Is globalization behind the recession?

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Businesses make money from selling to OTHER people. If you only sell cars to your own workers, then you are just taking back the money you already gave them. The strategy only really makes sense if it takes advantage of network effects, otherwise you are still better not giving them the money, as you still have to make the bulk of your sales selling to people you do not employ.

In any case, the point of paying workers is so that they can make the most product for other people. You are acting as if the job is the point of the productive process, when the productive process exists for it's own ends, and the jobs are the positive benefits that continually recur. If cutting wages is more efficient, then it is more efficient, and likely more efficient no matter who your customer base is. The real benefit of high wages really comes in in terms of reducing turn over and getting higher quality workers, as McDonalds isn't going to become gobs richer by the hamburger purchases of their teenage workers who may likely be just saving for a car, and the average office job never sells back to their employees despite paying relatively high wages.

NAFTA was definitely a huge player in all of this. Over the past decade and a half since it was passed, it's been slowly deindustrializing us. The reason we have these huge trade deficits is because we consume a lot more than we produce. That's bad. In the long run, you can only consume as much as your produce. If you consume more, it increases debt.

NAFTA claims to be "free trade", but it's not. Free trade is about being able to buy/sell products to whatever person/country you want. It's not about moving labor around. If an American company isn't efficient at making something compared to companies in Mexico/Canada/wherever, then they probably shouldn't exist. Their alternative would be to change the quality of their product (for the US, that would probably be taking the luxury market), or make something else.

It doesn't matter *what* we produce. It can be lightbulbs, cardboard boxes, cars, firearms, computers, or anything else. What matters is that American companies operate in the United States. If we move production out of the country, we'll lose our standard of living.

A tad ironic.

There is no "failure." Capitalism is the unequal distribution of wealth. Socialism is the equal distribution of misery.

America became insanely wealthy because as a nation, I accomplished things by allowing men to reap the wealth of making something new. That we enjoyed over 100 years of not fighting amongst ourselves (a major failing in third world nations) helped as well.

Global socialism is being pushed for, even though socialism has failed in every nation that's tried it. The more they promote moving jobs into countries with socialist models, the jobs leave America, people find new and lower paying jobs, and it begins the downward spiral that's created the recession.

There is no way Americans can enjoy the quality of life their parents and grandparents had if we try to compete on an equal footing with every other nation in the world. The come up, we go down. American business is PUNISHED for being successful and everything is done to promote building industry overseas even when it means putting Americans out of a job they already do very well.

In the past, sending work overseas was suicide for a business. Now, with globalism being the new buzz word, it's vogue to do it, but without American consumers, now American companies are starting to lose sales and go under.

The domestic worker is the domestic consumer. When wages are decreased consumption must also decrease. The USA maintained consumption in these later years by debt of the consumer from various sources such as mortgages and credit card usage. When that no longer became viable the economy declined. Production efficiency through technological innovation has accomplished much enrichment of management with little or no increase of compensation of the worker/consumer and that basically is the root cause of the economic decline.

Ummm.... yes, that is obvious, however, the point of production isn't selling stuff to the people who you gave money to in the first place. Here is what is necessary for the wage increases to be beneficial though:
change in wages = the profit level of a purchase * change in probability of purchase

Now, this just seems questionable, as the change in wages would have to be relatively low in order for this to work given that the profit level of a purchase is significantly less than the cost of a vehicle.

Secondly, your second assumption isn't necessarily true. If you state "when incomes are decreased consumption must also decrease" then it becomes logically valid because consumption is a function of income. The problem is that income isn't just a matter of just wages and can include returns upon investments, not only that, but part of the issue is that salary distributions can change dramatically while still not changing the mean salary, which, isn't the case that you are trying to argue, as you are trying to argue an egalitarian point.

In any case, I don't buy your point. The issue of credit cards really can only work if we involve a number of additional psychological or sociological presuppositions that can be questioned as necessary facts of human nature, which they have to be accepted as for your case to work as you want it to. Not only that, but I do not think that a lot of our issues are just matters of poor people with credit issues, but rather I think that the crisis we had was closer to a speculative bubble, which does not involve poor people but rather investors who are either psychologically deceived, or manipulated by false economic information being relayed to them through some vehicle(often in these arguments the false information is based upon government intervention). I could be wrong on this, but adjustable rate mortgages were the category that was affected by this situation, not so much just sub-prime mortgages, this means that the problem doesn't appear to be poor people having issues(what sub-prime is) but rather a speculative bubble is more likely because of the fact that adjustable rate mortgages are a good pick entrepreneurial sorts that do not plan to keep their mortgage for a long time. At least, I think that this case was made by a paper written by economist Stan Liebowitz a while back on the economic, perhaps someone else has a different analysis, and I know that some may reject his idea that a false government signal spurred the housing crisis.

