How Progressivism Destroyed Utica

 Below is a picture of the population trend in Utica, NY from 1850 to the present. Unlike Buffalo, whose population peaked in 1950, right after passage of the urban renewal act, the population of Utica peaked in the 1930s, about 15 years before urban renewal and about 20 years after an expansion of workplace legislation in 1911 to 1913, during New York's Progressive era.

The 1911 Triangle Shirtwaist Company fire in New York City had led to the passage of dozens of labor laws in the mid 1910s. According to Wikipedia's entry on Al Smith (who was the speaker of the New York State Assembly and a member of the New York State Factory Investigating Commission, which proposed the laws):

 
New laws mandated better building access and egress, fireproofing requirements, the availability of fire extinguishers, the installation of alarm systems and automatic sprinklers, better eating and toilet facilities for workers, and limited the number of hours that women and children could work. In the years from 1911 to 1913, sixty of the sixty-four new laws recommended by the Commission were legislated with the support of Governor William Sulzer.

Other sources say that there were 36 laws, but whatever the precise number, there was a lot of new regulation.

The stagnation in the Utica population began about six or seven years after Smith's State Assembly (and Robert Wagner's State Senate) passed the Progressive-era laws, and the decline in the Utica population began about 15 years after.

According to Wikipedia, "Utica's economy centered around the manufacture of furniture, heavy machinery, textiles, and lumber." All of these are subject to factory regulation, which in effect raises wages. Employers contemplate the cost of regulation in their relocation decisions.

As well, the 1913 founding of the Federal Reserve Bank, also in the Progressive period, led to increased availability of credit. Easy credit meant reduced costs of relocation. There may have been early relocations of plants away from the city of Utica into surrounding suburban areas and into the South.


The combination of easing credit and increasing workplace and other regulation--the policy mix of both parties, but especially the Democrats--has been deadly to American manufacturing.


Instead of thinking about underlying causes of Trump's popularity, the American media has fixated on ad hominem attacks and shrill rhetoric.


Wikipedia's entry on Utica says that suburbanization began occurring in earnest in Utica in the 1940s, but there may have been an earlier trend as credit became available. The suburbanization of the pre- and post-war eras anticipated the broader globalization that followed the easing of credit and further expansion of regulation before and after the abolition of the international gold standard in 1971.


The post-1971 world has been brutal for those who create value. Those who live off the state as commercial or investment bankers, government contractors, government employees, and welfare recipients have fared well.


Unlike Syracuse, Utica does not have a nationally ranked university. Hence, it has not as easily participated in the state-subsidized education industry. Unlike Albany, it isn't a seat of an ever-expanding state bureaucracy. Unlike New York, the city that has benefited most from expanding credit, it is not a seat of global finance and bailout funding.


Utica actually produced goods of value like furniture. It was not a center of financial or political power, which produce nothing. Such production has been  punished in the credit-based economy, which supports a limited degree of innovation and instead favors low-risk investments such as plant relocations.

Historical Population of Utica, NY

  

My Radio Interview with Dan Elmendorf on Redeemer Broadcasting

My friend Dan Elmendorf, who lives in nearby Olivebridge, runs Redeemer Broadcasting,  a Christian radio network that airs locally and in a couple of other states. The stations are FM WFSO Olivebridge, 88.3, Kingston, 105.3 Catskill, 101.1, Newburgh, 90.3 WNEQ, Taylortown, New Jersey 90.3, and WXMD California, Maryland 89.7.  

Dan interviewed me last Friday, and the interview aired today. The subject was the United Nations and its Agenda 21, which Olive residents know from the town plan battles of the past few years.  The link is http://www.redeemerbroadcasting.org/podcasts/apa_030715_Agenda_21--M_Langbert.mp3

Globalization and Human Resource Management

I am teaching an online human resource management class this month.  One of our first day's discussion boards was about globalization and human resource management.  I sent the class the following e-mail to cap off the class discussion on globalization and human resource management:

>The class is more balanced with respect to globalization than my classes last semester.  Globalization gets bad press but I am for it, although not in the way it is done.  The theory of comparative advantage that David Ricardo first expressed in the early 19th century shows why trade works.  Each country has relative strengths and weaknesses. If each country does what it is relatively good at (not necessarily better at than other countries, just what it is relatively productive at compared to its other opportunities) then the world will produce more and the greater productivity can be exchanged globally, making each country better off.  Tariffs and other trade restrictions thus prevent possible gains from trade.

The worst examples of tariffs were during the 1840s in Britain and Ireland and in the 1930s in Russia. In both instances there were mass starvation, first of the Irish during the Potato Famine and second of the Ukrainian kulaks under Stalin's socialism.  These two instances of trade restrictions amounted to mass murders, the first of  one million deaths and the second of I believe about 10 million deaths. Thus is the promise of tariffs, trade restrictions, economic autarky (whereby everything is manufactured at home) and government intervention.

