The American middle class was built on factory jobs but that’s over, finished. It cannot be rebuilt on factory jobs because the kind of factory job it was built on practically doesn’t exist anymore and when it does, it’s being done by low wage, workers in Asia and India. That does not mean that we cannot replicate those jobs in a different model. Most factory jobs are now done by workers who can operate a series of robotic elements to achieve the same goal that was once achieved by a group of laborers, each doing a single part of the job.
What does this mean? Simple, fewer jobs, jobs which require more evolved skills, skills which, at least so far, are not available in Asia & India, but which, despite that fact, we are not preparing our own workers to do.
Okay you say, so we fill those jobs but what happens to the rest of the guys who were on the assembly line doing the jobs that the robots are doing now? Well some of them will just age out of the job market but the younger ones must be retrained to do other jobs, jobs that will come from America’s great economic strength, innovation. But in order for that entire scenario to materialize we must get on board with education. Without it none of this will happen. We must educate our innovators as well as our 21st Century work force. We must welcome immigrant students into the work force instead of sending them back where they came from where they will use their American acquired skills to out-design our innovators and undercut our labor force.
There has been a lot of legitimate talk about infrastructure investments and how they are the solution to the jobs crisis. There has been just as much talk about pork belly spending and bridges to nowhere. The danger is that the worries about wasting a Stimulus package, ( the first one was not wasted, it was a success) will kill attempts to get the second surge of infrastructure building underway. The key is making the right decisions as to which projects to pursue and which to abandon.
Michael Grunwald has a fascinating essay called Street Smarts in the 9/30 issue of Time, in which, he describes some of the many innovations in infrastructure rebuilding that are being carried out in Philadelphia by Mayor Michael Nutter where using storm barrels, porous roads, basketball courts and parking lots to absorb water instead of letting it run off into the sewer system is going to save the city about $7 billion bucks by not having to replace the currently overloaded sewer system.
Another plan that is being explored is to force industry to supplement public works when those public works directly advance the industry’s means of doing business and therefore its profitability. A perfect example is America’s electric grid which is currently an outmoded analog network living in a digital world. Much of the existing technology is over a century old. Sure, everyone uses the grid, but the electric industry makes its principle income from it, therefore it behooves the electric industry to rebuild it. Forcing the government to fix it would be a waste infrastructure dollars and this is exactly the kind of commercial, non-governmental project that big business should be financing with the dollars they are currently hoarding.
Grunwald points out that in Louisiana the flood retention walls that were fronted by wetlands survived the onslaught of Hurricane Katrina whereas those that weren’t fronted by wetlands, but by rivers and bays collapsed. Despite this knowledge, Louisiana’s brain dead governor, Bobby Jindal and the Army Corp of Engineers are still pushing costly and disastrous levee plans that will only fail again. It is this kind of half-witted approach to the job of retrofitting the nation that will kill the whole program if not eliminated. The levees are Jindal’s bridge to nowhere, pulling tax dollars into his state for infrastructure work that is entirely wasted.
There are more than 4,000 structurally deficient dams in the country. The ASCE estimates it will cost about $12 billion to fix them. But most of them are no longer serving the purpose for which they were erected and in most cases it would be better and cheaper to tear them down and restore the rivers and fisheries that have been ruined by them. They all don’t need to go but most of them, a quick departure would be a blessing for the ecology and a boost for the budget.
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Bernie Saunders, (I-Vt) has laid out a series of concepts for reorganization of the government and the financial sector that seem to be more sensible and farsighted then anything so far proposed by anyone else.
1-Anything too big to fail is too big to exist. The six largest banks have assets equal to 60% of GDP. The four largest issue two thirds of all credit cards, half of all mortgages and 40% of all bank deposits. They must be broken up into investment banks and commercial banks and depositors should remove their money and redeposit it in small local banks and credit unions or the new commercial only banks.
2-Credit card interest rates must be capped. Credit card companies all of whom charge 25% to 30% interest are involved in extortion and loan-sharking on a major scale, not banking.
