According to the National Bureau of
Economic Research, the U.S. has been in a recession since December 2007.
According to “official” measurements, we came out of that recession. But most
Americans would not recognize that technicality, and we feel we’ve been stuck
in the economic doldrums for at least the last four or five years, if not
longer.
Many are calling this the worst
recession since the great depression. No doubt the news is bad and all the major economic indicators signal that growth is glacial. The question on most people’s minds is how long will this recession last.
It is frustrating to read about all the bad news making headlines everyday
and it would be nice to read a positive headline such as, “US economy adds 500,000 jobs.“
Jobs and unemployment is really the key
issue to most Americans. Pay stagnation and loss of our usual
optimistic view of the future are all symptoms of the malaise. Many are looking
for a political solution to the problem. If only the political party that they
support could get control and increase / decrease government spending or
decrease / increase taxes or enact more / less business regulation, then the
problems would be solved. If only the economic stimulus had been larger /
smaller or the banks and wall street could be punished / unfettered, then the
economy would spring back to life and the great “Middle Class” (that is all
anyone talks about in an election year) would reemerge as the marvelous economic
engine that it has been in the past.
There is no doubt that the middle class
is the key. It is the size and economic power of the middle class in America
that has been its economic strength for seventy or more years. We are concerned
about the poor, and many complain about the contrast between the “haves” and
the “have-nots,” or the difference between worker pay and CEO pay. We talk about raising taxes on the "rich," and blame the 1% or 2% as if it was all their fault. Political campaigns are full of finger pointing and dire
predictions, but is this really a political or even an economic problem? To me,
that is the question.
I wonder if it isn’t, at its core, a
technological problem. Things change. We’ve already witnessed in our recent
history sweeping economic and political change driven by technology. Whether it
is the industrial revolution driven by steam, or the early twentieth century
revolution driven by the automobile, or the current revolution driven by the
computer. Technology is causing great change.
Consider the Amish of Pennsylvania.
They deny change. In order to maintain a consistent and orderly lifestyle, they
refuse change. By keeping it simple and consistent, they protect their society
from the impact of change. Along comes the automobile … no need to change, keep
the horse and buggy. A society based on agriculture transitions to
manufacturing … not for the Amish … keep living off the land. The advantage is
that grandpa is not obsolete. He is needed for his skills and knowledge because
those skills are still vital.
It is a quaint and effective method to
maintain a society, but it doesn’t work for most Americans. As we are reminded
regularly, this is a global marketplace and we must compete. Looking for a
symbol of obsolescence, it is the buggy whip maker. With the exception of the
Amish, the buggy whip maker just has no place to go … to market.
It is sad but true. Only when the buggy
whip maker wakes up to reality and changes his or her profession will the
problem be solved. I grew up hearing economic explanations that included the
poor buggy whip maker. You didn’t want to be one. The underlying idea is that
the buggy whip maker’s time has come and gone. Change is needed. The concept is that change is good. It is only those that don’t recognize the need for
change and insist on keeping the old ways that will suffer. The poor buggy whip maker!
Now apply that message to our situation
today. Most have already noted the loss of manufacturing in the U.S. Often we
blame that on outsourcing and exporting jobs to China. Certainly the globalization of industry
has a part in the change. But, in fact, that is technology too. Modern
transportation and communications, including worldwide computer networks and
the Internet are part of that shift in manufacturing. Imagine that a car can be manufactured in Asia, and then transported across the wide Pacific Ocean to the U.S. and sold in competition to our domestic industry. Yet that is what is occurring today. The transportation and communication technologies have made this possible.
But I think the bigger shift is coming
through automation. While automobiles used to be assembled by thousands of well paid workers, now we see robots welding and big
machines assembling the cars. It is similar in the technology industries.
Automation and robots have reduced the number of workers required to assemble
everything from televisions to computers to the manufacturing of the wafers and
chips themselves.
There are still workers required, but fewer workers, and possibly more important, more highly trained and educated
workers. Someone is running the robots. The automation is doing the jobs of a
dozen workers, and one highly skilled worker is programming and running the
robots. The new jobs are in the robot manufacturing.
Dozens of laborers digging and shoveling on roadways have been replaced by giant machines that smooth, grade, and lay the pavement. Farms are harvested by great machines. Mines are dug by powerful machines. Even the grading of school papers and counting election results are done by machines.
This country used to have well paid
jobs in places like the steel mills and automobile factories. These jobs had
good pay and good benefits. They didn’t require much beyond a high school
education to perform. Well, that’s today’s buggy whip makers. These good and
well paid jobs for relatively untrained workers are gone. Many moved overseas
and many were replaced by automation.
Further, the income from these well
paying jobs allowed average Americans to become world-class consumers. We
bought cars and trucks, boats and RVs, houses and vacations. And that
further enriched our economy as the marginal propensity to consume fired a
great commercial class selling us those cars and trucks, boats and RVs,
houses and vacations. Everything was humming like a speeding locomotive.
