In the 20th century, the most important factor for a good life was to be born in the right country. The United States had the highest living standard by far. People from all over the world tried to immigrate to the United States. Its immigration quota served to limit the impact on wage through international labor mobility. Those who were born there were lucky. The country mattered so much because labor and capital were not that mobile.
However, in the 21st century, the modern nation state today is mostly a geographical concept. Immigration, the decline of religion, and the spread of English have rendered its old foundation less and less relevant. Multinational corporations inhabit a global network. Their networks tie the nation states together. When a government tries to resist globalization, they will find it very hard, because the negative side effects bounce back quickly through multiple channels.
Multinational and IT-led globalization is leveling the field for labor market across the world. A good living standard is no longer a birthright. The distinction between first world and third world is no longer a relevant concept to describe nation states. In rich countries like the U.S., a large proportion of its population lives under third world living standards. In China or India, a significant proportion of their populations live with first world living standards. A convergence is occurring with similar ratios of living standards across the world. Moreover, one can tell where pressure is more acute.
In developed countries, the pressure is worsened by high living costs due to regulatory constraints. To lessen the social pressure, they need to lower the living cost for low income workers. Wal-Mart, for example, is one manifestation of that force. It employs people at third world wages and offers goods at third world prices. This market solution to the rising inequality is often thwarted by regulations. A society that chooses this option must have sufficient income redistribution for those who earn third world wages to be able to pay for first world prices.
Europe is in that camp. Its policies are consistent. Through corporate welfare Japan is in that camp too. The U.S. wants its low income people, i.e., most of its population, to enjoy first world living standards but doesn't have to the means or policies to make it happen. Instead, it tries to juice up growth to achieve this goal. But, its success depends on the businesses' willingness to pay its workers first world wages. The evidence says businesses are unwilling. The U.S. policymakers keep thinking that it's a demand issue and embark on policies that seem irrational to others and scare the whole world to death.
Japanese people travel in Asia and see people who earn one tenth as much but can do similar jobs. Their income expectations adjust accordingly. They view their paychecks today as unsustainable. Is this expectation reasonable? I am afraid so.
Americans always expect tomorrow to be better. Well, this isn’t always so.
Source: http://blog.english.caing.com/article/102/
However, in the 21st century, the modern nation state today is mostly a geographical concept. Immigration, the decline of religion, and the spread of English have rendered its old foundation less and less relevant. Multinational corporations inhabit a global network. Their networks tie the nation states together. When a government tries to resist globalization, they will find it very hard, because the negative side effects bounce back quickly through multiple channels.
Multinational and IT-led globalization is leveling the field for labor market across the world. A good living standard is no longer a birthright. The distinction between first world and third world is no longer a relevant concept to describe nation states. In rich countries like the U.S., a large proportion of its population lives under third world living standards. In China or India, a significant proportion of their populations live with first world living standards. A convergence is occurring with similar ratios of living standards across the world. Moreover, one can tell where pressure is more acute.
In developed countries, the pressure is worsened by high living costs due to regulatory constraints. To lessen the social pressure, they need to lower the living cost for low income workers. Wal-Mart, for example, is one manifestation of that force. It employs people at third world wages and offers goods at third world prices. This market solution to the rising inequality is often thwarted by regulations. A society that chooses this option must have sufficient income redistribution for those who earn third world wages to be able to pay for first world prices.
Europe is in that camp. Its policies are consistent. Through corporate welfare Japan is in that camp too. The U.S. wants its low income people, i.e., most of its population, to enjoy first world living standards but doesn't have to the means or policies to make it happen. Instead, it tries to juice up growth to achieve this goal. But, its success depends on the businesses' willingness to pay its workers first world wages. The evidence says businesses are unwilling. The U.S. policymakers keep thinking that it's a demand issue and embark on policies that seem irrational to others and scare the whole world to death.
Japanese people travel in Asia and see people who earn one tenth as much but can do similar jobs. Their income expectations adjust accordingly. They view their paychecks today as unsustainable. Is this expectation reasonable? I am afraid so.
Americans always expect tomorrow to be better. Well, this isn’t always so.
Source: http://blog.english.caing.com/article/102/
