Every chance he gets President Obama exhorts that “The rich are getting richer and the poor are getting poorer”. He implies that the middle class is being destroyed by greedy capitalists. This is extremely dangerous and must be stopped before we have a revolution on our hands. Our President either knows nothing about what is happening to our middle class, doesn’t want to know or he is deliberately fanning the flames of class warfare to benefit his reelection chances. Moreover, he either fabricates facts or he has been poorly educated. For example, he berates the Supreme Court regarding Obmacare demonstrating that he does not understand Constitutional Law despite his having taught it. He shows daily that he does not understand free markets. And when he instigates class warfare over the alleged decline of the middle class he shows that he does not understand history either.
The historical fact is that the United States had a one time competitive edge in the worldwide market that elevated our middle class to a level of prosperity never before known in all of history. It was a fluke, a one time occurrence that lasted twenty five years and is not likely to ever be seen again. What caused this rare event and when did it begin? It was the event that Franklin Roosevelt called a “day that will go down in infamy”. That was December 7, 1941 when the Japanese bombed Pearl Harbor. This forced the United States to enter WWII, and that changed everything!!
Our manufacturing industry was flat on its back from the Depression, and one could not be certain that there was a middle class, let alone anything that could be called affluent. But from the moment we entered the war, our entire nation and its manufacturing capability were converted exclusively to the production of materials for war. Within the next three and a half years, we out-stripped the entire world in the production of war-time material. Our incredible military, using these materials, physically destroyed most of Europe’s manufacturing, and with atomic bombs completed what normal bombing had done to destroy Japan’s manufacturing base, as well. By August of 1945 the war with Germany, Italy and Japan was ended and on our terms of unconditional surrender. Meanwhile, the UK and the Soviet Union were bereft of any semblance of a manufacturing base as a result of what Germany had done to them in the late 1930’ and early 1940’s.
Consequently, the United States manufacturing capability survived the war unscathed, and our industries stood alone, without competition, to serve not only the US but the world markets, as well. In addition the GI Bill provided college and equivalent educations for the millions of returning veterans to man the positions required to fill the huge pent-up demand.
Then, perhaps because we felt remorse for the damage we had wrought to the world’s production capability, we introduced the European Recovery Program, dubbed the Marshall Plan. This Program provided monetary support to help rebuild European economies after the War in order to prevent the spread of Soviet communism. The plan was in operation for four years beginning in April 1948. Simultaneously, the United States funded Japan’s recovery when it occupied Japan from 1945 to 1952.
Therefore, it should come as no surprise that the United States economy would boom while the rest of the world foundered. This went on during the 1950’s and the 1960’s and halfway into the 1970’s, and manufacturing jobs paying good money were created in abundance. The unions which dominated labor in the automotive industry, through threat of strikes and actual strikes, demanded and received better wages and benefits than could have ever been imagined. Suppliers to the car, housing and related industries, which included steel, rubber, plastics and lumber expanded and prospered, as well. As a result of these high paying manufacturing jobs, a new vibrant and prosperous middle class developed in the United States that was more affluent than any middle class before or after it. The returning veterans could afford to wed and begin families, and they were able to purchase homes, furnishings, appliances and automobiles. And their affluence extended to their children, the “baby boomers”, born between 1946 and 1956 that were raised in the new middle class with privileges and educations like no children before them.
Beginning in the 1970’s, however, the unique monopolistic position of the United States began to be challenged by global competitors in virtually every market. In 1972 President Nixon opened the door to China, and by the end of that decade, Europe and Japan were once again world class manufacturers, Taiwan and South Korea were showing signs of industrial viability and China was entering the world market with a dedication that would change everything. Usually the competitive edge of the Asian countries came from their low labor costs which permitted them to price their products below comparable ones made in the United States. Thus began the gradual shrinking of the wages and salaries of our middle class whose employers had to compete. Making matters worse, US manufacturers enticed by special tax deals offered by the foreign countries, began to move entire plants from the US.
Then beginning in the 1980’s, the Personal Computer, Laptop and the Internet entered the marketplace. The world-wide adoption of various digital devices which included the cell phone, ATM’s, and robots that could answer and make phone calls started the digital revolution. By the end of the 1990’s, the creation of new digital applications and their adoption began to occur at an exponential rate. Recent examples include the I-Pod, I-Pad, Kindle, Google, Facebook, and Twitter, just to name a few that are less than five years old. This revolution is changing the nature of many jobs forever, and we ain’t seen nothin’ yet!!
