09 November 2011

Painfully Close To The Truth

A team of leading archaeologists announced Monday they had uncovered the remains of an ancient job-creating race that, at the peak of its civilization, may have provided occupations for hundreds of thousands of humans in the American Northeast and Midwest.

According to researchers, these long-forgotten people once flourished between western New York state and Illinois, erecting highly distinctive steel and brick structures wherever they went, including many buildings thought to have held hundreds of paid workers at a time.

"It's truly fascinating—after spending a certain number of hours performing assigned tasks, the so-called 'employees' at such facilities would receive monetary compensation that allowed them to support themselves and their families," said archaeologist Alan H. Mueller, citing old ledgers and time-keeping devices unearthed at excavation sites in the region. "In fact, this practice seems to have been the norm for their culture, which consisted of advanced tool users capable of exploiting their skills to produce highly valued goods and services."

From The Onion (n.b. for those of you not familiar with The Onion, this means that the piece is satire).

The Onion is so close to the truth it's painful. The ghost towns, and abandoned factories described in the piece are there, waiting to be found by the archaeologists of the distant future. The collapse of the "Rust Belt civilization" happened almost entirely in my lifetime. I was born in 1970, just as it peaked.

In the forty years, the cities have withered away, the jobs have moved away, four rounds of census results have shed political power in Congress, most of the steel, automobile and textile companies in the United States have shut down or reorganized in bankruptcies, and the economic fortunes of the working class American man have stagnated. The notion of a job for life that paid a living wage, let alone such a job for someone who didn't even get a college degree, is long forgotten. Nobody even makes televisions in the United States anymore.

Back when they were creating millions of jobs, the rich weren't nearly so rich as they are today, when we wallow in the worst recession since the Great Depression. Four years later, the nation's GDP is finally back where it was when the recession started, but the jobs situation is little better than it was at the worst point after the financial crisis.

It isn't because we ran out of oil or stopped using cars. Car ownership rates are about what they were in 1970, maybe higher. The interstate highway system may not be shiny and new as it was back then, but its roads are still the main arteries of commerce and travel in our nation. We had an oil shock in the late 1970s and early 1980s, and another in the past few years, but I bought a gallon of gasoline for less than a dollar once while I was in college and gas at $3.50 a gallon or more hasn't divorced us from our reliance on gasoline.

One can fault the failure to unions to protect workers. But, who could they organized now and achieve the situation we had then?

One can fault unions for striking to rich a deal for their members, even though that was their job. It would make more sense, if you are to criticize on that ground to complain that managers weren't tough enough in saying "no", of course. But, the reality is that no amount of wage concessions would have made American automobile and steel and textile workers competitive with Mexico or Japan of the 1970s or China.

The jobs we lost were overwhelming lost due to rising productivity, falling market share relative to foreign competition, and offshoring of jobs by domestic companies. Perhaps tariffs would have helped, and our focus on consumer well being to the exclusion of production jobs was myopic, although even that wouldn't have forestalled the loss of jobs and increase need for a skilled work force as a result of technologically driven increased productivity.

Even more myopic, perhaps, has been our belief that we can hold on to the high end design and engineering jobs while shedding the business of building things itself. Innovation flows naturally from day to day familiarity with who things are done and the informal spread of knowledge that accompanies it. An engineer in an office in Oakland County, Michigan will inevitably miss insights that someone on the ground in a maquiladora just over the Mexican border or a Chinese factory would enjoy. Foremen and shift managers and local parts company managers and technicians doing day to day work know a lot that no longer makes it to upper level management and design teams because they are now absentee landlords. Some of the most knowledgeable people in the manufacturing industry don't speak fluent English and don't have engineering degrees or M.B.A.s.

It also isn't the case that the demise of the industrial era left the nation without jobs at all. Squeezed between the tech bust and the financial crisis were years when the United States had approached full employment as the term is defined by economists. We dramatically increased the labor force participation of women, while no reducing the labor force participation of men by nearly as much. American did then, and perhaps still do, although the last few years have seen a slump, work more hours per year than any other country in the world. We have fewer paid vacations, work more overtime, and extract paid labor even from people like college students and mothers of young children who historically often haven't been in the labor force, although the high schooler with a part-time job is a vanishing species.

For whatever reason, proposals to encourage marginal participants in the work force like college students, to leave the work force, and to encourage employers to hire more people working fewer hours each, have not even made it into the discussion.