It's true that there are other sources of income than wages but the people who have the extra resources for investment are not necessarily in the bulk of the population who live on wages alone and within whom resides a very large proportion of the purchasing power. The statistic that wages in general have remained level or even decreased while production efficiency has increased through technological innovation is common knowledge. The benefits from this innovation has not been passed on to the working populace and the huge debts incurred by the bulk of consumers who have no income other than wages are a major problem. to fail to acknowledge this fall into debt is a very strange blindness.

oh hayul yeah. It's not the reason so much for the Global Recession (that was a combination of Wall Street playing fast and loose with financial instruments and globablization)

I had a job until April, when it took a train for South Africa. I've been looking for work ever since, and I don't even get rejections back. Next time you get to work, take a look around and see if the workforce seems.....younger. A goodly portion of those 'baby boomers' are out on the street. Some people are happy about that, some aren't.

I think the whole thing is a combination of really bad management, wealth destruction (what Republican would 'engineer' a recession? The Stock Market lost hundreds of billions of dollars. Talk about biting the hand that feeds ya...

In addition, the Globalization trend is only accelerating. What you're going to see over the next few decades is too few jobs chasing too few countries. Our jobs went from the US to Mexico, to China (and India), and now they're leaving China for Vietnam and other countries. As each workforce begins to see their wages rise, the jobs will leave for the next cheapest country.

I think the recession has been caused by debt of the first world countries. People lived beyond their means, partly because they were encouraged to. It wasn't going to last forever. I don't know why it's happened. It's clear though that if we in Europe, North America and Australasia want to keep our wealth we're going to have to write a budget that balances itself.

Large scale investment in renewable energy in our countries as well as converting cars to electric could save us a fortune by not having to buy much oil, gas or coal. That would reduce our cost of living, and then in our countries we could live comfortably on lower wages.

When we lower our cost of living the companies that have moved out will start moving back. Globalisation is fair because it's expanding the amount of competition in the market. China and India are barely different to our own countries. The people there are used to living more according to the natural law, keeping a balanced budget. It won't last forever. Fools rush in. Give them an inch and they'll take a mile.

In China a growing middle class is experiencing obesity problems, gorging on junk food and this newly empowered middle class is demanding more rights, dismantling the power of the government to pursue singularly economic successful goals. For example, they want nicer homes and more pleasant, environmentally-friendly neighborhoods - the sort of things that will end up affecting Chinese business efficiency. They are right to want those things but they will eventually lead to countries like China having less of a competitive advantage. The longer these people have most our jobs, the more they'll also expect our standard of living.

It is a gross misunderstanding to confuse means and ends in an economy. The ends of an economy should be the health, education, protection and well being of the populace, not the accumulation of wealth for the benefit of the few and the control of political and economic power by an elite. No doubt the current escapades in capitalism have generated huge sums of money to be allocated to a rather small sector of the populace. If that wealth is returned into the economy to produce more general benefits for the population by investment in economic advances and well being for the nation as a whole then it is playing a vital part in the health of the economic system. But if a large portion of that wealth is devoted merely into gambling on futures that have no positive economic effect on the nation as a whole then that wealth is being misused. When the benefits of production efficiencies produce excess wealth that is used to invest in external national production under the concept that lower labor costs result in more competitive prices that will no doubt benefit those areas which gain in investment and technological expertise but it is, in effect, exporting the benefits out of the originating nation. There will no doubt be some benefit locally in lower priced goods but in the long run it is leaching away the gains that should be returned to the local economy and benefiting only the management which then becomes an importer rather than a producer. It no doubt will benefit the world at large for the expertise and exported investment donated to them but the country exporting production and expertise will inevitably feel the loss of economic power and living standards which will then move down to the level of the countries receiving the bounty.

If globalisation happened properly then in the long term:

- There would be more worldwide consumers as those in the countries that are now the poorer countries would no longer be so poor and would consume more
- Therefore there would be a higher overall demand
- There would need to be an increased supply to meet this demand

Pure capitalism is a lovely system during a boom time. But it isn't a boom time all the time, there are recessions and during those times capitalism sucks. Therefore it is a flawed system too. Pure communism also doesn't work because there are no incentives. The only system that works is somewhere in between and it is the governments we vote in that decide where that "in between" is.

