One hour of US work no longer buys as many hours of Chinese work as it once did - The Nation

[rndmprsn]

fascinating article on "reforming" globalization, basically confirmed in very technical/intellectual terms what i already suspected...diminishing returns for us as a country, transnational corporates interest have diverged with the national interest, etc.

I'm going to check the book out.



http://www.thenation.com/doc/20070430/greider

The Establishment Rethinks Globalization

The church of global free trade, which rules American politics with infallible pretensions, may have finally met its Martin Luther. An unlikely dissenter has come forward with a revised understanding of globalization that argues for thorough reformation. This man knows the global trading system from the inside because he is a respected veteran of multinational business. His ideas contain an explosive message: that what established authorities teach Americans about global trade is simply wrong--disastrously wrong for the United States...

..."The offer that many Asian countries will give to American companies is essentially this: 'Come over here and enhance our GDP. If you are here our people will be building disk drives, for example, instead of something less productive. In return, we'll help you with the investment, with taxes, maybe even with wages. We'll make sure you make a profit.' This works for both sides: the American company gets profits, the host country gets GDP. However, there is another effect beyond the benefits for those two parties--high-value-added jobs leave the U.S."...

...Essentially, the terms of trade have changed as more and more value-added production has shifted from the United States to its poorer trading partners. America, he explains, becomes increasingly dependent, buying from abroad more and more of what its citizens consume and producing relatively less at home. US incomes stagnate as the high-wage jobs disappear and US exports become a smaller share of the world total.

The persistent offshoring of domestic production is leading to a perverse consequence: The United States finds itself paying more for imports. The production that originally moved offshore to get low-wage labor and cheaper goods is now claiming a larger and larger share of national income, as the growing trade deficits literally subtract from US domestic growth. "All the stuff you were already importing from them becomes more expensive," Gomory explains. "That's why you can start going downhill--because you pay more for what you were previously getting." Put another way, one hour of US work no longer buys as many hours of Chinese work as it once did. China can suppress its domestic wages to keep selling more of its stuff, but that does not alter the fundamental imbalance in productive strength.

[Warpy]

1. Plus those depressed wages here kill the consumer market

as people being squeezed to death among increasing ARMs/property taxes, car payments, high fuel costs, food inflation, and mounting credit card debt stop buying anything that isn't essential to daily survival.

It happens every damned time the rich get their way.

[AdHocSolver]

2. This only affects the middle class, not the rich, so this doesn't matter unless...

the middle class wakes up and demands that the U.S. government abandon its promotion of "globalization" before the middle class disappears. The tax laws and import laws promote the off-shoring of jobs to low-wage areas of Asia like China and India. The middle class is urged to support this on the basis that it is more "efficient" so that their prices are lower. Then, so the myth goes, workers here can be retrained for higher tech jobs so the U.S. will export higher priced goods and trade will be balanced.

The reality is that all the high tech jobs are going to Asia as well. Somebody forgot to mention that Asia has a lot of highly trained engineers and scientists. They don't need to buy high tech from us. They manufacture their own. So with help from the U.S. government, now controlled by the multinational corporations, the rich are investing all their money in Asia. U.S. corporations are building factories on a massive scale in China, and outsourcing any kind of computer work to India, such as programming, billing, technical support, etc.

The truth is that Americans are so in hock to Asian countries, that it is only a matter of time before the middle class in this country goes broke and disappears. Will this hurt the rich? Of course not! Their money will be safely invested in Asia with its cheap production costs and booming markets. The U.S. can become a second tier banana republic with a middle class now converted to the working poor and it won't affect the wealthy one iota.

The only way to save the U.S. is to make it more costly for capital to invest overseas rather than in the U.S. In his book "Wealth and Democracy", Kevin Phillips explains how it is a viable middle class and production of goods that makes for a strong economy and a strong country and is a requirement for democracy to exist. The rich can take their money and live anywhere. The middle class is stuck here with the rest of us and if they don't wake up soon and do something about the huge trade and government deficits, the middle class will become the poor class.