It was recently announced that Erie Insurance is now the
largest employer in the city of Erie Pennsylvania. If you've spent any time
living in, reading about or visiting the Rust Belt, such an announcement is expected
but still profound. Visiting Erie from time to time I often reflect on
deindustrialisation and financialisation. My most recent trip had me musing on
it more than usual and then I read the story in the news about Erie Insurance.
If you're at least in your forties you can probably remember
an economic world and culture that now seems like something out of a dream.
There used to a be a lot of solid working class people employed in factories
and in industry possessing good jobs that could support a family. They were
working class but the line between them and the middle class was blurry. The
middle class didn't live so ostentatiously and working folks were doing a
little better. A guy could graduate high school, get a job and support a
family. We've all seen the changes and clearly those days are gone but I often
wonder how many have really reflected on it all, let alone taken the time to
try and understand it. Most people see but one facet of the collapse and though
they may be right about certain aspects of what happened, they usually miss the
bigger picture.
Just recently I was at a family gathering I heard someone
spouting off about the autoworker unions and how they destroyed the American
car industry. We were talking about how American cars got really bad in the
1970's and 80's and how it seemed like many cars would barely make it to
100,000 miles before basically dying. The Japanese cars, Honda and Toyota
manufactured solid vehicles that often surpassed 200,000 miles without even
having major mechanical problems. It was the beginning of the shift in American
car culture that began in the 1970's but really took off in the 1990's. During
that decade there were still the 'Buy American' campaigns going on and there
were plenty of older folks that refused to buy a foreign car. But of course
through globalisation even American cars were no longer really American. You'd
buy a Dodge or Ford and find a Japanese engine. I had a 1980-something or other
Dodge pickup that was in reality a Mitsubishi. My 1990's Mercury mini-van was
all Nissan under the hood.
Anyway, someone spouted off about the unions. They're not
entirely wrong and yet that's hardly the whole story. It's much more
complicated and there's plenty of blame to go around. There was plenty of greed
from the corporate sector and yet the collapse of American industry was also
part of a larger process of deindustrialisation which could not have happened
without the tacit support of Washington. Why would a nation do this? The answer
to that is simple. It's greed and empire. Maybe you could say the unions with
their corruption and greed helped to accelerate the process but one way or
another deindustrialisation was going to happen and the economy underwent
another change over the following decades, that of financialisation... the dominant
service-sector model we now have. Our economy today is not built on production
and industry but on service and retail. It's about money moving around, not so
much money interacting with and invested in production. That aspect of the
economy takes place trans-nationally. Today, 40% of US jobs are in the retail
sector and it along with the service sector (banking, health care etc...)
dominates the US economy. By some estimates the service sector now comprises
some 4/5 of the US economy. This is fairly stunning when considers that in the
post-war period the US was a nation that produced, a nation that manufactured.
America was the workshop of the world and no wonder as much of the industrial
world outside the United States was in ruins.
Financialisation is a stage in the development of capitalism.
Viewed as positive by the financial or investor class, it's when the economy
shifts from an industrial base to a service sector centred on finance itself.
Money, investment, banking, insurance and all the instruments associated with
maintaining and managing this infrastructure become the basis of the economy.
Industry certainly still exists but primarily it has been
outsourced and moved off-shore, outside the borders of the national and local economy.
On the one hand such outsourcing represents 'globalisation' and the erasure of
borders but on the other hand, the system very much depends on the nation
state. While utilising international geo-political instruments to structure
alliances and trade agreements, the nation state is still requisite in order to
exert direct control over all phases of government, the judiciary and the
military.
Despite the protests of some libertarians the government of
the nation state system is considered a desirable element by Wall Street. Taxes
and regulation may be viewed as a curse but there is the need for things like infrastructure,
public works, large-scale research and diplomacy. The courts are viewed as a
necessity for upholding contracts, litigation and issues surrounding copyrights
and patents. And of course the military represents these same forces outside
the borders, backing up the interests of the finance-dominated US system.
But for the man on the street, financialisation means the
Rust Belt, the shutting down of factories and the dismantling of the industrial
sector. It means the breaking of unions and the loss of middle-class
communities. It represents a social catastrophe.
Others view this 'catastrophic' phase as just that...a phase.
They would argue that society will necessarily go through upheaval and yet
eventually the former blue-collar workers and their children will be re-tooled
(as it were) and re-trained. Apart from the ethics of such thinking, on a
practical level, the waste and wastefulness is just stunning. Our society
gobbles up the resources of the world, builds in a frenzy and then a generation
or two later tears it all down.
