What's at the heart of Muncie's economic problems? No jobs.
What happened to them? Ask an economic conservative, and he will tell you that freer trade and fewer restrictions on corporations have vacuumed jobs overseas. Ask an economic liberal, and he will tell you that unions pushed for wages far in excess of what a person screwing bolts into widgets for eight hours a day should make.
Where does the truth lie? Somewhere in the middle, I suspect.
As a form of monopoly, labor unions exercise collective bargaining power to push for wages higher than the market equilibrium. This puts pressure on the profits of corporations - we've seen this, for example, with big auto makers pushed into the red by their pensioners' retirement funds - and so it should be no surprise when some businesses close down shop or move away.
But globalization doesn't get away scot-free while we are assigning blame for our city's poverty and lack of opportunity, either.
If a company can pay 20 percent less to Indian, Chinese or Mexican workers, it will gladly do so. Free trade means that goods coming in from overseas are not taxed, and so, taking shipping costs out of the picture, the American market is as open to foreign-manufactured goods as to domestically-manufactured goods. All else equal, the company will relocate overseas.
This is not a consequence of labor unions; companies would have done this anyway because a higher American standard of living requires that Americans be paid higher wages than their dirt-poor counterparts in the third world. Labor simply exerted extra pressure. In any case, as third-world countries opened up to foreign investment between 1960 and 1980, manufacturing jobs started going overseas.
And Muncie's livelihood went with them.
What to do now?
The obvious answer is to somehow bring back the manufacturing jobs that left in the first place. That's not a very satisfactory answer, because there are just three ways to do that.
First, persuade Congress to pass protectionist laws that would make manufacturing goods to sell in the U.S. more profitable than making them elsewhere.
Second, wait for living standards in the third world to rise to the point where American laborers can compete again.
Third, foment a communist revolution and get the government to build factories and employ workers.
These are all obviously impractical solutions, especially when we want to formulate a plan now. So let's take the current economic climate as a given.
Now, the first thing to do is accept the reality of the situation - we might never get manufacturing jobs back, especially ones in heavy industry, such as the automotive industry. We need to look elsewhere in any case, in order to make sure the economy of tomorrow is robust and diversified.
When we are trying to build a vision, we need to get a sense of the future, and we need to play to our strengths.
What does the future hold?
Well, several major predictable factors will influence the economy in the future. These are global warming, peaking oil production and the rise of Chinese and Indian middle classes.
And what are our strengths?
Our centralized location, the Norfolk-Southern and CSX rail lines that run through our city, our university and, believe it or not, our poverty and underemployment
Next week, I'll take a look at Muncie's strengths and try to get some sense of how they will interplay with the interesting times ahead. In the meantime, keep thinking about these issues, and talk about them. The problem of what to do with this city is an interesting one to try to solve, and it also has plenty of practical applications.
Write to Neal at necolman@bsu.edu
Read More
Three Air Jam teams take home the win
October 12, 2012Nineteen teams shimmied, shook and flipped for a sold out John R. Emens Auditorium on Thursday night during the 25th annual Air Jam.
Bill Clinton Speaks at North Central High School
October 12, 2012Former President's Speech Could Have Effect on State Senate Race
