Innovation Ethic in Chapter 4 Of Perils

Innovation Ethic

In Chapter 4 of Perils of Prosperity, John Sarno argues that American industry does not really have an innovation ethic, and as a result it has been very badly damaged by the system of global capitalism and free trade that the U.S. government created after World War II. They were not prepared for the intense foreign competition that began to hit them full force in the 1970s and 1980s. As a result, the social and economic conditions of most American workers have deteriorated over the last thirty years, and this was already clear before the latest recession. As Thomas Jefferson had always feared, the great barons of American industry had turned the country into a nation of employees, and had trained and educated many of them to be dependents and conformists rather than innovators, independent thinkers and creators. Knowledge-based forms now contribute 20% of overall GNP and 40% of real economic growth, and knowledge workers earn 40% more, but most American employees do not fall into this category (Sarno 123). Today and for the foreseeable future "occupations that increasingly require cognitive complexity will continue to pay the biggest rewards as other occupations will pay increasingly less," and the effects of this can be seen everywhere in the global economy (124).

In 1979-84, nearly eleven million manufacturing jobs were lost to foreign competition in the U.S. And these did not return but rather left large parts of the old manufacturing regions as a Rust Belt. Most of those who were made redundant did not find comparable work again, but ended up in the service sector or as freelancers and independent contractors. They do not have pensions or job security and half lack any type of health insurance. New developments in technology also made middle management redundant, leading to a 21% reduction in corporate officers in 2002-07 (125). For the 70% of U.S. workers who have less than a college education, wages and living standards have stagnated or declined over the last thirty years. Even for the educated, jobs are being outsourced to China and India, including research and development work that can be performed at lower cost in Asia. These countries also spend more proportionately on basic research than the U.S., which is lagging behind in many key areas (126). In short, the American economy that emerged from World War II, dominated by giant global corporations, was totally unprepared to compete in this New World Order.

In American manufacturing, most of the jobs were based on the Scientific Management of Frederick Taylor, which was very efficient and productive, but also created millions of dull, robot-like jobs. Under Fordism, managers expected "little in the way of creativity from rand and file employees," while most union members were content with job security and lifetime employment (130). In American history, the debate over how large-scale industry would affect democracy, independence and individual liberty went back to the 18th Century debates between Thomas Jefferson and Alexander Hamilton. George Washington privately opposed slavery and endorsed Hamilton's plans to industrialize the country, which both believed would gradually make slavery extinct and obsolete. Southerners believed this as well, which is why they formed their own party against the Federalists, and later their Whig and Republican successors, who kept attempting to pass the same plans whenever they controlled the White House. Since the majority of the population consisted of small farmers who had been hostile to the Constitution, Hamilton opposed democracy and would have preferred a Senate and President elected for life. He was hostile to the French Revolution, and always looked to Britain as an economic model and trading partner. As Treasury Secretary, he had the federal government assume all debts from the Revolutionary War, which he argued would promote trade and manufacturing, called for a protective tariff for industry and a new Bank of the United States modeled on the Bank of England.

Thomas Jefferson was completely opposed to all these plans until the day he died on July 4, 1826, and stated that he would continue to oppose them even beyond the grave. He thought that large-scale industry would turn the American people into a class of dependents and wage slaves, while the owners of industry would become an aristocracy or oligarchy. This was also true of his slaveholding successors like Andrew Jackson (132). In contrast to Hamilton's nationalism, centralization and support for manufacturing and industry they envisioned an America that would remain mostly rural and pastoral, lacking big cities, factories, banks, and speculators in paper money and stocks. In the 1830s, Alexis de Tocqueville also noticed that a new "manufacturing aristocracy" already existed in the Northeast, and that the permanent working class that Jefferson had feared was coming into being as well (133). After the Civil War, it was already clear that the U.S. was going to become a nation of employees rather than independent farmers, and that the lives of these workers were very insecure, especially during periods of recession and high unemployment. Starting with the railroads, the new industrial corporations' "military and bureaucratic methods of organizing work demanded conformity" rather than creativity, innovation or imagination (134). Several generations of American workers were socialized through education and training methods that were intended to make them into cogs in the machinery, and "the lack of autonomy bred by dependence and conformity formed a poor foundation to compete in the world" (135).

For the generations that experienced the world wars, Cold War and Great Depression, social and economic security was far more important than personal liberty or individualism and creativity. Franklin Roosevelt's Economic Bill of Rights in 1944 promised full employment, decent housing, health care, old age pensions, and accident and unemployment insurance. Large corporations were prepared to provide these, but in the end they "could not endure in a free globalized enterprise system," the preservation and expansion of which was one of the main goals of U.S. foreign policy after 1945 (131). In this very limited sense, then, liberalism has been the mainspring of United States foreign policy since 1945 in that it has been the hegemonic capitalist power, although Western Europe and Japan also revived under its auspices in the 1950s and 1960s, to the point where they became economic rivals. Few developing nations advanced very far along the capitalist road of development in the Cold War, though, although Taiwan and South Korea were exceptions. Free trade was an important aspect of American hegemony, dating back to the time of Woodrow Wilson, although it also permitted its East Asian allies like Japan and South Korea remained largely closed to U.S. investments and exports until the 1990s, while being allowed an Open Door into the U.S. market. In this case at least, national security concerns in Asia did seem to trump economics, and did a great deal of damage to domestic American industries. As the leading liberal-capitalist hegemon, the U.S. also organized multinational institutions to promote order and stability, such as the North Atlantic Treaty Organization (NATO), Southeast Asian Treaty Organization (SEATO), the International Monetary Fund (IMF), World Bank and General Agreement on Tariffs and Trade (GATT), renamed the World Trade Organization in 1995.