Sunday, May 20, 2018

Threadbare Jeans and the Unraveling of America

If you live in the Bay Area, you cannot escape the 145-year legacy of today.  On May 20, 1873 Levi Strauss and Jacob Davis received their patent on what would become one of the world’s most iconic items – blue jeans!  Their patent, U.S.#139,121 wasn’t for jeans but rather for the copper rivets that reinforced the pockets and hems of jeans making them more serviceable.  Jacob Davis was an immigrant from Riga, Latvia and came to the U.S. in 1854 and became a citizen in 1871.  Levi Strauss, an Ashkenazi Jew from Germany, immigrated to the U.S. in 1847 and became an American citizen in the same year he started his dry goods business in San Francisco in 1853.  Riding the speculator wave of gold seekers across California and later into the Yukon, the two men set in motion one of modernity’s most ubiquitous brands. 

Moses Cone was born in Tennessee in 1857 to Jewish German immigrant parents Herman Kahn and Helen Guggenheim.  Thinking that “Cone” was more American than “Kahn”, Moses’ father changed his family name upon arrival into the United States.  In 1887, Moses and his brother Ceasar invested $50,000 in the C.E. Graham Mill Manufacturing Company in Asheville, North Carolina and from there aggregated several mills throughout North and South Carolina.  By 1908 their factories near Greensboro, North Carolina were the world’s largest supplier of denim.  By 1915, their relationship with Levi Strauss & Co was cemented and together, the two firms would clothe millions. 

In 2003, bankruptcy ended the Cone business.  Over 10,000 people lost their jobs and thousands of others saw their livelihoods destroyed as the era of denim faded in the West with the rise of competition from the East.  And while China exports the largest quantity of denim, Pakistan, Turkey, Egypt and Brazil are expanding their role in the global supply chain. 

I was reflecting on the Strauss / Cone paradox as a case study for the current upheaval in the world’s trade imbalance perturbations.  And, given the protagonist’s shared Jewish heritage, I was drawn to the economic cautionary parable from Genesis 25:29-34. 

29 Once when Jacob was cooking some stew, Esau came in from the open country, famished. 30 He said to Jacob, “Quick, let me have some of that red stew! I’m famished!” (That is why he was also called Edom.[a])
31 Jacob replied, “First sell me your birthright.”
32 “Look, I am about to die,” Esau said. “What good is the birthright to me?”
33 But Jacob said, “Swear to me first.” So he swore an oath to him, selling his birthright to Jacob.
34 Then Jacob gave Esau some bread and some lentil stew. He ate and drank, and then got up and left.  So Esau despised his birthright.
What strikes me about this story is the foreboding message it implies about U.S. economic behavior.  In the early days of the industrial revolution, cheap labor was an immigration issue.  When mines needed digging, railroads needed excavation, and mills needed tending, the affluent found ‘others’ to whom sub-standard wages could be paid in exchange for the promise of the ‘American Dream’.  At that time, the principal beneficiary was not a consumer paying less at the store but rather the industrialist pocketing greater profits.  As time went on, the laborers became slightly more affluent and started demanding access to goods and services – many of which they were responsible for making or assembling.  In response, in the 1970s and 1980s, a fatal decision was made to accomplish the Walmartization of the world by making vastly more products at vastly cheaper costs.  To prop up a consumer-credit financial system, the laborer-consumer demanded more stuff and bought it on credit.  That part of the equation was visible.  But what was not considered was that in exchange for sending manufacturing to ever cheaper labor markets, the ugly consequence of this would be the diminishment of the very labor that once paid the wages to support the consumer.  By demanding stuff rather than quality and value, we have ‘sold our birthright’ for thirty years of cheaper jeans. 

And now, when we want to “Make America Great”, we’ve got a tiny problem.  Our affluent expectations cannot be met by our own domestic production.  And while we’re pretty sure that the world will go on making cheaper jeans for us ad infinitum, the reality is that the world’s industrialized labor pools are themselves now growing their new lower middle class.  Domestic consumption rather than export is a growing reality for much of the world’s markets.  And what this means is that our temporary consumer orgy fueled by cheap labor is now starting to hit a wall.  The promise of perpetual growth, the always-better-tomorrow that would be the siren song of America’s capitalism, the illusion of our intellectual superiority always saving the day is now being shown for exactly what it is.  Hype and propaganda.  In his article in The Diplomat (“Chinese Consumers Will Change the Global Economy, April 6, 2017), Matthias Lomas highlighted the fact that the 400 million Chinese middle-class consumers are increasingly selecting quality, brand and status over price-sensitive consumption.  What if the world’s new middle class actually prefer ‘better’ to ‘more’?  In a world in which the American generation was based on ‘more’, we don’t have a clear picture on quality.  And this means that “Great” is a reach that may exceed our grasp. 

Our birthright – if there was one – was to be an experiment on democratized access to opportunity.  We turned it into a opium den of consumption.  And what did we get for it?  Cheap jeans! 


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Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave