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Is It Time to Rebuild America's Middle Class

Guest post by: Michael Farrell

Article Overview: While the Ford Motor Company is certainly associated with Detroit, Ford also cranked out cars in Pittsburgh, PA, reports Mike Farrell with aspenIbiz. Read this short post as it will explain how Pittsburgh’s Ford plant illustrates that America’s complex manufacturing backbone was created over many decades yet was wiped out in 10 years. In order to rebuild its middle class, America must make a conscious and collective national decision to be friendlier to capital investment in order to create opportunities associated with energy, mining, manufacturing, distributing, and selling goods and services.

Is It Time to Rebuild America's Middle Class

Ford Motor Company, Henry Ford's car company, is certainly associated with Detroit.

However, there is another Ford story. Mr. Ford also cranked out cars in Pittsburgh.

In the early 1910s, the market for Ford cars was growing. But there was a problem. Fully assembled cars were difficult and expensive to move by rail. Also, there was quite a bit of damage in transit. So Ford came up with a better idea.

Ford built satellite assembly plants. It was easier just to move parts to distant sites by rail. Ford shipped parts to Pittsburgh and hired local workers to put vehicles together near the point of sale.

From 1915-32, Ford's Pittsburgh plant assembled about 40 cars per day. The plant closed during the depths of the Great Depression. By modern standards, 40 cars per day seems like a low production volume. But for many years, this idea worked for Ford.

According to tax records, the Pittsburgh Ford plant continuously employed 400-600 workers, at remarkably good wages. The plant also created a thriving network of vendors that employed thousands of other people. This included railway workers up and down the Pennsylvania Railroad line between Michigan and Pittsburgh.

Plus, there were employees at smaller nearby factories and machine shops in Pittsburgh. These workers made components like hoses, springs, seats, and electric wire bundles.

The job chain of the Ford plant extended straight out the front door. There were transportation workers of the old Pittsburgh Railway Co who were driving electric trolley cars that were carrying people to and from work, their homes, and urban centers.

Down the street from the Ford plant was one of the world's first modern gasoline stations. It was the brainchild of the marketing department of the old Gulf Oil Co. At the filling station, attendants pumped gas, checked tires, washed windows and established an iconic image of service that is still burned deep into the heart and soul of America.

The Ford plant in Pittsburgh was a site of productive urban manufacturing jobs that paid well by the standards of the time. Plus, the Ford plant created nearby pockets of technology, industry and service that led to more jobs and more wages.

Directly and indirectly, the Ford plant in Pittsburgh supported quite a large population. Tens of thousands of people lived in nearby neighborhoods. Not far from the Ford plant, streets were lined with food stores, dry goods stores, restaurants, churches, schools, hospitals, movie theaters and much more.

To be sure, Henry Ford's plant didn't change Pittsburgh, let alone the nation, all by itself. The Ford plant helped transform one area of Pittsburgh into a wealth-creating hub. As mentioned above, the plant lasted only until 1932.

But even after it closed, the legacy of the Ford plant lived on. It's as if the Ford plant sowed seeds of perennial industry and commerce, which took deep root. Many of the nearby supporting businesses survived and outlasted the Depression.

Pittsburgh's Ford plant makes for interesting history. Indeed, if you ever wondered how the American middle class came about, it helps to know something like this story of one particular urban site. But it goes beyond this one plant in one location.

The larger point is that the Ford facility was one of many industrial plants that sprang up in Pittsburgh, across Pennsylvania, and across the country through the early part of the 20th century.

Now if you multiply this particular Ford/Pittsburgh story by the tens of thousands, or something along those lines, you get the idea of many other companies, popping up in cities and towns all across the U.S. over many decades.

It took a while however the economic landscape of many cities and towns across the USA included one or more plants and factories that comprised the long, complex arc of history that created America's manufacturing backbone, as well as the country's industrial-based middle class.

It drives home the idea, and the historical fact, that creating a middle class is no mean feat. There's nothing easy about it. It takes entrepreneurship, investment, technology and hard work; plus it takes a long time.

In a tragic turn of events, however, the American middle class has peaked. The industrial middle class is now declining, if not vanishing.

Between 1999-2009 over 45,000 plants and factories closed across the U.S. That is an average of over 84 plants per week, or about a dozen per day. The average job loss was over 200 direct employees from each locale, with countless other workers affected indirectly.

If you travel across the U.S. you'll see many places where the heartland, and by extension the American middle class, is a basket case.

The most shocking, eye-catching evidence comes when you visit Detroit, Cleveland, Buffalo or any of hundreds of other old manufacturing centers and factory towns across the land. There, you can drive mile after mile, observing declining, if not vacant, houses, as well as now-abandoned factories and workshops of the lost American middle class.

Go to these type of places, look around and ask a few questions. You'll encounter a former worker that was a member of the middle class that has been idled by serial plant closures and no longer able to gain economic traction.

Or look past the physical ruins and into the courthouse filings. The legal documents paint a picture of countless broken hopes and dreams. Within the court records you'll see the declining American middle class. You'll see the problem in the data for repossessions caused by unemployment, or mortgage foreclosures and bankruptcy filings.

