Globalization and the New Economies

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If you’ve heard it once, you’ve heard it a thousand times: Globalization is here to stay and it’s killing middle class jobs.

It’s true, but it’s not the only factor that is hurting middle class job creation in the US right now.

In an article in Bloomberg, globalization—the shifting of middle class jobs over seas to lower wage nations—is a big factor why the middle class is having such a tough time. The rising level of factory automation is mentioned as another.

And there’s no arguing the point; both are true. In fact, the article notes that “Even with 5.2 million fewer Americans employed since January 2008, the US is turning out more goods and services than before the recession.”

I know what you’re thinking…how can that be?

Well, it’s true.

Technology threatens jobs…and adds others

Automation and robotics are replacing factory workers and it’s more common than you might think. If you’ve ever seen how cars are made today, you know it involves lots of robotics and fewer people than it did, say, even 20 years ago.

But it’s not just factory workers that are being replaced.

White-collar jobs are also being replaced by technology. Take tax preparation software, for example. For years I had my tax returns prepared by an accountant, but for the past three years, I’ve been using Turbo Tax to do them myself. I saved myself several hundred dollars per year.

Want another very basic example?

Remember Blockbuster Video stores? They’re a thing of the past.  Now you just order streaming videos through the Internet. No cashiers, no stockers, no managers, no building cleaners, truck drivers, etc. Technology replaced all of the jobs that used to be a part of the video rental business.

How about banking? I rarely see the inside of a bank; my wife handles cash transfers and some bill payments online. And when I need cash, I get it at an ATM or cash back from a purchase.

And of course, many plants and factories have been closing here and relocating to China and other parts of the Far East for decades because of lower labor costs. My shirts are made in Cambodia, my running shoes in Malaysia, my computer in China, and on and on it goes.

So where has the economy added jobs? At the very top and the very bottom. The Bloomberg article points out that higher paying managerial and white-collar jobs have grown by about 2 million…

Low wage service jobs by 1.5 million. So some jobs have come back, but they’re at either end of the bell curve. What’s missing?

The return of middle class jobs.

In fact, 95% of job losses in the recession were in the middle class. Jobs like bank tellers and accountants--(gulp)--I do feel a little guilty…

And the thing is, automation and technology will not stop. If anything, its presence and impact will grow in our economy. Some experts even predict that its disruption to the labor force will be greater in the next 10 years than it has been in the last 10 years. I don’t doubt that it will.

Does this mean that the middle class is going the way of the dodo bird, the dinosaurs and constitutional democracy?

It certainly doesn’t have to mean that...

Americans adapt...if allowed to

People are smart. They adapt. They think of new ways around new problems. This is especially true when they are allowed to be creative and innovative. And of course, people are most creative and innovative when they are the freest. This is a simple calculus, but not simplistic.

People are freest when they are taxed and regulated the least. That is why the heavy taxation and regulations favored by statists of all stripes around the world yield the lowest in human output and creativity.

It may sound like a cliché, but the phrase “good old American know-how” didn’t come about in a vacuum. Americans innovated and created so many path breaking products and inventions in the past couple of centuries because they lived in a culture that allowed and rewarded the same.

The biggest threat to the middle class in this country is neither globalization nor technological advancement. We can make the adjustments to those changes…if we’re allowed to.

You see, the economic and political culture of America is the key to allowing and incentivizing Americans to create and find new ways of solving problems. The big deal today isn’t that the world is changing…

Change is the one constant in this world.

A political culture of dependency

The biggest problem I see is the change in the American political and economic culture itself. The spirit and confidence of Americans themselves has slowly but steadily been replaced by the misplaced confidence and hope in federal programs, political parties, and, in the case of the President himself, personalities.

As I have said in The Gorrie Details many times before, the huge federal intrusion into the economy and into people’s lives that has accelerated under the current leadership—including targeting the energy sector for extinction—will not lead to recovery in the middle class, but rather, its extinction as well.

A culture of dependence and group think is the biggest threat to our economic vitality, not the changes we see in technology. As for globalization, that dynamic is already changing in our favor…BMW and Toyota certainly have no problems producing cars here profitably; just union-heavy GM.

Look, the rules and forces affecting economies change; that has always been the case. However, the ability of Americans to find news ways to succeed has also been a constant in our history. The source of that creativity and problem solving never came from a government program or a union hall, but from individual efforts.

Self-reliance has been the hallmark of US productivity and ingenuity; being told what to do, how to do it, and then saying "thank you" for the bone you're thrown has never cut it America...

Using the current changes in the world as a reason to tax and regulate the nation into economic dependency and creative mediocrity is not the solution.

And those are…The Gorrie Details.

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