Sunday, October 17, 2010

A century of progress

Since this story is the 100th post to the blog I started in March of 2009, it’s appropriate that we all travel backward in time by 100 years in order to draw a few conclusions.

The “story behind the story” this time around is the mass e-mail that mostof us received recently decrying the “de-industrialization of America”. Although the source of the article wasn’t listed in the note that I got, a little research turned up the fact that it was generated by a publication called The Business Insider, which was launched in July of 2007.

Since it’s always important to consider the source of anything that you read or hear, especially if it’s negative information, you should be aware of the fact that Business Insider was started by a man named Henry Blodget. Although he was once considered one of the chief internet/e-commerce analysts on Wall Street, he was ultimately charged with civil securities fraud by the United States SEC in 2003. He was forced to pay a total of $4,000,000 in penalties, and was immediately barred from the securities industry.

Before I dig into the accuracy of the “19 facts about the de-industrialization of America”, let’s take a look at where America was in 1910, exactly 100 years ago.

In 1910, farming was still a very big part of the U.S. economy. The number of farms in this country had increased from 2,000,000 in 1860 to 6.4 million in 1910. During this same 50 year period, the rate of industrialization increased dramatically, but it’s interesting to note that the number 1 industry in America in 1910 was slaughtering and meatpacking, and it was 50% larger than the number 2 industry, iron and steel production. If you’ve ever read “The Jungle”, by Sinclair Lewis, you know that work conditions, and food quality, were abysmally poor at that time in history. The outrage generated by Lewis’ book resulted in the Pure Food and Drug Act of 1906.

Over time, manufacturing increasingly displaced agriculture as an important component of American GDP. In 1910, 41% of the American work force was employed in agriculture. As a percentage of GDP, agriculture’s contribution was 7.7% Today, 1.9% of the American work force is engaged in agriculture, and its contribution to the GDP is less than 1%.

1910 was also a time that the giants of the industrial age were in their infancy.

The Ford Motor Company was started a mere 7 years earlier, in 1903. General Motors Corporation, which became the world’s largest employer by the mid-1950’s, was started in 1908. U.S. Steel, which was the first $1 billion corporation in the world, was started in 1901. Early in the company’s history, it was not only the world’s largest steel producer - it was the largest corporation in the entire world.

Like agricultural, manufacturing’s share of the GDP has also declined, and it reached a low of 12% of the GDP in 2005, down significantly from its peak of 28.3% in 1953. As of today, the service industry accounts for over 80% of the U.S. economy.Included in the "service industry" category is a thing called broadband.Listed below is a direct quote from a page on the website for an organization called NextGenWeb:

who's wired now?

"Broadband is the essential foundation of our nation’s modern information economy. Assuming a constructive policy environment, broadband will be a primary driver of U.S. economic recovery, job creation and competitiveness over the next decade and beyond. The broadband/IT sectors created nearly half of all new American jobs in 2008. And, the converging broadband sectors of telecom, media and IT lead U.S. GDP growth, adding nearly $900 billion annually and expanding at a rate that is two to five times faster than the overall U.S. economy. IT-related sectors will remain the fastest-growing areas of our economy over the next 10 years".

If you’re concerned about the loss of America’s manufacturing might, you SHOULD consider a few examples of why de-industrialization may actually be a very good thing:

1 - In 1969, the Cuyahoga River in Cleveland, Ohio caught fire, in large part due to the industrial sludge that been dumped into it over the years. The 1969 fire was the 13th time that the river had caught fire since the first fire in 1868. Although the fire didn’t cause as much damage as the 1952 fire, which caused 1.5 million dollars of damage, it was the most significant fire, because it made the cover of Time Magazine, and was the main catalyst of the Clean Water Act of 1972.

2- Between 1942 and 1953, Hooker Chemical ( now known as Occidental Chemical) dumped 22,000 tons of chemical waste into the Love Canal in New York State. After shutting down operations in 1953, Hooker Chemical sold the land to the Niagara Falls School District for $1. In 1955, the 99th Street Elementary School was opened to students, and subsequent development would see hundreds of families taking up residence in the area. Unusually heavy rains in 1975 and 1976 brought to light the fact that ground in the area was highly contaminated. By 1978, the school had been closed down, and most of the residents in the area had been evacuated.

3 - In 1972, Outboard Marine Corporation started manufacturing operations in Waukegan, Illinois. By 1975, PCB’s were discovered in Waukegan Harbor, and not long after that, Waukegan Harbor became known as a Superfund site. Although OMC has contributed $25,000,000 to the remediation effort, it’s still not safe to eat the fish in the harbor more than 30 years later.

4 - Although you can still get your kicks on Route 66, you need to be aware of the fact that Route 66 State Park in Missouri is the former site of a town called Times Beach. The town was founded in 1925 as a summer resort. In the 1970’s, the town contracted with a waste hauler to spray waste oil on the dirt roads in town to keep down the dust. When it was later discovered that the waste oil contained dioxins, things got to be a little sticky. The EPA first visited the town in 1982. Within a year, the EPA announced the town’s buyout for $32,000,000. By 1985, all but two of the town’s 2000 residents had been evacuated to safer ground.

