  Masterblaster Member Username: Masterblaster Post Number: 9 Registered: 03-2005 Posted From: 155.79.138.253 |
In Motor City, anger yields to pragmatism Autoworkers acknowledge forces of globalization at work in GM buyout Interesting article from "washingtonpost.com" about how easy it once was to get a job at an auto plant in Detroit. http://www.msnbc.msn.com/id/12 018694/ | ||
My2cents Member Username: My2cents Post Number: 129 Registered: 10-2003 Posted From: 24.253.67.62 |
Hmmm........I have posted this before and see parts of it could use another shine of light......... Dr. Thomas Palley was chief economist of the US–China Economic and Security Review Commission. Prior to joining the Commission, he was director of the Open Society Institute’s Globalization Reform Project. He has written for The Atlantic Monthly, American Prospect and The Nation magazines. He can be reached at www.thomaspalley.com. If the United States were to add two billion low-wage workers, you'd expect that wages would fall across the board, right? Well, there is a famous theorem in international economics—the Stolper-Samuelson theorem—that says when a rich capital-abundant country (such as the United States) trades with a poor labor-abundant country (such as China), wages in the rich country fall and profits go up. The theorem’s economic logic is simple. Free trade is tantamount to a massive increase in the rich country’s labor supply, since the products made by poor country workers can now be imported. Additionally, demand for workers in the rich country falls as rich country firms abandon labor-intensive production to the poor country. The net result is an effective increase in labor supply and a decrease in labor demand in the rich country, and wages fall. The relevance of the Stolper-Samuelson theorem is clear. For the last two decades, U.S. policy makers, from both major political parties, have worked assiduously to create a global market place in which goods and capital are free to move. Over the same period, two and a half billion people in China, India, Eastern Europe and the former Soviet Union have discarded economic isolationism and joined the global economy. Now, these two tectonic shifts are coming together in the form of a “super-sized” Stolper-Samuelson effect, and they stand to have depressing consequences for American workers. Much attention has been devoted to the adverse impacts of the U.S. trade deficit, particularly with China. And the U.S. government has been rightly criticized for failing to apply adequate pressure to get China to remedy its unfair and illegal trading practices. However, no one in Washington is talking about the deeper question of what happens to wages when two billion people from low-wage countries join the global labor market. If anyone thinks this only applies to UNION workers and wants to BLAME same UNION workers it is only a matter of a few more years before this will ripple affect ALL workers in this country. The corporations are rubbing their hands together in glee over the profits they are raking in at the expense of ALL. Who cares what happens to the people of this country, we are getting ours now.... corporate mantra blah, blah, blah......depressing consequences for the American worker, indeed! Union or Non. When wages fall across the board in this country to third world levels, what do you suppose things will be like? | ||
River_rat Member Username: River_rat Post Number: 79 Registered: 02-2006 Posted From: 68.166.44.44 |
My2cents: It is unfortunate that the general public - worker is not aware of the effects of globalization so aptly discussed in your post. The twentieth century was the American Century. The twenty-first century wii belong to the countries who have leaders who understand global economics. I do not mean only political leaders, but corporate and labor as well. This is not to mention personal responsibility of each individual to understand and prepare for a new economic paradigm. Fifty years ago, most Americans had a wish to end global poverty. Be careful what you wish for as it may come true. What needs to be understood is the third, fourth and beyond order of effects from seemingly simple decisions. The over-generous wage and benefit packages enjoyed for so many years by the auto workers of our area have resulted in the current state of our auto based economy. What to do now? It is imperative that we maintain jobs and accept the pain now, or loose all manufacturing and all jobs. the river rat the economist | ||
My2cents Member Username: My2cents Post Number: 130 Registered: 10-2003 Posted From: 24.253.67.62 |
