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lighthousedave

How the Crash Will Reshape America

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How the Crash Will Reshape America

This is a long article, but it is a must read. I believe it will be particularly interesting to UP'ers.

Here is the opening salvo of the article:

The crash of 2008 continues to reverberate loudly nationwide-destroying jobs, bankrupting businesses, and displacing homeowners. But already, it has damaged some places much more severely than others. On the other side of the crisis, America

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Florida always provokes strong reactions one way or another - I tend to think he's a provocative sociologist, but has a loose grasp of economics. I though the article was intriguing, though I tend to think he's mainly reworking an old idea (the basic premise of his first book) to fit a drastically changed economic landscape. The real strength or weakness of the article - and by extension - his theory at all - would be in comparing his generalizations here with those put forth in the initial book. The places he's lamenting here - certain declining places in the NE, various real estate bubble cities - are well discussed by others, here and elsewhere, and he isn't telling us anything we don't already know.

The one intriguing new development here - and he only touches on this in the vaguest of terms, which is a mistake as it's deserving of lengthy examination - is his contention that his favored set of 'creative class' meccas are also phenomenally unequal places, that the highly educated best-and-brightest will put up with under-employment and very low wages (for a while) to be there (before being driven out if they don't get lucky), and that the permanence of the servant class in those cities is or will be unusually rigid. In discussing the success fo those places, this is the side to the story that tends to remain unexplored, and given the current economic shift, it's ripe for further exploration. It would demand a level of detail not often seen in Florida's work - given the economic compression in his favored cities, I would suggest that their anointed status as certain successes in an otherwise declining landscape is rather questionable. And - assuming that he may be correct, for a while, wouldn't reversing this brain drain (in an attempt at spreading innovation a bit more nationally) be a very good idea to dwell upon? If the current recession continues to deepen, or persists for unanticipated lengths of time, the idea of taking your masters' degree to go wait tables in a 'cool' city might lose its' appeal very, very swiftly. I'd still like to see Florida look under some of the stones he's leaving unturned.

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^He tends to state economic trends he thinks will happen but he really doesn't say why or back it up with any solid numbers.

He also jumped on the Midwest Hatin' bandwagon but we'll show him. We'll show them all! :tough:

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It seems like the author of this article is painting only doom and gloom for rural areas and esp. the midwest. While I don't think the midwest will ever be the indurstial and economic powerhouse it once was. I don't think the midwest is going to roll over and die as the article seems to predicting. We only need to look at midwestern cities like Grand Rapids and Ann Arbor and how they seem to be holding their own.

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this article should be taken with a grain of salt. I don't think that anyone will dispute that the midwest is undergoing a dramatic transformation away from manufacturing. While many are resisting it, there is no stopping it. manufacturing has become too expensive to perform on a widspread basis in our economy. The problem with the article and these types of projections in general is that what they are based on, history, sociology, and economics are pseudo-science at best. I don't think all cities in the midwest are bound to die but there needs to be a reason for an educated person to stay and it needs to be more than just a job although that is a requirment. a person numerous opportunites to work and there needs to be another compeling reason to stay. another factor is what small companies now will become the next microsoft? this is where the real growth will come from with a city like grand rapids. nurturing small companies and encouraging/supporting entrepreneurial types will drive future growth, in addition to making our city more attractive to an educated workforce.

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I never understood the argument that this country can prosper with a reduced manufacturing footprint, in fact I would argue that it's our loss of manufacturing that has deepened the crisis. And the loss of manufacturing is due to global economics that has leveled the playing field. At one time this country had a near monopoly on manufacturing and ideas. Not any more.

We got fat, sassy, and content, more concerned about higher wages and better retirement benefits and using our homes as ATM's than focusing on what got us here in the first place.

People talk about 'transforming' the economy ... the state ... to more of a service oriented society. A more 'diversified' economy? It happened and guess what? Financial services? Nuked. Banking? Lol. It was all a house of cards, brought down because people lost their uncompetitive jobs ... no more income ... bigger debt ... falling home prices ... tax revenues on the decline.

Now we're paying the piper and seeing firsthand something that no one wants to admit ... the ultimate cure (already happening) will be a substantial decline in standard of living. It's a foregone conclusion. The good news is the disparity between us and other countries will diminish and we become competitive once again. Til then the government throws money as a bandaid, then finally admits it doesn't solve the underyling cause.

When civil discontent erupts we should near the bottom.

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I never understood the argument that this country can prosper with a reduced manufacturing footprint, in fact I would argue that it's our loss of manufacturing that has deepened the crisis. And the loss of manufacturing is due to global economics that has leveled the playing field. At one time this country had a near monopoly on manufacturing and ideas. Not any more.

