Reading about the ongoing misadventures of the American automobile industry got us thinking. True enough, those Detroit worthies that have been making American cars haven’t been what you might call astute for a long time. The plain fact is that, unchastened by decades of declining fortunes in the market place, they have often been selling ugly and unreliable junk, even as their Japanese competitors have turned out attractive, dependable cars that have been snapped up by American buyers.
At the moment, American car manufacturers are doing better in terms of quality of their product, but given the state of the economy and all, this appears to be a case of too little and too late. There is a good chance that General Motors, Ford and Chrysler will be filing for bankruptcy in the near future. At least the market thinks so – General Motors bonds have been reduced to “junk” status and are yielding around 20% while the fed funds rate is a mere 1%.
In other words, the Japanese have been kicking ass in the American car market and doing right well at it. And so, it seems passing strange that – guess what? –American state governments have been subsidizing Japanese automobile manufacturers. Thus, the New York Times has reported that the State of Mississippi has condemned some 2.5 square miles of land for a Nissan plant, and on top of that has given Nissan $400 million in cash and tax rebates, and has assumed the $17 million cost of a vehicle preparation building, plus another $80 million for a job training program and another $60 million for new and improved roads serving the Nissan facility. See David Firestone, Black Families Resist Mississippi Land Push, N.Y. Times, Sep. 10, 2001, at A20. Why would the state do it? Money, that’s why. A number of southern states have been acquiring land, often by using eminent domain, and then turning it over gratis to the likes of Nissan, Toyota, Honda etc., along with multi-hundred million dollar subsidies in the form of cash and tax abatements. Is this a great country, or what? Can you imagine a Japanese prefecture spending its treasure, to the tune of gazillions of Yen, to subsidize an American automobile plant in some part of Japan that could use more employment, so the gaijins can better compete with Toyota et al.? No? Neither can we. The Japanese must think we’re crazy, and if they do, who can blame them?
This is done in the hope that those Japanese car manufacturers will create local jobs that, true enough, those states can use. But even so, if you stop and think about it, this thing is still crazy. Acting in the name of job creation, American [state] governments are blowing hundreds of millions of tax dollars subsidizing foreign competitors of American car manufacturers who are being forced to lay off tens of thousands of their employees, so that in the end, Mississippi’s gain is Michigan’s loss. A latter day economic civil war, as it were.
It seems to us that, whatever the economic benefits to those southern states, this is about as irresponsible a use of the power of eminent domain as can be imagined. If the Japanese want to buy American land in voluntary transactions and build their car plants with their own money, let them. That would be a case of the Japanese car manufacturers paying for the cost of doing business in America, and of market competition with which it is hard to argue. But eminent domain is not a private activity pursued to enrich private profit-seeking enterprises, a fortiori to enrich foreign enterprises at the expense of their Anerican competitors. It is supposed to be the exercise of sovereign government power that is proper only when the taking is for “public use” or at least is used to generate “public benefits.” So how can a state’s waging of economic warfare on other states and impoverishing them in the process meet those criteria?