Can Confucius save America’s middle class?

By David Rohde
October 6, 2011

Update: Sorry, in the first version of this column I confused two different companies. The corrected version is below.

BOWLING GREEN, KENTUCKY–For decades, this bucolic corner of southwestern Kentucky depended on Corvette sales from the local GM plant for its economic life. Now, it’s trying something different.

Last year, the state university opened a “Confucius Institute” that offers nighttime Chinese language classes to local business people. An American auto parts company chose to create 280 new manufacturing jobs here instead of Mexico. And government officials brag about the 19 companies from India, Japan, Finland, Germany, Israel and other foreign countries that have invested locally.

“We just came back from China,” Ron Bunch, the head of the Bowling Green Chamber of Commerce, told me as he escorted Chinese investors around town. “We’re starting an Indo-Kentucky Chamber of Commerce.”

Even the town’s old economy hallmark – the GM plant that is the world’s only producer of Corvettes – is expanding. Fruit of the Loom, which is headquartered here, is slowly growing as well.

While the middle class agonizingly shrinks in other parts of the United States, Bowling Green, Kentucky boasts a growing number of jobs and a lower unemployment rate – 7.9% — than the national average of 9.1%.

“It’s about not fearing globalization,” said Brian Strow, a former city commissioner. “But being an active participant.”

Bowling Green is reinventing itself. Pragmatic, diverse and not politically polarized, this city of 100,000 residents increasingly sees itself in a global context. It is slowly finding its way and providing a sign of hope for America’s beleaguered middle class.

After working as a foreign correspondent and investigative reporter for The New York Times for the last fifteen years, I recently became a columnist for Reuters. The primary focus of my column, “The Global Middle,” will be the state of the middle class inside the United States and around the world.

While the American middle class has struggled in recent years, a new global middle class is emerging in countries like South Africa, Brazil and Turkey. Worldwide, an estimated 70 million people join an “emerging market middle class” each year, earning incomes of $6,000 to $30,000 annually. Economists predict they will surpass the Western middle class in global spending power within twenty years.

This column will examine which economic policies help create middle classes. What lessons from abroad, if any, can be applied to the United States. And whether growing middle classes overseas inevitably mean a shrinking middle class in the United States.

For me, and many others, the creation and preservation of middle classes is vital. Two decades of covering political, religious and ethnic conflict around the world has convinced me that the single largest instrument of stability in any society is a middle class. Whatever their nationality, members of the middle class tend to reject extremist leaders. They try to make governments more effective. And they often cherish the same values, particularly merit, justice and stability.

I plan to visit Bowling Green and other communities inside and outside the United States to see firsthand what is occurring on the ground. My goal is to move beyond political posturing, news media hyperbole and academic theory. Here in southwestern Kentucky, community leaders are trying to innovate, export and educate their way out of Washington’s economic and political paralysis.

There are hurdles, of course. Over the last two years, only 2,200 jobs have been created in a community of 100,000 people. A taxpayer-financed, $25 million industrial park on the north side of town is attracting fewer tenants than hoped. And the desperate courting of foreign investors is a marker of the end of American economic omnipotence.

The Confucius Institute here is one of 74 that have opened on campuses across the U.S (and 322 worldwide) that are affiliated with a non-profit based in Beijing. Critics have said the Chinese government controls the organization and some have even accused it of corporate espionage.

And yet Bowling Green has few other options and a long history of welcoming foreigners. A refugee resettlement center since the 1970s, the city has large Vietnamese, Bosnian and Burmese communities. Thirty languages are spoken in local public schools.

The city defies traditional labels and limits. Neither Rust Belt nor rural, it has diversified from an economy dependent on Corvette sales to mix of services, technology and light manufacturing

While it is the hometown of Sen. Rand Paul, it is neither blue nor red. All local government offices are non-partisan. When party is identified, local Democrats are fiscally conservative. Local Republicans say government plays an integral role in economic growth. The local economic development philosophy is to add small numbers of jobs to existing companies, rather than courting potential white elephants.

“Our greatest strength has been staying the course,” says Kevin DeFebbo, the city manager. “There is a great practicality here.”

