Sunday, February 28, 2010
Killing America's jobs machine
- Heading back to the debate in Appalachia
- Redistricting process must be taken from pols
- A shutdown remains a very real possibility
- U.S. Navy Vets case argues for campaign limits
From the RoundTable blog
With unemployment hovering around 10 percent -- its highest level since 1982 -- there is a lot of anxiety about jobs. That anxiety won't be cured by reading a disturbingly fascinating article in the latest issue of Washington Monthly, "Who Broke America's Jobs Machine?" (www.tinyurl.com/yh9xqck).
Authors Barry C. Lynn and Philip Longman of the New America Foundation point out a remarkable and frightening fact about the last 10 years: For the first time since the 1930s, there was no net job creation over the course of the decade.
In contrast, every prior decade, no matter the depth of recessions it endured, saw a net job growth of at least 20 percent.
What happened? Most of the explanations bandied about don't hold water, Lynn and Longman explain. The collapse of the real estate bubble cost jobs, of course, but even at its height fewer jobs were being created than during the tech bubble.
Technology has had a definite impact on jobs, cutting the need for workers from automakers to airline reservation agents. "But throughout economic history, even as new technologies like the assembly line and the personal computer destroyed large numbers of jobs, they also empowered people to create new and different ones, often in greater numbers," Lynn and Longman write. That's not happening this time.
And they point out another intriguing clue: It isn't the loss of jobs that is the problem. The economy is shedding jobs at a lower rate now than it did in the late '90s. The problem is that fewer new jobs are being created.
Again, there is no shortage of explanations, but most don't stand up to scrutiny. After President Bush's eight years of tax cuts and a hands-off approach to regulation, the typical conservative response that government just needs to get out of the way to let private enterprise work seems hollow. American consumers certainly did their part, stocking up on flat-screen televisions and other luxuries, even as their wages stagnated.
International competition, lack of investment in research and development, and other theories are more debatable, but Lynn and Longman point to another culprit: monopolization.
The authors admit the word feels anachronistic, but they make a compelling argument that President Reagan's gutting of antitrust laws led to a truly "revolutionary restructuring" of the American economy.
"Four great waves of mergers and acquisitions -- in the mid-1980s, early '90s, late '90s, and between 2003 and 2007 -- transformed America's industrial landscape at least as much as globalization. Over the same two decades, meanwhile, the spread of mega-retailers like Walmart and Home Depot and agricultural behemoths like Smithfield and Tyson's resulted in a more piecemeal approach to consolidation, through the destruction or displacement of countless independent family-owned businesses."
Some examples of the new American economy: Walmart controls 25 percent of grocery sales in some states and 40 percent of nationwide DVD sales. Two companies have 70 percent of the market for toothpaste. Two other companies control 80 percent of beer sales.
The authors argue that this consolidation has not only destroyed jobs when corporations merge, but it has crippled job creation in a number of ways. Giant retailers like Walmart make it harder for small business to compete, but they also exert enormous price control over their suppliers. "The money that the managers and workers at these smaller companies would have used to expand their business, or upgrade their machinery and skills, is instead transferred to the bottom lines of dominant retailers and traders and thence to shareholders."
Monopolists and their defenders argue that consolidations lead to efficiencies that benefit consumers. But "efficiencies" in profit-making can lead to an unhealthy throttling of competition and an intellectual stagnation that impedes innovation and growth.
As the authors point out, the full impact of Reagan's antitrust rollback took time to be felt because companies like Microsoft, Apple and other innovative start-ups that helped fuel much of the economic success of the 1990s were founded and given time to grow in the 1970s.
Where are the next generation of innovators now when we need them so badly to pull out of this lingering recession? Chances are such start-ups were bought up by behemoths engaging in "innovation by acquisition." Instead of challenging the status quo and encouraging dynamic competition, they were absorbed into the collective and devoted to the imperative of generating short-term profits to satisfy restless shareholders.
Radmacher is the editorial page editor of The Roanoke Times.