The Costs of "Creative Destruction": Wendell Berry vs. Gene Sperling
THE COSTS OF “CREATIVE DESTRUCTION”:
WENDELL BERRY VS. GENE SPERLING
May 29, 2012
This is the first posting I have sent out since December of 2011, when I said that without my readers’ financial support, I would not be able to continue. That is still very much the situation. Be that as it may, I want to assure you that every last ounce of energy, heart and soul still in my possession has gone into this work, what I found, and what it says about our society, its politics, and the political economy we all live under. So I invite you along for the journey.
Ironically, it began as a letter to the Chairman of a very modern company, Joe Rothstein, of EIN News, who I happened to exchange comments with when I attended a conference at the end of March, 2012 on the possible “Renaissance of American Manufacturing.” Originally, I had intended it as a commentary on what we heard from the speakers that day, March 27th, at the National Press Club, especially Gene Sperling, the Director of the National Economic Council, but also as a possible job inquiry – although the more I learned about Joe’s company, that seemed unlikely, as you will see below.
But I also realized as I thought more about Sperling’s speech, that he was revising the very economic history that I had lived through and seen firsthand with my own eyes since graduating from college in 1972. Sperling was defending, and celebrating, the core processes of our economy - its “creative destruction,” competitiveness, technological innovations and resulting increases in productivity - a productivity, he claimed, which did not come at the expense of jobs, even industrial ones. In his economic vocabulary, “automation” is not a word to be feared – in fact, it rarely is used today. Back in March of 1963, however, it was such a worry that some the nation’s leading scientists, economists and academics, led by J. Robert Oppenheimer, who then headed the Institute for Advanced Studies at Princeton, took out a full page ad in the New York Times calling for a national dialogue about the dangers. And one of the chief dangers was from “cybernetics,” the new computer driven technologies, including “automated self-regulating machines.” As Jeremy Rifkin tells the story, the authors of the Times’ ad worried that it would result “in a system of almost unlimited productive capacity which requires progressively less human labor.” Not a bad insight for 1963.
So as I began to revisit the history of deindustrialization since the 1970’s, it also occurred to me that I was actually engaged in an exercise of “alternative” accounting, assessing what I felt that Sperling had left out with his very different methodology, and values: its human, community and environmental costs. There were benefits, no doubt, that came with the creative destructions; everyone can see them in the products and new technologies that we are immersed in, but we are now in a period so fraught with both the environmental and human costs – and yes, economic ones too, especially “surplus workers,” that to me the moment was ripe for a grand re-assessment.
It was Sperling’s statement, though, that in the decades which we think of as witnessing our deindustrialization, from 1965-1999, the nation had a fairly steady component of about 17.3 million manufacturing jobs that was so upsetting. For someone who had seen the factory shells and crumbling walls of manufacturing districts in Philadelphia, Camden and Newark close up, and had worked as a social worker in old industrial Trenton, NJ during the 1970’s, this was an astounding claim. Once again, just as I felt when I came of political age during the Vietnam War, I was at odds in a great “accounting dispute” over “costs” with the nation’s best and brightest. How could this economist who had served in Democratic administrations, advance such a blasé base line on manufacturing jobs, for the very years when a key part of that party’s base, organized labor, and the working class, were being evicted from middle class Main Street?
Sure, he was saying that now, finally, he and many other economists understood how important it was for a nation to keep its manufacturing base at home, and keep it alongside the Research and Development departments for mutual collaboration and invention. But who was it, in the first place, other than our own best and brightest corporate leaders and professional economists, who had sent the industrial jobs to Mexico, then to Taiwan, then to China, pleading “the natural evolution of capitalism,” the “inevitable” shift to the service economy, and the “shareholder value uber alles” driven rise of Wall Street finance; who thought it was an especially good idea, like hostile takeovers and mergers and acquisitions, all part of globalization and glorious creative destruction? In their view, despite the detailed historical evidence compiled by Kevin Phillips to the contrary, this was not going to be a repeat of the decline of Spain, Holland and Great Britain, which also had outgrown the earlier habits of making things themselves and shifted to finance - and never recovered.
I was close to finishing this more comprehensive “accounting project,” when I came across a brief summary of Wendell Berry’s Jefferson Lecture in the New York Times of April 24, 2012, written by the Time’s Food Editor, Mark Bittman, and simply entitled “Wendell Berry, American Hero.” Berry had been awarded “the highest honor the federal government has for ‘distinguished intellectual achievement’ in the humanities”: the delivery of the Jefferson Lecture, which he gave at the Kennedy Center in Washington, DC on Monday, April 23.
The talk had a striking title - It All Turns on Affection – which surely must have been a revelation, and a surprise, to the Washington Establishment gathered there, whom I am certain hold very different ideas about what “it all turns upon.” Wendell Berry was not a new name to me; I thought I had a pretty good sense of what he was about, having labored for many years in the environmental vineyards myself. But here was the Times’ food editor telling me that the speech was about “the costs of capitalism’s abuse of humans and land.” Bittman said Berry spoke about the “‘indifference of a grinder to what it grinds,’” and that “‘the two great aims of industrialism – replacement of people by technology and concentration of wealth into the hands of a small plutocracy – seem close to fulfillment.’” Now we were getting a little closer to what Washington, DC is all about. After reading this, I raced to get my eyes on that full Jefferson Lecture, realizing that even though Berry and I seemed light years apart in place, temperament and inclinations, we had really been working on very much the same large “accounting” project – confirmed even more so when I saw that he referred to “creative destruction” and “‘the collateral damages of an inhuman rate of technological change’” in his courageous speech.
And yet, in the weeks after he gave it, I would repeatedly Google the words “Reaction to Berry’s Jefferson Lecture, 2012,” and find out that American commentators, with very few exceptions, had not reported the Lecture at all, much less rendered assessments of it. In the Washington Post and the Washington Times, I found nary a word, nothing.
This gave me additional courage to do what I felt I had to do in this essay. If a nation can bestow such a high honor upon a person like Wendell Berry, and then totally ignore what he had to say – which was profound, right out of our own Classical-Christian heritage in his invocation of necessary limits and restraints – and spoken face-to-face with those who most needed to hear it – then I had nothing to lose and an even better understanding of wh
y our leaders cannot and will not conduct a genuine dialogue with our people, even at this late hour.
Without a change of values, Berry told them, “without this informed, practical, and practiced affection, the nation and its economy will conquer and destroy the country.” That was so close to my own writings about Karl Polanyi’s work from 1944, and my own essay from July 2, 20111, The Logic of Market Utopianism: When ‘Business Turns Bad for Society and the one that followed, When Market Man Consigns the Common Man to the Dustbin of History, that I just had to press on and complete the work which follows.
If you are anxious to get to the section on Wendell Berry’s speech and how I place him against the history of the Southern Agrarians, then the New Deal, especially the history of its agricultural programs, including the experimental communities, and today’s co-operative movements, then just hop ahead to page 36. (Part II)
The concluding section of the essay is an assessment of where the fragmented left stands today in relation to the Democratic Party, President Obama, and the left of the 1930’s, which faced similar economic times, but in a vastly different cultural era, one not laboring under the deep shadows of cultural “postmodernism.” The many-sided conversation about scarcity – now austerity – amidst capitalism’s unmarketable abundance is still with us from the 1930’s. But that great abundance is still not under democratic or social control, nor are the shrinking number of jobs; it is under the control of a business class that says they will maintain their control, and that of the political system as well, at all costs, even if it means altering the planet’s climate. And now we have something new, green “austerity,” which says that all the complex processes and assumptions that go into producing that abundance must be changed, and its scale and values as well. And time for doing that is running out.
Good luck to us all,
Readers who like this essay and who would like to make a $ contribution can send a check to William R. Neil, 2008 Gainsboro Road, Rockville, MD 20851.
PART I: The Hidden History of Deindustrialization
Dear Joe Rothstein:
It was a pleasure to be seated next to you at the National Press Club for the Renaissance of Manufacturing conference, way back on March 27th. I had intended to write just a brief commentary on what we heard there, and what Gene Sperling, President Obama’s Director of the National Economic Council said, but the more I thought about his speech, the more troubled I became.
Since I wasn’t familiar with your firm, EIN News – always a little embarrassing when someone tells you they’re the “Chairman,” but you’ve never heard of the company - I did some searching to fill myself in. I think I get the general idea: a sophisticated IT driven version of the former “news clipping business,” with a vast range of sources – was it 7,000? I’m trying to imagine those clippers keeping up with that vast library of news sources. And you’re doing this, worldwide with what – just 20-30 employees? In the “old days,” a phrase you don’t hear much anymore, because we’re busy accelerating past them, it would have taken hundreds of workers to do what you’re doing. That’s what high tech can do today, and I understand you’ve got some impressive proprietary software which makes it all possible. Now don’t take this the wrong way Joe, but I wondered, as I worked on what turned out to be the essay which follows, whether that made you a job creator, or job destroyer? Perhaps a bit of both. I think I know what Gene Sperling would say. In further searching though, the bio and personnel info seemed scarce and maybe even a bit opaque. I did see, however, from some other searches, your background in political consulting, and work on behalf of progressive Democratic candidates, so that helped a bit.
What I did learn set me to thinking about EIN’s methodology, curious as to how much “interpretation” your firm might supply along with the news, if any. I wondered about that for a couple of reasons. I have to confess, in some ways what I’ve been doing for the past four years, on a monthly or bi-monthly basis, sometimes more frequently, is a variation on what you are doing, with a different methodology and no special IT software: to follow the economic news and then supply my interpretation, backed up by my readings in economic history and theories. And I’m a news clipper in the same old way that I recall I.F. Stone did it: folders and piles by topic, to reach back into when I suspect the current stories are leaving something out. As they often are.
I was also curious to see if you were able to pick up the “warning signs” in 2005-2007 from a world where 99.9% of the journalists and about the same percentage of economists didn’t have a clue what was coming, including Gene Sperling. Mr. Sperling’s last book, which appeared in 2005, The Pro-Growth Progressive, had no entries for derivatives, mortgage backed securities, or Wall Street. It did have lots of references to Robert Rubin and Larry Summers, though, and “fiscal discipline” and “saving,” to give you an idea what else was on his mind besides the mandatory attention to growth. To be fair to Mr. Sperling, he did see the importance of the trade issue, devoting a chapter, the third, to it, entitled “Toward a New Consensus on Trade.” Although manufacturing didn’t rise to the level of even a single reference in his Index, it appears numerous times in this chapter, and I’ll comment further on it later in this essay.
And I’m also curious to see how you’re handling the coverage of today’s European crisis, where the volume and the endless duration threaten to drown us all, but the key to how it turns out depends, I believe, on the assumptions buried in the reporting. Thus it’s not just a re-run of Keynes vs. Hayek (thinking of Nicholas Wapshott’s recent book) although that’s a good part of it; it’s also the way austerity reinforces existing trends of “neoliberalism”: with increased privatization and labor “flexibility” (code for hardship) adding to the already enormous downward pressure on wages stemming from the addition of two billion new workers to the world’s labor force since the early 1990’s. It’s also very germane to ask if China will be the first modernizing “capitalist” nation in economic history to escape a panic, bust, or depression.
As an antidote to so much of what we heard about the Asian mercantilist model on March 27th, I would hope that business leaders also take into account the heterodox views contained in Nouriel Roubini’s paper from the fall of 2011, The Way Forward http://www.newamerica.net/publications/policy/the_way_forward), tri-authored with Daniel Alpert and Robert Hockett. And Thomas Palley has issued us a reminder about just who it was who led us into these trade imbalances, and why, in his Explaining Global Financial Imbalances: A Critique of the Savings Glut and Reserve Currency Hypotheses,” also from the fall of 2011 (http://www.boeckler.de/pdf/p_imk_wp_13_2011.pdf.) Neither paper seems to have drawn much attention; yet I submit they’re the most comprehensive and realistic statements of the depths of the current troubles, and how the problems of today differ in scope and complexity from where the U.S. stood during the 1930’s, which was bad enough. These are essays which aim to make sense of the economic problems today, not overwhelm the reader with data sets.
Unlike Amity Shlaes in her The Forgotten Man: A New History of the Great Depression, I don’t believe the troubles of today will be handled by the “self-healing” attributes she ascribes to private markets. Since President Obama has accused the Republicans of a budget which spells Social Darwinism, I was reminded that Shlaes wrote that FDR’s “forgotten man” metaphor came from a William Graham Sumner’s Gilded Age essay of that title. What she didn’t tell her readers was that Sumner was the leading “Social Darwinist” of his time, and, if you listen carefully, and extend the lines of reasoning in the austerity policies, both here and in Europe, that’s exactly where they lead after they privatize all remaining public functions: a hope that markets purged of “restraints” and government “overhead” will be self-healing, with just a little nudging from the central bank. Good luck with that.
I wondered too, after listening to Republican Senator Rob Portman (Ohio) reply to my question – which was “are Republicans willing to mobilize even a portion of American nationalism on behalf of our economy the way they have used it two drive us into two Middle East wars since 2001 – with a third right on the cusp” - by saying, in effect: “if we put the right policies and incentives in place for business, they won’t wander so far from our shores.” (A paraphrase of his response). What I wondered was how much, then, American business’ dream landscape would differ from what the European business community has been prescribing as the austerity “cure” for their crisis. Wasn’t that something the way the Senator slipped away so smoothly from the broad implication of my question, that the Right (and the Democratic Center) find it much easier to beat national war drums (yet again), than write the more complicated score of a national industrial policy, an undertaking which carries with it the disturbing implication that not all of it will be dictated by businesses themselves. His answer also makes one ask again, one of the grand questions haunting the West when pondering its periods of economic collapse, like the 1930’s and today: why is that, even at a time of massive ecological threat, business will not allow civilian governments to mobilize the “moral equivalent of war” even as their societies are torn to shreds?
Having now had my fill of nearly seven years of “Inside the Beltway” conferences, I’ve learned to step back and ask how much the friendly, cooperative spirit that usually presides at them (eternally optimistic that such a spirit is the prelude to building the “consensus” inside Congress) loses sight of the realities that we know all too well from the actual history of our times. Despite having the Steelworkers prominently represented, and Roger Berkley’s humane hat tip to labor (if you remember, he was the national textile industry’s rep), we know that American business, overall, has been quite hostile to labor and has ranged all over the North American continent, and then to Asia, in efforts to weaken them, although I concede there were certainly other motivations at work as well.
So we can listen all we want at a conference like this to the Republican Senator from Ohio, and his “it’s all coming together” take on revitalizing manufacturing, but let’s not forget, on Saturday, March 24th the NY Times ran an article (which only made page 4 of the business section) about an inquiry conducted by the inspector general of a Republican member of the National Labor Relations Board – Terrence Flynn – who “revealed information about the agency’s private deliberations to outside parties who had cases pending before the board…” (Here at http://www.nytimes.com/2012/03/24/business/inquiry-says-flynn-of-nlrb-vi... ). Some might say that’s trivial, but I think it’s real hardball, hardly indicative of a “let’s work with labor attitude.” We shouldn’t forget either, that on the Democratic side of relations with labor, once again, labor law reform/card check, has disappeared from the Democratic agenda, confirming the pattern of the preceding Carter and Clinton years. And if Senator Portman was so gung-ho to bring manufacturing home, why wasn’t he on Carl Levin’s “close the offshoring incentives” bill, S.1346, or its cousin, S.2075? Can you imagine Portman breaking with the Republican leadership to do that, or them supporting anything remotely like these bills, when Senator Levin couldn’t get the Democratic leadership to do it?
And Joe, if you remember, I was bothered by the speech from Gene Sperling, not just the style of argumentation, suited more to a professional economists’ conference, but also that national “stability” figure that he tossed out; of the U.S. having 17.3 million manufacturing jobs in 1965, and 17.3 million in 1999. It was meant, I think, to be a bit of a jolt to the sensibilities of the folks at the conference, demonstrating how stable the national manufacturing picture has been before taking the China plunge this decade, despite all the cries from labor and more industry specific data points that have been argued about over the deindustrialization years. Yes, “he gets it” now - the importance of manufacturing here on American soil, and its corollary benefits, and in having federal policies that encourage it, even if they amount to something less comprehensive than a “national industrial policy.”
Yet it’s that “continuity line” between 1965-1999 for manufacturing that is so troubling, which obscures so much economic history, union history, black history, rustbelt and urban history - in sum, so much American history - that I could not digest it comfortably. Indeed, since I graduated from college in 1972, right into that infamous decade for the American economy, Sperling’s gloss over manufacturing history was like someone trying to erase your own memory, imperfect as memories sometimes can be. In fact, I had already been fishing in the stream of deindustrialization thanks to my recent astonishment over Charles Murray’s account of “white working class” decline in his new book Coming Apart. The south “Pole Star” for the proles in his book is “Fishtown,” a neighborhood of Philadelphia, one of the classic working class ethnic ones; at the opposite pole is the affluent upper-middle class town of Belmont in Massachusetts. Now the astounding thing about Murray’s methodology is his absolute dismissal of deindustrialization’s impact on the work ethic and morale of Fishtown’s working class. To give you the sense of his schema, he remarks at one point that the divorce rate during the Great Depression didn’t rise, so why would a comparatively little thing like the loss of good industrial jobs in the 1970’s be an excuse to shun marriage and work?
Of course, in Murray’s chain of causality, it’s character that still counts the most, and the upper-middle class Belmontians have it but the proles in Fishtown have lost it. But there is no mention of Garry Wills’ Bare Ruined Choirs (1974) in Murray’s account, a shame, since a history of the decline of the Catholic Church surely must have had some effect on the predominantly Catholic working class. Murray certainly reminds us of the importance of Catholic institutions in trying to hold things together, certified by the stories he has Fishtown residents tell and that he chose to emphasize in his book.
Strangely, he pays no attention to the tremendous impact of race, with five million rural black folks arriving in the northern and Midwestern cities, in what would become the “rustbelt cities,” just at the time when they begin their decline - as Nicholas Lemann tells the tale in his 1991 book The Promised Land. Am I suggesting at least a faint connection between Sperling and Murray in their minimization of deindustrialization’s impact on the working class, on American urban history and race relations, just a whiff of the alliance between the American “Center and Right” on many matters economic? Yes Joe, I am.