river rat the economist, I agree with you up till this..... "The over-generous wage and benefit packages enjoyed for so many years by the auto workers of our area have resulted in the current state of our auto based economy. "What to do now? It is imperative that we maintain jobs and accept the pain now, or loose all manufacturing and all jobs." Before globalization the so called "over-generous wage and benefit packages" of the auto workers set the pattern for others across the board in our area and others around the twentieth, American Century Country, IMO. Maintain jobs and accept the pain now or lose all? That horse is out of the barn and long gone. The general public-worker just has not realized that it is a done deal, so to speak. Gone to NEVER return. Woe unto those who do not understand the nuances of the new GLOBAL ECONOMIC PARIDIGM. Most have never even heard of the the Stolper-Samuelson theorem or the globalized, supersizing of said theorem. What is the relevance of this one may ask? Well, a good friend put it to me this way while commenting on this theorem and the history of our country: "Adam Smith, a British economist who has been quoted by American statesmen, and Justices of the Supreme Court of the United States, wrote, in his book Wealth of Nations, published in 1776, "If the free importation of foreign manufactures were permitted, several of the home manufactures would probably suffer, and some of them, perhaps, go to ruin altogether...". He noted that "two great engines for enriching the country, therefore, were restraints upon importation, and encouragements to exportation." Mr. Smith had studied under Professor Francis Hutcheson, who had written, in his book System of Moral Philosophy, in the chapter Of the Nature of Civil Laws and their Execution: "Foreign materials should be imported and even premiums given, when necessary, that all our own hands may be employed; and that, by exporting them again manufactured, we may obtain from abroad the price of our labours. Foreign manufactures and products ready for consumption should be made dear to the consumer by high duties, if we cannot altogether prohibit the consumption;... What Adam Smith and Francis Hutcheson are saying is: If you do A, then B will happen. A -- Eliminate duties and tariffs on goods imported into this country from the lesser developed countries. B -- Manufactures will increase in the lesser developed countries, and will decrease in this country; some manufactures here will close down; they will move their businesses to the lesser developed countries; workers in this country will lose their jobs; the economy in this country will shrink. Well, the Congress did A, and B happened." (yep and one of the bigest backers of NAFTA and then GATT, was our own Carl Levin who told me when I brought this to his attention numerous times years ago, that HE would make that decision for his constituents. HE seemed to know that his base was not educated on the theorem hence he could participate in pulling the wool over the sheeplepeeples eyes while keeping his votes) A book that was published in March of 05 should be required reading for all in this country right now to prepare for the GLOBAL CORPORATE CONTROLLED paradigm is......... Dilemmas of Domination : The Unmaking of the American Empire by Walden Bello | ||
River_rat Member Username: River_rat Post Number: 80 Registered: 02-2006 Posted From: 68.166.44.44 |
My2cents: I don't see where we disagree. The horse in over in China and India and we own barns without purpose. The A and B cause and effect you refer to are undeniably occuring and were predictable. The question remains, 'how do we survive without core production of goods, not just services?' NAFTA / GATT will not be reversed and therefore the only answer at this time is very unfortunate for many of our citizens. Unless they accept significantly lower wages and benefits to have some ability to compete in the world market, they will not have any job. Look around our city and state if it doesn't seem plausible. With the lower remuneration will come a decline in the standard of living. This will be very hard to accept, but it will happen. It will "trickle down" and lead to reductions in the living standards of some of the more affluent as well. Are there any answers? Yes. Development of new technologies - the computer revolution, lead by the US has delayed the decline of our economic dominance through today. We need technologies that will provide new businesses. Technologies that will stem the drain of payments to other parts of the world. The conundrum is that the new technologies (as has every new technology in history)will divide the educated from those not educated and widen the wealth disparity problems even moreso. Your mention of a political figure is significant. As a long time advisor to many of them I have to say that the majority of them are not capable of understanding the implications of their actions. If more than a half a dozen US Senators know the Stolper-Samuelson theory, I would be amazed. Last week I asked a well known political figure what he thought of Adam Smith, the economist; he replied, "where is he now?" Enough said. river rat the depressed economist | ||
Bob Member Username: Bob Post Number: 881 Registered: 11-2003 Posted From: 64.12.116.204 |
RiverRat is correct. Technology has only prolonged the inevitable. The Auto Industry was first to fall, but expect other industries to say either accept lower wages and benefits, or your jobs are off to China and India. Gone is the day where the only place to do the brainwork is here. The world is changing and unfortunately, it will not be good for many people in this country. Not sure what the solution is, pay more for stuff to be built here in America, or pay Wal-Mart prices to have stuff built overseas. | ||
