The Coronavirus Didn’t Cause This Crisis by Itself. McKinsey Helped.

Crises like the coronavirus pandemic reveal the structural weaknesses in a society. But those structural weaknesses can be recognized and repaired only if they are correctly identified.

This is easier said than done, given the temptation of human beings to interpret facts in ways that reinforce their existing biases. Predictably enough, we are told by the left that the crisis proves the need for socialized medicine, and by the right that the pandemic shows the need to prevent disease-bearing illegal immigrants from sneaking into the country.

If we ignore our ritual partisan debates and try to be as objective as possible, I think we can agree that the pandemic has exposed two weaknesses in contemporary American society: the loss of critical manufacturing capabilities and the decline of the one-earner family.

The loss of manufacturing capacity means that the U.S. is forced to import from China and other countries essential products that it used to make inside its own borders: many drugs and their chemical precursors, large supplies of ventilators and safety masks, and so on. The decline of the one-earner family and its corollary, the breadwinner wage that could support it, magnifies the social crisis caused by the closure of public schools in the interest of reducing contagion.

I am not defending any other aspects of the 1950s when I observe that a global pandemic in that era would not have caused these problems in the United States. The U.S., the leading industrial power in a world still recovering from global total war, was almost wholly autarkic, providing most of it what it needed from its own factories, including pharmaceutical factories. And between World War II and the late twentieth century most married mothers were full- or part-time homemakers or caregivers instead of full-time workers while their children were young.

So whose brilliant idea was it to outsource the production of critical medical supplies and life-saving medicines to China, an authoritarian, mercantilist state hostile to U.S. global hegemony? And whose idea was it to replace the one-earner family with the two-earner household as the norm?

The answer in both cases is American business, aided by ideologues—libertarian ideologues in the case of offshoring, and so-called “corporate feminists” in the case of family structure (as we shall see, the present dominant form of feminism is only one among several schools). And in both cases the motivation of American business was the same—reducing the wages it had to pay to American workers.

Let’s begin with offshoring. “Unbundling” is the term popularized by McKinsey and other consulting firms and business theorists in the 1990s for the process of dismantling the pride of postwar American capitalism—vertically-integrated industrial behemoths like GM and IBM. Vertical integration had been a mistake, the consultants claimed with the passion of evangelists. There was no need for massive industrial complexes in which iron and coke and petrochemicals went in at one end and a steel-and-plastic car or refrigerator came out at the other, with unionized, well-paid workers with generous benefits laboring on assembly lines in between. Businesses should focus on their “core competencies” and try to replace production, finance and bookkeeping with arm’s-length contracts with external contractors.

In the last half century, most major corporations have unbundled. They have become “original equipment manufacturers” (OEMs), a somewhat misleading name, since they are really brand managers that orchestrate chains of external suppliers in the U.S. and around the world. They have not only outsourced much or all of the production of their own products to third parties, but also offshored much of it to contractors in China and elsewhere. Apple is not really a U.S. corporation. It is a Chinese enterprise with headquarters and executives in the U.S.

As I have documented in my book The New Class War, the pattern of offshore outsourcing to China, Mexico, and India is explained almost entirely by labor arbitrage—that is, the search for cheap, non-union labor, the same search that has led the parallel transfer of manufacturing by U.S. corporations from high-wage, pro-union states in the Northeast and Midwest to the anti-union, low-wage states of the former Confederacy. It is doubtful that American consumers have benefited much from lower prices as a result of offshoring. The gains from lower wage bills have gone mostly to executives and shareholders.

Thanks, McKinsey, for encouraging U.S. companies to cut wage costs by offshoring essential medicine and medical gear production from the U.S. to China. What could possibly go wrong?

The replacement of the vertically-integrated corporation with the OEM, sitting like a spider at the center of a web of transnational supply chains, did collateral damage to American society by blowing up the mid-twentieth century social contract between employers and workers. During World War II, the federal government pressured American businesses into a truce with organized labor, which lasted for a generation after the war. That truce was limited in extent—it didn’t apply to the American South—and it was limited largely to the manufacturing sector, leaving out much of the service sector, whose workers were disproportionately female and nonwhite. Nevertheless, the tripartite system of government-brokered business-union negotiation for a time set standards in the private sector for wages and benefits.

The goal of organized labor for generations, briefly realized after World War II, was not merely a living wage—enough for an individual worker to live on—but a family wage—enough for one earner in a family, assumed to be the husband and father, to support a spouse and two or three children. This was the goal of “labor feminism,” which overlapped in significant ways with “social feminism” and “maternalist feminism.”

