Krugman: US Auto Industry Doomed (UPDATED)
Paul Krugman says the death of the American auto industry is inevitable.
Nobel economics prize winner Paul Krugman said Sunday that the beleaguered U.S. auto industry will likely disappear. “It will do so because of the geographical forces that me and my colleagues have discussed,” the Princeton University professor and New York Times columnist told reporters in Stockholm. “It is no longer sustained by the current economy.”
Krugman won the 10 million kronor (US$1.4 million) Nobel Memorial Prize in economics for his work on international trade patterns. Some of his research on economic geography seeks to explain why production resources are concentrated in certain locations.
Presuming he’s talking about the Big 3 continuing to make cars in Detroit, he’s almost certainly right. Presumably, Ford and GM will continue to make profitable cars overseas and Chrysler’s Jeep brand (all that’s left of the old American Motors) will survive in some fashion. Nor is there any reason that the highly profitable “foreign” firms manufacturing cars in the American South will fail any time soon.
I do think we’ll soon see the day when Western firms get out of the economy car business, ceding it to China, India, and Korea. We’re simply not going to be able to compete on the basis of cheap. I think we’ll see the end of cars as we know them before we see the demise of luxury and sports cars being made by Western, including American, firms.
UPDATE: Krugman says he was misquoted: “What I actually said was that the concentration of the industry around Detroit would disappear.” Me figured.