Mechanical skills are making a comeback
When reflecting on the World War II aftermath, the overwhelming majority of troops returning from the battlefield took advantage of the GI Bill of Rights, passed by Congress, to give all returning veterans a prospective college education.
In the unprecedented need of rebuilding abroad, and reconstruction in the U.S., most potential participants chose engineering, architecture and associated sectors to prepare for upcoming jobs. Those who were not college-savvy chose technical trade schools that offered mechanical knowhow to prepare for the lucrative jobs that awaited those candidates.
These included contracting, mechanical knowhow, practical engineering, maintenance skills and more — all of which were in peak demand at that time. This would prepare them for the global, as well as domestic building boom awaiting such newly-trained individuals.
The clarion call of liberal arts, communications, accounting and more were less attractive during the time of global repair activities, which eclipsed all other necessities at that point in time. With hundreds of thousands of troops waiting to be prepared for the mechanical trades markets, additional trade schools sprang up in the nation’s metropolitan areas to accommodate these needs.
But as the post-war rebuilding activities proceeded apace, as expected, many professional opinion makers emphasized social services and the progressive-thinking educational processes as a major necessity in post-war teaching.
By the mid-20th century, this push toward liberal arts colleges was in full swing, and there was an increasing tendency to shift into these progressive teaching approaches by professors and university financiers alike. Such attitudes placed a social stigma on mechanical handiwork, as both government and private sector propaganda elevated the liberal arts education to a superior social standing.
This, in turn, created a dearth of job openings in the trades, as public perception seemed to effectively favor the intellectual education preference by professors and university management alike. Unfortunately, this resulted in the closing of many technical schools.
The emphasis on and social acceptability of a liberal arts education has resulted in higher college graduate unemployment numbers while serving to demean the more hands-on work of the trades. This unfortunate imbalance of reality has, in turn, created growing unemployment among millennial graduates and a shortage of the hands-on candidates desperately needed to fulfill the practical needs of an accelerated growth economy.
Housing availability is decreasing
With current American housing construction barely reaching a million starts per year, this ongoing new housing start figure compares adversely with the 1.6 million new homes completed annually prior to the 2008-2011 financial crisis.
While the U.S. started to dig out of the aftermath of the Great Recession, this muted construction level posed few problems during that period due to the high subsequent unemployment, and far stricter mortgage availability requirements. However, these stricter bank lending limitations, and the growing demand created by increasing job openings, are now putting new pressures on the national housing market.
Unfortunately, the indiscriminate piles of new housing construction regulations and impediments created by the U.S. Environmental Protection Agency (EPA) and associated agencies, unrestricted by Congressional opposition, have greatly discouraged the home builders nationally. This accounts for a drop of 35% below construction normal across the country. Combined with the much higher prices of new houses being sold in the past few years, this slowdown has added to the drop in starts and added to the resultant shortages.
While this has proved beneficial to the value of existing home ownership, the overall costs to national housing starts has increased by one third, according to the National Association of Home Builders (NAHB).
This has become increasingly valid in the big metropolitan areas on the east and west coasts. To compound these problems even more, the many areas that require additional housing availability are those where new job creation has been the most voluminous. This affects such newly vibrant cities like Atlanta and Houston, whose conservative state and local governments have been the most effective in controlling regulations.
Ironically, the most stringent regulations have occurred in the so-called “sanctuary cities,” states and regions that seemed to indicate little interest in the fact that the unrestrained regulations were hurting the middle- and low-income population. The average one-third increase in building costs imposed on the construction industry and their associated support personnel occurred even more in such major cities as Chicago, New York and Los Angeles — cities least resistant to burdensome federal regulatory actions.
Whether this can be ameliorated in the months and even years to come, it is a factor that must be considered by the White House and a less-than-cooperative Congress.
China destined to become world’s leading economy
Since the end of World War II, the U.S. has grasped world leadership far beyond other world nations. As Europe lay in shambles, the British Empire was dismantling and neither Mideast oil, Russia’s military development, nor those nations of Southeast Asia that were just emerging from colonial restrictions offered much competition.
