The Silver Lining to the Toyota Deal

The state of Michigan recently sold a parcel of land near Ann Arbor to the Toyota Motor Corp. so that the auto giant could build a technical and engineering center there. In terms of economics and good government, the deal was a travesty; Toyota paid only $9 million to acquire the property, while an alternate bidder had offered $25 million.

But there’s a silver lining to the event: The internationalization of commerce and industry has progressed to the point where our state’s political leaders no longer feel compelled to make invidious distinctions about whether the companies receiving their corporate welfare are American or Japanese.

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Twenty years ago, it would have been impossible to imagine Michigan’s political establishment giving a Japanese automaker a $16 million discount on state-owned property and then voting two weeks later to accelerate the collection of property taxes from Michigan’s homeowners and businesses. In fact, in 1984, Sen. Carl Levin won re-election by running television ads that showed film footage of his opponent giving a speech to Japanese executives and telling them how much he loved his Toyota. Two years before that, a Chinese-American named Vincent Chin was killed outside a Detroit tavern following an exchange of insults with laid-off autoworkers who thought he was Japanese and thus "responsible" for taking their jobs.

Early in his first term, even President Reagan imposed import quotas on Japanese automobiles. In 1984, presidential candidate Walter Mondale endorsed "domestic content" legislation that would have set a limit on the amount of foreign input allowed in the production of industrial goods.

In this environment of barely contained animosity, Sen. Levin’s politically adept advertising reflected a widely shared fear about the ascendancy of Japan and the prospect that Japanese companies would soon dominate the American economy. Actually, it might be more accurate to say that it was not domination by Japanese companies that was widely feared, but rather domination by an abstract entity known as "the Japanese."

This apprehension was not limited to the manufacturing sector. In the 1980s, when I was employed selling economic research to institutional asset managers, it was common to hear explanations of daily changes in interest rates that hinged on whether or not Japanese insurance companies were buying or selling U.S. Treasury bonds on a particular day. The rationale for this theory had a certain surface plausibility, since "the Japanese" were reputed to be the largest identifiable holders of treasury securities.

One proponent of this theory was a client of mine, a large institutional bond manager who intensively tracked Japanese buying and selling, thinking it held the key to understanding the overall direction of interest rates. I pointed out to him that since "Protestants" held a larger share of U.S. Treasury debt than did "the Japanese," Protestants were actually more responsible for changes in interest rates than the Japanese. Of course, this client thought it was ridiculous to analytically describe "Protestants" as an identifiable and meaningful segment of fixed-income investors, one whose intrinsic and uniform nature would drive their actions in the bond market. But he did not think it so ridiculous to impute this characterization to "the Japanese." I spent a fair amount of time — to no effect, it turned out — trying to convince him that he would not have much success understanding interest rates by assuming that an economic commonality drove the buying and selling of an entire race or nation.

What has happened since then to change people’s views? Aside from the well-known and commonly accepted economic gains from international trade, we have experienced the benefits that result from the increased cultural diversity that accompanies greater economic interdependence. We get to know and do business with actual people and companies, and as we have more direct interaction with them, we achieve a more textured understanding of their culture, so that we rely less on the generalizations and stereotypes we have learned from others. This deeper understanding is essential before foreign companies are willing to make significant direct investments in overseas markets, as Toyota is proposing to do in Ann Arbor.

Our ideas about the Japanese have evolved well beyond the suspicions that were incubated by our less-integrated economic interests in the 1980s. Back when Sen. Levin was running his anti-Toyota ads, Gov. Granholm, who was so instrumental in the Toyota land deal, was a first-year student at Harvard Law School and had not yet moved to Michigan.

Today, the political and ethnic undercurrents related to outsourcing are focused on India and China. As Mackinac Center adjunct scholar Dan Griswold pointed out in a recent Policy Brief, we would do well to remember that outsourcing is basically a form of international trade, and that if we had closed off trade with Japan 20 years ago, we would not be nearly as well off economically as we are today. Free trade and competition ultimately benefit everyone, which is precisely why Toyota should be welcome to bid on state land in Ann Arbor — and why state officials should turn it down when a better deal is available.


Chris Bachelder is communications director at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.