good lesson to learn:
Cheap labor is good for the economy.
Everyone
knows feels that Globalization is bad,
but no one can say why.
On the basic economics Dr. Wolff is correct (and his facts prove that globalization has made us all better off):
when a factory closed in Cincinnati, and reopened in Shanghai, that was good news for Chinese people who got jobs in Shanghai, but it was not good news for Cincinnati -- not for the workers who lost their jobs, not for their families, not for the little stores that depended on those workers having money to buy . . . . And they began to say something, these laid-off workers.
So someone got laid off and said something. And that's why Globalization is bad? because some get laid off (while most were made better off, even in Cincinnati)? and that's bad because it's always wrong for anyone to get laid off? So there should never be any layoffs? You'll notice that Wolff never says there's something wrong about someone getting laid off.
Of course the less competitive who are laid off sometimes complain -- that's to be expected. And if they have a strong voice, maybe a strong union or political power or connection, or if they're a large number in a particular community so they're more conspicuous, they might bring pressure against someone to stop these changes and remain longer in their uncompetitive jobs (like our uncompetitive overpaid autoworkers and steelworkers).
But usually the less competitive just do the necessary adjustments, like changing careers or retraining or shifting to a different part of their company, the same as when new technology forces them to change in order to stay competitive. In some cases they suffer a lower income for a period, like a small company or entrepreneur, struggling after a setback, becomes more competitive again by making changes to recover or regain their earlier place in the competition. Companies and investors and workers, producers of any kind, in a healthy economy have no guarantees to shield them from having to compete and improve and keep pace with the market changes.
Wolff gives the globalists' explanation emphasizing that the increased competition benefits everyone, rich and poor, capitalists and wage-earners, and Wolff never denies that consumers benefit from the increased competition:
Globalization is something everyone should support, because, you know, yeah, a few people may lose their jobs, . . . but we all benefit, even those people, but by going abroad, we corporations will be able to get the work done at a much lower cost -- Why? because the wages are much lower out there, . . .
This is just noting the facts of life, not saying there's anything wrong about it or that any of the decisions by the corporations are wrong. What's wrong in any of this? OK, someone got laid off, which happens, or a company loses some business, or even folds. Where in Holy Writ does it say "Thou shalt never lay off a worker"? or to a consumer or shopper "Thou shalt never switch to a more competitive capitalist to buy thy goods from, to get a better deal"?
. . . wages are much lower out there, in China, or India, or Brazil, much lower, so we'll be able to produce the goods, and the wages will be so much lower, and those countries are so eager to have us come there and provide jobs for their people, that they're giving us all kinds of extra deals, making the cost of production cheaper -- and it's so much cheaper that even when you add the cost of bringing the goods produced in China, half-way around the world back to the United States -- you gotta pay for that -- even when you have to pay for the transport, it'll still be cheaper.
Of course it was cheaper -- usually -- and when it was not it was a loss for that corporation (which had miscalculated), so the company always has/had the incentive to relocate only when they first determined that the change would produce the cost savings, to increase the profits. So in most cases the gamble paid off, meaning a net benefit for ALL consumers who enjoyed the lower prices as a result, and much expanded supply, or production to satisfy the changing demand. So it meant increased production and improved performance to better produce what consumers wanted. Which is the fundamental function of business. ALL the producers, including wage-earners, serve this basic function of the marketplace, by choosing whatever improves production to better serve consumers.
Dr. Wolff says this as though there's something wrong with this system of serving consumers better, and yet he never says this should not be done, or that companies should stop trying to save on cost and improve performance to serve consumers. He just chooses words and uses a tone of voice to make it sound as though there's something negative about all of it, even though he never once says companies should not relocate factories abroad in order to save on costs.
But of course if you lower the price because the cost is lower, where's the profit for the company? . . .
The profit for the company is in the higher volume of sales which happens with a lower price -- Wolff knows this, and everyone who's educated knows it. Of course Wolff is not so ignorant of economics as he pretends to be -- he knows a company also profits from increasing its volume of sales, which happens with lower price. So reduce the price and increase profit as a result. It's obvious that the greatest profit is to be gained not by just raising the price ever higher without limit, or never reducing the price (or keeping it down or reducing the price increase) in some cases in order to increase sales. So the profit motive per se, all by itself, drives the company to lower the price (or keep it down) in order to increase the sales higher enough so that the net revenue is more than it would be at the higher price level.
