Heard of an interesting study...

[johnpalmer]

...and I'm not trying to be scientific or anything, but some social scientists have been measuring what happens when economic opportunity leaves a place, and they find broken families and drug use and increases in crime and, well, basically, all of the things people use to blame black people for causing their own problems.

So, go figure. Human beings who are robbed of economic activity aren't the perfect "Leave It To Beaver" families imagined earlier.

And it's come full circle. I saw a conservative rag attacking these people for having these problems. And I couldn't help but wonder if there's some added anger, at the thought that they're acting like "those people".

I also had the ugly thought that some of these folks may have been staunch "conservatives" and yet liberal folks still have to fight to try to make their lives better. And if it worked well, in one location, they might go right on back to hating "those people" and scorning folks who have problems with broken families and drug use and crime... something about "no good deed goes unpunished" comes to mind.

But I've also been pondering. Do you know, since NAFTA was signed, Mexico's done a lot more manufacturing? But their GDP per capita hasn't really risen. Someone's making money - but it's not spreading to the people. How does a nation advance, these days?

That's a more important question than it might seem, because the next question could well be "how do we bounce back?"

Comments

[dubhain]

This is a subject that I view through something of a narrow lens, because NAFTA pretty much put the final nails in the coffin holding my home town of Flint, Michigan.

So far as the U. S. auto industry goes, production had been moving to Mexico even before NAFTA was signed. The first wave of lay-offs and job eliminations began as early as the mid-1980s. The shift in production gutted Flint, as it largely gutted Detroit, and neither city has recovered since.

And of course Mexico's per capita income hasn't really risen. Once one starts exploiting third-world nations to provide cheap labor and a business environment free from all those pesky pollution and worker-safety regulations, there're plenty of other third-world nations to move production to, once the workers currently being exploited start getting uppity and wanting better wages and safety regulations and their governments start insisting upon regulating the amount of pollution one's company is pouring into their air, their water,and their land. GM workers in Mexico engaged in strikes as early as 1992, demanding things such as a 40-hour work week and two days per week off. They didn't get it, of course. They also wanted a wage increase. It seems that, surprisingly to many corporate executives, once an impoverished population starts to improve its lot, it realizes it's being exploited and starts to demand the same wages and benefits which are being paid workers in the areas production's been moved from. Go figure.

The problem is, of course, that there are more impoverished populations in the world, and given modern advances in shipping efficiency and lowering of costs, it's relatively easy to move production to countries which offer even cheaper labor and even less regulation. Once demands for higher wages and increased environmental regulation began in Mexico, GM began moving its production to China, where much of it exists today. Similarly, early I.T. offshoring moved services to Canada, the Caribbean and Ireland, until advances in technology made it even more profitable to move it from there to India, and now the best programming firms are said to be in Banglaore, as judged by CMM Level 5 Certification. So long as production may be moved, once the locals get 'uppity' and begin demanding higher wages and better treatment, not to mention their governments demanding stricter environmental regulations, per capita wages aren't likely to advance past a certain point. There isn't much innovation or invention being done in these areas, after all. Rather entrepreneurship tends to be limited to forming companies which produce goods and provide services as close as possible to the way it's done in first world nations, simply reducing the cost per unit.

There's a similar game being played back in the U.S. of course: When companies keep production or services in the U.S. they tend to encourage localities to fight for the 'privilege' of 'earning' a new production site or service center. These municipalities compete by offering tax abatements, and even shouldering part or all of production and startup costs. The companies, in return, build factories, warehouses, and service centers which are designed to last only a few years, until the tax abatements expire, then either renew them under threat to move production elsewhere, or fail to renew them and actually move production elsewhere Ironically, this frequently leaves the area even more impoverished than it was before production was moved there, due to the fact that its tax base has only marginally increased, and has been more than offset by the increased cost of infrastructure services the municipality has had to construct and maintain in order to accommodate the manufacturing facility or service center and its workforce.