Lastly, the town has a college, Western Kentucky University, that is no ivory tower. Increasingly, the university is the region’s economic engine. In 2001, the university and state purchased a 300,000 square foot local mall on the south side of town and turned it into a research center that holds laboratories, private companies and a high tech start-up incubator.

One of its fastest growing tenants is Pure Power Technologies, a spinoff of a local carburetor manufacturing company. the research and development arm of a local heating and garden tool manufacturing firm that went bankrupt in 2008 after losing jobs overseas and being bought and sold by a series of private equity firms. Today, it creates develops and designs diesel engine control systems. Its director travels widely overseas to drum up new business. president is a university graduate, as are all eighteen of its employees.

“He’s in Brazil today,” said Doug Rohrer, a former business executive who runs the center. “He’ll be in China on Monday.”

What works in Bowling Green may not work elsewhere. Other communities lack the resources that exist here. But there is real change in this area. I will write more about Bowling Green and its efforts to fight back, and track over time its success or failure. For now, business people, local officials and teachers are engaging the outside world and succeeding. An odd mix of Corvettes, American pragmatism and foreign investment is helping Bowling Green’s middle class claw its way back.

PHOTO: Corvette fans look over the new 2006 Z06 Corvette during its roll out for Corvette fans and the general public. REUTERS/John Sommers


19 comments

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Bowling Green, with a population of 100k has created a total of 2,200 jobs in the past 2 years. Looking at this piece through those glasses, its a load of crap.

Funny to hear “middle class” defined as families earning $6,000 to $30,000 per year, well below the poverty line.

As for Fruit of the Loom, they exported their manufacturing jobs long ago.

So we are left with this…a vestigital Corvette factory which either is union or keeps the union out by paying union wages, and a chinese language school, where you are going to get a daily dosage of chinese government propaganda.

This is was passes for “Good News” in 2011 Corporate owned America.

The folks protesting on Wallstreet are right. Time to get angry.

Posted by LordCavendish | Report as abusive

I took this excerpt when the strikeouts were still visible. Strikeouts marked (((begin…end)))

One of its fastest growing tenants is Pure Power Technologies, a spinoff of a local carburetor manufacturing company. (((the research and development arm of a local heating and garden tool manufacturing firm that went bankrupt in 2008 after losing jobs overseas and being bought and sold by a series of private equity firms.)))

Today, it (((creates))) develops and designs diesel engine control systems. Its director travels widely overseas to drum up new business. (((president is a university graduate, as are all eighteen of its employees.)))

Posted by LordCavendish | Report as abusive

David, good to see you are back on the beat. I am in Haiti right now which sorely needs a larger middle class and hopefully with the new Prime Minister, Garry Conille that can be achieved. I look forward to this series. I also look forward to reading your new book, once I get back to the states.

LordCavendish, that was the GLOBAL “middle class” that was earning between $6 k and $30 k. I am sure $6 k in Africa in some areas is quite a bit. You’d think that would be good income in Haiti, but the cost of living here is very high, especially with all the NGO’s in town.

Cheers,

Kira

Posted by KiraTaiPei | Report as abusive

“We just came back from China,” Ron Bunch, the head of the Bowling Green Chamber of Commerce, told me as he escorted Chinese investors around town. “We’re starting an Indo-Kentucky Chamber of Commerce.”

Should please the Indians, but his Chinese guests need to introduce him to Sino-.

Posted by Humanismws | Report as abusive

I will be following your column. May it continue to leave me feeling a little bit more hopeful about our future/my future.

Posted by Train_Ryder | Report as abusive

LordCavendish, don’t you think that Americans demanding higher wages is what damaged the middle class in the first place. $6,000 will go a long way when you live in a 400sq ft. apartment, ride a bicycle, don’t buy gasoline, or heat and cool a McMansion, have government health care and free education, and buy a new $500 cell phone every 2 years. Our expected standard of living and consumption patterns cost too much for our wage earners to be competitive in the global economy. If every municipality in the US saw themselves as part of a global economy our national economy would be much better off.

