Outsourcing Prosperity 

The last time I was in an economics class America was only a dozen or so years removed from a period of trade surpluses and virtual isolation.  German and Japanese small cars had made inroads, but were still considered a bit of a novelty - until the real hammer fell in the form of the so-called Arab Oil Embargo.  It was the first time the post world war generation felt serious effects of any kind from foreign trade and it was an eye-opener indeed. 

While auto sales to the two aforementioned Axis powers boomed, my instructor informed me with a knowing and portentous air that within the decade, 80 percent of the wealth of the world would be in the hands of OPEC nations, courtesy of the runaway price of crude oil (about $30 a barrel as I recall) and he had some pretty impressive figures, charts, and even publications behind him.  Almost unnoticed, jobs in the manufacturing sector which had been the backbone of American Labor and the very engine of democracy, began the mass exodus from US soil in earnest, mostly in the direction of Taiwan, Malaysia and Mexico while the Capital was supposed to be finding a new home in the Middle East.

More than a decade later, about the time Sony bought Columbia Pictures and an investment group including the Mitsubishi family became the owner of Rockefeller Center in New York, Newsweek and the Wall Street Journal were encouraging all of us to learn Japanese - or else.   The Japanese had already crushed the American electronics manufacturers and as they gathered up all the monies associated with that victory, they were working on the remains of the automakers.  Everything they didn't own, they would certainly control, we were told.

But even as we quaked over the growing power of one Far East giant, the financial markets would soon become skittish over the impending return of Hong Kong to the remaining communist superpower.  Many voices were raised and hands wrung, wondering aloud about what havoc these inscrutable commies might wreak on what seemed to be the most robust and possibly the purest capitalist enclave in the world.  

Now almost a decade after the handoff, China has proven to be an extremely quick study - to the point where it has become the new bully on the block.  It is defining the ground rules and near-invisible profit margins for manufacturers and retailers alike with the help of its new best buddy from Arkansas, Wal-Mart. 

The manufacturing that largely built America and its middle class, the manufacturing that made us a genuine power in the First World War and saved the freedom of the western democracies in the Second World War is all but dead and the USA doesn't seem very upset about it.  Labor may be reeling a bit from the defeat but they have become accustomed to diminished and constantly eroding expectations while Capital seems to be doing just fine, thanks.

It would be hard to argue with the obvious conclusion that this is simply the natural result of laissez-faire Capitalism.  The Labor movement of the last century just postponed it for six or eight decades.

Class mobility as a result of the acquisition of wealth is one of the basic attractions of life in the US and it is proven to exist every day, but the advances are usually incremental.  Sixty years ago a lower class kid in Flint Michigan knew that he could go to work in the GM plant and if he showed diligence and aptitude and was patient for ten or fifteen years, he would most certainly be making the kind of money that would push him into the middle class -- given the UAW contract at the time. well into the middle class -- and his retirement would be provided for as well.  

With stock options and so forth, some of those kids born to plant foremen already ensconced in the middle class would find that a stint at a public university and a return to the management suites would allow them to assert themselves even higher.  There aren't many of those jobs left in the US - far fewer, anyway - and the benefits and guarantees that accrue to those positions are fast becoming a thing of the past.  When they are gone, how many will be upwardly mobile then?  How many kids can sell millions of dollars worth of life insurance or get continuous scholarships to college and medical school?

Just about everyone with a library card is aware that around 1937 we were deep in a Great Depression that was finally broken only by a war and the most amazing manufacturing boom in history.  But it is barely a footnote in most US history books that we were only two or three fireside chats away from truly embracing Communism - at least as a viable political party.  Labor reform was right at the front of that confrontation and in those days the workers had significant clout.  Items consumed in the USA -- whether electrical, textile or comestible -- came from the USA with extremely few exceptions,  and they were grown, built or assembled using materials from the USA. 

When Franklin Roosevelt or Joe McCarthy got a manufactured item in their hands, it had been designed, created, transported and sold by Americans exclusively.  They might have been recent immigrants but they were legal, and 100% American.  Nowadays it's a pretty good bet that with the possible exception of foodstuffs, you cannot put your hands on a single thing in your house that meets these criteria.

As if the current prospects for American labor weren't bad enough, we're made to feel politically incorrect, greedy and insensitive if we don't think the Mexican border should just be opened up with a big Welcome (¿perdón? - Bienvenido) mat facing south.  We're not talking about manufacturing jobs here of course but I'm more than a little suspicious when individuals of the moneyed class (let's just take the President of the United States,  as an example) appear to be the ones weeping the biggest tears for the plight of the poor illegal immigrants who sneaked across our borders fair and square and now seem to be harassed as they set about laying claim to the lower end of the wage scale.

There may be some truth in the assertion that this labor competes little or not at all with mainstream American labor - although I have to swallow hard to accept that logic.  But it does show graphically what the effect of competing in a true global economy is like.  Is there a shortage of American workers who do what the Mexican workers do, or is there just a shortage of those who will do it for the same wage?  And if so, should we just acknowledge it and quit whining?  That is after all what supply and demand is all about. 

Likewise if you work in manufacturing and don't know something that your counterpart in Shenzhen doesn't know, you better be willing to work for what he is getting, or hope that the supply chain between where you are and China is so poor that it makes you look good by comparison.  In America, if you don't have some extremely up-to-date technical skills, or maybe your own truck, you better have a lot of money.  The good news is that if you do, you are on the threshold of a new golden age that only the Robber Barons of the early industrial revolution knew - before OSHA - before child labor laws - in fact before any kind of labor reform. 

Working conditions in China and the third world would make Jacob Riis lose his lunch, but the vast horde who toil in this human rights vacuum are going to continue to be in such oversupply that they will literally compete to the death to get a tiny portion of your dollar (or euro or yuan, since we are now in a global environment).  So you won't be able to spend very much of it even to pay for your certified American servants because they must compete with the new semi-legal immigrants who are far more eager and less selective. 

Meanwhile your increasingly sophisticated manufactured goods will continue to be built by the international low bidder in an auction of unregulated labor so desperate that they will barter the lives of their children to build gaudy vessels for your conspicuous consumption.  And even as they express gratitude to the local overseer, they will hate you a little more every year for your distant complicity. 

This is the definition of capitalism carried out to its logical conclusion.  The free market is taking care of itself as it always has - with the subtle violence of Darwinian determinism.  The strong continue to prosper as usual, and the weak must look to the hereafter to inherit what's left of the earth.  Is that necessarily a bad thing?  Maybe not, but I think it's time we started looking farther down this road we're taking to see where it ends.  In the society to our south from which most of our illegal aliens originate there are also wealthy, sophisticated, intelligent people.  Not as many, granted,  but they live every bit as well as the wealthy in the US,  and when the middle class is gone we are going to look a great deal like our Mexican brethren. 

When the social burdens of the nouveau poor have driven the more capable of the population to seek a bit of satisfaction elsewhere, where will our refugees go?  Frankly, I don't think Canada can handle it.  And most sobering of all:  When the middle class is gone and the poor have even less disposable income, who will shop at WalMart?

(Dan Johnson is director of computing services for the information technology department of Exel Transportation Services, Inc.)



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