Addressing the Problem of Globalization on the working class in The First World

In an age where globalization has replaced the political division of capital flows between U.S./Soviet Union affiliations, the promise of alleviating the ills of poverty faces both free market optimism and capitalist paranoid pessimism, both with compelling evidence. The accessibility of more people into a global marketplace promotes the opportunities for individuals to do business that possibly did not have the connections or ways of communicating before. As noted on Kristof's blog yesterday, quoting Kim Tan “FDI (foriegn direct investment) is the key. I’m from Asia, and that’s how Asia has developed, bringing in capital, technology and inspiring young entrepreneurs who build businesses.”

The other side is not as compelling. Protection for workers from the competition of foriegn firms can also diminish the wages, and therefore the base, of prosperity in the USA. Then when a business fails because its costs are too high, the first thing blamed is the wages of workers. Any negative externalities in the growth of the global marketplace are overlooked, such as this business contraction in First World countries, which somehow most adversely affects wage earners.

An example of this is the auto industry's perilous times with the pay grade of its manufacturing employees. The negotiated contracts for laborers were based on market share and success of the auto industry in the past. The fact that shortsighted and greedy executives did not adapt to the new global marketplace with R&D and instead focused on advertising, future-oriented technology that only manifested in dream concept cars without making the bridge to affordable production, and the culture of bonuses, high executive pay and excesses show are not as heavily factored into the equation. The execs point to the "overly high" expenditures to its workforce as the major problem instead of its lack of foresight. As a result, the UAW is forced to renegotiate to save jobs, while the executives are asked to "voluntarily" give up their bonuses and/or some of their pay.

The public sector has responded by hearing business plans from the Big 3 that should have been pursued a decade ago, and then to ask them to intervene on their behalf. In effect, the taxpayers are paying to have a business plan proposed to us in order to dole out our money. A streetwise vendor is making a better transaction than these jokers. The market has already given judgment that the business of the Big 3, without a drastic restructuring and reinvestment overhaul in R&D is an unviable business in this new marketplace. The job of the government is to guarantee the unemployment insurance all the workers have been paying into for years, and to let other automakers absorb some of the market share that will be lost with the Big 3. Their production scales will increase with this void in market share if the Big 3 cannot properly restructure.

If the government wants to help out business, it should invest in its citizens in education and healthcare. Benefits seem to be a substantial cost to businesses, and by absorbing that cost across the board, or coming up with a system that alleviates some of the healthcare costs of individuals and businesses could be a big help. Creating a highly educated work force will also allow for increased productivity in businesses.

But make no mistake, this depression is in part because the US is losing its competitive advantage and lower costs to developing nations who are trying to catch up in the global marketplace. Unfortunately, leadership in government has decided to focus on the needs of investors and focused on guaranteeing their investments instead of focusing on a level playing field. They do this by bailing out failing businesses who have not played by the rules of regulation or smart business practices. The investment risk will bare its ugly head eventually, and the government has shifted that burden to the taxpayer. Subsidizing investors for the sake of attracting more investment is a disasterous policy position that is ready to snowball or avalanche.

Let businesses compete fairly, and let the winners and losers accept the outcome. It is the government's job to make sure the bottom doesn't fall out. Too bad Bush didn't know that, and too bad it seems like the "change" that is supposed to be coming may have a difficult time pursing through the veins of the old market worldview.