We got fat, sassy, and content, more concerned about higher wages and better retirement benefits and using our homes as ATM's than focusing on what got us here in the first place.

People talk about 'transforming' the economy ... the state ... to more of a service oriented society. A more 'diversified' economy? It happened and guess what? Financial services? Nuked. Banking? Lol. It was all a house of cards, brought down because people lost their uncompetitive jobs ... no more income ... bigger debt ... falling home prices ... tax revenues on the decline.

Now we're paying the piper and seeing firsthand something that no one wants to admit ... the ultimate cure (already happening) will be a substantial decline in standard of living. It's a foregone conclusion. The good news is the disparity between us and other countries will diminish and we become competitive once again. Til then the government throws money as a bandaid, then finally admits it doesn't solve the underyling cause.

When civil discontent erupts we should near the bottom.

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people said the same thing when we shifted from agricultural to manufacturing... You should probably check your facts though, we produce more now than at any other time in our history! The jobs are lost because ANYONE can do them, they require little/no skill and the jobs are being replaced due to automation.

Knowledge/information/highly skilled jobs are the now and future for our economy. WE CANNOT compete against Asia for production costs (nor should we want to)

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Don't fall into that statistical 'we produce more' trap. We do, but not proportionate to the growth seen in other countries and certainly not to the degree needed to offset the declines we are now witnessing.

Knowledge/information/skilled jobs are the future? Yes, in isolation this sounds great.

But, it's a brave new world.

Check this vid to see what we're up against:

After seeing this tell me where most of the skilled workers and jobs will be.

Quiz at 10 :)

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How soon we forget.

Still quite a bit higher than ours.

Speak of the devil, not a few hours about my statement on our declining standard of living this comes out ...

But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:

* An $8 trillion negative wealth effect from declining home values.

* A $10 trillion negative wealth effect from weakened capital markets.

* A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."

http://finance.yahoo.com/tech-ticker/artic...PC,^DJI,RTH,TGT

Production is now on the decline in many segments worldwide. The countries that get hit hardest are those with the greatest unused prodution capacity and the most fat to trim. Wait and see how big the Big 3 (if they even survive) will be in a few years!

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ok so let me get this straight... What you are saying is, if we were still primarily a manufacturing country then this wouldn't have happened? cough *Great Depression* cough Bad things do happen but it doesn't mean we should give up on everything and revert back to the caveman days

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I can see your point about the US moving on from industry to a post industrial economy filled with service and creative related jobs that capitalize on intellect more so than muscle. Obviously this will open the door for high quality higher wage jobs and perhaps translate into higher standards of living for those able to compete in this new economic landscape. However I have two concerns. First, even if all the industrial jobs go away and are replaced by the new types of jobs to come, how will the United State maintain political leverage in this changing world. I'm not too keen on geo/politics. But common sense tells me that a nation with a significant industrial capacity would fair better based on "Why should we buy it from you when we can produce it ourselves.?" Things like economic embargoes and war cutting off imports would have less of an effect. Also the key to winning a war is to have industrial might on your side. If you can out produce the enemy then you put the odds of victory in your favor. That was proven when the Allied Forces fueled by the US's industrial might defeated the Nazi forces. Secondly, even in the post industrial US where college education is an absolute must to getting a job, there are still going to be allot of people that can't afford a college education. They are going to be left in the dust increasing income disparities between rich and poor. Personally I think the US should embrace the new post industrial economy and all of the high quality jobs that will come with it. But we should not have to sacrifice our industrial capacity in doing so.

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people said the same thing when we shifted from agricultural to manufacturing... You should probably check your facts though, we produce more now than at any other time in our history! The jobs are lost because ANYONE can do them, they require little/no skill and the jobs are being replaced due to automation.

Knowledge/information/highly skilled jobs are the now and future for our economy. WE CANNOT compete against Asia for production costs (nor should we want to)

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ok so let me get this straight... What you are saying is, if we were still primarily a manufacturing country then this wouldn't have happened? cough *Great Depression* cough Bad things do happen but it doesn't mean we should give up on everything and revert back to the caveman days

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This really doesn't make any sense. First of all a society can't exist in the long term has to buy all it's basic needs unless it has something to sell to those doing the production. Second a society that moves all it's production, technology, and logistics know how to other societies will lose that ability over time. Send manufacturing to China and the engineers will follow a couple of business cycles later. I have worked as a licensed engineer in a major corporation and I will tell you that without a manufacturing base, engineering and development disappear. Engineers and developers don't sit here in the United States and throw engineering work over to China. Don't make the mistake of thinking they are not capable of doing it over there. Try to find someone in this country that can tell you how to build a television. A relatively simple device but one that we no longer have the ability to make. Information jobs are the easiest to outsource and if that is all we have left, then we have nothing. IBM laid quietly laid off over 6000 people over the last few weeks. Those jobs are going to India, Brazil, Argentina, and Eastern Europe.