Posted by calvinbama | Report as abusive

I think that the component lacking in the US Government, and Banking is stability. Without stability businesses like mine just stay where they are, keep the extra cash for any surprises from the Government or the Banks, and just exist. I hear the “Hire People” thing. How can you expand in an unstable market. Barak Obama does not understand stability, nor do the Yoyos in Congress. They listen to so many voices and dance aroung getting reelected so how would they ever get to a point of stability. If the Republicans can find a candidate with a stabile life and who is willing to do his own thing he is a shoo in to win. Same goes for Congressmen and
Senators.

Posted by fred5407 | Report as abusive

I am in agreeance with Calvin.

LordCavendish fails to read closely enough to see that the author labels those earning $6,000 to $30,0000 “emerging markets middle class” – which is not to be compared to the American poverty line. Although $6,000 is well below poverty line in America, Calvin makes a sound argument. The American standard of living is unsustainable. We need to realize that we are all part of the global community now and realize we are competing on a global level for jobs. Thus, we need to reform our tax code, regulatory environment, and bolster our spending (intelligently) on education, infrastructure, R&D, and energy independence to be competitive globally.

Posted by jaham | Report as abusive

BTW, I wouldn’t call an unemployment rate that is more than 100 basis points lower than than national average a “load of crap”

Posted by jaham | Report as abusive

Bowling Green sounds like every single small college town in the United States of America. What is not mentioned is that if the economics and business departments in Bowling Green and across the United States were not bought out by global corporations and teaching worthless nonsense then America would not be in this situation. With high unemployment and unsustainable government spending at every level, it is clear that globalization has not benefited the majority of Americans.

Posted by M.C.McBride | Report as abusive

David, good to see someone honing onto the importance of the global middle class and the impact they will have in future markets. Preparing for this rise in this consumer base now will undoubtedly give companies an edge later.

I hope you will develop this idea of American cities becoming more mindful of their role in the global context. Too often, people unintentionally corner themselves by thinking on a local level. For example, bloggers should know that as soon as they’ve created their site, it’s already gone global. By assuming you only have a set audience group, you’ve already put yourself at a disadvantage.

It is also important to note that a global mindset is only one important factor to this development in Bowling Green. David points out a great point about the openness of the city. If we look at Philadelphia in the years after William Penn, the city was the only city along the east coast of America that welcomed all (what did Boston do to those unwelcomed? Salem witch trials. Maryland only allowed Catholics, and so on and so forth). After 1776, Philadelphia became the center for industry and development. All railways wanted to connect to Philly. Workers had significantly higher wages (and therefore standard of living) in Philly. New York was only beginning to be competitive. Today, we look at Australia’s open policy on immigration and see how their population is growing at breakneck speaks, attracting huge amounts of human resource. Their economy is thriving and survived the recent recession relatively in tact. Standard of living across the nation is one of the highest in the world. Take a look at Shanghai, what I would call the new global city. The people in that city don’t sell to their Chinese counterparts, they’re selling to the world. Global corporations compete for a place in Shanghai. Bowling Green is on the right tract by attracting foreign investors. The next step that they might take, is foreign involvement.

Posted by tinatx9 | Report as abusive

“Globalization has not benefited the majority of Americans.”

Well said.

Democracy ceases to exist in a system where 1% of the people own and control everything, including the media and government.

Calvin needs to read John Calvin.

Posted by LordCavendish | Report as abusive

If you want to see what can really work for a Global Middle Class I would suggest a very hard look at Argentina and some of the innovations there.

When the Argentine economy collapsed, many businesses were shuttered as not worth even auctioning off the equipment. The workers there knew that just making anything would build more wealth in the long run and so broke into the factories and went to work.

By electing “managers” from among their own numbers and making them true agents at equal pay to line workers and so improved efficiency as a result of actual two way communication. Removing the overburden of excess “Top Management” pay also went straight to the bottom line.

When the previous owners showed back up to claim the now quite profitable companies the Argentine Courts awarded them the value of the companies at the time they walked away and that was easily paid.

But since most of the value added by those owners in many cases was the ability to borrow the money for capital expenses, and the companies themselves were the primary collateral, they discovered that the Royal model of business was no more and perhaps less valid than the Democratic/Republican model. All that is needed is structure to allow that to happen.

By making an open system that would allow the folks working at every level to compete and innovate, in creating products from vehicles to solar equipment, but have a published standard so parts are interchangeable, and those combining the final product can pick from those many available.

