I've included excerpts of an interesting article in U.S. News about globalization. It provides some further discussion of the fact that capital is being rewarded handsomely, whereas labor is being paid less and less.
Every properly educated commentator knows that freewheeling capitalism is the best economic medicine. Right? Well, up to a point--the point where our special interests get involved. Take, for example, the recent comments of columnist Charles Krauthammer on the talk show Inside Washington. In defending remarks by Gregory Mankiw, the president's chief economic adviser, about the virtues of sending U.S. jobs overseas, Krauthammer argued strongly for unfettered markets: "If the Democrats adopt protectionism, and they win this election, it will destroy our economy." Except, of course, when it comes to something really important. Like, say, baseball. What about those rich Yankees buying up Alex Rodriguez? "Rapacious capitalism," the columnist stormed.
The answer, says Federal Reserve Chairman Alan Greenspan in a recent speech, is better-educated Americans. But how will tomorrow's workers learn the skills needed to guide all those offshore minions if there are few entry and midscale jobs here at home? Add to that the trend toward replacing full-timers with piece workers--make that "consultants" or "independent contractors." With no healthcare, pensions, or vacation pay, these on-callers are great for a firm's productivity--though not so good for a family's pocketbook. Indeed, government data presented at an American Enterprise Institute forum last week show that, as productivity soared in recent years, total hourly compensation, especially for nonmanagerial workers, lagged far behind.
Economic dislocations, notes Peter Jay, former British ambassador and now a Bank of England director, "raise living standards on average. But average is not everybody, or even necessarily most people. Globalization discriminates." The biggest winners, Jay says, are owners of capital--CEOs and shareholders of the IBMs and Wal-Marts--who reap higher profits from cheap overseas labor. Workers in developing countries also gain, much less individually but a lot in the aggregate. Losers are the middle and working classes in now rich countries. If that kind of trend continues for long, we could end up a two-tiered economy, with a small coterie of superwealthy capital holders and a strapped and sprawling proletariat. Sort of like South America. Makes it hard to run a healthy democracy.
(Go to the article to read the proposed solution! You'll like it!)
http://www.usnews.com/usnews/issue/040308/opinion/8money.htm
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