Now let me add a personal touch on this topic of industrial decline and working class morale, stemming as it also does, in part, from my role as a commentator on Jefferson Cowie’s fine book, Stayin’ Alive: the 1970’s and the last Days of the Working Class, in my essay Pre-Occupied of November 28, 2011.
I grew up just outside Trenton, NJ, another once significant old manufacturing city, whose industries peaked, like Philadelphia’s, in the 1920’s! (Although knowledgeable commentators tell us the reasons for the declines were somewhat different.) Thus I’ve seen the physical sites of these old manufacturing areas, and Newark’s and Camden’s as well. When I first glimpsed Camden in the early 1970’s, having just graduated from college, it looked like the photos of Berlin in 1945; there was that much physical devastation. I last saw Philadelphia’s industrial ruins in the late 1980’s, from an unusual train ride cutting across the city (and not from the more famous “Main Line’s” view, which is bad enough) that offered a startling view of some of the factory districts. There is no other way to put it: it was a post-apocalyptical industrial landscape of abandonment, ready for filming the French Connection II (or is it III now?), and not matched in writing until the eighth chapter of Don DeLillo’s Underworld in 1997.
Perhaps someone could send Gene Sperling editions of Camilo Jose Vergara’s photographic works, American Ruins and The New American Ghetto, just to remind him what he’s obscuring in those statistics. So much pain, so much loss, but let’s not get emotional, let’s let the cooler economic heads prevail: the number of manufacturing jobs was just about the same over the 35 years of muffled agony, 1965-1999.
We can talk about all the other factors contributing to the decline of the work ethic and self-discipline in the blue collar white world, the cultural factors, as Daniel Bell has done in his classic Cultural Contradictions of Capitalism, but let’s leave them out for now: the view of the physical wreckage is enough to convey a sense of what went on…and it’s bad enough just by itself. But I’ll give you the numbers that Murray avoids any mention of in his book, and that Sperling obscures from his high altitude flyover, taken from Walter Licht’s brief but moving little online essay about Philadelphia’s industrial history, with the nostalgic title “Workshop of the World”: in 1953 Philly had 365,500 industrial jobs; by 1977 it was down to 168,400; and by 2008, it was down to 29,800! Here’s the link at http://philadelphiaencyclopedia.org/archive/workshop-of-the-world/
Thomas Sugrue’s magisterial work on these themes, centered on Detroit, The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit (1996), supports the Philadelphia story of a sooner than expected crisis of deindustrialization, starting in the early 1950’s. His numbers show 338,400 manufacturing jobs in 1947; 204,400 in 1958; 209,700 in 1967, and just 153, 300 in 1977.
In fact, I was so troubled by what Sperling’s stable manufacturing jobs’ history line obscured, and his citation of William Nordhaus’ 2005 study of the relationship between employment and productivity growth from 1948-2003 – and his assertion that “ ‘productivity is not to be feared – at least not in manufacturing’” - that I went searching for a copy of his speech, here at http://www.whitehouse.gov/sites/default/files/administration-official/sp...
And of course, that led me to read Nordhaus’ own paper, done for the National Bureau of Economic Research, here at http://www.nber.org/papers/w11354.pdf as well as the one done by the Information Technology & Innovation Foundation in March of 2012: Worse Than the Great depression: What Experts are Missing About American Manufacturing Decline here at http://www2.itif.org/2012-american-manufacturing-decline.pdf
So here’s the crucial contradiction which drove me to probe Sterling and Nordhaus’ assertions: how did they square them with the history of employment in such Ur industrial sectors as textiles, steel, autos, electrical appliances, and yes, even the mining of coal, which is by category “resource extraction” but is nonetheless so closely tied to that labor/machine/automation/innovation/productivity dynamic that it is well worth including?
First, let’s consider what’s closest to the economic “heart,” if that’ the right word, of Gene Sperling’s worldview, which is pretty much in keeping with that of the economics profession as I’ve come to understand it over the past four years and the 1,000 pages I’ve written about the political economy. Two quotes, in particular, from Sperling’s speech dramatize the turbulence at the core of the process, as well as the minimization of the impacts of productivity on employment. Here’s the Schumpeterian one: “Of course, dynamism – the so called ‘creative destruction’ and fierce global competitiveness – are facts of economic life. We can never pretend that we can or should drive them to a halt… Second, the last forty years have not painted a clear picture of productivity driving a dramatic decline in the number of Americans working in manufacturing.” (Page 5).
While Sperling got the quote right from Nordhaus (a Yale economist who also writes about global warming and its deniers) on not fearing productivity in manufacturing, Nordhaus also had some other very interesting things to say in his paper, including some very important qualifications, which didn’t make it into Sperling’s speech. Nordhaus starts us off with the “virtuous circle” idea, that innovation/productivity gains can lower product prices, increase sales and thus lead to greater demand and higher employment, but he added that “…the partial effects of rapid domestic productivity growth have been more than offset by more rapid productivity growth and price declines by foreign competitors.” And then, on page 13 of the 32 page paper, he added this qualifier: “While technological change is unlikely to have a major impact on aggregate unemployment or employment in the long run, this point most definitely does not apply to individual industries.” For example, he cites the impact of the computer on typewriter manufacturers.
And then there are these additional caveats from Nordhaus: “At the microeconomic levels, the impact of productivity growth on employment is ambiguous and depends upon the bias of technological change, on prices of competing goods and services, and on the price-elasticity of demand…in industries like agriculture, with rapid technological change and inelastic price and income effects, both employment and the industry share of nominal output are likely to decline over time.” (My Emphasis.) Trying to bridge the gaps, the discrepancy between his broader declarations and the actual results in the field of American manufacturing since 2000, he says this: “The paradoxical case, with rapid productivity growth and falling employment, appears to hold for the United States, while the opposite case, with manufacturing employment growing because domestic costs and prices are falling rapidly, would hold most notably for China.” We’re losing out to China because its productivity is rising faster, and its prices falling faster, than ours in competing manufacturing sectors.
At last, on page 18, Nordhaus makes the first reference to organized labor of any of the academic economists’ paper’s I’ve linked to, in an ironic quote, given the history of the employment levels in the particular industry: “The tentative conclusion here is suggestive of the views of the labor leader John L. Lewis of the United Mine Workers. His philosophy was that productivity advances in that industry should lead to increased production and employment and that the union should not resist modern techniques. Given the elasticities, Lewis may have been wrong about coal, but he was probably right about manufacturing.”
Well, we’ll still have to see about the broader assertion, but here are the numbers from Jeremy Rifkin’s admirable, but rarely cited book, The End of Work, from Chapter 9, “Hanging up the Blue Collar”: in 1925 the “soft” coal industry had 588,000 workers and mined 520 million tons; “In 1982 fewer than 208,000…produced more than 774 million tons…” Going further, the National Mining Association puts the 2010 workforce at only 86,000, but they’re mining 1,097 million tons. So coal follows the pattern of agriculture: it reaps large increases in productivity but sharply declining employment, with coal of course facing formidable competing energy sources and environmental protection pressures, fair ones, in my opinion. And let’s complete the analogy for our “postmodern” audience: both agriculture and coal, as practiced with their hyper-productivity, continue to transfer huge impacts upon nature’s integrity.
The story is the same in steel, Rifkin tells us: “in 1980 United States Steel, the largest integrated steel company in the United States, employed 120,000 workers. By 1990 it was producing roughly the same output using only 20,000.” Harold Meyerson, in his excellent 11-29-2011 article in The American Prospect, “Back from China,” takes us back to the 1940’s, when U.S. Steel employed 340,000 workers and says that today they’re down to 50,000 in the U.S., Canada and Eastern Europe combined, with the total steel industry employment in the U.S. today at 160,000, less than half of just U.S. Steel’s company level in the 1940’s. (Here at http://prospect.org/article/back-china.)
In the Big Three of the U.S. automobile industry, a Congressional Research Service Report from April, 25, 2005 tells us that 600,000 jobs have been lost since the peak employment year of 1979, with United Automobile Workers Union membership plummeting from 1.5 million to 700,000; today, they’re down to about 350,000, with something like 300,000 autoworkers now employed at foreign companies settled into non-union American states. And of course, these numbers got even worse during the calamitous years of 2008-2010.
While searching for one source which would pull all the manufacturing job losses together for these older, Ur American industrial sectors, which I never did find, I did come across a footnote in Mike Davis’ first book, his very interesting Prisoners of the American Dream: Politics and Economy in the History of the U.S. Working Class (1986), with its data taken in turn from Barry Bluestone’s and Bennett Harrison’s classic The Deindustrialization of America (1982). Davis writes that “between 1958 and 1975, the number of traditional manufacturing jobs in New England’s mills fell from 833,200 to 159,000.” Since these are primarily textile mill losses, The Monthly Labor Review of August 1997 (a U.S. Government publication) picked up the trends in both textiles and apparel manufacturing from 1973-1996, which saw the jobs plunge from 2.4 million in the United States to 1.5 million, down to 864,000 in apparel and 624,000 in textiles, with all the textile jobs being found in three Southern states, Georgia, North Carolina and South Carolina.
