Strengthening Constitutional Self-Government

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America’s New Norm

The first page of today’s New York Times describes Columbia, SC as "an ideal listening post. According to a range of indicators assembled by Moody’s — from job growth to change in household worth — this metropolitan area came closer than any other to being a microcosm of the nation over the last decade." What makes it typical?

The Carolinas may conjure thoughts of textile mills and tobacco fields, but Columbia has a diverse economy. The state is a major employer. So is the university, along with hospitals and banks. The Fort Jackson Army base employs 9,200 people. United Parcel Service has a regional hub here. Michelin operates a tire factory next door in Lexington County. The Computer Science Corporation develops software north of the city.

If that’s the mix that makes Columbia typical, it raises an interesting question about the current economic difficulties. The votaries of President Obama suggest that the troubles are primarily in the private sector. There was speculative excess and a lack of regulation that led to the crisis, and to a middle-class squeeze that has lasted several years. But what if part of the problem is that the public sector, and the service sector has grown too big to be supported by the rest of the economy? Note that only Michelin and the software company actually made something. And what if it is regulations in the use of land, in employment, in how to minimized the impact on the environment that, as much as anything, has caused America’s industrial and agricultural base to shrink?

Given the options, it is prudent to give Obama’s view a try. From his perspective, the problem is that the economic model America has developed since the 1980s is no longer functioning. But what if the problem is that the model we’ve had since the 1930s is the problem? After all, viewed from the perspective of the US as it appeared in 1929, in terms of regulatory bureaucracy, labor law, environmental law, the size of our manufacturing and agricultural sectors, etc., rather than from the perspective of those who wish for ever more laws and regulations, the changes Reagan made were minor. If the problem is that in the US to a certain degree, and in Europe to a greater degree, the modern social welfare state is not viable in the long term, it will be even harder to get out of the current mess than many suggest.

Discussions - 5 Comments

Where to start... Suffice to say, the speculation here - that the growth of the public sector is responsible for the destruction of America's manufacturing base - is risible. Pick up a newspaper some time, or if you're up to the challenge, some recent economic writing and encounter a phenomenon called "globalization" and more specifically, "outsourcing" and "offshoring." This is the result of your beloved "free market" (so-called), the global race for comparative advantage by which the U.S. was supposed to become the world-leader in high-tech and information services (leaving a formerly blue collar working class with jobs at Wal-Mart and Jiffy-Lube), and leave manufacturing to low-wage workers south of the border or in the far East.

Well, we've seen where our new information economy has gotten us (especially our vaunted financial sector), and we're discovering that many of those supposedly un-offshoreable service jobs can in fact be shipped overseas. A good deal of the ongoing growth of the public sector will be a direct result of these policies - ones pursued by Republican and Democratic administrations alike (Obama has promised more of the same, after his faux flirtation with some anti-free trade positions during the mid-West primaries). The demise of employment security means that people increasingly demand security from the State. Tocqueville predicted this long ago - the rise of the "vast tutelary State" will result when people are thrust onto their own devices, shorn of the capacity to rely on their communities and extended networks for support in hard times.

South Carolina is relevant because it is an employer-friendly State - right to work, among other things - meaning that workers have fewer protections or rights to organize than in other states. Thus, within the U.S. it has some of the comparative advantages that employers are seeking overseas. In the race to the bottom, South Carolina isn't all the way there, but it's more of the way than other parts of the country. The resulting cuts in benefits and various other features of the safety net means that Mrs. Nanny State steps in. The growth of the public sector is occurring not IN SPITE of the "free market," but BECAUSE of it. Never has that been more apparent than during the last six months.

Lets all take a deep breath. We are having a big cyclical downturn, a burst real estate bubble, and a finacial crisis all at the same time. These were not caused by either the New Deal's basic social welfare policies or the Reagan tax cuts, and trying to aid the economy by refighting those old political battles will only impair clear thinking.

The main post and both the comments are interesting. To an extent I think Columbia South Carolina and Lawton OK are very similar. I spent time at relaxin' Jackson and figure that Richard Adams shoud have included new soilders as a manufacturing product. That said both Lawton and Columbia are of similar size and have AIT and Basic Trainning components. Lawton also has a goodyear plant which I suppose is similar to a Michelin plant.

It is interesting that OK and West Virginia are doing better than average. OK, home of T Boone Pickens has abundant natural gas and wind power opportunities. West Virginia has plenty of coal(albeit mountain top removal is a bit vicious to the water tables)...

In a toss up between SC, West Virginia and OK, I suspect that OK that will do better going foward if all the casino's and indian smoke shops don't suck the economy dry. In any case Oklahoma is an interesting state with unusual dynamics, otherwise I would think Lawton an equal listening post to Columbia SC.

I am not sure that the Reagan tax cuts or the New Deal did not have a heavy hand in forming this economy and while some old political battles might prevent clear thinking I am not sure that clear thinking exists without a multiplication of old political battles. It would have been fascinating in my opinion to have heard McCain elaborate more on the productivity and value of our armed forces. Fukuyama was right to say that the open question on Iraq is not its sucess or the justice in getting rid of Hussein but its total cost. Was the global war on terror worth the price tag?

In some sense this is a hugely partisan question which is why old political divisions can't be ignored. In one sense the more "good" our military actually does in terms of making the world more peacefull and liberal democratic, the more we erode our very own comparative advantages. In other words bringing political stability to far off corners of the world makes outsourcing less expensive and a lower risk proposition. I am not a history proffesor like Mr. Adams but it seems to me that we do live in a less dangerous world with greater continuity from place to place. Here also I think the Austrian Economist have good insights when it comes to comparative advantages and construction to completion lag times in infrastructure. It just isn't true that India offers everything the United States does, but increasingly there are clusters of civilization across the globe that are for lack of a better word modern. While Columbia SC might be a listening post, it outright lags Dubai.

In some sense the world outside the United States is the frontier of the new american manifest destiny. Not to refight old political battles but the soviet union had a propaganda poster that encircled the globe in a red flag, a similar poster bearing the american flag would be less presumptuous.

I am not saying that the united states rules the world or that other nations will start applying for statehood, but rather that parts of Canada are similar to alaska, that Toronto is similar to New York, that Windsor Canada is essentially greater Detroit. That New Yorkers or the folks who work at Moody's can demographically farm information to construct a representation or microsm representative of a larger area, that such things are dooable points to the existance of listening posts outside the United States. In other words: Here are a similar set of working conditions. Here are factors x, y. z. The more politically stable the rest of the world, the less important it is that the "listening post" be in the United States in the first place.

The triumph of the United States is also its downfall.

Globalization diminished America's manufacturing base because it is much less expensive to manufacture things abroad. Why is that the case? What makes manufacturing so expensive in the US? And what makes it so hard to replace manual labor with machines?

Is an economy that's 80% service viable in the long term?

It isn't always the case that manufacturing things in the US is more expensive. Toyota and Honda both manufacture vehicles here. The US has several advantages, most notably transportation costs and an already existant infrastructure and manufacturing base. Part of the autobailout argument was that the failure of a single automaker would harm or disrupt the economies of scale of the parts supply chain, making automobile components more expensive for the survivors.

Part of the problem is the simple fact that Moody's is actually decent at what it does, which is largely to evaluate such things. That is not really a problem it is how capitalism works, seeking out competitive advantages. The brute fact is that the less corrupt and tyrannical the third world the less Europe or the United States enjoys such competitive advantages.

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