GLOBALIZATION IS GOOD (For the Rich)

First published 7/25/2013; updated 11/01/2016: 

Over at Carpe Diem, the blog of business school Prof., Mark J. Perry, globalization is GOOD.

Not surprisingly. A business school professor without faith in globalization would be like a priest without faith in God: useless to the powers that be, financial or ecclesiastical as the case may be.

American business has a legal obligation to maximize shareholder value, which for many means shuttering American factories, contracting production to Asian sweatshops, and selling the product back home with computerized efficiency via suburban big-box stores employing minimal staff at minimal wages.

The profitability of replacing American workers with cheap foreign labor in manufacturing, and cheap foreign brains in software, design, and R and D was explained by David Ricardo thus, "Wages plus profits, together, are always the same."

Which is to say, cheap offshore production and service = big profits.

Globalists, naturally, are reluctant to broadcast this particular piece of economic wisdom. But mere silence is not the way at Carpe Diem. There, not only is globalization not bad for the American worker, it's positively beneficial as we discover in the post: Yes, the middle class has been disappearing, but they haven’t fallen into the lower class, they’ve risen into the upper class.

Think about that for a moment.

Is not the concept of the middle class “rising into the upper class” some kind of logical or categorical mistake?

What is the middle class if not the people in the middle? You know, those who come between the upper class and the lower class. I mean, we're talking money here, aren't we?  That's how business school profs. define social class, isn't it? So, then, there'll always be some folks in the middle of the income distribution, won't there? Which means that if some people in the middle rise in relative income, some other people are going to take their place in the middle. Which is to say that the middle class ain't goin' no place, neither up nor down.

But what has actually happened to the incomes of those in the middle?

Well according to the Center on Budget and Policy Priorities, during the 30 years to 2009, the mean income of the middle 60% of the US population rose 26%, which was less than that of the bottom 20% at 35%, and of the 80th to the 99th percentile at 50%, and of the top one percent at 133%. So the evidence is conclusive: the middle-class in American have been financially downward mobile for thirty years or more. That is true both in relative terms and in real, inflation-adjusted money.

And between January 2009 and June 20012, so the Wall Street Journal reports, median US household income adjusted for inflation fell by $4,019 — hardly evidence of the flight of the middle class into the socio-economic empyrean.

But Carpe Diem goes further. Wal-Mart, declares Mark Perry: deserves the 2013 Nobel Peace Prize for improving the lives of millions of low-income consumers globally.

Yeah well, as the greatest purveyor of the products of sweatshop labor, painting Wal-Mart as the savior of America's working poor seems a stretch.

But if the argument is that Wal-Mart has enriched tens or hundreds of millions of Asian sweatshop employees, then, yeah, Mark Perry may have a case.

But nowhere, naturally, do globalists like to acknowledge globalization's dirty secret, which is that its profitability depends largely on global wage arbitrage, which is to say the export of the capital and technology accumulated in the West through the sweat of generations to the low-wage economies of the world, this being greatly to the detriment of the majority of working people in the West.

But, hey, maybe I'm just slow to see a joke.

So yeah, sure, if Barack O'Bomber of Tripoli, Kissinger of Cambodia, and that old terrorist Menachem Begin of the King David Hotel Massacre got the Nobel Piss Prize, why not the biggest bloodsucking American corporation of them all.

Let's see, a one-million -dollar prize means about one thirtieth of a cent per share. Not much, it's true. Still, when you're as tightfisted as the owners of Wal-Mart, every one thirtieth of a cent surely counts.

Related:

Jon Rappoport: The State of the Union speech Obama won’t give

Canspeccy: The 2014 Average Income of the 81 Million Lowest Paid Half of American Workers: $12,681

CanSpeccy: How globalization destroys Western prosperity

David Ricardo (1772-1823)

 CanSpeccy: Exporting the economy 

Ricardo was explicit ...that international free trade is beneficial to all parties only if capital is immobile, since exporting capital, one of the factors of production, will inevitably lower the productivity and hence reduce the prosperity of the population.

Consistent with these ideas, enlightened national governments endeavored to restrict capital outflow, promote workforce education and training, and in the Western World, limit mass immigration from the developing World since that diluted the capital stock of the nation on a per capita basis, reduced the per capita availability of land and infrastructure, and lowered average workforce skills and education -- aside from its potential for destroying the nation through population replacement and reproductive competition.