Financialisation doesn't eliminate all industry but shops
tend to be smaller, streamlined and more reliant on technology. Raw production
is gone but there's still specialised or 'boutique' manufacturing. Not all
high-tech manufacturing can be outsourced and that sector, while very different
from the old steel and auto industries nevertheless generates jobs. As
production costs change, cheap overseas labour becomes more expensive and
transport costs rise, some factories and plants will set up again in the United
States. We've seen this happen and people celebrate this fact but these jobs
are not the same jobs anymore. These are no longer middle class jobs that
support a family. These are now low-end jobs with only a shell of the salary
and benefit packages they once possessed. Some are still unionised but the
power of the unions has been both broken and corrupted and they no longer
possess any viable power. Some jobs might pay half-decent wages but now there
are a couple dozen positions at a factory or foundry while a generation ago
these jobs would have numbered in the hundreds and thousands. And even though
the overheard in the form of payroll was much higher, these companies were
still making money and often hand-over-fist. But if you're making profits of 5%
and your competitors are up at 9-10%, you have to change your model and do what
they're doing or risk investor flight. And certainly the CEO and others will be
fired unless they get their numbers in line with the profits everyone else is
making.
So who's at fault? The corporations? Wall Street? How about
the investors themselves that demand the profits? Do investors care about the
ethics of the companies they invest in or do they just care about profits and
portfolios? Are you going to resist moving your money to a more profitable
investment because of ethics? We already know the answer. It's the same reason
why people abandoned Main Street for the mall and the big box stores. They
destroyed their communities in order to get that 'Great Value'.
It's sure a lot easier to blame the brown-skinned people in
other countries who are being exploited by the system. Their own governments
have turned them into cheap labour platforms and while they work as something
akin to slaves, and bear the brunt of the pollution and all the rest, they also
get blamed for the lost jobs and the wounded Western economy. The media plays
no small part in this bait-and-switch game... and it works as we all know.
But the biggest shift represented by financialisation is the
growth in service sector jobs. Wealth creates a demand for services. We might
tend to think of retail, restaurants and hotels and indeed financialisation
generates wealth which then creates a further demand for the strip-mall sprawl
that frequents the edges of many urban areas. And yet there's also tremendous
growth in financial management, loans, servicing or maintaining these various
financial instruments. Insurance has seemingly grown exponentially. In our
depraved litigation culture, this is hardly a surprise.
These jobs can sometimes pay well but it is also argued that
they're not 'real' jobs. They don't produce anything. They provide services.
They're not part of an infrastructure but are instead cogs in a bureaucracy.
Experience tells us that factories and plants can shut down and yet there's a
viable and sometimes monumental cost in factories running idle or being
dismantled. It's something of a 'leap' for a company to cut thousands of jobs
or shut down facilities.
But for the service sector, eliminating employees simply
means turning off some lights and moving some chairs around. Job security while
no longer solid in the industrial sector, at one time possessed a modicum of stability.
Organised labour negotiated contracts and for several decades growth was stable
and assured. The US industrial sector was challenged by the rise of West
Germany and Japan in the 1970's. These countries had largely been destroyed and
it took almost a generation for them to become viable competitors and yet the
real enemy of the US industrial sector was Wall Street itself.
Avarice and a desire for higher profit margins drove US
investors to demand higher efficiency and a reduction in labour costs. Middle
class aspirations and greed on the part of workers didn't help either. First,
factories began to move to non-union states in the South. Today 28 states are
'right to work' states that either never let the labor movement acquire power
or have effectively broken the power of the unions to dominate the workplace
and demand membership. I'm neither lamenting this nor celebrating it, I'm
simply stating the facts. Today, even states like Wisconsin, West Virginia,
Kentucky and even Michigan are 'right
to work' states. The social and economic reversal which began in earnest under
Reagan has been nothing less than stunning. Financialisation and
de-industrialisation were processes built on the dismantling of the American
labor movement and the trade unions. What remains has been compromised,
corrupted and largely appropriated. Today's unions are little more than an arm
of the corporate executive. They pretend to represent the workforce but in
reality are there to contain them and manage them on behalf of the corporate governing
board.
