There is a reason for everything. A reason why jobs are out-sourced, prices go up, dollars go down, manufacturing shifts to China, the stock market varies, and a reason for everything. Some reasons are extended over a long period of time, and many reasons are interlocked, but there is a cause for every effect. I was born on Feb 17, 1934 in Washington DC. I was born a year after FDR took office. When I was growing up in DC, it was a far different place than it now is. In 1835, the federal government only had 550 employees, and in 1934, it had a fraction of what it has now. Times were good when I was growing up, and have changed much now. My parents bought a large six bedroom home in 1934 for $3500, and a new Plymouth in 1940 for $660. I grew up in my Dad’s drug store, where a cup of coffee or a Coke was a nickel, and you could ride the trolleys for a dime or all week on a pass, which cost a dollar. Times have changed.
The point is, that when I was a kid, and even as a teenager, things were a bit different. At age 14, my Dad bought a 40 acre retirement farm in Southern Md. with two barns and large house for $9500. When I was 18, you could still fill up your gas tank for about 20 cents a gallon. In 1963, when I was 29, and in the theatre business, one of my six theatres was a glorious movie palace built in 1927 with beautiful trappings, stage, goldfish in the lobby pool, and a Kimball Pipe organ. My regular admission price was 75 cents. In 1962, I bought a brand new Mercedes for $3700. Things change. In those years, America was a strong manufacturing land, and there was no such thing as jobs going overseas, boarded up or burned factories, high unemployment, Wal Marts, graffiti, abandoned cars and neighborhoods, and the cities were whole. Things have changed.
Why? As usual, it is economics, because the more of anything there is, the less they will be worth, which is “Stott’s Law.” This applies to dollars, water, land, sugar, oil, or anything there is on earth. When I was a year old, as I have mentioned, FDR took office. He started Social Security. We were in the midst of a great depression, some say caused by the Federal Reserve, and I agree, but won’t discuss that here. FDR was very determined to get America out of the depression, and he had a whole bundle of solutions, which he believed would do that. All cost a lot of dollars to implement. They didn’t work, but cost a lot, During the depression and in the 1930’s, hundreds of make work projects were begun and completed. Hundreds of post offices were built, as was Hoover Dam, now called “Boulder Dam.” The term “Alphabet Soup Agencies” was born, because they all had letter abbreviations. The “CCC,” was the Civilian Conservation Corps, as an example. Under the CCC, thousands were sent into forests to cut trees. Others built highways, dredged rivers, and built other dams. A lot of money was spent. Since unemployment was high, tax collections were low. The funds to finance all these projects, was created out of nothing, and the supply of dollars rose. I can’t remember what prices were when I was a tot, but I have read about them, and by the time I was charging 75 cents for a movie admission, it was several times what it was in the early 1930’s. The money supply had grown.
When I was seven, World War Two started, and this got us out of the depression in a big way. We will not discuss why we got into it or how it happened. There weren’t enough people to fill the jobs, and women became airplane builders, trolley motormen, and defense workers. “Rosie The Riviter,” became a term familiar in America during the war. After the war, a pharmacist in my Dad’s store, bought a new 1950 Ford for $1350, which was more than twice what a Ford had cost before the war. Most, if not all prices had doubled during the war. My Dad bought a pretty deluxe 1949 Ford for $1950. The supply of money had doubled or more. After the war, the US government under George Marshall, began what was called the “Marshall Plan,” which basically sent billions of dollars overseas to rebuild the nations we had fought and defeated, surely a first in history. The GI Bill of Rights was also passed by Congress, giving all GI’s free college tuition, health benefits, a pension, cheap home loans, and a host of other benefits. The Congress thought it was only fair to give those who had fought in wars, a start towards a new successful life. The money supply grew, and prices went up. Wages went up as well, to keep all in balance.
Nothing happened quickly, and even during WWII, we were so intent on winning, that no one really noticed that prices had doubled. After the war, everyone was so delighted that it was over, the doubling of prices didn’t give anyone much of a worry, because wages went up too. We had factories which were undamaged by the war, whereas England, Germany and Japan were in ruins, not to mention most of Europe. Our manufactured goods found a ready market overseas, and our factories were humming. Taxes were microscopic. Income taxes were just a couple percent if you had a large income, and the “Social Security” taxes were only a percent or so. Workers brought home most of what they earned, there were plenty of jobs. Cars sold as fast as they could be produced, and new homes by the thousands were being built every month. The money supply was growing, taxes were low, and prices were going up, but times were good. TV came on the scene, and this gave American manufacturers such as Hallicrafters, Motorola, Zenith, and RCA more things to make, which anxious Americans rushed to buy.
With little competition from overseas, our manufacturing capability was being used 100%. Few imported cars appeared until 1960, but when they started to come in, America fell in love with them on a gradual basis. The Volkswagen made a hit, because it was cheap to run, well built, and funny looking. Gals loved them. American auto manufacturers felt it a bit. Mercedes and Volvo began importing also about then, further taking away American auto sales. The Japanese hadn’t yet come on the scene with their cars, but when they did, it hurt American auto manufacturing a great deal. American capital was flowing overseas. Not jobs, but capital. American inventors foolishly licensed the Japanese to make their inventions, and the transistor was the main one at first. The Japanese often refused to pay royalties to the patent holders. Millions of Japanese transistor radios were imported, along with other cheap gee gaws. The Japanese were learning to make what Americans wanted. More capital flowed overseas, prices went up, and the money supply grew.
As time passed, American auto manufacturers failed to build what Americans wanted, as far as quality or economy was concerned, since gasoline prices had gone up, and in the early 1970’s, we had the OPEC oil crisis, when economy was very important. More and more Japanese cars came in, and Detroit slumped. More and more capital went overseas to Japan, and other European lands for their cars. The Japanese motorcycles had made their appearance also. By this time, prices had gone up so much, that American families were beginning to feel a squeeze. Self service gasoline pumps were common, so that gas could be bought cheaper. “Fast food” came on the scene, further allowing America to economize. Take home pay was going down pretty fast by the 1970’s, because of higher income taxes, and higher Social Security taxes, plus the new Medicare taxes. Workers brought home less and less of what they had worked for, and more and more capital went overseas. Eventually, the Japanese cars became so popular, that the Japanese began building plants in the American South, where labor was cheap. Detroit was becoming a literal “no man’s land,” due to layoffs of union auto workers, plus neighborhood changes.
The taxes continued to go up, as did the money supply to pay for the civil rights act, Medicare, school bussing, and huge highway expenditures to allow for the “white flighters” to get to work in the fading cities. Public transport was subsidized, because it could no longer show a profit, and government took over hundreds of public transit systems, paying for them and operating them with money created out of nothing. The FHA came along and allowed people who were desirous of owning a home, to have one, with little or no money down. This cost a lot of money, and the supply went up, along with prices. Notice, that as more and more government programs were instituted, payroll deductions increased, and at the same time prices were going up, while huge amounts of capital were going overseas to pay for the imports, which were increasing at an alarming rate. More next week.