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GRAPES OF WRATH AND THE RUST BUCKET (PART II)

January 15, 2015

GRAPES OF WRATH AND THE RUST BUCKET (PART II)

It is not only college graduates who are leaving town for greener pastures; they are joining blue collar workers whose jobs in the rust bucket Midwest have evaporated or are or will be evaporating, some of which have been outsourced, some that have moved to cheaper labor venues within the country, some that have disappeared in mergers and acquisitions, and some that have gone to foreign countries lock, stock and barrel.

An AP report notes that Danville, Illinois, is a good example of this Grapes of Wrath-like migratory pattern. At one time there were major manufacturers in the area who provided thousands of good-paying jobs, manufacturers such as General Motors, General Electric and Hyster. They are gone, and the ancillary employment their incomes supported in local market demand is gone as well. Danville is now known best as the hometown of Dick and Jerry Van Dyke (which is nice to know but doesn’t put groceries on the table or pay the rent). Predictably, and without Keynesian interference, the city’s population is dwindling as the modern day Joads move on to perhaps browning but yet greener pastures than those provided in Danville.

People are and have been moving from Danville and other such rust bucket cities lately because there are fewer jobs available that match their educations or other capabilities and the ones that are available may pay far less than the same jobs they can find elsewhere. The same is happening in Michigan, a state especially afflicted with the decline of manufacturing. A survey of some 3,000 2012 graduates of 15 public universities within that state found that 37 percent were living in another state a year later (and that figure was down from 49 percent in a similar 2007 survey), a finding which has brought about complaints from the political class in Lansing that the citizens of Michigan have gone to great expense to educate their work force only to see them leave, as alluded to in Part I of this essay.

Given the cost to individuals (and not to the citizens of Michigan) these days to obtain higher education along with the negligence of the political class in fashioning an economy that can absorb their graduates at a decent wage, I give little credence to such a public lament of the political class. These people in state legislatures who spend our tax money for tax cuts to the rich and corporate class within their boundaries instead of hiring people to fix their decaying infrastructure throughout the state and inner cities seem to me to be more interested in campaign contributions than caring for either public property or the unemployed and the underpaid (if working). I think their policy priorities are askew, unimaginative and dead-end.

The politicians need to cut off spending to make the rich richer and the poor poorer and instead invest (not spend) such tax monies in Keynesian fashion by putting thousands of people to work on state and municipal roads, streets, bridges, schools and other public buildings. I fail to see why it is more important to fund the rich (spending of tax money that goes down a black hole in China or Switzerland) than to rescue (investing in) decaying public property and putting people to work with the result that local market demand is stimulated and greater revenues are paid in to government as the money circulates and re-circulates – all of which provides for even greater employment as stores and markets share in the new money brought to town. Unlike tax money that is handed over to the rich and investment class for their further determination, tax monies allocated to investment in public facilities show concrete results. The roads become less hazardous to traverse and the public’s investment in its infrastructure is beneficial to everyone and not just the rich few who sign campaign contribution checks.

The AP notes also that “Since roughly 1980 (I say 1974), income has grown most for the top earners and dropped for the poorest 20 percent. Incomes for the highest-earning 1 percent of Americans soared 31 percent from 2009 to 2012, after adjusting for inflation, according to data compiled by Emmanuel Saez, an economist at University of California, Berkeley. For everyone else, it barely budged, rising an average of 0.4 percent.” This is wage stagnation in brutal profile, especially when contrasted with the booming fortunes of the superrich and investment class which gives rise to my frequent blogs of just which economy ordinary Americans live in, i.e., the one in Danville and Detroit or the one on Wall Street where traders trade, among other things, in derivatives (for which the citizens of Danville and Detroit are now again liable to backstop with bailouts if the big banks miscalculate in a classic example of corporate welfare in which the poor and what’s left of the middle class subsidize crapshoots of Wall Street banks).

These numbers in isolated context are easy to read and ignore, but let’s flesh them out in human terms suggested by the report with their resulting damage to our economy, our middle class and wholesale dispersal of families (a la the Joad experience). Thus the report tells us that while Wall Street traders and software CEOs soared to enormous affluence over this three year period, waves of people fell out of the middle class as manufacturing’s share of the economy shrank. Poverty came to the middle class whose jobs disappeared in such stricken factory towns. Many left town. Many were forced to stay – see Danville, Detroit etc. to face their fates.

Between 2012 and 2013, more than 26.7 million people age 18 and older moved – 17.3 million of them to a different county. Those in their 20s and 30s with a college degree were most likely to move for job reasons and to move the farthest. Millions of people from the stricken industrial north fled into such economic hot spots as San Antonio, whose population grew rapidly (all per census data). The data also tell us that the trend of more educated people moving and less educated people staying is hardly new; a Census Bureau study found that more than half of highly educated workers who moved between 2005 and 2010 left their counties. By contrast, 70 percent of people without high school diplomas who moved did so within the same county. So no rain or no jobs? Either such negative could trigger a Joad-like experience.

Solution?  Keynesianism – public investment in people and public property – it works. GERALD  E

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