Older men under the age of sixty-five are less prone to be working than in the past. In the case of working class men, Social Security disability or work related disbility policies or military retirement payments or first responder retirement payments after several decades of physically demanding work make an early retirement possible. In the case of upper middle class men, investment gains and savings after very fruitful boom year careers have made early retirement possible.

It is harder to blame international competition or rising productivity for the massive decline in economic security we have experienced. The percentage of non-governmental workers who are anything other than employees at will with no severance benefits other than unemployment insurance has never been smaller. Each successive recession has brought layoffs to unionized employees who aren't employees at will. The financial crisis led to layoffs among people like big law firm lawyers, even non-equity partners, who thought that their jobs were secured despite a lack of formal legal guarantees, and to government employees who are the last vestige of the kind of de facto lifetime employment arrangements with formal protection from wrongful termination that was common in the manufacturing industry of 1970.

Partially, the economic maxim that demand is insatiable, has broken down. In the last decade, the United Kingdom reached "peak stuff." The total mass of the good it consumes has fallen and its energy consumption has declined as well. There is a car for every driver, a house for every household, and a chicken in every pot. there are shoes on every child's feet and a cell phone in the hand of every middle school child and single mother waiting at a bus stop. Our aggregate demand for tangible goods and real estate per capita has peaked. Productivity as allowed those of us in the developed world to get everything that we need and turned out attention merely to quality, which has risen as well relative to price.

Personal services are also cheap. Our society may no longer have many servants, but lots of people employ a cleaning service, a lawn service, eat out or buy take out food, have someone else press their shirts, or hire baby sitters and day care providers. Very few people cut their own hair these days.

The crunch points today are in professional services and financial security. Health care costs continue to soar out of control. Higher education costs continue to rise, and income continues to drive college completion even after controlling for academic ability. Lots of people who need legal services can't afford a lawyer. Less than half of people who need nursing home care can pay for it with their own funds. Lots of middle class people are turning sixty-five and learning that they can't afford to retire as they had planned. A loss of a job can rapidly snowball into long term poverty. A third of the people in the United States who grew up middle class have seen their socioeconomic circumstances drop them below those circumstances. Upward social mobility is lower in the United States than almost any reasonably economically open country in Europe or Asia.

It is troubling that a job recovery and household income recovery seem no closer, and that the growing divide between the rich and everyone else shows no signs of abating. It is even more troubling that no one, myself included, seems to have a clear overall vision of what a political economy that would solve our woes would look like.

One of the reasons that the Republican pablum of starving the beast by lowering taxes without regard to the benefits, of letting regulations that have clear benefits be repealed in the hope that it will spur economic development, and of abandoning a societal commitment to care for all has been as popular as it has, and there are tens of millions of true believers, is that there isn't a better defined alternative vision. Liberals can trot out evidence that their economic theories are vodoo all day, but without a convincing narrative and vision for an alternative, it is hard to sway hearts and minds. President Clinton pitch to create a society that would help those who "played by the rules" had a powerful appeal, but a couple of decades later, that promise seems betrayed. Hundreds of millions of American who played by the rules are still worse off.

It isn't that liberals don't have piecemeal policy recommendations that make sense. Krugman is right to argue that we need monetary and fiscal stimulus in large doses, supported by empirically validated Keynesian macroeconomics, although one could hope for measure less microeconomically clumsy than the home buyer's tax credit and the cars for clunkers program. Progressives arguing for more parsimonious use of incarceration are right. The folks arguing that we should back away a war on drugs approach and take steps like decriminalizing marijuana are right. Those arguing that we need to make higher education available to everyone who has strong academic credentials without regard to financial need are right. Those arguing that the well off aren't paying enough in taxes to pay for beneficial government services are right. Those arguing that we need to increase gas taxes to catch up in the maintenance of our bridges and roads are right. Thoe arguing that we should be investing in high speed rail in appropriate corridors are right. Those arguing that we need to implement the kind of steps in President Obama's health care reforms that will greatly shrink the ranks of the uninsured are right. Those arguing that we need improved regulation of the financial industry that caused the crisis and corporate governance reforms are right.

There are a lot of right answer to society's troubles curning out there on the left at a time when right wing policy circles are an intellectual wasteland. But, there isn't much of a vision and a narrative to explain how the piecemeal reforms can be united into a coherent whole that people who aren't policy wonks can understand and rally around. Until that vision can be widely communicated, we, in a democracy where the median voters wishes drive policy, will remain stuck.

No comments: