Thread: A Nato For The World Economy

The role NATO played in an age of military threat could be played by a trans-Atlantic free-trade zone in today's age of economic confrontation. The two economic zones -- the European Union and the United States (perhaps with the addition of Canada) -- could stem the dwindling of Western market power by joining forces. Together the Europeans and the Americans are still a force to be reckoned with. Representing about 13 percent of the total world population and 60 percent of today's global economic power, they stand ready to act as producers and consumers not only of goods, but also of values.

There are few reasons to oppose the Americans

There are three reasons the idea is particularly attractive, and the first is political. Such cooperation would lead Americans and Europeans closer together again. The temptation to childishly score points off each other -- dangerous in light of the Asian challenge -- would be removed. And while there may be plenty of reasons to oppose US President George W. Bush, there are few reasons to be against America. From an economic point of view, there are many tangible reasons that it makes sense to work together with the West's leading power.

The military alliance which was forged in the Cold War could be carried over into the global economic war. The aim of maintaining freedom and increasing prosperity would remain -- only the methods of pursuing those aims would change. A free-trade zone would inevitably lead to a convergence of the two economic systems. Europe would become more Americanized and the US would become more European, albeit slowly in a process which would last decades.

Countries that remove all trade barriers and unify accounting standards, technical norms, copyright laws and stock market practices would also ensure that their financial, social, taxation and environmental policies didn't drift apart. Governments would have more room to maneuver, as well as greater opportunities and responsibilities.

he second major advantage is economic. A domestic market as reliable and as big as an EU-US free-trade zone would be advantageous for both investors and workers. Economic growth would be fuelled, though perhaps not drastically. But investment creates jobs. The West could at least win back part of what it has lost. For one thing, it would regain the power to set technical standards -- even if that does mean, in the global economy that is more a question of promoting standards than actually "setting" them.

The most imposing effect of such a mega-merger of markets would doubtlessly be felt in the Far East. The boom region of the last decade and a half would rightly sit up and take notice. The new message would be this: The price of a product is still important, but the way in which it has been produced is equally relevant. Countries that refuse to tolerate trade unions -- or which exploit women, children and the environment, to name just a few issues -- would no longer be spoiled by preferential treatment at customs.

Freedom on the inside, a fortress on the outside

Asia's current economic behavior could for the first time prove to be a disadvantage. Inside, the free-trade zone would give its residents courage, but on the outside, it would serve as a fortress -- at least for those who consciously reject, or even denigrate, Western values. This would rectify one European Union mistake: Until now it has been servile towards enemies of freedom. By allowing almost every third state the right to the same conditions, the EU has to a large extent destroyed the advantage of being a member. The EU Commissioners are the last true believers in the religion of free trade.

A trans-Atlantic free-trade zone would have greater aims than simply defending the interests of importers and exporters. "Peace in Freedom" has always been NATO's motto. "Prosperity with Values" could be the aim of the trans-Atlantic free-trade zone. One of those values would be the goal that this prosperity reach as many people as possible.

The notion of a confident and strong West is also one that is important to German Chancellor Angela Merkel. In the rare moments when Merkel is able to look past the day-to-day grind of political life and see the bigger picture, it is the trans-Atlantic free-trade zone which catches her eye. She envisions it as the fusion of the like-minded. At the very least, it would counteract the Asian strategy of pitting the Europeans and the Americans against each other. Indeed, the upcoming German EU presidency in the first six months of 2007 presents itself as a handy platform from which to push what could be the project of the century. Merkel speaks of a "fascinating idea."

When Merkel talks about a free-trade zone though, she isn't thinking exclusively about economics. It's true that the most transparent benefits for companies of lifting customs barriers and abolishing bureaucracy are most easily measured in dollars and cents. But there is another invisible advantage -- one that influences the landscape of power even if it doesn't appear anywhere on the ledgers. Merkel speaks of "non-material values" that could be preserved and indeed strengthened by the free-trade zone. For years and years, fear of globalization has preoccupied governments at the cabinet level in virtually all Western capitals -- and an alliance of the democracies and market economies surrounding the North Atlantic could do everyone there tremendous good. It would also re-energize the West.

