Bringing Back the Old Economy
In 1960, my father attended what was then Case Institute of Technology. Even though it was the most expensive school in Ohio, he was able to pay his tuition with his summer jobs. When he graduated, mechanical engineers were in demand; American manufacturing was booming, and the jobs being offered to good young engineers generally included the promise of a pension and the expectation of job security. In our neighborhood, most of the families I knew had a father working in manufacturing and a mother taking care of the children and the home. Not all those working in manufacturing were engineers; many were high-school graduates who worked on the plant floor. But all made enough money to support their families in comfortable, middle-class fashion, without the need for a second income.
The manufacturing sector they worked in was focused overwhelmingly on the American market. American tools processed American parts for American customers. People were wary of foreign products; their instinctive patriotism fully applied to the economic realm. Divorce was virtually unheard of—I knew one divorced family on our street. People did not often change employers, so few people moved off our street. Most of us were able to see our relatives on a regular basis. I saw my paternal grandparents at least once per week, and my mom’s parents regularly. Also missing from our street were liberals, although many of our neighbors voted Democratic. In 1972, we had a mock election at my grade school, and the children voted as their parents would, with Richard Nixon crushing George McGovern by a four-to-one margin. Our congressman was Ron Mottl, a crew-cut-wearing Democrat who came home each weekend, slept on a cot in his Washington office during the week, and was best known as an opponent of forced busing. He also represented his constituents by voting for the Reagan tax cuts, a move that cost him his seat after vengeful Democrats in the state legislature redrew the boundaries of his district.
Of course, all of this has changed. Private-sector pensions and job security have largely disappeared. Most colleges are so expensive that no one could earn enough over the summer to pay the tuition. People change jobs regularly, often moving far from home. As a result, many children grow up seeing their grandparents only a few times per year and their aunts, uncles, and cousins not at all. Divorce is commonplace, and women who stay home with their children are in the minority. But for years, we were told—by Democrats and Republicans, the New York Times and the Wall Street Journal—that we should not worry as manufacturing dwindled and trade deficits mounted. We were creating a new economy, where the loss of dirty manufacturing jobs no one wanted to do would be more than offset by all sorts of wonderful high-tech and service jobs. Any problems could be solved by more education, which would enable all of us to find our place in the “global economy.” The relentless drumbeat of globalization was designed to change attitudes, to divorce patriotism from economic decisions, and to accustom Americans to foreign goods displacing American goods and foreigners taking jobs from Americans. Feminism proved a handy way to disguise a declining standard of living, since the entry of mothers into the workplace was presented as social progress rather than economic necessity.
For a time, it even seemed to work, as the tech and real-estate bubbles pushed the stock market ever upward. In 1999, an incredulous Tim Russert asked Pat Buchanan on Meet the Press how he could square his economic warnings with the soaring Dow. Buchanan’s response was that America was selling off the family silver, and that we could only do that once. We can now see that Buchanan was right, and that the promise of the New Economy was a mirage: The average hourly wage for American workers, adjusted for inflation, has risen only 36 cents in 33 years, from $16.39 per hour in 1973 to $16.75 per hour in 2006. There has been no growth in real income this century. Although entertaining yourself with electronic gadgets is far cheaper today than it was in 1973, the reverse is true for healthcare, housing, and education. In 1970, the price of an average home was twice a young couple’s income; by 1998, that price was four times a young couple’s income. The cost of healthcare and education has greatly outstripped inflation for many years. Many families have maintained a middle-class lifestyle only by going deeply into debt. As David Hartman—another Case engineering grad—noted in Chronicles (“Anatomy of a Meltdown,” News, April 2008), from 1997 to 2007 there was a “49-percent increase in household debt compared with incomes, as Americans spent their money on imports and unaffordable residences.”
The decline of the U.S. manufacturing sector in the era of globalization has been undeniable. Over five million American manufacturing jobs have disappeared since the beginning of this century. To take the seven sectors that have formed the backbone of the economy in my home state of Ohio, 1997-2007 saw imports of motor vehicles and parts increase by 36.7 percent, imports of fabricated metals increase by 64.7 percent, imports of chemicals increase by 29 percent, imports of primary metal products increase by 52.5 percent, imports of food products increase by 39.9 percent, imports of machinery increase by 39.9 percent, and imports of plastics increase by 61.3 percent. Of the 1,344 major industries tracked by the Department of Commerce, America runs a trade deficit in two thirds, and the cumulative trade deficits between 2000 and 2007 were a staggering $4.5 trillion, in large part because of the many ways our foreign competitors protect their home markets. One way they do so is through a border-adjusted value-added tax, under which imports are taxed and exports earn a tax rebate. By 2006, a foreign VAT applied to 94 percent of U.S. exports and imports, and the combined amount of rebates earned by foreign companies for their imports to America and taxes imposed on U.S. exports was $428 billion. Besides decimating American manufacturing, our trade policies have undermined American independence. Foreign interests now own over half of the debt of the U.S. Treasury, a third of U.S. corporate bonds, and a sixth of U.S. corporate assets. Indeed, as Pat Choate writes,
The profile of the U.S. trade position today is that of a nation being economically colonized—one that is purchasing high value-added commodities and manufactured goods from abroad and paying for them with the export of agricultural commodities, massive foreign borrowing, and the liquidation of its own national assets.
