Working People Not Sharing Economy’s Gains – How Do We Fix This?

Dave Johnson

Robert Reich says the economy’s problem is that regular working people are not sharing in the gains that the economy makes. He says the idea that bringing back manufacturing will fix this is an illusion. I agree and disagree.

In Manufacturing Illusions, Reich writes that our challenge is not so much to bring back manufacturing jobs,

The real issue isn’t how to get manufacturing back. It’s how to get good jobs and good wages back. They aren’t at all the same thing.

… But American manufacturing won’t be coming back. Although 404,000 manufacturing jobs have been added since January 2010, that still leaves us with 5.5 million fewer factory jobs today than in July 2000 – and 12 million fewer than in 1990. …

Even if we didn’t have to compete with lower-wage workers overseas, we’d still have fewer factory jobs because the old assembly line has been replaced by numerically-controlled machine tools and robotics. Manufacturing is going high-tech.

Bringing back American manufacturing isn’t the real challenge, anyway. It’s creating good jobs for the majority of Americans who lack four-year college degrees.

Manufacturing used to supply lots of these kind of jobs, but that was only because factory workers were represented by unions powerful enough to get high wages.

Reich says that while corporations are making record profits, American workers aren’t sharing the bounty. In fact wages are dropping even as jobs are (maybe) starting to return, concluding,

The fact is, American corporations – both manufacturing and services – are doing wonderfully well. Their third quarter profits (the latest data available) totaled $2 trillion. That’s 19 percent higher than the pre-recession peak five years ago.

… The fundamental problem isn’t the decline of American manufacturing, and reviving manufacturing won’t solve it. The problem is the declining power of American workers to share in the gains of the American economy.

Disagree

I disagree that “manufacturing isn’t coming back.” In many ways this echoes the now-infamous Steve Jobs line, “Those jobs aren’t coming back.” Reich writes that these jobs “compete with lower-wage workers overseas” but also that there are just going to be fewer of them because technology is replacing jobs.

OK, first, the competitive advantage of China and others isn’t really lower wages, it is the overall working conditions forced on people who don’t have a say. We can and must do something about that, or there will be a natural migration of our own working conditions downward to match the worst around the world. As I wrote yesterday, We, The People Have To Say, “No You Can’t Do That”. The choice for us really is just that stark. We must use democracy’s power or lose it.

Next, jobs or not, we have to regain our manufacturing clout in order to tackle the trade deficit, which is draining our economy. This is a fundamental structural problem.

Finally, manufacturing jobs are different from other jobs, because of all the jobs that support those manufacturing jobs. They are a canary in the coal mine, or a spotted owl in an ecosystem — it isn’t about the manufacturing jobs themselves but the overall ecosystem of manufacturing. This is why manufacturing is so important, not just the jobs directly in the factories themselves on the day the widget is assembled.

It is also the lasting infrastructure and ecosystem that comes with manufacturing — and stays. It requires enormous investment to create a manufacturing ecosystem. But once you’ve got it, it’s hard to lose it, and once you lose it, it’s hard to get it back. Not so much with services.

This is why China is targeting supply chains and not just manufacturing. They want that ecosystem. Manufacturing means suppliers and all the jobs involved there, and researchers and designers and other innovators (and their patents) follow the manufacturing. And so does the balance of trade, and the overall position on the world’s economic ladder.

Agree

And this moves us directly to Reich’s other point, which I absolutely agree with. We, the People have not been and are not sharing in the gains that “our” economy makes. This is the key problem of our economy today. This is the Reagan Revolution coming home to roost. (See this simple explanation, in charts.)

But this again comes back to having to do something about getting back the manufacturing jobs. The unions were broken by the trade deals, which enabled the 1% to say to the 99% “shut up and take it or we’ll move your job, too.” When the unions were broken the only real mechanism available to us to challenge the power and wealth of the 1% was broken. And so we stopped being able to demand a share of the gains of the economy.

Up to that point yes, the 1% were able to buy enough of the government, but we were able to organize around our jobs and say “no we will not let you …” to the worst of the ravages of 1% capitalism. This was how we were able to force a certain amount of democracy on them. But after the trade deals broke the unions and the power to organize we were no longer able to do that. This has played itself out in the years since Reagan, but now the result of these changes are pretty clear in front of our faces. The stark choices are upon us.

The solution lies with us. We need to recognize this is a fight about democracy. This really is about the 99% vs the 1%. We, The People Have To Say, “No You Can’t Do That” We have to understand what has been happening to us, how the 1% were able to use China as a wedge to break the unions and break democracy, and demand these “trade” deals be rewritten to actually help us — and help the Chinese workers. We must not continue to let exploitation and lack of democracy reward the 1%ers. Democracy really is the best economics.

This means tariffs on imports made by people who do not have a say and are therefore exploited. This way those goods do not undercut the wages and working conditions of people here. Use those tariffs to subsidize our own exports so the exploitation does not undercut our own goods in world markets. The start is understanding the equation that exploitation is undercutting democracy, which is undercutting our whole economy.

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