I frequently visit the Rust Belt towns along Lake Erie and
the city of Erie Pennsylvania is well known to me. Like other Rust Belt cities
of the Great Lakes region and Northern Appalachia, Erie has more than its fair
share of dilapidated warehouses, crumbling factories and isolated smoke stacks
no longer connected to the buildings that once utilised them. Parts of the city
are severely run down. Not as bad as Buffalo, let alone Detroit, Erie is pretty
typical of the region.
And like most American cities it has vibrant and affluent
suburbs. The downtown is impoverished and run-down, a haunt of half-empty
buildings and down-and-out folks. It's interesting how you approach the outer
edges of the urban area and encounter a several mile strip of brand-name retail
stores and a fairly large shopping mall. This area is usually bustling with
activity and can become oppressive at times. My wife remembers when it was all
farm fields. Journey through this 1990's era 'city' into the older sprawl of
the 1960's, 70's and 80's, long boulevards of stores, restaurants and other
types of businesses that don't fit in the strip mall world. Some are doing
well, others are not and many buildings are empty or have been re-tasked. A lot
of buildings have been torn down and new businesses have gone in. There are
many training schools and vocational universities, signs of a city still trying
to transition to the service sector.
Past this sprawl, flanked and interspersed with residential areas
one enters the old downtown, an interesting but admittedly depressed and
dilapidated area. There are some failing neighbourhoods, and a lot of evident
poverty. Sometimes the change in activity is remarkable. The strip mall area of
Upper Peach Street (as it's known) can be a flurry of activity and yet the
downtown will be ghostly, with only a few sad people shuffling about or waiting
at graffitied bus stops. But past the downtown or rather on its edge one comes
to the lake shore which apart from some post-industrial wreckage is bustling with
hotels, restaurants, marinas and other activity. Erie is not atypical in the
least. This story is pretty common across the United States. Even cities like
Pittsburgh that have transitioned from industry to the service sector share in
this. Pittsburgh avoided much of the wasteland-dilapidation and has
successfully become the hub of a new tech sector. Erie continues to be a
plastics hub built around the abundant natural gas found in Pennsylvania but
much of the city is ailing.
I like to stand at the North Pier lighthouse out on Presque
Isle, a peninsula which juts out into Lake Erie. Urban peninsulas are great
places for reflection. I recall Point Loma in the San Diego area, staring out
at the ocean even while gazing at the bay filled with Navy ships and viewing
the city skyline in the distance. Mexico lay just on the horizon. It provided
much to consider and reflect on. The 'tips' of San Francisco, Manhattan Island
and even to some degree the 'point' in Pittsburgh have the same effect.
In Erie I look out at the open water and while listening to
the sound of trains in the distance I think about Great Lakes shipping, coal
from Appalachia, iron from Minnesota as well as other ores and agricultural
products. I look at the old moorings no longer used, the old dilapidated
Hammermill paper company smokestacks remind me of the industries that once
flourished in the city. The General Electric plant in a nearby suburb, long
associated with locomotive manufacture has been reduced to a shell of its
former self and is almost gone. Once employing 20,000 people, today only a
little over a thousand remain and many of those jobs will be gone within the
next couple of years.
As I said at the beginning of this piece I was struck by a
report that the city's largest employer is now Erie Insurance Group, a Fortune
500 company. Employing 5,000 people it has a presence throughout the Great
Lakes and Appalachia. I know and have known people who work for the company and
I've had dealings with them. They seem to do well enough in terms of their
paychecks and yet the jobs are volatile. I know locally several offices have
re-aligned and switched and brokers have been added and dropped. All par for
the course I'm sure but these jobs are far fewer and of a different stripe than
the industrial sector jobs that used to support whole towns and neighbourhoods.
Those are gone and are not going to return.
Erie has followed the pattern of financialisation. An
insurance industry now is the biggest employer. The economy is built around
retail and its location on the interstate, bringing significant traffic from
Ontario and elsewhere. Pennsylvania has long drawn folks from New York and
Canada due to its tax exemption on clothing. Erie is a place people come to
shop and there are other outlet malls within striking distance down the
interstate.
Along Lake Erie the city has one of the nicest state parks in
Presque Isle, an amusement park (beyond my family's budget) and it has also
sought to cash in on its interstate location by building a casino and
introducing horse racing. The economy is now centred on retail and service
sector jobs. The remaining industry is in plastics with small foundries and
some connections to Great Lakes shipping. But most of this activity is outside
the actual city, on its fringes. The downtown urban areas remain dilapidated.
Erie is also known for hosting large refugee populations.
