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Geopolitical Diary: The Significance of GM's Bankruptcy
June 2, 2009
U.S. auto giant General Motors filed for Chapter 11 bankruptcy on Monday, ending a period of U.S. dominance in automotive manufacturing that began when the first Ford Model T rolled off the assembly line in Detroit. In the United States and around the world, GM’s collapse is being viewed as yet another harbinger of doom — at least the third horseman of the apocalypse (right behind the collapse of Lehman Bros. and mounting government deficits) foretelling the end of U.S. hegemony — and as “proof” that American manufacturing capacity and industrial prowess is rotten to the core.
The collapse of GM is certainly not to be taken lightly, and its political, social and economic ramifications are serious. The U.S. “Rust Belt” has been rusting since essentially the late 1960s, and the collapse of what was once a manufacturing powerhouse certainly will erode it further. Some 21,000 employees (around 34 percent of GM’s total work force) are looking at layoffs. The 780,000-plus workers in the automotive parts industry are facing uncertainty, as their industry will be affected by the collapse. Then there are the serious effects that the end of GM will have for businesses that are not related to, but nevertheless dependent on, the automotive sector. According to estimates from the auto parts industry, 4.7 jobs — in everything from catering to regional banks — are created for every one job in the motor vehicle parts industry.
This is undoubtedly a social and economic concern. From a geopolitical perspective, however, it is far from upsetting the main foundations of U.S. hegemony.
First, American industrial prowess remains unrivaled in the world. In 2006, U.S. industrial production equaled $2.8 trillion — the largest in the world, more than double that of second-place power Japan, and more than the production of Japan and China combined. The collapse of GM, the symbol of American manufacturing might, will not put a dent in this industrial output.
In terms of value added from the United States’ entire industrial output, the automotive sector (counting both the suppliers and automotive manufacturers) accounted for only 5.54 percent. Motor vehicles alone accounted for just 2.49 percent, with the rest roughly representing auto-parts manufacturers’ shares. Computer and electronic products, by contrast, accounted for 7.64 percent, non-transport machinery (such as capital goods) accounted for 5.01 percent and aerospace accounted for 3.26 percent. In fact, if computers and electronics are combined with other “high-tech” manufacturing categories (such as communication equipment; aerospace; semiconductor and other electronic components; navigational, measuring, electromedical, and control instruments; and other electrical equipment), they account for more than 20 percent of total U.S. industrial output.
Nevertheless, automotive manufacturing does account for the majority of manufacturing jobs — 4.5 million of them nationwide. And according to the Center for Automotive Research, automotive manufacturing provides more jobs than any other sector in seven states (Indiana, Kentucky, Michigan, Missouri, Ohio, South Carolina and Tennessee). However, manufacturing as a whole has played a declining role in U.S. employment, despite a steady and regular rise of the industrial production index, which calculates real industrial output. The reason for this is the rise in labor-saving technological advances. For the U.S. industrial sector, this means that between 1979 and 2009, industrial output roughly doubled, but the labor force engaged in manufacturing dropped from 21 percent in 1979 to just over 9 percent in 2009. Basically, the U.S. industrial laborer has become four times more efficient than his or her counterpart in the 1980s.
The fact is that U.S. industrial output has been increasing along with the productivity of the American worker. The switch to more specialized and high-tech manufacturing jobs has facilitated that shift, and the collapse of the automotive manufacturing sector simply represents the culling of the least-efficient sector of American manufacturing. Highlighting that shift, GM was replaced in the Dow Jones Industrial Average — a key index for the U.S. industrial sector — by Cisco Systems, a manufacturer and designer of complex networking and communications technology.
The culling of jobs in the automotive sector will be extremely difficult. It will present a social, demographic and economic challenge that could define the next decade of American politics. However, from a geopolitical perspective, the United States is losing manufacturing capacity in a technology that has been mastered by almost every current, rising and future global player.
Whereas automotive manufacturing once signaled one’s “arrival” on the geopolitical scene — which in part explains a plethora of car manufacturers from Serbia to Colombia — it no longer represents a monumental technological achievement. Future economic competition will be based on the ability to master computer, communication, robotic, space travel, and nuclear technology (with potentially other, unforeseen technologies becoming part of the mix as well).
In other words, the United States is moving onto bigger challenges, fulfilling its role as a global hegemon, but incurring the political growing pains that go along with such a shift
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