The Betrayal of the American Dream

by Donald L. Barlett

  What Koch didn’t say is that free enterprise doesn’t offer everyone the same opportunities if policies undercut members of what once was the world’s greatest middle class.

  The year David Koch launched the “Defending the American Dream Summit,” Joy Whitehouse’s dreams came to an end. Barely able to afford minimal medical care and enough food to stay alive, she continued to maintain her independence by practicing free enterprise as best she could—collecting empty cans by the side of the road until her strength gave out and she died.

  CHAPTER 2

  THE COST OF FREE TRADE

  June 1979 was like any other month at the Rubbermaid plant in Wooster, Ohio. Out on the factory floor, huge quantities of plastic were being fed into massive injection molding machines, where it was melted down and then pressed into dozens of familiar shapes. Like clockwork, the big machines belched out storage bins, kitchen containers, wastebaskets, and other household products. Twenty-four hours a day the machines hissed and clamored, making staples for American homes—just as machines had been doing there for nearly half a century.

  All across America it was much the same story inside busy factories that month. Orders for machine tools, a reliable barometer of the nation’s industrial might, were up a robust 32 percent over the previous year, affirming the status of the United States as the world’s greatest manufacturing power, the country where more cars, steel, airplanes, cameras, stoves, refrigerators, farm implements, textiles, and glassware were made than in any other country in the world.

  A few weeks later, statisticians at the Bureau of Labor Statistics in Washington began compiling June’s employment numbers from reports submitted by hundreds of thousands of workplaces across the nation. When all the numbers were in, BLS tabulated that manufacturing employment in the United States had reached 19,553,000 jobs in June—a new high. BLS took no special note. Employment fluctuates, and although the number of manufacturing jobs was expected to go up and down in the months to come, everyone assumed that in the long run the total would just continue to go up. It always had.

  No one knew that June 1979 represented the zenith in manufacturing jobs, not a stepping-stone to greater things. Never again would so many Americans be employed in manufacturing.

  National policies that had been undermining domestic manufacturing for years were finally catching up with workers on the factory floor. Years of low tariffs, unrestricted imports, and a refusal by a succession of administrations and Congresses to insist on reciprocal trade with our trading partners all began to take a harsh toll on the nation’s manufacturing base after June 1979. That toll also went largely unnoticed, except by those who were directly affected. Unlike wars and natural disasters that capture the public’s attention, the slow, steady erosion of the job base just wasn’t headline news. But for millions of working Americans, it would be a cataclysmic event that demolished their standard of living and irrevocably changed their way of life.

  Workers at the Rubbermaid plant in Wooster would live this story.

  It was here in the 1920s that Rubbermaid engineered its famed rubber dust pans, an eminently practical item that became the first of many products that made Rubbermaid a household name. The company opened plants elsewhere, but the big gray stone building on Akron Road remained its heart and soul. Together with the company’s nearby corporate staff, Rubbermaid’s 1,600 employees made it the largest employer in the northeastern Ohio town of 24,000.

  A good corporate citizen, Rubbermaid contributed to the arts, led a drive to refurbish an old movie theater into a cultural center, and sparked a downtown renaissance by opening a retail store on Market Street. It was perennially named one of America’s finest companies and more than once snared Fortune magazine’s top honors as “America’s Most Admired Company.” No one who worked the factory floor was getting rich. But it was steady work, and it was not uncommon to find three generations of a family on the payroll. Judy Bowman, who worked there for thirty-two years, recalled, “It was like a big family.”

  The forces eroding America’s industrial base did not hit Rubbermaid in full until the 1990s. One of the most severe tests came in 1995 when the company lost a contract to supply Walmart with dozens of household items. Walmart, famous for squeezing suppliers for the lowest possible price and pressuring them to go offshore to keep costs down, balked at a proposed price hike from Rubbermaid. Rubbermaid had opened plants in Mexico, Korea, and Poland, but the bulk of its manufacturing was still in the United States. When negotiations failed, Walmart severed the relationship and turned to other suppliers, delivering a body blow to the company’s U.S. manufacturing.

