Fortune magazine, the offspring of Henry Luce's Time Inc. and a bible of the corporate establishment, has never been mistaken for The Nation or The American Prospect. Nevertheless, it has a history of employing liberal writers -- John Kenneth Galbraith, among others, was an editor there -- and serving as an occasional conduit for work useful to the progressive cause. James Agee's Let Us Now Praise Famous Men, the classic exposé of 1930s southern sharecropping, began as a Fortune-assigned report.
Now, the Republican journalistic gift that keeps on giving has given again. In the magazine's first March issue, staffer David Whitford penned one of the better brief analyses of America's ongoing deindustrialization that has appeared in recent times. Whitford's "Hanging It Up," an in-depth look at the death of the domestic metal clotheshanger industry, is an eye-opening examination, whether intended as such or not, of what unregulated capitalism and corporate-led globalization have done to one small sector of this country's economy. In a word, they've destroyed it.
The Whitford piece details the demise of the 90-year-old Laidlaw Corporation plant in Monticello, Wis., last of that company's six coathanger factories in North America, which as recently as 2003 employed 428 blue-collar workers at wages ranging from $10.45 to $13.65 an hour plus benefits, including family health-care coverage available for under $200 per month. These were not wonderful jobs by any stretch, yet they offered solid employment, enough to provide an entrée into the lower-middle class for individuals lacking college degrees. But in 2001, the company's management, along with other hanger makers, began shifting production overseas to China, where semi-enslaved manufacturing laborers earn less than $1 an hour. Over the next five years, low-cost Chinese imports gradually took over the American hanger market, growing by 800% and putting US domestic factories out of business. By 2006, Laidlaw's Monticello facility was one of only two left.
The axe finally fell on Laidlaw's remaining workers last spring, when their firm was bought out by private-equity interests, the scavengers of the American economy, whose aim was to physically liquidate the company and close down its American operations. The name, intellectual property, and customers will remain; the machinery is being packed up and moved to China. The ownership and profits will stay in the US; the production jobs are gone forever. They are among the one-million-plus jobs outsourced to China since the enactment of PNTR (permanent normal trade relations) with the Asian giant. And Laidlaw's former Wisconsin employees? They're collecting unemployment, trying to retrain, and hoping lightning will strike in the form of new opportunities.
For now, this sort of development, replicated across the economic landscape in a variety of industries, has not disturbed the equanimity of corporate America. Profits, the only acknowledged measure of capitalist success, remain at record levels. Fortune notes that the earnings of the S&P 500, including small and mid-sized companies like Laidlaw, were up 16% in 2006, rising for the fifth straight year; they are at their highest point since the 1960s. Nevertheless, it warns, stocks are expensive and overpriced, and a reckoning is on the horizon.
But that's in the future. At present, only workers are biting the bullet, and the jobs they're losing are not considered important by the country's business and political elites. Disappearing manufacturing work is dismissed as a natural outgrowth of our dynamic capitalist economy, the lovely symmetry of "creative destruction." The unemployed portion of the work force will adapt, we are told, reeducating for service jobs that are superior in every way -- except that they're not.
Put aside that many industrial workers will not, for reasons of background or aptitude, be able to adapt. Disregard the fact that many of them will never again earn as much as they have from the jobs they're losing. Forget that a country without a manufacturing base is vulnerable in countless ways. Americans, increasingly, can't make things for themselves; they're virtually dependent on external sources for everything (military hardware excepted) they wear, use, or consume. We are on the road to becoming a nation of computer jockeys and retail clerks, helpless if someone pulls the energy plug.
Sobering as this is, there's a greater price to be paid for deindustrialization: the loss of pride in the job, of the satisfaction of creating something tangible, of seeing the results of one's own labors. Could it be that much of the tension of modern American life -- the family breakups, the road rage, the coarse language and bad manners -- is due to the changing nature of work, its psychic devaluation and growing meaninglessness?
Unfortunately, none of this matters to the movers and shakers at the top of the American economy. They will reassess only when the disastrous results of their handiwork come home in the form of lower profits and lost business -- or when official Washington wakes up to the pitfalls of unregulated capitalism. It could happen, if the panicky response to the emerging housing crisis is any indication.
The Washington Post, another journalistic enterprise that combines bad editorial policy with solid reporting, provided a signal service recently by revealing the flaws in the underregulated banking sector that led to the present home-mortgage fiasco now threatening to undermine the entire economic house of cards. In late January, Post reporter Kirstin Downey anticipated the approaching storm with a trenchant piece on the proliferation of risky "nontraditional" mortgages -- mortgages requiring no money down and no immediate payment on the principal, but eventually subjecting the unwary borrower to radically higher adjustable interest rates and likely foreclosure. A third of all home buyers were pushed into these financial vehicles in 2006 by unscrupulous lenders whose ultimate objective was to bundle the loans and sell them as securities (perfectly legal under current law) to equally grasping institutional investors eager to capitalize on what until recently was a rising real-estate market.
The screw has now turned. Housing prices are down, borrowers are defaulting in record numbers (800,000 last year), and the stock market in which thousands of "subprime" mortgage shares were invested is in trouble. In mid-March, the Dow lost 242 points in one day, a loss directly credited to housing fears. The flimflammed borrowers, of course, are merely losing hearth and home. This is the destruction part of creative destruction. A reregulated economy, anyone?
Wayne O'Leary is a writer in Orono, Maine.
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