Surviving The Hollowing-Out of the U.S. Tech Sector

This post is another “diary” post, as opposed to a more journalistic essay. It is also a midweek post, so I'll try to keep it short. There won't be many links, as I don't have time for exhaustive research, but I'll try to include a few relevant and interesting sources.

As I have said before on this blog, I am an engineer. The type of engineering I do involves generating plans and specifications for large-scale built structures and facilities, whether they be shopping centers, airports, rail terminals, military installations, or industrial plants. I have noticed certain trends over the years, trends which recently seem to be coming to a point of crisis.

For over fifteen years, large design firms have been outsourcing various parts of construction engineering and design. It started with CAD, and has by now grown to advanced engineering up through detailed design. The countries of choice for outsourcing are China and India. Most U.S. based major design firms now have design centers in India. (I won't name names here. I still have to live in this town.)

I know of a firm whose stock was highly valued over the last few years, and which had an impressive backlog of large clients, both military and industrial. However, the economic meltdown that began in earnest in 2008 dried up a significant portion of that backlog and of their client list. One example: someone I know was involved in designing facilities for an industrial metals mine which was operating in a region where concentrations of the metal in the ore had dropped to very low levels. In order to continue operating that mine, the operators needed a stable and relatively high price for their finished metal. The crash in commodity prices at the tail end of 2008 shut down the mine (and one of this engineer's projects).

This firm was typical of most of the large players – publicly traded, requiring constant dividend growth in order to promote increased share prices, and having a business growth strategy that often consisted of capturing market share by buying up smaller firms. 2008 was a year in which dividend growth and corporate growth were threatened by the global economic contraction. This company's management turned much more to outsourcing – in an attempt, I believe, to maintain profit and dividend growth. Meanwhile, several of their U.S. offices began to shrink.

Did the outsourcing strategy work as intended? That's a hard question to answer. The local office had regular meetings where employees were told that “although we're facing lean times now, the future looks bright!” And, “The company is doing well overall!” I think, however, that they may have missed at least one 2009 earnings target.

They began to rely heavily on outsourcing in order to boost profits and increase competitiveness in a shrinking market, but I think the best they have been able to do is to slow their own bleeding. One other problem they have is that because they are so large, their business model depends on securing long-term contracts with large clients. This is the only way they can profitably support their large cadre of middle and upper managers. Outsourcing was a way for them to lower their fees in order to win these clients while maintaining their revenue flows.

But the supply of large, stable clients with lots of construction capital is drying up. Or at least, that's what I suspect, based on what I've seen over the last year. This is a natural consequence of a contracting global economy, in which both private and government clients have become so heavily indebted that it is becoming clear that they can't repay their debts. This is something I knew about via the news and blogs I read (read the May 10 post from the Automatic Earth blog to see how this is playing out in Europe) – yet I hadn't experienced it as directly until my own work started drying up and the firm I worked for began to shrink. For I also worked at a typical large firm. The story I told you about one particular large firm applies to most of the major players, I suspect. And it goes to show that a person is not always confined to reading the news – sometimes he gets to live the news as well.

As I said, I worked (or more accurately, used to work) at a typical large firm. But I found myself at home twiddling my thumbs for several weeks this year, due to lack of work. By now I have become addicted to groceries and hot and cold running water, so I needed to find a way to support my habit. I discovered that while the large firms seem to be contracting in several regions of the U.S., there were small firms that were still able to find plenty of work. As I once said to a co-worker, “It's easier for a cat to survive on a diet of mice than it is for a grizzly bear.” All the elk and moose seem to be disappearing. I am now at a cat-sized (smaller) firm.

This firm's projects rarely exceed a few hundred thousand dollars. Many of them are in the $10,000 to $20,000 range. There's still a lot of work to be done for that kind of money. It's quick-turnaround, bang-it-out work – and it keeps me on my toes. Yet even this I do not expect to last, due to the ecological and resource constraints which initiated our economic contraction in the first place. I think the economy still has a lot of shrinkage left to endure.

Therefore, my eyes are still open to options. One such option is teaching. God willing, I will be teaching a quarter of a sophomore engineering class as an adjunct at a local college. This college also does research on renewable energy, so I'll have a chance to rub shoulders with some bright people who can educate me as to just what can and cannot be accomplished on a societal level with the renewable energy options currently available. I suspect that the application of renewables will involve asking hard-headed questions about what a particular energy source is actually good for, and whether certain applications need this source or whether they are better performed using more low-tech methods. In other words, I think that the next few years will force us to triage our industrial society and its living arrangements. I suspect that engineering in the U.S. will soon be mainly about designing small-scale systems appropriate for poor communities. The future, moreover, will belong to people who know how to do productive things, not to people who only know how to "manage." Those who can teach others how to do productive things will enjoy a special place in their communities.

By the way, if you want to read an article on the ethics of outsourcing U.S. construction engineering projects to other countries, check this out: “Outsourcing Affects Civil Engineers, Too.”

The Dark Persons of America

Dark matter: that matter in the universe that is not directly observable. Dark internet: that portion of the Internet that can no longer be accessed through conventional means. Dark people: those individuals who have fallen out of society’s view, who have disappeared from society’s radar. (Most of them are poor.)

My follow-up post containing the rest of the brownfields interview will be posted this weekend. But for this present post, I want to discuss something different.

Bernard Hill is a name that is probably familiar to most people who remember the Lord of the Rings movies. He played Theoden, the King of Rohan. That role was the first role I saw him play, because I don’t go to movies much and I don’t have a TV. But because I was intrigued by the Lord of the Rings movies, I did a bit of research on the principal characters, and discovered a surprising amount of information on their previous acting roles. It turns out that an early breakout role for Bernard Hill was in a British TV miniseries titled, The Boys From The Blackstuff.

Hill played the character of Yosser Hughes, one of five unemployed asphalt (tarmac for you British) layers in the 1980’s. The series chronicled the lives of this loose gang of five men as they struggled to maintain their dignity and provide for themselves and their families amidst mounting national unemployment and the indignities of being “on the dole.” It was a struggle that each man eventually lost. The most harrowing portrayal of that loss was shown in Yosser Hughes, who lost his wife, his children, his home, and lastly, his sanity, while constantly asking – sometimes demanding, sometimes pleading – “Gizza job!”

The Boys From The Blackstuff was an eye-opener for many of the British, who had previously been trained by their culture and their own mass media to think of the poor and unemployed as mere scroungers. In fact, the series was widely seen as a dramatic denunciation of capitalist, free-market Thatcherism. Most of all, the series put a human face on the poor.

Such a series would probably not have been made or broadcast in the United States at any time during the Television age. (It is doubtful that such a series could be made anymore in Britain.)

Our nation has been trained to ignore the poor. This training has been accomplished through a steady diet of distraction and aspirational propaganda that claims that “anyone can be rich, and by Gum, everyone should want to be!” So we allow ourselves to be hypnotized by game shows, upscale living and “home improvement” shows, sports, the promise of the Lottery, and the advertising that goes with it all. When we go to the store, the magazines next to the checkout counter are full of flashy covers full of beefcakes and vixens and stories about the lives of these “stars.”

When events force the poor onto the American national consciousness, the response frequently consists of anger and hatred on the part of the rich and the “aspirational.” The poor are blamed for being poor. This, of course, gets the rich off the hook for any sort of duty or obligation of charity toward the poor. Thus the mainstream media (which is owned by the rich) denounces any suggestion that government social spending should be increased (though they are curiously silent when the Government bails out the institutions of the rich). They denounce any suggestion that the rich should be taxed more heavily than they are (and they are not taxed heavily right now). This is why the mainstream media in Oregon (such as that “progressive” newspaper, the Oregonian) have come out so vehemently against Measures 66 and 67. Measure 66 would add an increase of a (very) few percentage points to the tax rate of singles making over $125,000 a year or couples filing jointly making over $250,000 a year. How many people do you know that make over $125,000 a year?

Sometimes that anger and hatred takes even more grotesque forms. Pat Robertson, the outspoken founder of the Christian Broadcasting Network, recently denounced the country of Haiti, saying that the earthquake that struck that country several days ago is God’s judgment on its people for “making a deal with the devil” two centuries ago in order to get free from their French (white) colonial masters. If the earthquake is “God’s judgment,” that excuses rich Americans from having to help Haiti, doesn’t it? By the way, Mr. Robertson has a net worth of between $200 million and $1 billion, according to Wikipedia.