Replying that the United States survived the disappearance of buggy-whip makers misses the point: The industries we have abandoned have not disappeared; they have only disappeared from America. Indeed, communist China is becoming a world power by manufacturing the products our elites thought were beneath us. The decline of American manufacturing is not the natural result of Japan and Germany rebuilding their factories after World War II, but of our decision to allow Japanese and German goods unfettered access to our market. Nor can the outsourcing of manufacturing be justified by Ricardian comparative advantage, which assumes the immobility of labor and capital. Instead, as Paul Craig Roberts points out, it is a form of labor arbitrage, as mobile capital seeks the cheapest labor it can find. And the same mentality that led to the disappearance of much of manufacturing is now leading to the disappearance of the service jobs we had been told would sustain us. Princeton economist Alan Blinder has estimated that 28-39 million jobs are offshoreable in the near future. Industries are being told that the smart thing to do is to send their accounting and computer and engineering jobs overseas. I recently came across a trucking-industry publication that chided American trucking companies for being too patriotic and ignoring the profits that could be made by sending their accounting work to India. Then there is the other side of globalization, the mass importation of foreigners to drive down the wages paid to Americans. This phenomenon is hardly limited to agricultural laborers. We import 65,000 H-1B visa holders each year to do engineering work in the United States, and legislation has been introduced to triple that number. Since the U.S. government is simultaneously importing foreigners to drive down engineering wages and pursuing free-trade policies that destroy the manufacturing sector, is it any wonder that Americans with an aptitude for engineering are getting degrees in law or business?
Of course, not all parts of our New Economy are faring poorly. As John Derbyshire keeps reminding us, government is doing very well. The average government worker now makes more than the average employee in the private sector. The richest metropolitan area in the country is the D.C. metro area. Of the 50 counties with the highest percentage of people aged 25-34 earning over $100,000 per year, 16 of them are in the Washington area. Then there is the financial sector. Between 1973 and 1985, the share of domestic profits going to the financial-services industry was never higher than 16 percent. That number has risen to 41 percent. And there is this arresting statistic, which a commenter noted on Steve Sailer’s website: In 2008, the three top U.S. hedge-fund managers earned $2.5 billion, $2 billion, and $1.5 billion respectively—in total, more than the 70,000 people who graduated with bachelor’s degrees in engineering in 2008 put together. Their average starting salary was $56,921.
Is an economy dominated by the government and financial sectors good for America? The downside of too much government is well known to conservatives, and the downside of having too large a financial sector should be increasingly clear. Wall Street does not do much for Main Street. Lawrence Mitchell, a professor of business law at George Washington University, notes that
empirical evidence is clear that the American public stock market rarely has been a significant factor in financing industrial enterprises in the United States. The only American business sector to rely upon public stock issuances as an important source of financing public activity is the financial industry itself.
Mitchell’s examination of data going back to the 1950’s leads him to conclude that “America’s economy is increasingly based on finance, and our public financial markets principally are financing finance.” That is not to say that Wall Street does not have an impact on Main Street. Wall Street has acted as a cheerleader for globalization for many years.
And Wall Street helped trigger the latest recession. As University of South Carolina law professor William Quirk noted in Chronicles (“The Financial Crisis,” News, February 2009),
There are two crises. One is the “troubled asset” crisis, caused by subprime mortgages. That problem is finite and should be fairly easy to solve: Either let the loans fall where they may or guarantee the bad mortgages. But amazingly, the total losses from the crisis far exceed the bad mortgages, which brings us to the second crisis—the derivative crisis where “sophisticated” parties bet on anything.
“Sophisticated parties” is a reference to Lawrence Summers’ testimony to Congress during the Clinton presidency, in which he urged that derivatives be unregulated, because they concerned only “sophisticated financial institutions.” The cost of this second crisis continues to mount. As Quirk notes, the Office of Special Inspector General for TARP pegs the cost of shoring up the financial sector at $23 trillion, and 40 percent of bank profits still come from the murky world of derivatives, with who knows what time bombs waiting to explode. Suddenly, having an economy dominated by finance rather than manufacturing no longer seems like such a good idea.
Those who led the cheers for globalization did not see the collapse that was coming. Phil Gramm, who once called Wall Street “a holy place,” dismissed the looming crisis in July 2008 as a “mental recession” and castigated those worried about the economy as “whiners.” Of course, Gramm himself is somewhat removed from the realities of economic life, having been an investment banker and lobbyist for a foreign bank since 2002, and a government employee for the preceding 35 years. Even more incredibly, Gramm asserted that “We’ve never been more dominant; we’ve never had more natural advantages than we have today.” Oops.
Thomas Friedman, the grand panjandrum of globalization, recently admitted that education is not enough to help most Americans overcome the negative effects of globalization. Friedman quoted Lawrence Katz, a labor-market expert at Harvard, as saying,
If you think about the labor market today, the top half of the college market, those with the high-end analytical and problem-solving skills who can compete on the world market or game the financial system or deal with new government regulations, have done great. But the bottom half of the top, those engineers and programmers working on more routine tasks and not actively engaged in developing new ideas or recombining existing technologies or thinking about what new customers want, have done poorly. They’ve been much more exposed to global competitors that make them easily substitutable.
Friedman continues with the bad news:
Those at the high end of the bottom half—high school grads in construction or manufacturing—have been clobbered by global competition and immigration, added Katz. . . . Just being an average accountant, lawyer, contractor or assembly-line worker is not the ticket it used to be. . . . So our schools have a doubly hard task now—not just improving reading, writing and arithmetic but entrepreneurship, innovation and creativity. Bottom line: We’re not going back to the good old days without fixing our schools as well as our banks.
Actually, the real bottom line is this: Why did anyone think that a system that is rendering more and more Americans economically redundant was a good idea?
The Reagan Democrats I grew up with have largely disappeared, and those who have benefited from globalization generally display little enthusiasm for any variety of conservatism. Another high priest of the globalization cult, Richard Florida, has argued that the key to prosperity is having a large homosexual community in your city, and David Frum approvingly quoted a friend as saying that one of the Motor City’s major problems was that there were “Not enough gays.” As Derek Leaberry, a commenter at ChroniclesMagazine.org, pithily wrote,
An economy dominated by the therapeutic state, government workers, schoolteachers, flabby-handed computer geeks, restaurant chefs, sommeliers, Wall Street gangsters, and mall securitymen will be one that is antagonistic to conservative values. That is what the future holds if absolute free trade reigns globally. Karl Marx would be overjoyed.