3- The Federal Reserve needs to provide small American business with the same low-interest loans they made to foreign banks. This would provide jobs here instead of in Saudi Arabia, Japan, Korea and Germany.
4-We must stop oil speculators from artificially manipulating gas and oil prices. According to Delta Airlines, Exxon Mobile and the American Trucking Association, Wall Street speculators, playing in oil futures are driving up oil prices as much as 40%.
5- We must demand that Wall Street invest in job-creating enterprises instead of gambling on worthless derivatives. Right now we have a Wall Street that rewards brokers and CEOs for bets they make on exotic financial instruments that no one, including themselves, understands. What we need is a Wall Street that provides financial services to small businesses and manufacturers who create decent paying jobs and grow the economy by productive means.
6-Establish a tax on credit default swaps, derivatives, stock options and futures. These kinds of financial mumbo jumbo are what caused the crash. They are almost completely non-productive. They create paper money instead of products and jobs and they are in the forefront of the problems that caused the crash. The only people who profit from this kind of financial slight of hand are the brokers who sell them. Okay, if they’re making a profit they should be taxed on it, first by a transaction tax on every single sale. From 1914 until 1966 we had just such a tax, The Revenue Act of 1914 that imposed a 0.2% tax on all sales or transfers of stock. Congress doubled it in 1932 and it helped finance the government during the depression. England has a financial transaction tax today.
None of this will be easy. Wall Street blew over $5 billion between 1998 and 2008 to weaken regulation over the financial sector and look what it got us. They have spent hundreds of millions more to try to weaken the Dodd-Frank bill when what we really need is the repositioning of the much stronger Glass-Steagall bill. They will try to tell us that legislation is hurting the financial industry but what it is really doing is keeping the financial sector from destroying what they haven’t already destroyed of our great country.
Strangely enough, the way back may be led by the enlightened rich. Warren Buffet has called for higher taxes on the rich, as have 16 of France’s richest individuals, Italian magnet Luca di Montezemolo and about 50 of Germany’s richest people. These are not necessarily warm and cuddly individuals with hearts breaking for the poor. These are intelligent billionaires who understand that their continued prosperity is based on the entire economies of their countries improving. They also understand that for those economies to improve, there must be a consumer base and that, that base will not exist if we cut back on taxes for the rich and trim the deficit without somehow creating jobs. Cutting back on taxes and trimming the deficit will kill jobs just as it always has. I guess when you’re very rich you have time to read history.
There are two principle reasons for the current demise of the middle class in this country. One of them, deregulation of the financial sector, which, also led to the loosening of credit card controls can only be fixed by legislation, of which Dodd-Frank is only the tip of the iceberg. If the banks are forced to act like banks instead of casinos, they may have a chance to return to their ways of service to the public instead of their recent guise as croupiers.
The other, strangely enough, is the thing that always made America a leader in most phases of worldly competition, innovation. Yes, innovation has been one of the major causes of middle class decline because it has been through innovation and the education that leads to it, that American business has been able to replace costly labor with robotics. Whereas it once took eighteen men to assemble a car at the Ford plant in Dearborn, Michigan, it now takes three plus, the half-dozen robots that they run. The first problem with that situation is the fifteen men who are out of work, The second problem is that the three men who are now working aren’t laborers or mechanics but computer or robotic experts so of the former eighteen workers all are actually out of work as none were equipped, skill wise, to do any of the new work.
New technologies, container ships, satellite communications, computers and the Internet have changed the face of the workplace. That’s the bad news. The good news is that they can also lead to the kind of innovation that will create new jobs and put America back on top of the economic mountain. The key, however, is education. The lack of it in the proper fields has led us down into this valley and now we have to ramp up our efforts and give our people the knowledge that will enable them to compete with the already educated and much lower paid competition from China, India, Eastern Europe and soon, even Africa.
So what’s the answer? Haven’t you been paying attention? Education. At all levels. Get the kids interested in science and technology early, make those areas attractive to the high school and college kids and offer adult courses to retrain those whose jobs no longer exist. Sure it costs money. That’s what money is for.