There is much political rhetoric about the collapse of the middle class of the United States and what needs to be done to restore it. To understand how to deal with this, we must ask: What makes up the Middle Class, and has all of it collapsed?
Most of us believe that there are three classes: the Rich, the Middle Class and the Poor. The rich and the poor are clear enough, but the middle class is a bit more complex. Perhaps we should call it the laboring class.
There are three categories of labor; Agrigiculture, Service and Industry. The Industry group, which includes manufacturing, began with the Industrial Revolution, and the workers needed for it came from those working in Agriculture. Massive amounts of farm labor have migrated to the factories ever since so that today only a very small percent of the population is employed in farming.
Beginning with the Industrial Revolution in the early 1800's, manufacturing grew continuously for about one hundred years right up to the Depression of the 1930’s. Then it fell significantly and remained flat for that decade until after WWII, when manufacturing grew and continued robust growth for the next three decades until about 1980. After that it began to fall and has continued to fall ever since. So, what happened?
Here is what happened. During WWII, Germany destroyed most of England’s manufacturing, and the US destroyed the manufacturing capability of Germany and Japan. Consequently, when the war ended, the US was the only viable manufacturer that could supply the worldwide demand for consumer products such as automobiles, appliances, clothing and other goods. This explains the rapid rise of the industry curve beginning about 1950, and this growth continued until Japan and Germany, with US government help, were able to compete again. At this same time, China decided to become a worldwide capitalistic manufacturer. Consequently, by the 1980’s the United States manufacturers had great difficulty competing with low labor cost foreign manufacturers in products from shoes, to clothes to appliances to automobiles and especially to electronic products of all types. To stay in business many US producers closed their US factories and moved manufacturing to these low labor cost countries. The trend continues to this day.
During this halcyon period of the US domination of world manufacturing, US labor found that it could demand high wages and benefits from employers such as GM, Ford and Chrysler by unions going on or threatening to go on strike. We recall how the unions struck GM one year, Ford the next and so forth. The employers in turn found they could raise prices to accommodate these demands. This virtually monopolistic position for US labor raised it from Lower Middle Class to an affluent Middle Class never seen before.
Now, for perspective, it is important to note that most of the professional, shopkeeper, trade and the other service jobs have not and will not be lost to foreign competition. They remain based in the US, and most of them are considered Middle Class.
In short, the collapse of the middle class the politicians and media are constantly haranguing about occurred in manufacturing because during a brief period after WWII the US had virtually a monopolistic position vis-à-vis foreign competition. This advantage lasted for about three decades, and then it disappeared. It was a nice time as long as it lasted. But it was a fluke!!
So, the question is: Can manufacturing jobs return to the US?
The answer is: A resounding YES!!!
Here is why!! It turns out that the United States has all the components required to bring manufacturing back to the America and thus recreate that unique phase of the Middle Class. In an earlier blog I described how General Electric discovered and is implementing this. The factors that favor the return are:
1.Low cost and huge supplies of fossil energy in the US due to fracking
2.High tech automation due to our lead in digital technology development
3.The high cost of transportation from China to the US due to rising oil prices
4.The need for rapid turn around of product changes demanded by customers
requires that marketing, engineering and manufacturing be in close proximity to each other.
How lucky can we get?
The really good news is that the new manufacturing jobs require higher skills and are thus higher paying than the old ones. If this were not enough reason to make this the Nation’s top priority, a healthy manufacturing economy would increase GDP growth which would beneficiate the entire working population.
So why is manufacturing not returning?
The main reason is that our current administration is deliberately blocking it!!! Here is what they are doing that stands in the way.
1.The US government makes it difficult to get drilling permits to expand the supply of fossil fuels which would keep energy prices low.
2.The EPA is unilaterally planning a 30% surcharge on fossil fuel, despite Congress’s refusing to grant this, and all the while falsely claiming that carbon dioxide is a toxic substance despite the fact that without it there would be no life on earth.
3.US corporations pay the highest tax rate in the entire world. With little hope for any change in this policy, numerous corporations are not expanding in fact several moving their headquarters overseas.
From their words and deeds we all know that Obama and the progressives believe that Climate Change should be given the priority over job creation.
If that is the case, then let’s be honest!
They are sacrificing the Middle Class to save the Climate!!
What this country needs immediately are leaders who understand that the most important task before them is to rebuild the manufacturing segment of the middle class as soon as possible. It is clear that the government rules and laws are blocking it. For the citizenry to understand the importance of removing those restrictions, our leaders from both parties must speak unequivocally, clearly and with total and constant focus on the pressing need for, and unique opportunity we have presently to bring manufacturing back to the United States. American Business knows how to do it in an environmentally satisfactory way, and it can be made to happen soon. To accomplish do this we need to get government out of the way! Successes with this project will beneficiate everyone.
The mantra should be:
SAVE THE MIDDLE CLASS
RETURN MANUFACTURING
TO
AMERICA