Sure we can't compete against Asia for production costs because they don't compete. For them it is a war they intend to win at all costs even to the point of forcing their people to live and work at a standard of living/working that would simply be unacceptable to our society. Corporate America has sold us this story on the "globalized economy". Yet the only people it has benefited are those at the very top while our middle class gets decimated. There is no reason this society has to view ANY worker in this country in the terms of 3rd world slave laborers. I recommend looking at Japan. They are a highly industrialized, high standard of living country that views every job in terms of it's national defense. There are a number of industries there that are simply protected and they would never do what we do to jobs here. When was the last time that you have heard of the Japanese government paying GM or Ford to open a car plant there? It's not gonna happen.

Value is added to by society by only 3 things. You grow it, you dig it up, or you manufacture it. Everything else is a cost to that society. If we move manufacturing to other countries then we are left with growing and digging and that is the description of a 3rd world economy. This is why we have the economic collapse going on now. For the last 25 - 30 years the United States has been obsessed with writing stuff on paper and selling it back and forth all while off-shoring our production and technology to make certain individuals here very rich. We have gotten by because of the illusion of wealth formed by ever appreciating real estate backed up by very cheap and irresponsible credit. Now it has come crashing down and almost over night the paper wealth generated over the last 25 years has disappeared.

The results speak for themselves. A few years ago Florida said it would be the "creative class" that would save cities, yet it was that bunch that created the economic debacle that we see now.

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Maybe my impression of what makes up the "creative class" is different from yours, but I don't see that at all. I think of the creative class as small business owners who work in professional services, but not necessarily traditional banking, real estate and mortgages. Despite the economic malaise, it seems like the creative class is the only sector creating jobs here locally right now. That and bio-tech. It's certainly not suits in big towers of cube farms (the uncreative class). They all seem to be content with shipping jobs overseas, as you mentioned.

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The creative class seems to be in a 0 sum game these days, if not worse. For all the publicity about some small business opening/hiring/expanding there's those non-publicized ones cutting back. You also have to wonder how many mom & pops you have to open to equal the economic impact that a couple hundred workers recalled from just one business in the traditional area imparts.

With stimulus on the horizon there's sure to be 2 winners: education & government jobs. Today's paper reports that GRCC is eyeing Davenport's downtown campus for expansion, complements of the stimulus.

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This really doesn't make any sense. First of all a society can't exist in the long term has to buy all it's basic needs unless it has something to sell to those doing the production. Second a society that moves all it's production, technology, and logistics know how to other societies will lose that ability over time. Send manufacturing to China and the engineers will follow a couple of business cycles later. I have worked as a licensed engineer in a major corporation and I will tell you that without a manufacturing base, engineering and development disappear. Engineers and developers don't sit here in the United States and throw engineering work over to China. Don't make the mistake of thinking they are not capable of doing it over there. Try to find someone in this country that can tell you how to build a television. A relatively simple device but one that we no longer have the ability to make. Information jobs are the easiest to outsource and if that is all we have left, then we have nothing. IBM laid quietly laid off over 6000 people over the last few weeks. Those jobs are going to India, Brazil, Argentina, and Eastern Europe.

Sure we can't compete against Asia for production costs because they don't compete. For them it is a war they intend to win at all costs even to the point of forcing their people to live and work at a standard of living/working that would simply be unacceptable to our society. Corporate America has sold us this story on the "globalized economy". Yet the only people it has benefited are those at the very top while our middle class gets decimated. There is no reason this society has to view ANY worker in this country in the terms of 3rd world slave laborers. I recommend looking at Japan. They are a highly industrialized, high standard of living country that views every job in terms of it's national defense. There are a number of industries there that are simply protected and they would never do what we do to jobs here. When was the last time that you have heard of the Japanese government paying GM or Ford to open a car plant there? It's not gonna happen.

Value is added to by society by only 3 things. You grow it, you dig it up, or you manufacture it. Everything else is a cost to that society. If we move manufacturing to other countries then we are left with growing and digging and that is the description of a 3rd world economy. This is why we have the economic collapse going on now. For the last 25 - 30 years the United States has been obsessed with writing stuff on paper and selling it back and forth all while off-shoring our production and technology to make certain individuals here very rich. We have gotten by because of the illusion of wealth formed by ever appreciating real estate backed up by very cheap and irresponsible credit. Now it has come crashing down and almost over night the paper wealth generated over the last 25 years has disappeared.