Digging out of this mess will be difficult. It may be impossible. But any solution will have to include a return to the economic policies that made America the greatest manufacturing power the world has known. As Paul Craig Roberts wrote last February, “America’s 20th century economic success was based on two things. Free trade was not one of them. America’s economic success was based on protectionism . . . and on British indebtedness, which destroyed the British pound as world reserve currency.” He added, “The American economy has gone away. It is not coming back until free trade myths are buried six feet under.”
Extricating ourselves from globalization is not just a matter of economic survival, but one of national survival. Back in December 1989, Sam Francis warned us of what was at stake when he advocated a new nationalism in his monthly column in these pages:
Some Americans, especially the cosmo-conservatives in Manhattan and Washington, may fantasize that globalization will yield another “American century,” with Yankee know-how tossing institutional and ideological candy-bars to fetching senoritas in the Third World. But blue-collar workers in Detroit and construction men in Texas probably have a better grip on the realities of globalization as they watch their own jobs disappear before Asian competition and illegal immigrants. Globalization doesn’t mean that America will prevail, but that it will vanish among the laser beams and electrons by which the planet is to be held together . . .
America has not yet vanished among those laser beams and electrons, but she will, unless we finally heed the words of Sam Francis and the other patriots who warned us of what was coming.
This article appeared in the April 2010 issue of Chronicles: A Magazine of American Culture. Mr. Piatak presented a version of this article at the H.L. Mencken Club and the John Randolph Club in November 2009.
Entries(RSS)
This is an eloquent defense of the Old Amerca, which I grew up in, too, in a Detroit industrial suburb. I'll forgo my usual free-trade disquisition, which can be found on older Chronicles posts.
But I will point out that, if you give the government more power over trade, that power won't be wielded by Teddy Roosevelt, or Herbert Hoover, or Gerald Ford, but by Obama, Pelosi, Romney, Giuliani, etc. They and their cohorts will run the trade bureaus, and use their new powers to reward their friends and punish their enemies. And you and your friends are not among their friends.
Great overview of our current financial and trade crisis. This article should be recommended reading for all members of Congress.
Of course, to be moved by these figures assumes one is patriotic. I'm reminded of Paul Krugman saying that even if free trade is bad for the U.S. we should support it because it's good for the Third World; it's our humanitarian duty. I suspect Obama feels similarly. Despite Tea Party characterizations, Obama is more of a global crony capitalist than a "socialist," as is the leadership of both parties.
Regarding manufacturing, in my city in the Midwest - as in many other Midwestern cities - there is a large section of older brick buildings that used to house machine shops and other businesses supportive of local manufacturing. Today, these buildings have been turned into condos, ranging in price from $300K - $1 million. A real estate agent told me that about half of the people living in these buildings are federal employees in various capacities. This is a sign - not of 1960s European socialism - but of a Third World country, where a handful of the fortunate happen to be beneficiaries of an increasingly corrupt government largess.
Magnificent work, Mr. Piatak. The logic of your argument seems, to me, unassailable, and your conclusions therefore inarguable.
Here's another excellent summation of out current predicament:
http://www.youtube.com/watch?v=akVL7QY0S8A
Skip the first 5 minutes or so, it's fluff.
This is the kind of article that gets decent people on a hit list pushed by the Trotskyite SPLC.
This is the way the Left wants things: "Private-sector pensions and job security have largely disappeared. Most colleges are so expensive that no one could earn enough over the summer to pay the tuition. People change jobs regularly, often moving far from home. As a result, many children grow up seeing their grandparents only a few times per year and their aunts, uncles, and cousins not at all. Divorce is commonplace, and women who stay home with their children are in the minority."
But that is not nirvana to the Left. It must mandate homosexual marriage in every community, make school children accept that abortion is a sacrament, and take away tax exempt status of all churches that refuse to ordain women.
All that will be done in the sacrosanct names of Tolerance and Diversity.
Mr. Piatak,
Question for you with regard to the price of a home:
"In 1970, the price of an average home was twice a young couple’s income; by 1998, that price was four times a young couple’s income."
What was the price (in relation to income) in 1920? In 1940? I'm curious only because the post-WW2 period was such a golden age for the US. Hence my interest in seeing how current prices (which are awful) compare to earlier decades when things weren't quite as rosy as the 50s-70s. Granted, we had a manufacturing sector back then...
Tom,
This is a piece that I have shared to great extent when it was published in the magazine a few months ago. County managers and city councils know the perils of free trade and off shoring all too well.
Another great "for instance" are large swaths of the old textile belt in the South. Along with furniture manufacturing in North Carolina, textiles served as a great 2 punch with tobacco being number one. These industries paid good wages, they purchased county services in bulk (which reduced overall costs for the mass of the citizens), they paid city taxes, county taxes and state taxes. The ancillary impact of these industries was massive across North Carolina. Also not mentioned are the cultural factors: church involvement, university educated relocating to rural and semi-rural areas, civic involvement by these educated managers, industry support for local fund raisers, blood drives, local ball fields, local club teams............all of the many factors that keep specific places independent and functioning. A sense of identity whereby a people from a specific place, say Star, North Carolina, who took great pride in that they produced a quality product was the rule of the day.
All of that is now gone. The largest employer in nearly every county in North Carolina is now the school system. The drive for the educated toward the large cities, always strong, is now beyond resistance. There is simply nothing to work upon or build upon. The market capitalists have the same fervent ideology as the 60's radicals. Both are falling back on radical individualism based on the odd aspect of choice making as the basis for civilization.
Thanks for the good work.
McCallum
McCallum,
The largest employer in Michigan now is not GM, once a global colossus, but the University of Michigan. It's another example of how the government keeps devouring the private sector.
Although UM obviously does some useful research, its most important function is to brainwash its inmates in political correctness.
Here's a new plan to help manufacturing in the U.S.: Eliminate all tax money (federal, state and local) going to education -- K-Grad School -- and use the money to eliminate all taxes on businesses. Then watch American businesses innovate and compete with the foreigners.
Who would school the kids? Let their parents worry about it -- and pay for it by eliminating the parents' income and payroll taxes.
Thanks to everyone for the kind words, and to Mr. McCallum for usefully pointing out that the decline of manufacturing is in fact a national problem, not merely a regional problem.
Mr. Bourne, I do not know the answer to your interesting question.
I am amazed how this year 2010 is the year that we are waking up to the tresonists that have wrongly taken away our livelihoods and our independence as a nation.I heard Donald Trump say April 11Th that we need to start manufacturing again and tax china and other manipulators big 50%, he has said this other times years ago to,We need him and Lou Dobbs to run for office ,how about that,this is our tea party nominees.lets get them started .This article is dead on ,i am in the textile industry and have seen almost all of us lose our livelihoods and everything that follows after that.I always tell people my industry is not dead it has been outsourced because it was profitable,i say the south has won ,they were able to get their slave labor as they had back with slavery,with cheap labor countries,when you want to help a homeless man you do not put him in your house and you in the street,that is what our leaders have done to us,we are being penalized for progress and quality of life that we earned.We will never be able to compete with slave wage countries,so we should not have to just ask Alan Tonelson of the American industry and business council..God Bless America.Lets Take It Back.
John,
Not to dismiss your point, which is one I've not considered until now but the problem is much deeper. I'm not sure any amount of reduced taxation could get the country under the production costs of China. (look for a piece by Andy Warlick titled "what yarn are we spinning". It is from 2002 and addressed much of the problem faced by the textile industry) Philosophically, an entire generation has been brought forth that wants all of the supposed "freedom" that our inherited culture provides but none of the responsibilities required to maintain such a culture.(Randian influence without a doubt) They want safe places to work, they want good wages, they want nice roads, etc but they do not want the extra costs to burden them individually. They, and this concerns those graduate schools of business you've pointed out, have propped up their capitalist ideology on the backs of countries that deny those basic items they would never do without here.
I was reviewing a piece by Allen Tate the other day and it amazed me at just how astute many of the Agrarians were considering the modernist drive to appease individual choice making and that how concepts of "freedom" would evolve along the lines of the ability to purchase. Dr Fleming has spoken to a number of these issues and Mike Jones at Culture Wars has addressed them as well.
The ghost towns of the southeast are something to see.
Y'all do good work. Keep pounding at them.
McCallum
Erik Vogelin wrote of those so obsessed with an ideology that they lived in a dream world, totally disconnected with reality, where the dream world replaces reality. If the present off-shoring of jobs is ideologically driven, then it would certainly qualify as dream world driven, since even a fool realizes that an economy is impossible without jobs. However, if the off-shoring of jobs is occurring to make a certain group wealthy, despite the destruction of the nation in the process, then I believe it would qualify instead as treason.
Excellent piece and right on the mark. After I graduated from Indiana State in 1974 my wife returned to ISU to finish her degree in 1975-1977. She had a modest scholarship and I filled in the gaps by borrowing money from a LOCAL Terre Haute bank (usually around $500) and then paying it off during the course of the semester. When the semester was finished, I did it again. When she graduated we owed zero dollars for her education. This is impossible today because:
1. There are few LOCAL banks. Most are administrative units of financial behemoths;
2. No bank will loan anyone such a paltry amount as $500;
3. It costs thousands of dollars per semester now even at the "cheap" colleges.
My father who dropped out of high school during the depression to help with the family farm and to work spent over thirty years in a GM plant in Bedford, Indiana. My mother was a homemaker and never worked outside the home. We made a little extra money from our small farm (40 acres, but no mule). It seems a million years ago. The stupidity and cupidity of the major political parties and our "elites" have sold us out. There has always been international trade, but "globalization" is not about trade, it is about power and transformation of societies into a vast centralized, secularized bureaucracy intent on destroying any vestiges of traditional religion and culture. It is NOT, however, inevitable. Those in the saddle always insist nothing can be done to change direction. Bull. Interestingly, the early feminist movement (1800's to early 1900's) insisted on keeping women OUT of the workplace; not to oppress them, but to keep them from being oppressed by unscrupulous employers and to keep those same unscrupulous employers from driving down the breadwinner's (i.e., husband's) wages by flooding the marketplace with new potential (and cheap) labor. Good thing we don't have unscrupulous employers today.
If a prescription was ever written to cure an illness, your article "Bringing Back the Old Economy" would be it.Is it that difficult to understand our problems. Apparently so by our so-called "leaders". The United States once the leader in the world's economy was built on manufacturing. World War II is probably the best example of the power of manufacturing. Our facilities, the workforce in those facilities and the work ethic built the most powerful military machine in history in just a few short years that made the difference between winning and losing the war. God forbid, we have another world crisis. Do we ask China to build our weapons? The Republican candidate John McCain opposed a bill to "Buy American" and he got supporters in our Congress. We are going to hell in a hand basket. Corporate greed, self serving representatives, Wall Street and liberals are destroying our society. Americans are ignorant to the facts and care less about learning the facts. I will email your article to every one on my list and I doubt if five people on my list will read the article in its entirety. I did and thank you for writing the story. I doubt you will ever enter in politics. You're too smart to be a part of those prostitutes.
The best article I have read in a decade. This should be required reading for all americans. We were sold a bag of goods on free trade by those who profit from our demise. We are making china thee world power and they are not our friends. Our trade policy can be fixed in less than a paragraph " We will treat your exports in the same manor in which you treat ours". When company's like John Deere lay off 20,000 workers and build a new plant in India, it costs the tax payer hundreds of milions in benifits to those workers so that J.D.can make a few milion more in profit. We can fix that too with a few sentances " if you are an american company and manufacture a product off-shore, you don't get to ship it back here and sell it in the american market. Greed is more fashonable than patriotism today so it will never happen.
In line with the topic of this article, it would be very informative for people to read the works of the Irish business journalist Eamonn Fingleton such as his book "Blindside". Interestingly enough, Amazon charges customers a couple of hundred bucks to sell his books. This is much to the distress of the author, if you check out his website. I wonder if this is how Amazon censors authors it doesn't like, such as E. Michael Jones' "The Jewish Revolutionary Spirit". This is the new way to discipline or destroy ideological renegades. Another one of Mr. Fingleton's books is entitled, I believe, "Dragon Teeth".
Fingleton did complain at one time that his prices on Amazon were very high, but I must retract and apologize to Amazon for what I just said since his books are only about $8 to $11 on Amazon.
Tom,
Anyone who quotes Paul Craig Roberts approvingly should sit down, take a deep breath and start reading some different sources for information about how the economy works and American economic history. I mean, is it really accurate to say that "America’s 20th century economic success was based on two things. Free trade was not one of them. America’s economic success was based on protectionism"? America was a protectionist country in the 1910s and 1920s? What about Smoot-Hawley? What about our efforts to promote trade after WWII?
Your article also leaves out some important facts about American manufacturing -- yes, America has lost manufacturing jobs, but the evidence suggests that the main culprit is technology, not trade:
http://mjperry.blogspot.com/2010/04/productivity-improvements-destroyed-6m.html
We continue to produce, yes that's right, we continue to make stuff in this country at higher rates than ever before. The "problem" from the standpoint of jobs, is that it takes fewer and fewer workers to produce the same amount of goods.
Finally, the question about wages and income cannot be divorced from the question about standard of living -- most two parent families in this country still do very well. The problem is that people make stupid choices -- whether it is the underclass that continue to have babies out of wedlock, the working or middle class that insist on buying every last consumer product and financing everything with credit cards, or the rich who do the same but get away with it because they generally have the money. Folks need to make better decisions, which are moral choices.
Arminius writes:'Folks need to make better decisions, which are moral choices."
This may be true but sounds very strange coming from the connections to FrumForum. Since when have morals had anything to do with the choices those folks make and advocate?
"We continue to produce, yes that’s right, we continue to make stuff in this country at higher rates than ever before. The “problem” from the standpoint of jobs, is that it takes fewer and fewer workers to produce the same amount of goods."
Yes, this would explain why the factories that once were located in the US are no longer located in the US with a reduced number of wmployees, but have simply closed down operations and moved to Mexico or China? "Outsourcing" you see, dear reader, is not really "outsourcing" to other countries but simply the inevitable evolutionary processes of technology at work in the worlds only indispensable nation. You see, dear reader, the source of such talking points comes from the same type of GOP leaders who gave us the famous " In his January 2003 State of the Union speech, U.S. President George W. Bush said, "The British government has learned that Saddam Hussein recently sought significant quantities of uranium from Africa." which of course was just "another intelligence failure." Tempus fugit memento mori.
robert,
Did you check out my link? The facts are the facts. Did you know the U.S. remains the largest manufacturer in the world:
http://mjperry.blogspot.com/2009/12/us-remains-largest-manufacturer-in.html
Again, I don't deny that many factories have left the U.S. These are in industries that employ low skilled labor (and produce low cost products) and so can take advantage of that labor around the world. I don't deny those truths. Meanwhile, the U.S. continues to produce a lot of high-end industrial products with fewer and fewer workers thanks to technology. Can we reverse this trend by becoming a merchantilist country? I don't think so. That is not how wealth is historically produced:
http://www.wilsonquarterly.com/article.cfm?AID=1613
As for "FrumForum", I must admit the place has turned out to be less than I had hoped when David first set up shop. I actually hang out at What's Wrong With The World much more -- check it out!
Arminius:
Your arguments are answered convincingly in Ian Fletcher's "Free Trade Doesn't Work," which I will be reviewing in Chronicles. Yes, part of the decline in manufacturing employment is due to technology, but our trade policies have also been a major culprit, and Fletcher does an excellent job both exposing the fallacious arguments for free trade and detaling the damage the free trade ideology has inflicted on our economy. The historical record is ably summarized in Alfred Eckes' "Opening America's Market" and in Pat Buchanan's "The Great Betrayal." (Eckes is a historian at Ohio University and also served on the International Trade Commission under Reagan). As Fletcher, Eckes, and Buchanan all make clear, protectionism was indeed instrumental in securing American prosperity. Paul Craig Roberts is right.
41% of the GDP in this country is based on financial transactions alone.
Who in the hell needs money changers?
The technology canard is an often repeated one. The fact is this: what was once considered high technology is now low technology. What we see as high technology today and produces high margins of return will be out sourced or sent to a NAFTA or CAFTA country the very second possible. Dell set up shop in North Carolina and proclamations of high technology economy bubbled forth. The Dell plant was only open around 4 to 5 years and Dell shut it down last year. In their filing the the Federal Trade commission they admitted the real reason for the plant closing, which was not the reduction in sales but instead the opening of a new plant in Mexico.
Below is the Andy Warlick article concerning yarn mills. He takes the beast head on.
http://www.cotton.org/news/meetings/2002bw/Andy-Warlick.cfm
Free trade and globalization is yet another messiah complex. It has started crashing down as they all do.
McCallum
Mr. Piatak,
A very good piece sir. It's simply not possible to move all your productive capacity offshore and then expect something to miraculously appear, in the form of replacement jobs, in the service sectors. As Paul Craig Roberts has said over and over, a service based economy will never be able to replace one based on manufacturing. As he said in his last piece: "Good Bye: Truth Has Fallen and Taken Liberty with it" truth is an essential element in all things and if we can no longer speak truthfully about the facts then we will all lose our liberty. "Truth is inconvenient for ideologues."
