The Story – We Need More People Choosing to Work in the “Real Economy”
“Huge numbers of Harvard grads poured into finance during the 1990’s and early 2000’s, but all that’s changing now…”
Richard Florida, The Great Reset
I have commented often that there are some rather obvious themes that crop up, often enough, from enough divergent voices, that one begins to think that they represent truth. In Womenomics: Write Your Own Rules for Success, Claire Shipman and Katty Kay, two journalists, confirm this idea with the language of their discipline. They are writing specifically about the rise of “Womenomics,” but the underlying truth is “pay attention to rising themes shared by many.” Here’s the quote:
As journalists, when we start to read successive reports that come up with similar conclusions, we call it a story. When the results are this conclusive and this notable we may even call it a headline.
So – here is the theme that I am now ready to put in the category of “this really is a story!” We have too many college graduates, and other workers, choosing disciplines that do not build our “Real Economy.”
I posted about this a while back with The Rise and Fall of Finance and the End of the Society of Organizations (a little “serious reading”), quoting from The Rise and Fall of Finance and the End of the Society of Organizations by Gerald F. Davis; and recently with “Traders” vs. “Builders” – the “Fantasy Economy” vs. the “Real Economy.” And the theme is cropping up seemingly everywhere. For example, here are some excerpts from a recent column by David Brooks, The Genteel Nation:
After decades of affluence, the U.S. has drifted away from the hardheaded practical mentality that built the nation’s wealth in the first place.
The shift is evident at all levels of society. First, the elites. America’s brightest minds have been abandoning industry and technical enterprise in favor of more prestigious but less productive fields like law, finance, consulting and nonprofit activism.
It would be embarrassing or at least countercultural for an Ivy League grad to go to Akron and work for a small manufacturing company. By contrast, in 2007, 58 percent of male Harvard graduates and 43 percent of female graduates went into finance and consulting.
Then there’s the middle class. The emergence of a service economy created a large population of junior and midlevel office workers. These white-collar workers absorbed their lifestyle standards from the Huxtable family of “The Cosby Show,” not the Kramden family of “The Honeymooners.” As these information workers tried to build lifestyles that fit their station, consumption and debt levels soared. The trade deficit exploded. The economy adjusted to meet their demand — underinvesting in manufacturing and tradable goods and overinvesting in retail and housing.
These office workers did not want their children regressing back to the working class, so you saw an explosion of communications majors and a shortage of high-skill technical workers. One of the perversities of this recession is that as the unemployment rate has risen, the job vacancy rate has risen, too. Manufacturing firms can’t find skilled machinists. Narayana Kocherlakota of the Minneapolis Federal Reserve Bank calculates that if we had a normal match between the skills workers possess and the skills employers require, then the unemployment rate would be 6.5 percent, not 9.6 percent.
There are several factors contributing to this mismatch (people are finding it hard to sell their homes and move to new opportunities), but one problem is that we have too many mortgage brokers and not enough mechanics.
Where people work really matters. Not the company, but the industry — the end product. When our smartest people built things that were tangible, usable, exportable, it really mattered. And it can again.
We’ve got a story here (to use the language of the journalists). And the bad news is that we can’t fix this by tomorrow afternoon. It will take a while. We have to champion and applaud jobs that represent and build the real economy. We have to reward people who go into such work. And it will take a few years of graduates shifting their plans and dreams to pull this off.
The Brooks article, and the Florida book, reveal that the movement away from “finance” has already started. But it has not yet created movement into the jobs that build the “real economy.”
I’ll end with this, another cautionary paragraph from Brooks:
The shift away from commercial values has been expressed well by Michelle Obama in a series of speeches. “Don’t go into corporate America,” she told a group of women in Ohio. “You know, become teachers. Work for the community. Be social workers. Be a nurse. … Make that choice, as we did, to move out of the money-making industry into the helping industry.” As talented people adopt those priorities, America may become more humane, but it will be less prosperous.
One way to look at this is that businesses sold out the American people a long time ago and they knew it. I read “Which Side Are You On?: Trying to Be for Labor When It’s Flat on Its Back” by Thomas Geoghegan years ago when all the manufacturing was being outsourced when we were being told we will switch from a manufacturing based economy to a service based economy. Geoghegan (a trade union lawyer) asked management if they were aware that they were selling out the American people and they replied that they were aware of that.
Manufacturing involves efficient assembly lines and often robotic automation. Providing service on the other hand is labor intensive, and it requires a lot of it. Every place goods are sold now provides less service, and fewer employees mean less customer satisfaction, and less customers due to so many being laid off.
Latvia is going through 20% unemployment – austerity measures included cutting old age pensions by 70%, bankruptcies, foreclosures (sound familiar?) and resultant reduction in consumer spending, thus reducing the countries GNP.
Germany on the other hand is looking at more than 2% quarterly growth and the government subsidizing private businesses to keep their employees on the payroll and coming to work for shortened weeks (known as Kurzarbeit) with strong trade unions firmly in place, and Germany working towards a balanced budget (This according to Leslie Cohen of the BBC).
Almost every tax dollar collected now goes to merely paying the interest on the humongous national debt borrowed from the world bank – and there is no end to military spending as we switch from one theater of war to another without cessation.
What’s worse is that the *other* services that don’t help sell products such as web related businesses performing Search Engine Optimization etc. are being outsourced to India, China and elsewhere – selling out Americans again.
But in spite of all of this, behind all that’s wrong, there’s one issue nobody wants to address: There is no money left. Don’t believe me, see for yourself at www dot capitalbuilding dot us (sorry, not trying to add a spammy link – just another piece of the puzzle everyone out there is trying to solve).
Brooks is wrong to say that America would be less prosperous. The top 1% might earn less. America as a whole would be more prosperous, because it would be less unequal – for all the reasons outlined by Wilkinson and Pickett and by Danny Dorling. And in any case, the single measure of earnings is a very narrow way to assess social prosperity. But that’s just Brooks, isn’t it? He never quite thinks things through properly.