Wednesday, July 10, 2013

A thought on the disappearing middle class of workers in manufacturing industries.

Frontline broadcast a retrospective program on two American families suffering from the loss of manufacturing jobs. The point is that these folk work hard, and sought new training when their jobs were abolished, but have lost their place in the middle class. Once a worked on an automobile production line had a job for life with a middle class salary, and there were millions of similar jobs. No longer is that true. Charlie Rose interviewed Bill Moyers who suggested that the problem was the lack of U.S. government support for job creation in manufacturing.

I think the problem is more fundamental. There is a economic development transition that countries seem all to need to go through. Agriculture and other primary industries are the initial drivers of the economy and sources of employment. Manufacturing industries eventually grow to produce a greater volume of goods than primary industries, and typically are labor intensive in their early stages. Eventually service industries (financial services, education, health services. entertainment, etc.) become more important economically and in employment.

Revolutionary changes in transportation and information and communication technologies have fueled globalization, as poor countries have taken advantage of low labor costs to move into traditional manufacturing industries. U.S. industry has responded in part by developing new industries taking early mover advantage of opportunities produced by the Internet, mobile phones, personal computers, etc. U.S. industry has also taken advantage of the availability of capital to invest in automation in its manufacturing industry. Manufacturing continues to produce a large part of the U.S. GDP, but it provides fewer jobs, and fewest jobs for the manufacturing line workers like those of the past.

I suggest that the Information Revolution and the Transportation Revolution (jet aircraft, container shipping, super tankers, high speed trains, etc.) are comparable to the Industrial Revolution and the Second Industrial Revolution.

The social and economic transformations that accompanied the Industrial Revolution and the social disruption that occurred are well known. I would point out that the Second Industrial Revolution culminated in two World Wars and a Great Depression. Much of the world was a mess in 1945. The Information Revolution, the Transportation Revolution and Globalization are bringing huge benefits to much of the world's population, but they are also having their victims.

Of course government can and should do what it can to ameliorate the negative impacts of the transitions, and it should help the nation to take advantage of the opportunities to grow economically and improve the lives of its people. However, it is easier to see the big pattern of events in retrospect, but difficult to predict them and harder still to develop effective programs to protect the most vulnerable and the most affected members of society.

My guess is that the roots of the problems portrayed by these programs are cultural. We have an underclass of blacks, Hispanics, Indians and "poor rural whites". They are subject to prejudice, and the subcultures that they have developed are linked to poor education and high crime rates. We also have a tiny percentage of very wealthy people who are using their wealth and the power it brings to  get richer and richer, faster and faster, driving inequality levels to new highs.

Government can make a difference, but perhaps we in the middle classes will have to first take back control of the political parties to get them to make/allow government do the right thing. The right thing might be to improve human rights in this country, to breed a culture in which the very rich take responsibility that should be inherent in their wealth and power, and in which the underclass disappears replaced by people with real hopes of upward social and economic mobility.

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