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We Don’t Make Shoes Anymore October 23, 2013

Editor’s Note: This article first appeared in the October 2013 issue of Arizona Agriculture.

 

We forget how important protective tariffs were in building the U.S. standard of living.

 

By Joe Sigg, Arizona Farm Bureau

I bumped into a stack of old magazines:  “Twentieth Century Magazine” with issues from 1911 and 1912.  I was first drawn to March 1912 since that happens to be the month ahead of the Titanic disaster and certainly an event to be remembered.

 

There were articles about then Governor Woodrow Wilson, women’s suffrage (the 19th Amendment to the Constitution was not until 1920), and an entire issue devoted to the Progressive movement and Robert La Follette.  It’s always interesting to read things written before being engulfed by ensuing history.

 

A small op-ed by an author now forgotten to history revealed a paragraph that jumped out:  “The American nation decided that its superior standard of living requires  decent wages for the working-man, and by a protective tariff it enables the employer to give this living wage while making both ends meet for himself.”

 

I hope this statement, given the date, seems extraordinary to more than just me.  This was 1912!  We had made a choice, even back then.  It’s fundamental.  How can we sell a pair of shoes if our labor costs for the shoes force its price above foreign competition? How do we pay for it?  Who finances it?  The question is still before us.  A future hint:  we don’t make shoes anymore.

Back then the answer was import tariffs, but we know that world is going the way of the Dodo bird.  We forget how important protective tariffs were in building the U.S. standard of living and the nurturing of our productive capacity ─ protective tariffs work when the other guy has neither productive capacity nor the ability to retaliate.

 

The question was moot in the thirties – no one had any money to buy anything.  In WWII we converted our resources and production to the war effort unmatched by any other nation.  At the end of the war, we were the only ones left with production and infrastructures intact…untouched.  Additionally, WWII saw the largest disruption of populations in many countries across the world… the labor supply was not where it should have been, even if there was productive capacity.  WWII saw over 60 million casualties plus the largest population displacement in history.

 

Our soldiers just came home and went to work.  We converted to production of consumer goods, there was a huge pent-up demand, and we had the “home and away” playing advantage and proceeded to build the middle class.  This is an over-simplification in two sentences, but of course this is not a scholarly piece ─ just making a few points!

 

How do we finance our choices?  We have done some of it by creating efficiencies with applications of science and technology.  We have done it with deficit budgets.  Sometimes we just ignore the hard questions and kick the can down the road.

 

And quite frankly, in some respects we have backed away from these choices because they are not sustainable.  Loss of jobs, change in the nature of jobs, the walking back of benefits and erosion of the middle class.  Markets create rough justice, we said we had a market system, but then we tinkered with it, we tinkered some more…because we really don’t like all of the consequences of the marketplace, but we somehow deny or postpone its reality and then it comes back on us.

 

How do we finance our social costs?  We can use all sorts of gimmicks, we can use smoke and mirrors, we can simply forestall, but in the end we must take productive dollars to provide for social dollars.  And we can do this only so long as we don’t discourage the productive sector, make it uncompetitive or put it out of business.

 

It’s like musical chairs.  If the wealth is not produced ─ if capital is not created we will be a chair short.  The answer to how we pay for our choices ─ asked as early as 1912?  The answer:  careful balance and re-calibration, but it must start with an understanding of the fundamentals.  Sometimes, we understand our own pocket book economics, but have difficulty stepping back from it.

 

In agriculture, we have a greater chance of understanding, because we make stuff, we produce things; we create products which generate all sorts of infrastructures.  We create wealth because the sum of our parts is more than just the sum of our inputs.

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