For perspective, and to illustrate the size and magnitude of globalization during this period, the middle class has doubled on the planet within the span of one single generation. This is historic and requires us to rethink everything about markets and jobs, including the stress this demand will have on the supply and price of basic raw materials such as fossil fuels, mined elements, timber and even food. And this is just the beginning because vast numbers of Chinese, Indians and Brazilians are being added to the middle class as we write.
Prior to Obama’s rants, we have not heard much about the impact all of this has had on our middle class. That is because our middle class has been asjusting reasonabley well to their changing job and financial situation.The middle class was aided in their adjustment by: (1) the two income family, (2) the availablility of extremely low cost, good quality manufactured goods such as clothing, toys, electronic goods and even automobiles from Asia via Wal-Mart and the Internet and (3) the ability to draw on their assets for the cash needed to sustain their lifestyle while their salaries and wages remained static, declined or they had to take a lower paying job.
Regarding their assets, what happened was that during the decades of the 1980’s, 1990’s and the 2000’s, assets such as stocks, IRA’s and house values that were purchased during the 50’s and 60’s increased in value beyond anyone’s immagination. For example, a four bedroom home purchased in 1954 in a good neighborhood for $20,000 would probably have increased in value to about $140,000 by 2004 with normal inflation, but it turned out to be worth about $ 240,000 or $ 100,000 more.
Then came the financial crash of 2008. It wiped out these reserves overnight. The Dow Industrial Index fell from 14,000 to 7,000. Pensions based on IRA’s and 401ks owned by the middle class collapsed in front of the eyes. Home values declined to the point where the mortgage was often greater than the market value.
To summarize, the extraordinary level that wages of US manufacturing jobs reached during the three decades following WWII was a rare exception caused by the United States being essentially the only worldwide manufacturer left standing after the war. Then beginning about the end of the 1970’s, the US worldwide competitive position began a thirty year decline caused by a shift of jobs to oversea competitors. The problem has been exacerbated by the recent advent of the digital revolution which has eliminated even more jobs than overseas competition, and worse, it makes the workers unable to reenter the job market because the machines have replaced them or they lack the skills that are required to manage the machines. Basically, this means that our present workers, and this includes recent graduates, need to require new skills to compete globally. This is true no matter whether the field is manufacturing, education, health, book printing and publishing, ordinary business or the wide array of intellectual tasks. So, whether globalization and the digital revolution are good or bad, it must be recognized and fully understood that: “They are here, and they won’t go away!!
We can get through this, but we must avoid a war between the classes. Time itself will correct some of the problem because there are 80 million “baby boomers” that are becoming eligible for retirement and only 40 million of the next generation to take their places. The next phase therefore will be a shortage of workers. There already is a shortage of workers in the so-called fields of STEM (science, technology, engineering and math). Some workers can be retrained to fill these jobs, and we need to encourage college bound students to select majors in these fields. This especially includes females who make up to 60% of our college graduates.
However, there are steps that can be taken now to help those in the middle class who are most affected by the technology changes. The best example of a major one is to get on with the task of developing our own energy sources and stop buying oil from the Middle East. Conversion of our vast natural gas resources to replace gasoline, for example, would create millions of jobs without the middle class having to learn new skills. An ancillary benefit is that the price of natural gas produced in the United States need not be tied to what happens to the world price of oil.
To accomplish this, we must have strong leadership in our government positions, and we must insist that our political, media and educational personnel demonstrate that they understand and can communicate the true cause of what has happened to our middle class. This means that they must do what they can to help the middle class make the transition to the new global world in which we all live. If we continue to hear nothing from our leaders but class warfare talk, we will surely end up with riots in the streets.
It is despicable and unconscionable that political opportunists, including our President, would demagogue the problem the middle class faces by encouraging them to believe that the crash of 2008 was the fault of a conspiracy and that they are the victims. The President and his ilk continue this rabble rousing when they repeat the mantra that the “One percent are getting richer while the ninety nine percent of the population are getting poorer” with the implication that the one percent is causing the problem for the ninety percent. What is so outrageous and egregious is that their objective is a selfish one, namely to gain a political edge. This must be stopped!!
Our ideologue President and his know nothing entourage of czars are demonstrably proving they cannot do and maybe don’t want to do what needs to be done. There is only one answer: They must be removed from office!! This means that “We the People” must get out the Vote to remove Obama this November.