  Later that year, Rubbermaid cut its workforce by 9 percent and closed nine facilities—the first significant retrenchment in its history. Four years later, the company was bought by Newell Corporation, a global consumer products giant known for cost-cutting and cutthroat management. Newell shifted work from Wooster’s rubber division to Mexico and relocated the corporate staff to Atlanta. The Rubbermaid workforce in Wooster was reduced to less than 1,000.

  None of the Wooster workers had any illusions about their new bosses, but even so, they were in for a shock. On December 10, 2003, Newell announced that the Wooster plant would be shut down within months. Shock and disbelief swept through the Rubbermaid community. Many employees had never worked anywhere else. All of them wondered what they would do.

  Over the next few months, the plant was a scene of almost unbearable sadness to those who were left. “Little by little they took the machines out, one after another,” Opal Drysdale, who worked in the plastics unit, told a local reporter. “All we could do was watch. It was really depressing; a big part of our lives was disappearing in front of us.”

  After the doors finally closed, workers soon exhausted their meager severance packages, and they struggled to find new employment. Some did, often just temporary jobs without benefits that paid 30 to 40 percent less than they’d been earning.

  Judy Bowman had landed a job at Rubbermaid right out of high school. In the thirty-two years since, she had worked every shift, every day of the week; she had also worked almost every job, but mostly on the production line that made the popular rubber bath mats, until that work was sent to Mexico.

  “I liked my job and I liked the people,” Bowman said—so much so that the company called on her to lead guided tours of the plant for sales reps and visiting chamber of commerce types. She would show them how products were made by the big machines and then explain a little of the plant’s history.

  She was earning $13 an hour as a custodian in the plastics department when the plant closed. She was offered a job loading Rubbermaid products at the adjoining distribution center, but with nagging injuries from her years in the production line, she knew she wouldn’t be able to do the heavy work required.

  So for the first time in thirty-two years, she entered the job market. She answered an ad from the College of Wooster for a night custodian, but the college decided to use temps from a local agency. She applied to a new Hilton hotel to be a maid, but the job went to a woman with more experience. She applied for a custodian’s job at a local hospital, but nothing came of that either. Months later she got a part-time job as a janitor at a local school district, working one or two days a week, for $7.77 an hour. As a full-time job, that would have added up to about $16,200 a year, slightly above the poverty level for a family of four.

  The city of Wooster was shaken by the loss of its anchor company, but after the initial trauma the town tried to put its best foot forward, as towns are wont to do after the loss of a vital institution. Local officials said that Rubbermaid wasn’t the only plant in town; there were others that could help pick up the slack. They pointed to other companies that could help ease the transition: LuK Inc., an auto parts supplier; Tekfor USA, an iron and steel forger; Bosch Rexroth, a hydraulic equipment maker; and Robin Industries, an auto components maker. But soon those plants would be shaken by the same forces that had destroyed Rubbermaid in Wooster:
as companies began shipping work off to Mexico or relying on imports, workers were laid off.

  In early 2010, the unemployment rate for Wayne County, Ohio, reached 11.1 percent. With tax revenues plummeting, Wooster-area agencies tightened their belts. The sheriff laid off thirteen deputies, demoted six sergeants to deputies, and cut the road patrol from twenty-one to twelve.

  For Wooster’s Rubbermaid workers, their manufacturing jobs had been a dependable way to earn a living, provide for their families, and spend their working lives in a hospitable workplace. The big stone building on the hill had been good to them—why else would so many of them have worked there for ten, twenty, even thirty years, often becoming the second or third generation of their families to do so?

  But when the plant closed, few thought of seeking a manufacturing job elsewhere. Andrew Byers was just one of many who believed that within a few years Rubbermaid and other companies would be making everything overseas, then shipping back to the States. “There isn’t going to be anything left but warehouses,” he predicted.