The sins of growth

The history of the well-fortified West has taught us that those who defend their values also spread them. The principle of fair trade could also be spread in the Far East in the same way that the 1975 Helsinki Conference set off a process which ultimately benefited human rights in the entire Eastern bloc. Asia has a right to succeed. But the West also has the right to fight to preserve its own accomplishments.

Can a Western free-trade zone really prevent Asia's ascendancy? Clearly not. Nor is that the goal. However, what it can do is to help reduce the slope of Asia's ascent and prevent our flight paths from crossing too frequently.

But doesn't that sound too defensive? Is the energy needed to set up a trans-Atlantic free-trade zone worth it? Absolutely. A plane can take off in different ways: There is a violent updraft that creates turbulence on the ground and there is milder form of thermal wind which can also take others up with it. This take-off may not be as steep and as fast, but it is less destructive. Yes, global growth would slow down. But that wouldn't be nearly as tragic as many people think. The growth of the last few years has been impossible to enjoy anyway because of the many sins committed along the way, both in Asia and the West. Plus, it has been bought with other people's money -- namely through hefty borrowing and the money of future generations.

The creation of a trans-Atlantic free-trade zone would also send a strong political message: Look here, it would say, like-minded nations are coming together. The nations that gave birth to the Enlightenment are devoted to the individual's right to freedom, but not at the expense of the collective. World leadership may ultimately end up in others' hands, but we won't stand complacently by while it happens. The Asians still need us more than we need them: They thirst for Western capital and technological expertise. And without Western markets, the Asian export industry would soon fall apart.

No one less than Henry Kissinger, the godfather of modern American foreign policy, is encouraging Western government leaders to take steps in the direction of such a free-trade zone. The enormity of the task should not be a deterrent. The duty of governments, after all, Kissinger says, is to lead societies from where they currently are to places they have never yet been.

Apparently, Europe is smelling the coffee.

While it would be excellent for both Europe and US to boost their own economies by having a free trade zone, what is being missed out in this article is that more that State or Party control, it is cheap labour (in comparison) that no European or American company can match or expect their citizens to accept as pay!

It is incorrect to state that labour unions are vilified or not permitted. In India, the greatest millstone to any progress is the labour unions. They are calling for a nation wide strike on Dec 14. If fact, Europe and the US, Communism is banned so to say. In India, it is part of the government and is a pain that pulls India into a quagmire. That much for the spin Der Spiegel wishes to churn.

Child labour has just been banned in India. And anyway where it is still on, it is the European and US companies which is making capital of this labour. Levis being a case in point.

Ah well, it is sometimes a good feeling that we can give a scare to the Europeans who have done so well so far on our resources and capital under the colonial times!

More on the European fear of Asia!

ASIA ASCENDANT
Protectionism! The West Must Defend Itself

By Gabor Steingart

In the global conflict for wealth, Asia is on the attack using brutal methods. Working conditions are appalling and industry is destroying the environment. Asia's rise is the fall of the West. That is, unless the West can overcome its scruples and defend its interests.

Editor's Note: The following essay has been excerpted from the German best-seller "World War for Wealth: The Global Grab for Power and Prosperity" by SPIEGEL editor Gabor Steingart. SPIEGEL ONLINE is publishing a series of daily excerpts from the book.

After the end of World War II in 1945, the North Atlantic Treaty Organization (NATO) emerged as a Western military alliance. But its combat units don't prepare wars of aggression -- NATO is a defensive coalition. Nevertheless, the group's military planners do have the task of thinking about -- and planning for -- the unthinkable. Sometimes NATO even goes so far as to threaten military action.