Some of the previously offshored jobs are returning, true. This is largely because the U.S. labor unions have been broken and production (and many services) can now be performed in the U.S. for minimum wage or wages not far above it. At least for GM and the U.S. auto industry, 'breaking the unions' has been a goal since the unions firmly established themselves in 1937. Ironically, this was in Flint, Michigan, as a result of the UAW's famous "sit-down strikes" of that year. What used to be called the 'Big Three' (GM, Ford, and Chrysler,) began their major, successful push to do so in 1979, but it was known to be something of a dream among their management to do so ever since '37. Oddly enough, now that the labor unions have been broken, and U.S. workers are becoming desperate to get any work they can in order to provide for themselves and their families, wages have dropped to the point where it's now sometimes considered profitable to bring back production and services to the U.S. Provided the local municipalities kick-in the expected tax abatements and shoulder a significant portion of the cost of doing so, of course.

Naturally, the press and business journals laud the fact that some production and services are returning from offshore. But the way it's happening isn't really a Good Thing™. What it means is that wages (and thus the standard of living) for people available and willing to perform these jobs have fallen so far (meaning that people are desperate enough to work for such drastically reduced wages) that it now makes more money for the corporation in question to pay a U.S. worker to work in relative poverty than to pay someone in an impoverished third-world nation to do the same job (once the cost of transportation of goods or infrastructure to provide services from afar is eliminated. Along with, as mentioned above, the tax breaks and financial contribution from the municipality in which they're newly sited.)

The problem with the practice of offshoring should be obvious: When jobs are moved offshore, more people are out of work, and can't earn income. If people have no income, they can't buy manufactured goods or services. So eventually the market for said goods and services is likely to dry-up and the companies will lose profitability. Sadly, although that was the case with offshoring to Mexico, GM at least is cashing-in with China. Due to China's ongoing flirtation with capitalism, the Chinese economy is booming, and there's an intense demand for automobiles from its emerging middle class. Much as there was with North America in the early 20th century. There's an amusing story regarding the reason the Buick marque still exists as a GM trademark, rather than being axed along with Oldsmobile and Pontiac — GM's original idea was, basically, to have "Cheap car" and "Luxury Car" brands only (Chevrolet and Cadillac, respectively.) The Chinese still recall, believe it or not, that their last Emperor had a Buick, which was renowned as being very reliable. Therefore, China still views Buick as a reliable car (much as Americans did in the 20th century, for much of which Buick was known as 'A Doctor's car' because of its reputation for reliability — before production was standardized across GM and Buick engines were afterward built as GM engines, sourced from any of several generic GM engine plants.) Basically, GM found that Chevys and Cadillacs, being lesser-known brands in China, don't sell well, they kept Buick alive, and cars that are branded as Chevys and Cadillacs tend to be Buicks in China. Of course, they had to keep Buick alive in the U.S, too, or risk the Buicks sold in China being viewed as not true Buicks. That's how invested in the Chinese market GM is today. It drives the shape and the structure of their product line back 'home' in the United States.

The practical upshot of this is that, given the at-least-until-recently booming economy of China and the growing economies of other nations such as — to a lesser extent — India, U.S. corporations don't necessarily have to worry about increasingly impoverished North Americans not being able to afford their goods and services anymore. Many formerly U.S. corporations, even if still formerly headquartered in the U.S. are now truly global in scope, and rely less and less upon the U.S. economy as the primary source of their income. As purchasing power in the U.S. wanes, they turn to the waxing economies and incomes of the Chinese and other nationalities. And all this results in a net impoverishment of all the nations involved, save for the upper echelons of the global (what used to be called 'trans-national' corporations and (to a somewhat lesser extent) their major stockholders. Which, of course, is increasingly beneficial to the corporations and their upper management.