So here’s the problem with Gene Sperling’s “complacency line” about fairly steady overall national manufacturing employment job numbers from 1965-1999, of 17.3 million: it obscures an awful lot of American history, and not just economic history. He concedes that throughout these years, despite these absolute numbers, manufacturing’s share of overall jobs was declining. Yes, in rough, gross numbers the jobs lost in the old industrial regions, in New England and the rustbelt, were made up in other regions, especially in the South and the Southwest, and manufacturing jobs grew in the new computer and electronics industries, but these were also, and there is a direct relationship between them, the years of urban decay, weakening blue-collar institutions, intense racial troubles, and the rise of the world’s largest prison population. That population was gathered, disproportionately, from the people of color who might have held many of the old industrial jobs which migrated to the most business friendly parts of the U.S., then to Mexico, then to Asian destinations. And let us not forget that beginning in 1980, wealth and income distribution began their migration into the upper reaches of the society, and the pay of CEO’s began its fantastic multiplication from the line workers’. Is it fair as well to note that the “balance of power” in society and the political system also changed during these years, with the “status” of unions and workers falling, and that of business leaders and entrepreneurs rising? And that some of the crucial tools that government used during the Great Depression – direct job creation via the WPA and CCC – were no longer seen as available during the Great Recession in 2008-2009, as the Democrats seemed to have now agreed with the Republican Right, and the business lobbies, that “only the private sector can create jobs” - but when it’s not feeling “uncertain,” when it’s “in the mood.”
Unions failed mightily during this time period as well, starting with their disastrous “Operation Dixie” campaign in 1946 to unionize the South. But they also failed to make any headway in the new growth sectors represented by Silicon Valley and in what one would think would be more favorable terrain, the Route 128 hi-tech corridor in Massachusetts. These are two sterling examples of the creative destruction dynamism and innovation synergy that all the world’s economies dream of duplicating, yet they’re also glaring reminders of union futility.
So while we should applaud all the ways in which Gene Sperling and others in the economics profession have come around to appreciate the importance of manufacturing for the economic health of the United States, we need to introduce some other commentators on these matters to give us a more accurate view of manufacturing history.
The first we have already mentioned briefly, Jeremy Rifkin, author of The End of Work (1995), but he is due far more than a passing comment or citation. Rifkin is building a case that modern technology, the revolution in computers, information technology, robotics, machine intelligence and continuous process systems in manufacturing, are giving far greater powers to management to substitute the machine for human labor across nearly all categories of work in the economy, including the service sector and various professional niches. Thus in his Introduction to the latest edition of the book, in 2004, he goes after the core of Sperling’s (and Nordhaus’) assertion that productivity is not to be feared in manufacturing because of potential job losses; that productivity increases and innovation will drop prices, and create new and increasing demand which will compensate for or exceed the jobs losses stemming from automation and technological change. And he goes a step further, summoning up the argument from the earliest days of classical economics, the first decades of the 19th century, which claimed that “even if the technological advances result in sizable layoffs, eventually the ranks of the unemployed will swell, depressing wages to the pint that it will be cheaper to hire the workers than to invest in new labor-saving technology.” (And I have to note here that in his Foreword to this 2004 edition, the late Robert L. Heilbroner has a sentence quite at odds with both Sperling’s and Nordhaus’ view: that “between 1960 and 1990, output of manufactured goods of all kinds continued to rise, but the number of jobs needed to create that flow of production fell by half.” That seems more like an intellectual chasm than a data discrepancy, but the more one reads about the nature of data on manufacturing, the more one comes to expect such divergences. )
Rifkin, after all, is writing, in 2004, in the midst of another sub-par jobs recovery cycle after a recession, and in the wake of the large scale integration of the dot.com technological innovations into all aspects of the economy. And he cites a study which doesn’t seem to show up in the other contemporary works I am citing. That is the one by the Alliance Capital Management firm from November of 2003, looking at the relationship between manufacturing productivity and jobs in the world’s twenty largest economies. “According to the study, 31 million manufacturing jobs were eliminated between 1995 and 2002. Manufacturing employment declined every year and in every region of the world. The employment decline occurred during a period when manufacturing productivity rose by 4.3 percent and global industrial production rose by more than 30 percent… Manufacturing jobs, worldwide, fell by nearly 16 percent. The U.S. lost more than 11 percent of its own manufacturing jobs.”
Now it is my sense that mainstream economists are not particularly impressed with Rifkin’s work, and I don’t find many of them citing this book, which is understandable, since he is challenging one of the central tenets of economics, that the “creative destruction” that results from the intense competition driving technological change and innovation, and invoked by the terms “automation” and “productivity,” will, in the longer term and across national boundaries, result in the creation of more jobs than it destroys, in manufacturing, but also in the broader economy. Yet Rifkin covers much of the ground that Sperling and Nordhaus ignore. For example, he has a chapter entitled “Technology and the African American experience, which cites Nicholas Lemann’s The Promised Land on its second page, and Lemann’s description of the successful October, 1944 demonstration of the mechanical cotton picker in Clarksdale, Mississippi. This particular technological change nearly eliminated the need for human labor in the shameful sharecropping system (under which the black family was already disintegrating – with due apologies to Mr. Murray) and set in motion the great black migration to northern and eastern cities, “‘one of the largest and most rapid mass internal movements of people in history,’” in Lehmann’s words. It’s strange how, despite growing up during the Civil Rights era and being fully attuned to its dramas, I don’t recall this hard economic fact of basic technological change being invoked as crucial background, much less the corollary one that the receiving cities had no strategy to accommodate the new arrivals. (No comprehensive urban policy, no industrial policy; is it possible that American leaders don’t like “planning” very much – or acknowledging the disruptive ramifications of their love affair with technological change?)
I also don’t have any memory of what Rifkin tells us about in the next chapter, the sixth, “The Great Automation Debate,” launched by the publication in the New York Times of a full page ad containing the letter to President Kennedy from March of 1963, “by a group of distinguished scientists, economists and academicians, led by J. Robert Oppenheimer, the Director of the Institute for Advanced Studies at Princeton University.” The letter warned “of the dangers of automation on the future of the American economy” and called “for a national dialogue on the subject.”
That dialogue unfolded, however, inside a National Commission on Technology, Automation and Economic Progress which President Kennedy set in motion in July of 1963 and which issued its report in 1965. Daniel Bell, commenting upon it in National Affairs magazine, said that Johnson downplayed its conclusion, deciding that the Vietnam War fueled growth in the economy, well on its way to full employment and growing inflation, made worries about technological unemployment less urgent. Labor was pleased that among its 20 recommendations was one for the federal government to assume the role of employer of last resort, and another which called for national income supports. Rifkin says the report steered a “middle course” between alarmism that a major crisis was at hand, or that technological change could be ignored by the government and left entirely to market forces. Rifkin writes that labor largely capitulated (via a resolution at the UAW’s 1955 annual convention), deferring to management’s control over the issue, despite a 1949 letter to Walter Reuther from Norbert Weiner, the “father of cybernetics…who perhaps more than any other human being was in a position to clearly perceive the long-term consequences of the new automation technologies,” and who “had warned of the dangers of widespread and permanent technological unemployment.” He had explicitly warned Reuther that the trends would “undoubtedly lead to the factory without employees.”
I think we should give Weiner and Rifkin some credit here, looking at that early warning date, one that would not come fully into focus perhaps until Thomas Friedman wrote about Toyota’s Lexus factory in 1999, the one which produced 300 cars per day, “made by 66 human beings and 310 robots,” including robotic trucks that would “beep” the humans out of their way. Friedman wrote that celebratory book, The Lexus and the Olive Tree, at the high tide of globalization, but before the full rise of China, and his perspective from that year was the opposite of Weiner’s mid-century worries and Rifkin’s alarms in 1995. (Friedman didn’t mention Rifkin in his book, although he did mention Clyde Prestowitz and Gene Sperling in his “Acknowledgements.”)
But there was someone who beat both Rifkin and Friedman to the not always so happy realities of automation: Michael Harrington (1928-1989). Writing in the NY Review of Books in its May 28, 1964 edition, in a piece entitled “Modern Times,” he covers two books, Jobs, Men and Machines and Labor Today. That would place his commentary after the National Commission had been set in motion, but before the appearance of its report. Harrington’s comment on the consensus of that day applies just as well to the one in Gene Sperling’s mind in 2012, nearly a half-a-century later: “For some time now, Washington has been officially committed to the proposition that automation does not cause unemployment but, on the contrary, creates jobs.”
