In Canada we can compete in export markets with the third world, at the things that we do well, where the requirement is for a highly educated and skilled work force and capital intensity. Indeed in Canada we have the extra advantage of huge natural resources to exploit.This is absolutely true, but it supports rather than negates my argument that mass unemployment in Europe and America is due to competition from cheap Third World labor and that the recovery of full employment will not likely be achieved without the imposition of Third World wages on a large part of the Western workforce.
As Roderick Russell asserts, Canada competes well with the Third World in natural resources which make up an overwhelmingly large share of Canada's exports. Like Russia and Australia, Canada has a vast storehouse of natural wealth, which means that a significant proportion of Canada's rather small workforce can get decent wages in the capital intensive production of the resources upon which the World's industrial economy depends.
In other words, Canadian labor has a monopoly in the exploitation of a huge natural resource base, which greatly enhances wages. If Canada were to allow "guest workers" from the Third World to work in Canada's resource industry at Third World wages -- as Herman Kahn's Hudson Institute proposed many years ago as a way to develop the oil sands economically -- Canadian wages would be headed sharply downward, as they are in in the US and Europe.
But that means, simply, that Canadian labor is somewhat sheltered from low-wage Third-World competition. And yet despite such protection, the Canadian labor market is not immune to the effects of competition from low-wage Third-World nations.
A few years ago Canada was the largest exporter of car parts to the US. Then we were overtaken by Mexico. Now Mexico has been overtaken by China. Furthermore, most of the industrial and technology products that Canada exports are re-exports, things snapped together or stitched up with parts or fabric made with cheap labor abroad. This has caused huge long-term damage to Canada's industrial sector.
Thirty years ago Canada had a highly diversified industrial economy. Then with NAFTA, jobs began going South. The Janzen swimwear factory in Vancouver, to take one local example, moved to Mexico to take advantage of wages below the British Columbia minimum wage.
With the GATT agreement, we came into competition with cheap labor everywhere. Sawmills and pulp mills were dismantled in British Columbia and moved to places like Indonesia and the Philippines. That's capital disinvestment in the resource industry and is one of the factors accounting for declining real wages throughout British Columbia's once mighty forest-based industry.
Declining wages are a reality in the high-tech world also. Computer science grads who, in the 80's and 90's could expect to start work at $80,000 or more a year were suddenly in surplus. The local computer science school went from being a a training ground for the brightest Canadian geeks to a school for students mainly from Asia.
America's best hope for economic recovery seems to depend on the oil and gas industry, which through new technology may make America once again energy self-sufficient. With natural gas in the US selling at less than $3.00 per million btu's American industry has an energy cost advantage over Asia, which in part counteracts the wage differential.
But in addition to the impact of a developing energy cost advantage, the rise in American unemployment has been limited in recent years by declines in real wages, whereas in Britain and the rest of Europe real wages have risen.
Yet, still, black youth unemployment in America is around 90% and youth unemployment overall is approaching 50% as it is in Britain and most of the rest of Europe. And the longer young people remain unemployed the greater becomes the loss of workforce skills.
There's no doubt that unusually high unemployment in America and Europe can be reduced by lowering wages. In fact, unemployment is less high in America that it would otherwise be because of a booming underground economy that employs millions, many of them illegal immigrants, at less than minimum wage and often under conditions that fail to meet statutory workplace health and safety standards.
So yes, mass unemployment can be beaten, and is being beaten in some degree, by the adoption of Third World wages and working conditions. There may be other alternatives as I have spelled out elsewhere, but there seems zero interest in such solutions.
Huge trade deficits induced by stimulus spending will hasten the Third-Worldization of wages in the West by precipitating substantial currency realignments. The sooner this happens the better chance Western nations have of retaining manufacturing workforce skills and the critical mass of engineering and software firms necessary to a revival of manufacturing industry.