Focusonthed Member Username: Focusonthed Post Number: 78 Registered: 02-2006 Posted From: 209.220.229.254 |
Relating to the illegal immigrant thread as well, I saw on the news last night that the average pay for an illegal immigrant who comes across daily to supposedly do "the work we won't"..... is $10/hour. What the hell is so wrong with $10/hour to do shitty work? I have a college degree, and I don't make a ton lot more than that right now. This is our problem, those that insist on being paid extraordinary wages for doing menial labor. Like the long-time forklift operator once interviewed by the Detroit News over the summer, who was "in big trouble" because without overtime, he no longer made over $100,000 a year. For driving a forklift. | ||
Perfectgentleman Member Username: Perfectgentleman Post Number: 27 Registered: 03-2006 Posted From: 67.63.232.195 |
My2cents - Amazing posts. Very good and thought-provoking information. I have been an adherent to the prinicipal you discuss but had no idea until now it had a name. We all need to get involved in this debate as a nation, and the "Free Traders" and politicians need to start telling the truth about what is in store for us all in this new global economy. | ||
Spartacus Member Username: Spartacus Post Number: 105 Registered: 07-2005 Posted From: 209.114.251.65 |
River Rat, are you sure you're an economist? What percentage of your bretheren would agree that free trade will result in a lower standard of living for the country as a whole? I'll guess that less than 5% of Econ Ph.D.'s would subscribe to this notion. | ||
Track75 Member Username: Track75 Post Number: 2275 Registered: 10-2003 Posted From: 12.75.24.14 |
The predictions of all US wages tanking are overly pessimistic IMO. Global trade has been a force for increased global prosperity over the centuries and it will continue to be so. Putting up a wall to keep "bad" globalism out not only won't work, but it will backfire and harm us more. China and India represent new competitors but they also represent new markets. Those off-shore IT workers are the new middle-class. We ought not ignore the fact that China will soon have a larger middle class than the US. There's opportunity there if we don't freak out. We need to ensure that global competition is fair, and in many cases it isn't, but even under fair competition there will be goods and services that are better produced elsewhere (comparative advantage). The notion that we as a nation aren't producing anything is wrong. Some manufacturing is leaving, and now other countries are capable of higher-value-added manufacturing than before, but look at the steady climb in manufacturing output. It's generally tracked or outpaced overall economic growth since 1950. There may be a leveling at the most recent end of the graph but worker productivity has continued to increase rapidly which is good for high-value-added manufacturing.  Another "crisis" is that the US is becoming a "service economy". First, service doesn't equal flipping burgers. It's the whole gamut of occupations including the high-paying knowledge jobs that are the future. Second, the shift from a manufacturing economy to a service economy didn't start in 2000 or with NAFTA, it's been going on for decades. The last time we had more manufacturing jobs than service jobs was 1970, 36 years ago. You can see the trend has been constant since then.  The globalization of the economy and the shift to knowledge-oriented service jobs in the US requires changes but it isn't the doomsday some predict. It's a big opportunity if we take advantage of it. | ||
Southwestmap Member Username: Southwestmap Post Number: 438 Registered: 01-2005 Posted From: 64.79.90.206 |
Isn't Ireland suddenly a strong economy? There are surely very few manufacturing jobs in Ireland. I think the strong economy there is built on service -sector jobs, | ||
My2cents Member Username: My2cents Post Number: 132 Registered: 10-2003 Posted From: 24.253.67.62 |
THUNDEROUS APPLAUSE RIVER RAT! "Last week I asked a well known political figure what he thought of Adam Smith, the economist; he replied, "where is he now?" Enough said." That pretty much covers it all. Those knuckleheads lack a foundation in history, eh? Bob, this has already happened in other areas and industry. Some places in this country have not recovered from the devasting effects of this in the 60's & 70's, such as coal or cotton for instance. I have been on the side roads less traveled, in 25+ States and seen what the corporate controlled media will not cover. Thank you Perfectgentleman. I did not write either piece only added my comments. Knowledge is power. Discourse amongst family and friends is priceless. Pass the word on and have your library or local book store order up a copy of Bellos' book: Dilemmas of Domination : The Unmaking of the American Empire and pass it around when your done!  Focusonthed, pick up the book and let us know what you think after reading it | ||