So...yeah. The problem isn't simply "How do we get production and services to return to the U.S." but "How do we not only get production to return, but how do we get it back and have it provide not only a 'living wage' but the increased wages which allowed the U.S. worker to improve her or her life to the extent that what used to be called the modern "American Dream" lauded?" Our culture holds the (increasingly remote) notion that it should be possible to better one's life through the application of hard work and increased education. But this simply isn't possible when wages are forced lower and lower due to the increasingly prevalent cycle of offshoring jobs in order to cut wages, then, once the wages are lowered and people back home are desperate, bringing them back at sub-livable or barely-livable rates. Especially with the corresponding rise in college tuition rates throughout the U.S. We're fast approaching a scenario in which young people go into hock for huge amounts of money in student loans, only to spend the rest of their lives paying said loans back because the high-wage jobs they hoped to get simply don't exist in the U.S. anymore or are now paying subsistence wages or even less. All the while, of course, being harangued by the folks who haven't yet fallen prey to this effect that the only reason they're unable to 'get ahead' is because they're either lazy or stupid. (To quote a party to a recent conversation I had in a hot tub: "I'm not prejudiced! I just hate poor people!") If this trend continues, the economy of the U.S. will eventually suffer collapse. But by then the corporations who've gone beyond trans-national to global in scope will in all likelihood not need to worry overmuch about that. They'll still be profitable overseas, and so long as their upper echelons remain rich and their stockholders get at least a certain return on their investment, they'll consider the state of the U.S. economy — and the U.S. worker — irrelevant.

(Apologies for going on so long, here, in response to your post. But having seen what's happened in Flint and Detroit, not to mention much of the rest of the Rust Belt, it's something of a dear subject to me.)

[wcg.livejournal.com]

That's a good question. If the current market model of economics has failed -- and if it's not providing a significant majority with economic opportunity than it has -- we're on the cusp of a change in political organization of states as great as any we humans have experienced since the Renaissance and the subsequent end of the age of feudalism. Whatever comes next isn't going to be communism, but may be some kind of socialism with managed economies. China was making progress on that front for a while, but is right now having problems with bureaucrats who aren't the enlightened Confucians needed to intelligently manage a large and dynamic state.

Or heck, we might get something like Neal Stephenson's claves.

[johnpalmer.livejournal.com]

I do think we're hitting what I think of as the Star Trek limit. There's a lot of manufacturing moving back to the US, I've heard - but it's not providing a lot of jobs or economic growth.

And with 3D printing and ever-smarter robotics, manufacturing is going to become smaller and smaller.

I heard it said that there was a time when 30% of the population of the US worked in food production, at least part time. And now, with factory farming methods, it's down to a tiny percentage - maybe 5%.

Standard economics says "that's *twenty five percent* of the population freed up to pursue other economic activity!" and there was a time when that was true. That would be more people to work in factories to produce goods... but now the factories don't need as many people to work there, either. And new services aren't growing so fast as to soak up the rest.

So what do ordinary people do?

People need to work - they need to feel useful. (And for those who don't fit the general rule, well, people whine about welfare, but you know something? As long as a person making minimum wage is substantially better off than a person on welfare, I'd rather pay those who don't want to work to stay the heck out of the workplace and not take up a space that someone interested and ambitious could have had!)

I'm reminded a bit of Vonnegut's Player Piano (which I read far too many years ago to remember well) but I remember that after the revolution, people were starting to feel good being able to do a bit of work on their own again - but what they were doing was rebuilding the automatons providing all the goods and services. Which points out the difficulty of the questions, I suppose.

One thing that might help temporarily is a huge carbon tax. It's artificially cheap to ship automobiles and refrigerators and washing machines - maybe we'd be better off if we made it so expensive they had to be built close to home. But that's a temporary fix; technology will overwhelm that, too.

I do hope you're right - socialism at some level is what I think we need. Properly managed, it can make almost everyone better off with minimal pain for the most wealthy now. And honestly, I'm not going to shed any tears if the uber-wealthy feel their children will be worse off (but still filthy rich), if the remaining 99.5% all know their children will be as well, or better off.