Some parts of the economy are state-run and some are privately run. And for some things there should be international laws to protect people's human rights no matter where they are in the world.

I, personally, would like to push for more state-run businesses. These would be fairer places to work. However the market would be free for private ventures doing a similar kind of businses. The same way that we have a national health service and also private medicine as an alternative.

I would also like to see no restrictions as to where one can go in the world to work, i.e. an end to work permits.

The Planet Earth IS the local economy.

ruveyn

The issue is that your claim was not really about wages, but rather income of any sort, as consumption is just (propensity to consume)*(income - taxes), but wages are not a variable. One might argue that they are a variable in propensity to consume but that isn't direct. In any case, a large percent of purchasing power always resides in those who have money, the reason being that money is the power to purchase, so unless GDP decreases, there is no change in the economy's ability to purchase things.

I know that is common knowledge, however, that isn't sufficient to support your position though. Well, ok, they have debt, the issue is that their debt is not the cause of the housing issue as far as I can tell. Your claim about debt is not even a necessary one either, because even if there is variation in the growth of wages, there is no necessary reason why those who aren't having wage improvements will spend greater amounts of money, as frankly, one could argue that these individuals would just spend the same amount of money because the value of their money is remaining constant and so sticking to the same spending habits is rational, and one could also argue that LESS money would be spent as part of this skew in wages can be attributed to the increased value of human capital(education) and as such greater proportions of the budget would be devoted to capital purchases than usual. One could also argue that US actions are a result of a failing culture of savings, as a younger generation is not properly taught how to budget or even feels less need to budget given that social security insulates them somewhat for the need to budget in old age, it could be that a larger percent of the population is emerging from a culture that saves less, it could even be that lending mechanisms are failing to properly handle risk from debt and thus are promoting lending beyond what is good, etc. In any case, Sand, the issue isn't that I am not recognizing your facts, but I reject your interpretations.


No, the end of an economy is always the end of the people who act within the economy. This includes an accumulation of wealth for some. That includes the existence of TVs and computers and cars for those who purchase them. An economy exists because individuals want things, and that is its means and end, others can siphon off the economic benefits for other purposes though.


The benefit is production, people producing things better is the reason why the system works, as it is the real end of the system. As for benefits? Well, actually if we invest in them, then we get money back based upon returns on investment and really most of us will never directly deal with whatever company you are talking about anyway, so really the benefits of cheaper products is what is universal and the losses of any value of the company is just local. Not only that, but Sand, if we export something, then we don't literally lose money, the economy is a flow process, and if we give other countries our money, then they basically have to spend it back on us(and if they don't and hide the money in their matresses, then we have depreciation and the value of each dollar gets higher in return anyway). We do not lose resources, but rather different industries basically have to emerge. In any case Sand, there seems very little in your case that is profoundly different than the idiocy we know as mercantilism today, as really there seems nothing in your analysis that is different than mistaking gold for wealth. By using our resources more efficiently, we don't lose anything at all, and almost literally every economist today recognizes the benefits of free trade. I think your entire analysis collapses if you just recognize how much the economy is a circular thing, as the only reason why we are having changes is just because unskilled labor is easy to export, not some grand thing about the nature of trade, as the idea that making a free exchange for personal benefit is harmful is relatively stupid, just as it is stupid for the average person to provide their own medical care, grow their own crops, or build their own appliances, and I do not see how the household is different enough from the economy for this kind of analysis to fail in this case.(note: I know the differences, but the basic idea of comparative advantage still holds)

You don't even have to take that route to attack Sand, although the argument that trade increases peace is certainly not a bad one to take that goes along that route. Really though, I would think that the average economist who saw that long statement would just shake his head and say "Look, buying foreign products does not mean that we send money off to an abyss, as our money is useless to them unless they buy our products as well, meaning that the money has to come back to us. Not only that, but money that does not go back into our economy has no loss to our resources. International trade thus can only have distributional effects, and provide cheaper items, so trade cannot help to be a net benefit (ignoring any negative distributional issues)" As, let's face it, 90% or more of economists believe in some form of free trade.

The only problem with international trade is that you grow too dependant on the next person, so when the slightest malfunction happens, the whole economy becomes crippled until it gets jump started back. ^.-

Greed was the cause of the recession, and continuing greed is the reason it's hard to reverse.

And they say "greed is good" <.< .