Cross-posted from Real Economics.
On February 14, 2012, an op-ed by Republican Presidential candidate Mitt Romney appeared in Michigan newspapers, arguing that the bailout of the U.S. automotive industry was President Obama and "crony capitalism run amock." Romney's op-ed was almost immediately taken apart, point by point, for the pack of lies it was, by Justin Hyde, a Detroit newspaper reporter who covered the bailout and the legal fights over it. Hyde posted his riposte on the auto section of Yahoo, where it received gratifyingly large amounts of attention.
I'm not going to cover the ground Hyde so ably covered. I want to focus on one sentence in Rmoney's op-ed, and show how it is typical conservative, Republican stupidity and/or dissembling about the actual economic history of our country..
Romney writes, regarding the founders of the U.S. auto industry: "These giants never envisioned a role for government in their business, but relied on the hard work and commitment of private individuals."
More below the orange fluer de power.
Now, Rmoney's statement is obviously meant as an affirmation of conservatives' cherished anti-statist myths about heroic and individualistic entrepreneurs of capitalism rising to become captains of industry. But like so much of Republican and conservative dogma, it contains just a little kernel of truth, encased in layers and layers of willful ignorance and twisted half-truths. It's not entirely an outright lie, but it is definitely misleading as to how the USA economy actually was built.
The simple fact is that the auto industry has ALWAYS been entirely dependent on a role by federal, state, and local governments - for building a road and interstate system that the industry's products could be used on safely and conveniently. There was even a major political movement in the 1910s and 1920s called the Good Roads Movement that sought increased government funding of and involvement in building roads and highways.
The Good Roads Movement actually began in the 1880s, before the appearance of the automobile, when bicyclists organized a national association to demand state and county governments begin paving country and town roads to the same standards as some European countries were (oh, those blasted French!). But it was the rapid rise in automobile ownership and use after 1907-9 that propelled the Good Roads Movement to success. From 1900 to 1907, inclusive, a total of 154,000 motor vehicles were produced in USA. In 1908, another 63,500 were produced; then 123,000 in 1909; 181,000 in 1910; 199,000 in 1911; and 356,000 in 1912. Production continued to climb, to 895,000 in 1915, and 1.525 million in 1916.
Americans loved automobiles. There was only one big problem:
Not only did it become quite clear that the country needed paved roads, it also became clear that it needed a national road system. It was no longer enough to get states, counties, cities, and towns, to build roads. We needed some sort of national system, that set standards for road design, set standards for road signage, and ensured that major population centers were linked directly and not haphazardly. As Charles Henry Davis, founder and president of the National Highways Association said in 1911: "The nation can not permit the states to dictate the terms and conditions upon which our United States HIGHWAYS shall be built . . . . Only the nation can build the roads heavy enough, wide enough, straight enough for our national industrial and military needs." Davis' Association adopted the slogan: GOOD ROADS EVERYWHERE, and it quickly raised funds to publish a map of a proposed 50,000-mile National Highways network, which Davis described as "a broad and comprehensive system of National Highways, built, owned, and maintained by the National Government." At the time, the nation probably had over 2 million miles of roads and streets, but only 217,202 miles were surfaced - almost all in cities and large towns. And "surfaced" did not always mean paved. It usually meant that the dirt roadway had been scraped smooth, minimizing ruts and holes, and compacted.
While noting that differences in local geography and topography made it impossible to precisely estimate the amount of funding required, the Association argued that a "very liberal average cost" was $10,000 a mile, giving a total cost to the National Highways network of $500 million. The earliest date that the Historical Statistics of the United States gives for the amount spent on public roads is 1914, when states spent $53 million on construction, $14 million on maintenance, and $6.6 million on administration.
The amount spent by the federal government on "roads and canals" is given in another data series, but it ends in 1882. However, an interesting contrast with Davis' $500 million National Highways network is total federal government expenditures, which in 1911 amounted to $691 million. So, a roughly comparable figure for Davis' program today - estimated as just under three quarters of the national government budget - would be $2.7 trillion. That's a trillion, not billion. Just to give you some idea of what Good Roads people were trying to get the national government to do.
Then, as now, conservatives and states-rights fanatics came out in fierce opposition to this proposed enlargement of the federal government's role in our economy. So a few years had to be wasted arguing against the conservatives of that day. But, on July 11, 1916, President Woodrow Wilson signed the Federal Aid Road Act of 1916 into law. This was the first federal highway funding legislation in the United States, and it fulfilled one of the planks in the platform on which Wilson had run: The happiness, comfort and prosperity of rural life, and the development of the city, are alike conserved by the construction of public highways. We, therefore, favor national aid in the construction of post roads and roads for military purposes. The act contained an interesting coincidence: it limited federal funding of roads to $10,000 per mile, the estimated per mile figure Davis and the National Highways Association had first proposed.
