Why The Rust Belt Collapsed

The Rust Belt was once the industrial powerhouse of America.
Here's why the region ended up collapsing.
~

Got a "why" you want answered? Give us your questions here:

[danlaub]

Speaking as a trained economist and a native of the Rust Belt, you're spot on. Bonus points for quoting Von Mises.

[House]

I'm a native of the Rust Belt and I've seen and felt this devastation personally.

[libertycoffeehouse]

Well, I agree with you for the most part but there are a few things you are forgetting. The United States did not need to trade with other countries. We had the capability to make manufactured goods without trading. We also have the capability to produce our own food without trading. After World War II, most countries infrastructure was destroyed. American banks lent money to rebuild Europe and Japan. They had new factories with the latest technology. In the 1970s, Henry Kissinger opened up trade with China. American companies left to exploit slave labor. The dollar was no longer pegged to gold. This reduction in purchasing power was offset by cheap labor in Asia. Thus what you think is a result of free trade was actually the result of a manipulated market. The rust belt was created by Central Planning.

[dat]

Exactly the same thing has happened to the industrial areas of the UK, the country where the industrial revolution started. Many of the same factors have led to the almost total disappearance of British heavy industry with the main factor exactly the same; poor government. The solutions are almost the same too. Re-industrialise and rebuild technical education. Remove all tariffs and as much regulation as possible. Let the population then get on with it with minimal government interference. What does the UK still do well? Very high technology and very high quality manufacturing. They need to expand from there.

[aleb]

USA being a hostile environment to get all the permits and such, at a reasonable cost and a timely matter, does not help matters. If it takes you 3 years to get the permits required, it's old news before the production line even starts.

[TwilightMysts]

See the Jones Act.

A brief summary, US ship builders lobbied the government for protective laws, and it ended up making things worse.

[filster]

I work in a manufacturing plant in CO. We make products here in the USA, but, so many of my co-workers just go to Harbor Freight to buy their tools. I ask them if they would be pissed if the company closed and moved to China, and they, of course, say YES! So I say, "Well, you want YOUR products, made in the USA, to be bought, but, don't care if the guy making the USA-made tools loses HIS job?

[FredGerow-uweg]

Great info but I wish I didn't have to see a 'Donate to Biden' ad to get to the video!

[shameless]

I absolutely love these. Learning alot.

[vandertuber]

Labor Unions caused much of the decline of the Rust Belt.
Uncompetitive Wages, Benefits, and Pensions, plus opposition to automation.

[markzuckerberg]

Is it just me or do politicians f-ck everything up?

[lawrenceek]

Greed by both labor and management led to this. If both sides agreed in the 1960's and 70's to put more money into modernizing operations their demise is greatly lessened.

[kalburgy]

Nice theory, Nick, but the Japanese auto competition really only took root when the Rust Belt was well underway. European automakers were still a decade away from effective competition. The industries in the Rust Belt didn't initially move overseas. They moved to other parts of *this* country. California was an early beneficiary, then the Old South began to prosper.

In 1960, 60% of the entire world's industrial wealth was located in six states: New York, New Jersey, Pennsylvania, Ohio, Michigan, and Illinois. Neighboring states were also industrial collossuses on the world stage. West Virginia was then touted as one of the rich industrial states.

This inequality was unsustainable. The market for this industrial output was too limited. It couldn't sell to the poor rest of the world, so the rest of the world had to be made richer, and that meant moving this industrial base so that its wealth could reach new markets by moving that wealth to new markets.

This was accomplished in several ways. Number one, banks were not allowing factories built in the 1920s to upgrade. Number two, unions were encouraged to make ever greater demands, assuring that these factories would not have the funds to pay for needed upgrades on their own. Number three, the government became involved in regulating these industries (including new environmental requirements) so that what money these industries could scrape together was used up to answer these new statutes rather than actual modernization.

I'm sure there are more. But as you can see, none of these had anything to do with competition.

[davidwebb]

U.s steel mills did not innovate.after world war 2.the us under the marshall plan we rebuilt Europe and Japan with the newest equipment available.they could make steel cheaper.

[gordonallen]

He's right. Worked in a Midwestern foundry that produced pinions and axels for heavy vehicles in the 70's-80's. The technology and process we used to manufacture these parts had not changed since the 1940's. Lost the majority of our supply contracts to companies overseas in countries like Japan who had manufacturing plants with "cutting edge" technology who could make the same parts faster, cheaper, and with better quality. We suffered gradual layoffs in the early 80's, and the plant closed their doors for good in late 83 never to operate again. Other plants in the area closed as well leaving industrial and financial deserts throughout the Midwest. I was able to return to school, get a degree, and reinvent myself finding a new career that I am now retired from. Many of my fellow workers were not so fortunate. People took what ever job they could get, often paying less, with no benefits. Those who had the time and age in the plant retired taking their pensions out of the Midwest, and heading south for better weather, and a cheaper cost of living. 40 years later, and the community I grew up, and worked in STILL hasn't recovered. It's just gotten worse.

[gibbson]

I'm very dubious about the claims in this video. After ww2 i'm pretty sure Japan had near enough a command and control economy via it's state banks and pumped huge amounts of state subsides into selected manufacturing sectors along with high tariffs on imported goods. Germany post ww2 has also used tariffs, although more targeted to protect certain industries and continues to do so via the EU.

Sorry mate but you're off the mark with this one.

[johnjacobjinglehimerschmid]

Until economists stop pushing shareholder value and push economic value nothing will change.

In that respect ... I say we're screwed!

[camgblack]

Don't Germany and Japan have aggressive state intervention in the economy as well? Why was their intervention more successful than America's? I wish these why minutes were why hours so you and christian could get into the details. Thanks for your hard work

[goldwinger]

In the mid 70s, I worked in a steel mill during my college summers. Most of the equipment predated WW II. At the time, the corporate philosophy was "we're outproducing everyone using the old equipment, why spend money upgrading."

[rosier]

The real “hidden” cause is paying workers more than they contribute to the value of the product. So other countries simply out competed us.