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Why It's a Distinction Without a Difference

Who Will Create More Jobs: Romney or Obama?

by FRANKLIN C. SPINNEY

My prediction: The eventual answer will turn out to be a distinction without a difference.  Here’s why.

Both political parties and their candidates for President now accept neoliberal ideology as being the incontrovertible truth.  This belief is more theological than scientific, because neoliberalism has a thirty year track record of not producing the high-paying jobs for the middle class its promisers say it will produce.  Quite the reverse would be a more accurate description.

According to neoliberal dogma, the only way to stimulate the growth of high-paying jobs for Americans is to unleash the private sector by getting government off the back of business.  Therefore, given this truism, the government’s economic purpose is simply to make it easier for the private sector to invest in productive capacity at home — or to use a popular but vacuous buzzword: to invest in the ‘supply side’ of the economy.

To this end, the neoliberal policy soup always includes a mix of tax cuts to the investor class, investment incentives and (de)regulations to make life easier for big business, and austerity economics  by federal and state governments.  Examples include regressive tax cuts, deregulation of oppressive externalities (like environmental protections), union busting (to make wages more flexible on the downside), wage stagnation (no increases in the minimum wage), policy incentives encouraging financialization to increase flexibility of the investor class (rescinding Glass-Steagall), and cutting deficits via offsetting cuts in Federal, State, Local government spending, especially social safety-net programs, while protecting defense production, etc.

After over thirty years of trying and failing to create high-wage, middle-class jobs with various mixes of neoliberal snake oil, one might think neoliberal economics would be an issue in the current campaign for president, particularly in view of the fact that each candidate is claiming only he can create jobs.  The mismatch between past predictions and performance is mindboggling.  Even a superficial look at economic data collected by the Bureau of Labour statistics suggest that the real world behaves very differently from that imagined by the high priests of neoliberal theology.

If the contradictions between theory and reality remain unaddressed by the candidates in this presidential election year, you can bet what little is left of your IRA on a prediction that the real problems dragging down the lower 99% will continue to worsen for the foreseeable future.

Consider please the following:

From the end of WWII to the early 1970s, the prime engine of our prosperity was the economic vibrancy of a huge and growing high-wage manufacturing sector, which incidentally, was heavily unionized.  The quality and quantity of US production was the envy of the world.  And benefits spilled over into the other economic sectors, creating a virtuous cycle that made a growing proportion of the American middle-class better off economically than at any time in human history.  To be sure, all was not roses in the Leave-It-To-Beaver America of the 1950s and early 1960s.  There were horrible festering sores in our society, particularly segregation and racial persecution, which arbitrarily kept a large portion of our population disenfranchised and in abject poverty.  There were also pockets of intractable white poverty in rural America, particularly Appalachia and the Deep South.  Nevertheless, it is undeniable that the post-WWII American economy had mutated into a vibrant consumer society, the likes of which were unprecedented for a majority of the working class.

In addition to creating large numbers of high-wage manufacturing jobs, the manufacturing sector became the driver of beneficial spillover effects that fed back on and magnified the larger economy, ranging from supermarkets to suburban construction to larger local tax bases supporting social infrastructures, etc.  The total size of the American work force grew faster than manufacturing employment, and manufacturing’s share of the total work force declined, even as the absolute number of manufacturing jobs increased.

Figures 1 and 2 are designed to give the reader a sense of the magnitude of some of the astounding changes that have taken place since the end of WWII.

  Figure 1

Figure 1 depicts the growth in manufacturing employment (the blue line) and in total non-farm employment (a private sector measure that accounts for about 80% of the total jobs in the U.S., including those in the manufacturing sector).  Figure 1 makes clear the extent to which total non-farm employment (the maroon line measured on the left scale) grew faster than manufacturing employment, even though the latter grew in absolute terms between 1939 and 1979, before slipping into a long-term decline.  Manufacturing employment is depicted by the blue line, also measured on the left scale — we will look at this measure more closely in Figure 2.   The red line (measured by the percentages on the right scale) says it all.  It compares the size of manufacturing employment to the size of total non-farm employment in percentage terms.  It has been declining steadily since 1943.

In 1950, for example, Figure 1 tells that 31% or almost one out of three jobs in America was in the manufacturing sector.  In 1979, manufacturing employment reached its all time high, yet its share of the total workforce had declined to 22%.  By 2011, that share plummeted to 9%., or less than one out every ten jobs.  One might think the stability of the steadily declining percentage in Figure 1 suggests a kind of normalcy.

Such and interpretation would be a grotesque mistake, because it turns out that 1979 was an interesting year in the history of manufacturing jobs. After 1979, what was normal became abnormal or perhaps a “new normal,” to borrow yet another vacuous buzzwork.  This is not obvious in Figure 1, because the relative flatness of the blue line is driven by the scale of the maroon line.  Figure 2 peels back the next layer of the onion.

