Gull-wing doors, flyaway jobs: lessons from De Lorean
John Z. De Lorean is not a Boston boy. His meteoric rise at General Motors, from novice engineer in 1949 to a vice-president by 1973, was in Detroit. His own creation, the De Lorean Motor Company and a $25,000 gull-wing-doored sports car that bore his name, was based in Belfast, Northern Ireland. His recent arrest on charges of possessing cocaine and trying to buy $24 million more of it , was in Los Angeles.
But let us not kid ourselves. The lessons of his example - political, financial, and moral - are peculiarly relevant to Boston, and to the rest of the nation. We ignore them at our peril.
Even the high-tech Massachusetts economy, which survived the earlier period of this recession fairly well, is showing signs of strain. The official unemployment figure, a low 7.2 percent, seems more quirk than gospel. Even if accurate, however, there are still some 223,000 people out of work.
Predictable, perhaps, are such factory closings as that of the General Motors assembly plant in Framingham, Mass., last month, throwing 3,400 people out of work. More worrisome are indications that the much-vaunted high-technology industries are less recession-proof than once thought: Digital Equipment has put through a hiring freeze, and things have been flat for six months throughout much of the rest of the high-tech industry.
At such periods, the thoughts of politicians quite naturally turn to measures for relieving the suffering. Even in good times, however, it is by no means obvious how best to structure a productive relation between government and the job-creating sector. When times get harder, and neither side has the financial flexibility to experiment, that task is doubly difficult.
And when a tough economic period coincides (as it does now) with the election season, the job is triply challenging. At such times, the measures favored are those that are easily explainable and provoke quick positive reactions from voters. Even a topic as complex as protective tariffs is amenable to the lapel-button logic of such phrases as ''Steel Imports Steal Jobs.''
Under all these pressures, governments respond to the lure of initiatives promising great quantities of new jobs. Such a response, designed to show the world that something is indeed being done, is hardly new. ''We humans,'' General Motors vice-president Alfred Warren told a conference at Indiana University of Pennsylvania last month, ''tend to meet every new situation by reorganizing.'' He was quoting Petronius Arbiter, who said it in AD 60.
But where do the initiatives for reorganizing the unemployed into fruitful work come from? Some are clumsily cobbled together. Some belong to other eras, and produce products for which the demand has already receded or has yet to be generated. Some embody the personal fancies of an ego bent on expensive self-fulfillment. And some come from hucksters of the instant answer, who trade on politicians' hopes and fears.
In some ways, the initiative that produced the British government's sorry interlude with Mr. De Lorean - who had earlier been wooed by Maine politicians who wanted his plant in Portland - partakes of all these conditions. Back in 1978, it must have appeared a legitimate gamble. For a planned investment of $ 106 million, the British government was promised some 2,000 new jobs for an area where unemployment hovers in the 20-percent range.
In the end, however, the British bill was $138 million; and when Her Majesty's Government closed down the plant in late October after the De Lorean Motor Company had been in receivership for eight months, there were only about 70 people still at work. Now, of course, comes a chorus of I-told-you-so's. Blame will be parceled out widely. Parliament, the Labour Party, and the previous Labour government will all get their share.
But it may be - and this is the point for Boston - that the blame ought best be directed at something much deeper. What is at fault here is not this or that group of people. At fault is an idea - the belief that a government, facing high unemployment, should step in, offer huge subsidies, and in effect buy jobs.
That notion, which forms a strong undercurrent of the jobs debate now raging around Boston and America, carries within it a central flaw. Like a rattle in a dashboard that only shows up on rough roads, the defect may not appear when times are good. That's too bad: The notion needs examining under the leisure of a thriving economy. Instead, it is ignored during the booms - and dragged into further service during the busts. Only when a De Lorean comes along does it get any real scrutiny.
What, then, is the flaw? Simply this: that the political process, far from being a better judge of business than the market, is much worse. It is much better at propping up losers (as is often the case with nationalized industry in foreign countries) than in picking winners.
Why? Partly because ''winning'' is a matter of single-minded dedication, whereas the political process is one of compromise in a many-minded field. Whatever business is selected as the one that will save jobs in Belfast or Boston, then, has innumerable goals imposed upon it beyond the essential ones of trying to survive and grow.
But the main reason is philosophical: No government can assemble the decisionmaking talent that can properly direct something as vigorous and independent as an economy. No group of officials, however dedicated, can second-guess the millions of decisions made each minute by consumers in a more or less free market - decisions which, in the end, determine the success or failure of every business enterprise.
Even if the conception were not flawed, however, it would probably continue to suffer from misuse. No investment trustee, however good at picking winners, would violate the so-called ''prudent-man rule'' by plunging all of his client's wealth into a single enterprise. But governments are regularly pressured to pour huge sums of taxpayers' money into single ventures. Not only does that produce massive waste when the dinosaurs fail. It also produces, as the threat of failure begins to appear, a scrambling among politicians to justify the initial expense by pouring in yet more funds - as happened in Belfast. Again, the most serious problem is the conceptual one of how best to spend public funds. For, as MIT Prof. David Birch's widely cited studies have shown, it is not the nation's large companies that produce the most jobs. Small ones, somewhere in the 20-employee range, have the best record of job growth.
The question, then, is, How does the political process create these jobs? Not by morning subsidies, luncheons with the mayor, and headlines on the evening news. There are not enough noon hours in a year to direct that many small ventures, nor (one hopes) enough government officials to woo every small business man one on one. Governments can, however, establish a business climate in which companies can flourish. Pennsylvania promises entrepreneurs a kind of ''one stop'' shopping process, wherein all the permits needed to begin a business can be had within 48 hours. Massachusetts is considering rewriting its tax code to be more favorable to small business. In these and dozens of other unsplashy ways, governments are doing what they do best: stepping aside, and giving advice. Is the lesson of De Lorean, then, that government should be (as the far right would have it) essentially dismantled? Not at all. There may have been too much directing in this case. But there was a great need all along for regulation.
For Mr. De Lorean stands accused of becoming entangled with drugs. But drug traffic is something upon which an unregulated free market ought to smile. After all, despite its capacity for individual destruction and collective debasement, the drug market makes money - lots of it. In an unregulated market society, where social values are secondary to the profit motive, there would be no bar to stop investors from such a lucrative trade.
One can argue, of course, that the bar should have been an inner one - a perception of the damage done by drugs - and that the regulator should have been not so much government as religion. That could be: Society is no stranger to the spectacle of geniuses in the commercial, financial, and industrial world who , despite government regulation, come to grief on the rocks of immorality. In this area government regulation is crucial, even if it only helps remove temptation by upping the risks to would-be investors.
The lesson?Stay alert. When the congeries of forces calling for more jobs meets an entrepreneur with expensive plans, beware of quackery and cure-alls. Take notice of the moral tenor of those in leadership. Unemployment is only a symptom, not a cause, of a region's blues. The commitment to repair it carefully, thoughtfully, and over time will do more than anything to save us from gull-winged cars that fly away.
