Workingman globalization blues

U.S. wage growth has never been so slow. Time to bar the door, Katy.

Published January 19, 2006 12:05AM (EST)

Yesterday, reader "CamilleRoy" pointed How the World Works to an excellent Bloomberg news article addressing the conundrum of the current American economy. By historical standards, unemployment is low and economic growth is solid. But worker wages, over the last 16 consecutive quarters of growth, are "rising at a slower rate than in any similar expansion since the end of World War II."

One culprit: "globalization of the labor market." This, says the article, is undermining support for Bush's free trade policies in Congress.

There is no shortage of economists who will argue that the benefits of free trade for the American economy outweigh the inevitable pain, but numbers like those quoted in the Bloomberg article are impossible to ignore. Globalization is exerting downward pressure on worker wages in the developed world. It is likely of little comfort to a downsized auto worker that, at the same time, hundreds of millions of people are moving out of poverty in India and China. A lowering of the standard of living in the United States demands a political response, and the longer it continues, the more inevitable that response becomes.

The question is: What kind of response? For months, congressional leaders have been making protectionist noises, mouthing off about slapping huge tariffs on goods manufactured in China, demanding a revaluation of the Chinese yuan, or otherwise looking to close the barn door long after all the livestock have fled. Never mind that the majority of economists blanch at such steps. Something's got to be done, right?

Absolutely. But how about reinforcing the traditional strengths of the U.S. -- its leadership in science and technology, its ability to create new markets and innovate -- instead of trying to close out the rest of the world? If Congress and the Bush administration really want the U.S. to flourish, they should be pouring billions upon billions of dollars into education, job training and the funding of basic research. Instead of approving obscene tax cuts and immoral wars, they should be ensuring that American citizens have every advantage in a competitive landscape that will only get more cut-throat. And then, as nations like China and India, with their huge populations, mature into affluence, the United States will be there to sell them the advanced products and services that those countries will no doubt crave with historically unprecedented hunger.

My own thinking on this was bolstered today after the excellent New Economist blog alerted me to a new research paper by three Singaporean researchers examining the impact of the Chinese economy on its closest neighbors.

Nations such as Taiwan, South Korea, Singapore, Malaysia and Thailand have been some of the world's greatest success stories in recent decades. But competition from China has hit them hard. In low-level and intermediate consumer goods and electronics, China has seized market share. What was once, five years ago, made in Taiwan or South Korea and sold to consumers in the U.S. is now made in China.

However, according to the research presented in this paper, in 14 years out of the last 20, China's neighbors have more than made up what they have lost in exports to the U.S. or E.U. by gains in their direct exports to China. These exports tend to be "advanced" goods -- high-end semiconductors for cellphones, for example, or, in the case of lesser developed nations like Indonesia, raw goods to feed the Chinese manufacturing maw. As China's "middle-income purchasing power" continues to grow, conclude the researchers, the future of such "intra-Asian" trade looks healthy.

There's no reason why U.S. workers shouldn't also be benefiting from the surging economies elsewhere in the world. Except for the niggling little problem that U.S. leaders appear determined to deny them every opportunity.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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