Monday, September 04, 2006

Follow The Money Where?

Since it’s Labor Day weekend — the holiday celebrating the workingman — I wasn’t surprised to find a New York Times article about the state of the average American worker, as indicated by the latest Census Bureau figures. Between Jayson Blair and banging the Iraqi war drums the Times no longer deserves the reputation for honesty it once enjoyed, yet I see little reason to doubt a story like this:

JUST in time for Labor Day, the Census Bureau seemed to indicate that labor itself was no longer such a good way to get ahead.
Incomes rose last year, thanks largely to higher Social Security payments and investment returns, the bureau said last week. But median earnings failed to keep pace with inflation for a second straight year. Even as the economy has continued to grow recently, some workers have accepted outright pay cuts, men have dropped out of the labor force, and debt has kept rising relative to income.

So things got better for pensioners and those who live off their investment incomes, but worse for those who actually work for wages. Which doesn’t surprise me, but does tie in with the question I’d meant to ask anyway: where exactly does America’s wealth come from these days?

There was a time when American companies manufactured goods sold to eager consumers all over the world, and our country got rich. Now companies like Lockheed and Raytheon and Westinghouse are basically welfare recipients, making expensive weapons our government buys at exorbitant prices.

Except for weapons, we don’t make much to sell to the rest of the world. (And even the weapons we export are often paid for by us, via foreign aid.) When manufacturing died we heard “Don’t worry! We’ll transform ourselves into a sleek service economy!” But it turns out a lot of those services can be outsourced. As for those which remain stateside — who’s ultimately generating the wealth to pay for all this?

We export food, for a profit. We export weapons, but not really for a profit. We make money exporting our pop culture and music to the rest of the world. And we still have a pretty good computer/software industry. But otherwise, what do we actually do? How is our wealth created? We’re not even paying for the stuff we import from China and elsewhere, but buying it on credit. What happens when it comes time to pay our debts?

We still have the outward appearance of a wealthy and strong society, but are we generating new wealth or spending our hoarded principal?


Anonymous Sandy said...

Remember, our wealth doesn't just come from the net profit of our sales to other countries. We create rather a lot of it right here, selling stuff to each other. Our country was wealthy long before we became the export manufacturer of the world. We have a huge internal market, and it's possible to get filthy rich just by selling within the borders.

Ultimately, all wealth comes from knowledge--its creation and usage. You can rearrange stones all day, but without the knowledge of fence-building, they won't form a picturesque New England roadside. The roadside was and is worth something to people. Piles of rocks--not so much.

Along those lines, a lot of what we sell is the knowledge not only of how to make stuff, which we sell to the rest of the world, but the knowledge of how to make stuff better. iPods are designed here, made in Taiwan. The Infinity (or the Lexus, I forget which) was an idea developed here, and bought by the Japanese. PCs are made in China, but Bill Gates gets a cut from every one least in the West, and among those that aren't Macs or Linux-based.

And yes, we still manufacture stuff--more nimbly and with fewer people and with fewer smokestacks darkening the skies, but we still do it--we even make Japanese cars.

All your questions could apply to any arbitrary geographic boundary, which is fundamentally what countries are. The same could apply to your neighborhood, your township, your county, your Congressional district, your state, or the tri-state area.

9:19 PM  
Anonymous Anonymous said...

I've wondered along the same lines as you are here. I fully admit to only having an Econ 101/102 understanding of the subject.

We seem to be a country of middlemen. We don't make things, but we do assemble the things made somewhere else. We outsource our work to India, but they in turn spend the money on Nikes and clothes from the Gap. American companies who themselves outsource their production. Funny thing, capitalism.

I don't have a problem with our service-based economy. It's done right by me, but I do notice that many people (usually older) are unwilling to part with tariffs and other artificial boosts to our agriculture and manufacturing sectors because they can't bring themselves to embrace a future where America doesn't provide for it's own food and machinery. They seem to think that we'll be stomped when World War 3 inevitably comes around.

1:16 PM  
Anonymous Anonymous said...

All wealth ultimately coming from knowledge is as true as all wealth ultimately coming from labor. Knowledge of how to rearrange those stones doesn't a fence make.

10:00 PM  
Anonymous Sandy said...

Work is being done all the time, everywhere. Labor is a given. It's labor directed with knowledge that makes a difference.

9:44 PM  
Blogger Jennifer said...

Or perhaps, both labor and knowledge are necessary, and a system where only one pays enough to live on ultimately might not work out too well.

7:20 PM  

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