SME-Ch8-EconDisplace

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Chapter 8

THE ECONOMIC DISPLACEMENT

The move into labor-saving technology offers magnificent promise – except that itradically scrambles the usual order of things. What we are accustomed to is that peopleshare in economic output because they earn income that allows them to be consumers. Acircularity between income and consumption has formed the basis for the present and all preceding economic systems. When an economy will no longer need to employ largenumbers of people and pay them wages, or there are jobs but they are mostly marginal, thequestion will become one of how people are to receive income that will make it possible for them to be consumers. In turn, without consumers, how will the production of goods andservices continue to be motivated and funded?

This is the old "underconsumption" or "purchasing power" problem that socialistthought raised for over a century without a good basis for it. "Say's Law" – that each

producer's output provides the demand for what others produce, so that in the mutuality of multiple production there is no lack of demand – was formulated early in the nineteenthcentury as part of the general classical liberal rebuttal to the socialists’ many arguments that"the market can't work." Those arguments have until now lacked justification because a verylarge percentage of the population has been able to thrive in a system of personal striving.This has meant that they have in fact had the means to purchase the output. Say's Law madegood sense and has proved right about the working of modern economies.

Now, however, non-labor-intensive processes are coming in that will give the purchasing power shortfall a very real foundation unless there is a wise restructuring. Thiscauses a crisis even for the scientific-technical system as such. As technology comes todisplace labor and personal striving, the concern over purchasing power does become

relevant. Unless some way can be found for the billions of people who make up the world's population to share in the revenues of the economy, those revenues will begin to decline asmass markets disappear or fail to develop. In that case, the science and utopian possibilitiescannot be sustained, and will fade for the population as a whole – and even investors whoown the technology will cease to make more than piddling sums from it. The technologywill depend on the consumption just as much as the consumption will depend on thetechnology.

We don't need to engage in the "lump of labor fallacy" (the simplistic view that theworld has just a fixed amount of work to be done) to realize that there is a crisis for thetraditional work-centered society. Human beings no doubt have vast future undertakings toventure upon, including space and perhaps oceanic colonization. There is no end to the

things that need doing just to bring everybody in the world up to the existing standard of living in the developed countries, much less to the standard that is visible even today as a potential. So there is no thought of having a finite amount of things to do. The question iswhether they will employ hundreds of millions, even billions, of people. The president of one of Europe's conglomerates was on the mark recently when he asked, "Tell me where?In what jobs? In what cities? Which companies?"

Especially during periods of economic boom, it has been easy for many people tomiss the import of what is taking place. The university where I taught offers a good



example: a great many professors were busy working on Internet presentations of their courses, while at the same time the development of Internet course offerings was goingforward rapidly through the efforts of publishing companies, entire university systems suchas the State University of New York (SUNY), and think tanks. All of this activity continuesto occupy large numbers of people, who are pouring their professional talents into it. But

what they have been preparing is a system of educational delivery that will within a fewyears tend strongly to make the in-class professor obsolete under the impact of intensecompetition among low-cost, credential-granting Internet courses. What they are working onso intensely is a delivery system that will be profoundly non-labor-intensive. To point thisout does not suggest that society should retard in any way the technological and competitivefactors that are leading into the future. But let there be no confusion: the recent bustle of innovation, in all areas of economic life as well as in universities, seems to offer plenty for those who are technically proficient to do. Whether they realize it or not, however, they arelaying the foundation for their own displacement.

The whole phenomenon of economic displacement – of downsizings, layoffs and"early retirements” – is not a passing phase.

Over many decades since the beginning of the industrial revolution, people moved fromagriculture into manufacturing. More recently, the movement has been from manufacturinginto services. This has been true in all the advanced economies. The American economy hasto a large extent moved from there into “finance.”

In the underdeveloped world, the vast migration of populations from the countrysideinto the cities still continues. This is marked also by movement from the Third World intothe advanced societies, threatening in particular the West’s long-term demographic identity.This “peasant pressure” has in many places caused severe social upheaval.

There is much to be learned from looking at the specifics of the economicdisplacement.