  The data bear him out. By 2011 the number of manufacturing jobs had fallen from 19.5 million in 1979 to 11.6 million—7.9 million jobs had disappeared. More dramatic was the percentage of the total workforce that those jobs constituted. The good-paying jobs represented 18.2 percent of the workforce in 1979; by 2011 just 9 percent of U.S. jobs were in manufacturing.

  So what did the Rubbermaid workers do?

  Some took part-time jobs, some became temps, and others retired. Some, like Deb “Cuddles” Hoffman, trained for new jobs. Cuddles signed up to learn how to drive a school bus, a yearlong course of rigorous instruction in every facet of driving a school bus. There was no guarantee at the end that she would get a job, but she thought it was worth the gamble.

  Why a bus driver?

  “They can’t eliminate the kids,” she said. “They’re not going to ship my kids to China.”

  OPENING THE DOOR TO IMPORTS

  Across America, plants like Rubbermaid in Wooster have disappeared. You can see what remains of them in the abandoned factories that blot our cities and towns and in the novelties and collectibles that turn up in flea markets, products stamped MADE IN USA—flatware, toasters, cameras, eyeglasses, tools, toys, watches, jewelry, and dozens of other everyday items that are no longer made in the United States. Entire industries that were the backbone of America’s economy are going or gone—shoes, apparel, textiles, machine tools, luggage, glassware, refrigerators, washing machines, air conditioners, cell phones, auto parts, luggage, printed circuit boards, televisions, and telecommunications equipment.

  Many other industries have been crippled by Congresses and presidents who have turned a blind eye to unfair foreign trade practices that kill jobs and destroy companies. The once-vigorous American furniture industry, centered in North Carolina, has been devastated in the last decade by waves of imports subsidized by the Chinese government. The industry lost 70 percent of its production capacity from 2000 to 2010, and during this time nearly 300 plants employing thousands of workers closed. Imports accounted for only 19 percent of the domestic market in 1992; by 2009 the figure had risen to almost 70 percent. Another domestic industry, ceramic tile making, once boasted dozens of companies. Today only one major manufacturer is left: Summitville Tiles in Ohio. The company’s president, David Johnson, told Manufacturing & Technology News that the “industry is just about finished.”

  And it’s getting worse. The last decade alone saw the closing of 14 percent of the nation’s factories (56,190 establishments), the sharpest industrial decline in American history. A record 5.7 million factory workers lost their jobs during this time. This 33 percent decline even exceeded manufacturing job losses during the Great Depression, according to Stephen Ezell, a manufacturing industry analyst. As those jobs have vanished, millions of middle-class Americans—whose income has stagnated or gone down—have struggled.

  The decline of U.S. manufacturing isn’t a new story. But what hasn’t been told is how it happened, the role played by Wall Street and the ruling class, why it need not have played out the way it did, and why it symbolizes the end of an American era on the global stage. The demise of U.S. manufacturing dominance is usually pictured as the unavoidable result of the rest of the world catching up to the U.S. economy. But what doomed manufacturing jobs was largely an economic policy crafted by Washington and Wall Street that was sold to the country as a policy that would benefit the nation as a whole. Instead, the policy enriched a few at the expense of the many. They called it “free trade.”

  After the Second World War, the United States lowered tariffs on imports and thus opened its doors to manufactured products from abroad, in part to aid war-torn Europe and Asia. Because the United States was the world’s richest nation, policymakers maintained that we could afford to lower trade barriers without risking any economic harm to our own citizens. How could a few trinkets and cheap transistor radios from Japan possibly hurt the great American economy? Plus, they contended, it would be good for the U.S. economy: the more other countries prospered by selling to us, the more they could buy from us, which in turn would create more jobs at home. Reciprocity with our trading partners, we were told, would make it all work.

