At the heart of America’s problems is an economic policy which is designed to keep wages down but consumption up. That necessarily means more bubbles, more debt, more wealth and income inequality, and consequently more strife and social unrest when the gravy train ends. You cannot expect to hollow out a country’s manufacturing base, set up a bunch of McJobs to replace it, and still have consumers spend to support the economy.Well, you can, but it can't go on indefinitely. What's keeping wages down ? A toxic combination of union weakness and mass immigration. What keeps consumption up ? Debt. That scenario sounds like the UK to me.
Wednesday, March 31, 2010
Not Just America
Edward Harrison at Credit Writedowns :
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18 comments:
"What's keeping wages down ? A toxic combination of union weakness and mass immigration."
Actually, mass immigration is secondary - what really keeps wages down is globalisation. Mass immigration is used to compensate and union weakness only applies in the private sector in the UK because they know that production can be moved to some cheaper location at the drop of a hat these days.
In other words, mass immigration is a consequence of globalisation for developed nations and will continue to be so until a point is reached where there is either no economic benefit to be derived for the migrants - i.e. the wages they can earn and living standards they can attain are no different to those from where they are migrating - or we realise that the global free trade/free market model is actually harmful to our status as a developed nation and our living standards as individuals (which we currently sustain through personal debt).
Stan. I am a bit thick on these things, but why does buying cheap tat from Asia mean we have to take in millions of African, Asian and Eastern European immigrants("mass immigration is used to compensate")? I don't get it.
Anon -
More people means lower prices for work done (wages) - it's the law of supply and demand - hence we import people.
no Stan, you take the extremely simplistic libertarian stance at face value.
The most economically successful countries throught history haven't been multi-cultural open borders, with the instability that those almost always produce.
More people (through immigration) does not mean lower wages because you then need higher taxes to pay for all the extra social costs.
Anon - no, I don't take the libertarian stance. For starters I most certainly am not advocating open borders or mass immigration and I am completely opposed to globalisation and the global "free trade/free market" economic model.
Most economically successful countries throughout history have not developed with "globalisation" - indeed there have only really been three brief attempts at globalisation. Once in the latter part of the 19th century following the introduction of the telegraph. Again in the early 20th century following the introduction of the telephone. And again at the tail end of the 20th century following the rise of the internet.
Every time we try "globalisation", three things happen. First of all there are high levels of migration (relative to transport capability). Secondly there is a banking/credit bubble and finally there is economic crash.
With regards high social costs - well that is only a recent problem because - until 1945 - we didn't have the system of benefits and rewards for unproductive people. What is more, they aren't a major problem for businesses anyway - the biggest cost to them is always wages so the lower they can keep those the better and more people to choose from means lower wages - hence mass immigration.
Personally, I advocate protectionism - a clear and transparent system of tariffs and import restrictions designed to encourage and protect British manufacturing. I favour a free trade/free market model within the national borders, but I'm adamant that it can not work beyond those borders.
I hope that it clear.
Stan
You were very clear, thanks, but I still don't get it. Globalisation doesn't mean mass immigration for the Japanese and Koreans.
Let's put the non-productive immigrants to one side, if the Poles had been kept out of the UK we would have had higher wages and lower business profits, probably also a lower Pound. So what.
Libertarianism in one country!
The way to square the circle, guys, is to have open borders but not open-ended welfare.
In other words, you're all welcome but you have to support yourselves.
WY
"The way to square the circle, guys, is to have open borders but not open-ended welfare."
The resultant shanty towns would be a havens of open-ended warfare
Victoria station style gang fights - writ large
Very vibrant
"Globalisation doesn't mean mass immigration for the Japanese and Koreans."
Both of those countries are protectionist and strongly nationalist. Globalisation is a fantastic opportunity for any nation which is prepared to reject it.
OK Stan (& WY) but that still doesn't explain why we need to open our borders to anyone. Why can't we exchange goods and capital with China et al without taking in foreign labour?
OT, but on the subject of economics, check this out for the next financial scandal in the gold market.
http://www.huffingtonpost.com/nathan-lewis/its-ponzimonium-in-the-go_b_519893.html
Being opposed to globalisation (viz - Stan) is like being opposed to the tide coming in.
You have to accept it's going to happen, and make it work for you.
Mark
"You have to accept it's going to happen, and make it work for you."
Well it's not working very well for us
3rd quarter 2009 figures revealed that foreign investment here exceeded UK investment abroad by £107 billions.
The position has been deteriorating for some years. Together with the awful trade deficit, which devaluation has barely nudged, this bodes extremely ill.
Stan's interpretation is the correct one.
Globalisation is not win-win; that is shyster propaganda. Swift would have had a field day with such "projector" nonsense.
It is win-lose and it is the mercantilism of China that is doing the winning, and the neo-lib City/Wall St crap that is losing it for us
Agree globalisation isn't win-win if the countries we trade with are employing nationalistic policies, and not always if they aren't.
But as the other anon says.
Stan hasn't explained if globalisation is the problem why Japan and Korea two countries with extremely strong globalised industries, don't have mass immigration like Britain?
The British empire also had globalised trade across the empire, yet there was no mass-immigration then either.
It is a lie/con to link globalised trade with the globalised movement of people.
