Deindustrialization

Good summary from Paul Craig Roberts, Dave Kranzler and John Titus:

On January 6, 2004, Paul Craig Roberts and US Senator Charles Schumer published a jointly written article on the op-ed page of the New York Times titled “Second Thoughts on Free Trade.” The article pointed out that the US had entered a new economic era in which American workers face “direct global competition at almost every job level–from the machinist to the software engineer to the Wall Street analyst. Any worker whose job does not require daily face-to-face interaction is now in jeopardy of being replaced by a lower-paid equally skilled worker thousands of miles away. American jobs are being lost not to competition from foreign companies, but to multinational corporations that are cutting costs by shifting operations to low-wage countries.” Roberts and Schumer challenged the correctness of economists’ views that jobs off-shoring was merely the operation of mutually beneficial free trade, about which no concerns were warranted...in response to a question about the consequences for the US of jobs off-shoring, Roberts said: “In 20 years the US will be a Third World country.”

It looks like Roberts was optimistic that the US economy would last another 20 years. It has only been 10 years and the US already looks more and more like a Third World country. America’s great cities, such as Detroit, Cleveland, St. Louis have lost between one-fifth and one-quarter of their populations. Real median family income has been declining for years, an indication that the ladders of upward mobility that made America the “opportunity society” have been dismantled. Last April, the National Employment Law Project reported that real median household income fell 10% between 2007 and 2012.

Republicans have a tendency to blame the victims. Before one asks, “what’s the problem? America is the richest country on earth; even the American poor have TV sets, and they can buy a used car for $2,000,” consider the recently released report from the Federal Reserve that two-thirds of American households are unable to raise $400 cash without selling possessions or borrowing from family and friends.

Although you would never know it from the reports from the US financial press, the poor job prospects that Americans face now rival those of India 30 years ago. American university graduates are employed, if they are employed, not as software engineers and managers but as waitresses and bartenders. They do not make enough to have an independent existence and live at home with their parents. Half of those with student loans cannot service them. Eighteen percent are either in collection or behind in their payments. Another 34% have student loans in deferment or forbearance. Clearly, education was not the answer.

Jobs off-shoring, by lowering labor costs and increasing corporate profits, has enriched corporate executives and large shareholders, but the loss of millions of well-paying jobs has made millions of Americans downwardly mobile. In addition, jobs off-shoring has destroyed the growth in consumer demand on which the US economy depends with the result that the economy cannot create enough jobs to keep up with the growth of the labor force.

Between October 2008 and July 2014 the working age population grew by 13.4 million persons, but the US labor force grew by only 1.1 million. In other words, the unemployment rate among the increase in the working age population during the past six years is 91.8%

[...]

In the ten years since Roberts and Schumer sounded the alarm, the US has become a country in which the norm for new jobs has become lowly paid part-time employment in domestic non-tradable services. Two-thirds of the population is living on the edge unable to raise $400 cash. The savings of the population are being drawn down to support life. Corporations are borrowing money not to invest for the future but to buy back their own stocks, thus pushing up share prices, CEO bonuses, and corporate debt. The growth in the income and wealth of the one percent comes from looting, not from productive economic activity.

This is the profile of a Third World country.

The De-industrialization of America (Paul Craig Roberts) Third world country indeed. Perhaps that's why our politics increasingly resembles that of a banana republic and our rural areas look more like post-crash Russia (or tribal Afghanistan). It's something to keep in mind when "experts" talk about automation. According to them, America's de-industrialization was just fine, because people just went out and got new jobs in the "service economy" and the unemployment rate was only five percent! Now they are spinning the same "new jobs will magically appear" story in regards to automation. But the above story offers a different take, one actually based in the real world most of us live in. The term "Clerisy" is coined by this excerpt from a forthcoming book:

Despite America’s egalitarian roots, the prospect of mass downward mobility has been embraced widely by some business oligarchs and much of the Clerisy. The future being envisioned is one dominated by automated factories and computer-empowered service industries that will continue to pressure both jobs and wages in the future. In this scenario, productivity will rise, but wages may stagnate or decline. This leads some to propose that the American middle and working classes has become economically passé. Steve Case, founder of America Online, has even suggested that future labor needs can be filled not by current residents but by some thirty million immigrants.

Arguably the first group to feel the downward pressure has been blue collar workers, whose lot has declined over the past few decades. After World War Two, as the United Autoworkers’ Walter Reuther noted, “the union contract became the passport to a better life” that was creating “a whole new middle class.” But with the shifting of industry overseas and the decline of private sector unions, the path for blue collar workers to enter the middle class has become more difficult.

Although they often claim to defend the middle class, the political stance adapted by the Clerisy, as well as the tech oligarchs and the investors, tends to worsen this trajectory. Environmental concerns impose themselves most against basic industries such as fossil fuels, agriculture and much of manufacturing. These employ many in highly paid blue-collar fields, with average salaries of close to $100,000. In the last decade, top U.S. firms, notes the liberal Center for American Progress, have cut almost three million domestic jobs.  Automation also leads to the diminution of traditional white collar professions as well as the shift of high-end service jobs offshore.

Overall, it has become increasingly common to regard the middle class as threatened and even doomed. Indeed, as early as1988 Time magazine featured a cover story on the “declining middle class,” which at that time was considerably more healthy than today. After the great recession, the American blue-collar worker has been pitied, but certainly not helped by the clerisy, which believes that there is no hope for manufacturing or similar outmoded jobs in an information age. Blue collar workers were described in major media as “bitter,” psychologically scarred” and even an “endangered species.” Americans, noted one economist, suffered a “recession” but those with blue collars endured a “depression.”

This perspective extends across ideological lines.  Libertarian economist Tyler Cowen suggests that an “average” skilled worker can expect to subsist on little but rice and beans in the future U.S. economy. If they choose to live on the East or West Coast, they may never be able to buy a house, and will remain marginal renters for life. Left-leaning Slate in 2012 declared that manufacturing and construction jobs, sectors that powered the yeomanry’s upward mobility in the past, “aren’t coming back. Rather than a republic of yeoman, we could evolve instead, as one left-wing writer put it, living at the sufferance of our “robot overlords,” as well as those who program and manufacture them, likely using other robots to do so.

Contempt for the middle class is often barely concealed among those most comfortably ensconced in the emerging class order. Financial Times columnist Richard Tomkins declared that the middle class, “after a good run” of some two centuries, now faces “relative decline” and even extinction. This historical shift towards mass downward mobility elicited only derision, not concern: “Classes come and classes go” and that when the middle orders disappears about the only ones that will be sorry to see them go might be the “middle classes themselves. Boo hoo.”

In the Future We’ll All Be Renters: America’s Disappearing Middle Class  (Joel Kotkin)