On top of all that you flood the workplace with women looking for "careers" and you have a recipe for disaster. Not only has that ruined the employment prospects for (mostly white) men, but it has virtually destroyed the home atmosphere that Mr. Piatak and I grew up in. ( I also grew up in Cleveland in the 50s...and it was a nice place, although starting to struggle even then.) Today Cleveland is a mess, as well as most of Ohio -- most of the real strength of the state has been diminished through the loss of manufacturing and there appears to be nothing coming down the pike that will replace it. Even our vaunted financial sector has been been diminished by the carelessness of our government and the banksters, who have turned once respectable institutions into gambling casinos for the well connected.
I tend to think that most of this has been by design and now America's middle class is going to be paying the price.
Your work is much appreciated.
Cheers,
Mr. Breisch,
Thanks very much for your kind words. As you might have gathered from the piece, I grew up in Parma, the heart of Ron Mottl's old congressional district, in the '70s. In the '50s, my Dad lived first on W. 18th Street, where he attended St. Wendelin's grade school, and then on Riverside Avenue, where he attended West Tech. My Mom grew up in a city even more devastated by free trade than Cleveland has been, Youngstown.
Mr Piatak, I take it then you do not find Dr Wilson's pro- (real) free trade arguments persuasive?
I ask this because some of the protectionists fail to look at the more thoughtful arguments from those that oppose them.
Tom,
Thanks for the heads up about some other works I might want to read. I promise to at least check out Fletcher and Eckes and keep an open mind. I remain a committed capitalist and free trader at this point, although break from the neo-liberal orthodoxy on immigration (I want less Third-World peasant labor). I still think Paul Craig Roberts is off his rocker, but my brief against him is long and off topic.
In an article in the January Harpers (Shopping for sweat:
The human cost of a two-dollar T-shirt), Ken Silverstein indicates that pay for apparel workers in Cambodia has stagnated at 33 cents an hour. Other countries cited were Pakistan (37 cents an hour), Vietnam (38 cents), Sri Lanka (43 cents), and China (wages between 55 and 80 cents per hour in inland areas). Only Bangladesh has lower pay than these countries. Only one example of why low skilled jobs are fleeing the country.
One of the revealing aspects of a college education is that one becomes more familiar with their own generation. It is also one of the reasons I enjoy posts from some of you younger fellows. "Skilled and unskilled labor" is one such revelation from the younger generation. You fellows don't seem to grasp the meaning of labor or how it is distinguished from worker, wage earner,wage slave or free man. Socrates, for instance, would be considered an unskilled laborer by many of you. Or for another example, most of you would consider the altar server who knew his Latin responses as unskilled today, while any ol Priest or innovative Eucharistic Minister would be considered skilled.
But one of the points Tom Piatak makes in this article is the kind of life that was provided by his father's labor and not whether the labor was skilled or unskilled. Assembling a computer board may be unskilled labor, like building a tire or assembling an automobile, but cheap labor is only one aspect of the life of labor that Mr. Piatak is asserting. Assembling a Big Mac is not cooking, anymore than holding a job and raising a family consists entirely of skilled labor, but as Taki once suggested in another context, it beats the overweight lay-about with penis envy, who can only view the world in terms of the sophistry (I should have said sophisticated for many of you) of ever changing economic terms. How a man lives or aspires to live is more important than how he earns his daily bread. Of course ever since the Fall we all have been destined to toil, but not simply for bread alone. My thanks to Mr. Piatak for noticing this truth.
#2 M.A. Roberts,
You hit upon a - for want of a better term - soft spot of mine with your observations about the old factory buildings. Chicago, of course, is full of these relics, many used today, as you say, as condos. How often have I wanted to roam around in one of them in the hiatus between their demise as a going concern and the appearance of the rehabbers. What stories those walls, those workbenches, could tell; what mines of local history were salted away in those metal filing cabinets. Then all is carted away and the interior made safe for people who have not the slightest concern for what has been lost, and who would never deign to dirty their hands with the work once performed there.
Use care, Robert, so you don't fall off that horse. It's a long fall to the ground.
Sorry Andrew, I did not mean to getty-up on my High Horse but re-reading the darned thing,I can see how one might assume the poster was too high in his saddle. Thanks for reminding me. I think I will jerk the saddle off and put him up wet. At least for a few days, maybe turn him out to pasture for the year. God Bless and keep your good posts coming. I enjoy your contributions and did not mean to demean them.
Robert,
You have been writing a lot lately, so you've earned a week off, maybe two. But don't even think about taking a whole year off - we'll have to send a posse to come get you!
Thank you, Gilbert. It is a strange context, this internet stuff, but the last thing I desire to do is to offend good posters such as Andrew Van Zant. On the other hand I hate riding at a walk when there is so much ground to cover. Keep up the honest effort, it is really one of the better blogs for paleos and should remain so for a long time.
“These are in industries that employ low skilled labor (and produce low cost products) and so can take advantage of that labor around the world…”
So, I guess that explains why so many software engineering jobs are going to India and China now. If I had known that the four years of college and an uncounted number of years and dollars in continuing education would have yielded me a low skilled profession that can off shored to take advantage of ”that sort of labor around the world”; I may have reconsidered my choices.
“Assembling a computer board may be unskilled labor…”
I would like to see some of the posters here try it, I’m sure it would be amusing. That is to say doing it right (no cold solders, no damaged components from too much heat, not cracking the PCB). An unskilled person can be hired to do the work, but I assure you that by the time they are trained to do the job right they‘re very skilled. It seems that many in this country have forgotten that not all skills are learned in a four year institution of “higher learning”, but are learned on the job, the loss of manufacturing jobs has also meant the loss of learning a skill to many, not able to attend one of our glorified trade schools.
