“There is a Providence that protects idiots, drunkards, children and the United States of America.”
So said Otto von Bismark, the father of a modern, unified Germany. The quote would suggest that Bismark believed there was indeed something special and different about America.
And so there is. I continue to subscribe to this concept of “American exceptionalism,” even as our great middle class has been hollowed out with the loss of millions of jobs. I am now convinced that many if not most of the midpay, midskill jobs that were lost will never return.
Yet still I am hopeful that this 21st century can and will be an “American century.” Of course, there is a certain hubris to predicting the future, as we will never understand all the consequences of history as it unfolds before us.
But in this blog, as some have discovered, I do make predictions on how things may play out. As a business consultant, I should not be so shy. You see, if I bill myself a “futurist,” I just might command more money and become in greater demand, even if my predictions fall short of reality. Of course, this is predicated on the belief that few of you will be keeping score.
A Return Performance
So I am in the process of building a rather ambitious speech/PowerPoint presentation that I will give next month at LiveXchange, a forum where site selection consultants and corporate executives meet with economic developers from around the country. I spoke at this event in 2012, and must have said something of interest that warranted me to be invited back again.
Jack Rogers, the editor at Business Facilities magazine, which sponsors the event, said he found my presentation last year to be “zappa-esque,” a reference to the late Frank Zappa. I took that as a compliment, knowing full well that Jack viewed my presentation as weird but somehow satirically biting.
Generally, I pay editors no mind. They are a tiring, bombastic class of opinionated, shallow-thinking neer-do-wells who should be rounded up and barged out to sea, were it not for a First Amendment. It is but more proof that the Lord protects drunkards and idiots.
I can say that with some authority because I once was a member of this despicable class. But I cannot help but like Jack, because, well, he asked me back.
Without giving away too much of my upcoming presentation, which is a work in progress, I will tell you that I am coming to this not-so-remarkable conclusion that technological change and innovation both creates and destroys, some for good and some for ill.
Now we all know this. Smallpox has been eradicated in the U.S. because of the implementation of a vaccine. Advances in medical technology, particularly when they actually work, is a good thing. A nuclear weapon that could be hijacked and used by a terrorist group or rogue country, now, that’s a bad thing. Let us pray we never see it happen.
A Disturbing Premise
But I am thinking more about how technology both creates and destroys jobs. This has long been happening, but for the first time maybe in world history, I am now wondering if technology may be killing more jobs than creating. Some experts agree with this premise and some disagree. But this will be the topic that I broach at LiveXchange, May 19-21, in Frisco, Texas.
As I reported in my Barberbiz blog of two weeks ago, which I would recommend that you read, Sometimes You Get and Sometimes You Get Got, it is by virtue of technology that we are only now coming to realize just how much vast reserves of natural gas (and even oil) that we are sitting upon here in the U.S.
The Potential Gas Committee, an independent organization of geoscientists and petroleum engineers that is affiliated with the Potential Gas Agency at the Colorado School of Mines, now estimates the country’s potential natural-gas resources at 2,384 trillion cubic feet. That is a whopping 26 percent increase from the group’s previous calculation at the end of 2010.
That number of 2,384 trillion cubic feet is more than 90 times the amount of gas consumed in the U.S. last year, according to federal data. Hydraulic fracturing, also known as fracking, is the technology that it made this possible. It is the technology, which was pioneered and advanced not far from where I live here in Texas, that has unlocked gas from shale-rock formations all over this country.
Not surprisingly, the shale gas boom has created thousands of new jobs in Pennsylvania and Ohio with the Marcellus Shale and Utica shale plays; in North Dakota, Montana and Saskatchewan, Canada with the Bakken formation; and down here in Texas with the Barnett and the Eagle Ford shale plays.
Right now, there is about $62 billion in plant construction set to get underway in Lake Charles and along the Gulf Coast of Louisiana, driven by the ample supply of cheap natural gas in the Haynesville shale play in northwest Louisiana.