. . . profit for the company? which just spent a fortune moving the factory from Cincinnati to Shanghai? which did that because it wants more profit -- not to help the rest of us -- let's be real. So they didn't drop the prices, which is why you haven't noticed prices going down, have you? Prices mostly go up.
The downward pressure on prices is a slow reliable process extending on over many years, even decades. Overall the prices keep going up, due to automatic inflation, which government and economists say is good for the economy, as long as it's only 2% or so, and which is virtually planned by the economists, such as those who run the Fed. But it's a fact that the Chinese imports (and other foreign imports) tend to be lower-priced than the domestic products, so the cheaper imports cause downward pressure on prices, causing the overall net price level to be lower than it would be without the increased foreign imports.
This downward pressure on prices is a reliable long-term process in the economy, over decades, for the long-term benefit to all consumers. It's not the kind of quick-fix instant gratification benefit which Trump promises in his "jobs! jobs! jobs! jobs!" speeches to the mindless masses (in unison with Bernie Sanders and Thom Hartmann and Joe Biden and other protectionists who give higher priority to saving uncompetitive "middle class" jobs over the interests of consumers who have to pay the higher prices as a result).
And the more competitive producers benefit while the less competitive struggle, including the workers, who mostly grow up without whining and do what's necessary, making the necessary changes. The winners are 100% of the consumers, i.e., the entire population. While among producers there are winners and losers (as producers), as consumers all of them are made better off. Almost all are made better off from the globalization, while if there are also some negative events in the economy, this is caused by many factors other than globalization.
Long-term Benefit of Reagan's Free Trade -- NAFTA-GATT-etc.
During the period of about 1990-2020 (when the increased globalization had the highest impact on the U.S. economy), the inflation rate overall was kept low compared to earlier (e.g. 1960-90). During the increased globalization period the Fed often was worried that the inflation rate was too low, and it took artificial steps to drive the inflation back up to its target of 2%. It's rare in history that a gov't made desperate attempts to drive up the inflation rate. The U.S. inflation has generally been lower and steadier (in 1990-2020) than other countries which mostly had a slower rate of globalization than the U.S. (It's difficult to factor in the 2020-22 period of the Pandemic, but the dividing line of 1990 is a good starting point for the recent higher-trade period, including higher trade deficits.) So the period 1990-2020 is a good test period for judging the impact of the Reagan "Free Trade" experiment of increased globalization.
So it turns out that the corporations were celebrating something that was very good for them. Globalization! not for everybody, not at all.
So maybe only 99% of the population benefited rather than 100%. All the poor benefited as consumers. The only ones made worse off were uncompetitive workers (not the poor or low-income workers, but rather a very loud vocal group of middle-class largely unionized workers whose main contribution to the economy is their talent for whining) earning about $40,000 - $100,000 per year and now faced with an increase in competition which would benefit 100% of the population as the producers' performance improved.
These particular middle-class workers getting laid off had been enjoying their higher living standard/entitlement at the expense of all the poor and all the rich and most of those middle-class workers who were competitive and didn't need to be protected from them damn foreigners "stealin' our jobs" -- the large majority benefited from the new competition. Just as they benefit (as consumers) from an increase in immigrant workers.
It was good for everyone except the least competitive demanding their entitlements. In the long run even most of the uncompetitive benefit as consumers, from the higher production, the improved performance as the competition increases.
So that's the only downside of the increased globalization -- i.e., some of the uncompetitive get laid off, or some producers suffer from the increased foreign competition, including some capitalists.
Globalism pro/con -- to sum up:
Free Trade
Globalization = more trade, more interaction with other countries, more immigration, more competition (always good for consumers), more emphasis on improved performance by producers (merit over privilege and birthright). More EVs and other pro-environment products. And more cheap labor (good for all consumers).
vs.
Progressive Leftist and Marxist and Trumpist (and Democrat/Republican)
Anti-Globalization = less trade, more embargoes, trade sanctions, less immigration, crackdown on hated employers and companies "shipping our jobs overseas," bigotry, hate of immigrants and foreigners, China-bashing, demagoguery and pandering to uncompetitive producers/workers. Fewer pro-environment products. Less cheap labor.
