So lower skilled people living in areas surrounded by high skill/cost people can't easily find a better Cost-of-Living balance. They get trapped with no job to match their skill.
To put it more bluntly - the people of Detroit simply aren't allowed to move to the surrounding areas of the BYD factories in China.
IMHO a bigger problem is the whole MBA mentality of stripping companies down to the bones, lots of huge companies are now just trademarks and vendors, to the point that's hard to prove what exactly is their advantage besides the brand.
In an ideal world, yes, this would help/solve the problem. In reality, government and the private sector have done little about this.
Our strategy so far has been to let them starve and tell them to "learn to code" or "become a machine operator/technician", but that strategy can only help so many people. We do not need as many technicians as laborers that the machine replaced.
And when you have a mass of people who see that the future globalist economy is moving in a way that has no place for them, or plan to make sure they don't starve, you get the globalism backlash like what's happening in the US and UK over the last decade, and nationalistic pandering politicians taking advantage.
The only solution is to tax the billionare owners of the job-displacing machines to provide basic living UBI to the people they replaced.
Standard of living has been steadily declining in most of Western Europe post 2009: stagnating wages, exploding costs of living, declining public healthcare, pension and welfare funds, with longer waiting queues and scarcity in public services, etc.
Hence why so many people are mad and see globalization as one of the main factors. They feel rug-pulled: those with inherited wealth can relax and cash in on this new status quo, those without now have to compete with Asia as they no longer have a moat that guaranteed a good and stable income from basic low-skill jobs.
Actually this is because of how government financing works. Globalization, if anything, gave Europe another 50 years of growth (since this really should have become a critical problem in the 1980s) by providing very cheap products and services.
The economic theory ("capitalism") that the west supposedly lives by is that in times of excess (like the last 80 years, or since 2008 at the very least) the government saves up enormous amounts, because they can easily do that, so that when international trade causes problems again that built up wealth can buffer against shocks by having the government directly finance a significant portion of GDP.
The EU itself is a massive force of globalization of course, if countries join the EU they can go a lot deeper in debt. So really ... they shouldn't have done this (because if they join they can't avoid taking on extra debt).
Oh wait. European governments haven't saved - at all. In fact they are deep in debt. Well, then shocks are as unavoidable as they would otherwise be, BUT now there's nothing the government can do about it.
And while, yes, there is inherited wealth, frankly, it's a rounding error. Especially compared to the situation in "Asia". Not that I support inequality, I just don't understand why this is called out when it is such a small part of the problem. The problem is extreme government overspending through financialization. That is not an accident, it was (and is) deliberate policy.
The real problem is that labor "needs to become more efficient". A lot more of Europe's people need to work more and/or longer. Because underneath it all, it's not really a money problem. It's a problem that things aren't getting done because governments have built all of this on income tax - which has made many jobs impossible.
The situation is that we've come from a situation of growth, where everybody gets a little bit extra, and we're mostly just discussing who gets how much extra. Now, there's no growth. That means the only way pensioners get more is if unemployed people get less. The only way kids get more education is if we let more cancer patients die. The only way unemployment can go up is if we let the roads deteriorate ... And, because the governments are overfinancialized ...
I wouldn't worry about wealth. Wealth has to be tied up in ownership of resources. Houses, companies, ... And when everybody is forced to use less, the prices of houses, companies, ... where that wealth is tied up, will fall a lot more than wages will fall.
One thing I really hate is that people don't see what is coming. Now the argument is "we'll tax the rich". That will, of course, fail. If you steal all the wealth you've solved ... nothing. And ... you know what is a really easy, stupid job that can avoid all those tax problems? The army. And how will you finance that? "We'll just make those rich $neighboring_country assholes pay for it after we conquer them!"
In other words: what's coming in Europe is war. It'll take 2 decades, but it's coming.
No amount of mass-produced goods from the developing world will ever be enough, as long as Western governments are committed to diluting the wealth of their people through QE.
The perfect example of a country playing globalization to their benefit is Singapore: started off manufacturing cheap plastic stuff; kept levering up, retraining their citizens, and aggressively pitching their country to businesses; maintained a levelheaded, business-friendly atmosphere; accumulated extremely deep reserves.
Singapore has like $2.5T in reserves, which is mind-boggling for a country of 6M that spends just 10-20% of GDP annually. In comparison, excluding the UAE, most of the Arab Gulf who literally dig up money from the ground, haven't accumulated that much in their sovereign wealth funds.
