It seems curious that so many Americans are so ignorant of ordinary economics, and so uncaring that they have not figured out what is happening to them and their lifestyle. It certainly doesn’t require an advanced or even any, degree to understand. Granted that the government obfuscates it and also that the media pretend not to know it, but still… It is about as obvious as the need to come in out of the rain, yet we never see it discussed, anywhere. Maybe, because it isn’t nice? Because there’s no solution the politicians can promise? Or perhaps, because we’ve done it to ourselves…
Say there was a little town somewhere where a smart woman, tired of sitting up nights under candlelight sewing garments for her family, designed a sewing machine for herself. She paid the local blacksmith to build it for her and it worked. Her output went up so much that she started earning extra money sewing clothing for others in the town, at prices cheaper than the towns few tailors. She morphed from a housewife into a tiny garment industry. Naturally, she and her family prospered and her customers too, relieved of their own sewing. Her products were desired by other villages, she had to order more machines made and hire workers to operate them.
The blacksmith also did well, with his new line of products. And as the clothing spread through the region, entrepreneurs in other places ordered his machines for themselves to compete with the women’s products by taking advantage of lower shipping costs for locally made stuff. The blacksmith also became a factory.
A very poor city on the other side of the country couldn’t afford to import the products but after learning about them, a few locals with some money or credit imported a few machines to make cheaper, better clothing for the locals. Because they were so poor, their workers earned low pay, making their output very cheap. A local blacksmith imitated the sewing machines and made a few improvements, so that they ran faster. Soon, the poor city was producing more efficiently and cheaply than the factory of the original manufacturer and began to take away her customers.
This success brought money into the poor city and it became less poor; everybody’s lives improved. And as the original town’s business dwindled from the competition, it received less money and its people’s lives became harder.
See, economics is called “the dismal science” because its foundation is an implacable reality. Wishes nor politicians’ promises can alter it. America got rich on industrializing before most of the world did. It exported its capital and know-how to customers elsewhere; those customers have become competitors with lower costs because as America became rich, their poverty became a cost advantage: cheap labor. American priced itself out of the common world market; its industries, to compete, have had to leave America for cheaper places. Their jobs went with them. Economics, the great leveler, has raised the lifestyles elsewhere while undermining those of America; all will eventually meet at the halfway point.
It doesn’t have to be so; government policies have assured it is. Much of the American cost increases resulted from two government policies: political corruption between unions and politicians that drove labor prices above market, plus government industrial regulation and protection that did the same. Now, Americans are getting the bill for those policies and mostly, done’t realize what is happening.
If the American producers had been left more capital to invest in production instead of diverting it to labor costs and if they had been less restricted by regulation, perhaps they could have stayed ahead of their foreign competition by continued development, keeping those industries at home to employ people. We’ll never know, of course.
In that little town where that first sewing machine was designed and made, the daughter of its inventor still lives in her mother’s house, though the garment factory is long closed. She sews her own clothes…