Indeed, Harrington’s commentary captures much of the contemporary feel, including all the ways to increase lagging demand without actually creating jobs directly, as in the New Deal, or in reducing hours, another proposal that has resurfaced in response to the Great Recession of 2008-2009. And he also foresaw the caveats in Nordhaus’ findings, the ones glossed over by Gene Sperling. The relationship between productivity increases and job growth depends upon where an industry is in its “evolutionary” cycle, at the beginning with a brand new innovation, or in a mature industry facing more recently capitalized entrants…
"The problem, the Council (of Economic Advisors) has argued, is not that computers and feed-back machines are destroying work, but that there is a lack of effective demand in the economy. From such a premise, a tax cut follows, even when its bonus to corporations may well be used to automate; and from such a premise, the reduction of the work week does not follow. Among the essays in this book (Jobs, Men and Machines) is a temperate, persuasive critique of the official line by Professor Charles Killingsworth of Michigan State. He deals, for example, with the argument that the technological change of the past always created jobs. Here, the classic case in point is Henry Ford’s 90 per cent reduction in the man-hours required to make a car, an act which expanded the market and employment enormously. This, Killingsworth concedes, does happen when technological innovation takes place in an industry at the rapid growth stage. But what happens when automation takes place in Detroit now? It does not reduce the price of the automobiles, it does not de-saturate the car market, increase volume, and thus put men to work. It does, however, cut down on employment."
But Harrington is tough on labor as well, accurately predicting its troubles down the road if it failed to begin organizing the unorganized outside its classic strongholds. Echoing Nordhaus’s observations on John L. Lewis and automation in coal mining, and citing miner complicity with the owners’ “consolidation” efforts, he throws a sharp elbow into one of labor’s most famous leaders: “In San Francisco…Harry Bridges’ longshoremen have agreed to the eventual elimination of their trade so long as the present membership is paid off.”
Now a logical question that flows right out of the longshoremen’s acquiescence in their own obsolescence is: who manufactures all those steel shipping containers, 17 million of them today, the innovation that allowed for such intensive automation? Here’s the answer at http://www.isbu-info.org/all_about_shipping_containers_industry.htm :
"Although the ISO shipping container got its conception and start through American ingenuity, the United States had no ability to either build shipping containers or the ships to carry them. The first shipping containers were manufactured by Japan, Europe, then later Korea, Hong Kong and Taiwan. China entered into the shipping container manufacturing in 1980…by 2000 China had become the largest manufacturer of ISO shipping containers in the world, and by 2007, China was producing 82% of the entire world supply…”
While one has to question the observation about the U.S.’s initial ability, please take notice that the chain of countries succeeding each other in the manufacturing evolution here mimics that of the foreign challengers to U.S. domestic steel’s domination, from the 1950’s on, beginning with Europe and Japan, and that the U.S. lost this huge contemporary market by failing to link its inventiveness to an adaptable manufacturing process, the very co-evolution that this Renaissance conference stressed was so important to nurture.
In 1966, the year after the National Commission on Automation released its report, economist Robert Heilbroner (1919-2005) reviewed The Shape of Automation by Herbert Simon in the March 17th edition of the New York Review of Books, and left us with one very apt observation and one penetrating question in his article, “Where Do We Go From Here?”
The observation is one that most mainstream economists like Sperling dismiss to this very day, and Heilbroner opens his article with it this way: “… I believe that a persistent cloud of technological displacement will nonetheless hover over the future of capitalism, and proposals to remedy it will accordingly provide us with fare for our reformist appetites for a long time to come.” That was 45 years before the essay The Way Forward (Roubini, Alpert and Hockett) reminded us that the world had added “more than two billion newly employed workers” over the past two decades, and what’s just as important, did it “against the back drop of dramatic productivity gains rooted in new information technologies and the globalization of corporate supply chains…”
But Heilbroner went even further, asking a very basic question about the type of capitalism necessary to cope with the changes the creative destruction the system itself unleashed. He asked, again in 1966, “…whether the market process will be able to supervise the inevitable transition to a society in which less labor will be used.” It’s a profound question, of greater significance today than even Heilbroner’s excellent mind could have foreseen at the time, and posed before Daniel Bell picked up on the “Cultural Contradictions of Capitalism” in 1976. Those contradictions began where the system’s own advertising and marketing mechanisms, and inventions like the credit card and the pill, undermined the very work ethic, the self-discipline and personal restraints that capitalism originally emerged with in its symbiosis with Protestantism in the 16th and 17th centuries; ones which have been “born again” in the alliance between the religious Right and the business community, the backbone of today’s Republican Right. So consider a new contradiction: a merger of Heilbroner’s question and Bell’s contradictions, where present day neoliberalism – the philosophy of business itself – is demanding an austerity program of longer hours and less pay coupled with automation capabilities “cubed” compared to those available in 1963-1966. And then add in the 2 billion new workers infused with the Asian work ethic at a time when perhaps 20% or more of the U.S.’s and the world’s work force is pure surplus labor, simply not needed.
Do any of the presidential contestants in 2012 grasp the absurdity and tragedy of this situation? Hardly, based on their economic pronouncements. The Keynes who wrote The Economic Possibilities for Our Grandchildren in 1930 would have, though, marveling over the again enormous increases in capitalism’s productive powers, yet troubled by the still driven ghosts of a revived Protestant Ethic, and the Promethean if not Faustian “technological frenzy” to yet greater inventiveness and competition. And surely he would recognize the diagnostic words of The Way Forward, its recognition of a “…world economy beset by a glut of both labor and capital.”
There is yet another person whose work consistently placed the importance of manufacturing right under the noses of an indifferent political and economic establishment, and kept on doing so for a quarter century: Kevin Phillips. Phillips stopped writing, and then speaking in public, just two years after the appearance of his last book, Bad Money, in 2008. By that time, publishers had ceased listing one of his books on the traditional “Also by …” author’s page, the one which appeared in 1984, Staying on Top: The Business Case for a National Industrial Strategy.
Phillips had several intellectual quirks which endeared him to the populist streak in the American public, but ones that simultaneously made him the bad boy of American political commentators in the eyes of the powers that be as he migrated from Right to Center along the political spectrum over more than 40 years. One of those “quirks” was his habitat of going deep, going for historical perspective in both politics and economics, and especially in that forbidden end zone of American presidential politics, the public discussion of American “decline.” Phillips did this by looking at the common characteristics in former great European economic powers, beginning with Spain in the 16th century, Holland in the 18th and Great Britain in the late 19th and early 20th centuries. And what he found most predictive of national decline was a shift away from manufacturing to financial services, with a consistent late trend to overseas investments (and a tragic inclination to over-extend in foreign wars). He listened to the case made by the defenders of the natural “evolutionary” theory of capitalist nations, that the shift from manufacturing to services and especially financial services, buttressed by the dogma of free trade, was a sign of economic logic and mature good judgment. Here’s how Phillips delivered his answer in Arrogant Capital (1994):
"The lesson is obvious: the great economic powers of the last five hundred years have each gone through a late-development era in which earlier reliance on seafaring, manufacturing, or bourgeois commerce yielded to a cocksure faith in finance and a financial services economy. Not once, though, did this lay a framework for continued national retention of status as the world’s leading economic power. Quite the reverse. For the overall national economy, financialization has been a stage of decay, not triumph. An important yet small elite flourishes, but the average citizen is a loser. The odds are that the latest of these stages in the United States will have a similar effect – and that the political and governmental failure in the late 1980’s and early 1990’s to deal with financialization and its abuses will leave a bad taste in the mouths of twenty-first-century Americans."
So perhaps one consideration in Kevin Phillips leaving the public stage in 2008 was to leave as an honorable economic prophet of decline; warnings don’t come any clearer than the one just cited.
Nor do they come any clearer than the one delivered – in book length by William Greider in his insightful One World, Ready or Not: The Manic Logic of Global Capitalism (1997). I offer just one selection, on the connection between trade balance success and manufacturing, because it echoes the main point that Phillips has been making. It comes from Chapter 10, entitled “The Buyer of Last Resort”:
In the real world, it did matter. Across five centuries of capitalism, manufactured goods have always been the vital center of trade among nations. That was why poor nations struggled to attain manufacturing sectors and why developing countries protected their infant industries by refusing to buy imported goods from others. Or why the U.S government itself subsidized technological research and overseas sales. It was also how postwar Japan went from poverty to great wealth, as other nations hoped to do themselves.
But Kevin Phillips wasn’t finished yet with his insights at mid-decade in the 1990’s. In Chapter Six of Arrogant Capital, “The Fading of Anglo-American Institutions and World Supremacy,” he added another, one that the labor unions in the United States need to hear, loud and clear. I say that because the Legislative Counsel of the United Steelworkers was at the Renaissance of American Manufacturing Conference on March 27th, and asked, with justice, “What took the rest of us so long” to recognize that the crisis in manufacturing jobs was going to hurt the country. But there is also the union hope that an American manufacturing Renaissance, including a “return home” from Asia, means betters days and more members for organized labor. Phillips cautions us about
"Anglo-America’s poor record of government-business collaboration, plus the inability, stark in early twentieth-century Britain, to formulate and pursue a strategy to keep manufacturing and status as a great economic power from slipping away…Shaped in this free-market forge, business-government relationships in both countries have been standoffish and frequently adversarial. Indeed, collaborative business-government–labor industrial strategies on behalf of manufacturing or key industries may run contrary to the Anglo-Saxon thought process."
Readers who want more contemporary research into the accuracy of Phillips’ observation can do no better than to consult Kim Phillips-Fein’s Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan (2009), especially her focus on “Boulwarism” at GE, and the more famous Lewis Powell memo to business leaders from August of 1971.