Of farmers. The displacement of agriculture that has been underway for centurieshas much further to go. In his seminal book The End of Work , Jeremy Rifkin says "new breakthroughs in the information and life sciences threaten to end much of outdoor farming by the middle decades of the coming century... leading to a world without farmers." 1 Thiswill occur in the advanced economies; and as Third World farmers become more efficienttheir farm production will multiply and displace hundreds of millions of people who todayscratch the earth for a living.

An example of how the displacement is strongly felt by the individual farmer camein 1998 in the Kansas controversy over the introduction of "hog megafarms." A companywas given permission to establish two farms that together would have 40,000 sows, whichcould have as many as 500,000 piglets a year. This gave rise to an organization of westernKansas farmers known as Families Against Corporate Takeover. The number of hog farmsin Kansas fell from 22,000 in 1965 to 3,600 in 1997.2

While the number of U.S. farms has shrunk, the average size of farms has gone up.The cause: a “relentless movement to take the costs out of the system.”

Of workers. Economic theory says that because of "the inexhaustibility of humandesires," if wages are flexible there will (subject to some frictional disconnections) always be demand for as many people as want to work. The theory needs amendment, however, inthe cyber/robotic context. The new technology’s impact has already been enormous even in



its incipient stages.Tens of millions of jobs have been eliminated in the United States since the 1970s.

The number of corporate layoff announcements has been high even during periods of economic boom. Much of the time, the public has been reassured by the more Pollyannaishcommentators that laid-off employees will find good jobs, often at better compensation. But

if this is to happen in the relatively brief time needed to alleviate their condition, it iscontrary to what economic theory would lead us to expect, since it suggests that hundreds of thousands of workers will have been employed at jobs that have been below what has beenavailable in the labor market, held back by a lack of job information or mobility.

It now takes far fewer hours of labor to make steel than it did a short time ago. Theresult has been that the number of U.S. steelworkers has dropped drastically even as production has increased. During one period, General Electric’s profits tripled while it cutits global workforce in half. As one company after another in a variety of business contextshas “struggled to remake itself,” thousands of employees have been found superfluous.Consolidations and corporate restructurings, leading to a shedding of jobs, have becomesubjects of daily announcements.

Employees of all kinds are affected, including a great many in the service sector.We see the effect of non-labor-intensive technology in such a thing as the optical scanner,which has displaced thousands who at one time worked at data-entry. This has meant thateven the Third World keypunch employees to whom work had been outsourced for their cheaper labor have been displaced. Postal workers have seen the impact of address-readingmachines, and studio musicians that of electronic synthesizers. Even so obscure a professionas Braille translator has been disappearing as audio readers and voice-recognition computershave come in.

Needless to say, there are some important offsets. The new technologies create jobsrelating to themselves, such as in information technology. Even those technologies,however, are becoming increasingly non-labor-intensive as they mature.

Of firms. Among business firms the struggle to survive amid lowest-cost worldcompetition leads to much desperate activity – what is best described as “churning.”Larger-scale enterprises such as Wal-Mart, which has displaced countless small-townretailers, have succeeded, although their brick-and-mortar stores will themselves soon bethreatened by direct consumer-factory transactions through the Internet. At the same time,the new technology lends itself to small business units serving unique niche-markets.

Firms and production facilities move to where there is lowest-cost labor, only tomove again when a still-lower-cost location is found. By 1992, 1800 U.S. manufacturingfacilities, with half a million workers, had already located across the Mexican border as partof Mexico's Maquiladora program. MagneTek set up a 150,000-square-foot factory acrossthe Rio Grande from Brownsville, Texas. It wasn't simply that American companies weremoving south; Asian companies were also moving to northern Mexico. Some of the production was high-skilled, since Mexican engineers made half as much as Americanengineers.3 The result was that by 1992 no television sets were made in America; ZenithCorporation had just "turned out the lights" by moving the final production facility fromSpringfield, Missouri, to Reynosa, Mexico.4 At the same time, China’s shadow fell acrossthe Third World. Attracted by its even lower-cost labor, much manufacturing moved not toMexico, but to China (or away from Mexico, if it was already there, to China).

Of industries. Whole industries are churning in much the same way as individuals



and firms. This has been visible in deep-water oil and gas production where large platformshave given way to automated production technology located on the ocean floor. In the steelindustry, minimills located near their markets came in to take advantage of new technologyand non-union labor, while the large mills spent billions of dollars for modernization thatallowed a greatly reduced workforce.