Figure 2

(note the range of the vertical axis is 9 to 20 million)

Figure 2 enables us to look more closely at the blue line in Figure 1 by re-plotting on an expanded vertical scale ranging from 9 million to 20 million employees.  The numbers behind the blue lines in Figures 1 and 2 are identical.   Figure 2 shows more clearly how the dynamics of growth and decline in the manufacturing sector changed over time.  To this end, I added the shaded area merely to give the reader a sense of the how the size of short term fluctuations changed over time.  After World War II, the total number of manufacturing jobs rose in absolute terms from 13 million in 1946 to an all time high of 19.4 million in 1979. This is an astounding number for peacetime, exceeding that maximum of the WWII’s “arsenal of democracy” employment of 16 million by 20%!

The total increase between 1946 and 1979 was of 5.9 million jobs or 44%. After 1979, the total declined to 11.7 million jobs by 2011, a reduction of 40% from a much larger base. What is even more stunning is that employment in the manufacturing sector today is almost half a million people smaller than the 12.1 million employed by the manufacturing sector in January 1, 1941, eleven months before Japan bombed Pearl Harbour, even though the current U.S.  population exceeds that of 1941 by 152 million people!

But there is more that can be sniffed out of Figure 2, now that we have the benefit of 30 years hindsight. The flat growth and wild swings in employment data (indicated by the greater width of the blue shaded area) show this engine of prosperity began to sputter around 1970 (perhaps because of over heating caused by the guns and butter policy in Vietnam ???), before moving into a more coherent pattern of long-term decline after 1979.  So, the 1970s turned out to be a period of transition.  This is hinted at in the pattern of data in Figure 1:  First, note how the pattern of decline became more stable after 1979, with the magnitude of the short term fluctuations being much reduced compared to those of the 1970s.  This stabilization also hints at the introduction of deeper causal factors, but does not tell us what they are.  Note also that no lost ground was ever fully recovered after the peak in 1979.  Each major cyclical short term term peak in employment rose to a level that was less than its predecessor (in one minor case it was about the same).  This is even true for the sustained economic growth period of the Clinton Administration, which Democrats like to compare to the Kennedy-Johnson expansion during the 1960s.  The failure to recover from successive downturns is yet another hint of long-term causal factors.

Regarding these deeper factors, much has been written about de-industrialization, and there is no need to repeat it here.  Suffice to say the onset of the stagnation of middle-class wages in the late 1970s corresponds to the loss of high wage manufacturing jobs in a de-industrializing manufacturing sector, reflected by decline after after 1979 in Figure 2.  The onset of the explosive growth  of consumer debt and the growing inequality of income corresponds with the decline in manufacturing.  For those who drank the kool-aid about the information society displacing the manufacturing society, I note that computers and software industries are included in the employment figures of this chart. Indeed, given the quality of the jobs debate by Mssrs. Obama and Romney, one could argue America has entered the post-information age.

If either Mr. Obama or Mr. Romney is going to turn around the high-wage job meltdown, they need to explain to the American people how their policies will create a new virtuous cycle of expansion begetting expansion, either by (1) reinvigorating the domestic manufacturing sector, which is a proven engine of virtuous growth, or (2) by inventing a new engine of virtuous growth to replace the role that manufacturing served between the end of WWII and the early 1970s.  Creating jobs to flip hamburgers at McDonalds or slosh ice cream at Ben and Jerry’s will not do the trick.  Military Keynesianism — i.e, shoveling money into weapons manufacturing — certainly worked in WWII, and it may have worked more modestly in the late 1940s and the early 1950s, although given the anguish of Eisenhower’s farewell address, my guess is that he may have thought Military Keynesianism created more problems than it solved.  Whether or not that was the case by 1961,  one thing is clear from Figure 2 in this regard: Throwing money at the Pentagon over the last 30 years has been a total bust in terms of stimulating any growth in manufacturing employment, not to mention Military Keynesianism’s complete failure to re-igniting anything remotely similar to a virtuous cycle of prosperity begetting prosperity.

There is a reality-free normalcy now driving American politics.  Both parties would rather fiddle with Karl Rove’s soothing “create-your-own-reality” political meme than douse the ideological fires of neoliberalism that are torching the American economy and impoverishing the middle class. With politics this boorish, is it any wonder that people are tuning out?  A better way for understanding what ails our political class would be to begin with one of the most elegant quotes in Gibbon’s Decline and Fall of the Roman Empire, because as he explained … “Their credulity debased and vitiated the faculties of the mind: they corrupted the evidence of history; and superstition gradually extinguished the hostile light of philosophy and science.”

Franklin “Chuck” Spinney is a former military analyst for the Pentagon and a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. He be reached at chuck_spinney@mac.com