Thomas Shevory, Ithaca College

This posting is a part of series, written in connection with a bicycle trip that I completed  around Lake Huron, in the Summer 2011, to survey, at 12 miles per hour, the history, culture, ecology, and economic evolution of the region.  While on the trip, I read Phil Bellfy’s Three Fires Unity, a history of the Anishnaabeg people of the Lake Huron region, a book that helps to explain why there are so many more native-held lands and communities on the Canadian side of the lake than the American.

While my home state of New York was, pre-European settlement, dominated by the Haudenosaunee, farther west, in Ohio, Southern Central Ontario, and Michigan, the land that I am currently bicycling through, it was the Anishnaabeg. The French arrived in the 17th century with Jesuit missionaries who attempted, sometimes successfully, to convert native people, but in economic terms, they were primarily interested in the fur trade.

British colonists in the east,  favored agricultural production, and were thus more interested in appropriation, expulsion, and clearing. According to Bellfy, “the Native people of the region regarded the French presence in North America as largely benign.”

Because of their more favorable view of the French, many Native groups, sided with them during the so-called French and Indian War.  But, even after British success in the war, the Anishnaabeg had control over most of their historic lands, which included much of the Great Lakes watershed.  

The British attempted to control the fur trade in these areas with limited success, with the hopes of using revenues derived from it to finance the costs of maintaining control over their North American Empire. Native traders simply ignored British licensing requirements.

Colonists, however, continued to move into these territories, in spite of British attempts to limit their incursions. The Treaty of Fort Stanwix represented a deal between the British Crown and the Haudenosaunee, in which the British would be granted control over Kentucky, in exchange for no further encroachments.  

But colonists were dissatisfied, wanting access to lands farther north and west.  This dissatisfaction helped to fuel an ever-increasing displeasure with British rule.  To enforce the treaty, the British needed revenues, and thus imposed a tax on the American colonists. This tax sparked the Boston Tea Party and helped to instigate the American Revolutionary War.

The conflict between British imperial rulers and American colonists on the status of the Indian Territories is one of the often-overlooked, but important, aspects of the American Revolution. In fact, the Declaration of Independence lists among British “injuries and usurpations,” that, “[The King]  has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.”

Recognizing the hostility of colonists, and their seeming insatiable desire for land, many native groups sided with the British during the revolution.  Referring to the Anishnaabeg, Belfy notes, “when Native people did fight, it was almost exclusively on the side of the British.” Sullivan’s campaign, and post-war developments, devastated the Haudenosaunee, but the Anishnaabeg,  remained in control over of their territories.  

The Northwest Ordinance, passed by the new government, in 1787, often celebrated for its protection of religious freedom and ban on slavery, was a blueprint for occupying the region and displacing the people that lived there.   Their resistance and British support for it was one of the triggering factors for the War of 1812, a conflict that ended Anishnaabeg hopes of controlling their land in the U.S. As a result, many sought refuge in Canada.  



 

Thomas Shevory, Ithaca College

A series of articles from the New York Times, and other sources, on manufacturing, recently attracted my attention.

One discussed a two-tiered wage structure, that now seems to have become the norm for autoworkers.  Older workers started at around thirty dollars an hour, whereas younger workers are coming in at fourteen.  Benefits have also been reduced.

While that’s better than the starting salary at Wal-Mart, which is just over seven dollars an hour,  it’s not enough to get someone into the middle class, as such jobs once did. And the potential for such a system to generate resentment seems real.

Newer autoworkers at Chrysler are no longer able to afford the cars that they are building.  It was Henry Ford who, a century ago, had the brilliant idea to pay workers enough to  buy the cars that they were building, initiating a self-reinforcing loop that made him one of the richest and most powerful men in the world.  

A second Times article discussed the continuing decline of manufacturing as a segment of the U.S. economy, and suggested that a vibrant manufacturing sector cannot exist without government support in the form of tax incentives, favorable trade agreements and currency arrangements, and outright subsidies.  

European governments have recognized this and have few qualms about exercising such policies.  China is, of course, even more aggressive, offering huge incentives for transnational manufacturing firms that locate there, including free land and substantial tax breaks.  Manufacturing in the U.S., it is worth noting, has declined from almost 30% in the 1960s, to about 11% today.  It has declined substantially as a percentage of GNP over the last four years. In the last year alone, U.S. manufacturing has fallen 5%.  

