The Dillinger approach.

The Dillinger Approach

BILL BROCK, the U.S. special trade representative, has declared that it is time to lift import quotas on Japanese cars, the reason being that Ford and GM executives are collecting big bonuses this year. His conclusion is fine, but his reasoning is a bit odd: Quotas are to be lifted, not because they are robbing the U.S. consumer blind, not because they destroy more jobs than they save, not because people should be free to buy what they want to, but because some top executives have been cleaning up on the deal. It is as if the feds were to round up the Dillinger gang for making an uneven division of the loot.

Now in one sense it is true that the bonuses are unfair: If they are based on performance, they should go to the companies' Washington lobbyists instead of to the home office. Those lobbyists have succeeded in getting the United States to block its own harbors much more effectively than its agents have blocked the ports of Nicaragua. In effect, one out of five Toyota freighters doesn't make it in. We'd be better off if we could switch places with the Sandinistas: They'd take our protectionism, and we'd let them drop acoustic mines in L.A. harbor.

As it is, import quotas have added upwards of $1,000 to the average price of an imported car and $400 to the average price of a U.S. car, according to economist Robert Crandall of the Brookings Institution. With 6.9 million cars sold each year, that amounts to $2.8 billion in added profits for domestic automakers. Chrysler gets more than its share because the quotas shift sales of Japanese cars toward the larger, more expensive end, where they compete more with GM and Ford. Fans of government bailouts like to point out that Chrysler has paid off its government loan. But when is it going to pay off the subsidy it has gotten from consumers?

Of course, the industry claimed it needed protection so it could retool to meet the Japanese threat. But its rate of capital investment actually dropped, from $9 billion a year before quotas to $6.5 billion after (in 1980 dollars). This is consistent with the theory that protection takes the pressure off an industry to compete and adapt.

To judge by the latest brouhaha, you'd think that the missing $2.5 billion went straight into the paychecks of the chief executive officers. But in point of fact the size of the bonuses is not that unusual in business terms. GM is paying 55 executives an average of $532,000 each. By comparison, the CEOs of Fortune 1,000 companies get an average of $473,500. You could split GM into 55 companies, each headed by one of those executives, and all 55 would be in the top half of the Fortune 1,000. And as GM chairman Roger Smith says, "If you've got a company that lost $763 million [in 1980] and turns a $3.7-billion profit, how much would you pay them?'

It has been argued that $1.5 million is more than is needed to keep Mr. Smith in his present job as GM chairman; he'd do the work for less. That's probably true, but not quite the point. The salary serves to recruit not just the GM chairman of today but also the GM chairman of thirty years hence, some whiz kid who has to be persuaded to tackle the ranks at GM instead of going to Silicon Valley or Wall Street.

So the automakers can argue that their high salaries simply reflect market values. But there's only one way to know for sure.

Tack off the quotas.