03/04/10 Baltimore, Maryland – Miserable cities…ghost towns…angry voters…
Market flash:
The Dow was flat yesterday. Gold rose $2. And Greece said it was making progress towards cutting its deficit.
Yesterday we looked at America’s most miserable cities. Today, let’s take a gander at its new “ghost towns.”
There are many towns and cities that are losing population…losing key industries…and probably on the verge of extinction. USA Today mentioned some of them in a cover story this Tuesday.
Ravenswood, W. Va., for example. It has 4,000 people and one major business. It’s a one-horse town, in other words, and the nag is leaving. The aluminum works are partly shuttered already, says USA Today; the rest is for sale.
What’s going to happen to Ravenswood? It could become a ghost town.
There are already dozens of towns in West Virginia that are inhabited mostly by ghosts. They’re relics of the booms and busts of the past. Mining, logging, railroads – each one created it own towns. Then, the profitable industries of the 19th and 20th century became unprofitable somewhere along the line. People left. Those who remain live among the shades.
The booms and busts of our time are simply claiming more victims. Cleveland is losing population. So is Baltimore. So are dozens of US cities.
“In the America where things are made the recession has a depression,” continues the report. “According to a new Northeastern University study, one in every six blue-collar industrial jobs have disappeared since 2007.”
And one in five adult males of prime working age is out of work. There are fewer and fewer factory towns in the US…and fewer and fewer jobs for people who work in them. And now comes word that auto sales in February fell nearly 4%. And early estimates suggest that the job report coming tomorrow will be depressing.
“Industrial workers are dinosaurs,” says one laid-off worker, now retraining to be a traveling nurse.
Hmmm… Let’s see. How does this work? No one makes anything anymore. We all become service industry workers…looking out for one another. I give you $5 for cutting my lawn. You give me $5 for cutting your hair. Neither of us has a penny more. How then do we afford to buy anything?
“An industrial town makes products that bring wealth into a community; a post-industrial ghost town as a zero-sum economy – people in marginal jobs ‘serving and paying each other,’” says USA Today.
Services don’t make people wealthier. They may make them more comfortable. But real prosperity requires real stuff – food, cars, tables, light bulbs, iPads.
Of course, you could offer services to people who make these things. A small nation, such as Singapore, for example, could earn a living by offering financial services. A Caribbean island could offer vacations. But what can a great nation like the US offer? It can’t get by on services. And it can’t support half its population on welfare, unemployment and food stamps. It needs manufacturing…it needs to make things…and sell them.
Why doesn’t it do that already? How come so many people are out of work? How come men can find jobs?
Ooh la la…too many questions. But when was the last time you heard a mother proudly announce that her son was going into manufacturing? Or that he was learning to be a machinist? When was the last time you saw a major factory under construction? When was the last time you picked up something in a shop, turned it over and found “Made in America” stamped on the underside?
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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I’ll tell you why…. because mfg is more difficult, what we have now are what someone coined a long time ago “hollow corporations”. A mfgt plan needs so many people, departments and specialized knowledge that modern “Chief Whatever Officer” prefer to run simples businesses.
Said by someone who proudly works improving processes at a manufacturing plant….
Nursing sounds downright useful compared to “service” jobs I see here in LA: everyone here is a dog walker, hair or nail stylist, or realtor.
Now even small law firms have jumped aboard the outsurcing bandwagon:
bigdebtsmalllaw.wordpress.com
Kids are borrowing 150 K and up for law school while the ABA and big firms are shipping legal work offshore at a pretty fast clip. See ABA 08-451 the infamous “outsourcing” green light. Bunch of criminals.
What a complicated question this essay poses–the only solution here is that a new paradigm is needed–wealth, money, work; these are outdated concepts that need to be scrapped. Of course, many people have no respect for blue collar workers. But who can blame them? Companies don’t want to pay them a US living wage, so their jobs are outsourced to children in the Third World. But wait! Why do we need people to build McMansions that will be bought with subprime mortgages? Why do we need to scrap cars and pay people to buy new ones, just to keep the factories running? Cars in particular are a product that lasts much longer than before–60s and 70s cars at 100,000 miles would have smoking engines and rotted out bodies–ready for the junk, but today cars easily get to 200,000 or 300,000 miles or even more. So, we have to force people to scrap them. What folly!
The world changes, economies change but this is the beauty of having a capitalistic democracy. Sure manufacturing has faded and is staging a bit of a comeback as the numbers show. But other industries fill the gap. And that’s exactly what the service sector is doing.
We saw great productivity numbers today. Much better than anyone thought. Somebody’s obviously making something. And more importantly, we’re seeing much brighter skies on the job front with claims moving down again on the 4-week average.
These are all good, positive points that can’t be overlooked. While manufacturing lulls, other industry grows.
1. What’s going to happen to Ravenswood? Die a slow agonizing death, those with marketable skill will leave the rest have nowhere to go.
