How the Democratic Party Has Caused Upstate New Yorkers to Flee

Upstate New Yorkers flee in large numbers.  According  to Jeff Platsky of the Binghamton Press and Sun-Bulletin. (h/t Glenda McGee),  84 people leave Broome County each month, 39 leave Chemung County, and 29 leave Tioga County.   

Platsky observes that every single county along Route 17 from Orange County to Pennsylvania has declined in population over the past decade; moreover, in upstate New York overall, 42 of 50 counties lost population.  Route 17 runs along the state's southern rim, known as the Southern Tier, which borders Pennsylvania. 

The reason is simple: lack of jobs. Yet, the Democratic Party has prevented  fracking in the Marcellus basin, which would have created thousands of jobs.  Instead, the jobs went to Pennsylvania.  Meanwhile, New York has the worst income inequality in the country--and the highest electricity rates.

Much of the protest against fracking has been misguided. For instance, Youtube  carries several videos of people who are able to ignite their tap water. The video makers claim that the problem was caused by nearby fracking. 

I asked a colleague at Brooklyn College about the videos.  The colleague, Constantin Cranganu, is a geologist who has written books on fracking. He told me that the water was catching on fire before the fracking and that fracking cannot possibly cause this, in part because the fracking occurs at a depth of over a mile while the water well is 100 or 200 feet deep.  Thousands of tons of rock separate the well from the fracking drill. 

Yet, meshuggener Democrats show this video to each other and proclaim that they wear the mantle of the one settled science, courtesy of Youtube, Bill Maher, and Al Gore. 

Writing in Forbes in 2015, Jude Clemente notes that New York's natural gas consumption had risen by more than a third, to 60% of its entire energy generation, but the state cut its natural gas production in the interest of ideological purity. The anti-fracking proponents are rich Democrats who work in tax-subsidized businesses: academia, government, law, and health care.  They have no qualms about forcing blue collar laborers into permanent unemployment. 

The handful of upstate counties that have gained population in New York mostly have been the ones surrounding Albany, seat of New York's bloated state government, or college towns. 

Platsky notes that there have been plenty of bureaucratically inspired, state-subsidized development schemes, all of which have failed.  

The exit of manufacturers like IBM and GE in the 1980s has not been followed by the kind of innovation that occurs in a free market economy. New York's high tax rates and totalitarian regulatory regime have inhibited entrepreneurship.  Retirees have little incentive to stay because of the cold climate and high taxes. 

The Disadvantages of Trade Are Due to Federal Intervention

The federal government, not trade, is the source of social losses from the exit of manufacturing firms. Trade always results in making the parties to the trade better off. It may result in one party's being made better off to a greater degree than the other, but without both parties' being made better off they wouldn't trade.

The declining automobile industry and Chinese manufacturing illustrate separate issues. With respect to the US auto industry in the 1960s and into the 1970s, when I was in high school and after, consumer advocates talked in terms of "planned obsolescence"--that American car makers deliberately produced badly made cars so that consumers would be forced to buy new ones within a few years. That was probably an exaggeration of the Big Three's competence: They produced bad cars because their management systems were crummy, not because they consciously made bad cars. The 1979 book by John Z. DeLorean and Patrick Wright "On a Clear Day You Can See General Motors" covers GM's often laughable incompetence.

Thus, global competition has been a boon to Americans. It increased the quality of cars because of the Toyota production system invented by Taiichi Ohno and the Toyoda family. The result is that cars that once had to be junked at 100,000 miles or less now frequently last 300,000 miles.

That means every American who buys a car enjoys three times the value. Although American auto workers lost their jobs (a plight amply illustrated in Michael Moore's best work, "Roger and Me"), Americans have on balance been made better off by trade.

With respect to China, there is a combination of issues. First, labor costs are lower in China, and there is a reason to move labor-intensive plants there and to other low-wage countries. Low labor costs mean lower prices to Americans. One of the reasons we have sustained a relatively high standard of living is the inexpensive merchandise at big box stores due to low labor costs in China.

At the same time, plant relocation requires capital investment, and when capital is at its market rate, there is an impediment to making risky and costly moves. The costs of relocation have been suppressed by the federal government and the Federal Reserve Bank. By keeping interest rates artificially low, firms have been able to invest in plant relocation and make other labor-cutting capital investment at subsidized cost. There likely has been overinvestment in labor-saving technology as well as plant relocation because of suppressed capital costs.

