There can be no freedom, of any kind, without economic freedom.
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I didn’t
learn that concept in school. My grandmother, who only had a third grade education, was the first person to share that idea with me. As a senior in high school with an academic scholarship to any college of my choice, I thought my grandmother was old and not as “educated” as I. As a teenager, I had not learned to distinguish between education and wisdom. Consequently, I had a “ho-hum” reaction.In retrospect, what my grandmother lacked in formal education, she made up for with wisdom. During her long life, she had crossed the plains in a covered wagon and lived to watch a man walk on the moon. She had experienced both the agricultural age and the industrial age.
When my grandmother was born, agriculture was king. 98% of the population worked on farms. The common man’s “formula for success” was to acquire his own land. Land was desirable not because the land would increase in dollar value. Owning land assured the ability to grow food and thus not starve to death. Even doctors and lawyers had small plots of land on which they grew their family vegetables. In the agricultural age, people did not need money because they grew, or made, everything they needed. Those things they could not grow or make were obtained by bartering. The average farm family earned less than one hundred dollars in cash a year.
My grandmother was a young girl at the end of the Civil War when the nation’s economy began to change. The harvester, cotton gin, gang plow, steam tractor and many other labor saving devices began changing the economy of the nation from agrarian to industrial. As machines replaced farm labor, farm work began to disappear. People became apprehensive, fearing change, both unable to predict it and unable to prevent it.
In the Agricultural Age, if people did not grow their own food, they would probably die of starvation. As the Industrial Age began, children would leave the family farms to get jobs in factories. The aging parents would ask “How can we survive if our children do not help us grow the food? “What are we going to do when we are too old to do all the work that needs to be done on a farm?” “What’s happening to the world we have always known?”
Imagine asking a farmer in 1870, “What will our economy look like, and how will our nation survive, if only 2% of people work on farms?” The farmer would probably consider the question ludicrous. The rule of the Agricultural Age was “produce food or die”. According to the farmer’s knowledge, belief, and experience, if only 2% produced food, then 98% would probably die. The agricultural age had existed for tens of thousands of years because people grew, hunted, gathered, and stored, their own food. The agricultural age was all anyone had ever known.
Yet, by 1950, 98% of the population no longer worked on farms. In less than 100 years, 98% of the population no longer grew their own food.
Rather than masses of people dying from starvation, the population of the nation actually increased. Rather than millions of people dying from starvation, the farm output of the nation actually increased faster than the population growth. My grandmother lived to see 2% of the population growing enough food to feed the other 98% and export the surplus food to other countries. The job had become king. While 98% of the population worked in industry as employees, very few became employers.
Building the infrastructure (railroads, factories, electricity, bridges, cars, steam ships) for the Industrial Age required a lot of money. Since the common man did not have any money (he bartered), the common man could not build the Industrial Age. The common man could only partially participate in the Industrial Age. Consequently, the common man’s formula for success was not “build factories” but rather “Go to school, get a good job, work hard, save your money, and everything will be great.”By 1950, 98% of the population had transitioned from self-sufficient and self-employed farmers to dependent employees. It was when income taxes were only 2%, that I first heard my grandmother tell me that “there can be no freedom, of any kind, without economic freedom.”
In the fifty some odd years since I first heard that statement, my reaction has changed from “ho-hum” to astonishment at my grandmother’s wisdom. During that half century, I watched inflation gradually erode away the life style of the American worker. As the buying power of the American worker declined, more and more time was required to provide for a family. Less and less time was spent with the family, enjoying diverse recreations, pursuing a hobby, and all the other “reasons” for working so hard in the first place.
From about the 1910’s to the 1970’s, American families traditionally had one person working a forty hour week to support a family. During this time, any husband/father whose wife had to work outside the home was considered a sluggard, irresponsible, and less than a man.
From the 1970’s to the 1990’s, inflation reared its snake’s head and spat venom at the honest labor of the American worker. Year after year, the cost of living increased faster than wages, and began to slowly poison the economy.
For example, at current real inflation rates of 4.2%, if a worker went for 8 years without getting any cost of living pay raises, he/she would lose ½ of their buying power. This employee would have to work 80 hours (two jobs) to have the same buying power that 40 hours once produced.
Suppose another worker received annual cost of living wage increases of 2.2% (2% less than real inflation), this employee would lose half of their buying power in eighteen years. The only way an employee can compensate for inflation is to increase their earning power (more education or more skills) OR WORK MORE HOURS.
By 1990, in order to compensate for the loss of buying power, two people had to work a least 90 hours week (45 hours working and commuting per person), to support a family. During this time, any wife/mother who did not work outside of the home was considered a second class citizen, anachronistic, a piece of chattel, and was not doing her fair share of the work.