Now, having filled in some of the missing components from Gene Sperling’s tour of manufacturing history in the United States, the burden is on me to give some shape to what we might expect to happen in the coming years. You can already get a sense of my tempered view from the urban, union, and racial perspectives I added to the economists’ manufacturing storyline, and my insistence that some forgotten chapters in the history of automation be added as well. Yet I agree with the main thrust of what I heard at the conference, that manufacturing is very important for a nation’s positive trade balance, that it should be married to R & D and they should live if not in the same house, then on the same street, and that it is important to the American national economic interest. We have to develop more than just a few policies: we need a comprehensive industrial policy to recapture lost ground and keep more manufacturing on our shores, serving our national purpose.
There are quite a few perspectives that have gone into shaping this outlook and its “Curb Your Enthusiasm” tone. Suzanne Burger’s and company’s practical, and grounded study of How We Compete (2005), based on “a five-year study of 500 international companies,” gets paired next to David Harvey’s widely praised The Enigma of Capital (2010). Enigma supplies the historical and philosophical rigor of a different tradition to the same economic actors, now working under the duress of a major crisis, but still facing the stark standard that “no matter what innovation or shift occurs, the survival of capitalism in the long run depends on the capacity to achieve 3 percent compound growth.” To continually clear that hurdle, capital must “circulate and accumulate” by juggling “‘seven distinctive ‘activity spheres’ within its own evolutionary trajectory: … technologies and organizational forms; social relations; institutional and administrative arrangements; production and labour processes; relations to nature; the reproduction of daily life and of the species; and ‘mental conceptions of the world.’” (Notice that Harvey adds six other categories beyond the one that Burger’s book focused on - technologies and organizational forms.)
Also very much worried about capital’s circulation and accumulation imbalances, especially the trade imbalances triggered by Asia’s success, is Martin Wolf in his Fixing Global Finance (2008). Manufacturing doesn’t even get an entry in the index, though. Instead, he’s worried about lagging business investment rates in the United States, echoing Harvey’s imperative without mentioning him, although Wolf’s newspaper, the Financial Times gave Harvey’s book sterling back cover praise. And challenging the conventional wisdom from all points on the political-economic spectrum is economic historian James Livingston’s Against Thrift: Why Consumer Culture is Good for the Economy, the Environment, and Your Soul (2011). The Wall Street Journal came close to giving him an Op-Ed piece, although my take is that the folks at the Journal didn’t quite understand what he was about, beyond his “endorsement” of Consumer Culture; the New York Times did give him an Op-Ed in October of 2011 because he is dead set against austerity economics. (Here at http://www.nytimes.com/2011/10/26/opinion/its-consumer-spending-stupid.h...) In fact, Livingston leans left in the general thrust of his work, but there is nothing simple about his inventive synthesis; both Martin Wolf and David Harvey show up in his work, but not Jeremy Rifkin.
I mention Rifkin here, and Livingston’s relevance to an essay on the revival of manufacturing, because of his provocative thesis about the declining importance of “net private investment.” Livingston writes that “the obvious trend of economic development since 1919 is the reduction of socially necessary labor time…around 1919, additional labor of either kind (i.e. - labor force or capital stock) became unnecessary to increase the production of goods. In the 1920’s, for example, the output of nonagricultural goods grew 60 percent but the labor force in manufacturing, construction and transportation declined, and so did the capital stock per industrial worker. For the first time in human history growth happened in the absence of net additions to the goods-producing labor force or to the capital stock.” This is a similar theme, located much earlier in time, to the one Rifkin cited in that 2003 Alliance Capital Management study of increasing productivity and declining manufacturing jobs in the world’s twenty largest economies.
But it is even more provocative, because Livingston is going to take it a notch higher, and broader in implications, to threaten some of neoliberalism’s most cherished notions, about the need for higher personal savings and lower corporate tax rates to stimulate greater investment:
"I’ll put it another way. After 1919, net private investment becomes pretty much irrelevant to growth. This means that both corporate profits and personal savings become more or less redundant, because corporations don’t need their after-tax profits to invest in new plant and equipment – they can expand output just by replacing and maintaining their existing capital stock out of depreciation funds earmarked for that purpose – and because banks don’t need to gather the personal savings of households so that they can loan to corporations wanting to finance increased investment by borrowing. This atrophy of net investment also means that, between them, increasing profits and savings will strangle balanced growth. On the one hand, both these forms of “saving” –another word for restraint, renunciation, and delay – will limit consumer spending, the single most important component of aggregate demand, because they withdraw money from the share of national income other-wise available for consumption. On the other hand, both of these forms of saving will accumulate as idle surpluses that fuel speculative markets, then inflate bubbles, and finally cause full-blown economic crises – as they did in the 1920’s, and in the age of the ‘global savings glut,’ ca. 1983-2009."
So that could be one reason Livingston is having trouble getting a hearing in economic academe – along with the fact he’s an economic historian, not an economist, and as we’ve learned the hard way, economists in the 1990’s believed they had escaped for good the gravitational laws demonstrated by the history of previous economic panics and depressions. I’ve recommended to him on his blog that he distinguish his findings on “net private investment” from the role of “Research and Development,” and the funding sources for that, to make it sound a bit less sweeping. Still, he’s on to something large, picking up from where Daniel Bell left off, and showing how the cultural contradictions of capitalism are being overcome, pointing in the direction of both Marx’s and Keynes’ vision, the one throwing off the heavy yoke of so much socially necessary labor, and pointing towards “Don Draper’s Utopia,” even if there is vast denial from nearly every point on the political economy’s spectrum. (And Livingston does use the term “automation” at least twice, in his discussion of Herbert Marcuse’s work, though the term does not appear in his Index.)
Maybe Professor Livingston deserved a seat on one of the conference’s panels; after all, he has a rather different take on the desirability of an American Manufacturing Renaissance, which I cite from his Chapter called “Their Great Depression and Ours”: “But now, with the export of so many good jobs and the more general ‘deindustrialization’ of the American economy – the persistent problem of unemployment exemplifies these trends – we have to decide whether to (a) re-create ‘full employment’ by the repatriation of manufacturing or (b) detach the receipt of income from the production of value through work.”
Well, I’ve got some more “Curb Your Enthusiasm” advice for both Professor Livingston and labor’s hope for their own revival through a manufacturing “Renaissance.” It stems from the realism of David Harvey’s view of the way neoliberalism is able to “manage” those seven “activity spheres,” even in the face of the magnitude of a crisis like 2007-2009. Remarkably, the Republican Right in the U.S. has been able to perform an ideological summersault, turning it into a crisis of government, not of the private sector, or more deeply, “capitalism” (much to the outrage of Thomas Frank in Pity the Billionaire). And in Europe, as in the U.S., neoliberals have made “thrift” the remedy, removing the focus from the consequences of financial de-regulation, unemployment and the deficit of demand, allowing austerity to merge seamlessly with the long standing program to dismantle what remains of the Social Democratic social contract.
Livingston will have additional troubles on the left from folks like Michael Hudson, who takes a far more sinister and moralistic view of banking behavior, and what banks are after in, for just one example, his April 22, 2012 article at Naked Capitalism: Productivity, The Miracle of Compound Interest, and Poverty (here at http://www.nakedcapitalism.com/2012/04/michael-hudson-productivity-the-m... ; and from Richard Wolff, the popular Marxist economist who also sees a structural logic to banks substituting a malevolent loan-debt-interest cycle for the missing productivity gains-wage increases that characterized the pre-financialization era, 1945-1973. Here it is in his widely viewed “Capitalism Hits the Fan” presentation at http://www.rdwolff.com/content/presentation-movie-capitalism-hits-fan-vi...
So right now, were momentum to pick up for reviving domestic manufacturing, it looks like it would come mainly from the private sector’s own calculations about the truer (and higher) costs of doing business in China, and the short and medium term price they are willing to pay for access to the proverbial Heavenly City of the Chinese market. We shouldn’t discount the chances for a bi-partisan effort to set a more bountiful domestic policy table for basing manufacturing here in the U.S. – which is more likely than enacting a series of restrictive or punitive measures (financial and legal) to curb offshoring, tax sheltering and profit hiding in the mysterious reaches of international business “accounting,” judging from the lack of enthusiasm for Senator’s Levin’s bill along those lines.
In more than one sense, though, we’ve had a preview of the power relationships crucial to any dramatic change in the manufacturing picture. And that unfolded over the past four years in the great global warming and “green collar economy” debate, which certainly contained a strong element of domestic manufacturing revival with its focus on alternative energy sources. Indeed, in books like Van Jones’s The Green Collar Economy (2008), Paul Hawken’s The Ecology of Commerce (1993), Natural Capitalism (1999) and Blessed Unrest (2007), the necessity of employing business’ creative side to overcome its destructive one (a new twist on Schumpeter’s “creative destruction”) gave green entrepreneurship the starring role. And let’s not forget the policy gymnastics displayed by major environmental groups like Environmental Defense and the Natural Resources Defense Council to make a Cap and Trade carbon “derivative’s” market the cornerstone of their efforts to curb global warming, also in the most business friendly way. Indeed, firms like Goldman Sachs were drooling in anticipation, according to Matt Taibbi.
