’ basic business model.
For a long time, cheap gas and the continuing Middle American penchant for overcompensatingly large, powerful vehicles allowed Detroit to keep making money in its familiar way. Meanwhile, outside the Detroit-Washington-exurban street tank driver feedback loop, the American auto industry inexorably lost market share and reputation to foreign competitors. The point at which Detroit could have acted decisively to rescue its image and become known as a producer of reliable, modern, environmentally sustainable vehicles passed almost imperceptibly some years ago. In a bit of painful poetic justice, the industry’s constant, usually successful battles against effective environmental regulations probably contributed to the deterioration of Detroit’s “brand” in the marketplace. The incessant quasi-jingoistic commercials on sports broadcasts and local TV news probably did not help much either.
Waking up in the crash of 2008, the Big Three found Toyota, Honda, and Nissan occupying their old position as the American middle class’s default vehicle suppliers and foreign automakers generally having built a sufficient number of plants across the U.S. to undercut some of the jobs-based political support Detroit had always enjoyed. The three CEOs’ disastrous last private plane trip to D.C. earlier this month revealed a shockingly changed political atmosphere — the shock showed on the executives’ faces — and it immediately precipitated the fall of Detroit’s strongest redoubt on Capitol Hill, House Energy and Commerce Committee chairman John Dingell of Michigan. Now the abyss really seems to loom for the American automakers, and one can almost feel the country mentally preparing itself for the coming bankruptcies, at best. Former Rust Belt senator that he is, President Obama will probably step in do something for the auto industry early next year, but by that time he may only be refilling a largely empty shell.
Clearly, the auto industry has been a case where Big Business needed a Big Government to get tough with it, with no John Dingells to cry to. Contrary to its own ideology, what American business needs is more regulation and less input. By the same token, our elected representatives need to think a little more about what would be wise policy, and less about what makes their local industries happy.