CanSpeccy: Why even balanced trade between the West and Rest threatens your job

CanSpeccy: Why China Booms While America Slumps

So why have the benefits of foreign trade that David Ricardo predicted [under the very different conditions of 200 years ago] not materialize?

First, because an important assumption underlying Ricardo's theory of comparative advantage no longer applies.

Experience... shews, that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connexions, and intrust himself with all his habits fixed, to a strange government and new laws, checks the emigration of capital. These feelings, which I should be sorry to see weakened, induce most men of property to be satisfied with a low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations.

Today, there is no need for the investor or capitalist to "quit the country of his birth and connexions" in order to exploit cheap foreign labor.

The executive jet, the Internet, the enormous size and hence political clout of the multi-national corporate and financial entities and the international acceptance of a single set of rules governing world trade make it a safe and simple matter to invest almost anywhere in the world.

For this reason, if no other, foreign trade need not, as Ricardo believed, necessarily benefit all parties to the transaction.

When capital is exported from a high-wage nation to a low-wage nation, the investment per capita and hence the productivity of labor in the former declines and the investment per capita and hence productivity of labor in the latter increases, with a consequent decrease in wages in the former and an increase in wages in the latter.

Related:

CanSpeccy: The Globalist Lies of the New York Times: No. 47 — Trashing Trump With Free Trade Bunk

CanSpeccy: Third World Wages Coming to a Factory or Workshop Near You

CanSpeccy: How globalization is destroying the livlihood of Western youth

CanSpeccy: Barbgate: How Western elites opened the gates and what to do about it

CanSpeccy: Ending the Hegemony of Liberal Economic Ideas and Western Economic Stagnation

CanSpeccy: The Second Great Depression and The Cause That None Dare Name

CanSpeccy: USA Boom or Bust: The Next Decade

First published 7/25/2013

Exporting the economy

David Ricardo (1772-1823). Image source

Until recent times, it was understood that the prosperity of a nation depended on three factors: capital invested in industry; the skills and experience of the workforce, and the availability of land for economic activity, i.e., the three factors of production, land, labor and capital.

International trade was acknowledged to be advantageous to all parties insofar as it enabled each country to do more of what it is did best. This was the theory of comparative advantage, enunciated by 19th Century British economist and bond trader, David Ricardo.

Ricardo was explicit, however, in stating that international free trade is beneficial to all parties only if capital is immobile, since exporting capital, one of the factors of production, will inevitably lower the productivity and hence reduce the prosperity of the population.

Consistent with these ideas, enlightened national governments endeavored to restrict capital outflow, promote workforce education and training, and in the Western World, limit mass immigration from the developing World since that diluted the capital stock of the nation on a per capita basis, reduced the per capita availability of land and infrastructure, and lowered average workforce skills and education -- aside from its potential for destroying the nation through population replacement and reproductive competition.

But today, to hear the media, the Nobel-prize-winning economists, the politicians-on-the-make, and the human rights activists tell it, that's all anti-diluvian racist rubbish.

How come?

In one word, globalization.

Or in several words: We're an empire now and the leadership elected nationally, serves the empire not you, the people, who elected them.

But how does that change the principles of economics?

Easily: through the allocation of money, fame and power.

Thus, says J.J. goldberg in a  Jewish Daily Forward article entitled: A Low-Rent America Can't Be a Strong Friend of Israel.

Fans of New York Times columnist Paul Krugman might get a kick out of this. Nearly a decade and a half ago, the acclaimed economist savagely reviewed a new book on the perils of economic globalization, dismissing it as “simplistic,” “foolish,” “thoroughly silly” and more. He said the author, Rolling Stone investigative journalist William Greider, had naively failed to consult “competent economists,” which led him to “trip on his own intellectual shoelaces.” Classic Krugman.

Krugman has since moved from MIT to a tenured chair at Princeton and a Nobel Prize. Greider moved from Rolling Stone to the smaller and less remunerative weekly The Nation. The funny thing is, Greider turned out to be right. Krugman got globalization very wrong.

