I posted this today on Facebook; it represents my musings about trends I see in the American economy, but it also reflects on world economics.
Something worth considering:
We’ve built a middle class consumer economy in this country based on Henry Ford’s model; pay the workers enough that they can afford to buy the products. I’ll note that Ford didn’t go broke doing that; he got pretty rich, if I recall. And soon other industries leveraged that prosperity by paying steelworkers and miners and construction people better, albeit with a lot of union arm-twisting thrown in.
But then unions became overly powerful and many became corrupt. Membership declined; it’s a great cycle when looked at in this way. Much of the reasoning behind unions went away as government began doing what only unions had done before. To make it seem as if they were still needed, unions demanded ever higher amounts of money, so a cycle of inflation boomed; people got more wages, but they also paid more because everything else went up.
And government pushed quality of life issues; reducing pollution, cleaning up mine and industrial waste residue, things like that; these cost manufacturers instead of increasing profits. So they went offshore.
Gradually we’re taming this; other nations are also being faced with the necessity of controlling pollution of water, earth, air; safety of workers is also a rising issue. The great consumer market in the US, the one China leveraged to raise herself from backwardness to leadership, is faltering.
Competition has become something that companies avoid in the drive for ever greater profits. Those profits are concentrated at the very top. This really is a ‘zero sum’ game; what goes to the oligarchs isn’t available to those who once fueled the great consumer market. Not even the insane advertising industry can prop it up for long. Simply put, there’s just not enough money at the bottom or in the middle.
We once turned our economy ‘outward’ when recessions hit; we employed people making exports and brought in money from other nations. But now they’re largely in the same boat we are. All those developed nations are attempting to export goods and bring money home to aid their economies. Europe calls it ‘austerity’, but it’s the same problem; profit isn’t to be found in manufacturing, in making goods for people to buy, it’s increasingly gained by manipulating money. The stock market is part of that, banking is a large part of it, real estate and speculating in general is a part of it.
And the fallout is distrust in major employers, as well as in the oligarchs controlling our political system. People are fed up in general, disgusted with political scheming and manipulation, they dislike what the president is doing and detest Congress.
One immediate improvement is to begin teaching children that self employment is preferable to employment by a corporation. Once, an employee had a living wage, benefits, and job security if he/she worked for a large corporation; and if the corporation was multinational, that provided security against economic downturns.
No more. All those things have largely vanished. You can spend half your working life becoming skilled at making widgets, only to find yourself turned our with no prospects because a worker in some foreign nation can afford to work for half what you can work for without starving or becoming homeless.
If you become a plumber or an independent mechanic or dentist, you’ll never be unemployed; you might not get rich, but you also need not suddenly find yourself homeless.
It’s time we stopped aiming our children at a future of neo-slavery under the corporate whip; it’s time to emphasize individual initiative, individual responsibility, the necessity of taking care of our individual selves rather than expecting someone else to do it for us.
Corporations specifically won’t. Unions won’t, or can’t. Government won’t, because they’re the lackeys of the oligarchs who run the corporate world.
For those in the middle, there probably isn’t a universal solution. What’s left of your working life is more bleak than rosy.
But maybe it’s not too late to let the future learn from what’s happened in the late 20th–early 21st Centuries.
Archive for the ‘Productivity’ Category
Economics, Consumerism, and Individual Responsibility
August 6, 2014The Role of Productivity in the Economy’s Problems
June 10, 2012According to an economist on Bill Maher’s show, economists look at finance, labor, and productivity. I haven’t directly discussed that last, although it’s a part of our economic problem.
Productivity gains have been a part of our economy for centuries, but they really took off in the period of the world wars. Here, and also in other countries, productivity was seen as a weapon to win the wars, and every part of the economy got a boost.
Meantime, labor came to be in short supply because so many men went into the armed services. Even with this lack, even with less capital available for development (government capital was also being siphoned off to buy weapons and pay troops), productivity boomed. I googled a history of shipbuilding during the war years and found this: “In the decade prior to 1940, America’s shipyards launched only 23 ships. In the five years after 1940, American shipyards launched 4,600 ships. San Francisco Bay Area shipbuilders produced almost 45 percent of all the cargo shipping tonnage and 20 percent of warship tonnage built in the entire country during World War II. The war lasted 1,365 days. In that span of time Bay Area shipyards built 1,400 vessels–a ship a day, on average.” Auto manufacturers made airplanes as well as trucks, typewriter manufacturing turned part of their effort to making weapons, and all of them made more in a shorter time and used less labor in the process.
Since that time, innovation has continued. Farmers use machines instead of farmhands; miners use machines instead of miners, and this includes not only deep-shaft mining (boring machines, etc) but also the huge machines that scoop up multiple tons in one pass and load it on huge trucks that require one driver rather than a hundred to move the equivalent amount of ore.
John Henry lost eventually. So did all the other laborers.
With productivity gains, education became more important. Unskilled workers had no place in most industries. And labor became excess. We no longer need large numbers of workers, but I can only provide an estimate: perhaps 60% of our workforce is needed to provide everything we need in goods and services. I tried to google this and found nothing. So I’ll go with my estimate; if you have better data, please share it.
So by my figures, 4 of every 10 workers aren’t needed in the domestic economy. They must provide goods for export, or act as a drag on the economy.
But we aren’t really keeping up with exports when they are compared with imports. Free trade agreements are more harmful than helpful. I’ve written about this before so I won’t rehash it here.
We import; manufactured goods, but also commodities. We have a potentially strong manufacturing sector, but we don’t make full use of it. Our manufactures come from places where labor is perhaps 1/10th the cost of labor here. Only through political control, e.g. tariffs and taxes, can we address this. But the business sector favors the higher profits from importing as compared to manufacturing, and they have extraordinary clout in politics. Politicians refuse to act. For some, influence from management elites combines with simple lack of understanding of the economy.
So: productivity gains reduced the demand for domestic labor, failure of the export process made that labor valueless, and government borrowing propped the economy up so that this was hidden for too long. And now a failure of our education system, coupled with a failure of our politics, has rendered an once-addressable problem critical.
And no one in government appears to understand the problem, much less be involved in devising a solution.
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