Deindustrialization: The Road to National Poverty
Posted by RMS on December 14, 2008
It has been said time and again that the US is entering a period where we no longer need to manufacture. We no longer need to manufacture because we are transitioning to a new economy. The service economy as it is known is our new destination and experts are certain it will bring high tech, knowledge based jobs. As was the case when the US transitioned from an agrarian based economy in the mid nineteenth century to a manufacturing based economy, workers were freed from the old sector and reallocated to the new.
Industrialization set the stage for the rise of the middle class and social mobility. “Freedom” from the land was seen as a step forward. Farming became very efficient using a smaller workforce and was able to produce a more than adequate food source for the population . Those excess workers made their way to the factories where the pay and working conditions eventually exceeded those of the old agro-businesses. This was progress and seen as a natural progression in the economic development of modern society. Thanks in part to industrialization, the US became the wealthiest country in the world. Educational institutions churned out engineers, scientists, chemists, manufacturers and doctors by the millions. Those employed in factories were able to purchase homes, cars and educations for their children. Health care became an incentive used to attract good workers. The children of these workers would have a chance to become engineers, scientists, chemists, manufacturers and doctors. Job security, good pay, health insurance and pensions were the cornerstone of the factory job. Of course the factory job was the end result of work done by investors, inventors, manufacturers and engineers. Those were the people who used their mathematical and scientific creativity to make both products and factory jobs possible. Today we are experiencing a new transition. It is believed that industrialization is dead and the service based industries are the future. But what is a service based industry and what does it produce? Is it banking and investments? Is it preparing food? Or is it administrative work? My point is that while there may be service jobs that provide a good living, we are slowly beginning to see that service based jobs cannot replace work that produces a product. Wages are less, benefits are lower and retirement plans in most cases are non-existent. Economists argue that we cannot compete with countries who pay their workers less but why would we want to? Why would we allow jobs that produce items of value to be done outside the country? Even if it lowers the price of the item (in most cases it does not) should that be an excuse to send jobs overseas? It is unrealistic to believe that the “grunt work” or factory work can be done in the low wage countries while the high value jobs will continue to be done here. I think that is misguided and shortsighted. To manufacture a product involves more than “dreaming” up the item and engineering it. Building the facility and running it requires expertise and can be considered high tech also. Designing, building, supplying and running the factory are all spin off jobs that require skill. They are spin-off jobs that create supporting jobs that spin-off even more jobs all the way down to the lowest wage earner. In effect, manufacturing leads to exponential job growth. Losing manufacturing leads to massive job loss for our economy and cannot be replaced easily if at all.
The service economy is a road to poverty. Just look at the state of our economy today. The US has gone from the world’s largest creditor to the world’s largest debtor. When the US was an industrial country we were a top exporter of goods but today we find ourselves with heavy trade imbalances with all of our trading partners. This transformation is even more evident when one looks at the average citizen’s debt. We have taken on more and more debt to make up for the loss of wages thanks to deindustrialization. Those who argue that the US will be better off with a service economy fail to see reality. California, once the second largest producer of automobiles next to Michigan, no longer builds cars (or ships or planes) with the exception of one last plant. So what happened to the middle class jobs? Well, all of the old manufacturing sites are now strip malls and housing developments. Can you say retail jobs? How about Detroit itself, once the pride of the US industrial economy. One drive through the city and you will know why the Midwest is known as the “Rust Belt“. Factories that were closed in the 50′s, 60′s, 70′s and as recently as the 80′s still stand vacant and rotting. The jobs lost were not replaced and the tax base of the city and the state has been decimated. That in turn has effected the quality of city services which has led to Detroit’s decline and its current state of poverty. Deindustrialization of the United States will only bring us closer to resembling those countries we call the Third World.
Why industry matters.
