By Dean Whittaker

With globalization has come the ability to source work anywhere in the world. The economic thought was that as the world economy grew, the demand for our goods and services would grow too, and we would all prosper. As we now know, things haven’t quite worked out that way.

Ten years ago I gave a presentation to the local chamber of commerce which I have since described as my “doom and gloom” speech. It described a future world which was inhabited by the “knows” and the “know nots.” In this world, there was no middle class. It was a feudal system. Well, as they say, the rest is history…or, is history repeating itself?

The nature of the work done domestically has changed. It is now highly automated, reducing the need for those who work just with their hands and increasing the need for those who work with their heads and their hands. There has been a structural change in our economy, not a cyclical one.

Much of the domestic demand is being met through the importation of goods and services, leaving behind only work that cannot be sourced elsewhere, such as education and some healthcare services as well as that which can be done in a highly automated way. In other words, work that could be done with our hands moved to the lowest-cost hands, and with it, the middle class income that helped created domestic demand for our goods and services. If there is no demand, there is no work to be done. If there is no work to be done, there are no jobs created.

There is a glimmer of hope in the “on-shoring” of work when companies have found that the hidden cost of off-shoring work such as escalating wages, security issues and increased transportation cost and long delivery time have begun to out-weigh the benefits of lower wages.

However, work that can be done with just our hands has shrunk, while the work to be done with our heads and our hands has grown. A refrain I hear frequently when I speak with local companies is that they have work to do; they just cannot find people with the skills or knowledge to do it. This is where we find the void left by the middle class. When our middle class lacks the knowledge and skill to do this work, they lack the means to earn the income to provide even the basic needs for food, clothing, and shelter. As a result of this loss of demand, our economy contracts. We need the middle class working if we are to prosper as a nation. A country’s greatest competitive advantage is a knowledgeable, skilled population.

Knowledge and skills are the factors that will turn our economy around. Knowledge is knowing what to do, skill is having the ability to do it. These two factors will enable us to work with our heads and our hands, increase demand, and therefore, create more jobs

Recently, I started asking my friends and colleagues if they knew of anyone looking for work. I was initially surprised to learn that they did not. Then it occurred to me that most of the people to whom I had posed this question were college-educated, leading me further to recognize the importance of working with our heads in addition to our hands. We can now see the transition to a society of “knows” and “know nots” and the disappearance of the middle class and their jobs. We are becoming a feudal society.

Those who study history say that the feudal periods end with revolution. Is one of the purposes of economic development also to maintain the current power structure by giving hope to the middle class for a better future, and therefore, prevent revolution?