Revving Up or Running Out of Gas? The Economics of Cars
With the rise shift in market power in the automotive industry going from the United States to Japan, the reign of the American automobile is sputtering. Brad Andrew, assistant professor of economics, talks "spare-parts" on the issue, as well as how the American automobile could use a tune-up.
Question
Do you think the emersion of Japanese imports has been good for the competition of U.S. vehicles?
Answer
Yes, it has. American companies started producing more reliable cars in the late '80s and into the early '90s. Saturn would have never existed without Japanese competition, and for the first 10 years of its existence their cars were every bit as high quality as Japanese cars. However, over the last decade American car companies have let their quality slip as well as their features.
Q
Take for instance the cotton industry, the US government polices the industry to make sure that we only use American cotton, as opposed to foreign; this keeps the cotton industry booming in the U.S., and do you think that the U.S. should also police its automotive industry? And how would it affect the automotive industry at this point in the game?
A
It keeps the cotton industry booming at the expense of efficiency of the domestic and world cotton market. Why pay more for something here rather than buying abroad for less? If Americans buy cheaper products from abroad, the US can put more people and other resources into industries that are more efficient than those in other countries.
It wouldn't do anything for the automotive industry because it would be rewarding them for inefficiency, not planning ahead and not producing as good a product as Toyota or Honda.
Q
With China starting manufacturing on vehicles, what effect will they have on U.S. cars?
A
I look forward to seeing Chinese cars but that is probably 15-20 years or so away. I view any competition as good.
Q
With GM having to close manufacturing plants, Ford's reputation beginning to plummet, what do you think this says for the U.S. economy as a whole, as compared to the world?
A
The US doesn't just make cars. It has a strong, diversified economy with an unemployment rate at 4.4 percent, which is low by historical standards. The biggest problem I see with the U.S. economy is a sustained inequality.
Q
With China predicting cars in the US by 2020, Japan's booming industry, where do you see the US's automotive industry in 20 years?
A
I see the auto industry producing cars that are cheaper but of a lower quality than Japanese cars, much like right now, and smaller than it currently is.