My little blue bike

Awww.

When I was 5, my teenaged next door neighbor spray-painted his old bike blue and gave it to me. I learned to ride on it. I remember my mom making a big deal about the fact that it was a Schwinn. That meant much less to me than it did to her. When she grew up the Schwinn bike was a status symbol - a sign of middle-class prosperity. For the last two decades we haven't even heard the name. Here's an interesting article from today's Washington Post about the Schwinn bicycle company and its financial condition in the new world economy.

What happened? At the end of the 1970's, Schwinn started outsourcing to Taiwan. The Taiwanese suppliers learned how to manufacture bikes and discovered that they could sell their own poor-quality copies at a much cheaper price. Schwinn could no longer compete. That fact, coupled with new trends like BMX and mountain biking, signaled the end for a once-proud bike manufacturer. A flexible company might have adapted, but Schwinn stubbornly stayed true to it's traditional American roots. In 1993 they went bankrupt.

That in itself is enough to make you think twice about globalization. What's perhaps more interesting about this story is the broader picture - looking at the Schwinn company as it exemplifies the fate of American manufacturing (and the American middle-class) in the late-20th and early-21st centuries.

"As employment rose at Schwinn and other factories after World War II, so did the fortunes of the middle class. From 1947 to 1979, median family income more than doubled, from $21,201 to $45,989 in inflation-adjusted terms. The gap between rich and poor narrowed, as the middle 20 percent of families gained ground more rapidly than the top 5 percent."

Sweet! But...

"[Outsourcing led to broad] decline in U.S. manufacturing, with the sector supplying 5 million fewer jobs today than at its peak in 1979. Meanwhile, family income growth slowed, rising only about 15 percent over nearly a quarter-century. Americans without a college degree -- who make up about three-quarters of the adult population -- now earn lower wages in real terms than they did a generation ago."

The middle class in America today is both smaller and poorer than it was when I got that blue bike 25 years ago. In the words of Richard Schwinn, "We're missing a big, important part of our society. Either everyone has to go to college or everyone has to have very low-paying jobs." And guess what? Everyone can't go to college. With the burden of taxes shifting to the states, funding for higher education is being slashed. Tuition at public universities is sky-rocketing. The cost of attending my own alma mater, the University of Maryland, more than doubled in one year. College is fast-becoming what it was 100 years ago - a luxury for the rich.

Hooray.

What's going on with Schwinn today? Good question. In 2001 a Canadian businessman bought the Schwinn company out of its second bankruptcy. Today, he imports inexpensive low-quality bikes from China and sells them under the Schwinn name. They're a huge hit at Wal-Mart this holiday season.