(Pat Robertson claims to be a Christian and a minister of the Gospel. But I am a Christian, and I’ve read the Bible, and I think Mr. Robertson might have to prepare for an unpleasant surprise on the Day of Judgment – see Matthew 6:24; Matthew 25:31-46; Luke 16:19-31; 1 Timothy 6:9-10 and James 5:1-6. I shall have more to say about him on my other blog. Has he ever heard of a place called Gehenna?)

Usually, though, the eyes of American society are directed away from the poor. There’s a store I regularly visit that carries Newsweek Magazine next to its checkout counter. Last week, Newsweek’s front cover was dedicated to picturing the “new face of Al-Qaeda” – the supposed black Nigerian threat. This week’s cover featured the growing American conservative acceptance of gay marriage. To the best of my knowledge, Haiti did not even make the front cover of Newsweek. (In fact, I’ll bet that in two weeks, Haiti will be forgotten – just like New Orleans was after Katrina.)

But we don’t have to go as far as Haiti to see how hard our leaders are working to keep our eyes off the poor. There are the “official” Government unemployment figures that are regularly cooked to a reality-obscuring flavor. I am truly thankful for those analysts who are able to sniff out the truth, people who publish websites like Shadowstats and The Automatic Earth. Basically, what they reveal is that in order to keep the “official” unemployment rate from going much above ten percent, the Government is ignoring huge and growing sectors of the unemployed population. Would you like to meet a “dark person”? You may not have far to look.

Meanwhile, if you want a peek at the lives of these dark people, feel free to rent or buy The Boys From The Blackstuff. You won't find another such portrayal in our mainstream media. It’s a good preparation for the time when you yourself will have to shout out the American version of the plea, “Gizza job!”

Involuntary Part-Time, Part 2

One of the dangers of covering the news of a particular place at a particular time is that the reporter doing the coverage may wind up being part of the news himself if he stays too long in a place where news is happening. I'm not a professional journalist, but I have been trying as best I can to give an accurate account of the unfolding economic collapse that has resulted from the passing of the worldwide peak of crude oil extraction. Now it seems that this collapse is about to touch me personally.

Our company's local office has been shrinking steadily over the last several months, as departments representing various design disciplines have run out of work. Some parts of our leased space are now more than half empty. The office management has offered to put the remaining employees of several departments on part-time schedules in order to avoid further layoffs. Within the last two weeks, our department's turn has come. Even though we get to choose whether or not we want to work part time, it seems to be a Hobson's choice, as the likely alternative is to be shown the door.

This comes at an interesting time for the engineering profession nationwide; it seems that employment for electrical and electronic engineers is shrinking, and that many EE's are being shown the door during this economic downturn. (Source: http://news.softpedia.com/news/Engineering-Jobless-Rates-Are-Sky-High-116168.shtml) Of course, if any engineering jobs are being created, they are increasingly to be found in “low-cost centers” overseas, or they involve significant overtime and extensive, mandatory travel.

This trend in engineering job availability brings up an important question for those who are collapse-aware. Given what we know and the trends we see, should we take the disappearance of our employment as a signal to jump clear of the breaking system of the official economy? If you were laid off tomorrow, would you take it as a signal that you should start your own business or make some of the other radical readjustments commonly known to collapse-aware people? Or would you try as hard as possible, for as long as possible, to cling desperately to the official economy, in order to continue meeting your needs via that economy?

To cling to the official economy when one knows that it is breaking seems unwise to me. There is an opportunity cost involved, if one is working 60+ hours a week and traveling one or two weeks a month for a paycheck in order to prolong, for a little while, a certain lifestyle. One who lives such a life has very little time to prepare the necessary adaptations of self-reliance for the day when the official economy breaks. If my office shows me the door, there are some jobs for which I will not apply.

But I have a friend who has taken an engineering assignment in a faraway foreign country for a few years. The pay is very, very good (although the country itself is not the sort of place most tourists would like to visit), and my friend needs the money because of a large mortgage. I only hope his company doesn't go out of business while he's overseas. Such an event might make it extremely difficult to get back to the U.S. again. Such a possibility should not be taken lightly; much stranger things have happened within the last couple of years.