Relevant and even prescient commentary on news, politics and the economy.

Hey Rustbelt and beyond, Losing factories is not new

(There’s a movie at the end!)

For decades we have been hearing about the loss of industrial production through out what is called the “Rust Belt”.  It’s presented, even as recent as the prior presidential election as a relative regional problem that only began post Reagan.  What gets me though is that the reporting and ultimately the politics are as if the rust belt is/was unique in their experience with the west and east coast experiencing nothing of the sort.  The presentation is of the west coast Hollywood economy and now the “tech” economy, the east coast (namely New York/Boston) being the money economy.  The south east is not considered other than Disney and orange production.  The north west?  Microsoft and Starbucks.  Well I think it used to be lumber.

Wiki notes that the rust belt is not geographic but is a term that “pertains to a set of economic and social conditions“.     It includes the northeast which is proper in that industry started there but I have had the feeling for a few decades now that such history is forgotten and thus no longer considered when we look to understand what the hell happened to the middle class.

Let me start with this fun fact.  Rhode Island was the most industrialized state per capita in the nation at one point.  Wiki notes that:

…Aldrich, as US Senator, became known as the “General Manager of the United States,” for his ability to set high tariffs to protect Rhode Island — and American — goods from foreign competition.

We were where the super rich came to escape the heat and play.  And then it started to die.  Not just here though.  Neighboring Massachusetts was hit as was Connecticut.  If you ever get a chance, come visit the New Bedford  Whaling museum and read about the massive industry that was there.  Example, the worlds largest mill of weaving looms.  Some 4000+!  Whaling from that city in the later 1800’s generated some $71 million per year!  Not impressed? Well, using the GDP deflator it’s $1.480 billion per year!

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Roger and George [Will]*

Despite the UAW’s attempt to do for the South what it has done to Detroit, the South can continue to practice entrepreneurial federalism. Capital is mobile. It goes where it is welcomed and stays where it is well treated, so states compete to create tax and regulatory environments conducive to job creation. Liberals call this a “race to the bottom.” Conservatives call it a race to rationality.

Breaking the grip of the unions, George F. Will, the Washington Post, Feb. 18

Yup.  The decline of the U.S. auto industry was the fault of the UAW, not, say, decisions by top management to deliberately destroy vehicle quality and ignore the clearly growing need for fuel efficiency.

Bring back the Ford Pinto!  And the Chevy Vega!  We want to compete with those anti-union German companies,* and those employee-hostile Japanese ones!

Elsewhere in that column, Will complains that VW management was quietly assisting the UAW in its organizing efforts.  Obviously a plot to undermine VW’s competitiveness.

Seriously?  Seriously?

Note to Mr. Will: There is a difference between ideology and fact; ideology does not constitute fact.

What a ridiculous column.


*Updated to add that link to a Dec. 2011 Forbes article.  The article’s title: “How Germany Builds Twice As Many Cars As The U.S. While Paying Its Workers Twice As Much.



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Okay, What Is It About This That I’m Not Understanding?

Union leaders note that under the law, workers whose family income is less than four times the poverty line will qualify for subsidies in the form of tax credits to obtain health insurance in the exchanges, with insurance sold by for-profit, nonprofit and cooperative companies. The union leaders say they want similar treatment — for unionized workers to qualify for those tax credits to help finance their Taft-Hartley insurance plans, which covers about 20 million workers and retirees.

“We just want to be treated like equals — we don’t want special treatment,” Mr. Taylor said. “An employer will say, ‘O.K., your plan costs about $10,000 a year. Let me get this straight. I only pay a $2,000 penalty if I drop you. That’s an $8,000 saving for me.’ That’s actually going to happen all over this country.”

Unions’ Misgivings on Health Law Burst Into View, Steven Greenhouse and Jonathan Martin, New York Times, today

Because of Obamacare, an employer will say, “O.K., your plan costs about $10,000 a year. Let me get this straight. I only pay a $2,000 penalty if I drop you. That’s an $8,000 saving for me.”? That’s actually going to happen all over this country?

Why, then, haven’t those employers said years ago, “O.K., your plan costs about $10,000 a year. Let me get this straight. If I drop your plan, that’s a $10,000 saving for me.”? Why hasn’t this actually been happening all over this country, for years?

Well, it has, of course, except when union contracts prevent it, or where the employer thinks healthcare insurance is a benefit that it makes economic sense to provide as part of employee compensation–a tax-exempt part.

Why is it suddenly more attractive to these companies to save $8,000 a year per employee than it has been for those companies to save $10,000 a year per employee?

C’mon, y’all.  Explain this to me.  What is it about this issue that I’m not understanding?



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