With the Great Depression ended by America’s World War II armament for democracy, America’s combination of a broad range of commodities, a 150-million-strong population, and an unprecedented consumption sector put the U.S. at the top of the world’s gross domestic product (GDP) of goods and services — well above the range of secondary nations. These included a rebounding Japan; an embryonic, highly populated India; and a geographically huge and commodity-laden Chinese topography never before envisioned.
With European dominance, Japanese partial occupation, and the ultimate civil war between nationalist dictator Chiang Kai Chek fending off the presumptive takeover by Mao-tse-Tung’s Red Army, which acquitted itself powerfully against the World War II Japanese occupiers, China was embroiled in seemingly never-ending internal disputes.
But by an unexpected twist of fate, a preliminary Chinese leader, Deng Xiaoping, released from Chiang Kai Chek’s jails, took over in 1980, launching the idea of a two-phased China where government-owned industries such as steel, copper and major industrial sectors were run by the government, along with China’s unique small business components. These privately owned companies were given more freedom of activity in order to increase the private sector.
After a decade-long spurt of Japanese exports into the U.S., the overwhelming power of China’s 1 billion population overcame America’s Japanese penetration by its varied superiority of low-cost products and its welcoming attitude toward foreign manufacturing relocation.
Also, the Chinese by early 2000 were hard at work rebuilding their nation’s modern infrastructure and developing world-leading production of steel, copper, coal, oil and rare earth metal commodities.
Under the astute direction of dictator/president Xi Jinping, China has built the world’s leading infrastructure of dams, highways, speed trains and an unprecedented consumer sector, moving hundreds of millions of farmers into the previously built cities and expanding a major commercial sector.
While still a distant second to the U.S. in GDP of goods and services, with a total of $11 trillion per annum versus the U.S.’s $18-plus trillion, China is only beginning to exploit its numerable export advantages.
With a population four times greater than that of the U.S., a strong military/space segment development plus an embryonic consumer sector eclipsing that of the U.S. and others, China is looking at the 21st mid-century as its target for optimizing all the advantages at its disposal.
If Beijing continues on its current acceleration, a world-leading GDP of goods and services is in the cards by 2050 with a rash of new capitalist billionaires leading the way.
Will renewing Smoot-Hawley trigger another depression?
When President Herbert Hoover (1929-1933) implemented the Smoot-Hawley Act in 1930, he did this to nip in the bud an oncoming depression emanating from the infamous stock market crash on Oct. 29, 1929.
As history tells it, the freeze on imports and exports caused trade to come practically to a halt as the 1930s evolved. In effect, this economic trade freeze laid the groundwork for Germany’s Hitler disaster as failing American banks desperately demanded U.S. loan repayment, which had previously saved German banks from going under during their “runaway inflation” of 1922-23. This measure was compounded by the Glass Steagall amendment, which separated commercial lending banks from financial investment institutions.
These Hoover-inspired initiatives had the negative effect of causing U.S. ports to close to imports and exports as foreign trading partners reacted antagonistically, shutting off receiving American-made products and services.
The ultimate extent of the Great Depression was marked with the closing of most factories and record unemployment in the double digits.
Despite the efforts of the succeeding Franklin D. Roosevelt Administration, which implemented limited infrastructure through such “alphabet agencies” as WPA, PWA and more, as well as other efforts at new job creation, the worst U.S. depression in history held its grip on most of the 1930s.
It was only America’s new role as progenitor of the “arsenal for democracy,” supporting the British Empire’s and Russia’s efforts against the Nazis, which served to turn around Great Depression. Ironically, the empty U.S. factories were immediately reopened to accommodate the manufacturing of planes, ships, guns and other military equipment and supplies, replacing previous consumer and commercial products already in oversupply.
World War II assumed the role of putting American men — and many women — to work for the global German/Italian/Japanese World War II defeat.
In effect, the war produced the involvement of all American men and women, whose previous workforce abilities were now reawakened.