It's one of the cities that have been established as a 'settling' place for
refugees. All too often economically depressed areas are selected for this
task. It creates a small infrastructure in language, training and assistance
programmes but many of the locals resent it. And yet the refugees aren't seen
too much at the brand-name stores. Those offended by their presence don't have
to look at them too much. I tend to run into them at the low end stores where
we shop or in the downtown where we wander the streets or out on the piers
fishing the often polluted waters of the bay and lakeshore. I interact with
them whenever I can.
As one somewhat familiar with construction and building codes
I know that many of the old buildings in the downtown will not be fixed. The
costs of renovation are staggering and there are additional problems
surrounding parking and modernisation. What will happen to these old downtowns?
I don't know, I'm not sure anyone really does. Again, Pittsburgh is probably
the best model for what can happen, but it involves great transformation.
Gentrification is the model and it's on display in places like Pittsburgh and
Manhattan. The cities can be revitalised but only through transformation. The
poor have to be forced out. Even many of the modern crime statistics are
misleading when it comes to large cities. Yes, violent crime has dropped but
it's not so much through policing as through gentrification. The poor and 'bad'
neighbourhoods have been removed and transformed. The problems haven't gone
away, they've just been pushed off into another corner.
In some ways these cities almost take on a Ship of Theseus paradox. The
geographical location stays the same and there might be a handful of old
buildings and churches but are these really the same cities? Of course the
answer is both yes and no, honest but dissatisfactory.
What is a city? What is a community? Economists will view the
question through one lens and sociologists and historians through another. It's
frustrating and open ended. For those that have lived through the
transformation it can be quite disturbing and upsetting. I know of numerous
people that I would describe as being somewhat traumatised when they are forced
to reflect on the cities, towns and neighbourhoods they once knew compared to
what those geographic locations are today.
In terms of the larger culture, few truly reckon with the
prices that are paid. There was a tremendous price in life and resources for
the process of industrialisation. It was devastating and yet few consider it in
light of all the 'progress' and wealth it produced. And yet even fewer reckoned
with the costs of de-industrialisation and who imagined that the economic
system so celebrated and ingrained in American thought would undo these very
models and ultimately destroy the new urban culture that developed around them?
Factories in places like Erie used to drum out Leftists and people accused of
communism. The management feared labor organisers and yet those managers would
have never guessed that the system they were protecting would eventually wipe
out their jobs as well.
What's the solution? There isn't one. Sorry, that's not what
people want to hear but we as Christians should know at least this. This world
is fallen and cursed and people are bent on selfishness and evil. Social
structures can be created to foster stability and promote a high standard of
living but nothing is static. Avarice destroys all. Those with the most are the
most avaricious and yet the middling folk possess no small portion of greed
either though they are often blind to it.
It's a fascinating story and worthy of examination but never
for a moment should we as members of the Kingdom be taken in by one side or the
other. No side has it right because none of the sides are pure in their
motives. Money corrupts everything and even those who simply want to help their
communities are often unwilling to consider the costs. Their profits even if
earned through hard work are nevertheless usually built on the exploitation of
someone else further down the line.
American labour has been willing to call management and
owners to account and yet as a group they have been largely hostile to the
concerns and grievances of people in other countries and cultures... often
being exploited by the same system, and often to a much greater degree. We tend
to focus on our communities but we're not alone. Like it or not we're part of a
larger system and story and our decisions and our economy affect people in
other places. All too often people see only their own situation and miss the
forest through the trees. It's understandable but it's wrong and leads to
further confusion and bitterness. This is but another aspect of how Wall Street
tends to leverage the nation state. What it fears more than anything is people
uniting across the boundaries the divide us. They needn't fear. Tribalism is
alive and well. They've even infected the Christian Church with it. We of all
people should be internationalist in our outlook but sadly most Christians (at
least in America) have a higher loyalty to nation than they do the Kingdom to
which they purport to belong.
These are things I think about as I stand on the edge of the
lake, listen to the trains and hoping to see a freighter moving in or out of
the harbour. I watch the other people standing on the pier and looking out
toward the city and I wonder... what do they see?
Though the peninsula can get crowded during the summer I am
often struck how few people are there on beautiful spring and fall days. We'll
sit on the beach and watch the sunset and on a windy evening it can be glorious
with the waves and the roar of the surf and yet there are few around. At those
moments it seems like most of the city is consumed with consuming. The strip
mall district will be overflowing with people... an ignorant lot that doesn't
know the best things in life are free. Even tired old Erie has its treasures if
one wants to find them. And they're not found at the mall.
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