While regular mortals have been fiddling around with Christmas, New Year's, and playoff football ..... and while GOP primary voters have been doing everything possible to avoid Willard Romney's advice (via Jimmy Kimmel) to 'Mitt or Get Off the Pot' .... and while the country enjoys a totally natural, non-man-made, petroleum-blame-free, utterly benign and cyclical winter of little snow or even cold (what my good friend Michael Rainho calls the "horribalmy")..... a couple of really important pieces have been released on the state of the American economy.

First, the cover story from the latest issue of Atlantic Monthly is a compelling piece on manufacturing called "Making It in America," by Adam Davidson (not sure if this is a fluke today, but direct links to this story and to The Atlantic in general are really kloogey, and keep crashing my browser -- so you might be well-served to buy a good old-fashioned [gasp] paper copy, or, god forbid, hit one of our four remaining public libraries). Davidson has a two-pronged approach, embedding the struggles of a typical 'unskilled' laborer in an auto parts factory in South Carolina within a larger narrative about the general drift of the manufacturing sector in America. The personal story of laborer Maddie Parker is by now familiar, filled with that low-intensity but pervasive and unshakable sense of uncertainty, anxiety, dread, and dead-end hopelessness that stalks our citizenry. She had to abandon higher education goals because of the demands of a youthful motherhood. And once she was off the knowledge-track of employment opportunity, the relentless pounding of stagnant low-wage labor, which seems to gobble up all the time and energy of the working poor, locked Maddie out of any type of job security or mobility, seemingly forever. Her precariousness is now simple: as long as the cost of a machine that could perform her function stays above what Maddie makes in two years (the company's standard time for equipment to earn back investment capital), she has a job. If the cost of that machine comes down below her 2-year salary, she's out. Great way to live.

Even more alarming, however, is the general backdrop of American manufacturing that Davidson lays out. As campaigning for Fall 2012 heats up, we will be exposed to all kinds of rhetoric about how we need to beef up American manufacturing again. We need to rescue and recover all of those awesome, high-paying jobs that got shipped off to China or Indonesia or Malaysia, so that people can have solid, middle-class lives again. "We've got to start making things again! We gotta stop pushing money and other abstract things around! That's not what America is all about. We're doers!" That's the gist of popular sentiment in many corners, from the right and the left.

The Atlantic article highlights the emptiness, or at least the short-sightedness, of this sentiment. Sure, we've lost a lot of manufacturing jobs to overseas entities, but American manufacturing is actually quite robust, in one sense. As Davidson notes: 

"Depending on which stats you believe, the United States is either the No. 1 or No. 2 manufacturer in the world (China may have surpassed us in the past year or two). Whatever the country's current rank, its manufacturing output continues to grow strongly; in the past decade alone, output from American factories, adjusted for inflation, has risen by a third." 

So what's the problem, then? Why all of the political podium-pounding and hand-wringing about how we don't make stuff any more? Why all the lectures on how we need to roll up our sleeves and do some manly-man work again, and stop with all the credit default swaps and leveraged buyouts and all that? Manufacturing seems to be going like gangbusters. So what gives?

What gives is that long-term trends in technology and corporate organizational structure have rendered labor a decreasingly important part of the overall picture of production. Davidson again:

"Yet the success of American manufacturers has come at a cost. Factories have replaced millions of workers with machines. Even if you know the rough outline of this story, looking at the Bureau of Labor Statistics data is still shocking. A historical chart of US manufacturing employment shows steady growth from the end of the Depression until the early 1980s, when the number of jobs drops a little. Then things stay largely flat until about 1999. After that, the numbers simply collapse. In the 10 years ending in 2009, factories shed workers so fast that they erased almost all the gains of the previous 70 years; roughly one out of every three manufacturing jobs -- about 6 million in total -- disappeared. About as many people work in manufacturing now as did at the end of the Depression, even though the American population is more than twice as large today."

This is essentially what is known as "technological unemployment" ( see my earlier pieces on technological unemployment and the future of work). Many economists, including people like Paul Krugman, minimize the impact of technological and other forms of systemic unemployment, preferring to see ebbs and flows of joblessness as a result of cyclical changes in consumption, debt, inflation, and the like. Other liberal commentators like to stress that technological explanations for unemployment are smoke-screens; they're just another way to white-wash the very specific political and economic policies that the powerful have used to crush unions and other organizations that strive for fairness in the workplace.

Now, I don't mean to dismiss all of the devious shit that has gone down with politicians turning their backs on the working class. Of course our mainstream national parties have sold their souls to big money and left regular workers hung out to dry. But which really comes first, government decision-making or the evolution of the business world? What allowed politicians to flip their allegiance over from the masses to the corporate elite? Did the political policies come first, and only then were companies able to globalize their supply-chains and automate their factories, rendering workers less powerful? Or did long-developing trends in computerization, information technology, corporate governance, and financial evolution create the conditions for degradation of labor-input and the acceleration of top-down control of capital? 