Thank you Mr. Platak for your dead-on article. I worked in Design Engineering for 30+ years, and since the late 1990's, the loss of manufacturing has not just been substantial everywhere in America but scary. The global elitists who have ignored the economy's dominant wealth-creation sector, manufacturing – have helped shed plants and jobs throughout the last decade. Many American politicians and the global economists preached also that expansion in finance, services, and real estate would maintain America's living standards. These policies ended up collapsing in late 2007 causing the mess we have now. Your final comments on our national survival are also 100% correct. Patriots, like our fore-fathers, like Sam Francis, like you, are the kind of leaders our country desperately, needs now. I guess the only thing us "Average Joes" can do is spread the word, as much and as fast as we can, don't give up, and pray that God will forgive our country’s transgressions. They are many.
Please forgive my snippy comment, robert. Following my posting, you seemed to be jumping to a lot of conclusions.
In regard to labor skills, every job requires some skill. However, some skills are easier to acquire than others. About five years ago, I finished half of my basement. The finished space includes a sitting room, bedroom, full bathroom, and walk-in closet. I did much of the work myself, but coming from the "Dirty Harry" school ("A man has got to know his limitations."), I hired or contracted with some other people to help me. One was a "Master Plumber," who installed all of the plumbing, including a sewage ejection system, sink, toilet, and combination tub and shower. I paid him about $3,000, which included all of the materials. He did almost all of the work. (I rented an electric jackhammer to breakup and remove the section of basement floor that he marked out.) It was a pleasure to watch this man work, and to work with him when I helped him install the tub/shower. I was really impressed by the way he installed the vent line for the sewage ejection system. The building code requires the vent line to run from the ejection line at the pump and exit through the attic. I had bids from two other plumbers. One was cheaper, but wanted to simply route the vent line back into the main sewage line in the basement. The other was more expensive and was going to run the vent line in a corner of the family room and second floor bedroom, leaving it exposed. I would have to cover it however I chose to do so. My master plumber, at the appropriate time, took a few measurements and then, in about an hour and a half, installed the vent line by running it up an interior corner of a hall closet, where it cannot be seen, through the closet ceiling and inside the wall of the second floor bedroom, where it is completely hidden, and into the attic, where he joined it to another vent line that exits through the roof. This man was worth every penny I paid him, including a bonus.
I used drywall screwed to 2x4 studs for the walls and ceiling. I hung the drywall for the walls. I first did the bathroom. When I tried to do the taping and mud work on the joints, I quickly discovered that it would take a bit of time to develop sufficient skill to do a satisfactory job. Fast Eddie to the rescue. Recommended by another friend, Eddie is a drywall wizard. He did the taping and mud work and I did the sanding after the compound dried. Eddie then returned to fix any remaining rough areas after I sanded. Then I sanded again and my wife painted the finished drywall. I had spent about three hours in the bathroom, had completed only half of it, and Eddie needed to fix most of it. His first pass in the bathroom took about 30 minutes, including the ceiling. Eddie, his son, and a third man hung the drywall for the ceiling in the rest of the space after I installed the recessed lights. Again, it was amazing to watch them work. Eddie and his son were on ladders taking measurements that they passed to the third man who then cut the holes in the drywall sheet for the recessed lights. Then Eddie and his son screwed the sheet in place. The holes cut in the drywall were always perfectly placed. Eddie did the taping and mud work after they hung all the drywall. I sanded it the next day and Eddie fixed any remaining rough spots. If I recall correctly, I paid Eddie about $240 for doing all the drywall, not including a big bonus. He paid his son and the third man from what I paid him. I subsequently hired Eddie to do the drywall finishing when I remodeled my upstairs bathrooms and finished the basement stairwell. Eddie and I have become good friends since I first met him.
I needed to install 25 square feet of marble tile in the bathroom after the plumbing was installed and the walls and ceiling were finished. I bought thirty one-foot squares, which came ten to a box. I had five extra pieces. I bought the tile compound and decided to do the tiling myself. (How hard can it be to lay 25 tiles?) After not being able to get the tiles level, and breaking two in the process, I picked them all up, cleaned the tile compound from the tiles and the floor, and hired the tile guy recommended by a friend. First, the tile guy told me that the store that sold me the tiles had sold me the wrong tile compound. It was latex based, which doesn't work with marble tiles. Then he installed the tiles, perfectly level, in under an hour - for a fair price and another well-earned bonus. He told me that he worked as an apprentice for two years and didn't feel that he had mastered tiling until he had been doing it for another two years.
After I put in the subfloor in the basement, my wife picked out the carpet and hired a father and son team that was recommended to us to install the carpet. Again, quick, professional work for a fair price that also earned a bonus.
I have always enjoyed watching skilled people doing professional work. I think it stems in part from watching my father and mother work when I was a child. I’ll tell you a little about them in another post. This one is too long, already.
#24 McCallum: "Who hell needs money changers?" Well, it is great fun to drive them from the temple with whips (if only someone would).
Thomas,
Clearly nothing has changed in over 2000 years except the coming of Christ.
Subversion with sophistication, that is Goldman.
By any other name.
McCallum
“In our neighborhood, most of the families I knew had a father working in manufacturing and a mother taking care of the children and the home. Not all those working in manufacturing were engineers; many were high-school graduates who worked on the plant floor. But all made enough money to support their families in comfortable, middle-class fashion, without the need for a second income.” Thus writes Mr. Piatak.
My father was a high-school graduate, and although he didn’t work in a factory, his job depended on the large number of factories in Racine, Wisconsin. We lived in Kenosha and he worked for a small industrial cleaning company that supplied factory workers with clean work clothes and similar items that they used in their jobs.
My father would start his workday at about 4:00AM by driving to the cleaning plant in the company-provided panel truck to load it with the deliveries for the day. Then he would drive to Racine to start his work for that day. But first he would stop at favorite spot at the start of his route for breakfast. After that, he would stop at each factory on that day’s route and deliver the clean work clothes to his customers and pick up the soiled items to be brought back to the plant for cleaning.