So how did all these gestures of accommodation and assimilation into the general “free market” business climate work out? Well, I think Naomi Klein’s provocative essay, Capitalism vs. the Climate tells the story very well. It appeared in November of 2011, here at http://www.thenation.com/article/164497/capitalism-vs-climate
Living in Maryland, I can take some state pride in the fact that she begins the essay with a quote from a Carroll County, Maryland Commissioner’s assessment of what is really going on behind the proposals for combatting climate change, rendered at a conservative conference on the topic: despite all the best efforts of ED, NRDC and Paul Hawken, the policies amount to an “attack on middle-class capitalism.” So said Commissioner Richard Rothschild, who doesn’t exactly have a name with a populist ring. But it’s still closer to the man-on-Main Street view than the one I found, also in The Nation magazine, this time over national health insurance, of a CEO’s view of pending change: “‘We like driving the car, and we don’t intend to share the steering wheel with anyone else.’” Ouch: take that Leo W. Gerard, president of the United Steelworkers.
Let me expand a bit on that emboldened quote, because I think it speaks very succinctly if not very eloquently to the nature of the American political economy in 2012, despite the appearance of Occupy Wall Street last fall. As a prelude to the awful 2011 summer debates in Congress, the New York Times ran an article on the “War of Ideas” over the reasons that 25 million Americans are unable to find full time work – or any job at all. In this article, the Republican and business framing timbers stand out in bold relief: it’s not the private sector’s fault, it’s all government’s doing. According to Speaker John Boehner, who talks to the “job creators”: “…they’ll tell you the overtaxing, overregulating and overspending that’s going on here in Washington is creating uncertainty and holding them back.’” Representative Jeb Hensarling, from Texas, said there was a lack of confidence “‘…from an administration where regulators have gone wild…’” The regulation complaints were seconded by John Engler, head of the Business Roundtable, who brought down the gavel by stating that “‘the private sector is the only hope for future job creation.’” The concluding two paragraphs spoke of the Democrat’s “Make It in America” legislation for high speed rail and other transportation projects, tax breaks for research and development, and a call for “government to develop a national manufacturing strategy,” but ended with a resigned sigh that Republicans would block the efforts and that they were long term in nature, and no help for the currently unemployed. (Here at http://www.nytimes.com/2011/06/04/business/economy/04assess.html
“The private sector is the only hope for future job creation.” Let’s think about the ramifications of that assertion, which carries with it the power of a papal declaration on matters of economic theology, with no disrespect intended, because in America, conservative economics carries a theological intensity. What it tells us as far as the Democrats who buy into it go – whom I believe are a two-thirds majority in the party - is that not only have they accepted the fact that the “era of big government is over,” they have also the erased from memory the time when government itself created jobs directly, in the WPA and CCC of the New Deal. The broader meaning of the fiat that the private sector is the only legitimate “job creator” is the reduction of the government role to lowering taxes, removing regulations and weakening the remaining termite riddled supports for organized labor, even at a time when economic reality cries out for direct job-demand creation programs. The ideological force field against government action is so powerful that even when terrible economic circumstances meet a promising efficiency-productivity-innovation program – as in reducing businesses and homes energy costs via energy efficiency improvements – the connection can’t be made. (See the McKinsey & Company study from July of 2009 here at http://www.mckinsey.com/Client_Service/Electric_Power_and_Natural_Gas/La... ).
Nor can the connection be made over something as logical as a National Infrastructure Bank, where members of both parties, the AFL-CIO and the U.S. Chamber of Commerce seem to be pulling in the same direction. That’s because once the parties actually sit down to try to work out the details, all the boundary problems between the public and private sector arise to prevent consensus (as well as the Republican political policy to give the Democrats no political victory with economic implications that could resonate the way the New Deal once did). If the private sector is going to contribute the bulk of money in the form of loans to the bank for projects, then how will they be repaid at interest: out of the national purse, or from the project’s revenues themselves? If the latter, that dramatically limits the nature of the possible projects, and raises the issue of the continuing privatization of traditionally public services, like education, as well as the old danger of private powers bending “public infrastructure” to their own narrow economic ends, which was one of the accusations leveled against the Intercounty Connector Toll road built in Montgomery County Maryland.
But the catechism of the private sector and the Right goes further yet. Conservative Commentator Michael Barone, writing in the Washington Examiner on October 31, 2010, asked that the Democrats “leave the private sector alone…so it can recover from the financial crisis recession and once again create the bounteous and unscripted growth that has been the norm in American history.” (From his column “Obama’s economists missed what voters plainly saw,” our emphasis.)
So if you put the thrust of these three statements together - business controlling the steering wheel and maintaining an absolute monopoly of job creation, and trusting in the serendipity of “unscripted growth” - you pretty much have eviscerated the entire achievement of the American left since the Progressive Era, as well as the rationale for future action. And in the matter that Naomi Klein wrote so insightfully about, global warming’s perceived threat to the nature of neoliberal capitalism, the reform program managed to touch live ideological wires at all their highest voltage exposures. Just as the New Deal made business leaders realize that they then had to sit across the table and bargain with union representatives and governmental officials from the pertinent regulatory bodies, preventing global warming potentially threw the power negotiations, and future arrangements, open to yet additional interlopers: climate scientists and representatives of the environmental NGO’s. The horror, the horror…
Now the great tragedy of today’s situation is twofold, in light of these very unbalanced power equations between private economic power and everyone else in the society who doesn’t identify themselves directly as entrepreneurs. The economic policy tools which the New Deal forged in the heat generated by outside reformers are embargoed, untouchables at the philosophical-ideological level as well as the practical implementation level. On global warming, it is apparent that a majority of businesses are comfortable ignoring the strong scientific consensus for action, despite their own fascination with the technological-scientific “frenzy” represented by Silicon Valle and Route 128 and the promise that something similar might emerge from an intensified alternative energy/efficiency commitment. Thus neither a climate crisis nor an unemployment crisis can break through the ideological barriers set up in the political economy, ones that have been hardening for more than 40 years.
Let’s come back to Gene Sperling’s worldview on this duel tragedy, the depth of which he doesn’t seem to recognize. He took note of the calls for an Apollo Project scale alternative energy mission in his 2005 book, but he also observed how the volatility of energy prices undercut such an undertaking. He specifically mentions the Clinton/Gore administration’s Climate Change Technology initiative, funded at just over a billion dollars; but that program only brought it up to funding levels equal to those at the end of the Carter administration. And Clinton-Gore had to fight, once again, “low oil prices and bitter partisanship” to get it passed. The significant role of speculation in causing erratic price swings in energy markets, which the Clinton administration must bear a significant share of the blame for because of their anti-regulatory actions, has thus come back to undermine Sperling’s efforts to shift energy policy towards alternative sources. Both in his book The Pro-Growth Progressive, and his speech to the manufacturing conference on March 27th, Sperling comes across as a very incremental policy person, who will go with the main flows in the private sector, and in academic economics, even under these crisis conditions for so many of our citizens. Whole cities abandoned by the effects of deindustrialization, the Great Incarceration locking away millions, private sector union membership decimated, key technical processes sold by American businesses as the price of entry to the great China Market; all acceptable, because look, the absolute number of manufacturing employees didn’t vary dramatically between 1965-1999. But now, if the business perception of China is changing, and we’re learning that pure R & D doesn’t bear as much practical native fruit when it’s decoupled from the actual manufacturing process, he can swing back to be more favorably inclined to manufacturing. His endorsement of manufacturing’s physical reconnection to Research & Development, promising more innovation and therefore productivity increases, is a good example of the core values of Gene Sperling’s economic vision, more significant than all the conciliatory nods and gestures made in his book to various constituencies being hurt by the economic trends of 1990-2005.
Thus he wrote on page 2 of the book’s Introduction that “those on the left whose legitimate concern about protecting hardworking families leads them to call for limiting the pace of change may find themselves trying to hold back the inevitable global competition and innovation that are critical to sparking the next burst of high-paying jobs and wealth in our economy.” Seven years later, in his speech before the Renaissance of Manufacturing conference, he returned to that theme, to protecting one the core capitalist processes: “Of course, dynamism – the so called ‘creative destruction’ and fierce global competition – are facts of economic life. We can never pretend that we can or should drive them to a halt.”
And indeed, we haven’t. That Promethean Process – David Landes entitled a book about the industrial revolution, Prometheus Unbound (1969) – was surely at work from 1990-2008 and not just in the world of electronics, computers and IT. It was also at work in the financial world of derivatives, mortgage backed securities, CDO’s and Credit Default Swaps, and complex interest rate swaps sold by Wall Street banks to the school boards which served the deindustrialized towns of Pennsylvania, and to yet another famous old manufacturing place – the “Pittsburgh of the South,” Birmingham, Alabama. There the nation is currently witnessing the largest municipal bankruptcy in history, Jefferson County’s, which includes the city of Birmingham, a tale which is inseparable from the application of “creative destruction” in finance, although it is blended together with outright corruption in both banking and government.
