During a recent conversation with a friend, we were discussing what needs to happen to improve the jobs market that is the foundation for reducing our national unemployment crisis. With over 6 million 99ers trying to survive without any unemployment benefits, hundreds of thousands joining them every month, and new unemployment claims holding at rates around 38% higher than normal, what is the solution to this calamity? We can banter back and forth about how we got here, but the important question is which direction do we need to go in to fix the unemployment problem and get people back to work?
There is great wisdom in the old adage that those who do not learn the lessons that history has to teach are doomed to repeat them. In many ways our current situation is also much like the old joke about the guy that goes to the doctor and says “Doc, it hurts when I do this.” And the doctor responds, “Then don’t do that!” Sometimes you simply need to stop doing what hurts and what failed in the past. Here is where my thoughts turned to the move towards global markets over the last few decades.
As our new world economy has unfolded, millions of jobs have been lost. What is new about this recession from recessions in the past is the elimination of jobs and not just lay-offs waiting for the markets to improve. To a very large degree, the jobs are now gone.
Year after year after year of trade imbalances precipitated the continual erosion of jobs as we continue to import more and export less as if the American economy was immune to the basic laws of supply and demand. Demand was derived by having good paying jobs and the supply of cheap goods met the demand. But we have oversaturated our market with too many imported goods. We cannot create jobs in a market that has too little demand due to a massive reduction in consumer activity due to unemployment and joblessness. This trend is simply unsustainable.
Saving money on consumer goods costs jobs in the long run if these saving are generated solely through the importation of goods produced in other countries. Call this the Ford strategy versus the Wal-Mart strategy. Henry Ford believed that to be able to sell his products Ford needed to pay his workers a living wage sufficient enough to allow his workers to be able to afford the purchase of his product. Sam Walton believed just the opposite. The cheapest product will win. By paying people low wages and importing cheap goods, your company can thrive at the expense of others. There is absolutely no concern for the support of a local or national vendor base in the Wal-Mart formula as their strategy is all global all the time. The people in China making the $12 toaster for Wal-Mart still can’t afford to purchase one. It has become a strategy of self-interest only, much like the rape and pillage strategies of long ago wars.
To recover we must learn from history and become much more like the Henry Ford version than keeping to the Sam Walton vision lest this all just becomes a world dictated by the lowest common denominator – a few very rich divided by a very large prime number of the poor. In a world where every company must follow suit by purchasing goods from developing low pay countries to be able to compete while less and less demand is generated because everyone is losing their jobs here is a horrible formula for future success – it is a death spiral! We must move back towards economic self-reliance where we produce what we need on our own even if it means having less and paying more. Those who want the bargain should move to the country that offers them – and try to buy that toaster while making a $1.00 a day.
Demand drives growth and growth creates jobs. Phase one should be the passage of the soon expiring federal unemployment extensions to show the markets that we will not have a sudden drop in consumer demand. Phase two should be the passage of a Tier V unemployment extension to put funds back into the hands of over 6 million 99ers that will help stimulate demand in the consumer markets. The third step at a minimum should be a quid-pro-quo tariff structure on foreign imports. Your charge our exports 20% we charge your imports 20%. The increase in tariffs collected could be used to support the Tier V extensions and offset some of the costs for the unemployed until internal consumer demand generates the growth necessary to create full time jobs. Now all we need to do is to get those that care to overcome those that just want to get richer raping and pillaging this once great nation.