At this point, we’re probably each wondering what the world will look like when this crisis ends and whether we’ll get back to the “good ole days” of last month.
I hope not.
I hope not because, before COVID-19, the U.S. already had other major crises – we were just kicking those cans down the road.
So, now is a good time to ponder our future as each of us sit in our “Shelter-in-Place.” We should be thinking about what kind of country we want to be and how we’re going to make it happen.
Some background – Services represented almost 80% of the 2019 $21.4 trillion U.S. GDP. Less than 2% came from industrial production. Hard to believe, but that’s why about everything on the store shelves says MADE IN CHINA.
We currently import $2.5 trillion in goods, including capital goods ($678 billion), consumer goods ($654 billion) and industrial supplies ($522 billion). That’s a lot of stuff we can start making in the U.S again…
In the early ’80s, I remember, as a baby investment banker, looking down my nose at the French with their parochial attitudes as they tried to protect their way of life. They weren’t into “global.” Then, much later, after moving to North Carolina in 1995, I began to see what they meant…
Driving around the state over the past 25 years, it’s shocking to see first-hand the devastation globalization has caused for so many once-vibrant cities and towns. Winston Salem, Tarboro, Whiteville, to name a very few, had their local economies destroyed as textiles, furniture and other industries moved to Mexico, Pakistan, China, etc. It’s the same story across small-town America.
In 1994, I was First Boston’s “Country Officer” for Pakistan (privatized a power plant and actually loved the work). I can vividly remember meeting the patriarch of a leading business family who said he was moving his textile production to Ethiopia because it had become too costly to manufacture in Pakistan. Think about it…
Opportunities – There are empty buildings all over this country that can support manufacturing again (old manufacturing spaces, former big-box retailers). Many still have railroad spurs nearby to efficiently move raw inventories in and finished product out.
A manufacturing renaissance in the U.S. would, naturally, maximize the use of robotics, artificial intelligence and other technologies. It’s a chance for America to rebuild using state-of-the-art manufacturing processes and, thereby, improve our global competitiveness for decades. That is what China, Pakistan, Mexico, Vietnam, etc. have done since the 1980s.
Some Background – We had a low level of unemployment (3%), but about 40% of the U.S. workforce made under $50,000 (really tight) and about 20% was actually under $25,000 (poverty – they get a short-term raise with CARES).
We’re now on our way to seeing 30% unemployment in the U.S. Some say it’s short-term – I don’t think so… Even if it does bounce back, the system’s broken.
You may be one of the winners in our society. But a huge portion of American workers is losing – big time. They didn’t get on the digital train, play professional sports, become celebrities, work at private equity funds or other professions that pay well.
I have wondered for years how the U.S. can address this disparity. Literally, how we can we avoid a revolution by the poor? The rise of the progressive movement in the presidential election suggests that politicians are playing heavily to those who can’t see their way to a reasonable living. And a future with even higher levels of entitlement is a nightmare to me.
I’m all for becoming a billionaire, and I salute those that have attained it – it’s the American way. But we can’t leave a huge swath of Americans in the economic dust and think it’s a sustainable way for our society to function. For the first time in American history, people are earning less and dying younger, something that income inequality will continue to perpetuate unless addressed.
Technology, by its nature, drives efficiency and fewer jobs, but the information age has been a game-changer. There aren’t regional winners (we get only one Amazon, one Uber, one Twitter), and it flattened management structures (wiping out middle-management jobs). The result – you get a wider range of incomes, with too many at the bottom.
Opportunities – COVID-19 enables a “do-over.” By dramatically increasing domestic manufacturing, entrepreneurs will create a vast number of better jobs. Also, adjusting our lives to this new reality can create jobs and even industries that did not previously exist.
Ironically, by undermining so many service-related jobs, the COVID-19 sucker-punch also leaves many stranded Americans available to fill new, higher value-added manufacturing jobs — Jobs paying much more than McDonald’s, and with better benefits (which starts to address healthcare issues in our country…).
Some background – To manufacture products in the U.S. in 2019, we still had to import $522 billion of industrial supplies, $191 billion of which was oil and petroleum products. It’s looking like COVID-19 can live on plastic for 72 hours, but on paper for 24 hours (we still don’t know for sure). I vote for paper!
If we’re going to develop a more reliable supply chain, it will require an increased amount of domestically sourced raw materials. I’m NOT advocating a major relaxation of our environmental standards – that would be yet another short-sighted approach for our country. But the U.S. is a huge country with an enormous capacity to expand our agricultural base to produce biodegradable raw materials.
Our family now drives smaller U.S. Highways and State Roads as much as possible to avoid the Interstate Highways’ trucks and construction. It takes a bit longer, but it’s more relaxed, and you get a window on rural America. The number of abandoned farms we see across the Southeast is staggering. The U.S. still has ample farmland available to grow whatever we need, thus creating additional good jobs and requiring more U.S. manufactured farming equipment (go John Deere; bring back Massey Ferguson!).
As for energy consumption, solar efficiencies have grown exponentially, and we’re already seeing a big jump in solar as a supplemental energy source. Putting panels on the repurposed buildings mentioned above would help limit the amount of farmland now becoming solar farms.
Opportunities – We should start producing domestically, using materials, methods and energy sources that are sustainable. The R&D for using biodegradable plant-based materials is now highly advanced, and we can scale production quickly. Researchers in the U.S. are making sustainable energy sources even more cost-effective as you read this.
Mark Twain said, “there are three types of lies – lies, damn lies, and statistics.” Most of the figures used above came either from the U.S. Census or U.S. Bureau of Labor. I’m guessing they still paint a fairly accurate picture.