The Buckle on the Rust Belt.

From the 1890s to the 1970, you could travel from Rochester to Buffalo to Pittsburgh to Cleveland to Dayton to Gary to Chicago to Milwaukee to Detroit, and see the beating heart of American industrial power.  It helped win two World Wars and helped keep the Cold War cold.  It provided lots of jobs at increasingly good wages to millions of workers.  American manufactured goods dominated world markets.

Then things went sour.[1]  Between 1979 and 1994, the U.S. lost half of its manufacturing jobs.  Improved technology and automation are part of the explanation.  The growth of international competition as foreign industry revived or started fresh after the Second World War offers another part of the explanation.  The domestic competition from new “mini-mills” in steel and other disruptive industries that targeted the low end of the market offers another part of the explanation.  JMO, and I come in peace, but the arthritic nature of much heavy industry offered another part of the explanation.  Bloated industrial bureaucracies and rigid work rules imposed by unions alike made American manufacturing slow to respond to challenges.

Then, in 1994, came the North American Free Trade Agreement (NAFTA); in 2001 China gained admission to the World Trade Organization (WTO).  Between 2000 and 2010, 5 million more manufacturing jobs disappeared.[2]

The human costs of successful business adaptation to changing conditions have been very high.  Old industrial cities and regions have lost jobs and incomes, and many of the businesses once supported by consumers.  Local and state governments have lost the tax revenues from these businesses, so they struggle to provide services to people in crisis.  Lots of people have lost hope.  Many younger people have moved away in search of a future that works.  Many of the displaced shifted into the ballooning service industries of health and education.  Not healing or teaching so much as filling out forms.  In some cases, however, the older people left behind with no future that works have turned to substance abuse.[3]  Much to the distress of the Democrats, the 2016 election demonstrated that these once-reliable voters could not be taken for granted.[4]

For reasons not immediately apparent to me, free trade, an open world economy, and “globalization” became the goat.  Free trade helps many American producers: 40 percent of corporate profits and 30 percent of agricultural revenue comes from foreign sales.  Also, the Gummint projects that 3.5 million jobs will be created in specialized manufacturing by 2025.  This means workers (presumably named Dave) who can run the robots.

There probably is no way of “saving” or “reviving” the “Rust Belt.”  Guys now in their 40s and 50s who walked off the high school graduation stage into a job at the plant aren’t likely to want to/be able to “retrain” as medical coders or McDonald’s imagineers.[5]  They’re close to the end of their working lives.  Soon enough, they’ll be on Social Security and Medicare.  Give them basic medical coverage and beer money.

That doesn’t mean that there isn’t room for improvement in the trade deals around the margins.  After an ugly early spat with Mexico, the NAFTA renegotiation has begun.  China is next, although there is the whole North Korea issue to tilt the scales.

[1] “Rescuing the Rust Belt,” The Week, 24 March 2017, p. 11.

[2] Economists estimate that 85 percent of these jobs were lost to automation of production.   It cuts labor costs: welders in the auto industry earn $25 an hour; spot-welding robots cost $8 an hour.  Take that coolies!

[3] Obviously, this latter issue is a much more complex story than is presented here.

[4] The recent passing of Norman Lear led to much revealing commentary in  the media.

[5] As in “imagine this is real food.”  Except, you know, those sausage biscuits (without egg) with a coffee and hash browns you get early on Sunday morning when you’re headed home?  Whole world feels fresh and new and clean.

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