5- In 1908, Standard Oil opened a refinery in Wood River, Illinois, a town that is located about 15 miles north east of St. Louis. In the 1920’s, Wood River was one of the fastest growing communities in the country, and 90% of the workers in town were employed by Standard Oil. After Standard Oil closed down its operations in 1981, strange things started to happen in town.

The residue from the refineries had gone into the groundwater, which caused oil and gas to seep into the basements of houses that had been built in the town. On occasion, the “junk” from the refining process caught fire when pilot lights on water heaters clicked to the “on” setting - and things got to be interesting.

6- In 1935, Dupont adopted the advertising phrase “Better Things for Better Living .. Through Chemistry”. Some 20 years later, a young woman named Rachel Carson started to notice that chemicals weren’t always a good thing. Her book, Silent Spring, was arguably the catalyst for the environmental movement.

7- In 2003, our country invaded Iraq because our intelligence forces told us that Saddam Hussein had weapons of mass destruction. Although we weren’t able to find any once we got there, some of our stateside researchers dug a little deeper, and found the EXACT LOCATION of all of the sites that had weapons of mass destruction. The map below shows you where they are. As you might suspect, they’ve all left a nasty environmental legacy:

Manufacturing will always be a part of the American economy, but it will be dramatically different from “what used to be”. Buick Motor Company sold 450,000 cars in China in 2009, far more than the 102,000 cars that the company sold in the United States. Although 100,000 cars may still sound like a lot, it‘s far fewer than the 737,879 cars that Buick sold in America in 1955. Since it’s always smart to give your target audience what they want, the new Buick Lacrosse was actually designed in Shanghai, not in Detroit.

If you’re a big believer in “buying American”, you’ll be happy to know that the second generation Lacrosse will be made in Kansas, unlike the first generation LaCrosse, which was made in Ontario. Both generations were also made in China, and the second generation is also going to be produced in Russia

Buick also recently introduced the latest version of the Buick Regal. It’s an amazing vehicle, but it will be produced in Germany, until production shifts to North America - specifically Ontario.

The best defense against any crisis is always positive action.

The solution to today’s problems is still the same as it was at the time of the Century of Progress Exposition that was held in Chicago in 1933 and 1934.

The Century of Progress Exposition was conceived in an atmosphere of economic, political, and social crisis, shaped by the economic recession that followed America's victory in World War I, the ensuing Red Scare, Chicago's 1919 Race Riots, and Chicago's notorious gangster violence. These threats to social order led Chicago's political and cultural authorities to organize the 1921 Pageant of Progress along the Municipal Pier (Navy Pier). The festival's success in attracting over a million visitors during its two-week run inspired a diverse group of Chicago's business and civic authorities to propose another world's fair that would build confidence in the fundamental soundness of the American economy and political system. A decade later, the fair they initiated assumed national importance during the Great Depression, the nation's worst crisis since the Civil War.

In the last two years, we’ve all witnessed massive government programs that were created to once again build confidence in the American economic system, and nothing establishes the link to the past more strongly than the Mike O’Callaghan-Pat Tillman Memorial Bridge that was recently completed downstream from the Hoover Dam, the most massive of the government projects of the Depression era.

I’ve never been a believer in the doomsday message that our country is going to hell in a hand basket, so I really don’t care that the Ford Plant in St. Paul will stop producing stopped producing pickup trucks in 2011. Virtually all of the proposals for the redevelopment for the site involve cutting edge environmentally-sound products ranging from massive windmills to electric cars and trains, and all of them will lessen our dependence on foreign oil, something that the continued production of Ford pickups does not do.

Although the conversion of the old Ford plant is a step in the right direction, it pales in comparison to what General Motors is doing with some of its old plans. GM recently agreed to contribute $773 million to clean up 89 locations in 14 states so that they can be used for new purposes.

what is a brownfield?

I’m also not concerned that a lot of manufacturing jobs have moved to China. I lived in southern China for a year, and can personally attest to the fact that the air quality there today is a lot like it was in Pittsburgh in the early 1950’s. To my knowledge, none of the rivers in China have caught fire lately, but you wouldn’t want to swim in them either. China has 1.3 billion people, but only 10% of the sewage that goes into the river is treated.


That’s something that we can all cheer for.

1 comment:

  1. Very interesting tidbits you dug up there, Tom... the shadow side of turn of the century industrial U.S. I wonder if the industrial giants were ignorant of the consequence of their waste products or if this was deliberately overlooked in the haste to make a buck. It also brings to mind the "consequences" we aren't aware of now in the service industries... particularly the IT sector where I make my living. Most of the shadow side of the internet ecommerce/communication industry I've read about relates to the social affects of virtual communities. Most children today will be proficient in relating to one another through digital devices, but will they understand "real" human relations? I think every economic boom comes with its glories and a subsequent "shadow." We shall see, most likely. :-)