The alliance also strives to keep its arsenal state-of-the-art -- whichever member notices a shortcoming has a duty to raise the alarm, even if that warning is unpopular. Former German Chancellor Helmut Schmidt, for example, noticed the Soviet Union build-up of SS20 rockets and immediately realized the implications. The West had nothing to counter these mid-range missiles, aimed as they were directly at Western Europe. The region was at risk, even if the majority of Germans didn't notice or feel the danger.

Even members of Schmidt's own party, the Social Democrats, thought the Chancellor's concerns exaggerated, with some even accusing him of being overly hawkish. His campaign to deploy Pershing and Cruise missiles was met with angry protests. Armament finally came, but Schmidt was no longer in office.

Why the history lesson? Because in today's economic world a similar security risk has developed with China's emergence as an economic power. Free-market economies in the United States and Europe find themselves confronted with China's controlled market economy -- a model for which they are unprepared. In the global war for prosperity, a rival has emerged -- and it is willing to use complete state protection to win.

China is supported by a banking system which pursues other ends than mere profit. Import tariffs protect entire industries as effectively as a brick wall. Thus does China, a shoe exporter, prevent shoes from coming into the country. The domestic market is protected from foreign competition by a 27 percent surcharge.

Furthermore, Chinese currency policy acts as a massive subsidy for exports by keeping prices of goods sold abroad artificially low while the intellectual property of foreign firms is taken without payment and without compunction.

More than any other country in the world, China talks the free-market talk while never deviating from the state-controlled walk. The country's leaders clearly don't navigate by the principles of free trade, despite having committed themselves to do so in international treaties.

China promises remedies but does nothing

As the West looks spellbound at developments in the Far East, the old dream of unconditional free trade is slowly fading, with nothing waiting to replace it. Apart from a collective feeling of outrage, which the Chinese leadership has learned to live with, there is no consensus about what to do. Diplomats and leaders who visit the country demand fair trade conditions, call for better protection of intellectual property and criticize the role of the currency policy. China's leadership listens passively to the West's complaints, before apologizing, and promising to address the situation. But they have done nothing about it for the past decade and a half.

So far, Europe and the US have avoided changing tack from focusing on trade to focusing on trade policy. The idea of protectionism has become taboo. When uttered, economists shake their heads and politicians roll their eyes.

The current situation, though, cannot continue. Not that we should blithely erect protectionist walls. What we can do, however, is display the bricks which could be turned into a wall if necessary -- while making clear our unwillingness to ever use them. As it currently stands, the Western countries are economic pacifists, uneasy about even arming themselves.

The Old Continent and the New World swore they would never use the weapons of modern economic warfare because they believed free trade would necessarily lead to wealth and growth. The result, paradoxically, is that the economists and economic policy makers -- who see themselves as a highly rational bunch -- have become the biggest dreamers of all. The accusations once levelled at peaceniks and pacifists now apply to Western economists: They think the best of people and are therefore dangerous. They know a lot and are still incredibly naïve.

Aiming for parity

The question today, of course, is not whether free trade should be ended. Even Helmut Schmidt didn't end the policy of détente and march on the Soviets. Instead, the question is this: When will Europe and the West realize that a pure market economy exists only in the minds of our economists, but is not how individual states function in reality? For China, trade conditions are a question of utility, not of faith. Europe and America would do well to aim for parity.

Given the present-day realities, America has started to back down from the economic ideals it once touted. The state protects and supports its own economy wherever it can. Steel and agriculture in particular are two industries which get special protection. Additionally, foreigners are not allowed to hold controlling stakes in media companies, and ports were, prior to a recent intervention by the US Congress, in the same boat. Asian companies are taken to court for violating copyright and trademark laws and for stealing software. Import quotas have likewise been slapped on the Chinese textile industry -- and customs authorities are vigilant about reporting any infringements.