William Davidow has referred to a "process of disintermediation – getting rid of services that are in the middle." This will go far toward eliminating wholesalers, retailstores, publications carrying advertising, travel agents, automobile dealers, stockbrokers,and even educational institutions.5

The late historian-businessman Otto Scott wrote that "U.S. shipyards are gone:vanished into the mist of ‘free trade' that has turned so many U.S. heavy industries over toother countries and peoples. The vessels that arrive in our ports are virtually all foreign-owned, built in foreign shipyards."

Just as newspapers and book publishing are threatened, there is a serious questionwhether brick-and-mortar universities will continue to thrive, as we saw when we noted howunaware many people are of their own impending displacement. "Distance-learning" offers

students accredited courses, degrees and credentials at a fraction of the steadily-increasingcost of an in-residency education. If, to speak hypothetically, a student can take a for-creditcourse on the "History of Western Civilization" from an Oxford professor for $11 instead of a similar course from a local university for $300, how long will the latter retain marketshare? As long ago as 1982, The National University Teleconferencing Network wasestablished to offer programs by satellite. Two years later the National TechnologicalUniversity came into being as a consortium of engineering departments – and offereddegrees. It is no wonder that Herbert London of New York University predicts "the end of the university as most Americans picture it."6 The challenge to public universities becomesespecially clear when we consider that their funding has been based on "credit-hour production"; i.e., the number of students taught. The funding of teaching has then carriedwith it, as if it were an incidental, the "community of scholars" that make up the heart andsoul of a true university. The professors do some teaching but mainly pursue a life of research or, to an increasingly lessening degree, “of the mind.” If the teaching functiondisappears in a welter of electronic competition, will state legislatures make the leap fromthe old funding method to one that will simply pay to maintain the community of scholars assuch? Will contributors to private university endowments make the leap, either? It isdoubtful in both instances, since continued funding will require a higher level of appreciation of the scholarly function per se than most people possess. “Research” willlikely receive more eager support than more general scholarship.

Of national economies. If a nation’s economy is based on items that can besupplanted by new technologies, the economy is in jeopardy. An example mentioned earlier is Madagascar, which in the past produced two-thirds of the world’s vanilla, with peasants performing tedious hand-pollination. Rifkin mentions that inexpensive gene-splicingtechniques now allow vanilla to be made in large laboratory vats.7

Will skilled and service jobs fill the void? A number of commentators have looked tohigh-technology and services as an inexhaustible sink for the absorption of labor. Acommon recourse is to say that "people must train themselves to be highly skilled, to work flexibly and to be comfortable with considerable insecurity." Today's literature is filled with



this prescription.This reflects the faith we have mentioned that in a market economy there will

always be endless things to do, since scarcity is a given and human wants are infinite. Butthis is wishful thinking, engaged in by commentators who have failed to adapt anideological fixation to the world as it is now becoming, and who are willing to grasp at any

straw or to think only incompletely about a problem. They forget two fundamentals: (a)First, that half the members of the human race are below 100 in I.Q. and have always foundemployment in repetitive tasks. These are people who have little aptitude for flexibility andlittle tolerance for ambiguity. It is no slur against them to point this out; it does not reflecton their character or worth as human beings. But it does negate the expectation that theycan en masse "turn to high-skill training" and take jobs where they are counted on to makecomplex decisions as masters of advanced technology. (b) Second, that there just won't beenough high-skilled work, under any conceivable scenario, for billions of people to perform.If this is true in the advanced economies, it will be even less true in the less developedcountries.

Today, we hear this sort of transfer-to-upgraded-skills optimism as part of the

conventional wisdom. In the movie "You've Got Mail," a small bookstore goes out of business when a giant store opens around the corner, but it is presented as a blessing-in-disguise because the small store's owner (played by actress Meg Ryan) goes on pluckily to become a writer of children's books.