2. How does this work? It does not.
3. How then do we afford to buy anything? We service the rich and the rest trickles slowly down the chute.
4. But what can a great nation like the US offer? Nuclear deterrent.
5. Why doesn’t it do that already? Obvious reasons we can’t compete.
6. How come so many people are out of work? See the answer to number 5.
7. How come men can find jobs? See 5 again.
8. But when was the last time you heard a mother proudly announce that her son was going into manufacturing? Happens everyday in China.
9. Or that he was learning to be a machinist? See answer number 8.
10. When was the last time you saw a major factory under construction? 8 again.
11. When was the last time you picked up something in a shop, turned it over and found “Made in America” stamped on the underside? It’s going to be a while.
Market flash: the Dow went up today and it’s in the black for this year! Recovery is on again. AIG resents the public, and believes that they are entitled to the bonuses that they are paying themselves.
The current market is a lot like the newly released DVD Zombieland. There is a lot of movement, but they are all just walking dead. Get the picture!
Service industry can only exist if it service people who produce (manufacture) surplus after having enough food on their table. With US manufacturing gone past its youth and now well into its last phase, there is no way any service industry can sustain in the US, including Obama’s health services plan.
Once again people have outsmarted themselves. There is a line that gets crossed at some point where people in power become stupid again. Tax, regulate, impose fees, tax again, spend the tax, spend $1,000,000.00 to save $100,000. Tax the income, tax the things I buy with my income, tax the income I make on my savings, when I sell something that I paid tax on the income, and sales tax on the item, then tax me again on the proceeds of the sale. After I pay tax on my income tax me .50 cents a gallon on the gas that I buy with the money I already paid tax on. So I need $35.00 an hour plus to put lug nuts on an American built car so I can afford to live and pay my taxes. The easy work is spending the $$. Congress!! The hard work is figuring how to get by on what you have. All these so called educated people and they still can’t figure it out. Or maybe they are just to lazy.
recently I bought a ten dollar plastic toolbox at Walmart made by Stanley. Much to my surprise it is stamped Made in America…I almost fell over!
Wheel of history crash every system sooner or later. It crashed a powerful Roman Empire 1534 year ago. It crashed a mighty England which once controlled half of the world. Crashing systems losing a common sense is history’s specialty. Cracks in an American system are already gaping holes but the band is still playing service waltzes. Bill Bonner is right.
Even “real stuff” has more and more “service content”
Take the iPad you mention.
What part of the price consists of real manufacturing cost?
And what part of it consists of services like design, programming, research, marketing,…?
That’s why it hardly matters that the iPads are made in Taiwan.
And this is becoming the situation with more and more “real stuff” products.
A few centuries ago 90% of the people worked in agriculture. They also wondered what they would do when their agriculture jobs disappeared.
The same is happening now with manifacturing. It will gradually decline to 5% of the jobs, maybe even less when robotics come of age.
What will people do?
Research, leisure, design, health care, programming.. maybe only a few hours a day. But if that’s all it takes then the wage will be enough to pay all living expenses.
A new post manufacturing economic model will slowly emerge from the ashes of the old one. Who can say what it will entail but the transition is going to be painful for many. The old model consisted of buying oversize McMansions we didn’t need with money we didn’t have to impress folks we didn’t like. Same thing with our oversized cars, big screen entertainment centers and all the other superfluous trappings of modern day “life” in America. Change can be good, the old way of life was wasteful, destructive to the environment and meaningless. We had become a nation of mindless “consumers”
MakeSense–I like the way that you are thinking but it might take a while for that to happen. And, the iPad also I’m sure includes a mark up for brand recognition and trendiness.
Kruz–that is true. The old way of life was morally bankrupt. You aren’t what you own.
LIVING OR JUST EXISTING AMONGST BILLIONS
OF OTHER REDUNDANTS CONSUMING SCARCE RESOURSES.
The notion that we can’t compete is idiotic. American workers are the most productive in the world. We don’t compete because both political parties are devoted to one particular ideology and make policy based on that ideology. We can compete with any country that doesn’t allow child labor and virtual slave labor, that doesn’t allow corporations to just dump whatever they want into the air, water, and soil. For 40 years, we’ve been walking and then running down this path where we completely open our markets to anyone who wants to sell here without demanding the same from them and without demanding that their businesses are forced to respect basic human rights. No one can compete with that.
Go to a major manufacturing city in China and take a look at what you see. I’d rather live in a dying town in West Virginia than try to breathe the air or drink the water in those Chinese manufacturing towns.
I think “Made in America” isn’t all that important. “Designed, marketed, and sold by an American based company” is more important. Why don’t people think “global”..?? If you like in Ohio and want to manufacture something, and make yourself a profit, where will you make it..?? The cheapest place possible while keeping enough quality to continue selling. If this is in Ohio, Kansas, Peru, Thailand or California… well..?? It used to be people had things manufactured locally, then regionally, then nationally. Only ‘exotic’ items were sourced internationally. Today the ‘world’ is ‘local’. Need a replacement hard-drive..?? It doesn’t come from a warehouse in your state or even the USA… it often comes direct from the local of origin. “Go West Young Man” still applies… it’s west all the way to China now.