Then there's the case of Paul Craig Roberts, a better man than Krugman, surely. Former Deputy Secretary of the US Treasury, former associate editor of the Wall Street Journal, Business Week, and Scripps Howard News Service, senior fellow in political economy at the Center for Strategic and International Studies, contributor to numerous magazines and newspapers, author or co-author of eight books.

On March 26, 2010, Roberts wrote Truth Has Fallen and Taken Liberty With It

There was a time when the pen was mightier than the sword. That was a time when people believed in truth and regarded truth as an independent power and not as an auxiliary for government, class, race, ideological, personal, or financial interest.

Today Americans are ruled by propaganda. Americans have little regard for truth, little access to it, and little ability to recognize it.

Truth is an unwelcome entity. It is disturbing. It is off limits. Those who speak it run the risk of being branded “anti-American,” “anti-semite” or “conspiracy theorist.”

Truth is an inconvenience for government and for the interest groups whose campaign contributions control government.

Truth is an inconvenience for prosecutors who want convictions, not the discovery of innocence or guilt.

Truth is inconvenient for ideologues.

Today many whose goal once was the discovery of truth are now paid handsomely to hide it. “Free market economists” are paid to sell offshoring to the American people. High-productivity, high value-added American jobs are denigrated as dirty, old industrial jobs. Relicts from long ago, we are best shed of them. Their place has been taken by “the New Economy,” a mythical economy that allegedly consists of high-tech white collar jobs in which Americans innovate and finance activities that occur offshore. All Americans need in order to participate in this “new economy” are finance degrees from Ivy League universities, and then they will work on Wall Street at million dollar jobs.

Economists who were once respectable took money to contribute to this myth of “the New Economy.”

In evidence of this charge of treason by America's elite Roberts continued:

I was associate editor and columnist for the Wall Street Journal. I was Business Week’s first outside columnist, a position I held for 15 years. I was columnist for a decade for Scripps Howard News Service, carried in 300 newspapers. I was a columnist for the Washington Times and for newspapers in France and Italy and for a magazine in Germany. I was a contributor to the New York Times and a regular feature in the Los Angeles Times. Today I cannot publish in, or appear on, the American “mainstream media.”

For the last six years I have been banned from the “mainstream media.” My last column in the New York Times appeared in January, 2004, coauthored with Democratic U.S. Senator Charles Schumer representing New York. We addressed the offshoring of U.S. jobs. Our op-ed article produced a conference at the Brookings Institution in Washington, D.C. and live coverage by C-Span. A debate was launched. No such thing could happen today.

...The American corporate media does not serve the truth. It serves the government and the interest groups that empower the government.

And what Roberts says of the American elite and the American corporate media is true of the elite and the corporate media throughout the West. The interests of the people are to be sacrificed without limit for the "interest groups that empower the government."

Thus, jobs are off-shored and outsourced to take advantage of cheap labor in Asia, the Middle East and Africa. Thus, mass migration from the developing world to densely populated Western Europe is promoted to drive down wages, while it destroys local culture, and in an increasing number of urban areas, reduces the indigenous populations to a demoralized minority that is being out-bred by the immigrants, of whom some show an unconcealed contempt for local customs and religion.

Likewise in America, native born citizens are displaced from the labor pool by millions of illegal immigrants who work in the underground economy at below minimum wages and often under appalling and illegal conditions, a process enabled by the Federal Government by the deliberate non-enforcement of Federal immigration law.

Thus, also, Nobel Prizes and newspaper columns for bent economists, power and prestige for "human rights advocates" who promote mass immigration and genocidal policies of political correctness and multi-culturalism, and massive profits for those enabled by a corrupt political establishment to engage in unrestricted global wage arbitrage resulting in mass unemployment in the West, collapsing welfare services, failing schools, underfunded pensions, and racial and cultural demoralization and destruction.

And astonishingly, so callous is the ruling elite that the fate of the unemployed and the underemployed is barely discussed. Indeed, it is enforced by minimum wage laws, bad schools, and welfare legislation that scandalously deny employment and the opportunity to gain work experience to a large part of the workforce that cannot compete with Asian labour that in some industries earns only pennies per hour.

What Milton Friedman said in 1978 about black poverty in the United States, is now applicable to much of the white working class in the U.S., Canada and Europe. Sadly, Milton Friedman is no longer around to state the fact.