Also, not surprisingly, consulting firms are making bold predictions as to job creation caused by the natural gas boom, again spurred by the fracking technology. IHS Global Insight produced a study for America’s Natural Gas Alliance in 2011 that estimated the shale gas industry could eventually create 1.6 million jobs in the coming decades.
A December 2011 report by PricewaterhouseCoopers and the National Association of Manufacturers said fracking could help add 1 million manufacturing jobs in the U.S. by 2025, whereas a May 2012 study by the American Chemistry Council, which represents the chemicals industry, estimated that increased gas production could create 200,000 jobs in the broader manufacturing sector.
The Skeptics Among Us
Still, some remain skeptical and are taking a more wait-and-see posture. I would put myself in this camp. I have no doubt about the job growth in the energy sector created largely because of technological advances. It’s happening before our eyes. It’s hard to ignore billion dollar projects being announced with now some regularity in Texas and Louisiana.
But I think it may be premature to advance that it will necessarily translate into millions of new manufacturing jobs, although the unlocking of abundant supplies of domestic energy should present U.S. manufacturers with a cost competitive edge. (If only our policy makers in Washington permit.)
“Even though the U.S. is more competitive globally, manufacturing doesn’t give you the kind of direct job creation it did in years past,” said Joseph G. Carson, director of global economic research at AllianceBernstein, a Wall Street investment firm, in an interview with The New York Times. “At the end of the day you still want a strong manufacturing base, but there aren’t as many people on the factory floor.”
There aren’t as many people on the factory floor.
Why is that? Were most of those jobs essentially shipped abroad, off-shored to lower cost developing countries? Well, certainly many were, but I am now of the belief that the demise of most of those jobs – most of the people – on the factory floors across America were due to advances in technology.
Yes, there was a movement for cheaper labor by going offshore, but bigger yet was a movement to produce more with fewer people by employing state-of-the-art technology. Machines have long been a part of the process of manufacturing, but in a sense, the machines may soon rule the factory floor. The robots are here, they are getting smarter and cheaper, and they are coming.
There has been much talk of late about a “manufacturing renaissance” in this country. I happen to regard most of it as bandwagon gibberish that editors, the foul group that I was telling you about, permit to be published without casting a critical eye.
The truth is while the manufacturing sector has added 500,000 jobs since the recession ended and the production value of factory output is close to an all-time high, there are still nearly 6 million fewer manufacturing workers today than in 2000. Since the early 1960s, the share of U.S. manufacturing jobs has been on a nearly uninterrupted downward slope. Manufacturing now accounts for less than 9 percent of all jobs in this country.
The Real Job Killer
I used to blame the Chinese as the main culprit. And in many ways, they have not been the best trading partner.
But we did compete and we continue to compete with the Chinese and everybody else by employing more and better technology – robots, automation, new software advances. You see, that’s the only way for our manufacturing sector to remain viable.
It’s why we must remain an innovation nation. We have to invent new technologies and continue to improve on existing technologies. It’s our only hope at remaining a world power and sustaining this idea of “American exceptionalism.”
And that’s your job killer right there. Advances in technology, almost by its very nature, means pushing the envelope in terms of productivity and efficiency. It means employing machines to do things that people were doing, particularly repetitive tasks. It means replacing people with machines that can do the job better, faster and cheaper.
Factory floors in this country look radically different than they did not so long ago when “turning machines” were run by hand. The truth is that plants are increasingly devoid of people.
There’s a joke going around in South Carolina that a modern textile mill employs only a man and a dog. The man is there to feed the dog, and the dog is there to keep the man away from the machines.
But if you think that job loss due to technological change has been happening only in manufacturing, you are quite mistaken. It’s happening in service industries as well, much of it driven by how we conduct our lives. We’ll talk more about that in next week’s blog.
I think old Otto was right. Providence protects, as I am reminded by an old Irish fiddle tune, which says nothing about productivity. But the machines don’t care.
“Lord protect us, Saints preserve us. We’ve been drinking whiskey ‘fore breakfast.”
I’ll see you down the road.
Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm in Plano, Texas —http://www.barberadvisors.com He can be reached at 972-767-9518 or email@example.com
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