The impact of "cheap and often undocumented labor from poor countries" is minuscule, especially considering the sectors that have the highest profit margins aren't low-skill manufacturers, but rather finance, tech, real estate, private equity, and so on.
There are two main issues at play here: corporate debt levels, and interest rates. The article does a pretty good job of covering both, and trying to spin the past few decades as some sort of "corporate colonialism" is missing the forest for the trees.
If American labor had been able to demand a greater share of the wealth created, corporate profits would have been far lower.
I would push back a bit. First, I think these easy money policies are basically "possible" whenever the Fed mandates them (and the markets simply react accordingly). My point here is that they actually don't have to be rooted in any kind of fundamentals. Even now, the Fed is basically willing to blow up foreign markets (which might seem irrational) because it doesn't want Americans to go through inflation.
Second, while I do agree that cheap labor has enabled some of this, it's mostly due to China's insistence on treating its citizens like chattel; and, yes, to some extent the West being complicit, though calling it colonialism deflects blame from the true architects of this evil: the CCP.
> and if American labor had been able to demand a greater share of the wealth
The way I see things, wealth demanded is a function of leverage. American labor has no leverage when compared to Chinese labor (maybe apart from quality), and therefore always loses out.
> Even now, the Fed ... doesn't want Americans to go through inflation.
Exactly. The Fed's current behavior shows that they probably would not have lowered interest rates so much if the resulting inflation hadn't been countered by lower manufacturing costs.
> American labor has no leverage when compared to Chinese labor
Yes, and this was, I believe, that issue that photochemsyn was referring to. If manufacturers making products for the American market had to obey American labor laws (and other regulations), then American labor would at least be competing on equal footing.
As far as real estate, that's been highly manipulated (tax havens, money laundering etc.) as well as heavily subsidized (in favor of large owners) by the federal government (i.e. subprime bailouts, etc.).
Many of the “neoliberal” things that supposedly happened did not actually happen.
https://noahpinion.substack.com/p/was-there-really-a-neolibe...
Also, the issue with corporate taxes has been more to do with European tax havens. Places like Netherlands, Ireland, Luxembourg got very aggressive in offering corporations bilateral deals (i.e. bespoke deals on corporation tax outside the legal framework that applied to domestic companies). The US tax rate in the early 2010s was still 35%, it was only when revenue began moving offshore that the US felt the need to cut (not just the US, the same thing happened in the UK). The global minimum corporation tax deal is supposed to tackle this but, to be honest, the US should have cracked down on individual countries far sooner.
This is a direct reference to QE.
Corporations do not pay taxes - their customers or their employees do.
The only way that a corporate tax is better for the worker than not a corporate tax is if that money will be better spent by the government. We cannot show this to be true, because very often government funds are utilized to fund programs and projects that are primarily ideologically motivated instead of mere improvements to facilities and entitlements we all use.
Additionally sectors that have largesse of government spend (Medicare, military procurement, California HSR) start to morph to maximally abuse procurement bureaucracy and obtain monopoly power rather than provide service.
These problems are solvable to be clear, but it doesn't strike me as obvious that the money Amazon makes is spent better by Congress than by Amazon in every possible case.
The decline in taxes and interest rates mechanically account for 1.8% points of the 5.4% net income growth in the SP500 since 2004. This is not in dispute, unless you don't trust the numbers.
Outsourcing and cost cutting account for some of the difference between sales growth (2%) and EBIT growth (3.6%), or 1.6% growth. Basically if you only sell a little bit more, but your costs go down, you can take home more earnings. But it's not a given that 100% of this 1.6% gap comes from sweatshops, there have been some legitimate reductions to cost of labor domestically, unless you think literally nothing has changed about productivity in the last 18 years.
So sweatshops account for a maximum of 1.6% of returns, likely less, while taxes and cheap credit account for 1.8%. Outsourcing is not "the primary issue", mathematically.
My conviction is that the growth in corporate profits is driven primarily by technology advance and globalization. And no, globalization is not a one way street, only benefiting corporates. China achieve their economy growth and their status as superpower, lifting a billion people out of poverty, thank in no small part to the large and rich market of developed countries they've been able to access.
The growth is slow down because temporary roadblocks such as the pandemic and financial measures countries adopted to counter it. Geopolitics also play a role. Globalization is well and alive still, and while it will evolve, it is not reversible. We will not go back to the world pre-1990s.
