|Eveready Diner • Rhinebeck, NY • October, 2008|
Once upon a time the United States was the only major industrial nation not rubbled by World War. No, not wars... War! The gap between the first and second halves of the European Psychotic Break was a couple of decades... just enough time to reload and suck the Asian Pacific into its madness. And so it came to pass that world wealth got transferred here in exchange for jobs, finished capital, and consumer goods.
The bargain was unsustainable. As bright, educated peoples restored their tools... like factories, dams, power grids, roads, rails, airports, institutions, and competitive sanity – trade imbalances shrank and inevitably turned against America. But the 50 or 60 year capital advantage created a golden moment for US consumers got drunken on their temporary possession of so much of the world's wealth.
Speaking of unsustainability, American union monopsonists struck equally unsustainable deals with their monopolist employer/partners to achieve average wage heights built upon the myth of eternal world pauperism. US labor shared in the flow of world wealth to its shores with no threat from cheaper labor that lacked competitive tools.
Now they have the tools.
Ever heard of arbitrage? It means buying cheap and selling dear. Buy stuff made for less in Romania, sell it in London where incomes, hence prices, are higher. Like that. Today financial capital dispatches tools to low wage world spots to produce goods or services for a lot less than American companies whose workers have identical tools but with legacy high wage contracts (and government mandated additional labor costs) unavailable to Romanians, Ethiopians, Peruvians, British, or of course, Chinese.
Investment capital is the most mobile factor of production. It moves at quantum speeds through digital pipelines. Errors in predicting arbitrage advantages are spotted and overcome, by computers, at light's velocity. And while actual production and employment follow those directions with a lag... their vast movements are inexorable.
See the October 2008 Eveready Diner up there? It's a relic of "Mid-Century" America's momentary competitive advantage. Unlike anytime before in history, regular people... typical families... drove there and in air conditioned comfort chose from enormous menus.
October 2008 was about a month after America came aware that its financial iceberg had calved off over a quarter of its value. Access to financial capital got squeezed in what was to become known as the Great Recession. The lag between financial loss and real economic activity was about to bring down a curtain. The Eveready Diner (which may or may not be gone) stood on quaking economic ground - a 50s lyric of an unsustainable time when thanks to Europe's Psychotic Break - even the poorest consumers in the US were better off than their counterparts anytime in the history of history.