An article by Erin Ailworth in today's Boston Sunday Globe ("In China, opportunity is in the air"') as well as two stories that appeared last week in the New York Times about the use of third-party vendors in China by Apple corporation reveal the magnitude of this country's economic problems. All of the platitudes about the need to build a knowledge-based economy can't counter the evidence that a huge chunk our adult and adolescent population can't read, compute, or understand scientific reasoning well enough to cope with the technological and information demands of this century. Hence, they will never be a part of a knowledge-based economy.
For that very reason, the need to invest scare funds to improve
public education for future generations has never been greater. Sadly,
however, the retrenchment of funding at the state and local levels -
fueled by a mistaken and short-sighted insistence upon austerity in the
public sector - has only exacerbated the problem.
In the
long run, of course, the migration of jobs to China and other
third-world countries will prove self-defeating: An increasingly
impoverished middle class here in the U.S. will eventually be unable to
purchase the high-end goods that out-soured manufacturers such as Apple
and other U.S. based corporations wish to sell to domestic consumers.
Thus, over time, as economic inequality continues to grow and purchasing
power erodes, the life-styles of perhaps a majority of Americans will
be reduced to that of most Chinese and Indians today.
The
problem is that, by and large, entrepreneurs and the boards of directors
of corporations do not care about the long-run consequences of their
behaviors, no matter how ill-advised self-defeating. Perhaps they have
accepted, accepted as a corporate credo, to blithely, John Maynard
Keynes' observation that, in the long-run we will all be dead.
Their sole goal is to maximize profits to please their shareholders.
Given a mind set that sincerely believes that the pursuit of
self-interest is somehow a public good, they remain oblivious to
problems such as poverty, pollution or basic principles of social
justice.
Left to their own devices, entrepreneurs and
corporations often engage in practices that have harmful consequences to
the public, notwithstanding the fact that their activities are heavily
subsidized by taxpayer money - e.g. roads, trains, airports, intangible
infrastructure such as employee training and R&D, favorable tax
policies, legal standing, and legal protection of trade secrets and
intellectual property. They also know that if they are unable to escape
the ultimate consequences of their poor decisions, if all else fails,
they can always enter into bankruptcy and re-emerge as a new corporate persona.
The manufacturing crisis in the U.S. has a long history. The migration
of American manufacturing began in earnest with the passage of the
Taft-Hartley Act. Shortly thereafter, Southern states out-bid one
another in a collective race to the bottom as they rushed to enact
"right-to-work" laws that destroyed families and unions and impoverished
manufacturing in New England and the Mid-West.
Today,
out-sourcing works even better because corporations such as
Boston-Power, Inc., Apple and other corporations can avoid the expense
of employing a domestic labor force and can thus be free of all
government regulations that concern safety conditions, workers' rights,
and wage and hour laws and pensions.
The kind of short-sighted, predatory capitalism described in the Globe and in the Times,
coupled its exploitation of vulnerable workers in the third world
whose governments and the elites who control those governments are
unwilling to protect them, appears to be the favored model of
twenty-first century capitalism.
It is reminiscent of the
kind of manufacturing capitalism that was widely practiced in Lowell,
Massachusetts at the beginning of the Industrial Revolution in the 19th
century. The difference, however, is that the descendants of those
exploited workers were able to move on and up for two important
reasons: the ability of workers to unionize and to demand higher wages
and better working conditions; and the emergence of a progressive
political tradition that, through concerted political efforts, brought
an end the worst vestiges of the First Gilded Age, including monopoly
capitalism, Social Darwinism and laissez-faire.
Unfortunately, the social mobility enjoyed by our grandparents and even
our great grandparents will be alien to our children and grandchildren
unless the apathy of citizens can be overcome and the enormous wealth
and power now wielded by the few and wealthy to shape opinions and
political consciousness can be countered.
There are no
easy solutions to this crisis, but the purported "laws of economics" are
not to be confused with the laws of physics. Economic systems do not
operate in a vacuum and there is nothing inevitable about the operation
of economic trends. Economic systems and political systems are the
products of human imagination and ideology as they are shaped by
historical forces. Economic theory itself is the step-child of political
theory.
Capitalism as an economic system emerged only
slowly as result of the disintegration of the feudal, agrarian economic
system and the development of trade and banking in the late Middle Ages
and the Renaissance. The development and justification for it as a model
was provided by the political ideas of John Locke, David Hume and Adam
Smith.
Because there is nothing inevitable about
economic trends and developments, they can be countered by intelligent
and carefully crafted monetary and fiscal policies, and intelligent
legislation. In extremis, even the "laws of economics" - as
articulated by the proponents of classical, orthodox liberal economic
theory - can be suspended by operation of law, as was required during
World Wars I and II.
All of the empirical evidence suggests
that out-sourcing, deregulation and a commitment to the myth of
"free-trade" have been major contributing factors to the loss of
manufacturing, stagnating wages and the growing impoverishment of the
former middle class. The model of the market economy, because of these
practices, is no longer responsive to the political system that was
responsible for creating and nurturing capitalism.
The
critical need is to restore the proper balance between the pursuit of
wealth as a purely private activity and the public interest. In a
democracy, citizens have the capacity and the right to imagine and to
create new political, economic and social structures and arrangements
that are rooted in a shared commitment to social justice and a
recognition of the mutual obligations that we owe to one another as
members of a political community. By law, policies can designed and
imposed to protect the rights of workers to join unions, to create an
industrial policy, to re-impose selective tariffs (as the Chinese now
do), to enact a tax code that punishes out-sourcing and domestic
dis-investment and to provide incentives for job-creation and domestic
re-investment.
All that we lack is the commitment - and a sense of urgency.