Imagine if you will a scene from the early twentieth-century. A slight gray man in his late fifties presides over the U.S. Senate as Vice President. Before being overwhelmed at the 1912 Democratic National Convention, he had a real shot at the presidency, but the lofty rhetoric and airy idealism of the dour and quixotic Woodrow Wilson won out. Prodded by his social climbing wife (who wanted to mix in Washington society) he reluctantly accepted the Vice Presidency.
I could do a whole essay on this mostly forgotten Vice President, Thomas Riley Marshall who would later go on to be the first Vice President to run cabinet meetings, and would stand at the forefront of a constitutional crises that would eventually lead us to the Twenty-fifth Amendment, but for now, focusing on his legendary wit will suffice. In the senate that day as debate wore on over the many special interests demanded by the country during the "Progressive" movement, and the various senators expressed their constituencies' extensive and expensive laundry lists, a weary no-nonsense Marshall leaned over to his clerk and uttered his famous quote:
"What this country really needs is a descent 5¢ cigar!"
The smoke filled chamber (fueled by 50¢ cigars I might add) supposedly erupted in laughter, and the acrimony of the competing factions melted away for a few moments. Ah, for wit in the Senate again.
I was thinking about Vice President Marshall the other day, not so much for his wit as for his prescience. As President Trump begins his term next year, and we begin to see tariffs unleashed on the American markets, what sort of products should a revitalized American industrial base pursue? It's a valid question for all parties concerned: management, labor and consumer. What do we want "Made in America" to look like in the unfolding era, and what can we hope to achieve?
We should probably start with some basic realities. As of this writing, the United States hit another ignominious milestone. Our debt crossed $36,000,000,000,000 on Friday 22 November 2024. This means that whatever retooling industry and our economy faces in the next four-years will be against the headwinds of expensive credit and a tightening money supply. This is because (regardless of contrary opinions) inflation is caused by the excess supply of money. Full stop. And the only way to deflate an economy is to tighten the money supply by increasing interest rates, limiting lending, or both. With this said, American industrial interests should be looking to what they can do with what they have, keeping in mind the price expectations of the American consumer.
One of the great disconnects of consumers as it relates to prices, is that labor is a huge component of the Cost of Goods Sold. Ironically (but only to uninformed consumers I might point out) the better paid the workers, the higher the prices for goods and services. This leads us to another reality: whatever retooling we face in American industry, it must be built on very low or greatly reduced labor costs to be successful, otherwise, even with tariff protection, the only thing we will accomplish is higher priced goods and services with no increase in American manufacturing capacity.
So what does all this mean? It means American industry needs to retrain the American consumer and fast. The pith of Vice President Marshall's quip should lead the way. What we need in this country is a really good $5,000.00 car. American consumers, especially starting in the 1980s, were lured to foreign imports not just because of price, but because of value. Foreign cars of equal price offered all kinds of standard amenities that were add-ons to American cars, and they gobbled them up to the point that now we have cars that are so complicated by "amenities," they are virtually impossible to repair on your own.
If I were an American car manufacturer, I would certainly keep my amenity laden luxury brands, but not at the exclusion of some truly ultra-economical alternatives. My first car was a 1982 Chevrolet Chevette that retailed for $2,500.00 new and that I bought for $1,500.00 when it was a year-old. An incredibly economical car that would go for a week on ten gallons of gasoline (when gasoline was cheap). The car was basically a motorized box with manual everything, and it served me very well through college and even beyond, until I replaced it with my 1986 Cavalier (a car I kept for ten-years).
Ultra economical cars are one thing that can help a beleaguered and transitional American consumer, especially ones just starting out. Pared down, low maintenance housing is another.
In the decades following World War II, the United States and Great Britain went on a building spree to house the veterans and their growing families, each employing a slightly different but similar strategy. In the U.S. we employed the modest yet desirable tract home, comprised mostly of ranch, split-level and "Cape Cod" styles, and generally consisting of six-rooms at well under 2,000 square-feet, set on a comfortable quarter-acre lot. The U.K. went in a similar direction, only employing "terraced" homes of roughly the same size, but connected together in a style we would call "townhouses" here in the United States. In either case, modesty and affordability were the point. Not just from the standpoint of initial cost, but from the perspective of ongoing cost of maintenance.
In the modern United States however, the American consumer is sold (and likewise pursues) houses at almost three-times this square-footage, with many times the cost of maintenance due to amenities such as cathedral ceilings, open floor plans, and large plate glass windows in irregular sizes. Add to this a plethora of "smart" (read expensive and complicated to repair) appliances, and you can see why especially young homeowners are overwhelmed, not only by acquiring a home but by maintaining it.
The United States needs an entrepreneurial disruption in how it approaches affordable housing and for that matter, affordable appliances. Micro Homes and Container Homes show promise on some level, but this is not a viable solution for families with children or even multi-generational housing arrangements. Some sort of return to modestly appointed tract homes, even within decaying city centers, would be a boon to both sagging urban environments and a woefully under producing housing market, especially in the area of "affordable" housing. An interesting disruption might even be self-financed developments, where the builder is also the mortgagor, and accruing equity is retained by the builder until the mortgage itself is satisfied.
And as for appliances... I had (and used) a 1940s era General Electric toaster, manufactured in Upstate New York, well into the twenty-first century, and only surrendered it when the Bakelite handles were getting too brittle to be safe. The coffee I am currently drinking was perked in a 1950s era chrome percolator. I can't even count how many toasters and drip coffee makers I have gone through in the interim between these two mid twentieth-century stalwarts and today's slapdash equivalents. Making American Great Again would be wonderful if the mythical goal is to return to an America that makes affordable products that last indefinitely. Not only will retrained consumers be thankful for reliable, long-lasting products in the long-run, the planet will be happier as well, since we might not have to dump quite so much schlock into our local landfills.
In the areas of housing, transportation, and manufactured goods, Americans in the America First era to come, will have to make big adjustments to their tastes and expectations. It is the responsibility of our leaders to frame this as what it is: a patriotic sacrifice for a better national economy down the line, and its up to our industrialists, union leaders, and general employees to get on board with a reasonable program for retooling the American economy within the restraints of limited capital and diminished money supply. Like those self-serving, bickering senators over one-hundred years ago, we need a witty pragmatist to break the oncoming tension and point out the absurdity of thinking otherwise. Hopefully Mr. Trump and Mr. Vance will be up to the task ahead.
Comments