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This is a very thought provoking analysis.  It seems to be based in a traditional economic mode of thought that considers a single, (national), market for labor and capital.  This is what Keynes was describing in The General Theory of Employment, Money and Interest. But in our current situation much of the complication and much of the underemployment, now unemployment, involves trans-national issues and processes.  Companies that once manufactured products in the USA have either been bought and pulled apart, with the manufacturing and associated jobs sent to China or other low wage countries, or the management of these companies has done this themselves.  There was great pressure from the "financial sector" which profited greatly by this move.  This constituted regulatory and benefit "arbitrage" on a massive scale.

All of the aspects of labor in the USA to which so many conservative economists and businessmen objected, such as health care, environmental protections, retirement, etc. was not required in China and there is so vast a supply of labor available there that labor is practically free.  Ross Perot was concerned about US jobs going to Mexico, but China took US jobs and then Mexican jobs.  We fought a Civil War in the USA over race based slavery in significant part because so many working class men in the North did not want to have to compete against slave labor.  But our brilliant, if amoral, business and financial class has discovered that wage slavery in China is far more "efficient" at putting money in their pockets than any economic arrangement previously devised.

Your argument is illuminating in an "as if" sort of way.  The net result is the same: the owners and financial types get to keep a massively larger portion of the money than was the case when goods were manufactured in the USA.  In order to properly account for the existing situation we would require a multi-national General Theory, as the workers in China do not consume any significant portion of what they produce and US labor is completely left out.

This is exactly what the critics of "Globalization" predicted.  Ross Perot was right about the general process.  He was only in error as to where the jobs would go.  They went to China, not to Mexico.  It got so bad that the Mexicans were seeing their own chili peppers pushed off the shelves by cheaper Chinese products.  But none of the "serious people" wanted to see this aspect.  Their profits and the profits of those for whom they worked depended on not seeing and, especially, not acknowledging this situation.  For twenty years the downside of this fraudulent process was concealed from the public by a series of financial bubbles.  Why should they complain when they were getting richer due to rising property values, etc.

In effect, they managed to confound their critics by conflating an economic analysis that was based on a single market for goods, services, labor and capital with a trans-national or global production system for which that mode of analysis was grotesquely inadequate and concealed it all with Greenspan's unlikely bubble dance.  The only thing more grotesque is the consequences this successful conflation of disparate realities has had on workers in the USA.

I love your graphs and agree with much of what you are saying.  I just don't think we can afford not to look at the whole picture.  We cannot let the inadequacies of our modes of analysis blind us to the underlying reality. Perhaps now there will be some scope for economists who want to actually analyze and describe what is occurring other than in academia.  My sense is that prior to the blowup, bringing up such issues, especially in a business or financial context, was  not a way to advance a career.


"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Jan 10th, 2009 at 03:09:40 AM EST

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