Global Economy Concept Collapses

By Cesar F. Lumba

(Many of you have asked how you may contact our writers. Cesar Lumba’s email address is lumbacesar@gmail.com.  His facebook page is Cesar F. Lumba and his twitter hashtag is #morningcall11.  Jules Lombard’s email address is jlombard0306@gmail.com.)

A recent post in this blog, titled “There is No Global Economy” has not received as much notice as the more popular posts:  ”A Proposed New American Doctrine,” “The Giant Sucking Sound and the Rise of Employnomics” and “Was President Obama Taken for a Ride…”

But the evidence that there is no global economy has become more convincing, and it is time we revisit the concept of a global economy.

If there were a world economy, we would now be seeing – after nearly six years removed from the collapse of most economies in 2008 – an accelerated convergence of the world’s economies and most economies would be marching in lockstep or near-lockstep.  This is because of the equilibrium effect that an economy experiences when its sectors retool and recalibrate.

But the U.S. economy remains strong and resilient despite its high unemployment and Germany’s, France’s, Switzerland’s, China’s, Brazil’s, the Philippines’, Indonesia’s, India’s etc. economies are apparently insulated from the continuing turmoil in most economies of the world.

If there were a global economy, most economies (sub-economies?) would now have adjusted, but that is far from the case.

We don’t have a global economy as long as western economies can inflict great harm on their target economies.  Look at what’s happening to Russia. The western economies have placed sanctions on Russia and Russia’s economy has gone into a tailspin.  If there were a global economy, this would not be possible because sanctions on Russia would adversely affect the western economies also.

From David M. Herszenhorn’s article published in the New York Times, April 16, 2014:  ”While the annexation of Crimea has rocketed President Vladimir V. Putin’s approval rating to more than 80 percent, it has also contributed to a sobering downturn in Russia’s economy, which was in trouble even before the West imposed sanctions. With inflation rising, growth stagnating, the ruble and stock market plunging, and billions in capital fleeing the country for safety, the economy is teetering on the edge of recession, as the country’s minister of economic development acknowledged on Wednesday.

“Mr. Putin, who just lavished $50 billion on the Sochi Olympics, also must now absorb the costs of integrating Crimea, which economists and other experts say has its own sickly economy and expensive infrastructure needs. The economic costs have been masked by recent patriotic fervor but could soon haunt the Kremlin, as prices rise, wages stall and consumer confidence erodes.”

Mr. Putin got Crimea, but the Russian economy lost its ability to tackle its myriad economic woes.

Why do the pundits keep telling us there is a global economy?  Because the lords of industry have chosen to abandon the western economies’ workers in favor of low-cost, low-wage countries like China, India, Brazil and Mexico and have successfully justified the wholesale transfer of jobs as a natural consequence of a globalized economy.

“Hey, it’s the economy, stupid,” they seemingly tell us.

We blame the so-called global economy when the blame actually belongs to the lords of industry who manufacture in China at Chinese prices and sell in the U.S. and Europe at American and European prices.  It is greed masquerading as the profit motive that is responsible for the massive layoffs in the U.S. and European manufacturing sectors, but we are being led to believe that the culprit is the global economy.

Our sons and daughters are being told, “because of the global economy, you must learn to compete with the Chinese, the Indians, the South Koreans, etc. and therefore must do very, very well in school.”

Our kids have to do better in school, of course, but that is not the reason they no longer can find jobs in their home country.  The main culprits are outsourcing and offshoring.

At FoxConn, the world’s biggest electronics manufacturer, Chinese workers as young as 16 are employed and forced to work eighteen hours a day welding electronic parts together.  Many are contemplating suicide, some have in fact succeeded, because of the horrible working conditions. And they are grossly underpaid.

American, European and Australian industries do their manufacturing in China and some third-world countries because the cost of labor there is very low and there are no labor unions that protect the workers from exploitation.

It’s not and never was because of the boogeyman known as the “global economy.”

If American industry is pressured by Americans to bring manufacturing back to the U.S., it can be done overnight.  We have the factories here, albeit somewhat rusting from disuse, and it will be easy to retrofit the factories and even modernize many of them.

The U.S.-manufactured products will of course tend to cost more, but that’s OK because Americans will have jobs and will be able to absorb the additional costs.

The U.S. multinationals will see their U.S. profits plummet, but they will remain hugely profitable outside the U.S. because their products that are intended for international distribution will still be manufactured in China, India and other low-cost, low-wage countries.

Over the years, the same U.S. multinationals will learn to adjust their operations to allow for a greatly disparate mix of production costs in the U.S. and other countries.

This brings us back to the proposed new American doctrine.  We must insist that 51% of all products sold by multinationals in the U.S. are manufactured in the U.S.  The other 49% and products intended for international distribution can in fact continue to be manufactured outside the U.S.

If Europe, Australia, Canada, Japan and South Korea adopt a similar policy, manufacturing will head back to the fully industrialized countries and the youth in those countries will have good jobs once again.

The growth of developing countries will slow down, especially China’s and India’s, but that’s a good outcome, because the growth of those countries has come at the expense of the young people in the fully industrialized countries and the net result is a destabilization of the industrialized countries’ societies.

Here’s what we should all do.  Let’s create more noise out there.  Tell everyone you talk to that we are not going to take it anymore.  Nobody has a right to sell in the American market products that are made outside the U.S. if those products used to be made in America.  Free trade is no excuse for the wholesale abandonment of America by American multinationals.

If they want to continue selling in the lucrative American market, they must bring back some of the manufacturing we lost during the last few decades.