President's Journal - January 2010
The Industrial Revolution - great name!
Historical moments in time require a label, a name, or a category, like the Industrial Revolution, so that the future may find this thin piece of history quickly and easily from the bookshelves of our story. So here it goes, but first let’s throw away some of the names already tried: This is not a Depression. This is not the Great Recession.
This, is the Great Adjustment.
I like this term, because it most accurately describes the times that began for the United States in September of 2008 and continue to this day. Terms like Depression and Recession suggest a cyclical nature to economic times. Adjustment, especially Great Adjustment, suggests a permanent and severe change (within that context, of course, there will still be smaller cycles and pendulum swings, but it’s important to understand the difference from before). Clearly, once we have collectively accepted the fate of a Great Adjustment, and accepting fate starts with our use of accurate if not cruel language, the faster we can build new, positive, less fearful solutions- a bridge to the future- together.
But the nation will face a great challenge in adjusting to the “new normal”, as they say. People on Main Street strongly sense the challenge, with fear and anger, swinging wildly to the false comfort of the extreme left or right for a simple, comforting if not conspiratorial answer. A growing number of politicians, academics and Wall Streeters are now beginning to understand the challenge and dangers too, though reluctantly.
But our private and public sector leaders have not begun to adjust policy, let alone contemplate the short and long term consequences, so that we may build solutions.
If you don’t believe me, let me suggest that the country’s future has already been revealed, over the past decade, in Michigan.
Its time for the rest of America to realize that the “current economic downturn” is not an anomaly; that we are not simply riding out a return to our pre-September 2008 selves. We, in Michigan, are ten year victims of such shortsighted thinking. Michigan has yet to adjust its public policy, government structure, business reforms or even annual budgets. No economic development priorities with limited resources have been set at all. As unpleasant as it is to contemplate, the Great Adjustment is the new base from which we must build upon. The sooner we all realize this point, the faster we can get to work rebuilding this economy from its core, from our GDP.
Again, back to that language thing. GDP stands for Gross Domestic Product. It seems to be the absolute bottom line assessment of our well being as a nation. As a little reminder, it is not called, GDS, Gross Domestic Services, and for good reason. Making value-added things for export is still and always will be fundamental to an equitable, therefore healthy, and forward moving economy and nation. And no matter what anyone says, low tech or high tech services are, in the end, 100% dependent on the making of value-added things that creates the many middle class jobs, i.e. customers for those services. That is an absolute.
Over the last decade, in Michigan, we have lost the precious balance between manufacturing and service economies. And I fear, the nation’s turn is now coming.
America take note.
Michigan lost over 700,000 manufacturing jobs since 2001. Can you imagine that, in that short of a period of time? But forget the jobs. Multiply each one of those numbers by a family of four. Three million of a population of ten million. Then, think middle class families. You know, that huge portion of our population that is not really equipped to go to college and become attorneys, stock brokers, web designers or nurses. But these people are good with their brains and hands and hearts. For decent pay, they made things. With that pay, they sent their kids to college, provided them with excellent health care, bought a good house, paid a lot in taxes to support fire, police and schools, went to dinner and the movies, maybe bought a cabin up north, bought a boat, bought a flat screen TV, bought a nice car(s), travelled, and so forth.
In other words, this class of people was the key to consumerism and a high quality of life. Thus, they were the key to the U.S. economy.
But that has been adjusted in Michigan and is perhaps beginning to be adjusted nationwide.
The point of naming this period “The Great Adjustment,” however, is not simply us settling to live out our days without the things and middle class enjoyment we once had. It is to set a new foundation from which we grow. It would be easy for us to say “this is the way things are going to be forever more,” but if our forefathers had taken a similar attitude in those dark years just before the industrial revolution, where would be today?
But, first, we have to be able to have a dialogue about manufacturing without being labeled woebegone ourselves. The issue is serious and requires legitimate discussion.
I mean, to talk of manufacturing and unions seems tantamount to talking about the return of dinosaurs. To suggest fairness for free trade, is protectionism. To question the wisdom of an economy based on just services, is, well, anti-new economy. Michigan, synonymous with manufacturing and unions, was perhaps seen as an embarrassment to the rest of the country. I think people on Wall Street, in the south, on the Coasts, in Washington, pretty much thought that Michigan was getting what it deserved over the last ten years. And so they turned their eyes away from the carnage, creating bubbles of safety instead of listening to the canary’s warning.
Yes, Michigan has been enduring, quietly, stoically, with its usual pride, dignity and toughness, a Great Adjustment for ten years and counting. It is a jobless recovery because the manufacturing sector has been slaughtered and there is no replacing it. The recession doesn’t stop. It doesn’t cycle. It only gets slowly worse and worse. Jobs have been permanently eliminated by the ruthless and short-sighted outsourcing by companies that have forgotten the fundamental premise of Henry Ford and successful capitalism- pay your workers enough to buy your product and a middle class life. Worse, the manufacturing jobs are gone- forever, for the most part not to be replaced by worker re-training programs or new “service-oriented” industries, green and global and hopeful as they may be.
Not only has it devastated millions of people’s lives, permanently, but the real surprise is that our entire, grand state has been left emaciated, slowly wasting away. A death by a thousand cuts.
Take note America.
Manufacturing, even in this new and exciting global, high tech age, is still fundamental to our entire middle class lifestyle.
It’s even harder to adjust when you were once rich. Michigan was rich only ten years ago. Now, it is poor. Michigan’s average wages went from top ten in the United States to bottom ten. In suburban school districts, schools are being closed, teachers laid off, art, music, sports and bussing- eliminated. In-state tourism has dropped. Cities and counties are wiping out three quarters of their law enforcement.
Yet, from here, the Great Adjustment is now our opportunity to rebuild Michigan to its former greatness, to bring back our product-based economy side by side with new economy industries. To return wages beyond just livable levels and restore our superior services, education, and public protection. It isn’t going to happen with just a service economy, it’s going to happen in the industrial parks and cities also. We, as a state, need now to wake up and make it happen. It’s a mix of all economies- let’s be inventive about them all, but be careful not to throw out manufacturing.
In fact, let’s re-create what makes us great, an entrepreneurial environment, connecting cities and universities, building a sense of place with high tech jobs, let’s connect to the global economy in very smart ways, but let’s also have a true manufacturing policy with effective tools. I think there is a way for the world to rise, but without the United States collapsing as a consequence.
It is also the time to ask our multi-national CEOs- are you really sure it’s good for your business and good for your country to outsource more than 75% of your manufacturing base or supplier base?
Perhaps the first, small step for Michigan and a good forewarning to the entire country, is to start calling this period of time- the Great Adjustment.
Then, understanding what we are up against, together, we will find our many solutions.
