We Are Detroit.

Prof. Richard D. Wolff (The New School Graduate Program in International Affairs, with links) has an interesting piece on the collapse of Detroit (h/t David Ruccio). Beyond its relevance to understand the collapse of Detroit as a separate historical event, I believe that history can help us in Australia understand where we are.

Wolff focuses on "the automobile companies' competitive failures, and then their moves" out of the Detroit area. That was an insightful choice.

The auto makers became uncompetitive for many reasons (including their own managers' incompetence), says Wolff, but one of them was the higher wages they paid their workers. In other words, it was the very success of militant unions that determined Detroit's history: "Detroit's decline, like the parallel decline of the United Auto Workers, teaches an inescapable lesson. The very contracts that militant unions win with employers give those employers great incentives to find ways around those contracts."

The way around the Detroit auto makers found was to rush to the exit: "Detroit's capitalists thus undermined the middle-class conditions workers had extracted from them - and thus destroyed the 'capitalist success' city built on those conditions."

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This leaves us with a conundrum: if higher wages help make capitalist firms uncompetitive in a world awash in cheap labour, what is the solution?

Hourly compensation in China has been increasing... but was still less than USD 2 an hour in 2009.

(source)

One answer, presumably the answer capitalists prefer, was given by Peter Reith (former minister in the Howard "conservative, centre-right and libertarian" Coalition government and frequent contributor to The Drum: profile) last month:

"The most successful political leader from the centre left on the world scene in recent years has been Tony Blair. He was proudly New Labour. Julia Gillard is old Labor. Blair kept Thatcher's deregulated labour market whilst Gillard has busily overturned the Howard reforms. The unions can't ever admit the reality that old Labor is finished. So, as a result, the failure to reform and their many wrong policy decisions have left the ALP stranded in its own mess. Regardless of which side is in power, the following current Labor policies are all unsustainable: the Hansonite policy on 457 visas; labour market reregulation; shipping industry; car industry protection; the transport industry; and the constant promulgation of green-inspired red tape on environmental projects. Labor's approach is undermining Australia's longer term future." (See here)

I can't blame Reith for being indirect: we are in an election campaign, after all, and the policies he proposes are unpopular (and rightly so) with most voters, who actually depend on wages to survive. But I will be more direct: what Reith tells us is that we must accept lower wages; we must undo what little remains of what we (not Gillard, not Labor) achieved, before we are forced by our masters, on whose behalf Reith speaks. That's Plan A.

And then, there's Plan B: we expropriate capital and give it to those who actually make it produce.

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Now, personally, I can't see any obvious third alternative: it's either Plan A (a.k.a. capitalism) or Plan B (a.k.a. socialism).

So, you've been warned. If you make the wrong decision, please, don't come later saying that nobody warned you.