As a tumultuous 2014 drew to a close, Federal Reserve chair Janet Yellen had encouraging news for the American economy: all the signs pointed to a recovery in full swing, six years after the worst of the 2008 crisis. November had just seen the creation of 320,000 new jobs. Job creation in 2014 averaged 220,000 a month. Unemployment had fallen to 5.8 percent even as more people entered the labor force, business confidence was up, and the Fed was backing off its extraordinary monetary easing. Things were finally returning to normal.
Boom, Bust, Exodus:
The Rust Belt, the Maquilas,
and a Tale of Two Cities
by Chad Broughton
Oxford University Press, 399 pp.
The only problem? Underneath these top-line indicators, “normal” looks very different today than it did a generation—or even just a decade—ago. Inequality has gone mainstream, with the top 0.1 percent (about 160,000 families) now owning 22 percent of the nation’s wealth (versus 7 percent in the 1970s). More fundamentally, a major pillar of post-World War II American prosperity—well-paid, well-pensioned jobs manufacturing consumer goods for the domestic market—has totally crumbled. While manufacturing employment has been in decline since the late 1970s, the 2000s alone saw a loss of nearly six million jobs, while the aughts became the first decade in sixty years to see zero net job creation.
The remaining factory jobs are largely lower skill, lower paying, and benefits free, while the recovery’s new jobs are centered in the often-precarious service sector. The 2008 housing collapse plunged the middle class’s wealth to its lowest level since 1940, and the economic upswing has been driven not by rising wages but by the highest levels of consumer debt in history.
All this adds up to deeper economic, and cultural, shifts in the American landscape than can be captured by mere statistics. Rising to the task of chronicling this epochal transformation is the University of Chicago public policy lecturer Chad Broughton, with his new book, Boom, Bust, Exodus: The Rust Belt, the Maquilas, and a Tale of Two Cities.
Through rigorous reporting and extensive interviews with workers, Boom, Bust, Exodus tells the stories of two distant but closely intertwined communities: the Rust Belt town of Galesburg, Illinois, and the fast-growing border city of Reynosa, Mexico. For over a century, Galesburg hosted a steadily expanding complex of factories known as “Appliance City,” which employed thousands of workers until it closed in 2004. Meanwhile, Reynosa became the poster child of the maquila industry, in which multinational firms send parts to Mexico to be assembled before being re-imported for final sale in the United States.
Broughton traces the sad trajectory of Galesburg, a small community battered by economic decline. But the story begins with a portrait of a bygone era of plenty—plenty of jobs, plenty of disposable income, and plenty of purchasing power for big-ticket items like the refrigerators produced at Appliance City.
Boom, Bust, Exodus introduces Appliance City in 1959, when it was owned by the Chicago-based Admiral Corporation. At that point, the United States was in the midst of an unprecedented postwar expansion. For much of the 1950s, real GDP growth topped 7 percent and purchasing power spiked by 30 percent. Moreover, growth was equally shared: between 1950 and 1980, income grew just as fast for the bottom of the wealth distribution as it did at the top. By 1974, Galesburg was booming, with more than 10,000 unionized manufacturing jobs in a town of just 36,000 people.
But the good times weren’t to last. A series of corporate maneuvers led to the 1986 acquisition of Appliance City by Maytag, the washing machine producer headquartered in nearby Newton, Iowa. Consolidation within the industry, combined with competition from domestic giants like General Electric and foreign companies like Haier, resulted in a total focus on cost cutting that strained union-management relations. “Instead of going into negotiations asking, ‘How much are we going to get,’” says one of Broughton’s union interviewees, it was “How much are we going to have to give up?” By 2002, the local union was pushed to the brink of strike; just months later, Maytag announced that the Galesburg plant would close—with operations reopening in Mexico at the Planta Maytag III in Reynosa.
Thirteen hundred miles to the south of Galesburg, history was moving in the other direction. While middle America deindustrialized, Mexico was traveling the same difficult road toward industrialization that developed countries had taken more than a century before. Progress, as in Dickensian London or early-twentieth-century New York City, took the form of low-wage factories filled with desperate migrants packed into precarious and chaotic urban slums. And in Reynosa, the central figure—the villain or visionary, depending on whom you ask—was Mike Allen, the charismatic leader of the McAllen Economic Development Corporation, or MEDC.