A flurry of articles also appeared last week on the American solar industry.  While American media, including The Daily Show, focused on a non-existent scandal involving Solyndra, a firm that received $500 million in subsidies and went bankrupt, this diverted attention from the more important development.  Not that long ago, the U.S. led the world in the production of solar panels, and today we have only one major producer left. The reason for this trend is quite simple. The Chinese government made a conscious decision several years ago to “own” the solar power industry globally, and invested vast resources into making that happen.

Unfettered by faith-driven, free-market ideologists, the Chinese essentially undercut the American market. Moreover, they didn’t do this with “innovation.”  In fact, the more innovative American firms, banking on gains in panel efficiency, tanked.  The Chinese simply took the standard preexisting model for solar panels and decided to make them as cheaply as possible.  The problem, in other words, wasn’t too much investment in American firms by the U.S. government, it was too little.  

Anyone that thinks that the long-term structural problems that we face were either caused by the current administration in Washington, or that they can be cured by “liberating” the U.S. economy, as John Boehner has recently suggested, is, to be quite blunt, out of touch with reality.

On the other hand, perhaps, at some point, the two-tiered labor system will become so pronounced that American workers will be competitive with their Chinese counterparts.  And perhaps American regulations will become so lax that demonstrations will break out at solar manufacturing factories here, as has recently occurred in China.  But I believe that's a future we should try to avoid, rather than embrace.
 

Thomas Shevory, Ithaca College

President Obama is sending a legislative initiative to Congress this week, based upon his last week’s speech, offering a set of proposals for attempting to reduce the country’s unemployment rate, and to get the economy growing at a faster rate.  A number of commentators embraced the proposal, including some recent critics of the President.  

At the very least, it helped move the public discussion away from long-term debt problems, and back to the immediate, and more important, matter of jobs. Moreover, the sheer size of the proposal, nearly $450 billion, was more than many folks had been anticipating.    

Unlike the Republican’s offerings, which are mostly oriented towards the supply or production side of the equation (reduce taxes and regulations on business, so that they will produce more and hire more people), Obama’s plan, in typical Keynesian fashion, focuses on demand.  Richard Nixon once, following Milton Friedman, declared himself a Keynesian.  But the Republican Party abandoned common-sense economic theory long ago, as it embraced supply-side, the gold standard, and the tenets of Ayn Rand.

Most conventional economists at this point, see the economic problem that we face as a matter of slackness on the demand side:  Individuals have lost assets, due to the collapse of housing prices. Many have lost jobs.  Others are worried about losing theirs.  People with assets are paying down their debt. As a result, less money is circulating through the economy. We don’t face a business profitability crisis, so much as a demand, and consumer confidence crisis.  There’s no reason for businesses to produce goods if there’s no one out there to buy them.

The President’s proposal then is welcomed, but there are longer term problems.  And I am not referring here to the obsession with debt.  In truth, U.S. economy continues to grapple with the consequences of 40 years of deindustrializaton.   

In the 1990s, the internet economy was hailed as the replacement for the old industrial economy. And while it’s continuing economic and social impact cannot be discounted, the digital economy actually produces very few jobs.  Facebook, for example, employs only 2000 people total. The last decade was bouyed by the housing bubble, which created construction jobs, but which also tended to make Americans believe that they were much wealthier than they actually were, generating a spending spree that encouraged debt and then exacerbated it when housing prices declined.

In other words, we haven’t found an adequate job generating replacement for the manufacturing economy yet.   Without a resurgence of manufacturing, it’s hard to see what will stabilize the economy and cause it to grow over the next decade or two.  

There are grounds for some hope.  The big three car manufacturers are doing relatively well, partly due to the government bailout that many conservatives continue to criticize (although with far fewer workers than they once had).  The green energy sector may provide some jobs, but it seems to be gravitating more and more to China, in terms of both production and ownership.  What’s becoming increasing clear is that if manufacturing doesn’t return to the U.S. in a major way, inequality will continue to increase, demand will continue to weaken, and everyone, including business owners, will suffer.

But these longer term issues cannot be addressed until the economy is somewhat stabilized, which is why the President’s plan is both important and worthwhile.