Reply #16: No one ever accused me of being a Nobel-winning economist, but I saw this coming in the Reagan 80s [View All]

What ye need to know: There are two kinds of industries in the world. One group is "wealth creating" industries, the other is "wealth transferring."

There are exactly four wealth creating industries: mining, forestry, agriculture and manufacturing. There can never be any more. Please understand that these four industries can expand--for instance, before 1823 there was no petroleum industry because there was no practical use for its product. In 1823, petroleum lamps were introduced on a large scale, and the mining of crude oil began in earnest.

All other industries are wealth transferring industries.

Ronald Reagan's administration caused the great sea change that led to the current collapse, and he did it by emphasizing wealth transferrence over wealth creation. Look at the Dow. For most of its existence the only companies on it were at least partially in the wealth-creation sector. Sears was on there, but Sears used to manufacture some of the things it sold--it made its own power garden tools, for instance. Now? Twenty percent of the Dow--six out of thirty companies--are either financial or retail establishments.

We shall now examine one of the wealth-transferring businesses on the Dow Jones "Industrial" Average, Walmart. About ten years ago, Walmart had this huge ad campaign going on called "Bring It Home To The USA." They bragged about all the product they sold that was made in the US, and how many American jobs were being created by Walmart's largesse. This was at the time when Walmart was outsourcing its ass off, even worse than they do now--I read at the time that of every 20 shipping containers that was brought into the United States, one of them was going to Walmart. There were big hanging signs on every Walmart's racetrack showing all the American-made products they sold, and the number of American jobs created by each. What killed the "Bring It Home" campaign was one rather innocuous-looking ad, in which they extolled this line of really nasty plastic measuring cups--you know, the kind of cup that lasts about three months before milady gets scared of the germs lodged in the cracks and throws it away. The manufacture of these cups brought six jobs home to the USA. They put it on there in a figure a foot high--we brought home 6 jobs to the USA. There was a huge picture of six old ladies all wearing the same lipstick holding up one of these under-$1 plastic cups and beaming at the wonderful relation they had with Walmart. Printing the sign and shipping it to all the stores probably "brought home to the USA" more jobs than this cup did. That was the end of the campaign.

Back to the point: Wealth is created by making things and selling them to other people. You can sit in your back yard making million-dollar cars for years, but so long as you ship them all straight to your mom you'll never become a millionaire. During Reagan's administration we stopped shipping cars to other people's moms--with predictable results. Couple the end of American large-scale manufacture with all the "classical" economists saying how good outsourcing was because it cut down on the cost of labor (who buys the stuff in the first place, as we know), and you will understand what happened.