Hence, the relocations and the loss of blue collar jobs are not entirely due to free trade. They are in part due to the federal government's subsidization of capital investment.

That's not the only way, though, that big government interventionists have hurt blue collar workers. During the same period that it subsidized plant relocations, the federal government increased all kinds of regulation, from human resources and employee benefits to OSHA, to environmental regulation, to Sarbanes-Oxley, to product liability. In addition, it raised corporate tax rates. The Democratic Party's policy mix seems designed to force manufacturing to move overseas.

Moreover, and most importantly, the federal government through its protected monopoly, the Federal Reserve Bank, has inflated the money supply while the dollar is used as the world's reserve currency. Foreign holdings of dollars limit the inflationary effect of historically low interest rates. The dollar remains relatively strong despite massive increases in the number of dollars.

In a free market trade regime, if many manufacturers exit a home country and sell their goods back to the home country, the value of the home currency will decline. That has not occurred. Rather, the dollar has retained its relative value despite the exodus of manufacturing to China. The reserve currency status of the dollar allows the Fed to subsidize privileged industries in services, government, education, and health care while it drives productive industry to China.

It is not surprising that President Trump's often-blue collar supporters have been skeptical of trade, for the managed version of it has harmed their interests. In contrast, the well-to-do beneficiaries of Fed policies, stock market investors, Wall Street, government employees, beneficiaries of government welfare plans, real estate developers, professionals like psychologists who benefit from state programs, are key constituencies of the big government economy. Notice that none of these produce much of value. America's has increasingly become a vampire economy.

The Federal Reseve Bank Has Driven Innovation to China

I recently subscribed to Gerald Celente's Trends Journal. In the winter issue Celente makes the following point:

Innovation, once the province of the developed West, and especially the USA, is now too “Made in China.” In 2009, the Chinese processed some 600,000 patents, compared to 480,000 in the US. China plans to raise that figure to one million by 2015 and double the number of its patent examiners to 9,000, while currently in the US there are only 6,300 such examiners.

The reason innovation is now made in China is monetary. Under a market-driven monetary regime, as existed prior to 1913, if excessive numbers of manufacturing jobs were to move to China, its currency, the yuan, would rise in price. This would cause demand for Chinese goods to slow. Manufacturing would stop moving there, and move back. But the Federal Reserve Bank has not allowed that to happen. Because the dollar serves as the reserve currency around the world, the Fed has been given carte blanche to inflate the money supply without short-term consequence. This has fueled the federal deficit, consumer debt and real estate and stock speculation on Wall Street. The dollar remains firm despite the Fed's profligate monetary policy because the Chinese and other central banks hold treasury bonds as reserves. It seems cheap to manufacturers to move to China.

Thus, by voting for the Democrats and Republicans, Americans have voted to disemploy themselves. They have voted for politicians who have empowered the Fed to inflate while holding the dollar at excessive levels. Consumers have benefited, but when those consumers put on a hard hat or a white collar they have been harmed. Younger Americans have been increasingly harmed. The post-war generation consumed at the expense of boomers' jobs, and boomers consumed at the expense of gen-x's and gen-y's jobs. One of the offshoots of unlimited monetary expansion has been the expansion of government education programs, which churn out ever greater numbers of unemployed graduates who lack skills necessary to compete.

One of the offshoots of de-industrializing America is loss of innovation. Creativity results from familiarity with processes. Most advances are made by engineers and laborers familiar with specific production processes and problems who attempt to build on the status quo with respect to a particular process. Innovation is particularistic, it is not theoretical. Einstein's science, while broad, imaginative and impressive, has done little for important innovation. Tesla, who lacked theoretical breadth, had an enormous impact on human standards of living. Innovation does not generally come from theory. It comes from creative thinking about specific practice. So if practical activity moves to China, then innovation will move to China as well.

The loss of manufacturing, therefore, has graver implications than loss of jobs. It implies the loss of America's future as the Chinese replace the Americans as the world's innovators. How long will it be after that until the Chinese grow weary of holding treasury bonds that steadily decline in value? The final step in America's turning itself into a Third World nation will occur when the Chinese and other nations sell, and the dollar crashes. Then consumers will find prices increasing just as producers they have been able to find only low-wage retail jobs.