I heard a segment on NPR the other day that examined the economic debate. I forget the names of the guests, but they are irrelevant. It was the classic conservative vs. liberal scenario that is all too familiar. The basic message from both sides was that, “We need to increase and stimulate growth.” What the guests failed to discuss was how to do so and in which sectors they thought growth was possible.
This is the issue with modern day America: everyone talks and pays lip service to their voting base, party and agenda, but nobody acts. The United States began as a country that, for better or worse, led by its actions and now it is a nation that is lagging behind with its rhetoric.
As a people we have become used to what is EASY, which translates into complacency on all fronts. Somewhere along the line, the captains of industry decided manual labor was largely the work that “other people” should do and shipped it overseas to other places while hundreds of thousands of Americans were left to find employment elsewhere.
Now it is popular to complain about China, yet nobody wants to look inward and speak the truth, which is that the outsourcing of American industry almost single-handedly created China’s booming economy. Those who initially realized it was much cheaper to have products made overseas started an all too popular trend for other first world nations to follow:
Ship your manufacturing abroad for cheap and collect higher profits for your company at home no matter the consequences.
The unfortunate reality that everyone seems to be ignoring is that America has virtually no industry. The country that embodied the Industrial Revolution ironically has nothing but depressed mill towns and overpriced converted factory lofts left to show for it. We find ourselves neck deep in a recession without the necessary bootstraps by which to pull ourselves up.
With few industry and manufacturing jobs, there is very little room to grow. The tech boom is long over and companies have been successful enough at trimming the fat in the past few years that there is no need or incentive to hire a large population of workers. Even if there was incentive, those jobs are limited. Unless another all encompassing revolution such as the one experienced with the explosion of the Internet shows up, the unemployment line will not become noticeably shorter.
So how do we solve America’s economic anemia?
It is clear that the government, which is so mired in partisan politics that it has become woefully and dangerously inefficient, is nearly incapable of doing anything to help the problem. It is also embarrassing that the two major parties in Washington refuse to resolve their differences on all fronts for the greater good of the nation. The fact that they are incapable of doing so, no matter who is in the oval office, is a testament to how far from the course the nation has strayed as a whole. Have we forgotten the axiom, “united we stand, divided we fall?” By all means, have your opinions, but don’t polarize the nation and freeze all political progress with childish name-calling and king of the hill antics typically reserved for a middle school playground. In other words: agree to disagree and get to work!
In the end, the private sector will be the one to stem the tide and help rebuild the nation’s poor economic status. Politicians could help by doing more to encourage small business and manufacturing, but it comes down to those captains of industry. Are they proud to be Americans in a time when the country needs decisive action or does their pride simply come from collecting the most cash?
Those jobs that were shipped “over there” need to come back. America is a voracious consumer, but until we once again make the bulk of the goods we use, we are in trouble. Even if we are spending again, those dollars are largely going back overseas when the bulk of them need to be going into the US market.
The formula for at least part of the turnaround is in front of us and it is simple: manufacture what you consume in order to establish a self-sustaining economic cycle. It is not going to be easy to implement, but the answer is not a great mystery to be solved.
Ultimately it is time for this nation to realize there is no quick fix, roll up its sleeves and get to it. We need to stand up and stand behind the three-word tagline that was once the global standard of excellence: Made In America. Before we can pull ourselves up by the bootstraps, we must first put our nation back to work and manufacture them.
Interesting thoughts, Will– I see things slightly differently–
first China didn’t ascend due to American industry shipping jobs overseas. If anybody shipped jobs to China it was the Japanese and the Taiwanese.
Chinese agricultural reform starting in the late 1970s closed collective farms and left farmers free to exploit their land the way they saw fittest. Farming became more efficient, which freed up excess labor in rural areas to migrate to the cities, where they were willing to work for cheap. At the same time, other Asian countries were looking for cheap labor to help them assemble manufactured goods, like computers, iPods, etc– today, while a vast amount of goods are imported from China, it’s important to remember many are re-exports of goods first manufactured elsewhere in Asia. Taiwanese and Korean memory chips are turned into Chinese iPods, if you will.
The important point here is that computers have NEVER been mass produced in the United States. The last manufactured goods that were in any significant amount, basically were cars. And who shot the American car companies in the foot? Well Chrysler, Ford, and GM did. Remember in the 80s when Chevy, Oldsmobile, Dodge, etc would all have their own versions of the same cars? It’s called lack of innovation.
The only industry that has continued to innovate in the US over my lifetime is the financial industry and the media industry. These are service industries and the inevitable consequence is the increase in incomes at the highest levels of the income distribution. Match this with lower taxes on those incomes and skyrocketing costs of higher education and healthcare (spurred on by the increased returns to education MBAs, lawyers, and finance whizzes could obtain in the marketplace) and you have a recipe for a stagnating post-industrial high-school educated workforce. But of course the finance whizzes had a brilliant idea to allow the lower half of the income distribution to continue to grow their consumption despite stagnating or falling real wages– simple, borrow against your house! I don’t think I have to get into the trouble that volatile episode has laid upon not only the US but also the world economy.
And the sad fact is that now retrenching and going back to Made in the USA is not going to help. Unless we can find something in the USA we can make better. The crisis has only convinced countries like China and others that they cannot depend on insatiable demand from the US. The population is leveraged to the hilt, going broke and getting sick. So those countries are working on stimulating their own domestic demand instead.
The best thing the US can do is reform its state higher education and healthcare systems and do a better job at integrating migrants. Our greatest strength is that our population growth is keeping up with economic growth. As long as that population is healthy, smart, and has more to look forward to than working at Walmart, we should be okay. Rather than innovate more in finance, lets actually raise taxes on the highest 1% of earners. It’s not as revolutionary as it sounds. The highest marginal tax rate in 1955 under Pres. Eisenhower was 91%!! It will pay for better healthcare and cheaper education. Exactly the kind of stuff that will breed the kind of innovation that those computer makers in Korea and Taiwan needed. And if we really want to learn something from Korea, or Taiwan– hell, let’s do some industrial policy. Let’s build wireless internet and high-speed rail all over the country. It’s exactly projects like that gave us the period of great prosperity from post WW2 until the late 70s.
Let’s teach more foreign languages, let’s finance more American kids moving not only outside the country, but also just around the country itself. The cultural hole between the red and the blue states is shocking. People have to wake up and realize that all that partisan rancor, division, and griping is simply just another way for America’s last homegrown sectors, the finance industry and the media industry, to profit off people’s boredom, bitterness and nostalgia. Should it surprise you that Rupert Murdoch owns Fox AND the Wall Street Journal? Or that General Electric owns NBC/Universal and more than half of its profits come from its GE Capital division?
You’re absolutely right that small business is probably the best thing to help pull America out of its trouble, but it’s going to need to be small business the likes of which we haven’t seen in generations. And we’re going to need very very educated small businessmen– engineers, writers, foreign language speakers– all very open minded and in it for the love of the business. Not just because they want to make a quick buck. Because all around the world, our competitors are in it for the love of it.
Oh and one last thing– it’s also very important to remember that the vast bulk of all those dollars going “over there” end up coming right back here in the form of purchases of government treasury bonds. The largest holders of US treasuries are the Chinese and the Japanese. They store their wealth by lending us money to consume more. It’s like the chicken and the egg.