Creative Destruction of Manufacturing Jobs

George Rebane

Yesterday’s demise of GM bodes ill for low end manufacturing workers, and the service industries that have supported them.  Stratfor’s ‘The Significance of GM’s Bankruptcy’ is illuminating in the statistics it presents.  It turns out that total US employment by carmakers is now about a million workers.  And its parts industry has employed just under 800,000 additional people in manufacturing.  That industry also estimates that each of these jobs gives rise to 4.7 more jobs in “everything from catering to regional banks”.

But in terms of the US economy, putting all of that together accounted for only 5.54% of total US industrial production.  So cutbacks here don’t have the hyperventilating effect that you hear on the MSM.  We are still the big industrial producer of the world with an output greater than Japan (number two) and China combined.  However, the remaining production is in high-end products like computers, telecommunications, specialized production machinery, aviation, instrumentation, … .  Making cars is now a strictly commodity enterprise that is overwhelmingly dominated by things high tech, like robotics.

So here we are witnessing more ‘creative destruction’ of companies and jobs that provide little added value to an advanced economy like ours.  Such creative destruction has been going on for decades without much notice by the rank and file, because the requirements for getting a newly created job were pretty much the same as for the one you lost.  Those days are over.

And this phenomenon is not just happening in the manufacturing arena.  At the agricultural end we are beginning to see smart machines displacing humans in task both mundane and sophisticated. (‘Robot farmhands prepare to invade the countryside’)  The unskilled and undereducated worker is being pushed back on all fronts at an ever increasing pace.

These under-employed represent a permanent constituency of our country's redistribution politics.  The Democrats have this figured out, and welcome these events for the simple reason that they generate reliable voters who readily believe every unsustainable promise that is made to them.  The Republicans don’t have a clue, and base their hopes for retaking Washington on Team Obama making an utter mess of it.  If the Dems just make a half-way mess, then the GOP might as well sell their elephants to the nearest circus (and also join it).

I have tried to point this out to RR readers and local Republicans ( ‘Republicans Need a New Strategy (edited)’).  It’s not clear that the Republicans are yet ready for such a message.  Their focus still seems to be on tea parties and hopes for a nationwide tax revolt.  As important as that is to nail the conservative base, it won’t deliver the votes needed to make a difference.  And one reason is because more than half of those eligible to vote don’t pay income taxes.  They vote for the party/candidate that promises them yet another free ice cream cone.

So we all go merrily sailing toward the cataracts that herald the approaching waterfall, not listening to the roar of roiling waters which sound a lot like the cheers of approval that continues to hail Team Obama.  We still fool ourselves that all these jobs will return once the economy recovers, all we need to do is keep faith in hopeful change.  Even hereabouts among our locals there is a coalition that continues its moonlight rituals that remind us of the post-war Cargo Cults in the highlands of New Guinea.  These folks hope for manufacturing jobs to again descend from the sky, comfortably settle in among our pine trees, and deliver the goodies like in the old days.

Comments

[Russ Steele]

George,

In the mid 1990s Caltrans and UC Davis Intelligent Vehicle Design Center build an automated machine to detect and fill pot holes on the freeway while in motion, but the Caltran's Union nixed the purchase of these machines. They would put too many road repair people out of work. A local company developed an automated systems for running sewer and water processing plants, instrumenting the pumps and flow pressures. The when the pumps and motors were approaching a failure mode they sent an e-mail to a regional central control facility. One facility could monitor plants for multiple communities. You can guess what the government unions had to say about that, and the company could not sell enough units, so they went into another business. When GM installed robots, the displaced workers went to work in the break room to eat their ice cream cones, waiting all day for the for the robots to fail. Then they came in the next day, the next week and the next year to collect their paychecks, but do no productive work.

[John S]

It all boils down to this: The unions have protected the workers right out of business, wages and benifits are too high, we can no longer afford them.
They are not quite dead yet because our President is in the process of saving their butts with YOUR money. Ultimately it will not work, and the unions will not budge. So, like California, we will have to hit bottom before they understand.
We aren't there yet. Give it a year or two.

[George Rebane]

[I've also gotten some emails on this post. One questioned Stratfor's claim on the relative size of US industrial production. There may be a follow-up on this. With permission, I'm posting the following email from James Dickenson, author and former Washington Post political editor. gjr]

Good piece George. On target, very cogent.

I read the link on agriculture with great interest. Coming from western Kansas wheat farmers, it struck me how technology is coming to labor-intensive crops--orchards, vegetables--just as it did to us in the last century. The internal combustion engine destroyed the small town culture I was born and raised in. I think I've told you how the largest farmer in the northwest corner of the state, whose farm is just a mile out of my home town, runs his 25,000 acres--owned, not rented--with five people--himself, his son, his wife, his daughter-in-law, and a full time farm hand. The women operate the computer system.

In addition to the engine, we use computers and sensors to a fare-thee-well. We take soil samples in fields and then use sensors and computer chips on corn planters and wheat drills to deliver the proper doses of needed chemicals--nitrogen, phosphate, potassium, etc.--in the various areas where they're needed. I devote a chapter to the technology in Home on the Range which to me was the most interesting aspect of the book. It's more than 10 years old now but still pertinent.

Cheers, Dick