  Manufactured goods surged into the American market. The United States kept posting trade surpluses throughout the 1960s, but as imports continued to swell the surpluses dwindled—from $5 billion in 1960 to just $607 million in 1969. By 1972 a miniscule surplus had turned into a whopping $6.4 billion deficit. The U.S. market was open, but foreign markets for U.S. goods were not, and imports began to erode employment in long-established industries such as apparel, shoes, and textiles. The United States posted an anemic surplus in 1973 of $911 million, and that was the last trade surplus the country would ever see. Since then, there have been only deficits—for nearly forty consecutive years.

  The term “trade deficit” may seem abstract, but a nation’s trade balance is a fundamental indicator of the economic well-being of its workforce. When trade is in balance—when imports and exports are roughly the same—there are plenty of opportunities for good-paying jobs. But when imports swamp exports, as is the case in the United States, basic industries that provide solid support for middle-class Americans are undercut, and jobs vanish.

  By the 1970s, it was clear that free trade wasn’t going to be good for America’s workers. The steady erosion of good-paying jobs was under way. In the beginning it affected only blue-collar workers in manufacturing, but eventually it would spread. All the forces were in play that would systematically undermine and depress the earnings of millions.

  If Washington had been truly concerned about the livelihoods of working people, it could have dealt with the growing trade issue then and there by putting in place a system that was fair to all. Instead, it passed the Trade Act of 1974, which fostered the illusion that Washington cared but in fact ensured the continuation of the same policies that were destroying jobs.

  The act was prompted after Congress held hearings on foreign trade practices that were hurting American manufacturers. It was the first of what would become a steady stream of trade bills in the next few decades. Sponsors claimed they were designed to safeguard domestic workers and force our trading partners to open their markets to American goods.

  The Trade Act of 1974 was a huge bill filled with arcane provisions, but its main purpose was to show our trading partners that this country was no longer going to be Mr. Nice Guy. The act would be a template for Congress for decades to come—a sort of how-to guide to pacifying workers in the short term by promising action on trade, but doing nothing to solve the problem in the long run, thereby bowing to the wishes of Wall Street, which would make trillions on globalization.

  In urging adoption of the 1974 act, Democratic senator Russell Long of Louisiana said that “the United States can no longer stand by and expose its markets, while other nations shelter their economies—often in violation of international agreements . . . [with] practices
which effectively discriminate against U.S. trade and production.” Republican senator William Roth of Delaware claimed, “This bill strengthens basic legislation and statutes designed to protect our industries from unfair or disruptive import competition.”

  The bill did nothing of the sort. Despite the new legislation, conditions worsened. The deficit in goods soared from $6 billion in 1974 to $34 billion in 1978, an increase of 467 percent. More industries came under intense pressure from imports, which threatened yet more jobs. That meant it was time for Congress to pass another trade bill. Lawmakers were scamming the American people once again.

  This time they called it the Trade Agreements Act of 1979. While the title was slightly different, the speeches coming out of the Capitol sounded a great deal like the speeches that had praised the 1974 trade bill.

  Democratic senator Daniel Patrick Moynihan of New York described the 1979 legislation as the most momentous trade act in half a century: “It begins a new era . . . that has one specific purpose above all: to see that non-tariff barriers to trade come down.... [And] to stop that hemorrhage of American jobs and industries profits.”

  Republican congressman Frank Horton of New York said the act “recognizes formally for the first time that unfair subsidies are damaging to international trade. It gives us power to strike back if a foreign nation harms our industry.” Russell Long, who only five years earlier had given a ringing speech about the 1974 act’s tough provisions, made similar claims for the 1979 law: “It will permit the United States to attack foreign barriers to our exports and it will provide more efficient defenses to unfairly traded imports.”

  Once again, misleading speeches were intended to pacify working folks and make them think that Washington was looking out for their best interests. In fact, lawmakers were looking out for their own best interests. Five years later, in 1984—as the goods deficit topped $100 billion for the first time—Congress returned to the get-tough warpath. Lawmakers railed about the unfairness of our trading partners, and they proposed remedies that they maintained would open foreign markets to American goods. In the Trade and Tariff Act of 1984, lawmakers asserted that they were beefing up the law to aid companies harmed by foreign trade practices.