Thursday, November 27, 2008

Once Upon a Time (Before Globalization)

Once upon a time there was a big beautiful country with fertile farms that grew and raised almost everything their people ate and factories that made almost everything they needed including their processed food, their clothing, their furniture, their appliances and cars.

The farms needed many workers to tend and harvest the crops and look after the poultry, and cattle, and in the towns the factories needed semi-skilled and skilled workers for production, and workers with trade skills, engineers, clerks and accountants. There were many good jobs to choose from and people could select the job they were best suited for based on their aptitudes and education. And in these fields and factories if you were good enough you could advance to become lead hands, foremen and even the general manager. With passing years as these companies grew and prospered workers, often with the help of unions, were able to gain a share of this wealth with better wages, retirement benefits and health coverage. As the years past and the businesses grew the workers and people benefited and became increasingly secure and satisfied with their lives and committed to where they worked.

Then one day the owners of these businesses got the bright idea that if they shipped all this work far away to countries where people would work for much less and without benefits and where there were no laws governing working conditions, or hours worked, their companies and its owners could earn much more money. No longer would they have to put up with unions and the wage demands of their workers. And the politicians agreed with this and used terms like free trade and globalization to glorify it.

And now with cheap foreign labour the profits of businesses greatly increased and the owners and their bankers greatly prospered. The population of multimillionaires and billionaires increased like dandelions in an unattended field and the result was an unparalleled demand for the things great wealth could buy such as giant yachts, aircraft, toy girls and boys, and many mansions.

The manufacturing plants were now closed, their workers gone and the life in the towns was greatly changed as the plants became silent shells. Many of the workers who were let go were fortunate to find work in the great shopping areas outside the towns where there were vast shopping plazas and box stores selling food and goods from far away countries. The problem was that the work paid far less than what they had been earning before but with two or more family members working long hours and with fewer benefits and belt tightening life carried on. For those who were unable to find work, food stamps kept them from starving

Governments don't like belt tightening because people spend less and this isn't good for the economy. The solution was reducing interest rates and encouraging lenders to offer easy credit terms: no credit check required, nothing down and next to nothing to pay for the first two years. That enabled people on small incomes to start buying again with borrowed money. This money felt just the same as additional tax free income. They bought houses, put big cars in the garage, or in the driveway for the neighbours to see, and filled their houses with the things they always wanted. With all this buying, housing prices continued to rise and the people were borrowing even more against this, and so it went for many years. People came to believe that a good life living off credit would always be this way as they continued to borrow to finance their new life. So the policy worked for a while. Flat or declining earnings for workers but lots of easy money on credit to keep them buying. There was lots of money going around so the community and everyone benefited.

Then one day the loan payments started to come due and many discovered that they didn't have the money and in desperation began walking away from their homes and the many things they had bought on credit. This caused housing prices to start declining rather than growing so people couldn't borrow anymore to meet their obligations. Then everything began to collapse. The banks faced billions in unpaid debts, business performance declined because fewer people were buying, many businesses failed and millions of people became unemployed.

The government, like Mary Mapes Dodge's Little Dutch Boy, kept plugging the holes as best they could with pots of money but unlike the Dutch Boy they didn't succeed because all those good paying jobs on the assembly lines were gone and along with them many of the research, engineering and skilled service jobs. The obvious had happened; without these jobs the country had lost its buying power and the housing bubble couldn't be blown up again.

This formerly great country subsequently went into an economic decline for many years, faced political turmoil, and faded away as an industrial power.

But many years later this  story has a happy ending. The far away countries became very rich and their people prospered. Then one day the owners of their businesses got the same bright idea that if they shipped all this work far away to a country where people would work for much less and without benefits and where there were no laws governing working conditions, minimum wages or hours worked, their companies could earn much more money . No longer would they have to put up with unions and the wage demands of their workers. And the politicians agreed with this and used terms like free trade and globalization to glorify it.

And so, the work came back again to that now poor, but once big beautiful country, and the cycle started all over again.

3 comments:

Firefem said...

Well, I have to disagree with the "happy ending" because the cycle started all over again (sounds like someone's been watching too many American movies that always have happy endings). I'd like to think that our economic downturn has inspired people to closely examine their lives to see if they can make any changes to improve their outcome so that the cycle NEVER happens again. But, I too, am wishfully thinking that other Americans will wake up to their plight and really do something about it. Until that time, we are doomed to repeat history.

Unfortunately, the only "thing" America manufactures anymore is war and it's supporting instruments to carry it out. Recruiting in America has hit an all time low with sending preteens to military boot camps and promoting military style training to high school students in the guise of "leadership training". Appalling at best, but the uninformed eat it all up.

I loathe Fleet Week and the flying antics of our Blue Angels. Glorifying war is all they know.

Looks like we haven't evolved very far since we've been on earth.
Laila

Unknown said...

"Fairy Tales" or "Once upon a Time" have to have happy endings.

The reality is that the way out will require a revolutionary change in American values. Too many share a visceral rejection of the role of the nation state in guiding values and regulating policies. It's resulted in uncontrolled rogue capitalism being turned loose on the world. It's all about greed and the pursuit of oligarchic wealth.

Well the system is badly, and maybe mortally, wounded now and several billion people are suffering the consequences.

Throwing the public's money at these rogues won't solve anything. The system and it's underlying values are corrupt. I have said for many years that the Republican dream is a Latin American society where an unregulated oligarchy own it all while surrounded by poverty. Its a perversion of what we mean by "freedom"

Karl Marx and Lenin had it wrong and so did Milton Friedman and his Chicago School. There will be no happy ending if Americans are unable to find a middle ground incorporating some socialist values and a firmer government hand in directing the nation - such as we see in Northern European countries. We can't continue to let corporations set our national goals.

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