The factory men would pay him for whatever he gave them that day. At large factories where he had a lot of customers, he would pack one or more large bags (think of a sailor’s sea bag on steroids – maybe four feet long when it was fully packed) and take an empty one (or more) for the dirty clothing he would collect as he passed out the clean clothes. After his last delivery, he would drive home where he dumped all of the money he collected on our kitchen table. There he would put the coins (virtually all of the money he collected was in coins) in paper wrappers and count it. He knew from what he delivered how much money he should have. Everything over that amount was the tips that he was given by his customers. After counting and wrapping the coins, he would drive to the plant to deliver the dirty clothes for cleaning and put the company’s money in a safe.
The plant was a long brick building with industrial washing and drying machines. They were arranged in a long line running the length of the building driven by a drive shaft that also extended the length of the building close to the ceiling. Drive belts would extend from the drive shaft to each washer or dryer to power them. The plant workers used long levers to engage and disengage the drive clutches to start and stop the machines. The plant always smelled of industrial strength pine-oil cleaner that was stored in 55 gallon drums and used to clean the floors. (To this day, whenever I smell pine-oil cleaner, I think of my father. )
How do I know all of this? Because my father was way ahead of the “take your kids to work” bunch. During summer vacation, I would often go with my father on his route. (I was probably about 8 – 10 years old.) I’d help him deliver the clean clothes and pick up the dirty clothes. I’d collect money (and tips). I was supposed to put the company money in one pocket and my tips in another pocket, but I’d always make mistakes. We’d get it right when we counted everything when we got home, though. I was always impressed that my father never seemed to write anything down or refer to a list when he loaded the truck or made his deliveries. He also knew all of his many customers by name. (I was easily impressed by this. When I was that age, I feared that I would never be able to remember how to get anywhere when I grew up!) With this job, my father was able to buy our modest house on the south-western edge of the city and support our family. We were probably poor, but I and my sister didn't know it. My younger brother (12 years younger than me) and his family live in that house today, having finished the attic and the basement to provide additional living space.
I'll write about my mother and her job in another post. She eventually went to work when I was in high-school.
John Seiler wrote: Here’s a new plan to help manufacturing in the U.S.: Eliminate all tax money (federal, state and local) going to education — K-Grad School — and use the money to eliminate all taxes on businesses. Then watch American businesses innovate and compete with the foreigners.
Who would school the kids? Let their parents worry about it — and pay for it by eliminating the parents’ income and payroll taxes.
Hey, I like that idea. Count me in.
To continue from my previous post, while my father (and the other fathers in our neighborhood) worked, my mother, and the other mothers in our neighborhood, stayed home to take care of their children. At least one mother, and usually more, would sit on the front porch of one or two of the houses and visit while they watched the children play. They would relieve each other so they could all get their house work done during the day. Often, one of them would make a treat for the kids to have with lunch or later in the afternoon.
Eventually, the owner of the small industrial cleaning company where my father worked decided to retire. He didn’t sell the company, he just went out of business. My father then went to work as the service department “manager” of the local Ace Hardware. He wasn’t really a manager in the labor relations sense because he was also the union representative (Retail Clerks, if I remember correctly) of the store’s employees.
My mother, who was schooled only through the eighth grade, didn’t go to work until I was in high-school. Although my parents probably got a break on the tuition for me and my sister, who is two years younger than me, at the Catholic High School (my father was scout leader for one of the three troops sponsored by our church and my mother operated the church kitchen for weddings and other events), my father was making less money at the hardware store and he also had the added expense of owning a car, so, in order to make ends meet, my mother went to work in a small restaurant owned by three brothers. (The mother of the brothers was a long-time friend of my mother. The brothers would often watch me when I was younger. They gave me my nickname “peach fuzz,” in recognition of the way my father cut my hair, a skill he had developed while in the Navy.)
The restaurant had a bar and about 15 tables. (Only one brother worked full-time in the restaurant, tending bar. His brothers, one older and one younger, worked part time, also tending bar. They also worked at the local American Motors plant.) My mother didn’t drive, so one of the brothers picked her up and drove her to the restaurant each morning. (They also paid for a sitter for my younger brother.) The restaurant was located in down-town Kenosha on the main street. It had great food, possibly the best hamburgers ever made - my mother was the cook and she ground the beef herself. In fact, she bought all of the ingredients for the restaurant and prepared all of the food from scratch.
I got to watch my mother work at the restaurant on numerous occasions. I worked at the restaurant during a couple of summers, washing dishes, restocking coolers and shelves from the storage area in the basement, and mopping the floors and cleaning the restrooms after hours. There were usually three waitresses, each serving five tables. They would write down the order for each table and put it on the end of the bar near the door to the kitchen and shout the order through the open door to my mother. The only time my mother looked at the written orders was when she placed the plates of food with the order slip on the end of the bar and yelled to the waitress that her order was ready to serve. My mother would take verbal orders from three waitresses and she never got them mixed up.
All of my friends loved my mother’s cooking. They would beg her to make her famous fried chicken with either cheese cake or pineapple upside-down cake for dessert. She was always happy to do so. (Having a mother who is a fantastic cook is a good way to have a lot of friends when you’re growing up!)
I hope that I haven’t bored you with my remembrances of the economic changes that my family experienced in the ‘50s and early ‘60s. As I said earlier, we were probably poor, but my sister (and younger brother) didn’t know it. I can’t speak for them, but I never felt deprived. We did a lot of things together. For example, we usually piled into the company-provided panel truck after dinner and drove around while we recited the rosary. Then we might drive down to Zion, Ill. to get Pistachio nut ice cream cones, the nearest place that sold that flavor. On weekends (Friday or Saturday), my mother would make a big tub of buttered popcorn and we’d go to a drive in movie in the panel truck.