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DAVID KRUSE

By Staff | Oct 14, 2011

Many Americans are pining for the good ol’ days when the middle class, blue-collar factory worker clocked eight hours at the plant putting steak on the table, a new Chevrolet in the garage and retired on a pension and doctors still made house calls. I don’t know whether this idyllic picture of the middle class ever really existed, but it is gone today and it is not coming back.

Those that lament the loss of these blue-collar factory jobs want to somehow bring those times back. They are ready to lash out at whoever they see as the villain to blame for the loss of these jobs. Their prime suspect is whoever filled containers with manufactured goods and shipped them to the U.S. cheaper than those goods could be made here

The problem is that 95 percent of the world’s population lies outside the U.S. and they desire a better life, too. They are competing in the world market to make these manufactured goods at prices U.S. consumers have found extremely attractive.

Access to electricity, a new T-shirt and pork with their rice is humanity come calling to their standard of living.

These foreign workers were not the first choice of U.S. companies looking for low cost production. These foreign workers did not outbid U.S. blue collar workers for manufacturing jobs, they outbid the machines that U.S. companies were going to eliminate those blue collar jobs with.

Companies that can not outsource, like meat packing plants, have eliminated blue collar jobs with automation.

For example, at a beef packing plant where they used to employ 5,000 workers killing 3,000 cattle per day, they now employ 3,000 workers killing 5,000 cattle per day. These plants have been automated.

Machinery doesn’t require health care benefits, overtime, vacations or pensions. The legacy cost of machines is deductable depreciation. Many of the 3,000 workers still employed are doing entirely different skilled jobs than the old workforce.

Somebody has to program the computers that control the automated forklifts. Manufacturing plants that can’t outsource to cheaper labor outsourced to automation.

The idea that if access to the workers in China were eliminated that these jobs would come back to America as blue collar workers, earning ideal wages and benefits, is a pipe dream.

If the access to outsourcing is politically blocked, U.S. companies would invest in automation. If enough protectionism is applied, those machines may be made here, but the world economy will collapse and jobs lost by the export sector of our economy would negate any benefit.

You have to have slept through a lot of history classes to ever believe that protectionism creates wealth. The idea that if we label our competitors as “currency manipulators” and put tariffs on foreign goods that we can add jobs and bring back the glory days of the American manufacturing worker, is bunk. Those jobs are gone and are never coming back so we need to train our workforce for the jobs that exist.

We need to use our technological edge before we lose that, too. We need to quit pining for the good ol’ days, whining about how unfair the world is treating us and discover and exploit our strengths. This country is so busy thinking about how elite and special we are that somehow something hard is too much of a challenge for us anymore.

Theodore Roosevelt once said he didn’t care what people thought, he only knew what they ought to think and he used his bully pulpit to let them know what that was.

Roosevelt would not be impressed with how Americans are approaching the country’s challenges today.

He believed that government was there to lead and to use.

The U.S. and the world are heading toward a trade war. Americans are being duped into thinking that if China’s Yuan appreciated more than it already has and we put tariffs on imported goods, we can bring back what looked like middle class utopia in the rearview mirror.

That is not what is going to happen if we go down that road. What would happen is newly automated U.S. manufacturing plants would have no market to sell to and of all the sectors of the U.S. economy, U.S. agriculture would be devastated in the global depression.

U.S. ag groups were first in line to oppose the Chinese currency bill, saying, “Legislation that would increase tariffs on imports from China would result in retaliation against U.S. exports into China, which is currently the fastest growing market for U.S. exports.”

We have already had one tit-for-tat exchange of tariffs with China. President Obama placed a tariff on Chinese tires and they retaliated with tariffs on U.S. chicken. How has that worked out for China and the U.S?

Chinese food inflation is soaring so that banning U.S. chicken imports makes it worse. U.S. poultry integrators, stung by poor export markets, are reducing egg and chick sets.

Tires not bought from China are imported from the next foreign supplier, Vietnam or Indonesia, but no new tire plants will be built here. Everybody loses. (To be continued).

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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