Why Recovery is so Elusive

There was an article, finally, in the Sunday September 11, 2011 New York Times: “Is Manufacturing Falling Off the Radar?” by Louis Uchitelle (http://nyti.ms/oUFOlr). It was the number two article on the front page of the Business section. It should have been the headline story on the front page. Well perhaps not on the tenth anniversary of 9-11. From our perspective it is a topic that should be top of mind and central to the discussions on how to emerge from our current economic condition.

Manufacturing has to be at the center of any discussion and strategy to revive and improve the economy. It is precisely the blue collar middle class jobs that we have lost in the past 10 - 15 years that is the reason we are not recovering the way have in previous recessions.

Face it; we have turned into a corporate and service economy. The corporate part is largely white collar and administrative. The only part of the supply chain that remains in this country is distribution that services the US markets. Corporations have become international entities that look to survive, thrive, and grow however and wherever they can. Lately, that has meant focusing on developing markets internationally and primarily in India and China where, coincidently, all the market growing is currently happening. This has also meant finding the best low cost venue to produce. That clearly has not been the United States.

As a result, we have been exporting jobs. This is a nice way of saying that factories close here. People are put out of work here. Entire towns and communities are turned upside down. And… eventually… we lose so many good paying middle class jobs that the middle class is smaller. Where did these people go? To the lower class where their livelihoods are merely a struggle to subsist and where there is not much hope this class of folks is going to fuel any recovery by their increased consumption.

There is an economic reality to this. It is called globalization and resetting of the equilibrium that is the result of moving from national to international markets. If the corporations left the factories and jobs here, they would have been at a competitive disadvantage. If they left the factories and jobs here, they would have had to seek bankruptcy protection and then move their factories anyway.

Bottom line, as a country, we cannot count on our corporate citizens to be overly patriotic and go above and beyond to create and maintain jobs here. We are not able to stimulate our way to recovery. The folks that used to work in factories now work… where? Retail? Food service? Their former employers are not calling them back or creating new jobs as the GDP increases? Why? Because the jobs simply no longer exist here. Companies will create new jobs and hire people in the countries where the factories are. We will increase the spending power of those peoples and thus stimulate their economy. It seems that simple.