Times have changed in the U.S. and not for the better for many. It's not overstating the case to say that something great has been lost. What took many decades to build was wiped out in 10 years.

So what's the answer? Can the U.S. somehow rebuild and restore its former industrial middle class?

Should we, or could we if we wanted to, go back to the good old days, of building Ford cars out of kit parts in factory buildings like the one previously described in Pittsburgh?

If only it were that simple. No, we can't go back to living in that now-vanished industrial past as too much has changed.

Today, the U.S. work force competes against newly built parts of the world; from Brazil to Singapore and from Turkey to the far reaches of China. Other locales have their own Ford plants, so to speak. These plants may actually build cars, just like Ford. Or perhaps they fabricate microchips, computers, pharmaceuticals, oil field equipment, airliners or many other things.

Whatever they make, the plants in these other sites across the globe now create jobs, and support their own wealth creation economies and middle class populations.

While other parts of the world are building out, the U.S. has arrived at its sorry predicament through its own actions. The country has spent several decades pursuing a lot of bad economic ideas, starting with a general debasement of the dollar. It is as if the Federal Reserve is simply incapable of respecting the monetary signals that certain items send, particularly gold and silver.

Now add in more bad policy. The U.S. has abandoned capital-friendly ideas that used to work and adopted other ideas that are designed and destined to fail. The simple way of stating it is to say that local, state, and federal governments now tax, spend and control things way too much.

For example, the federal corporate tax rate is 35%, which is the second-highest rate in the world (after Japan, if you're wondering). Then add on numerous state corporate income tax rates, as well as many local tax rates, and you have tax rates that discourage business formation.

These high U.S. tax rates discourage business formation and because business owners have many other options, we will probably never know how many businesses never started up or took root in the U.S. because the federal, state and local business tax rates are too high.

But it is accurate to say that the 35% federal tax rate, applied to nothing, yields nothing. And the same can be said of high state and local tax rates.

Let's also discuss how the country has financial-ized its economy. The biggest part of most discussions of the economy nowadays is about what's good for Wall Street, versus what helps businesses on Main Street. The idea is that Wall Street somehow has a collective way, and financial magic, to properly allocate the nation's capital to the highest and best uses. But that is not really how it works.

With Wall Street benefiting mightily over the past decade or so, the big picture is that the U.S. economy has lost millions of middle-class industrial jobs. Is the country now better off? I believe we can all agree that the answer that question is no!

The bottom line is that the U.S. has to make a conscious and collective national decision to become friendlier to capital investment; that is where the jobs are. It is how the wealth of the nation will be created.

In order to prosper, the country has to generate energy, mine things, produce things, make things and sell things. That is, after all, what makes nations great. It means that across the U.S., governments need to lower business taxes, reduce regulation, offer a friendlier labor climate and adopt a more open approach to development.

As the story of the old Ford plant illustrates, the rise of the American middle class took many decades. And as the recent data show, the fall of the middle class was fast and steep.

It will require many decades to rebuild things, if that's even possible. But if we want to remain a great and powerful nation, we have to make the effort.

I trust this post has provided some background and evidence about the rise and fall of the American Middle Class. As the US begins to rebuild the middle class, we will again have wealth creating opportunities associated with energy, mining, manufacturing, distributing, and selling goods and services.

I favor a quote from Steve Forbes. Forbes says that pursuing additional financial education and the resulting increase in our financial literacy (including the investment potential of breakthrough technology) will open our eyes to alternative wealth creating strategies and this will be the key to resolving our global financial crisis.

To gain the necessary financial education, it is best to obtain association with, access to, and membership in a wealth creation community. As a result, you will learn and have the knowledge to use alternative wealth creating strategies such as Bank on Yourself, debt reduction, and asset protection. You will be exposed to wealth acceleration investments in areas (discussed in this and previous blog posts) such as a electric cars, new access to space, 3D virtual technology, atomically precise manufacturing, nuclear power generation, commercial space ventures, Carrier Ethernet technologies, nanotech lithography, robotics, nano-based next-generation battery technology, precious metals, water rights, oil, natural gas, potash mines, food commodities, and gold mines. You will have the knowledge to consider investments in assets that are inherently useful like oil rigs, hydropower, or methanol plants; things that are hard to build, difficult to replace, and costly to substitute; definitely not financial stocks, definitely not retail stocks, definitely not commercial property.

Another benefit of membership in a wealth creation community is exposure to entrepreneurial leadership and business opportunities. Many of these leaders suggest that if you don't focus on being a digital entrepreneur, being self-employed, or being a small business owner, it will be a very tough road in the months and years ahead; actually it will be an uphill battle. As a result, the innovative wealth creation communities provide education and training on B2B, and B2C, eCommerce enabling a new breed of professionals that are creating six figure second incomes.

It is wise to monitor breakthrough technology as there are truly exciting developments underway with electric cars and related business activities. I will continue to monitor developments and provide updates in future articles and at my blog.

Finally, I want to thank Byron King editor of Agora Financial as he was the source of some of the materials about Outstanding Investment strategies mentioned in this post.

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Article Tags: American Middle Class, B2B B2C eCommerce, Breakthrough Technology, Financial Education, Manufacturing, Mike Farrell aspenIbiz, Second Income Opportunity



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