It’s not that the US doesn’t make anything anymore. It’s productivity: the ability to make stuff using fewer people, that took away most of the manufacturing jobs. Economists and investors see productivity as good. But the workers left behind probably don’t, and haven’t since the Industrial Revolution began about two centuries ago. But for most of that time, the economy has managed to deal with the results of improved productivity. For most people, it has meant more prosperity, and people displaced from old jobs found new ones. Remember that most Americans were farmers then; we produce a lot more food now with only a few million farmers, and overall we’re a lot richer.
This leads to a general notion that people displaced by increases in productivity will always find new work. This is a frequentist notion. Frequentists base predictions of the future upon past experience. The classic example of frequentism’s weakness is that of the man falling off of a 60-story building. After 59 stories, nothing has gone wrong, so he might conclude that nothing will go wrong....
So 200 years of increasing productivity, of increasing prosperity, have generally been good. But we have to admit that there have been a lot of bodies left on the roadside along the way. Think about the early mills, which paid so little and kept finding cheaper and cheaper labor. Visit Lowell for a view of that. Initially they hired New England farm girls. New England (and especially New Hampshire, where many came from) does not have a lot of good farm land; between 1800 and 1850, most of the farmers left or abandoned agriculture. So for many, a low-paid factory job was actually a step up.
This same phenomenon is still happening today in China and other places and I’m not moralizing about it, just pointing out the history. In Lowell, the Yankee farm girls gave way to French-Canadian immigrants, who worked even cheaper, then Greek and other immigrants. The mills didn’t move in the 19th century; the low-paid workers did. Eventually the mills moved south, then overseas. And the mills still here need far fewer workers per unit of output.
Yet unemployment in the US overall isn’t all that high, and some other advanced economies have relatively few workers in the production sector, or in export industries. The answer comes from economics. The economy has a multiplier: Wealth input to a local economy circulates, so each productive job creates several more other jobs. These are mostly service jobs, a broad term that can include everything from housecleaners to hairdressers to mechanics to doctors to bankers.
The “service sector”, then, is basically the multiplier that hinges off of a multiplicand (no economists never use that word) of export industry and basic production. Close the mill in and the mill workers in the mill town lose their jobs, but so do the many service workers dependent on that money.
Yes, this is about politics, and it’s about why populist demagogues (no names needed) can find a ready audience in rural areas, in small towns, and in many places away from the major metropolitan areas. It explains the electoral map, and why the “Obama Coalition” failed to hold. It was automation.
In the early 19th century, the Luddites attacked the early English mills, fearful of losing their livelihoods. In the 1960s, the word “automation” got a lot of play. Allen Sherman, the comedy singer, even wrote a song about it, albeit a fairly stupid one about falling in love with a robot. But then the talk faded, with a second peak during the Reagan years when “office automation” referred to putting computer terminals, and later PCs, on desktops. Society and most workers survived those rounds of automation. Not all, of course. But many displaced workers moved to more prosperous markets. They might end up with only service jobs in Texas or California, but at least they had jobs.
And that’s what we no longer like to talk about. Productivity tools, such as automation, have always displaced people from their homes. First off the farms. But factory towns are transient too.
New England, where I live, is mostly forested nowadays. There are big urban and suburban areas, but former farmland returned to forest. Some remote towns have fewer than half as many people now as they had 200 years ago. One town I am familiar with had iron mines, forges, and farms. Then the train passed through a nearby town, making that one less competitive. Most people left. Today its land produces good lumber — a sustainable crop — and maple syrup. And many of its residents have a long commute to jobs elsewhere. The big displacement was so long ago that there is no pervasive sense of poverty; there just aren’t many people.
Now turn to the midwest (and places like it). The factories (and mines) that prospered there in the decades after WW II were no longer competitive, in a globalized economy, or else they simply make do with more automation and fewer people. Bringing back more factories won’t bring back that many jobs, but frankly even that isn’t going to happen. And without the factories, the multiplier jobs go away too — unless the town in question gets particularly lucky, and gets a new export industry (that doesn’t just mean export from the country, just something bringing in money from outside of town), it will never regain prosperity. It will never be “great again”. Detroit itself has a better chance of a comeback simply because it is part of a major metropolitan area and the job market is naturally more diverse. Kentucky mining towns have no such opportunities.
The natural course of such towns is for people to leave. There are supposedly jobs elsewhere, even in “service”. Silicon Valley needs its servants, as does Wall Street. But that involves going there, and nowadays the cost of housing is so high in key coastal markets that service workers literally can’t afford to live there. Jobs go begging because there’s no place for the workers. And where there’s housing, there aren’t jobs.
Automation rewards capital, not labor. It is the natural course of capitalism, wherein wealth concentrates among the few with the most capital. With fits and starts, we’ve actually done okay with capitalism, but it has always worked best when the government intervened to help the displaced. That’s a missing element from today’s Randian Republicans: Government mostly helps capital, not workers. Obama didn’t do enough, it seems — actually Congress wouldn’t let him — but Drumpf wants to do far less. This will get ugly.
But it’s also quite possible that the multiplier has reached its limit. The frequentist fallacy will be proven in here too, that after 200 years of finding new work for people displaced by productivity improvements, it may not be possible any more. We just don’t need that many workers, even if they are willing to move. In a capitalist economy — and this rises to religion in America — one’s income must come from work (unless you’re very rich). So survival comes from having a job.
Now there is work that needs to be done, as the US public infrastructure is in pathetic disrepair, but it requires the public sector to pay for it, and that’s not forthcoming. Trump’s “infrastructure” talking point is a farce, basically just a plan to give tax breaks to hedge funds who invest in toll booths. Some European societies are farther along in decoupling work from survival, but the concept of permanent dole, or guaranteed minimum income, is anathema here.
And just paying people to not work, while possible, fails another test. Work gives people dignity, and that’s a basic requirement too. It’s hard to quantify dignity, so economists ignore it, but even crap jobs like mining coal and working on an assembly line provide dignity. The dole doesn’t. This may be one reason why the working class people are so easily taken in by racism — they seek dignity from identity, since they can’t get it from accomplishment. If other avenues of dignity were provided, it might undermine racism.
Solving all of this is not going to be easy. There are several problems to be solved, and politics does not favor complex solutions when a simple one will do. If we’ve really reached the state where automation makes too many workers redundant, the market won’t solve it. But if we ignore the underlying issues, we will all be their victims.