Investor Behavior, Employment, Changing Occupations, Capital Flow Analysis
Employment and Changing Occupations
How Americans Changed Jobs
The United States was founded as an agricultural democracy, with a population composed mainly of immigrants from Protestant Europe.
Because land was almost free (i.e., confiscated from Native Americans), colonizers who were poor in Europe had the capital necessary to start a farm and go into business for themselves.
By 1860, almost two-thirds of Americans had their own enterprises, usually a family farm.
However, by the 20th century the frontier was gone, while new immigrants (mostly Catholics and Jews) in increasing numbers poured in and as the supply of virtually free capital, in the form of land, disappeared.
Leaving The Family Farm
Colonial and frontier agriculture was inefficient.
With the industrial revolution, factories opened and people left family farms for a better life in the cities.
By the 1930s, less than a quarter of the population was still on farms and as agricultural productivity continued to improve, the number of farm workers kept falling, until, by the 1980s, the percentage leveled off at about 3% of the population.
Because of high productivity, this small percentage of the population was able to feed the entire nation and still generate surplus food for export.
Assuming Industrial Leadership
With a supply of inexpensive labor coming from farms and from abroad, and with investment capital flowing from Europe, and with an environment of low taxes, small government, and free enterprise, America became the world's leading industrial nation.
The capital required to maintain the world's largest industrial base came from Wall Street at a time when stock prices moved between ten and twenty time earnings, and when dividends returned about 120% of the yield on AAA corporate bonds.
By the First World War, there were twice as many Americans working in factories as there were on farms. By the Second World War, about half of the population were industrial workers. (See Lesson 19.)
Followed by Deindustrialization
The end of American industrial supremacy began with Roosevelt's New Deal, with rabid anti-capitalist propaganda (see Commonwealth Club Address), the highest income taxes in history, privileges for labor unions, minimum wages, and the beginning of over-regulation that has not yet ended.
By the 1950s, American industry began to go offshore, setting up factories in developing nations like Brazil, encouraged by tax incentives abroad and anti-business legislation at home .
Over-regulation that began in the 1930s, worsened under FDR's protegé, Lyndon Johnson, who inaugurated the Great Society programs, while running the nation into debt by a War in Vietnam when there was no will to win.
From the 1980s onwards, the pace of deindustrialization quickened and now seems irreversible.
By the end of the 21st century, the United States may no longer be a leading industrial power.
American workers, backed by the Democrat Party, still clamor for minimum wages, thereby ensuring a global competitive disadvantage for the foreseeable future.
Since productivity in the service sector is less than in industry, and since at least half of the people do not have qualifications to compete for higher paying jobs in computer programming, management, or the professions, the stage is set for further widening the spread between rich and poor.
Whereas the decline of agricultural workers was spurred by true productivity advances that allowed the remaining workers to produce enough for the entire country and more, this is not so with the loss of industrial jobs.
The work simply left for foreign shores.
The Rise of the MBA
Not only has deindustrialization deprived America of the productive assets and factory workers, but leadership in engineering and technology is also threatened.
The table shows how the number of engineering graduates has turned downwards, being surpassed by non-scientific MBA graduates in 1992.
The formation of engineers in the U.S. reached a peak in 1986 and has declined steadily thereafter.
This decline is consistent with deindustrialization and a slow erosion in technical leadership.
On the other hand, the sharp and steady rise in the production of non-scientific MBA's, indoctrinated in the fallacies of the Nobel gods and asset-lite management, suggests that deindustrialization will continue, along with a greater divergence in the economic well-being of the rich and the poor.
The rise of the MBA was accompanied by a sharp increase in mercenary, non-altruistic attitudes among the young.
A survey by the U.S. Department of Education showed that only 24% of high school senior boys said that "making lots of money" was important in 1972, while 45% showed similar money-grubbing inclinations by 1992 — the Clinton years.
This is consistent with the consensus of moral decline in America.
In 1952, 51% of the population thought that people in general led as good lives — honest and moral — as they used to.