The kind of people who do that, are people who see us purely as 'workers' or 'human resources', yet as most of us know there is much more to our identity than that.
"Stan hasn't explained if globalisation is the problem why Japan and Korea two countries with extremely strong globalised industries, don't have mass immigration like Britain?"
I have explained this.
"The British empire also had globalised trade across the empire, yet there was no mass-immigration then either."
Exactly. Global trading is not the same as globalisation. Nations have traded with each other as long as there have been nations, but without globalisation. As Korea and Japan demonstate, it is quite possible to trade globally in today's world yet still protect your national economy and industries.
Globalisation is not about trading between nations - global trading has existed as long as there has been trade. Globalisation is the process of handing control of your your ability to and conditions of trade to some global authority - usually an unelected, remote and bureaucratic corporate body such as the EU, UN, WTO and World Bank.
Essentially, it is about deciding that you have no right as a nation to determine who trades in your country and how they trade in your country. Britain has done this and done it completely - and is quite probably the only country that has. The USA and the rest of the EU has gone some way to doing this, but to a lesser extent (the other EU nations are supposed to, like Britain, but are less concerned about bending or breaking the rules to suit their national interest than we are). Japan and Korea have hardly done this at all - but have been delighted to take advantage of the opportunities it has afforded them.
Now, as for why this means mass immigration. Once you have decided that you have no right to decide who can trade and how they trade in your country then your nations industry is under extreme pressure to compete with nations who can produce what you produce far cheaper than you can do it. You can only go so far to compensate for this through productivity and efficiency savings, but that's never going to be enough when you are competing with businesses that can pay their workers less than a dollar a day. You need cheaper labour - but in a developed nation with high social care and a limited pool of workers this is never going to be cheap enough. So the answer is to import labour - immigration and lots of it.
Now do you see why globalisation means mass immigration? Japan and Korea do not need to do this because they retain control over who trades in their country and how they trade. They also remain strongly nationalistic nations so, for instance, Toyota might build factories all over the world, but they will always be a Japanese company with their main focus on their home country. Toyota will shut down every other factory in every other part of the world before they close down Toyota City.
Mark - if you truly believe that globalisation is inevitable then you have to accept that a global government is also inevitable.
I do not.
"It is a lie/con to link globalised trade with the globalised movement of people."
I think that is valid
The political classes first sold us out in 1948 when the Atlee gov't effectively gave a blank cheque of settlement to anyone who could get here from the hundreds of millions in the Empire/Commonwealth.
This was done out of thoughtlessness and "idealism", with no consideration as to consequence.
The Tories could have tackled it in the fifties but were too idle and complacent to do so.
None of them have had the courage to tackle this awful chain migration
Over the past 15 years "asylum" has been another blank cheque - on a world scale.
There has been a great deal of theorising but what essentially emerges is a picture of neglect, sloth, cowardice - an abject refusal to grap the nettle.
"Now, as for why this means mass immigration. Once you have decided that you have no right to decide who can trade and how they trade in your country then your nations industry is under extreme pressure to compete with nations who can produce what you produce far cheaper than you can do it."
Very interesting post Stan - but most of the migrants that have been taken in over the last 15 years certainly work in the service sector, in activities like restuarants and care homes; not the tradeable sector.
Employment in manufacturing has collapsed
Globalisation - particularly the extreme and suicidal specialisation in financial services -certainly is a complete disaster for us.
"Very interesting post Stan - but most of the migrants that have been taken in over the last 15 years certainly work in the service sector, in activities like restuarants and care homes; not the tradeable sector."
The restaurant/care argument is a popular progressive liberal fallacy promoted by the likes of YAB and Johann Hari (the old, immigration is great because I have so many different foreign restaurants to choose from and a wonderful Filipino nanny working for me here in Islington).
Secondly, thanks to globalisation, even wholly internal sectors of the economy are required to comply with international regulation. So even though a restaurant in Halifax is not in direct competition with a restaurant in Hamburg it is required to manage its business as if it is. This drives up costs and when costs go up the business will try and find a way to keep them down to maintain profit margins. And the easist and best way to do that is ...... cut wages.
Finally, thanks to globalisation, a considerable proportion of the internal service sector is now open to competition from foreign enterprise who can bid for and win contracts. To do this, they need to be able to offer the service cheaper than other companies competing for the business. They do this by paying people less (and often importing workers to do it).
Well ok Stan you are defining globalisation as the loss of our sovereignty to international bureaucratic structures, I guess you are right.
I thought you were making a general attack on free trade.
Now I agree the nation-state should set its own rules on trade, but I don't think forcing people to pay extra for a product produced locally without a pretty good reason is a recipe for economic success.
"I thought you were making a general attack on free trade."
There is no such thing as "free trade" - it does not exist. It is questionable whether it is possible (or even desirable) to achieve really free trade within a national context - but it is definitely not possible to have global free trade.
Free trade can only be possible if the conditions for trade are indentical for both parties. When those two parties are two separate nations with widely differing governments then that is never going to happen - one side or the other will always have a "penalty" in some form or other so "free trade" can not be possible.
"Now I agree the nation-state should set its own rules on trade, but I don't think forcing people to pay extra for a product produced locally without a pretty good reason is a recipe for economic success."
Would you accept that maintaining a healthy national economy and high living standards to be a good reason?
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