Posted 12/16/2010

UNEMPLOYMENT: THE DANGER

Albert Einstein once said, "Everything changes except the way we think."

The United States has been losing manufacturing jobs since 1970, but no one has seemed to notice. Not Democrats. Not Republicans. Not even the socialists.

We seem to be in a period of denial. Some deniers even claim we had the same number of manufacturing jobs in 1970 that we have now. True.

But we have 100 million more people now.

That means there are more than 30 million families looking for manufacturing jobs which have disappeared. And because we are now in a two-wage family world, the pressure is magnified. Possibly there are 50 million more people looking for the same number of jobs that existed in 1970.

Remember that manufacturing jobs are supported by clerical and executive workers, whose numbers also shrink along with the lost manufacturing jobs.

The prime danger to our society is a serious weakening and shrinkage of the middle class. As our population becomes steadily more bi-polar economically, the society will become more and more destabilized. The rich will prey on the poor and the poor will prey on the rich.

New York City lost its manufacturing base in the 1960s and 1970s, leaving only the rich and the poor behind. The next decades saw a rapid escalation in crime – murder, robbery and burglary. The term "mugging" was coined in New York. The situation was solved only by the growth of the financial industry, which created a new middle class in Manhattan.

Mexico is another stark example of a society crumbling under the economic infrastructure of a weak middle class. Throughout the 20th century, Mexico was beset with murder, kidnapping, robbery and burglary. Even lush resorts like Acapulco suffered. No one in the United States seemed to notice, until the drug trade poured gasoline onto the situation, causing much of Mexico to go up in flames.

This pattern pervades world history: No middle class meant no stability.

In its four-thousand-year history, China has been a rich nation. It had the world's largest economy during 3,800 years of its history. But the wealth was divided between the rich and the poor. With the exception of Shanghai, China had no viable middle class to buffer the gulf between the rich and the poor.

This is why China has had 38 dynasties in 4,000 years. This works out to each central government collapsing every 100 years or so. It is even worse when you consider that China's first dynasty lasted 500 years, and for about 800 years there was no central government as China split into various kingdoms. Eliminating these two periods, we find China with 37 dynasties covering a period of 2,700 years.

This means that an average Chinese central government lasted only 73 years.

This also means that if the current decline of the American middle class continues, we may see "the American Empire" collapse before the end of this century.

What is the future of our jobs situation and the health of the middle class?

Without a dramatic change, it is not bright.

While the USA has over 30 percent of the world's gross domestic product (GDP), we boast only 15 percent of the world's manufacturing output. And the ratio is shrinking every day. The USA's current GDP growth rate of two percent cannot solve an unemployment rate of 9.8 percent. (Especially since this figure understates the true jobless rate of 15 percent.)

Comparing our situation to other nations may be illuminating:

The Euro Zone is growing only 1.1 percent, while unemployment is 10.1 percent. This discrepancy signals the potential demise of the Euro as a currency.

Spain's GDP is shrinking while unemployment is growing beyond 20 percent – which is why the country faces economic collapse. Ditto Greece, Ireland and Portugal.

Germany is in the best shape of any European nation with GDP growth of 3.3 percent and unemployment at 7.5 percent – which is a mediocre picture at best.

China has a high unemployment rate (9.6%), but its growth rate (10.2%) is solving the problem.

India's unemployment rate of 10.7% is being alleviated by its 8.8% growth rate.

Despite Mexico's tragic drug wars, that nation's GDP is growing 5.0%, which is solving its 5.7% unemployment rate. (This is why illegal emigration from Mexico to the USA dropped so sharply in 2009 and 2010.)

Venezuela's Hugo Chavez keeps railing against the USA, hoping the natives do not notice that he has mismanaged his oil-rich country into negative growth and 9.0% unemployment.

The opposite of the economic troubles in the USA and Europe is Singapore, which is growing over 4.0% a year and confronting a small 2.0% unemployment rate. (This country needs more land and more people.)

Other places with favorable GDP growth rates and unthreatening unemployment rates include Australia, Hong Kong, Indonesia, Malaysia, South Korea, Taiwan, Thailand, Argentina, Brazil, Chile and Columbia.

It is clear that American economic growth will not solve the high unemployment and under-employment situation. Middle-class jobs are disappearing faster than they are being created.

If the USA is not to destabilize into a massive "tea party," unemployment causes must be identified and solutions found.

No real solutions are being offered by the current administration as none have been offered by any administration since 1942.

The danger of social upheaval is real.

Following articles will identify the root causes of American unemployment, and solutions.

Next article in three-part series: UNEMPLOYMENT: THE CAUSES.

The third and final article: UNEMPLOYMENT: THE SOLUTIONS.

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