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.