In the early days of the PC anyone could build them in the garage, because of just this happening and so growth was explosive. By guarding against manipulation of the markets and creating such standards for US businesses with loan & tax advantage for worker ownership, there could be a total renaissance of the middle class.

Posted by FreeDem | Report as abusive

Nice touch, Reuters, leaving editor strikeout text so we can see previous revisions and decide for ourselves if the editor’s change was justified, lol.

Posted by DisgustedReader | Report as abusive

It is OK for cheap manufactured Chinese goods, but should we get the ideology too?

Perhaps a little too much!

I wonder if any lobbying interest behind this kind of articles.

We need to tax offshore outsourcing, perhaps some “decent” jobs will come back.

Posted by robb1 | Report as abusive

The high philosophical moral and logic on peace and hospitality introduce by Confucius which had surpassed the Christianity is far beyond world’s comprehension.
The space technology was stolen and confiscated from the Nazi pre and post war. The reason for western civilization been capable of launch the space plane against the soviet was because the original idea was taken from the Nazi scientist who had bad intension to enslave the world.
Of course, Chinese were the first one who invented the rocket which had overtaken the European culture. Not to mention the gunpowder which later modified by noble. Neither were out of bad intension, but both were for the celebration of the festival.

Posted by ladygaga | Report as abusive

What have I been living for? Is it to realize a foreigners life or my own? To accept guilt for being alive?!! What have we grown up experiencing? I can not possibly accept guilt for the life I have lived!

The United States of America has contributed a tremendous amount of effort and innovation to improve living conditions for everone in the “global community”. I believe that is to be celebrated greater than pointing to the differences caused by hedonists.

Posted by mdblitz | Report as abusive

Free trade exports standards of living. Both ways. How could it not? Buy much, sell less, does that.

What we in the US call a Middle Class is wealth in many countries, but as we export our standard of living we will find ourselves converging with people whose cheap labor and pollution-generating industries we have exploited. However… our Middle Class has gained only what we bought; our Super Rich reaped what profits could accrue.

Posted by RET_SFC | Report as abusive

The real problem is that what we once called the “middle class” has lost self-government and become just another bunch of peasants ruled by aristocrats.

Our money needs to be under our control, not Wall Street’s, not Washington’s, not Beijing’s. The dollar is simply priced to high. A Chevrolet Corvette is a good, fun car, but if you price it at $250,000. you will not sell many, nor make many, nor employ many. It is a matter of price.

If needed, we should abandon “free trade” and slap up tariff walls. We are a continental country and can manage if we must. So what if a bunch of rich people in New York can no longer try to boss the world around? What did they ever do for us? Export all our jobs and profit from it? Yeah. That’s it.

Posted by txgadfly | Report as abusive

[...] Glossa News meryluiseastri  titolo ” la trasmutazione del piombo in oro” in polemica con pluri Pulitzer David Rohde is a Reuters columnist and former reporter for the New York Times. He is a two-time winner of the Pulitzer Prize  articolo da leggere   Il giornalismo deve essere solo ricerca di fonti per scrivere un articolo oppure dovrebbe essere curiosità di conoscere l’ esperienza altrui? Quanto un giornalista  ascolta realmente i campanelli d’allarme e di cambiamento e quanto invece ricerca solo risposte ovvie alla sua opinione?http://blogs.reuters.com/david- rohde/2011/10/06/can-confucius-save-amer icas-middle-class/ [...]

[...] Glossa News meryluiseastri  titolo ” la trasmutazione del piombo in oro” in polemica con pluri Pulitzer David Rohde is a Reuters columnist and former reporter for the New York Times. He is a two-time winner of the Pulitzer Prize  articolo da leggere   Il giornalismo deve essere solo ricerca di fonti per scrivere un articolo oppure dovrebbe essere curiosità di conoscere l’ esperienza altrui? Quanto un giornalista  ascolta realmente i campanelli d’allarme e di cambiamento e quanto invece ricerca solo risposte ovvie alla sua opinione?http://blogs.reuters.com/david- rohde/2011/10/06/can-confucius-save-amer icas-middle-class/ [...]