It was during the 1990’s that jobs began going offshore which began driving down onshore wages. When an employee’s job went offshore, the employee rarely found a new job at a comparable salary. Between inflation, cheap foreign labor, and reduced wages, we began to hear about three income families. Economists like Paul Pilzer and Frank Feather are “guess-timating” that by 2020 four income families will become commonplace. All across this great nation, people are asking, “What’s happening to the world we have always known?”
Yogi Bera put it in a nutshell when he said, “The future ain’t what it used to be.”
Like the farmer in 1870, we are facing massive changes. The future in 1870 wasn’t “what it used to be”. The farmer in 1870 couldn’t “predict” the industrial age because the descriptive words had not been invented. Words like “off ramp, jet plane, 401K, microwave, TV, even sliced bread, were meaningless words. For the first time in history, the farmer’s words and knowledge could no longer be used as a guide to prepare for the future.
It is now 2009. How would you answer this question? “How will our nation survive; and what will the economy be like; if 90% of our population does not have jobs?” Millions of jobs have already disappeared. We are in the early stages of the transition from the industrial age to the information age. Millions of more jobs are becoming either obsolete or priced with offshore workers. Like the farmer in 1870, we can no longer use the past to indicate how to prepare for the future. We don’t have the words to describe the new economy because the factors creating the new economy are still being formed.
However, we can make educated guesses.
The agricultural age was based on acquisition of land and farming. The industrial age was based on building capital assets (i.e. factories) and manufacturing. The information age will be based on “net-weaving” individuals and small groups into teams, and sharing of information for mutual benefit.
For most people, the transition from the Industrial Age to the Information Age will not be easy. People will have to learn what they don’t know exists, just as the farmer accustomed to a horse and plow had to learn how to use factory equipment. The farmer could say “giddyup” or “whoa” to a horse … but the machinery would not obey. The Industrial Age employee who is accustomed to going to a store, earning a regular paycheck, having great benefits, will have similar learning experiences in the Information Age. An employee, who has been a source of profit to stores for their whole life, may not easily see how to become a source of profit for themselves.
The Industrial Age small businessman will transition into the Information Age more readily than an employee. (Business to business sales took only four years, from 1996 to 2000, to make a complete transition from stores and catalog ordering to purchasing online. Currently, virtually all businesses buy and sell online.) A businessman is accustomed to thinking in terms of cost, quality, convenience, and profit. An employee only thinks in terms of cost, quality, and convenience. An employee has never had access to profit before, so there will be a learning curve.
The Industrial Age became very efficient at manufacturing. According to Paul Zane Pilzer, in 1910, 80% of the cost of a product went directly to the manufacturer, only 20% went to moving the product (distribution) from the manufacturer to the consumer. By 1990, only 20% of the cost of a product went to the manufacturer, while 80% was taken by the distribution system.
To illustrate, suppose a person earn $500.00 a week. If they were to buy a “widget” that cost $500.00, then the actual cost of making the “widget” was probably $100.00. The person earned enough money by working on just Monday to pay for the actual cost of the “widget”. However $400.00 went to the distribution system. Tuesday, Wednesday, Thursday, and Friday’s work went to pay to get the “widget” from where it was made to where it could be bought.
In the last forty years, manufacturing efficiency has increased to where one man can now do the work of ten, or fifty men. Distribution did not become equally efficient. The distribution system we had in the early 1900’s has only changed by moving products faster from one warehouse to another.
Only the internet is capable of eliminating nearly all of the distribution systems middle men (wholesalers and retailers). Because we are in the early stages of the Information Age, few manufacturers have re-tooled to be able to ship one item to a household rather than a train load to a wholesaler. Manufacturers need online “groups of consumers” who will agree to buy direct from them. These online “groups of consumers” will be reminiscent of the consumer co-ops that existed in the 1960’s and 1970’s.
Some people in the Information Age will organize manufacturers into business co-ops so consumers can have a large selection. Other people will organize consumers into shopping co-ops, so manufacturers will have a larger loyal customer base. Both are necessary.
We, GreatTeamTNT, organize consumers so they can tap into the 80% of the dollar that is currently being devoured by an inefficient distribution system.
If you are like me, then sometimes you feel like the farmer back in 1870 when some smart aleck Industrial Age promoter asked a really meaningless question, “How will you survive and how will our country survive, if only 2% of the population work on farms?” He couldn’t answer that question. But he could see one machine harvesting more wheat in one day than 50 men could. He could see steam ships sailing against the wind. He could see one railroad engine pull a load that would require hundreds of horses to pull. Could he see everything? Absolutely not! Nor can we.
However, because of the changes the farmer could see in 1870, and we can see in 2009, we can assume that financial freedom will not be achieved in the future in the same way it was in the past.
So now, I will ask you what my Grandmother asked me. “How can we have financial freedom in the information age, so we can enjoy all the other freedoms?”
Welcome to the “Information Age”!