With both excess war production, and the largest military force ever assembled, America’s then-125-million population reached undisputed economic world leadership. It is a position it has never lost in GDP top-notch standing.
Trump struggles to follow overly ambitious game plan
When President Trump first occupied the Oval Office, he set an overloaded game plan, which has become increasingly apparent, even as his first 100 days followed in lockstep.
The president, still reveling in his unexpected victory last year, set objectives that were overwhelming (healthcare and tax reform, border wall, infrastructure, etc.). He didn’t count on the fact that his every move would be contested by Congress, even including some GOP party members. The Freedom Founder subcommittee was balking and the healthcare proposal had to be reworked to bring potential new healthcare approval.
While much of America’s working class supported his long-term expansion plans, Trump also didn’t dream of the difficulty in implementation as well as imposing import tariffs, which could engender retaliation from those countries — China, Mexico, Southeast Asia — most affected.
As the first business president, Trump believed that righting initiatives for badly needed domestic expansion — which previously had deteriorated to the point that the U.S. consumer index had become the highest ever at 68% of a world-leading GDP — was a hurdle to overcome. The president also didn’t figure on the need to hire and fire in rapid order.
Another phase Trump faced was a multiplicity of foreign policy issues, which had expanded to include much of the world as terrorism ran amok among five of the globe’s continents.
The major task of repairing the infrastructure of the nation’s roads, highways, dams and more had been ignored for some 50 years since President Eisenhower’s term at the height of the U.S.-Russia confrontation (Cold War). In facing this Herculean task, Trump is further faced with 55,000 bridges that are considered unsafe and crumbling by highly approved experts, as well as a rash of national pipelines to further the American nation’s 10-year-old oil fracking production. President Trump’s “menu” also seemed to include rebuilding new factory production and increasing employment, which he had promised before the election.
Despite the general public’s support and appreciation, the President seems on the way to accomplishing only a part of what he had promised leading up to the November 2018 mid-term elections. It is doubtful that much of his promises can be carried out unless he is reelected in 2020.
Current economic surpluses may impact the U.S.
While a mild deflationary cost pocket seemed to have softened expected interest rate increases for now, Trump will have difficulty in generating previously anticipated employment growth as well as significant factory expansions to accommodate expected jumps in manufacturing production.
With second-half 2017 U.S. GDP now not expected to generate the potential 3% level cited by economic optimists, the year as a whole will likely be lucky to wind up with an overall 2%.
Since tough tariff obstacles are literally being delayed on imports from China, especially those produced by U.S.-owned conglomerates, a narrowing of the world’s most glaring import/export deficit is not expected to happen this year. This is especially certain due to the urgent Chinese support that is needed to pressure North Korea to halt its dangerous nuclear missile experiments.
With foreign policy factors injecting themselves into the global overall economic scenario, the world’s military strife will become the leading factor in U.S. presidential decision-making for the rest of the year. At the same time, India is grabbing the brass ring in global economics, with expectations of both domestic and export booms extending well into 2018.
China, which had primarily held this percentage increase for the past several years, is now expected to slip further behind in 2018 as India’s current export-based GDP growth rate over Beijing is sure to widen substantially. Since India’s strong Prime Minister Narendra Modi has carefully avoided export-import strife with its economic global partners, it will not be affected by the anticipated Trump tariff restraints next year.
With the European Community holding its own (1.8% increase at best this year and next), the U.K.’s strengthening of its economic ties with the U.S., and little change anticipated in the ebbs and flows of other world-leading economic nations, it’s doubtful that 2018 will feature meaningful upward change. The world as a whole will probably inch forward during the rest of 2017 and 2018, registering an overall GDP increase of slightly more than 3%.
While the very ambitious Trump Administration’s economic agenda is being held back to some extent by the greater dangers emerging from the foreign policy front, Trump’s hopeful 100-day achievements will now be stretched out over the two years leading up to the mid-term elections.
The ability of the GOP to hold, or even increase, their slender majority in the Senate will likely determine both the success of Trump’s legislative ambitions, as well as a second term.