Another Perspective

Little Red Wagons and Our Service Economy

Facing the inevitable as our manufacturing sector disappears.

By 8.8.13

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It was the year 2045 and America no longer manufactured anything. The GNP was now based entirely on the service industry. The value of the U.S. dollar had slumped to an all-time low. The yen and euro now ruled the international market place. Foreign investors had finally purchased every publicly held company in the U.S.

Historians point to a little red wagon as the tipping point in the exodus of manufacturing from the U.S. The decision by Radio Flyer, Inc. in 2004 to move production of its classic red wagons to China. Imagine, that revered American icon, “Made in China.” The move was at once profoundly symbolic, and the beginning of a long downward spiral of domestic manufacturing. In the first decade of the 21st century, that trend accelerated.

U.S. exports dried up to a mere trickle. Americans imported everything from automobiles to toilet seats. Labor costs had forced many U.S. manufacturers to move their plants overseas. Meanwhile, the few foreign companies that had invaded our shores, with the 1980s boom of auto plants and computer chip factories located in the U.S., had long since retreated to Korea and Taiwan and Africa (the new frontier of offshore capitalism) due to labor costs. For decades, cheap labor had been the business planners’ primary compass for locating new plants.

By 2045, the U.S. was populated mainly by lawyers, doctors, and financial analysts. Oh, the country still claimed to be productive – lawyers made justice, doctors promoted good health and extended life, and stock brokers made a market in the stocks of the foreign companies that made goods for the rest of the world. But, in reality our entire economy was based on several undeniable illusions – that endless legal squabbling and litigation is a productive pursuit, that the cost of social justice and absolute equality is small, that extending life is more important than quality of life, and that making a market in the stock of foreign corporations is a useful exercise.

Americans had also become indisputable kings of the information age. They could crunch numbers, retrieve vast stores of data, and do it all in the blink of an eye with hardware the size of a 1987 quarter. Of course, they hadn’t built these computers. Why, they hadn’t even made the component parts or designed the programs. Those had all been imported.

But these service industry Americans sure could use those computers. They were masters of the information age (or regrettably, maybe it was vice versa). With this vast wealth of information readily at their disposal, this 2045 generation of Americans had finally licked cancer and AIDS, learned to cope with toxic waste, and through the wonders of statistical analysis, had finally achieved that elusive American goal of absolute equality. Yes, they were the best informed people in the world who, nonetheless, repeatedly asked themselves the agonizing existential question “Is too much information dangerous?”

By the early 2030s, the economy based on goods and services had dwindled to just services. Some had suggested that to balance payments the U.S. should export doctors, accountants, and attorneys on the same ships that brought cars, electronic equipment, and cameras to our ports. But then, that suggestion had been made for scores of years without any real progress. And so, our country continued to be as litigious, and health conscious, and arbitrage-oriented as ever.

Even farm production had been converted into a service industry for Americans. Agriculture in this country, which had survived the crises of the 1970s, was plunged into economic peril in the early 21st century. Family farmers, who consolidated their properties in a last ditch effort to survive, were stunned by the elimination of all federal price supports and other subsidies. As their borrowing needs mounted they turned to foreign banks whose credit terms were infinitely more reasonable. Further downturns in the agricultural economy brought foreclosures by those same foreign banks. As a result, Japanese, British, and German interests ultimately owned major tracts of the American breadbasket which were farmed initially by Iowa and Indiana tenant farmers.

To consolidate their holdings further, foreign investors continued to purchase prime farm acreage in the Midwest and in the wheat-belt of the great plains. When these foreign landowners imported sophisticated farm management teams from abroad to run their sprawling agricultural interest, American farmers were yuppified. Many became commodities traders and agricultural consultants. Others turned to real estate, brokering American farmlands to foreign capitalists and developers. Still others went into law, medicine, and accounting. So the American breadbasket continued to feed the world, but under new ownership.

This national shift to the service industry all started innocuously enough with the movement of manufacturing and assembly operations out of the big cities. Urban areas became increasingly inhospitable to industry. Corporate taxes skyrocketed. City regulations proliferated. City zoning inhibited growth and development. Outmoded building codes drove construction costs through the ceiling. Mountains of bureaucratic red tape choked corporate development. The cost of doing business in an urban area became prohibitively expensive. 

The uncertainty of city policy trends left corporate long-range planners mystified and nervous. Militant labor unions set wage and fringe benefit standards that drove some companies from the city, rendered others uncompetitive and destined to failure, and frightened other prospects away. And the quality of the urban labor pool continued to deteriorate due to deplorable city schools and the welfare “entitlement” mentality that sapped the urban work ethic.

Chicago was a classic example of industrial flight. It was always the city of broad shoulders. Hog-butcher to the world. It was the proud home of heavy industry. Steel mills. Refineries. Smokestacks of every description. They all moved out of the city. Some into the suburbs. Others out to the collar countries. Into the high-tech corridors north and west of the city. Into the communities that welcomed their tax dollars and corporate goodwill. Communities where they could be competitive, offer employees a quality lifestyle, and recruit the very best people.

Then, over time, the lure of the sun-belt states became totally irresistible. Tax breaks. No oppressive regulations. Political certainty (or at least predictability). Labor pool quality. No union threat (or union realism). And a friendly, welcoming response from those sun-belt politicians. All in all, a warm, attractive package that was hard to ignore. And so they went south and flourished in the warmth of southern hospitality.

But competition in international markets intensified. And with the exponential growth of the industrial south and resulting population growth pains, taxes escalated and the host of urban problems that drove those companies south snared them again. Caught in the inevitable cost/price squeeze once more, corporate planners set their sights on foreign shores. Cheap labor, non-existent regulation, and a political environment that fostered business development made their weighty decisions to move overseas easy. And so away they went. To Taiwan, China, Mexico, and emerging nations in Africa. The moves were so easy. The moves were so logical to a corporate mind. The moves were so profitable. But, the moves overseas were also enormously destructive to the fabric of our American society.

“Buy American” became a distant echo. “Made in the U.S.A.” was a label destined for the museum of American industrial history. Wealth continued to flow abroad as our service economy became reliant on the import of foreign goods. Trade deficits skyrocketed. Federal budget deficits mounted despite tax increases and program cuts.

And then it happened. Over night, the trade imbalance was resolved and the federal debt was retired in its entirety. All through the generosity of our foreign trading partners. Foreign investors lined up to buy pieces of America put on the auction block by Uncle Sam to retire our debt. The Japanese bought Yosemite, Yellowstone, and the Everglades. They built condos and golf courses in the midst of our wilderness treasures. Arab investors meantime continued to buy property in the south, U.S. Navy bases such as Mayport, Pensacola, and Key West.

And so it went. America became exclusively a service economy. Beholden to foreign interests. Its future mortgaged in international markets. The year was 2045 A.D. and all was not well. America was the land of professional services. The work ethic continued to spur activity. But, it was the artificial ethic of the billable hour and the satisfied client or patient.

Americans no longer manufactured anything. They paid others to do it for them. Americans no longer grew anything. They paid others to grow farm-fresh produce. Americans no longer built much of anything. Americans did almost nothing for themselves. They let others do it all for them…including the production of little red wagons for their grandchildren.

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About the Author

Gerald D. Skoning is a Chicago lawyer who specializes in labor and employment law.