> "This note's key finding is that the reduction in interest and tax expenses is responsible for a full one-third of all profit growth for S&P 500 nonfinancial firms over the prior two-decade period"
Even if accurate, where is the other 2/3 coming from? You'd think the primary issue would be more explicitly noted. As far as China, their escape from famine-level poverty took place well before the neoliberal outsourcing program adopted China as one of its preferred sweatshop zones (along with Mexico, Indonesia, India, Philippines, Bangladesh, Honduras, etc.) - it really began with importation of ammonia fertilizer factories in the 1970s under the Nixon agreements, which really ended the famine era. The big change wrt the USA and China took place in 2000-2001, with WTO membership. While NAFTA had already been gutting the US manufacturing sector for the past half-decade, the explosion took off after that (just look at any major box store and count the items with 'made in China' labels).
Fundamentally, the neoliberal project is all about 'liberating' international pools of capital from the restrictions (tariffs, sourcing requirements, capital transfer fees, etc.) imposed by nation-states, as a means of putting more and more wealth and power in fewer and fewer hands. It's profoundly anti-democratic in nature, and should be ended.
It is explicitly accounted for, in TFA. ~30% (1.6%) is coming from cost cutting --so potentially sweat shops, but also productivity gains--and another ~37% (2%) is coming from an actual increase in sales, i.e. GDP growth.
Except this relied on having countries with corrupt governments and human rights abuses. The lower costs didn't just happen out of the void, this was not the free market. Then there was how the loss of manufacturing knowledge would not come without a big cost.
Globalization isn't just good for developing nations, it benefits developed ones as well. American's dominance in technology, finance, and entertainment would not be possible to sustain without it.
I'd rather say globalization is good for developing nations and the rich of the developed. It brings the middle class and labour of the world close together. Dragging down developed world a bit and enriching developing world a ton.
Now is the most interesting phase when developing world has developed somewhat, local elites grew up and now they'll start challenging „developed“ world elite.
It will be most interesting to watch developed world non-elites. Developing world is very happy with improvements and have the momentum. Meanwhile developed world is slowing down and it will be damn hard to turn the tide.
Yes, without it, other nations could develop competitive industries at the top of the food chain and their citizens would have options other than working in sweatshops.
Many of the subsistence farmers have a crapton of knowledge about their environment and how to make stuff grow. Many of them are pretty good at basic redneck engineering too. That's a pretty good background to get hold of basic programming which is not that far off.
If I absolutely had to work full days ( which incidentally isn't limited to 8 hours a week in all countries in all jobs) to make ends meet, my chance of finding my calling would have been pretty slim.
In other words, just the learning tools are not enough, it's but one of the necessary resources, and for some people spare time or strength can be very difficult to find.
And many farmers (labour, whatever) do know how important it is to give kids time to study things. TBH for me parents who drive kids around to all sorts of extra-curriculum activities for me seem to be much worse than free-range parents who just ensure that kids have time to pursue things they like. Just with some navigation to ensure they don't spend all the time partying. Which is also important though.
Moreover the effects of capitalist-globalism have, I would posit, given rise to poverty in many instances with first-movers advantage, selectively shunting trade into some nations and away from others. If one nation elects to adopt the Western zeitgeist, and their neighbors neglect it, their neighbors will suffer as a product of their lack of technology. This will decrease the proportion of product to labor, increasing production cost (including non-monetary expense). [This creates huge reserves of impoverished people, otherwise known as cheap labor] pidgeonholing them into deals with the devil. At which point more developed nations can either strongarm them into really shitty compromises or just outright implant leaders. Haiti is a really stunning example of this, where France levied a huge debt against the newly independent nation. Or we can point at Madagascar where the IMF discredited them, eventually forcing them into a position where they couldn't fund malaria vaccines (or anything else for that matter).
On Madagascar from David Graeber's Debt: the First 5,000 Years:
"France invaded Madagascar, disbanded the government of then–Queen Ranavalona III, and declared the country a French colony. One of the first things General Gallieni did after “pacification,” as they liked to call it then, was to impose heavy taxes on the Malagasy population, in part so they could reimburse the costs of having been invaded, but also, since French colonies were supposed to be fiscally self-supporting, to defray the costs of building the railroads, highways, bridges, plantations, and so forth that the French regime wished to build. Malagasy taxpayers were never asked whether they wanted these railroads, highways, bridges, and plantations, or allowed much input into where and how they were built."
