On a business trip to St. Louis a couple of weeks ago, I got a chance to look at a different economy from the one I’m normally exposed to here in Toronto. Flying in to somewhere different gives you a sense of perspective that you can test with some simple economic truths.
The light industrial area I was in was at the corner of "For Rent" and "For Lease". Almost every second building had some kind of appeal from a realtor: "Your Business Name Here!" was a common pitch. This tells me that a lot of small businesses have disappeared, taking with them, the jobs that are always attached to a small and medium-sized businesses.
Downtown, office space is readily available. Whole floors of buildings are open and ready for a business to move in with cubicles, work pods and grey coloured boardroom-ettes.
At the hotel on one night, there was an event for a local Christmas Charity. I was going out and had to swim through the crowd, eventually making my way outside to wait for a friend. In the valet parking, fleets of luxury cars and SUV’s. No modest Toyotas were to be seen, unless one counts a surfeit of Lexi. Benzes, Escalade’s, and high-end BMW’s would roll up to the valets without a word being exchanged: The occupants would dash into the hotel.
The Base was in full attendance, women with flat foreheads, air kissing each other, lest they displace makeup or disturb the Botox-induced visages. The men were attired almost universally in evening dress, without a callused palm to be seen among the well-tanned and manicured hands: Some of the wristwatches cost what the servers made in a year of hard work and a lot of overtime.
Looking in the local newspaper, there are no jobs in the help wanted section, unless you count multi-level marketing scams, temporary envelope stuffing gigs and day-labour as a career path. Perhaps more telling was the half-page of bankruptcy auctions. You could buy the whole production line of an injection molder, electronics assembler or engineering and prototyping concern at auction from the liquidator for cents on the dollar.
Gone with those companies are the jobs. Middle-class, solid, respectable jobs that pay reasonable to very good wages and provided benefits like health care and dental care for the employees.
There is critical data point: America and to an extent, Canada, are becoming economically stratified societies. There are Poor folks and there are Rich folks and there are very few left in between.
Those that are in the middle-class are one twisted-ankle health-care bill, or plant slowdown from being out of money and flat broke. The reasons for this stratification can be laid at the door of The Base, the upper-class wealthy who make their money by shuffling paper around. The Base has the ear of the politicians and a hand on or near the power levers, so things like tax laws are jiggered for their benefit.
For instance, in the bitter bitching regarding the auto industry bailout, several Republican senators put the blame on the UAW as the sole reason the Big Three are in DC looking for a slice of Hank Paulson’s TARP pie. Facts, those pesky little reality pearls that get in the way of a good sound bite, would show that the UAW (and the CAW up here) have, over the past ten to fifteen years, have partnered with the auto industry by rolling back wages, taking benefit cuts and even running retraining for their laid off members at their own expense.
Those are not the actions of a ‘greedy’ union workforce. The unions have made real sacrifices to keep at least some of their jobs. It’s The Base trying to squeeze and blame everyone but themselves.
I’m overlooking the international trade barriers that are viciously one-sided in the auto industry. You can’t import North American made cars into Japan or Korea without doubling the price, as Japan and Korea have very effective tariffs and duty structures that protect their auto industry and the jobs associated with it.
If you could actually import North American cars into Japan or Korea, there still is no market, as the products themselves are crap. If memory serves, the UAW doesn’t get involved in the design or marketing of the products. That would be the responsibility of…wait for it…GM, Ford and Chrysler executives.
It is so much more convenient to blame a union/the middle-class than to look at the ineptitude of your golf buddy who couldn’t manage a good bowel movement, let alone design a product that real humans would buy with a straight face.
Historically, we only need to look back a few thousand years to see what happens when you have a two-strata society. Rome went into the toilet. Greece went into the toilet. Their societies had approximately two strata: Slaves, who didn’t actually exist as anything but chattel and the Wealthy, who made the laws. In both examples there was a merchant-class, but taxes and laws made it very difficult to stay in business without resorting to every possible trick, dodge, finagle and illicit market going.
Eventually, like a Ponzi scheme, it all falls down when that tiny little sliver of the upper-class, consumed by greed beyond the dreams of avarice, cannot get, find, or steal enough money to keep the show going. I have no idea why but the names of Ken Lay, Conrad Black and Bernie Ebbers keep coming to mind.
A $50 Billion dollar Ponzi is unravelling right now. It was a hedge fund, oddly enough and the perp, Bernard Madoff has admitted he took the wealthy, banks, investment dealers and a raft of Wall Streeters to the cleaners. Madoff has said he’s broke and now a lot of banks are trying to pillow their involvement in the scheme, as the banks bought Madoff’s sales line. There is much soiling of the undergarments in the financial sector as revelations come out. (Not to worry though, the soiled undergarments will be hand-laundered and gently pressed by our hired girl from Guatemala that we pay almost $4.00 a hour for a 100 hour work week.)
Again, historically, what happens when a two-strata society collapses? The Dark Ages comes to mind. So does Germany in the 1920’s to 1933 when bread cost 13 million marks a loaf. Somalia is a contemporary example of a country that fully imploded with all the systems that describe a society, flat-lined, torn up and sold for scrap.
The dangerous part is what happens a few years down the road in a disintegrating two-class society. It is not unknown for the poor to rise up and take what they need to survive. France, during the Revolution. Britain, in the days of Cromwell. Russia at the beginning of the 20th century. These are all examples, historically, of what happens when the poor can’t afford to eat: They attack the rich.
This is not to say that it will happen, only that it can happen. Rio De Janeiro or Mexico City come to hand as examples at the smaller end
of the spectrum. The rich do not go outside, unless armed, as it is not uncommon for organized kidnappers to grab those perceived as wealthy and hold them for ransom. The gated and patrolled communities of the US Southeast are only a few steps removed, representing a rapidly building fortress mentality of the rich.
Which leaves us where? On a slippery, high, windy ledge is where.
RoadDave 