Back from the brink

Most Midwesterners think that manufacturing has gone away — to the Sun Belt or Mexico or China. It hasn’t.

By Richard C. Longworth

The economic history of the American Midwest is repeating itself. No one knows if the region’s social and political history will do the same.

Once, the Midwest lived on farming. Midwestern farms not only fed the nation. In days long gone, they provided more than half of the farm belt jobs.

Agriculture remains a key to the Midwestern economy. These days, its vast farms help feed the world. Agribusinesses such as Cargill and Archer Daniels Midland are among the nation’s biggest firms. Exports, mostly corn and soybeans, flow from the region’s farms to distant markets.

But this doesn’t produce many jobs. Fewer than 2 per cent of the American workforce is employed on farms. Over the years, technology has enabled the individual farmer to run ever-bigger spreads, with little or no help. If the Midwest had relied on agriculture to provide its jobs over the last century, it would be a much emptier place today.

Fortunately, it didn’t have to. Manufacturing took up the slack, and then some. The Midwest became the industrial heart of the nation, creating factory towns big and small. Farm boys who lost their jobs to technological progress found that they could get better ones in the factories of the cities. Manufacturing employment boomed and so did the factory towns.

And then it stopped. Technology wasn’t the only reason, but it was a big one. As on farms, technology enabled one worker to do the work of many. Factories once employed 32 per cent of the American non-farm workforce. Today, it’s 9 per cent, and certain to keep falling.

But manufacturing itself isn’t declining. In output, as in employment, it’s the new agriculture. As jobs have vanished, manufacturing has boomed. It produces more now than ever before, and exports much more.

Manufacturing and agriculture remain the twin pillars of the Midwestern economy. But they don’t create many jobs. These facts make it hard to think about the economy, and where it goes from here. For instance:

    • Because the Midwest’s two leading industries account for some 10 per cent of its jobs, the region’s economic survival depends on other industries creating the jobs that no longer exist on farms and in factories. But those industries are nowhere in sight.
    • But farming and manufacturing remain vital to the region’s economy, not least in export earnings. Many of the remaining jobs in the two industries are good ones. But as their employment shrinks, so does the political support that both need to thrive in the future.

Chicago, in particular, used to be called the “City of the Big Shoulders,” so dubbed by Carl Sandburg in a poem describing it as “Tool Maker, Stacker of Wheat/Player with Railroads and the Nation’s Freight Handler.” Chicago is a global city now, officially post-industrial. For most Chicagoans, Sandburg’s imagery is nothing but nostalgia in rhyme. They’d be surprised to know how much of it remains true.

Even with its diminished jobs base, manufacturing payrolls put $6.4 billion annually into Chicago pockets, the metro region’s second biggest source of incomes, outranked only by the “professional, scientific and technical” category, which provides jobs largely for college graduates. Overall, manufacturing adds $53.9 billion annually to the city’s gross products; transportation and logistics, which involves largely shipping these manufactured goods to the world, brings in another $17 billion.

There is some sign of a bump in factory employment, but it’s probably minor and temporary. The Midwest has lost one-third of its manufacturing jobs in the past 12 years, many of them in the Great Recession, and the slight recovery going on now was to be expected. In addition, there is evidence of some reshoring of industry from Asia and Latin America. But much of this reshoring is creating work for robots, not people: indeed, these industries are returning because technology eliminates the cost disadvantage that sent them overseas in the first place.

There is more to the decline of industrial employment than technology, of course. Globalisation and the growth in world trade have much to do with it. So does the early flight of Midwestern industry to the Sun Belt to escape northern trade unions. Soon after came the invasion of Japanese auto, steel, and radio-television firms. China’s arrival on the world industrial scene in the 1980s was only one nail in the Midwestern coffin.

Like so much else, Midwestern manufacturing employment peaked in 1979. The stagnation of median wages in the United States dates from the same year. So does the nation’s growing inequality in incomes and wealth. Coincidence isn’t causation, but the mass employment created by postwar industry did create the relatively well-paid blue collar middle class that has since all but disappeared.

All this puts Chicago and the Midwest in somewhat the same position as an oil-rich OPEC nation. The region churns out valuable food and products, but employs relatively few people to do it. Like many oil nations, the Midwest is rich but its people aren’t.

Hope, like corn, springs eternal on the fringes of this scene. Bioscience and biotechnology, the offshoot of the plants and animals that the region produces so well, is a promising future industry, but so far creates relatively few jobs. New government-sponsored manufacturing laboratories in Chicago and other old industrial cities promise innovations in advanced manufacturing, including digital manufacturing.

But these factories seem likely to create a few specialised and highly-paid jobs, nowhere near enough to replace the huge number of routine assembly-line jobs that have been lost. The social and political cost has been terrific in the factory towns that depended on these jobs, just as it was in the farm towns after most of the farm jobs left.