Wednesday, June 22, 2011

How Not to Rush to the Bottom

Today's must-read is by Harold Meyerson in the Washington Post. America is dealing less intelligently with global trends than its European rivals. We are losing ground as a result.

American business seems bent on making the U.S. into a low-wage paradise, like Indonesia, the Philippines, Mexico or Guam. We are blind to the flip side of this "paradise". The downside which we can see right next door. We are becoming a nation that can't afford the products being made. Low wage countries are not the envy of the world. They are not societies to emulate or admire, and we should know better. The leaders of American business should know better. Many of them do. But the low-wage competition has a powerful pull to it. It's hard to compete against a more ruthless business rival, hence this foolish race to the bottom. And what do we have when we arrive there? We have low-wage consumers who cannot afford to buy the products or hire the services.

Prosperous workers are not the enemy. Prosperous workers are less inclined to radicalism and likelier to invest in the company they work for. They become partners––up to a point. They share the same broad goals and values.

At some point the systematic impoverishment of the American worker will do two things. It will reawaken radicalism among workers, radicalism to match what we see in their employers, the Chamber of Commerce and the Republican Party.

The second thing is already happening. Flat and declining wages over the past thirty years have already eaten the muscle out of the American consumer economy. Workers who once could afford homes no longer can. Nor are they buying goods to furnish and fit them. They don't have the money. Rising necessary costs and debt have squeezed out discretionary spending. Workers can afford cars less often. They can barely afford healthcare and are becoming less healthy as a result, at the same time that employers are cutting health benefits and government programs to fill the gap are being cut. We have a revenue deficit because low incomes pay less in taxes to pave the roads and hire the teachers. When they retire the young workers of today will be much poorer than today's retirees, and there goes another large segment of the economy.

A prosperous working class was the goose that laid the golden egg––creating a half century of stable growth, broad prosperity and a robust economy. Reaganomics crippled organized labor, which killed that goose. No more goose. No more golden eggs. The current economic crisis was the inevitable result, but it's only the opening chapter.

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