Meanwhile in most of Europe it's based on socialist principles where everyone receives as much as they need regardless if they didn't contribute, a system which stops working the moment you have more people using it than paying in it, basically a ponzi scheme propped up by governments and voters.
If only house prices would fall.
>Globalization, if anything, gave Europe another 50 years of growth (since this really should have become a critical problem in the 1980s) by providing very cheap products and services.
My parents could barely afford a color TV or washing machine but they had their own home. What am I gonna do with cheap widgets from overseas when I can't afford a house? And which cheap services do you mean?
>The problem is extreme government overspending through financialization.
Maybe Brussels knows where that overspending is happening?
>A lot more of Europe's people need to work more and/or longer.
Younger generations of workers won't be liking this rug-/ladder-pull. And guess who they'll vote for to vent their frustrations that they've been strewed over? Another Austrian painter type of character. It's inevitable.
Nope, you don't want that. You want a house, and that's not dependent on price, though I understand why everyone feels it is. House availability is a function of supply and demand. That doesn't change with price. However, the actual amount is a function of what people can pay. What will happen is the government will cause a serious reduction in what people can pay, which will drop house prices.
But without building housing or reduction in people (or at least people being willing to live together again) affordability won't change. Only price.
> And which cheap services do you mean?
Services is simply anything you have/acquire that isn't a physical good. Like the internet. Your parents probably also couldn't afford a meal in a restaurant, more than, say, once a month. Or buying food near work (except in a factory restaurant). Maybe you're old enough to remember the necessity of buying food at a farm, or market, with very minimal middlemen, and to buy whatever is available (you know, the seasonal foods), so another (VERY) cheap service you have is supermarkets. Oh and you'd be walking or biking to the farm, so whether it's public transport or a car (or an uber) is another one of those services. You also "get" more and more management (and if you think it's bad at your private sector job, try working at the EU ...), and every company is further expanding it, mostly due to legal requirements, like dedicates psychological support personnel, which you also "get".
The reduction in prices will probably be masked by large inflation. Well, inflation without rising wages, and certainly without rising benefits. That would allow governments to pretend to avoid the completely unconscionable: live within their means ... In other words: governments sold you pension plans when THEY got money. Now that governments don't get money from it anymore ... "we must raise pension age", "we can't do inflation adjustments for benefits", "we can't ...". But of course, they ESPECIALLY can't reduce their own size. That isn't even being discussed.
> Maybe Brussels knows where that overspending is happening?
Wait you're not aware of this? Pensions. Governments promised pensions with total disregard for cost. People in the EU don't work from ages 0 to 20. And they don't work from 59 to 79. (59 due to the many times government has paid for earlier retirement). So working career from 59-20 is 29 years of working. You are dependent on services for 40 years. So the tax necessary to pay for only pensions without constant growth ... is more than half of your wage.
Second is medical expenses. I don't mean treatment. Actually making people better, at a doctor or a hospital is not the big deal. "Long term illness", between quotes because some 10% of the total active workforce has long term illness without being actually disabled (burn-out, psychological difficulties, ...). Great that we allow that, but it needs to be paid for. The problem, of course, is that medical insurance is about 10%, and the money is entirely eaten by people long term ill.
> Younger generations of workers won't be liking this rug-/ladder-pull. And guess who they'll vote for to vent their frustrations that they've been strewed over? Another Austrian painter type of character. It's inevitable.
Sure, and you can bet your firstborn that they will blame "rich Jewish bankers" again, rather than reasoning along the lines of: we, as a group, don't get labor-intensive services ... we also work less and less ... I wonder if there could be a connection. No no no, it's those rich bastards (the ones that match existing racist stereotypes) keeping us down.
Sounds like the easiest and fairest fix would be to slash the pensions of current retirees to match the current real world economic conditions, so that funds can be freed for economic investments in the future generations of people.
It's not the fault of the younger workers of today that their parents and grandparent wrote cheques in their name that they now have to cash.
If there are things that need doing, you need to consider is it better for the government to do it, or to pay the private sector to do it. In principle the latter will still need to employ people.
The objective is to make use of the lost resource that comprises the unemployed, whilst also removing the social problem of having long term unemployed. It has the final benefit of anchoring the value of the currency against a unit of unskilled labour.
I guess they have a lot of Pizza Huts or something?
