We have been stressing the unresponsiveness of industrial management here, and I think a few other factors must be considered.
It was 1970 when the government established the EPA and OSHA. While workplace safety was not a budget buster, it significantly changed the role of labor unions in that capacity. The clincher was environmental protection.
The need for pollution control was obvious. In 1970, Lake Erie was considered "dead." Earth Day made the news in April. They sang songs about the situation:
Don't it always seem to go;
That you don't know what you've got 'till it's gone;
They paved paradise, put up a parking lot.
Joni Mitchell, 1970
Out in the country;
Before the breathing air is gone;
Before the sun is just a bright spot in the night time;
Three Dog Night, 1970
My biggest concern over industry is not just automobiles, but steel. The need for pollution control was obvious. Industry was paying good wages. They had good pension and health care programs. Add the burden of a large battery of pollution control to be installed over the course of a decade, and American industry does not have a level playing field with foreign competitors whose governments do not force them to fund so much.
Some industries successfully relocated. Remember the odors from the stock yards in large cities in the sixties? By the seventies, the yards were moved. The work was not outsourced to foreign soil, they simply moved the operations from the middle of Chicago and Kansas City to rural areas.
Steel mills are a backbone industry, not easily moved. The rusting of the rust belt was the negative consequence of two other benefits: clean air and clean water. Lake Erie is alive again.
So, does this mean the rust belt can be avoided with massive public funding for pollution control? Or tariff barriers for certain goods from countries that do not practice pollution control? Neither choice (or combination) fits the American tradition.
We must also look at the generational change in management between 1965 and 1980. In 1965, the 60-year old executive remembered the onset of the Great Depression as an adult. Businesses were diversified, with highly varied product profiles. Some divisions made less than others, depending on the year but management kept them together.
A 60-year old in 1980 was born in 1920, with no working knowledge of the time before the Depression. As an adolescent, he was in a struggling but improving economy and at 21, a war broke out and suddenly there was more work to be done than there were people to do it. When executives retired in the seventies, many were replaced not by 55-year olds, but by candidates under 40, further empowering people who could not anticipate how supply might catch up with demand in key areas of activity.
The biggest growth sectors around 1980 were real estate development and petroleum resourcing as opposed to heavy manufacturing. This brought the "tail wagging the dog" effect. It hurt Wall Street, but by then the damage was done to the industrial base.