Tuesday, January 10, 2012

South Carolina

This month's Atlantic has an article entitled "Making it in America" that brings home the plight facing American manufacturing workers. The problem is not, as conventional wisdom would have it, that we don't make anything in this country anymore.  We still make a great many things. The problem is that we need fewer and fewer people to make them.

The author visited a factory in South Carolina, where he found a few highly skilled operators running the machines that precision-cut fuel injectors for automobile engines, and a diminishing pool of less-skilled assemblers of these parts, whose jobs may eventually be performed by robots. The few machine operators, who earned their place by extensive training and education, seem likely to retain good jobs. However, the unskilled assembly line worker profiled in the article will keep her job only so long as her wages remain below the cost of replacing her with an automated machine. If the machines get cheaper, as they probably will, she is out of luck. This process seems especially cruel in a place like South Carolina, which saw a boom in textile production years ago, after the closing of textile mills in New England in preference to cheaper labor in the South. That advantage couldn't last long, as in the global economy it was inevitable that the mills in places like South Carolina eventually closed in response to competition from Mexico and China and other lower wage countries. Fortunately, the void was filled to some extent by a boom in auto manufacturing in the south, and other high tech manufacturing like the auto parts factory described in the Atlantic article.

The problem now is not so much that these factories are closing, but that they are automating. The inexorable process of using fewer and fewer workers sharply accelerated over the past 10 or 15 years. This country lost about a third of our manufacturing jobs in the decade from 1999 to 2009, due to sharply increased productivity, and global competition. This change is so recent that we might just be beginning to understand what has been happening.

The Atlantic piece put a human face on the trends described in another article in Vanity Fair by the famed economist Joseph Stiglitz, called "The Book of Jobs." Stiglitz has been working on an alternative theory explaining the causes of the Great Depression of the 1930's. Traditionally, that economic failure has been blamed on excessively tight monetary policy. Stiglitz thinks the bank failures and other problems of the Great Depression might instead merely have been symptoms of a collapse in the "real" economy, mainly due to increasing productivity in agriculture, that caused the displacement of millions of farmers. We did not solve the problems of the real economy or end the Great Depression until we mobilized for World War II, when we built the factories and trained all those extra workers to make thousands of trucks, boats, tanks and planes. All that "investment" nicely translated into the post-war boom when those same workers started making automobiles and refrigerators and everything else that fueled the next economy. But it took us a long time to figure out how to cure the problems that caused the Great Depression, and we did it quite by accident, by responding to a world war.

We might be making a similar mistake by thinking that the Great Recession of 2007 and onward was caused by a housing bubble and unwarranted speculation in the financial markets. Those might merely have been symptoms of deeper problems, or perhaps ways of masking those problems. (The illusory wealth we created in the last decade hid our real decline.) Nevertheless, we responded to the collapse by bailing out the financial industry, and loosening the money supply. But if the current economic slowdown was caused instead by the amazing productivity increases in the manufacturing economy, as well as the massive losses of jobs to low wage countries, which occurred starting at the end of the 1990's, we might have barely begun to solve our real problems. Stiglitz suggests that we need another massive investment on the order of  the one we made to prepare for World War II in the kinds of infrastructure and education that we will need in the next economy, whatever it might look like.

So as the Republican presidential candidates troop down to South Carolina to try to persuade the voters that they have answers to the problems of people like the assembly line workers in auto parts factories there, it might be fair to ask them to move away from the politics of blame, and also away from the tired solutions to our economic problems that politicians have traditionally proposed. We're not going to fix the economy just by talking about tax policy, or the size of the federal deficit, or the number of government regulations. Rather, we need to be talking about a vision that will build the kind of future that will enable more people to succeed.

(Dean Kaufman photo from The Atlantic)


  1. Great article Joe!

    Each of us have to ask, are part of the problem or part of the solution. Bush did the tarp loans without requiring payback. We saw Halliburton making billions from the war efforts. We have a serious problem with cronyism.

    We send jobs overseas to ‘friends’ and make up other jobs for political supporters while ignoring or snubbing others. Repubs and Dems are equally guilty. This administration just told Hawker Beechcraft Corp and its union members that its Beechcraft AT-6 has been excluded from competition to build a light attack aircraft, a contract worth nearly $1 billion. Instead, the no bid contract is going to Brazilian company named Embraer. Could it be that Soros’s investments in Embraer influenced our government?

    Or is it that Hawker Beechcraft employees are represented by the International Association of Machinists (IAM). IAM president, Buffenbarger said this about Obama: “Barack so loved his own performance that he made Galesburg part of his presidential stump speech. That’s right, he’s damn proud of his performance. Well I’m not. All he proved is like Janus, the two-faced Roman god of ancient times. He could act like a friend to the workin’ man. Even as he danced to tune dictated by billionaires. Yes, we’ve seen this act before.”

    << The problem now is not so much that these factories are closing, but that they are automating. The inexorable process of using fewer and fewer workers sharply accelerated over the past 10 or 15 years.>>

    Maybe Dems should ask themselves how Obama could give the Tonopah Solar Company in Democrat Harry Reid's Nevada a $737 million loan from our Department of Energy. The project will produce a 110 megawatt power system and employ 45 permanent workers, costing us $16 million per job. One of the investment partners in this endeavor is Pacific Corporate Group.The PCG Executive Director is Ron Pelosi, the brother of Nancy's husband. He is the uncle of California's Lt. Governor, Democrat Gavin Newsom.

    It’s tough for the working man to get ahead when both parties are so steeped in cronyism. I wonder how the unions and left feel about this in light of Obama crushing the oil pipeline.

  2. Thanks Kevin. You should read the two articles I linked to. My post is just a summary. But I think one of the points of these articles is that the forces that are being described are much larger than any politician, and it might be pointless to blame politicians for economic problems that have been caused by such large forces as the automation of manufacturing. That would be like saying that politicians caused the Industrial Revolution.

    What we can ask politicians to do is help us prepare for the changes that are coming. That means helping figure out the kinds of investments in infrastructure and education that will help us compete. In the 1930's, the only way that politicians were ultimately able to help us cure the Great Depression was by starting a war. Hopefully we can move to the next stage of our economy without such drastic measures this time.

  3. I did read the articles. Thank you for your research. I hope we can avoid missteps of politicians in the 1930s. Education must be altered. In my view, there is empirical evidence that the public system is collapsing and charters are the way to go. Investment in infrastructure is a no brainer. Rhetorically, how did we ever get to the point where investment in infrastructure is a political issue. Cheers.