Southeast Michigan still has plenty of manufacturing is the point.
The QE point you're making is interesting. In addition to that I think it should be noted that the money that was "printed" disproportionately went to the richest, just as the benefits of globalization did.
In conclusion, while globalization has increased global economic growth and made us all richer on average, it has also exacerbated economic inequality. That's fair to criticize.
That's why unemployment is so low.
>The QE point you're making is interesting. In addition to that I think it should be noted that the money that was "printed" disproportionately went to the richest, just as the benefits of globalization did.
It's not anyone's fault that Western governments decided to dilute their people's purchasing power and transfer it to the wealthiest. China (and Vietnam, Ethiopia, etc.) is actively helping those who have been so robbed by producing low-cost goods they can buy and enjoy in abundance, despite the constant erosion of their wealth.
We can turn and twist and look at it from many different angles but the conclusion is the same: Global economic output increased and economic inequality in rich countries increased.
I don't think it's meaningful to blame any other countries like China and Vietnam for this development. But critique against globalization/our current system of trade should be taken seriously.
Buying 31-inch CRT TV in the 1990s would have set you back somewhere between $2-$3k, adjusted for inflation. But, because it's been outsourced to where it can be made more efficiently, a 32-inch HD TV costs just $99 from Amazon.
This is just one product. I could go on and on. If you want to mention housing, it's a political problem since zoning doesn't permit anything to get built.
The reason inequality increased is because Western governments (everyone, really) printed trillions into existence and it diluted the purchasing power of savers, the poor, and the middle class, and went into stock markets to bid up securities.
That's the problem, not China making affordable stuff that costs fewer hours of labor to buy.
What would an iphone be worth in the 1990s? $20 million? Does that mean every American is now a millionaire? Not really.
We have cheap goods from China now, so what exactly is going wrong in your scenario? You didn't flesh that part out at all. If anything, you've decided to gloss over it, because housing is the primary issue.
As someone else has said: current account deficit is capital account surplus, meaning that the Chinese are flooding the US with money that could be used to build housing, but the Americans in their wisdom decided that that's a stupid idea and the money should go in the same quantity of housing and bid it up instead.
Unlike stocks people actually need housing to live in. It doesn't take much to explain how a rising cost of housing makes people feel squeezed, since it can literally lead to their eviction and homelessness.
Obviously, they sold what the buyer was asking to buy.
> Global economic output increased and economic inequality in rich countries increased. > critique against globalization/our current system of trade should be taken seriously.
Globalization promised increased economic output and delivered, I assume you're OK with that.
Then your serious critique must be directed towards the increased economic inequality. However, there's no reason to believe that globalization has anything to do with that, on the contrary, given a trickle-down distribution system, inequality would increase with or without globalization.
It's kind of obvious now that globalization was implemented the way it was in order to increase inequality and... blame "globalization" for that outcome. This little trick allowed the libertarian foundations of trickle-down and competition-is-for-losers to remain intact, out of scrutiny and boosted by a giant dose of steroids.
In other words, the critique against globalization is a coverup for more of the same.
Trade can be balanced without tariffs... why tariffs then? Simple, because tariffs are a tax on the population at large, not on the top tier of inequality who created this mess. The latter get... why, they tax cuts ofcourse.
Do you still blame inequality on globalization?
Many governments around the world have figured out the US unemployment rate filter trick. What is actually being measured at this point is not important.
The market fundamentalist are performing a type of data ritual to the market gods with the unemployment rate. Make the data look good and the gods will reward us.
Specialization is not the key here. Although it certainly is one of the major methods that we have used to attain the actual key feature - productivity. Less work per thing produced. Specialization is one enabler for this. It is easier to optimize when the scale is huge. But specialization is not a requirement.
We used to have one device per technical problem. Now we have fewer and more general devices. A smartphone or a pc does what a multitude of devices used to do. The same transformation can happen in industry as well.
Less-tangible--but even more morally-fraught--might be the case where one country's competitive advantage comes from chattel slavery.
Specialization may confer advantage, but not all advantage is specialization.
I find the idea that difficult physical labor is the driver of suicide rates to be silly.
EDIT: wording
Definitely. The other way to look at it is that we were exporting our inflation to places like China. But that's (for various reasons political and otherwise) starting to change which means we can expect to have higher inflation than we had for the 30 years or so between 1990 and 2020.
