This year, in the opening statement to his annual report to shareholders, J.P. Morgan Chase bank chief Jamie Dimon wrote “this is not your grandfather’s economy.” Whether you like big bank executives or not, Dimon’s statement was right on the money. I admit a grudging respect for him compared to all other money moguls.
The theme is an important one as we look at today’s economy and the mood of the people. For perhaps the first time in our long history, the majority of Americans do not look to the future with optimism. In a way when you look at the statistics, you can see why people are discouraged.
As we write:
1) Nearly one in five Americans is out of work or underemployed. Sure, the official unemployment rate is 9.8% but just as many work part time or in lesser jobs than they are capable of doing.
2) One in nine cannot make a minimum payment on their credit card balance
3) One in eight is in default or foreclosure on their home
4) One in eight is on food stamps
5) And, most damning of all, real average hourly wages now stand at 1974 levels!
No wonder people are discouraged. My favorite European commentator, the late Italian Luigi Barzini, once wrote of us—“America is alarmingly optimistic, compassionate and incredibly generous. It is a spiritual wind that drove Americans irresistibly ahead from the beginning.” Today, the American dream seems like a nightmare. Some 29 million households live on under $27,000 per year. Exactly one half of women 70 years old live only on Social Security payments.
To me, the American Dream never meant two cars in the garage and a college education for all. I was brought up to see it as each generation doing better than the previous one. For my children those hopes are still very much alive. Sadly, they are in a real minority. For over 100 years, America had greater upward mobility than any other nation of size. Now, there is far more upward mobility in Canada and all of Scandinavia than the U.S. Data is not available for Asia, but one would think, given their explosive economic growth, some nations there have surpassed us smartly.
Some say we need another leader. Many hark back to the sunny optimism of Ronald Reagan as the prescription for our current ills. He was a wonderful speaker, came off as a real leader, and made us feel good about being Americans. But, the problems now are more structural than in our heads.
Right after his inauguration, President Obama commented that we needed to maintain a vibrant middle class as they were “the class that made the twentieth century the American century.” It is hard to argue with that no matter what your politics are.
What is going on? To me, we have lost our economic mojo. We had it good, maybe too good for way too long. Those of us in advertising, publishing and broadcasting let the good times roll. As long as people were borrowing and spending, people advertised and we had one hell of a ride. In 2008, reality set in and we may not all feel the pain but we definitely see it.
Everyone has heard the boring statistics that in 1950, some 30% of non-farm employment was in manufacturing. By 2009, it had dropped to 10%. So, our industrial base has eroded. To me, the middle class erosion is totally tied in to this. The INDUSTRIAL middle class is shrinking. Some data from the labor department released recently made the point chillingly.
From 1999-2009, some 45,000 factories or plants have closed in the U.S. Think about that for a moment, please. Another way to look at it is 84 per week or a dozen a day! The average plant employed about 200 workers. This is horrible but think of the collateral damage of small businesses servicing the workers of such enterprises that were also sharply affected.
So, if we are going to get out of this mess, we need to rebuild our industrial base. Everyone cannot work in Silicon Valley or financial services. The president’s proposal of transferring industrial workers to green jobs is well intentioned but will take decades and not make a huge dent in unemployment.
Here is the root problem to me and it is not a pretty one to talk about. Imagine if you were an executive of a foreign firm or an entrepreneur from outside the U.S. considering locating a plant in the U.S. Would you really want to come here? The Federal Corporate Tax Rate is 35% which is higher than any other major country except Japan. We will hit newcomers with terrible regulation and a workforce not as skilled or eager as it once was. Also, we are the most litigious society on earth. When traveling abroad you learn that they get by with far fewer lawyers and lawsuits. In Paris, lawyers are rare, almost exotic. The Japanese always tell U.S. attorneys who land on their fair shores that they would like “less lawyering and more conscience” from them. Interestingly, Japan has both one twentieth of the lawyers and crime of America. Hmm.
We need to start making things again. And, using what we have. Arguably, we have the world’s biggest reserves of natural gas in the world. Yet, the government order hundreds of thousands of gasoline fired vehicles each year. And, billions leave our shores each week to pay for oil bolstering up the regimes of countries that despise the American way of life. We can get out of this mess if we made America attractive to capital again. Especially global capital, regardless of its passport.
Winston Churchill once said that “Americans can be counted on to do the right thing after they have exhausted all other possibilities.” Most of us see what is unfolding. Let us hope the New Year brings a desire to do something about it.
If you would like to contact Don Cole directly, you may reach him at email@example.com