Speaking of locomotives, modern trains
didn’t require as large of crews to operate. For many years the unions tried to
ignore that fact and invented “feather bedding” and “no-work” job positions to
protect the workers. But inefficiency never protects anyone. A failure to
recognize just who is making buggy whips is bad for our economy.
Early aircraft had large flight crews
with pilots and copilots and engineers and navigators. Stewardesses (that we
now call flight attendants) had glamorous and well paid jobs, and air travel
was comfortable. But then competition … and improvements in technology
… came along. Now airlines are wobbly enterprises and passengers no longer even
get a hot meal on a flight. Although we may wish to go back to the “good old
days,” it really is a technological and economic shift that, like entropy, you
just can’t reverse.
Consider the lowly garbage truck worker. At one time there was a driver and possibly several other workers who would fan out in the neighborhood, collecting trash cans, and dumping them by hand (and back) into the truck. There were a lot of injuries and problems with that method. In our municipality, the city gave out large carts on wheels. Now two workers would arrive. One would roll the cart to the truck and connect it to a mechanism that lifted the cart and dumped the contents without effort or injury. A few years later and the trucks and carts were replaced again, this time with large robot arms that pick up the cart at the curb. Now only one worker is required to collect the garbage.
Another trend supported by modern technology is mergers, acquisitions, and consolidation. Small businesses are replaced by giant corporations and coast-to-coast franchises. Although many view Wal-Mart as a company built on the backs of poorly paid workers, in reality the great success of Wal-Mart is more due to modern data processing. Giant computers in Arkansas process the previous day's sales and identify trends, order new goods, and manage a transportation system that carries these goods all across this land. The mom and pop store has been replaced by Wal-Mart, PetSmart, Home Depot, and the restaurants replaced by chains from McDonalds to Red Lobster. The service station attendant has been replaced by the self-service pump. The technology of advertising and leveraging economies of scale aided by the ever present calculating and computing machines has reshaped the commercial landscape.
Consider all the other business areas affected.
Offset presses are replaced by digital copiers, libraries are replaced by the
Internet, police directing traffic on the corners are replaced by signal lights.
Even lawyers are being replaced by web sites. We’ve all seen advances in technology replace the old ways of doing business …
if not entirely, then at least partially. And we’ve also seen many businesses
fail because they didn’t change with the times.
My grandfather was a grocer in the 30’s
and 40’s. He was part of the revolution called “self service.” Prior to that
the grocer would reach onto high shelves behind the counter and get down the
item requested by the customer. The new way of doing business was to let the
customers pick out the item for themselves. Instead of the clerk taking
the money and sending it up to the cashier in a small basket, that was replaced by the
cash register, or in today’s markets, the laser scanner that the customer uses
to check out their own goods … and pay with a little piece of plastic.
Most of us have lived long enough to
witness giant leaps and bounds of technology and how it affects our daily
lives. That new technology is affecting business too. Who would seek a job
today without skills in Microsoft Word or Excel or knowledge of computers in
general?
That is my thesis. The current “Great
Recession” and particularly the slow job growth has much more to do with a
sweeping technological change in the workplace rather than a failure of wall
street and banks or the housing market or a political failure due to the poor
policies of the Democrats / Republicans.
The solution: obviously it involves
education and re-education, job training, better schools, a different attitude
of our students today, and about a thousand other things that need to be tried,
improved, or emphasized. My point is that as long as we try to boost the buggy
whip manufacturing in our country, the greater the great recession will
become. Make work, job stimulus, government spending is not going to create new
jobs in areas that just don’t match our modern society and technology. Some
things must be left in the past. We can’t all become like the Amish and keep
our old ways.
You can’t go back. “And, when you can't
go back, you have to worry only about the best way of moving forward.”
―
Paulo Coelho,
The Alchemist
There is a place for government. Transitions of this scope are not going to be easy, and people will need protection from the negative effects of change. I'm not suggesting more government spending nor less. I'm arguing for clear priorities. There are buggy whips in some old government programs too. How can we maximize the investments made by the market and government to truly respond to these changing conditions? Some say the Pentagon is always fighting the last war. Is congress always responding to the last crisis? Is what worked in the Great Depression going to solve the Great Recession? Or is new thinking required? What should be the priorities for government spending in this twenty-first century?
How must businesses respond to these changes? How must American workers respond? Schools? Institutions? Charities? Investors? Tax payers? The news media? The public?
It is a new world, reborn. The future
belongs to those that grasp this simple fact of the future -- change! The horse and buggy
is gone except for quaint county fairs, museums, and central Pennsylvania. Take
a serious look at your skill set. Are you a buggy whip maker? Are you training
your children to be buggy whip makers? Do you yearn for the return of the buggy
whip industry?
And most important, is the U.S.
becoming a country of buggy whip makers? What is the solution? I think the
first step in solving the problem is clearly understanding the problem. I think
the problem is really one of technological change. The world will change. Will
we change with it or be left behind … with a buggy whip in our hand?