Thursday, October 15, 2009

The “Gravy-Train” Crashed in a Fiery Ball of Destruction

The illusion of riches that could be made in the service sector was so strong that nobody wanted to invest in manufacturing. The problem is this: manufacturing is the only way to generate “real” wealth.

The service sector can never be the foundation of a stable and sustainable economy. Manufacturing is the only economic activity that can generate new and “real” wealth. The service sector can only re-distribute existing wealth. Service industries have only one long-term economic function. They siphon money from the consumers and concentrate riches in the hands of a few wealthy individuals. The long-term effect of an economy that is dominated by an unconstrained service sector is an economic collapse that will lead inevitably to another Great Depression.

Stable and sustainable economies must be built on a manufacturing base! Only the production of “real” wealth can sustain healthy economic growth. The workers have to participate in the growth of wealth or consumer spending will become inadequate to sustain economic growth. “Real” wealth can only be created by extracting resources and using them to manufacture goods. For example, no “real” wealth is created if you pay me thirty dollars to clean your house. This transaction adds thirty dollars to the GDP, but it represents the transfer of existing wealth and not the creation of new wealth. The service sector can only redistribute wealth that already exists. Generating new wealth requires a significant and robust manufacturing sector.

After WWII the American manufacturing sector was the “manufacturer to the world”. All products of relatively sophisticated design were produced for consumption in America, and the world had to either buy our goods or go without. During the first three decades after WWII America produced a vast middle-class and a vast reservoir of wealth. This period represented the pinnacle of American economic power and stability.

The American economy was transformed by the domination of the service sector in the last 30 years. Entrepreneurs focused on creating service corporations, and corporate raiders made billions of dollars dismantling our manufacturing sector. Now only about 10% of the American workforce is engaged in manufacturing (according to the CEO of G. E.).

As manufacturing decreased, the amount of new wealth generated by American workers also decreased. At the same time, the service industries were transferring the existing wealth from the middle-class to the wealthy at an alarming rate. The only way to maintain economic growth was to convince consumers to burden themselves with a vast debt so that they could continue to consume goods and services. Our current economic crisis is the inevitable consequence of “forcing” economic growth by increasing consumer debt. In other words, “debt-based” economic growth is not a sustainable economic strategy. The “gravy-train” of the service sector hay-day is over. That fiery ball of destruction on the horizon is the crash of the service sector “gravy-train”.

The choice is clear. Imagine your boat sinks five miles from shore; your choices are to either swim the five miles to shore, or to give up and drown. Our economic choice is just as obvious; either we do the hard thing and rebuild the manufacturing sector, or give-up and sink into economic oblivion.

1 comment:

  1. The transformation of the the U.S. economy from a maker of goods to a seller of services had it's nexus with the demise of union jobs in the early 1980's under President Reagan. The precedent for governmental dismanteling of unions began with Reagan smashing the Air Traffic Controllers Union. Union membership in private industry has fallen from over 35% in the 1950's to less than 8% today (U.S. Dept of Labor and Statistics). Perversly, union growth in the government employment sector is on the rise. Paralleling the loss of family wage jobs with union benefits has been the shipping of those very jobs overseas. Free trade agreements(NAFTA et al)have proved to be the straw that broke the middle-classes back. The giant sucking sound of the loss of minimally, three million jobs overseas is drowned out by the cash flowing into corporate coffers akin to a four card deck shuffling machine. Today, there is a greater concentration of wealth and disparity between the haves and the have nots since the halcyon days of The Great Gatsby. The resulting shift from a manufacturing based economy to a service sector one is not sustainable; as was evidenced in the recent and massive government bailouts of our private financial services corporations. We simply go from one bubble to the next one. Housing to banks, stocks to commodities and then the cycle of boom and bust is repeated because the losses are assumed as national debt. American families have gone from one bread winner to two, are more productive and work longer hours than any other industrialized country and yet real purchasing power declines and personal debt climbs. Fifty Percent of the children in the U.S. will know food stamps during their childhood. Why all this goes unaddressed is one of the great snow jobs of history. The lie is perpetuated because we are blanketed in a perpetual state of fear(another lie). Commmunism, nuclear holocaust and now the indefinate, undefined "War on Terror" is the smoke and mirrors of our military-industrial complex. The raising of social consciousnes that is necessary to break these shackles of bondage is nullified by the promulgation of a desensitizing popular culture. A dumbing down, if you will, of America that is sponsored by the corporate behemoths who pull the strings in our elections. The choices left us are vague and few: education, communication, citizenship- and pray.