Indeed, as with Ryan’s character, there is a factual basis for the optimism. Butoptimism doesn’t adequately tell the story. If the principal services come to be performablewith only minor, rather than mass, human effort, we get to what Rifkin calls "the end of work." Stanley Aronowitz and William DiFazio have written in The Jobless Future: Sci-Tech and the Dogma of Work that “the new technology has fewer parts and fewer workersand produces more product. This is true not only in traditional production industries but for all workers, including managers and technical workers."8

Even many services now require less human input, and other services are becomingunneeded. Moreover, whatever takes their place is not likely to require mass human effort.Among the many examples: In aircraft manufacturing, coordinate measuring machines arecontrolled by computers, eliminating the need for thousands of hours of inspection. Inarchitectural firms, computer-aided drafting not only replaces the old manual drawing, butincreases productivity several times over. Within organizations, top managers don’t needstaff and middle managers when real-time information is available at the click of a mouse.(This is the “disintermediation” to which we have referred.) Sales forces shrink, andwholesalers become unnecessary, as customers come to have a direct computer link with a business firm.

“High-tech” will no doubt continue to employ a rush of new talent to feed its rapiddevelopment and implementation. This need will be so great that for many years there will be rewarding opportunities for those with the necessary intelligence and aptitude. Becauserapid innovation will remain a feature of society unless we allow serious impediments tostop it, new opportunities will arise in perpetuity for such people. But high technology'slong-term direction is to make its own workforce redundant. The present technology will benon-labor-intensive itself once it reaches maturity, and later innovations are almost certain to be non-labor-intensive as well. As the technology becomes self-automated and "user friendly," fewer skills are needed to run it, so that less high-skilled labor is required. This is



referred to in the literature as "de-skilling."

There may be an interesting twist to all of this in the advanced economies.1. It is worth considering what the situation might be in the absence of a distributive

mechanism such as a “shared market economy.” There is a possibility that a near-total

displacement of workers will not occur within the economies that sustain a substantialindustrial base, and that people won't be rendered desperate in their search for scraps. Nodoubt, even in a best case scenario, much churning will occur as people are made insecureand tossed about by constant restructurings as businesses react to the relentless drive to cutcosts. The downsizings and restructurings of the past few years aren't over. Rather, they are just starting, since they are a response to computers, technology and global competition.Despite this churning, near-total as distinct from partial displacement may conceivably notoccur. Why not? Consider an illustration: In a town in 1849 California, it was sufficient if,say, thirty percent of the men worked in the gold and silver mines. Their income wasenough to support a large number of mercantile stores, dentists, doctors, saloon-keepers, andthe like. The latter were certainly not parasites, but regular parts of the local economy

serving the needs and desires of the miners themselves. In the world of the near future, if thirty percent of the public make a good living out of technical work, demand for servicesmay be enough to make possible a certain level of economic activity for the others.

With the engine of science, high technology, and global competition, the marketeconomy will so greatly enrich a portion of the population that their wealth may providedemand for services from the others. Riches will go to leading-edge entrepreneurs, a certainfraction of the population that is employed in operating existing or creating new technology, people who provide something marketable that mass markets can disseminate to tens of millions or even billions of others, and investors who own part of the productive mechanismand derive dividends, interest or capital gains from it. These income-earners will then provide demand for a multitude of subsidiary services to be performed for each other (subject, however, to the fact that most of those services will be more and more availablethrough means other than mass human effort).

Just the same (continuing to assume that there is not a broad program of incomedistribution), a severe economic polarization will be the main manifestation of the changedconditions. There will be those who participate in the highly rewarding high-tech economyas skilled technicians, as owners, or as people who reap enormous earnings from massmarkets. And there will be the great bulk of other people, in comparatively endless supply,who compete with each other, with foreign labor, and with increasingly non-labor-intensivetechnology for the supporting roles. Science and technology may under those circumstancesraise the overall level of life, but the differences in income and wealth will be immense.

Something to note now is that in the absence of a wide dispersion of wealth throughsomething like the shared market economy, we would have reason not to welcome some of the forms this spreading-out may take. I saw reference the other day to the possibility thatdomestic servants may again come into demand. And I recall that in the main hallway of the historic old Hotel Colorado in Glenwood Springs, Colorado, there is a picture of thegangster Al Capone, with a caption under the photo that reads: "Legend holds that during prohibition, a Hotel Colorado bellman delivered a case of gin to Capone at his request. In agesture of appreciation, Capone tipped the bellman enough to put him through college at theUniversity of Denver." As nice as this was for the bellman, this leaves much to be desired



as a model for the future support of a population. Dependence upon the beneficence of thesuperrich would be inconsistent with a free society based on upstanding individuals.