From 1987 until Allen’s retirement in 2006, the MEDC was the driving force behind positioning Reynosa, and its neighbor McAllen, Texas, at the bleeding edge of globalization. The MEDC lobbied officials, pressured labor leaders, and stoked infrastructure development in order to position the Reynosa-McAllen “node” as the leading option for multinationals seeking an edge. As Broughton writes, “The MEDC worked daily with companies from twenty-five countries to give them everything they wanted: a cheap and flexible labor force, a fluid border, low transaction costs, efficient logistics, and access to the largest consumer market in the world.” Allen also pushed hard for the North American Free Trade Agreement (NAFTA), which the Galesburg workers, like so many other American workers, blamed for their woes.
But if anything, Broughton’s narrative underscores how these downward trends predated NAFTA, which only began taking effect in 1994. Appliance City, like much other American manufacturing, was under pressure from firms in Asia and Europe well before the maquila industry took flight. And the Congressional Budget Office, among others, has concluded that NAFTA barely moved the needle on total U.S.-Mexico trade—something NAFTA’s boosters would also do well to keep in mind.
Where NAFTA likely had a much greater impact—and where Broughton focuses much of his attention—is its role in hastening the collapse of Mexico’s small-scale farming (ejido) economy. With protective import tariffs gone, highly subsidized American grain flooded the Mexican market, sweeping away all but the largest and most export-oriented agribusinesses. For many of these now-unemployed rural laborers, the booming maquila factories became their only hope for a livelihood.
In the view of Mexico’s intelligentsia, this restructuring of the country’s inefficient farming sector was inevitable. That may well be true. Throughout Boom, Bust, Exodus, critics of the haphazard industrialization in Reynosa are asked whether, given a simple yes-or-no choice, things are better with the new factories. It’s a loaded question, but most reluctantly answer in the affirmative.
One Planta Maytag III worker whom Broughton follows over the course of several years clearly illustrates this ambivalence. Laura Flora Oliveros found factory life harsh and unforgiving after her upbringing in rural Veracruz. But she continued to choose the low wages, long hours, and chaotic urban life because of the promise of steady work, overtime pay, and upward mobility for her children. “The only inheritance that I can give you is your education,” Flora tells her daughter.
Thus, despite Broughton’s nostalgia for the heyday of the American union, and the author’s penchant for indulging in anti-globalization sloganeering, the lessons in its pages are essentially realistic ones. Back in Galesburg, there are few illusions about the return of a 1950s-style economy. The book’s most instructive—and moving— moments involve the daily struggles of former Appliance City workers to move on and remake their lives. One shrewdly acquires a degree in the growing field of radiology. Another pursues her dream of a journalism career, working and attending school as a single mother. Yet another struggles with crippling factory-work-related injuries and sinks into alcohol dependency. Most of them are scraping by on severely diminished incomes, unfulfilled pensions, reduced hours, and unstable benefits. Many find that their lack of formal education renders them desperately unequipped for the job market. For all of them, who were once part of the upwardly mobile middle class, supports such as Trade Adjustment Assistance, unemployment benefits, and food stamps have been critical for survival.
Given the anger and disillusionment that drives much of his narrative, Broughton offers a surprisingly moderate conclusion. “Economic globalization is not the nub of the problem,” he concedes. “It’s how the American political system responded (and failed to respond) to it.” What would a better response look like, then? He has several options in mind—from narrow measures like more generous worker retraining to broader reforms in education, health insurance, and a more robust national industrial policy. None of these policies, however, would overturn globalization or the changes it has wrought; they would only mitigate its impact on those hardest hit.
Ultimately, Boom, Bust, Exodus serves as a reminder that there was nothing inevitable about America’s period of plenty, and no guarantee that it will return anytime soon. More sobering yet is the thought that perhaps it was that unprecedented prosperity, and not our subsequent malaise, that was the historical anomaly. “Even economies have histories,” wrote the late scholar Tony Judt. Chad Broughton has done us a service by shedding a bit more light on the one in which we are currently living.