Continued Slow-Motion Implosion of America’s Hollow Economy

Posted on October 25, 2009


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Nobody can predict the future. But I have a hunch, so I might as well share it.

I believe the United States economy has been so hollowed out that we will not return to the prosperity we were accustomed to in the latter part of the 20th Century. There is no economic foundation on which to build. For more analysis and explanation of the economic decay, see Jon Taplin’s Blog.

The American industrial base has been eroding for four decades.  There is almost no industrial base left. In recent years, the white-collar and service base has been disappearing as well. There is nothing — nothing — that we can do in the U.S. that can’t be done cheaper in India or China.

Rather than sustained expansion, I can imagine further economic collapse, a continuation of the slow-motion implosion of America’s hollowed-out economy.

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The Wall Street masters of the universe who believe the recession is over are fools. Their dreams of corporate buyouts are insane. Yes, the bonus babies in New York are still riding high. Yes, there probably are corporations remaining to be plundered through leveraged buyouts.

There may be a temporary bounce throughout the economy, a desperate, callow attempt to re-inflate the bubble. Gimmicks to jump-start housing with the first-time buyer incentive, and save auto manufacturers with the clunker trade-in program, appear to work in the short run. Home sales may rise a bit, but real estate prices have not bottomed out, in my opinion. And I think real estate values are key. Demand for new cars was moved forward a month, but not increased. Money is flush on Wall Street, but credit remains tight for small businesses.

Any recovery is limited and illusory, not strong and sustainable. All the trends are going in the opposite direction. The European Union will eclipse the U.S. as a market and a center of world finance. But Europe has an aging workforce, and a declining population. Europe’s return to financial supremacy surely cannot be sustained.

BRIC is economic shorthand for the economic future: Brazil, Russia, India and China. Their ascension will be mirrored by America’s decline.

The factories are gone. Now the non-factory industries in the U.S. are fading.  The newspaper industry has been in long-term structural decline since 1990. Now it’s on the brink of total collapse. Even the New York Times is in trouble. Ditto the legacy television networks. Now the Hollywood film industry is on a downward trajectory. The high-flying finance sector that replaced our industrial base, will be decimated, even if bonuses continue.

Pressure to reduce costs will force government and higher education to embrace technological advances and eliminate redundant personnel. See Slate’s The Big Money “Welcome to Yahoo! U: The Web Will Dismember Universities Just Like Newspapers.”  How many different professors need to be giving the same lectures on Sociology 101 or History 101, at how many different colleges and universities, The Big Money asked. The ultimate answer is ONE, the one best professor, teaching everyone through the magic of “distance learning,” otherwise known as television and the internet. We will not be needing many new college professors, or new college buildings. A college education can be had anywhere there is a computer and a television monitor.

What is true of higher education will probably trickle down to high schools. The great teachers will teach through TV and computer. The classroom chores can be handled by low-paid teaching assistants. Even medicine may not be immune. In the future, there may be fewer doctors. You’ll see more physicians’ assistants and nurse practitioners, using computerized medical records, at lower cost.

Intelligent computers and robots will compete with human beings for the shrinking pool of jobs. In many cases, the computers and robots will win. Real estate agents, stock brokers, accountants, grocery store cashiers — all will become as obsolete as service-station attendants, stenographers, elevator operators, and telephone operators. I’m not making this up. For instance, Jeremy Rifkin published The End of Work in 1995. He was ahead of his time, but on target. Check out this concise summary of Rifkin’s view from the Utne Reader.

Do you think 10 percent unemployment is bad? With a nonexistent industrial base and replacement of white-collar and service workers by smart machines, how is unemployment going to go down? It’s not. Unemployment is going to increase. There is no demand for displaced workers over 50. Their skills and experience are mostly useless, worthless. Retraining for other work is improbable. What other work? Soon workers over 40 will be in the same fix. I’m thinking unemployment will hit 20 percent before it declines to 6 percent.

You’ve heard about creative destruction in capitalism? What we’re looking at in the U.S. economy feels more like slash and burn. We’re not dealing with a passing recession; we’re living in a time of  economic dislocation and structural economic change. We’re probably in the earlier stages of this worldwide economic change. It’s going to continue for awhile.

It won’t be the end of the world. Life will go on. We’ll have to give up our materialistic culture, adjust to simpler lifestyles. There’s lots of work that needs to be done, but much of it will be volunteer labor, not paid labor.

As I said, no one can predict the future. All of the above is just my humble opinion.

— John Hayden