Check Engine: A Globalized Industry Collides With National Politics – The Big Picture

Opinion


Sergio Marchionne told it like it was. Shortly before his death I asked the FCA CEO whether Donald Trump’s trade wars and Britain’s turmoil over Brexit—its departure from the European Union, one of the world’s largest trade blocs—posed a threat to his company’s business. He paused a moment, then powered ahead: “These are strange times,” he agreed. “We have never been here before.”

Indeed. Globalists are out. Economic nationalists are in. It’s a bad time to be running an automaker. With everything from the smallest part to complete vehicles streaming ceaselessly across borders from factories all over the planet, the auto industry is the globalists’ poster child. It generates billions in revenue, employs millions, and offers consumers an unprecedented choice. But not everyone believes that’s a good thing.

“Build them here!” tweeted President Donald Trump as he threatened tariffs on imported cars and castigated Harley-Davidson for plans to move some motorcycle production out of the U.S. to avoid retaliatory taxes from the European Union. “F**k business,” former British Foreign Secretary Boris Johnson reportedly said after BMW warned that, without a guarantee of tariff-free movement of cars and parts across Britain’s border, Brexit would threaten the viability of its U.K. manufacturing operations.

What alarms auto industry executives is these strident voices are not coming from a radical left-wing fringe but from politicians belonging to parties they have long regarded as business-friendly. However, those parties are now in thrall to voters angered by wage stagnation and declines in social services—voters for whom life in the globalized economy has not improved their personal pocketbooks. The awkward problem for the auto industry is those voters have a point.

Research by the Hamilton Project at the Brookings Institution has revealed that, adjusted for inflation, worker wages in the U.S. have only grown by 10 percent since 1973. Over the same period, the inflation-adjusted price of a base Mustang has increased more than 60 percent. It’s a similar story in Britain, where a base Ford Mondeo costs 50 percent more than the inflation-adjusted price of a 1973 Ford Cortina. Of course, today’s Mustangs and Mondeos are in every way far better cars than their predecessors. But for average wage earners, they’re not as good a deal as they used to be.



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