It was Globalisation that done it!

This opinion piece by Jeffrey Sachs comes closest to lining up with my long posited theory that the introduction of asia’s (mostly China) workforce into the world economy was going to be like a python swallow a buffalo.

Jobs for low-skilled workers in manufacturing, and new investments in large swaths of industry, have been lost to international competition. Employment in the US and Europe during the 2000s was held up only by housing construction stoked by low interest rates and reckless deregulation – until the construction bubble collapsed. The path to recovery now lies not in a new housing bubble, but in upgraded skills, increased exports and public investments in infrastructure and low-carbon energy. Instead, the US and Europe have veered between dead-end, consumption-oriented stimulus packages and austerity without a vision for investment.

Not only has anglo-saxonia failed to create jobs, it has set up a divisive situation where only the rich can benefit from globalisation. The problem is that this is only the start of things. Now that the asian economies have a foot on the skill ladder, there is no need for them to be satisfied with the low skilled jobs. And, in stark contrast to your average low-skilled european worker, these people are highly motivated to succeed, if not for themselves then certainly for their children.

The Wests standard of living, and indeed global supremacy, is under attack as never before.

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7 thoughts on “It was Globalisation that done it!

  1. I’m not sure the US or Europe have enough time to upgrade skills. That takes decades. It’s more of a long term play (which they both are clearly not interested in implementing at the moment).

    But they surely *can* reindustrialize and they can do so rapidly. That’s relatively easy and the people in both regions would embrace the strategy immediately (well, Americans would, but I don’t know much about Europe so you’d have to tell me). They industrialized in response to various hot/cold wars throughout the years and they can do it now if they see the current situation as threatening as a war (without having to actually start one, I mean). But they don’t see the current problems as a threat at all, and they do not see how to industralize without the military. So, things like a new power grid, bullet trains, replacements for nuke/coal/oil, etc are all trivialized. So, they won’t reindustrialize. And since the current laws are designed around deindustralization (globalization) and propping up the existing financial system … well off the cliff they’ll go, dragging everyone else with them. The only real discussion is the timing. A year? Two? Five? I am hard pressed to find a case in history where trends like these are reversed before their inevitable conclusion: collapse.

    Your comment about the Asian workers being motivated is really critical. And interesting. I’ve been to a few countries in this region, and the motivation among young people is massive (except for Japan). And Americans are entirely clueless about this (again, I don’t know about Europeans). It is shocking how complacent middle-class Americans are at the moment and how much they *don’t* know about what’s been going on in China, India, Vietnam, Indonesia, etc for more than a decade. Will make for a fun future …

    • Grrr. I just wrote you a nice long reply and lost it…

      Short version: look at this table http://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance

      Note that the non-primary economies dominating the top of the list are mostly central / norther european, with highly educated work-forces, exporting high-tech / high margin products. The Asian leaders are a mix of cheap labour and high-tech.

      How does Anglo-saxonia (currently languishing way down the table) fit into this mix? I don’t think America / UK workers are going to work for the equivalent wage of a asia (recently) peasant. Actually, they couldn’t if the wanted to – it’d be starvation wages. And they don’t appear to be well enough educated (or motivated) to compete with, say, Northern Europe.

      It’s all very well keeping busy building roads, bridges, trains, power grids, but without industry to utilise them they are a non-productive use of (now scarce) capital…

      In short, yep, agreed. The short-term, get rich quick, empty materialism championed by the US / UK is reaching the end of it’s arc. The only way back is via a bounce off the bottom, hopefully with a little more humility, better wealth distribution, and a some long term social planning / thinking.

    • I’m not sure we Germans would need to reindustrialize… The model to mostly reward parasitic enrichment and punish those actually providing services and producing goods seems to be an anglo-saxon thing.

  2. You’re looking for a “bounce” off the bottom? 🙂

    I think we go splat myself. No bounce. But I could be wrong. They (the bad guys) have a particular talent for keeping things going far beyond anything reasonable. The reason I say to reindustralize by spending massive cash on infrastructure is to get money directly into the hands of people who spend — without filtering the money through banks — and people who can immediately work. Rich people do not spend and their filtering process is too severe when the govt gives them the money. They just don’t lend. It’s time to cut the banks out (yes, you can stop laughing now, especially given the current US president is a pure product of Wall Street. But still). I mean, seriously, it the US wants a bullet train why go to the French or Japanese? Why not build the damn thing in Detroit? The Americans have the technical talent easily.

    Plus, I’m looking to generate some unintended consequences from dumping big money into programs that are not ever touched unless we go to war (at World War scale, I mean, not the low-grade background wars the US implements now). No one is working on this. No one. Silicon Valley is too busy worrying about who “likes” who on useless social networks (useless in the sense that they do not generate employment), and Wall Street is too busy hiring politicians to give them money so the can further deindustralize the country. When you take those two segments out of the picture, the rest of the country gets buy from one paycheck to another. They miss a few and they are in serious trouble. They are the majority. They are the people who need work and attention. So, although they can’t compete with Asian labor, certainly, their wages have been held down for three decades now and I bet they’d jump on anything to even stay level.

    Regarding capital: Bernanke give away 16 trillion to banks and other corps in secret. Poof. Gone. No one even noticed. Seems to me the Americans can generate another 10 trillion or so to directly invest in programs to get people back to work. Imagine if that 16 trillion made it into the hands of people who spend?

    That’s a heck of a chart. Amazing what a few years of trade imbalances can produce, eh? I’m not sure at all how to reverse such a disparity.

    • Cheery thought: we’re reduced to throwing money around in the hope of unintended consequences…

      Social Networks seem like a good metaphor for everything that’s wrong with the West. Ad supported services, provided free to end user, that provides little value, and lots of distraction. The ads promote other free, ad supported services, and it’s turtles all the way down.

      Is it as simple as us no longer adding value?

      • Your perception of the value of social networks is stunted. You essentially deny the foundations of community and human connection. And of course you’ll deny that too.

        • The value being discussed here is purely economic. It may be the case that social networks are, or become, net creators of jobs / wealth / growth, but it’s not a case i’ve yet seen made.

          You might as well ask me when i’m going to stop beating my wife…

          My “stunted” view of social networks is that they may not be an unalloyed good. The obvious social value that they provide, of keeping people in touch, facilitating discussion, promoting interaction across traditional social divides, etc. deserves to be balanced against the price extracted for that service.

          I understand that you don’t think that, in the big scheme of things, it’s a particularly relevant question to ask, and readily admit that my part of our discussion on the subject has become divisive, and even offensive to you. Therefore, i’d suggest that if you wish to continue to talk about it we attempt to do so on a higher level.

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