By 1998, only 26% of the population shared this optimistic view. (See Bowling Alone, p. 139)
Two Income Households
The other great trend in the U.S. work force has been the growth of multiple-income households.
- In 1960, only 36.3% of the population had paid employment.
- By 1999, this percentage had risen to 48.8%.
In these two periods, unemployment (the percentage of people who couldn't find a job) stayed the same.
1960 |
1970 |
1980 |
1990 |
1999 |
|
| U.S. Employed (Millions) | 180.7 | 205.0 | 227.7 | 249.9 | 273.1 |
| Percentage of Population Employed. | 36.3% | 27.5% | 43.6% | 47.4% | 48.8% |
| Population Working Relative to 1960 | 100% | 75% | 120% | 130% | 134% |
| Unemployment | 2.1% | 1.9% | 3.3% | 2.8% | 2.1% |
Source: President’s Report to Congress 2000 |
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What this meant was that more women were entering the paid work force.
This helped increase Gross Domestic Product (which only measures cash wages), but did not necessarily signal an improvement in well-being.
1960 |
1970 |
1980 |
1990 |
1999 |
|
| U.S. GDP Per Capita (Deflated) | $9,111 | $12,688 | $15,944 | $19,967 | $23,310 |
| Deflated GDP Per Capita, Adjusted for Increased Working Population | $9,111 | $16,917 | $13,286 | $15,359 | $17,395 |
Source: President's Report to Congress 2000 |
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The table, above, shows that GDP per capital (deflated) more than doubled during the last forty years of the 20th century.
However, when this figure is adjusted for the increased percentage of the population that was now in the paid work force, the figures are not so impressive.
The 'Rat Race' Is Real
In fact, between 1970 and 1990, when adjusted for the increased portion of the population in the paid work force, there was a decline in real GDP per capita.
This is consistent with the complaints of many Americans that they are in a 'rat race', working ever harder to stay in the same place.
Of course, the government is happy to have more women out of homes and in the paid labor force because this means more taxes to support the bureaucracy.
The woman who stayed home to mind the kids in the 1960s would have to work outside the home to pay a child care worker in the 1990s, and both she and the child care worker would pay taxes to the government.
Serial Occupational Changes
In two hundred years, the United States has changed from a nation of self-employed farmers and craftsmen, to the world's greatest industrial power, with well-paid factory workers, to a post-industrial society with half of the population relegated to low-paying, low-productivity service jobs.
There has been a movement from non-cash home and farm employment to earning wages outside the home.
The income tax has risen from zero to more than thirty percent of earnings.
The economic condition of Americans has changed, with most material progress occurring during the last half of the 19th century and the first half of the 20th century.
Before proceeding, check your progress:
Self-Test
In 1860, two-thirds of Americans:
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Deindustrialization of the United States is due to:
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The major reason for increased real per capita Gross Domestic Product in the U.S. over the last fifty years has been:
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Demographics : return to lesson 12 >
| Commonwealth Club Address : Franklin Delano Roosevelt: Commonwealth Club Address, delivered 23 Sept 2020, San Francisco, CA. [Return] |
| New Deal Income Taxes : "Myths of the New Deal", Burton Folsom Jr., August 2002, Foundation for Economic Education. [Return] |
| Privileges For Labor Unions : "National Labor Relations Board", Fact Monster Encyclopedia. [Return] |
| Minimum Wages : "History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938 - 1996", U.S. Department of Labor. [Return] |
| Over-regulation : "FDR and the End of Economic Liberty" by Jacob G. Hornberger, August 1991. The Future of Freedom Foundation. [Return] |
| Deindustrialization : "The Visible Hand of U.S. Deindustrialization", Adam S. Hersh, Economic Policy Institute. [Return] |
| War in Vietnam : "The American War", Wade's Vision Quest Journal. [Return] |
| Lyndon Johnson : White House biography. [Return] |
| Great Society Programs : "The Great Society" from "Federal Grantmaking: The Long View of History", Barbara Floresch. The Grantsmanship Center. [Return] |