Labor feminists in the early and mid-twentieth century supported equal treatment of male and female workers when it came to equal pay for the same work. But they were motivated by the not-implausible belief that women perform a unique service to society by having and raising children, a service which is just as important if not more important than boosting GDP by sweeping office floors or cooking fast food. They rejected the radical socialist vision of collectivized child-rearing in institutions like kibbutzim in favor of the ideal of the nuclear (or perhaps extended) family as a locus of care outside of the market and also outside of the state. For this reason, labor feminists supported not only a family/breadwinner wage for the presumptively male single earner in the family, but also various kinds of protective legislation that applied to women but not men.

From the early twentieth century to the present, business has sided with the rival school that is often described as corporate feminism. This business-friendly version of feminism holds that the firm and the government alike should ignore biological differences between the sexes and treat all citizens as androgynous individual worker-bees whose training for their future jobs in cubicles or behind restaurant counters should begin in the hatchery—excuse me, the preschool. In the first half of the twentieth century, business lobbies were more likely than trade unions to support the Equal Rights Amendments (ERA), which indeed was opposed by many old-fashioned labor feminists and New Deal liberals who believed that it threatened protective female-only legislation. Corporate feminism has always been more popular among elite professional class women, who think of their jobs as fulfilling careers, than among working-class women. Many of the latter, according to polls, would rather raise their young children at home than drop them off, on the way to their own low-wage, dead end jobs, at a crowded, possibly unsanitary toddler warehouse staffed by low-wage, poorly-educated workers.

Most married women with children in the U.S. today work full-time because of economic duress. The de facto family wage system, based in the unionized manufacturing sector, collapsed when companies replaced well-paid, unionized auto workers in Detroit, for example, with poorly-paid, non-union workers in the Ozarks or Mexico or China. In contrast, in Germany, where business has not adopted anything like America’s version of low-road, low-wage, non-union capitalism, only 12 percent of mothers of children three and under work full time.

The response of American progressives to the rise of the two-earner family is that on the whole it has good—women have been liberated from the dehumanizing nightmare of having to tend their own toddlers during the day, rather than fobbing them off on somebody else—but a system of socialized public child care is required to ease even more mothers of young children into the workforce. The manifest moral ideal of today’s American left—both the neoliberal center-left and the neo-socialist left—is what has been described as the Swedish system of “statist individualism,” in which the government assumes more and more of the functions once performed by the family, including care-giving. (What most American leftists do not know is that the golden age of Social Democracy occurred in Sweden in the 1950s and 1960s, an age known as “the housewife era.”)

Child care is only one example of the need to transfer what was once unpaid domestic production by family members to for-profit firms or bureaucratic state agencies in a society in which all parents of children are encouraged or compelled by necessity to work full-time. The two earners are too busy to cook for themselves and their children, so they pick up fast food or order it delivered. There is no time to help children make their own creative Halloween costumes at home, so they buy prefabricated costumes—possibly manufactured by low-wage industrial serfs without any rights in China.

And what of the grand-parents and other relatives? For most of history, human beings lived in extended families, with several generations under one roof, whether it was the roof of a hut, a cave or a tent. The post-war American custom in which adult children, including the majority who do not graduate from four-year colleges, are expected to move out of the parental home would seem to most of our ancestors to be bizarre. Equally weird and repellent, by comparison to universal human norms, is the belief that the elderly should live apart from their children and grand-children if possible, and, if they become too feeble to be independent, should be wards of the state in care homes, taken care of by lower-class workers. Ironically, the COVID-19 pandemic, which disproportionately affects the elderly and makes younger family members possible carriers of contagion, has reinforced this separation of the old from their families which became the social norm in the U.S. after World War II.

The coronavirus pandemic will expose different critical flaws in different social systems. In the U.S., it has exposed the folly of transferring critical medical production to foreign countries, while pressuring all adult family members under penalty of poverty into joining the workforce rather than caring for their own children and their own elderly.

Americans never got a chance to vote on whether unbundling and offshoring the industrial corporation and unbundling and commercializing or socializing as many family functions as possible were good ideas. Neither policy has been desired by the majority of Americans who are high-school-educated and working class. Both deindustrialization and defamilization have been backed chiefly by the U.S. business sector and the college-credentialed, professional-class consultants, think tank experts, academics, and activists whom business elites have bankrolled.

Thanks, McKinsey.