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The new economy's biggest product: an enduring underclass?

The US and its presidential candidates must face the reality that low Wal-Mart prices mean little on low - or no - wages.

By Dante Chinni / April 27, 2004



EAST LIVERPOOL, OHIO

The United States of America, circa 2004, offers a fairly straightforward economic proposition. The nation's change from being a maker of things to a seller of things rests on the simple assumption that the consumer is king. And because everyone's a consumer, everyone wins. Cheap imports and competition force producers and retailers to keep prices low, inflation stays down, and everyone can buy a little more - maybe even a lot more.

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Viewed from upper-middle-class America, this isn't such a bad deal. Computer help or air-reservation calls may occasionally go through a Bombay call center where someone claiming to be named "Brad" offers heavily accented advice, but overall the gripes are minimal.

Viewed from the Ohio Valley, though, America's economic restructuring seems less like an "everybody wins" proposition than a zero-sum game. Here in the rolling hills that straddle Appalachia and steel country, the picturesque landscape is dotted with towns like East Liverpool, places where vacant storefronts dominate what's left of the downtown and many of the remaining businesses are bars or drive-through liquor stores. They're towns full of boarded-up buildings, empty streets, and people short on options.

Five days a week, Luellen Bozek works at the Homer Laughlin China Company plant, which makes Fiestaware. She's secretary of the local Glass, Molders and Potters Union, and would like to retire soon, but can't because her husband was forced out of his job at the nearby Weirton, W.Va., steel mill two years ago.

"They took his pension and his healthcare away when the union renegotiated," she says.

"[My four children] had to leave. The jobs are gone," Mrs. Bozek adds, referring to the once plentiful factory work. "There's Wal-Mart and the supermarket. That's about it. There are some new hotels and lodges going up, but they don't pay. Round here, there really isn't anything that's going to pay well and you're not going to find benefits."

So anger bubbles up quickly here - about imports and megastores and a political system that seems to have forgotten places like this town of 13,000 on the banks of the Ohio River. It is a testament to the challenges the new economy has created.

Up and down this small stretch of the Ohio, young people have seen their inheritance of well-paying union jobs with good benefits evaporate: The ceramics industry that was, and still is, this city's identity (the high school's team is "The Potters") has cut 500 jobs since the late 1980s. The Weirton steel mill that employed 8,000 in 1984 now employs 3,000 and is soon to lay off 900 more.

What's left behind here, and in places like this, raises complicated questions about the nation's economic direction.

What long-term price will America pay for the restructuring taking place? What's to become of the industrial Tom Joads the system has created - manufacturing employees displaced by a changing economy?

These questions aren't meant to inspire a round of folk songs or odes to dying Rust Belt towns. Change comes in economics just as sure as it comes in anything else. And we've been through these transitions before. The industrialization of the early 1900s led workers into factories, where, with time, wages climbed and benefits improved, setting the stage for the economic growth of the 20th century.

Some say the current transition is no different. They may be right, but 20 years into the transition, the jobs that allow people to lead comfortable lives and create better futures for the next generation have yet to appear. And if they don't soon, America's new economy may have one substantial unintended consequence: a large and permanent underclass.

People have been promising better times here for years. Bill Clinton and Al Gore came in 1992 and won East Liverpool's county, Columbiana. But when Mr. Clinton supported the North American Free Trade Agreement (NAFTA) - a political no-no anywhere in the Ohio Valley - he angered many. In 2000, Columbiana went for George W. Bush by a slim 2 percent.

Now, with Ohio considered a swing state in the 2004 election, Columbiana seems to be a swing county - the kind of place where John Kerry would expect to make inroads this week as he makes a three-day campaign tour through the Rust Belt. And Senator Kerry has a lot to harp on here. Unemployment is near 9 percent. More than 3 million manufacturing jobs were lost in the recession. And the steel industry is fuming at President Bush, who enacted foreign steel tariffs to protect the US industry, then lifted them 16 months earlier than promised.

But Kerry's job may not be so easy. After years of being let down by the political system, voters here have come to view all politicians warily. Kerry, like the Clinton administration, backed NAFTA, says Mark Glyptis, president of Weirton's Independent Steelworkers Union. And even though Mr. Glyptis says he will probably vote and work for Kerry, he views the Massachusetts senator as simply the lesser of two evils.

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