Today I read the above cover story in Business Week, “What’s really proping up the economy?”. It’s major point was that since 2001 1.7M jobs have been added in health care, and that the rest of the economy has collectively added zero.
Crazy, but it makes sense. The core of our economy has been carved out . . . jobs in manufacturing, call centers, software development, even agriculture to an extent have all been replaced by lower cost methods, whether automation or offshoring. What’s left is a creative class of upper level managers, designers, producers, etc. and everyone else. And there is less and less left for everyone else: basically that which can’t be offshored or automated. Health care is tough to automate or offshore and, as the population ages, there is more and more demand for it. So it becomes one of the last job producers left.
The article then cites Johnstown, PA as a big example of this phenomena. I know Johnstown well as it is my mother’s home town and I have lots of relatives there. It is a former steel town which has been wiped out by offshoring of steel production. Most of the downtown is a ghost town (see photo). I’ve remarked myself when I’m downtown that the only part with any vibrancy is the hospitals. With the exception of a handful of small businesses, Medicare and Medicaid seem to be the only cash inflows into the region.
I am certainly a capitalist and a believer in free market economies. But this article gave me a real hesitation regarding globalization. What could be a more clear indication that our economy is sick if health care is our major job producer? That just does not seem sustainable. It seems intuitively wrong.
The envisioned position of the US worker in the global economy is to continue to climb the value chain, and continue to add value up the ladder from their lower wage offshore counterparts. Education is held as the vehicle to accomplish this, and certainly through educaiton we can help on this issue.
But is it really possible? It is really conceivable for all US workers to serve as the creative class for the whole world? US workers design the products and global workers to manufacture them? US workers to provide the banking services for global companies? US workers to design the video games and global workers to manufacture and purchase them? This vision does not seem possible, and it leaves a bleak outlook for those Americans not in the creative class–left to lower wage service jobs, a distinct underclass. And that assumes that there is even enough of such jobs for everyone.
So it seems that American globalization will at some point hit a wall where the economy topples from the erosion of its middle class base.
What could serve as a detour for such a scenario? Oil is what greases the wheels of the global economy. We can continue to get our apples from Chile and our Barbies from China so long as the cost of flinging these products around the Earth remains incredibly low. An increase in the price of energy, which may happen dramatically and soon, could put all of our globalization concerns to rest, and awaken many others.