The Roots of Decline

(This is the first of several posts on the link between globalization and social and economic decline in the United States.)

The presidential election, now a month away, may or may not produce solutions to the immediate problems, such as the deficit, that ail us. But no matter which candidate wins, he won't be able to deal with the deeper problems -- the collapse of the American middle class, the vast inequalities between the rich and the rest, and the decline in this nation's ability to support its people.

The reason is globalization. The American economy, once mostly national, used to respond not only to national laws and regulations but to American ideas of economic decency -- the belief that the one true purpose of an economy is the well-being of the people who live within it. Now it has gone global. Neither old American regulations nor old American beliefs still apply.

There's not much that a president or Congress can do about this. The real power -- political as well as economic -- lies in the private sector, with the great corporations and corporate leaders who have always shaped the American economy and, hence, American life.   

This isn't new. In a capitalist society, the private sector, especially the great corporations, have always played an outsized role. But once, the interests of the private sector and public sector meshed: there was some truth in "Engine Charlie" Wilson's dictum that "what's good for GM is good for America."

No more. The fact is that these corporations and the people who lead them are no longer American. Instead, they have gone global, beyond the reach of American laws and, more important, beyond the needs of American society.

What this means is that, if America is declining, the people and institutions most able to reverse that decline don't care. Globalization, by freeing the economy from its national roots, has freed corporations and their leaders from any perceived responsibility for the United States.

They may call themselves American, but they aren't. Not anti-American, certainly. Just non-American. Their headquarters may remain here, for now, but they are truly global.

This post will be the first of several studying this transformation and what it means. The thoughts rise from The Midwesterner's focus on the Midwest and its traumas, but the diagnosis applies as much to the rest of the nation.

The problems, especially the inequality, are obvious to nearly everyone, but little agreement exists on the cause. On the right, free-market economists argue that the global economy belongs to the educated and skilled and that those without sufficient education and skills have only themselves to blame. On the left, some new books say it's all a plot by rapacious CEOs and financiers to squash the working class and steal all the assets for themselves.

Alas, it's not that easy. Increased education and skills will help some workers cope with this new economy, but there won't be enough good jobs for all the workers capable of filling them. Better law enforcement can curtail the sheer fraud that besets too much of the financial sector, but it can't deal with corporate policies that may be perfectly legal but cut the heart out of the American economy. 

But it's not that the millions of downsized workers are dumb or unskilled. They are every bit as smart as the Mexicans or Chinese who now hold their jobs. Those jobs went away not because they could be done better somewhere else, but because they could be done cheaper. Some, employing the most skilled, may come back or remain here. But most? Don't bet on it.   

And despite allegations of conspiracy, it seems unlikely that corporate elites actively plotted to undermine the lives of their workers. Rather, globalization has made it both possible and profitable for them to abandon any national responsibility. This is good for the bottom line: whether it's good for the folks left behind is of no interest.

Basically, corporations and their leaders are doing what you and I would do if our jobs depended on it, which is to take the money and run.

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Once, in the old industrial days, strong needs linked the big corporations to other Americans. Most of their employees were American, so the quality of American education mattered greatly. Most of their sales were in the United States, so it was important that Americans could afford to buy their goods.

In smaller factory towns, workers and bosses shopped on the same main street, worshipped in the same churches, often sent their kids to the same schools, breathed the same air. It was not a classless society, not by any means, but the same things mattered to workers and to the men who signed their paychecks.

That's over. Global corporations still tap American universities for PhDs and MBAs. Beyond that, they are more concerned with schools in China, because these schools educate their workers. As global markets boom, the purchasing power of American shoppers fades from the bottom line.

Industry has left the old factory towns and so have the men who ran it. If Main Street is crumbling, its stores boarded up, its remaining storefronts filled with AA clinics and gift shops, that's no concern to the new masters of the American economy, who live in isolated suburbs, with plenty of boutiques and clean air. Their kids, to be sure, go to the good schools, where they learn to take their place in the global elite.

What this means is that, if America is declining, the people and institutions best able to reverse that decline just don't care. David Rothkopf, in his book Power, Inc., talked with a CEO of a major technology company who put this attitude into words: 

"I am an American. Our company was founded in the United States. Most of our management is from the United States. But having a national allegiance is a luxury we can't afford. We have to go where the conditions are best, and if that means shifting jobs or triggering a bidding war for financing or tax treatment, all the better. Being global means being competitive......and we know we are in the driver's seat when it comes to writing terms."

This is the economic rationale for American decline -- economic, political and social. These same super-powered corporations and leaders who are exporting the economy also have the means to defeat any government attempt to corral this decline.

A later post will explore why this is more than a Midwestern problem, and will dig into the consequences of this decline, both at home and abroad.  

Comments

[Matthew Hall]

If the problems are being experienced most locally, maybe the solutions will be found there as well. If the corporations have stopped thinking nationally, workers need to as well. How can states, localities, and third-party organizations build local and regional economies without reference to national efforts.

[Aaron M. Renn]

Matthew, it's not that simple. The system of globalization wasn't just an accident of history. There were a number of entities who helped architect it along the way. Principal among them are large corporations, who benefit enormously from globalization. But others who might also benefit from global free trade often can't. For example, large corporations, who have no problem procuring labor anywhere in the world they can find it cheaply, continues to argue that consumers should be limited to purchasing goods and services only from their local markets. See this forthcoming Supreme Court case as an example:

http://www.marketwatch.com/story/your-right-to-resell-your-own-stuff-is-in-peril-2012-10-04

In short, globalization is not a neutral phenomenon. It was designed (or at least steered in its course) to benefit select groups of entities at the expense of others.