But the process is not just one of “harvesting” the benefits from the unchained Prometheus now allegedly serving us, even for those societies who are willing to give the process special incentives, and “mountain top clearing” permissions. The question is what else accompanies the process, its intensity, pace of change and its collateral damage, such as the job eliminating process of automation – and the environmentally damaging by-products – two matters which raise the question not of Prometheus but of Faust, and a Faustian bargain. (Readers are invited to sample Marshall Berman’s 1982 book, All That is Solid Melts into Air, especially Chapter 1, “Goethe’s Faust: The Tragedy of Development.”)
Technological optimists, like Paul Hawken, were hoping that the very process of innovation and productivity, creative destruction itself, could be set loose inside of our old chemical and industrial processes to turn them, and very profitably so, into less, or even non-polluting processes with beneficial side products. But James Gustave Speth, who, if anyone did, epitomized the environmental establishment of our era, made a clean break of such optimism, arguing, eloquently in The Bridge at the Edge of the World: Capitalism, the Environment, and Crossing from Crisis to Sustainability (2008) that the intensity, pace and expansion of industrial capitalism to the rest of world was going to tsunami the modest improvements the green movement had won, and overwhelm the remaining natural systems of the earth, including its climate. Speth said that what environmentalists had been doing in the past wasn’t going to meet the current challenge, and indeed, he’s put himself on the line in the mass arrest protests against the XL Pipeline-Tar Sands Project on August 20, 2011. (Here’s my review of the book at http://www.amazon.com/review/R2APXCJ1AUCUGY )
To demonstrate just how hard it will be to change the nature of the “technological frenzy” itself and bend the process of “creative destruction” to more humane and deliberately chosen human goals – like stopping global warming, or even slowing it down - consider what’s happened over the past four years. Not only did the ideological opposition of the Republican Right and business itself kill the momentum for “Cap and Trade,” they have pushed the salience of the global warming issue way down in the polls. And these legislative tragedies have been accompanied by a sea change in the prospects for domestically produced fossil fuels from technological advances in horizontal drilling, along with the infamous procedure called “fracking,” which I have likened to “waterboarding nature.” The old fossil fuel industry – oil and gas – just as Kevin Phillips had warned in his last book, Bad Money (2008), has broken through at the weakest link in the environmentalists’ game plan for a massive shift to alternative energy: their lack of short and medium term alternatives to everyday demand (setting energy efficiency programs aside for the moment – they have their own complex story and unrealized promise).
Not only is the price of natural gas falling dramatically, thus undercutting the nascent solar and wind power industries, it is also laying the groundwork, via cheaper energy prices, for the revival of U.S. manufacturing, including new steel plants for the drilling pipes and gas pipelines, gas powered vehicles and the stations to service them, as well as many other industrial processes that can be driven by a cheaper hydrocarbon fuel stock. Although it is true that gas is a cleaner source than coal when used for direct energy generation, and all should rejoice that additional new coal plants are on hold, these are still CO2 generating sources, with the tar sand oil said to be such a dirty one that widely deploying it will be enough to overwhelm the efforts to stop massive climate warming, according to the leading scientist in the field, Dr. James Hansen.
(See the New York Times Special Section on Energy of April 11, 2012, and some of its key articles here at http://www.nytimes.com/2012/04/11/business/energy-environment/energy-boo...
If we accept the sweeping projections for these new domestic fossil fuel sources at face value, they sound like they could be the basis for an economic recovery all by themselves, and a balm for the national trade deficit as well. (If you can push the other issues raised in The Way Forward out of sight.) Indeed, the picture was so rosy I had to ask myself after reading this Special Energy section whether it was one of those advertising section disguised to look like real journalism. (It wasn’t.) Yet they are full of unknown environmental risks (like the long migration times of water and pollutants thousands of feet underground, in newly configured, fractured formations, and the long-term integrity of the thousands of bore hole linings.) This direction also threatens to divert the nation’s focus from the urgent goal of dramatically and rapidly lowering the amount of CO2 emitted, and the promise of genuine alternative energies. Already the low price of natural gas (which has fallen from $14 per thousand cubic feet to around $2.00) is undercutting wind power projects, which are slated to lose their federal tax credit at the end of this year.
So perhaps, after reading this Special Energy Section at the Times, and the breathtaking claims made for what the revival of domestic energy sources will bring, we can all better understand what must have been going on behind the scenes within business lobbying organizations and in conversations with members of Congress from 2008-2010, all working to undercut the grand hopes for capping carbon emissions and rapidly pivoting to a truly new energy regime. Already, just two weeks after the special appeared on April 11, another NY Times article was delivering part of the sobering message of this essay, that all this new economic energy is taking place against a background of technology that can produce vastly more with far fewer people. At the Timken Company, orders for steel to serve gas and oil producers are growing, and a $200 million dollar, 83,000 square foot plant expansion is under way in Canton, Ohio. However, the president of Timken’s steel group said that “425 people worked at the plant and that automation in the new buildings most likely meant that few if any jobs would be added.” (Here at: http://www.nytimes.com/2012/04/25/business/energy-environment/ohio-steel... ).
As I was working on the latter stages of this essay, I was simultaneously reading David Harvey’s 1990 book The Condition of Postmodernity: An Enquiry into the Origins of Cultural Change. I was doing so to formulate better questions, if not insights, into the shady border areas where economic changes triggers cultural change, or perhaps vice versa, in a hard to decipher, complex feedback loop. I hope readers can appreciate the origin of this curiosity, triggered by the disturbingly blunt casual explanations found in Charles Murray’s Coming Apart, where the white working class is crumbling due to its abandonment of the virtues of our Nation’s founders. Murray is not going to let them, or anyone on the left say that they became disoriented by the scope of the changes portrayed so movingly by Jefferson Cowie in his Stayin’ Alive: The 1970’s and the Last Days of the Working Class.
David Harvey’s argument, put at its grandest level, is that the changes in American cultural life, fashion, and morals, so often deplored by conservatives and pinned exclusively on the spread of the 1960’s countercultural values to the rest of society, were actually closely connected to the vast changes in the economy which began in the 1970’s. Being a writer on the left, Harvey likes to call this the shift from the “Fordism” model of production – for example, the huge, bureaucratic, vertically integrated giant conjured up by images of Ford’s River Rouge Plant of the 1930’s to the horizontally and internationally dispersed, just-in-time, low inventory, outsourcing and “contingent” workforce oriented model which was emerging already in the late 1980’s, and now is fully evolved and described so well in Suzanne Berger’s study of 500 companies, How We Compete. Harvey calls this new corporate form the “flexible accumulation” model.
Follow along with me as David Harvey conveys some of the cultural costs involved in this dramatic transition to the “new economy,” and as you do, keep in mind what economists like Gene Sperling gloss over in their assessments of the collateral damage caused capitalism’s tornadoes of “creative destruction.” Although unemployment must be our major worry in the spring of 2012, there was a whole train of troubles that followed this shift in economic forms from the 1970’s through 2000. It is the pace of change and the dramatic rise in uncertainty that color these years, and perhaps the most frequently employed words in Harvey’s book are “ephemeral” and “ephemerality.” In finance, the abandonment of the gold standard and the move to floating international currency values in the early 1970’s played a major role in driving the development of the derivatives that would lead to Michael Lewis’ portrayal of Wall Street’s “Doomsday Machine” in The Big Short. So here is Harvey making connections that we suspect would make Gene Sperling very unhappy, but that he would nonetheless, intellectually, shrug off as just the price of facing those inevitable “facts of economic life,” to borrow the phrase from his March 27th Keynote address.
"Everything, from novel writing and philosophizing to the experience of laboring or making a home, has to face the challenge of accelerating turnover time and the rapid write-off of traditional and historically acquired values. The temporary contract is everything…becomes the hallmark of postmodern living. But, as so often happens, the plunge into the maelstrom of ephemerality has provoked an explosion of opposed sentiments and tendencies…Firms sub-contract or resort to flexible hiring practice to discount the potential unemployment costs of future market shifts. Futures markets in everything, from corn and pork bellies to currencies and government debt, coupled with the ‘securitization’ of all kinds of temporary and floating debts, illustrate techniques for discounting the future into the present…Deeper questions of meaning and interpretation also arise. The greater the ephemerality, the more pressing the need to discover or manufacture some kind of eternal truth that might lie therein. The religious revival that has become much stronger since the late sixties, and the search for authenticity and authority in politics…are cases in point. The revival of interest in basic institutions (such as the family and community) and the search for historical roots are all signs of a search for more secure moorings and longer-lasting values in a shifting world. "(Pages 291-292.)
One of the tragic ironies in finance, which rises during these years to become the dominant “arm” of the economy, is that its new derivative instruments began as defensive measures – hedges - to cope with all that currency and commodity uncertainty set off by the abandonment of the U.S. gold standard. But they didn’t stay defensive for long, and a very competitive “arms race” was triggered between Wall Street firms (and later hedge funds – the lines between them are blurring) to invent the most profitable (and usually most complex and opaque) investment instruments. This led to a talent race for mathematical modelers and computer programmers, drawing in some of the best physicists and complex systems specialists as well (often lumped under the term “quants”) and resulting in books about the trends with neo-Faustian titles like Richard Bookstaber’s A Demon of our Own Design (2007).