RELATED SPIEGEL ONLINE LINKS

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War for Wealth: The Global Grab for Power and Prosperity

In the eyes of both Republicans and the Democrats, imports and exports are not acts of nature which flow uncontrolled into or out of the country. Trade is a political instrument to be leveraged according to national interests.

Further illustrating America's attitude toward dealing with the global market, the US commissioner for trade is a member of the cabinet. And yet, when it comes to trade, the president himself has a very limited mandate -- one which Congress, even in the middle of a president's term in office, can refuse to renew. When it comes to global trade, Congress demands its say.

A tougher authority

The new US Treasury Secretary, Henry Paulson, former head of the investment bank Goldman Sachs, announced his readiness to take on Asia the very day he was appointed: He would, he promised, promote free trade -- which for him means ensuring that "our trading partners play by the rules."

The most common critique of aggressive trade policy is the price argument. In the end, the argument goes, any control on the economy only hurts the consumers because manufacturers who offer the lowest price may not get the chance to enter the game at all. Such reasoning, though, ignores the fact that consumers not only demand cheap T-shirts and bargain electronic goods, but also want jobs.

Plus, even low consumer prices can't go on forever. If one country succeeds in dominating the global market and destroying the competition, rock-bottom prices are history. Monopolies and cartels are not in the consumer's interest, which is why smart trade policy is also anti-monopolist. It must ensure that anti-cartel legislation, essential to the health of the marketplace, also be applied internationally. When it comes to monopolies and cartels, global markets function every bit as badly as domestic ones do.

Low prices is always one -- but not the only -- criteria for trade. If the aim is to increase the wealth of one's own nation, and not that of the country goods are being shipped to, it is important to pay closer attention. The liberal economic structure is only liberal within its sphere of influence. In order to win out in the end, the liberal model requires an authority which allows for punishment and monitoring. It must have the ability to maintain a surveillance of the market. Who is the supplier? What are the conditions? How was the price set? And, what benefits accrue to the manufacturer's home country that are not reflected in the price?

The paradox of Western controls

In exercising such surveillance, the threat of quotas, tariffs and import bans is more important than actually implementing them. International trade policy is a bit like a game of poker, in which one player tries to trump the other. Pacifism in such an atmosphere is a sign of stupidity. Those whose ideology prevents them from playing the trump card are destined to lose the game.

In Western Europe there is a strange imbalance when it comes to foreign and trade policy. Europeans are very interested in what happens abroad when it comes to air and water pollution, and to capital invested in foreign countries. Europe now has environmental agreements and treaties concerning the protection of foreign investments with over 100 countries.

Similarly, the state also tries to prevent dirty money from crossing its borders. Millions earned in drug smuggling, human trafficking and the illegal arms trade are tracked down with all technological means available. Goods are checked and confiscated, making life difficult for criminals. The state doesn't necessarily win every time, but it aggressively plays the game. The message to criminals is loud and clear: Be on your toes, because we certainly are. There is no refuge.

Even food imports are closely examined. The laws governing food in Vietnam and Morocco are all well and good, but they are of little interest to us. But what finds its way from there to Germany, France and Italy, is determined by European import legislation.

All of which serves to protect citizens here. There is a consensus that food has value over and above its price. Indeed, access to nearly all sensitive markets is regulated in a similar way. Medication made by a pharmaceutical company in India, for example, would never be sold in Europe without the company first being checked by EU authorities. A nuclear power plant constructed by those who built the Chernobyl reactor wouldn't have a chance in Western Europe. And cars without modern catalytic converters are routinely knocked back by customs officers.

It makes sense that goods have to comply with the safety standards of the country where they will be sold. The decisive factor here is the national criteria of where the consumer is, rather than the manufacturer. And it is a factor which necessarily causes the manufacturer to adapt his goods to meet the criteria his customers demand.