The wages for the millions who want to provide ancillary services will be presseddown by the on-going introduction of non-labor-intensive ways of providing them, and theenormous supply of people anxious to offer the services. In theory, those wages could fall

to the subsistence level, but in fact they won't unless the cultural factors that have repealedMalthus's dire predictions (about the expansion of population always pressing onsubsistence) are also repealed, such as by mass immigration. In fact, the "rising tide" of potential well-being caused by science and technology may even lift everybody to a levelthat in absolute terms is higher than the present one. But the wages will be very low relativeto the riches of the groups of people who are able effectually to draw income from the productive mechanism. This polarization of income and of wealth is precisely what wehave been seeing.

2. If, now, we consider the situation where there is a shared market economy, wefind that the possibility for economic activity among the population at large is considerablyenhanced. There, everyone will receive income from the overall productivity. This income,

in turn, will provide purchasing power for the items produced not only by the technological powerhouse but also for the goods and services people will otherwise choose to provide for profit.

This gives rise to important questions. Isn't inequality – even some considerableinequality – just an indication of the normal operation of a free society based on the marketeconomy? Won't the unequal distribution be a product of free economic interchange, so that people will receive neither more nor less than what freely-arrived-at contracts will lead themto receive? And don't inequalities of income and wealth simply demonstrate the salutaryfact that there is no "command economy" dictating some other distribution?

Because of the income people will be able to make from sources other than thegeneral distribution, a shared market economy will feature a fair amount of precisely the sortof inequality that is the hallmark of a free society.

But there is more to be said. A consideration of these things is why we must devotedetailed attention in coming chapters to issues that some readers may think "are tooacademic for me." Far from "academic and theoretical," such questions go to the heart of how we are to live and to structure society. In fact, a consideration of those questions will be the most interesting and important part of our analysis. What we say in the following paragraphs provides some foretaste of that discussion.

If the supporters of a free society extrapolate their market ideology (as so many of my friends have so far been inclined to do) to provide a normative justification for the vast polarization that is developing in the absence of a shared market economy, they will beholding to the outer shell of their (and my) philosophy without remaining true to itssubstance. That substance has many facets:

To classical liberalism the market economy is not just an essential alternativeto a command economy, but is a way to realize the benefits of the vitalenergies of millions of people pursuing their own ends. The theory of the"invisible hand" postulated that "natural processes will indeed work to thegeneral benefit." The aspiration has been a vast middle class, with the entire



population producing and benefiting. Classical liberalism, placing individualliberty at the center of its thinking, has embraced many of the values of aristocracy in the best sense, since it isn't slobs who are best fitted to be freemen; but classical liberals have believed in an aristocracy of merit, notculturally (or technologically) hardened aristocracy. They saw the Old

Regime of medievalist Europe as antithetical to their "republican"aspirations, not as an expression of them.

Thus, the possibility, mentioned earlier, that a society can become inured toextremes of wealth and poverty poses a real danger. Herrnstein and Murray warned: "Wefear that a new kind of conservatism is becoming the dominant ideology of the affluent–notin the social tradition of an Edmund Burke or in the economic tradition of an Adam Smith but ‘conservatism' along Latin American lines, where to be conservative has often meantdoing whatever is necessary to preserve the mansions on the hills from the menace of theslums below."9 An indifference toward polarity has been accepted as natural in manysocieties and at most times in history; but it is utterly at odds with classical liberalism as best

conceived. This is a major reason why a "market ideology" that is too narrowly framed, andthereby becomes a rationalization for the intolerable, is fundamentally inadequate toclassical liberalism.