The results speak for themselves. A few years ago Florida said it would be the "creative class" that would save cities, yet it was that bunch that created the economic debacle that we see now.

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,....

Also, you failed to read the previous post which CLEARLY said that we manufacture More now than EVER before. (less people doing it)

.....

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An economy is grown through savings, not spending, production, not consumption. Every stimulus bill reasoned for by our congress is a reason for other countries to drop our currency and loose American assets. This idea that we can sustain a viable economy without large amounts of production is a mirage, lie, fallacy, illusion. Do you know why we have such a high level of living? Its through the back breaking slave work of foreigners. We can afford to base our economy on "knowledge" growth i.e. intellectual properties technologies, innovations, etc." because we can count on foreigners to provide for the means to do so, and on the cheap. It can only be done through our debt finance consumption of these foreign products. And the debt we are racking up through this consumption is provided by the countries we consume from! This happens because they have true wealth called "savings" which is created by their vast production capabilities. They feel obligated to lend money to us because we are their consumers. But once they realize that we: are not being accountable with their money, can not afford their products due to our debt running loose, and their products have more value than the "Made in China" sticker placed on them, this ponzi scheme will quickly come to an end. Does this make sense? They give us money so we can buy their products. How is this fair to them? They will stop lending money to America, the dollar will no longer be the international currency, and the value of the dollar will tank. When this happens, the true nature of our economy will be shown.

I agree whole heatedly that we are in desperate need of manufacturing jobs in America. I don't think this economy is resetting because we don't have the production base to justify our lifestyle, but rather the lifestyles that we drove for that have put American production on the side burner to cheap imports.

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'Devising a successful economic strategy for the United States is a good deal trickier. When our economic elites offshored much of our manufacturing sector to East Asia and other cheap-labor lands, and took arms against union labor here at home, they ensured that most of the American jobs created over the past quarter-century would come in retail and service sectors that paid less than manufacturing. Every year for the past couple of decades, we've added lots more sales-clerk, cashier and fast-food jobs than we've created in high technology or energy. Yet Americans have been able to maintain middle-class living standards -- not through rising income but through rising debt, available to us because China has funneled the immense revenue it amassed selling us goods back to us in the form of loans that we can no longer repay.'

http://www.washingtonpost.com/wp-dyn/conte...1702769_pf.html

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I am not an economist and certainly do not have the grasp of these issues that many of you appear to have.

I would have to agree with those who have indicated that the loss of manufacturing is critical here. Go try to buy clothes made in the USA. I brushed my teeth this morning with toothpaste made in Mexico and a toothbrush made in China. This is pathetic and there is absolutely no excuse for what we have become. We will not run this country on the technology industries. We will not run this country on service industries. And we will not defend this country without a manufacturing base.

But is it far deeper than that.

Someone mentioned trying to find someone who can build a television....try to find someone to fix one!! Or try to find someone to fix a six year old camcorder. You will be laughed at because there is no one to fix it and you can buy a new one cheaper - a new one made with slave labor and shipped half way around the world to be sold by an "associate" in big box mart to you on your credit card.

The issue is not just manufacturing, but a great deal of other things. Lack of quality leadership, lack of public outcry, lack of resources, too much greed and grift, lack of the ability of this nation to find its way...to pull up its collective boot straps and start doing something about all of this - instead of waiting for the "stimulus to kick in".

It is time that we, as a nation, stop thinking that it is a God given right of all Americans to get something for nothing. To get a decent standard of living without producing anything of real value. To get a mortgage that you can not afford. To borrow a trillion dollars from your grand kids so we can keep it all running. To farm out all the hard stuff.

There is a grave general complacency of the entire population. We have lost our way and frankly we don't even seem to give a damn. Our leaders, for the most part are weak - both liberals and conservatives and in fact provide not leadership but just smokescreens and the appearance of looking out for us.

We need to accept the fact that we are going to be a poorer nation. Our standard of living is going to decline. Our net worth is going to decline (and already has). We are in for much more hardship, the kind of hardships seen in these depressions Florida speaks of - or worse.

We need to accept the fact that we can no longer look at growth as a measure of economic success, because the growth we have seen in the past is over and it isn't coming back. Add to that the specter of less petroleum or more expensive petroleum and the entire scale of our entire nation needs to change. It needs to change fast.

We can all make changes to this scale issue in our own spheres. Living local needs to be embraced more than as a lip service. We need to stop relying on large organizations and more on local enterprise and relationships. We need to stop thinking of finding the silver bullet to solve all this - because there isn't a single one.

Everything must be rescaled and the stuff that is not is not going to survive.

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