My2cents Member Username: My2cents Post Number: 133 Registered: 10-2003 Posted From: 24.253.67.62 |
Hey Track75 My humble, aching, homesick heart disagrees. In no way do I advocate putting up a wall to keep out "bad" globalization. SUPERSIZEing the Stolper-Samuelson theorem is what has me thinking of things to come after some of the things I have seen on the east coast. I believe the trickle down will make its way to even the high-paying knowledge jobs in the "service" sector in a few short years as well. I already witnessed a bit of that downsizing in Boston 2002 with the importation on H1B visa foreign workers replacing American high tech, high paid computer workers for less. In Las Vegas the teachers do not make enough at 34,000 a year to buy a house and are leaving the area. Last summer the school district imported a bunch of teachers from Asia on H1B visas after a heavy recruiting effort over seas. Average price of a home in vegas has been said to be 289,000 and that is for nothing special. Blah, blah,blah and the beat goes on, eh? Back on topic of the area wide effects of this SUPERSIZED GLOBAL CORPORATE touch on my beloved D and the state of Michigan......... (Message edited by My2Cents on March 28, 2006) | ||
My2cents Member Username: My2cents Post Number: 134 Registered: 10-2003 Posted From: 24.253.67.62 |
I forgot to add this for those who might like to delve a little more: - point E. This point represents the equilibrium wage and rental rates that would arise in an H-O model when the price of steel is PS and the price of clothing is PC. Now, suppose there is an increase in the price of one of the goods. Say the price of steel, PS, rises. This could occur if a country moves from autarky to free trade, or, if a tariff is placed on imports of steel. The price increase will cause an outward parallel shift in the blue zero-profit line for steel as shown in the adjoining Figure. The equilibrium point will shift from E to F causing an increase in the equilibrium rental rate from r1 to r2, and a decrease in the equilibrium wage rate from w1 to w2. Only with a higher rental rate and lower wage can zero profit be maintained in both industries at the new set of prices. Using the slopes of the zero-profit lines we can show that which means that clothing is labor intensive and steel is capital intensive. Thus, when the price of steel rises, the payment to the factor used intensively in steel production (capital) rises, while the payment to the other factor (labor), falls. If the price of clothing had risen, the zero-profit line for clothing would have shifted right causing an increase in the equilibrium wage rate and a decrease in the rental rate. Thus an increase in the price of clothing causes an increase in the payment to the factor used intensively in clothing production (labor) and a decrease in the payment to the other factor (capital). http://internationalecon.com/v 1.0/ch60/60c080.html | ||
River_rat Member Username: River_rat Post Number: 81 Registered: 02-2006 Posted From: 71.126.176.158 |
Spartacus, yes, I really am an economist. Sorry I have been absent from the thread for the last few hours as I had to be inside the beltway to hear some guy named Bernacke say a few words about the economy. I never said it would reduce the standard of living as a whole, only to some. Unfortunately, all market forces have those who are winners and those who are losers. Maybe the politically correct way to put it is that some will be more successful than others. An example you may consider is Toyota vis-a-vis GM. What our country needs to be aware of is that we and our leaders have to understand real economics, not political economic pandering to voters to make certain that we don't lose to China, India, Korea. Excuse me, I mean be less successful than those countries. My appreciation to the participants of this forum discussion. My2cents and track75 for their great posts and everyone else who has made this such a civil and learned thread. the river rat out of the beltway back in the rust belt | ||
River_rat Member Username: River_rat Post Number: 82 Registered: 02-2006 Posted From: 71.126.176.158 |
Addendum. Usually my favorite quotation for our threads is from Beaumarchais, "It is not necessary to understand things in order to argue about them." Thanks. This thread has had thoughtful and knowledgable comments from all. the surprised river rat | ||
Livernoisyard Member Username: Livernoisyard Post Number: 361 Registered: 10-2004 Posted From: 69.242.223.42 |
Ireland was one of the first countries to which US IT was offshored. After some time, the salaries of its IT workers increased, making the IT of other countries, such as the Philippines, Russia, and India, comparatively less costly. Thus, now Ireland has less US business than it had a few years ago. Even foreign service industries, which benefit from global competition, have international competition themselves. (Message edited by LivernoisYard on March 28, 2006) |