The economic displacement has contributed to serious problems for many American blacks. It is impossible to say precisely how much of the devastation American blacks haveexperienced since World War II and of the consequent social problems for American societyas a whole have been due to blacks' displacement first from southern agriculture and thenfrom northern factory jobs

The situation with many blacks feeds into the problem of an "underclass." In his book on the "new urban poor," William Julius Wilson said that "where jobs are scarce... andwhere there is a disruptive or degraded school life..., many people eventually lose their feeling of connectedness to work in the formal economy... In the case of young people, theymay grow up in an environment that lacks the idea of work as a central experience of adultlife." Middle class and working class black families have moved away from black ghettos,and many black businesses have closed down. This has been accompanied by increaseddrug trafficking and consumption, and so much violence, augmented by rapid-fire assaultweapons, that there has been a vastly increased murder rate among young black males. Neighborhoods have come to resemble a war zone, with abandoned and ruined buildings.Sexual barbarism reigns and there is an extremely low rate of marriage. 10 The serious-minded comedian Bill Cosby and columnist Juan Williams have commented on all thisextensively in the 2000s.

Nor is the underclass limited to ghetto-mired blacks. Murray and Herrnstein’s book has asection on "the emerging white underclass," and predicts that "sometime in the next fewdecades it seems likely that American whites will reach the point of conflagration." They point especially to the rise of illegitimacy, which they see as a trigger. The illegitimacy ratioamong whites has been increasing rapidly in the United States, and in Britain shows “nosigns of slowing down."11

Such an underclass, and the fact that it is increasing, amount to a social cancer. The



underclass is different from the immigrant-poor of earlier generations, who were poor in thefirst generation but whose children rose out of poverty and saw their places taken by thenext wave of immigrants. The underclass is composed instead of people who are sunk inhopelessness and have personal characteristics to match. George Schultz, former U.S.Secretary of State, speaks of this as a "group of people that I feel is growing in the United

States... that are not really in this system. They are in a system of crime and drugs, of nofamily attachments, and of gang attachments... They are in a different pattern, a differentsystem... It is a threat to society...."12

The criminality prevalent in the underclass was underscored by Charles Murraywhen he commented on reports that U.S. crime has gone down. He pointed out that a major reason for the drop is that immense numbers of criminals are incarcerated, and that scholarsestimate that every year of a criminal's incarceration prevents from 12 to 21 new crimes.

The displacement has broken the connection between productivity and earnings.According to the major Austrian economist Ludwig von Mises in Human Action,economists reason that "the height of wage rates for each kind of labor is determined by its

marginal productivity." If a gap exists between the marginal productivity of labor and the prevailing wage rate, "there will be people eager to take advantage of the margin... Their demand for labor will bring wage rates back to the height conditioned by labor's marginal productivity."13 Economist William Allen had this reasoning in mind recently when he said"wages have grown rapidly during our nation's history because the productivity of labor hasincreased... By competing against one another to obtain greater quantities of labor mademore valuable by more capital, businesses bid up the wages they pay."14 We will see other statements of the argument in Chapter 14 when we critique a number of free-marketconcepts.

The theory is a good statement of a syllogism’s major premise, but the factual minor premises don't exist to complete the argument. First, the facts today make the gap so greatthat there is no real chance for the adjustment Mises and Allen talk about. Productivity has been rising far beyond what the outmoded statistical measures show, and yet wages haveremained stagnant or fallen. Why? Because of an immensely expanded labor pool – whichhas fast become a worldwide, not merely a local, pool. The theory itself tells us that anenormous expansion in the supply of an "economic good" (which is what labor is in aneconomic sense) will bring its price down even if there is an increasing demand for it, unlessthe added demand is commensurate with the additional supply. Second, although the newtechnology raises productivity, its non-labor-intensivity offsets the adjustment that Misesand Allen describe as business' "competing to obtain greater quantities of labor" to "takeadvantage of the margin." The augmented productivity doesn't stimulate a commensuratedemand for labor because it simultaneously makes labor unnecessary.

Accordingly, Kevin Kearns spoke recently of "the de-linkage of wages fromincreases in productivity." He says that "from 1972 onward, the productivity of theAmerican worker has continued to rise. In fact, in the last several years it has skyrocketed.But real wages have continued to decline."15 In the Harvard Business Review, Schwab andKaljian say "the whole phenomenon of delocalization [i.e., the seeking of the lowest costsworldwide] has broken the linkage that previously existed among high technology, high productivity, high quality, and high wages. It was this linkage that once appeared toguarantee ever-improving standards of living in the industrialized countries. Today,



however, it is possible to have high technology, high productivity, high quality, and low

wages" [their emphasis].16

Is "deindustrialization" happening to the United States? Bluestone and Harrison's The