If jobs can't be exported to specialists who can do it at scale in Asia, Europe, etc. then there should be no specialization at all! Your logic demands that everyone fend for themselves primitively, which will lead to a collapse of the abundance mass production/specialization has created for humanity.
[0]: https://en.wikipedia.org/wiki/Farmers%27_suicides_in_the_Uni... [1]: https://en.wikipedia.org/wiki/Farmers%27_suicides_in_India [2]: https://en.wikipedia.org/wiki/Farmers%27_suicides_in_Canada
See, if anyone who said that took it seriously, or even partway seriously, I would find the prospect of free trade much less offensive. Yet the beneficiaries of "current account deficit equals capital account surplus" squeal like stuck pigs and cry "socialism! communism!" if one even hints at the possibility that they might pay a tax to help counterbalance the extent to which the asset pump / export dump negatively affects employment and drives inequality.
That said, the conception that manufacturing jobs are "good" compared to other jobs is simplistic if not outright false.
The US once had quiet a few relatively high paid, unionized manufacturing jobs. Some of those went to China and some of those went to the South/South-West where wages were also lower and union protections less.
The fuzziness of US political rhetoric creates a real distorting lens. Manufacturing jobs can be substituted for safe, well-paying skilled jobs. The existence of jobs can be sold as a goal rather than (employment, wage and safety) protections for workers, etc. And then what politicians actually do winds-up with little relation to the rhetoric anyway.
https://ourworldindata.org/data-insights/manufacturing-accou...
The ideas behind globalism was to promote peace through trade and it worked for a while until China used it to try to become an empire.
Anti-trade activists always agitate about how they'll jerk up prices after capturing markets, but Uber hasn't managed to pull it off, despite >$50 billion burned. The moment a company's margins hike significantly, they attract competitors chasing those same dollars and they have to lower prices or lose market share.
The Brettons Woods inevitable collapse was known when it was introduced, but it was implemented anyway because it unfairly advantaged the US. Meanwhile Keynes proposed balanced trade via his Bancor System. This would have addressed abuse by any specific nation, but the US didn't want it, because it would have limited their ability to be abusive as well.
Why not make the cost of living cheaper for every one?
The people in power in the US lose their grip. As the rest of us become subscribers to a better economic model, support for the domestic lords wanes. Why didnt Soviets want to be western? What happened to the soviet union when the western meme penetrated their mindshare?
In it, the author blames China's industrial ascent for America's deindustrialization, the hollowing out of cities like Detroit, the fentanyl crisis, the looming challenge to American power in the Pacific, the intimidation of America's allies, etc. Basically: China bad, turned into a political doctrine.
My rebuttal is simply a rehashing of what I said in an earlier comment [0] which is simply logical, no matter how you see it:
For most of human history, everyone lived at a subsistence level because we all had to farm our food, bake our bread, sew our clothes, build our own houses, etc.
Specialization is what makes the luxury and wealth of the modern world possible: you do one thing all day long and convert it to cash, then exchange value with people who do other stuff to get what you want. And since they're operating at scale, they can build more houses, make more stuff, etc. that you ever can if you did it yourself. So, you pay less for more stuff.
International trade simply takes it to the next level. For instance, the average American will not bend over to pick cocoa beans for chocolate for even $100k/yr. Many of you will argue, but all I'll say to you is that there's a reason agricultural work is referred to as back-breaking work. There's also a reason why farmers have the highest rate of suicides. Even if the American eventually agrees to do it, the cost will be so prohibitive that buying chocolate will be out-of-reach for everyone but the rich. Abundance ended; the end.
If you believe China is stealing American jobs by making things cheaper an at scale, then tractors stole farmers' jobs by making it easier to consolidate; cars drove much of the horse rearing business into bankruptcy; mobile phones have driven countless industries into extinction, but we're not trying to regulate them out of existence. Why does the logic fail when a nation of 1.5b wants to make stuff cheaply and send it to you for affordable prices? How does it hurt you?
I have this belief that one of the reasons why inflation has been under control despite the QE experiments undertaken by the Federal Reserve, ECB, etc. is because of the impact of 600M Chinese workers, leaving their farms to work in manufacturing, making products cheap enough for the average Westerner to afford, despite dumb government fiscal policy.
If you take that away, your political system becomes even less stable and you have to keep reaching for ever more outrageous stunts to stay relevant or get voted into power.
[0]: https://news.ycombinator.com/item?id=44866645