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But the result of Free Markets + Globalization = loss of jobs and eventually consumer power in the developed nations. China is playing it smart. They are allowing global business to function in their country with little interference. This economic article theorizes that globalization will eventually have an equalizing effect on quality of life around the globe.
The inevitable process that is underway is a long-term pernicious undermining of our quality of life to allow for the improvement in the quality of life of the three billion new Chindia entrants to the capitalist world. The standard of living throughout the world will, over time, move towards equalisation, a fact that we must include in strategic thinking now. We must build our careers and invest our wealth to benefit from, not to suffer from, these seismic changes. At RHAM we skew our processes and direct our attention to those aspects in the investment market place that are likely to benefit and this has been a long-time theme of this newsletter.
If the world is changing in this way, if our standards of living are to persistently subside whilst those of the emerging world are to improve, then that should lead to lower inflation here and higher inflation there. The risk in our world is the risk of deflation! The risk of inflation is in the emerging world.
This shows how little you know about China. They said the same thing about Japan and we know what a powerhouse they have become.
Actually, no, no one ever 'said the same thing about Japan' since the Japanese have always had a realitively high and prosperous, commercially oriented standard of living since the 1850's (with a brief pause in the 1940's for that little go-round we had with them).
It is virtually economically impossible for China to raise their standard of living to be on par with ours. It's a simple matter of math, not to mention social and systematic considerations which basically ensure that it can never happen.
What they *can* do is raise their standard of living at the expense of ours, but they will never, ever be able to match it and I seriously doubt Americans will ever, ever be willing to compete with them on a level field.
Many good ideas have been brought into this discussion. But, what I see as the major problem is that we've allowed government regulation, trade unions, and tax policy to make producing goods in the U.S. too expensive. One good first step would be to implement the Fair Tax and reduce the cost of producing goods, giving businesses more incentive to stay in the U.S. or move back. We need to eliminate minimum wage laws which eliminates many unskilled labor jobs. We need to remove the teeth from the labor unions, to prevent them from mandating how a company compensates their workers so that true competition in hiring can again be utilized by potential employees.
This is just a beginning, but a good start.
The Fair Tax may not be a bad idea. However, eliminating minimum wage laws would be terrifically bad. Some employees would naturally try to pay as little as possible, meaning a number of people would end up working for as little as, say, 2 or 3 dollars an hour. Such people would act as a drain on society at taxpayer expense because they would easily be eligible for such handouts as food stamps and government subsidized housing.
Since unionized workers generally get paid more than non unionized workers making unions yet weaker would be another pretty bad idea. Since unionized workers have more money to spend, they are of great importance to keeping the economy going. Their extra spending ability helps to create jobs.
The Fair Tax may not be a bad idea. However, eliminating minimum wage laws would be terrifically bad. Some employees would naturally try to pay as little as possible, meaning a number of people would end up working for as little as, say, 2 or 3 dollars an hour. Such people would act as a drain on society at taxpayer expense because they would easily be eligible for such handouts as food stamps and government subsidized housing.
Since unionized workers generally get paid more than non unionized workers making unions yet weaker would be another pretty bad idea. Since unionized workers have more money to spend, they are of great importance to keeping the economy going. Their extra spending ability helps to create jobs.
Considering unions, they've "powered" themselves out of jobs completely by helping force companies overseas, thus not only reducing the money the workers have to spend to "0$", but increasing the amount of public assistance.
The minimum wage has prevented many small businesses from hiring non-skilled and/or inexperienced workers, since paying the minimum wage wouldn't allow for a sustainable profit margin. Eliminating the minimum wage would allow these same workers the opportunity to get jobs AND increase the competition for those same workers, keeping starting wages relatively high.
I don't believe you can beat the Chinese by racing to the bottom. That will be a losing strategy for the US. Gutting labor laws and selling off the public good to businesses will not beat the Chinese at their game. They can always play dirtier, and it doesn't play to American strengths (what economists call "comparative advantage").
I don't have any simple answers but blaming the New Deal for the current woes of the US economy is mostly incorrect analysis.
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