Deindustrialization of America appeared in 1982. The authors referred to a "widespread,

systematic disinvestment in the nation's basic productive capacity." As we look back almostthree decades later, it is amazing how prescient they were. Their thesis was that capital inthe United States has been moving away from production and toward "speculation, mergersand acquisitions, and foreign investment."17 Writing in 1994, Wallace C. Peterson said"‘deindustrialization' may be the wrong word... What has been happening has been a slowand insidious erosion of America's capacity to make things and compete in world markets.There is solid evidence in support of this view, in spite of the presumed stability of manufacturing's share of total output." He pointed out that a large fraction of U.S. exportswere of military, not consumer, items. The U.S. share of high-tech production "has beeneroding since the mid-1960s."18

But this is hardly the perspective of those who most strongly support globalization.

Thomas J. DiLorenzo argued that "the deindustrialization theory is a hoax. Manufacturingoutput as a percentage of GNP is about 24 percent today, compared to 25 percent in 1950."19

William Niskanen pointed out at the end of the Reagan administration that "in terms of whatwe produce, America is not deindustrializing," since the manufacturing percentage of totaloutput actually increased during those eight years even though the percentage of peopleemployed in manufacturing dropped.20 Compare this with William Greider's critical view,which looked to the decrease in manufacturing's percentage of GDP between 1977 (when itwas 20.2 percent) and 1993 (18.7 percent) and also thought in terms of "what America'smanufacturing output might have been if the country were still relying mainly ondomestically produced goods."21

The world is changing so rapidly, however, – with the shift first to countries withlow-pay workers, but then eventually to whichever has the most efficient technology – thatthe key eventually will be held by whoever has the technology. The ultimate issue will betechnological expertise, transcending the issues as we know them today.

ENDNOTES



1. Jeremy Rifkin, The End of Work (New York: G. P. Putnam’s Sons, 1995), pp. 70-80.2. The Wichita Eagle, June 19, 1998.3. Washington Times’ National Weekly Edition, November 30-December 6, 1998.4. Donald L. Bartlett and James B. Steele, America: What Went Wrong (Kansas City: Andrews and

McMeel, 1992), pp. 34, 35.5. William Davidow, “The Buck No Longer Stops Here,” Forbes ASAP , February 24, 1997, p. 24.6

. London is quoted in Parker Rossman, The Emerging Worldwide Electronic University: Information Age Global Higher Education (Westport, CT: Greenwood Press).7. Rifkin, End of Work , p. 124.8. Quoted in the review by Edward T. Chase of the Aronowitz-DiFazio book in New Leader , March 13,

1995.9. Herrnstein and Murray, The Bell Curve, p. 518.10. William Julius Wilson, When Work Disappears: The World of the New Urban Poor (New York: Alfred

A. Knopf, 1997), pp. 52, xvii, 4, 9, 34, 35, 60, 88, 99.11. Herrnstein and Murray, The Bell Curve, p. 520.12. George Schultz, "Closing Remarks," Federal Reserve Bank symposium on Reducing Unemployment,

Jackson Hole, August 1994, pp. 366-7.13. Ludwig von Mises, Human Action (New Haven: Yale University Press, 1949), pp. 591-2.14. Allen, The Midnight Economist, Third Edition, p. 144.15. Kearns, testimony, October 25, 1995, p. 2.16. Schwab and Kaljian, Harvard Business Review, November-December 1994, p. 41.17. Barry Bluestone and Bennett Harrison, The Deindustrialization of America (New York: Basic Books,

Inc., Publishers, 1982), p. 6.18. Wallace C. Peterson, Silent Depression (New York: W. W. Norton & Company, 1994), pp. 191-2.19. Thomas J. DiLorenzo, "The Political Economy of Protectionism," in Burton W. Folson, Jr., ed., The

Industrial Revolution and Free Trade (Irvington-on-Hudson, NY: Foundation for Economic Education,1996), p. 135.20. William A. Niskanen, Reaganomics (New York: Oxford University Press, 1988), p. 261.21. William Greider, One World, Ready or Not (New York: Simon & Schuster, 1997), p. 211.

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SME-Ch8-EconDisplace