On Haiti from David Graeber's Debt: the First 5,000 Years:
"Haiti was a nation founded by former plantation slaves who had the temerity not only to rise up in rebellion, amidst grand declarations of universal rights and freedoms, but to defeat Napoleon’s armies sent to return them to bondage. France immediately insisted that the new republic owed it 150 million francs in damages for the expropriated plantations, as well as the expenses of outfitting the failed military expeditions, and all other nations, including the United States, agreed to impose an embargo on the country until it was paid. The sum was intentionally impossible (equivalent to about 18 billion dollars), and the resultant embargo ensured that the name “Haiti” has been a synonym for debt, poverty, and human misery ever since."
The whole angle of dragging a people up is bullshit. The US alone has installed leaders and toppled parties repeatedly to maintain our status quo, and historically empires just do this. And it's always justified with some magical self-righting pretense. We do as much damage on a cultural scale as we do good on an economic one - when we're not doing damage to both, which I think is certainly the most frequent case. And let's not get started on the various military interventions over the history of the US...
I have no position on your argument other than those examples aren’t making it for you.
Not to mention the fact that the IMF (International Monetary Fund) is the posterchild institution forwarding the Neo-liberal Gloablist agenda.
The idea being that global trade should act as a mutually beneficial agreement without needing force of arms, trade protection or extractive colonial policies. Rather than 1 party sucking all the resources from another in a zero sum way.
It's "extractive colonial policies" obfuscated through tools of finance, where force of arms has been a reality in some cases, in others there are different but nonetheless serious coercive threats, sometimes a little bit of both (plausible deniability, nice). As far as determining whether or not it's single sided, if you're calculating with something as primitive as Pareto efficiency or something equally hamfisted, yes, sure, everyone benefits, some by literal pennies and others by many millions of dollars. It's very much one sided from any [reasonable] moral perspective, at least any moral perspective that hopes to treat humans with any semblance of dignity.
A lot of the pretenses developed nations use to intervene in the affairs of the "Global South" have their roots in colonialism as evinced by the grandparent.
It's almost as if... protectionism is bad. Colonialism and imperialism are inherently protectionist. No matter how talented they were, a Madagascan was prohibited from pursuing the same desirable administrative jobs that were available to the French elite. The French elite prohibited their competitors from offering from offering the Madagascans a better deal.
Also, have you considered the opinion of the "sweatshop" workers because for them the options are "sweatshop" or not working at all
They have a protectionist economy, and it was the most successful economy over the last forty years. China seems to have proven the benefits of protectionism.
And I'm arguing that sweatshop workers would have options other than "'sweatshop' or not working at all" if free trade weren't killing any opportunity they might have to develop local industries.
Their situation is not entirely unlike a small town in America when a WalMart opens, kills the local businesses, and the only remaining jobs are at WalMart.
My thought is that we are witnessing the beginning of the end of globalization.
Fun fact: Victorian England even had several very successful uber-like businesses (phone ordering aggregators in this case).
> importation of cheap and often undocumented labor from poor countries
> That's the essence of what its dectractors (including myself) call the neoliberal economic model.
This is the economic nationalist (i.e. Trumpist) critique dressed up for polite company. You and the rest of the economic nationalists have no plan to make the lives of people in “sweatshop zones” or those desperately escaping them to the west, better. You are attempting to exploit pathos on their behalf to make their lives actively worse by shutting down the movement of goods and labor.
At least Trump is honest about it.
> "Some of the improvement in profit margins may have come from sourcing cheaper inputs from abroad, enabled by increased globalization. Moreover, for output produced within the U.S., growth in labor productivity—i.e., real output per hour worked—exceeded real wage growth since the mid-2000s. This means that, for a given cost of labor, firms were able to produce more output, which would also likely have contributed to the improvement in profit margins."
I's rewrite the introductory sentence for this article as follows:
"Over the past two [four] decades, the corporate profits of stock market listed firms have been substantially boosted by ~~declining interest rate expenses~~ [outsourcing manufacturing abroad to sweatshop zones] and ~~lower corporate tax rates~~ [importation of cheap and often undocumented labor from poor countries]."
That's the essence of what its dectractors (including myself) call the neoliberal economic model.