My bet is the latter. Powerful undercurrents have created an entirely new algorithm in the US (and indeed everywhere). It is no longer necessary for large swaths of people to get paid decent wages in order for businesses to thrive. You can still have national economic growth while the majority of us have stagnant or declining incomes. Labor is just not as valuable in the overall picture of churning out lots of stuff.

To highlight this a bit more, let's turn to the other great piece from the last few weeks: Philip Pilkington's "Fear & Loathing in the Financial Markets: What Happens to the Economy When the Oil Bubble Bursts," at the superb website of Yves Smith, Naked Capitalism.

First, Pilkington notes that corporate profits have rebounded quite nicely since the housing bubble collapse. In the chart below, you can see the dip in 2008 when the recession hit, but notice the quick comeback.




Next, Pilkington explains this by showing how the fortunes of labor have become uncoupled from corporate profits. This is why we can be two years into a 'recovery,' with economic growth humming along steadily, if a bit subdued, while the situation of regular families remains dire. Again, to highlight my point from above, notice the long-term decline in the value of labor:



So keeping in mind this picture, with work's value steadily declining while corporate profits are way up (largely because of that smaller labor slice), let's look at manufacturing as it relates to other segments of the economy. Here is another chart that Pilkinton puts up, to show that the post-recession return to corporate profitibility is not all that it seems. In fact, it was the financial sector that again drove almost the entire comeback:

  

Non-financial profits are certainly still rather healthy, but they are nowhere near the robustness of the financial sectors. One final graph that Pilkington uses shows the overall shares of corporate profits broken into three segments: manufacturing, services, and FIRE (finance, insurance and real estate).



The things to notice here are the long-term decline of manufacturing profits as a share of overall business activity, as well as the relatively stagnant and now-slumping service sectors, as opposed to the surging financial areas. Some will say, going back to the first point of this post,  "See, that's exactly the problem! That shows that we're not making enough stuff any more, and we're f'ing around too much with money-shuffling, property-flipping, and insurance bundling!" But when you see long-term trends like this, it seems all-but useless to swim against the current and try to reverse them. The fact that finance has become such a huge piece of the overall economy is not a moral failing or a political sin. It is simply a result of the constituent parts of the overall economy being reshuffled by powerful undercurrents in technology, corporate evolution, legal trends, etc. If highly-paid labor is not really necessary to keep a huge economy growing, as we are seeing right now, then the sector that handles all of that excess profit is naturally going to emerge as the most dynamic. Power flows to where the wealth is, and that wealth is definitely NOT flowing to segments of our economy that have high labor-costs.

Against this backdrop, it is futile to pretend that a return to a healthy middle-class society is possible. No matter how much we pump into education, job programs, re-training, and the like, the relentless trends of de-skilling and technological unemployment will stay ahead of our best efforts. As soon as we manage to get a bunch of new workers trained up for some exciting new green-tech jobs, another software program or mechanized process will sweep them down the income fun-slide again. We are seeing this already today, as income stagnation is creeping up the educational ladder. Sure, college grads still do much better than high-school drop-outs, but historically, even advanced degrees are not holding their value in relation to the rising costs of living. Today's college grads are already the economic equivalent of yesterday's high-school grads, only with a lot more loan debt. And it will get worse.

And really, this is okay, if we can chage our frame of reference. If our baseline for normality is that every person must have a successful career, that every couple must have their own house, that every kid has to go to college, that every individual must engage in maximal personal consumption, then the future is going to be very disappointing. We will never catch up to reality's icy pace of change, and our unrealistic hopes for a way of life that has past will torture our psyches and our politics. Shedding an ideology is perhaps the most difficult of all social tasks, but it will be absolutely necessary to preserve any kind of civilization on the downslope of centralized industrialism. If we want to hold onto the things that really matter (like human dignity, companionship, intellectual adaptivity, and the like), we need to adjust our expectations to a different kind of normality, one that recognizes the twilight of our current arrangements, especially as regards to labor, production, consumption, and habitation. The future belongs to the flexible, the open, the adaptive, and most of all, the combined. The collapse of labor-value is an extraordinary opportunity to restructure our lives along different lines. Overall consumption can be reduced, which is good for the environment. Work can be shared and working hours reduced purposely, which is good for mental health. Resources can be collectively managed at the group level, which is good for stability and self-reliance. And collective living units could exercise more control over the political and economic landscapes, as the power of combination frees people from the cruel winds of centralized authority. A new normal is possible. It's out there.