In 1918, for the first time, the federal government disbursed money to various state governments for highway construction and maintenance: a grand total of $2.1 million. But this amount grew rapidly. In 1920, the amount disbursed was $62.0 million, and in 1925 it was $92.2 million.
The $10,000 per mile limit proved too constrictive, and there were a few other problems. For example, there was really no systemic planning of a highway network taking place at the national level, and with national goals in mind. And so on November 9, 1921, President Warren G. Harding signed the Federal Aid Highway Act of 1921. This law mandated the development of a coherent national highway system. Then, as now, one of the ways to overcome the objections of conservatives was to convince them that a national system was needed for purely military purposes. In 1922, the Bureau of Public Roads requested Gen. John J. Pershing - then the most-well known military figure in the country because he had been the overall commander of the U.S. forces sent to Europe in World War One - to study which roads would be most important in the event of war, and determine the standards to which those roads should be constructed to handle military traffic. The result was the “Pershing Map,” which was the first official topographic road map of the entire United States.
At least one state, Kansas, tried to circumvent federal oversight of its state highway program by refusing to accept federal funds (which sounds so familiar today as conservative states battle the national health insurance mandate). The Kansas State Historical Society webpage on the Good Roads Movement in that state notes:
In 1920, faced with the loss of federal funds because of the lack of state control, Kansas voters passed a "good roads" amendment allowing state aid to counties for roads. The counties and townships still controlled the road system, an arrangement that violated federal law. In 1928, $2 million per year of federal aid for Kansas roads was stopped because the state would not fund a state highway system. In that year, Governor Ben Paulen borrowed money from Topeka banks to pay for the State Highway Commission and called a special session of the legislature to propose a constitutional amendment removing all obstacles to establishing a statewide highway network. In 1929, after passage of the amendment, Kansas joined the other 47 states and the state began building and maintaining a system of cross-state highways.In 1930, the states spent $341 million in property taxes and other revenues on roads, while the federal government disbursed another $94 million. As state budgets were battered by the First Great Depression, these numbers reversed. In 1934, state spending on roads had fallen by two thirds to just $74 million, but the federal government stepped in with $354 million for the states to build and maintain roads.
Like much else in the U.S. economy, the development of the auto industry is really the forgotten story of an unstated but crucial partnership between private enterprise and the national government. The role of government is not to actually control private enterprise down to the minutest detail - the straw man "socialism" or "statism" that conservatives scream would turn the USA into some terrible place like France - but the create a technological and economic milieu in which private enterprise can flourish. Sometimes, there simply are things that government can do that private enterprise cannot or will not do.
There were certain safety features that eventually had to be mandated, and the industrial activity of actually manufacturing motor vehicles had to be regulated to protect the environment and not poison neighboring citizens. But the federal government did not dictate to Henry Ford or Billy Durant or Walter Chrysler or Charlie Nash or James and William Packard how many cars they should build, what colors they should be painted, what price they should be sold at, or how the cars should look. What the federal government did do - acting at the request of a large number of the American people, and thus acting as their agent for general social transformation - was to mandate, oversee, and help fund the development of a national road and highway system on which the products made by Ford, General Motors, Chrysler, and other makers, could be operated on safely and conveniently.
And it was not the federal government itself that built the roads and highways. It wasn't Army troops that swooped in an built the roads. It wasn't government equipment that was used. It was all built by private firms and individuals using construction equipment made by hundreds of makers around the country. The national government played a crucial role of supervising the effort, making sure it kept national goals and standards in view.
This role of the national government in building was a continuation of the American System policies that were first established by George Washington's Treasury Secretary, Alexander Hamilton. This American School of political economy, which rejected the complete laissez faire of the competing British school, was based on a system of protection of American labor and manufacturers (through tariffs and other means); government oversight of the banking system to ensure that flows of credit and money tended to go into real economic activity, and not just speculation and usury; and "internal improvements" as infrastructure programs, such as road building, were called in the nineteenth century.
Romney's and conservatives' selective amnesia about how America was actually built is like lauding the "free enterprise" system for those wonderful little GPS guidance systems, without ever acknowledging that GPS stands for "global positioning satellites" - and those satellites are designed, built, launched, and maintained, "all on the taxpayer's dime" as as Rmoney would write. If conservatives and Republicans had their way, we'd all be stuck in the mud. There probably would not be much of an auto industry that ever developed. But, the tractor industry would have been HUGE.