Risk Rap

Rapping About a World at Risk

Riding The Acela Express

I don’t really know what Acela means.

I imagined it to be a Greek or Latin word perhaps the name of a divine conveyance or swift footed messenger from Roman mythology. It’s probably nothing that deep. Most likely it is one of those made up words invented by a high powered marketing firm on Madison Avenue. Most know it as the rebranding of Amtrak. A kind of corporate rechristening available only to the well capitalized and those blessed with fat marketing budgets. They had to do it. After the supply-sider victory of the Reagan Revolution the legacy of losses and unending government subsidies to the failing railroad industries had to be purged from the new American political lexicon. It’s kind of like when Khrushchev was removed from power in the USSR. History books had to be rewritten to exclude the memory of Khruschev’s glorious contributions to building a workers’ paradise with Stalinist absolutism.

Riding the Acela Express from Newark New Jersey to our nation’s capitol in Washington DC provides a front seat view of a sad and sobering survey of our quickly evaporating manufacturing base and our country’s diminished industrial strength.

Riding the Acela Express down the spine of our county’s once formidable east coast industrial corridor presents a sad irony. The former Soviet Union unintentionally destroyed its economy due to its inefficient deployment and allocation of capital. While the United States, the USSR’s great historical antagonist and seeming victor of the cold war, destroyed it’s manufacturing base through the carefully considered rationalization of our industries by reallocating capital to foreign markets in search of superior returns.

In practice, this meant closing old inefficient factories and moving them overseas. From an economic standpoint it makes perfect sense. Capital seeks its best return. If that return can be found in an overseas market where labor costs are lower, tax rates are more favorable and regulatory oversight is non-existent the shareholders of the firm that closed the doors on US workers will realize a better return on their equity investment. That’s how capital markets work. Michael Milken and other predators would have a ball and build many fortunes instructing corporate America on the finer points of financial alchemy and demonstrate how easy it was to spin gold from the junk of old rust belt industries.

At first it kind of made sense. We didn’t want those kinds of jobs anyway. They were dirty and caused pollution in our communities. These types of businesses were highly unionized and susceptible to industrial disputes that only antagonized the uneasy relationship between labor and capital. Many of these industries were too capital intensive and the investment needed to maintain world class competitiveness was just too high to see any kind of acceptable return within the required time frames that benefited management and shareholders. The US was moving to a service oriented economy that obviated the need to manufacture anything. We would be an economy of designers, merchants, consultants, marketers and bankers. We did retain some clean, high tech, lite and lean factories that would rely on assembling machines from various components sourced just in time from overseas manufacturers. That was the industrial and economic vision of post cold war America.

But the vision outside my window on this Sunday morning Acela Express ride looks very different. They say that Georgian’s know their home when they see the red clay soil of their beloved state. As I pass through the metro areas of Trenton, Camden, Philadelphia, Wilmington and Baltimore I see miles and miles of half demolished factories whose crushed emulsified bricks have turned the earth of these abandoned industrial brownfield to blazing acres of red ochre.

The landscape offers a view of row after row of empty disassembled and decaying factories. They litter the landscape like forgotten industrial sarcophagi that was long ago broken into and pillaged, its contents whisked away by savvy tomb raiders.

The abandoned shipping docks whose bills of lading long since posted last orders that disembarked decades ago. Old forges, not fired since our Great War now stand as furtive tombstones to a productive past. These committed sentinels still stand post, watching over rusted rails that once creaked under the weight of bulging freight cars delivering goods to defend the arsenal of democracy. Now the rail yards serve no purpose other then rusted planter boxes for some invasive plant species. Closed beer gardens stand next to empty Union Halls whose cheap tin signage proclaims solidarity from a bygone day. You can still barely make out the union local number if you catch the right light from this mornings emerging sun. And the church steeples and factory smokestacks both covered in many layers of hard earned coats of gray soot stand in each others holy presence reminding us of the solemn Shaker proverb, “hands to work hearts to God.”

Last we witness the awful toll the dismantling of our industrial base has claimed on our urban communities. We pass archaic schools that rise like Gothic anachronisms, resembling prisons not Lyceums of learning. We see the tiny wooden row houses of Philadelphia and Baltimore and wonder how the inhabitants will sleep through a night where temperatures will remain uncomfortably hot. Nature and capital both abhor a vacuum. In the absence of legal industry and commerce such areas will become incubators for the growth of black-markets whose social cost and commercial thrust poses great risk to the heath and efficiency of free markets and the personal liberties of free people.

The USSR failed miserably in its attempt to build a workers state. Centralized bureaucratic planning, totalitarian political control, and the parasitic drain of capital by a class of ruthless self serving party elites strangled all entrepreneurial initiative and any hope for an efficient economic system. The possibility for workers to fully enjoy the fruits of their labors vanished as nothing more then an idealistic dream.

The current state of our manufactures and how we got there may turn out to be one of those funny ironies of history. What the Soviets did to their economy by accident and incompetence, we did to ourselves through intention. The industrial policies and practices we have pursued have strengthened the economies and industrial capacities of Russia and China. Both countries economies are experiencing robust growth. Russia due to its extensive oil and natural gas reserves is once again an emerging superpower that the United States must consider in its global political, economic and military strategies. China due to its rapid development of its manufacturing capacity now boasts tremendous balance of trade surpluses. China’s exports far more then it imports and it puts its surplus into its massive Sovereign Wealth Fund. This SWF is an investment vehicle that loans money to the large US banks to bolster their fragile balance sheets so we can get through this dangerous and debilitating credit crisis. The tables have dramatically turned.

The Acela Express. What a window it provides on the state of the American economy. After an exhaustive search I discovered a reference to Acela. In a far eastern language it refers to “a cloth less one.” Or in other words naked, as in the emperor has no cloths or perhaps we are vulnerable and exposed as a naked child in a blizzard without a strong industrial and manufacturing base? Or as in the “clothless one” hides nothing and always presents the naked truth. However you interpret Acela, let us hope that the Midnight Special continues to shine an ever loving light on you.

Music: Lonnie Donagen, Midnight Special

Risk: capital flight, manufacturing, labor unions, urban communities, political, global competitiveness, balance of trade, railroads,

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June 14, 2008 - Posted by | China, culture, folk, manufacturing, sovereign wealth funds, unions | , , , , , , , , , , , , , , , , , , , , , ,

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