While such extremes are unlikely here, at least in the near future, there are other repercussions to trade restrictions.  For instance, trade restrictions preceded the Second World War.  The Smoot-Hawley Tariffs, the most extreme in American history, were passed in 1930 at the outset of the Great Depression. It is difficult to prove that World War II and the Great Depression were entirely caused by the Smoot Hawley tariffs. But it is astonishing the labor movement now advocates similar kinds of tariffs.

The Great Depression was far worse than any that preceded it and there was much less government intervention in the economy until within 20 years of the Great Depression.  Hence, the Smoot Hawley tariffs and the increased regulations of the 1890-1920 Progressive era and the New Deal along with the establishment of the Federal Reserve Bank in 1913 all may be part of the reason for the Great Depression of the 1930s.

Astonishingly, Americans under George W. Bush and Barack H. Obama have opted for policies that are similar to the policies that were adopted preceding the Great Depression: expansion of the money supply, more regulation, higher tariffs. Have fun, guys. My career is drawing to a close. You are the ones who will be hurt by economic insanity.

One of the chief policies that the Federal Reserve Bank and the US government have emphasized is ever increasing foreign indebtedness.  Numerous foreign countries have been holding large shares of treasury bonds. This has the effect of propping up the dollar.

The natural response to excessive outsourcing ought to be a weakening dollar.  As firms move overseas demand for dollars declines. When the dollar declines demand for foreign goods also declines and firms move back.  But the US government and the Federal Reserve Bank have orchestrated a pattern where foreign countries hold our debt, keeping import prices low.  Thus, the two-party system, specifically including the Democrats under Obama and the Republicans under Bush, have pushed for policies that ensure that jobs leave the country.

Of course, given the huge indebtedness now to foreign countries, if those countries were to unilaterally sell off the US debt there would be a currency collapse here. The dollar would be worth pennies, much like the Papiermark in Weimar Germany in the early 1920s.

The effect of the twin policies of monetary expansion by the Federal Reserve Bank coupled with subsidization of the dollar by foreign central banks and governments has been a weakening of the manufacturing sector here and the comparable strengthening of the competitiveness in European and emerging market countries, for instance, the BRIC countries, Brazil, Russia, India and China. At the same time, consumers here are better off than they ought to be as merchandise is at low prices.  However, the inflation due to the Fed's monetary expansion can be seen in the rising property taxes and cost of services such as construction, government, health care and education.

Thus, it is inaccurate to view globalization and its implications as separate from monetary and Federal Reserve Bank policy. These issues are linked as well to human resource management.

Many students note that culture clash, complexity and the need to increase skill levels are coupled with slow job growth, outsourcing and increasing competition.  All of these factors coincide with monetary policies.

There will be no easy way out for the US.  The dollar will become weaker and consumers will be worse off before manufacturing will return here.

There were several interesting responses to this discussion board, one of which was R's:

"Some employees who have lost their jobs have either relocated, changed their career, returned to school, negotiated with their former employer for a part-time position, pay-cut, or have accepted a lower level job. In turn, this has often led to a decline in living standards.

"2. Many employees who had maintained their jobs, felt insecure and were under constant pressure at work. This led to chaos, over-achievement, competition to outperform colleagues and an obvious decrease in desire to help co-workers leading to decreases in efficiency and lower product quality. This marked a  withdrawal in loyalty toward the employer and the employer’s goals. The low morale and insecurity would also heighten the employee's interest in social insurances (health, social security, education…) as the fear of job loss intensified.

"3. On the other hand, the import of these goods manufactured offshore has created end-line positions at retail stores...This yields a boost to the nation’s economy and the acceptance of diversity and multiculturalism. It can also foster positive feelings towards others cultures and harvest communication and cross-cultur(al) exchange of ideas on an international, national and intra-company level. (Of course the reverse exists due to globalization as well, with Dunkin Donuts, Starbucks, Walmart, McDonald's etc…  opening worldwide.)"

All of these behavioral and economic outcomes are linked not only to globalization but also monetary policy.

The error virtually everyone who discusses this makes is to blame globalization for phenomena that would not occur without the Federal Reserve and other central banks' monetary policies that have pegged other world currencies to the dollar.  The dollar has been propped up, encouraging exodus of manufacturing jobs.  If the propping stops, consumer prices of imports will rise and job losses (and foreign trade deficits) will come to a halt.

New York Times at New Lows

Joseph E. Stiglitz reviews Naomi Klein's Shock Doctrine in the September 30, 2007 New York Times Book Review. Klein's book is currently number 4 on the New York Times bestseller list. I have not read it, and do not intend to, so I will not comment on the book, but rather on Stiglitz's review on p. 12.

The most intriguing part of Stiglitz's review is Naomi Klein's photograph in the print edition. Klein peers from a heavy swath of expensive makeup, I suspect Estee Lauder, and her hairstyle and lipstick alone probably cost about as much as an African farm worker makes in a year. What better image for a phony liberal/left critic of capitalism?

Given that Ms. Klein's coiffure is magnificently appointed, we may expect her to rail against globalization and the provision of manufactures to low income consumers who, probably in her view, would be better off prancing about in grass skirts and of course chucking spears. We are not disappointed.

Professor Stiglitz's review illustrates why the Times has become increasingly irrelevant and dull. For instance, Ms. Klein associates Milton Friedman with Pinochet's crimes, which were indeed horrific. According to Conservepedia.com and moreorless.com Pinochet was responsible for 3,197 murders, roughly the same number as occurred on 9/11. Recently, though, the Times's Thomas L. Friedman has suggested that he hopes that "anyone who runs on a 9/11 platform gets trounced." Despite the 17-year gap since Pinochet held office, Klein's book pounces on Pinochet's 3,197 murders (horrific they be)while Thomas L. Friedman, also in the pages of the Times sneers at al Qaeda's 3,000 murders that occurred six years ago. In contrast to Pinochet, Fidel Castro, currently in office and rarely criticized in the Times, has murdered roughly 100,000 victims, 33 times the number that Pinochet murdered. The New York Times had supported Castro in his insurgency and yet Stiglitz does not qualify his remarks about Milton Friedman.

Stiglitz and Klein sociopathically ignore that the chief mass murders of the last century were committed by those who opposed globalization, many of whom found themselves in the good graces of the Times. These include Stalin, for whom Walter Duranty apologized in the 1930s, as well as Castro and Mao, whom John Kenneth Galbraith praised to the heavens in a 1972 New York Times Magazine article. Mao alone was responsible for 25 million murders 8,333 times the number that Pinochet killed. The sick, sociopathic history of the anti-globalization left, in which Stiglitz and Klein participate, is repugnant.

Klein and Stiglitz together with the anti-globalization movement have blood-soaked hands. That anyone takes what this crew has to say seriously is astonishing.

The Wal-Mart Revolution by Richard Vedder and Wendell Cox

Richard Vedder and Wendell Cox.
The Wal-Mart Revolution: How Big-Box Stores Benefit Consumers, Workers and the Economy.
Washington, DC: The AEI Press, 2006.
Softcover. $20.

Richard Vedder's and Wendell Cox'sWal-Mart Revolution: How Big-Box Stores Benefit Consumers, Workers and the Economy is a solid piece of work. I have previously blogged a review of Charles Fishman's Wal-Mart Effect in which I note that Fishman's book lacks balance. I also note that Fishman fails to competently interpret research that he quotes at length, and that several of his criticisms of Wal-Mart are misguided. Despite these drawbacks to Fishman's work, I note that Fishman's Wal-Mart Effect "is likely the best that will be written in the near future about Wal-Mart's supposed ill effects." That statement is probably true. But while Fishman's is still the best book about Wal-Mart's ill effects, Vedder's and Cox's is clearly the only competent book that has been written about Wal-Mart. All the others, including Fishman's, are so much worse.

The reason may in part lie in the authors' credentials. Richard Vedder is a labor economist who is a distinguished professor at Ohio University. Vedder and Cox are able to analyze studies intelligently. In contrast, Fishman is a journalist who lacks Vedder's technical background. Moreover, Vedder does not carry the ideological biases that characterize the popular press and academic discussions about Wal-Mart, much of which (outside the economics literature) involves spilling from emptiness into the ideological void.

Vedder's and Cox's book is well worth reading from cover to cover. The authors explain somewhat technical material in very clear English. The authors present a fascinating overview of the history of retailing, and show that each generation's innovations are subjected to the same reactionary, left-wing criticisms as previous ones. The attacks on Wal-Mart that appear in a variety of websites, films, newspapers and academic conferences echo similar attacks on A&P, Standard Oil and the automobile industry.

Vedder and Cox show that Wal-Mart's contribution to American and global economic progress has been enormous and that the chief beneficiaries are the poor. In the 1970s and 1980s, it was a commonplace that productivity in the manufacturing sector grew at a faster pace than productivity in the services sector, to include retail. As Wal-Mart has grown, because of the brilliant management insights that Sam Walton pioneered, productivity growth in retail has outstripped manufacturing's. In some analyses, the productivity growth due to Wal-Mart and other big box retailers (see chart on p. 134) seems to have been an astonishing three times (300 percent) greater than in other sectors of retail and in other sectors of the economy. This implies enormous welfare gains to the American public.

Using intuitive, clear explanations, Vedder and Cox dispose of the arguments that factories in the third world make workers poorer and that because third world factories are not able to meet first world standards they should be closed. Vedder and Cox use basic economics to prove otherwise.

In recent years, the left has become increasingly indifferent to the plight of the poor, to include the poor both domestically and internationally. Vedder and Cox argue that Wal-Mart's contribution to consumer surplus in America alone is likely around five percent of gross domestic product, which they state is comparable to the contribution of the entire railroad industry during the 19th century. Yet, the left is eager to destroy Wal-Mart. Wal-Mart's raising of prices would have a maleficent effect on the poor, not only in America but throughout the third world. Wal-Mart's opponents might be viewed as advocates of starvation and deprivation.

The Wal-Mart Revolution should be read by all Americans interested in protecting progress and management innovation.