But nowadays workers enjoy less protection than bees and prawns. The consumer need not balk when prawns from China appear in the supermarket freezer next to prawns from the North Sea. Both must adhere to the same law governing banned additives. Even the amount of antibiotics used in breeding is controlled. A memo issues by German customs authorities on Sept. 25, 2005 was categorical:

"In the past, some foodstuffs from China have repeatedly contained the antibiotic Chloramphenicol. The member states of the European Union have therefore banned the industrial import of animal products. This ban was decided on as a result of inspectors in China finding substantial deficits. All animal products which are destined for human or animal consumption are covered by this ban. This includes in particular food such as prawns, chicken, rabbit meat and honey."

Unspoiled capitalism

The memo is an example of how Germany both protects its citizens and educates its food suppliers. Most of the time the customer decides -- but where he is unable to make the decision, the nation quietly protects him. That the food market be protected by the European Union is seen as entirely natural.

But while consumers are protected, workers are not -- an exception to the rule of EU regulation. There are practically no rules protecting workers -- instead, their lives are run by out-of-control capitalism. Payment can be as low as possible, work conditions can be inhumane, labor practices can flout any of the standards judged necessary at home -- from expected hygiene to gender equality to child labor -- and customs officials raise nary an eyebrow. Manpower is the freest of all the tradable goods, able to enter a market unchecked, with our values and sense of fairness suspended.

If two mobile telephones lie next to each other on a table, nobody cares if they were manufactured under different social conditions. The one may contain all the social responsibilities of a developed industrialized country, such as regular working hours or maternity leave. While the other may have been manufactured under conditions determined by an extreme form of capitalism in which the worker has no more rights than a dog. That may sound left-wing and revolutionary, but it describes quite simply the reality of a global economic world in which two different eras are constantly meeting in the shop window. Goods from social welfare states side-by-side with products made in a modern-day era of Manchester capitalism. Suddenly those who view themselves as modern, seem pretty old-fashioned after all.

So everything wrong in Europe is Asia's fault.

Apparently, they don't appreciate a level playing field.

What if the Asians start grumbling about the looting by the colonial powers which put them in poverty in the first place?

How Globalization Drives Down Western Wages

By Gabor Steingart

Asia is fast developing into an economic powerhouse, with China and India gradually transforming themselves into the new masters of the universe. Meanwhile, the West faces the prospect of losing the globalization game, as European labor is devalued -- by the millions.

Editor's Note: The following essay has been excerpted from the German best-seller "World War for Prosperity" by SPIEGEL editor Gabor Steingart. SPIEGEL ONLINE is publishing a series of daily excerpts from the book.

The capitalist is a logical creature -- he invests his money where he can expect the greatest return on his capital. Whether it's building a factory in the tropics or digging a tunnel in the permafrost, the capitalist is mainly interested in expanding his assets. After all, the most important objective of capital is to multiply. Were it to do the opposite -- if it decreased -- no one, not even workers, would be better off. Indeed, shrinking capital usually leads to a decline in jobs. Words like mismanagement, crisis, restructuring and layoffs quickly find their way into the newspapers.

Whether jobs will survive a crisis is ultimately determined by a single, remarkably straightforward question: Can invested capital be turned into more capital? No capitalist would be interested in looking on as his investment shrinks from one day to the next, otherwise he'd quickly cease to be a capitalist.

Workers have a better reputation, although they're just as likely to go where the jobs are. If they are left to migrate freely, they'll go where the pay is good and where they can expect a reliable standard of living. Southern Italians migrate to northern Italy, eastern Germans to western Germany and South Americans to North America. Millions of people are constantly crossing oceans and continents for the sole purpose of getting closer to what they are convinced is the promised land.

But the great injustice is that capital is welcome almost everywhere, while workers are not. Tricks and incentives are used to attract investment worldwide, but countries routinely close their borders to migrating workers. In some cases, they even call upon their militaries to keep out potential troublemakers.

There is also another aspect in which labor and capital differ. Capital and the capitalist are a single entity. They are essentially joined at the hip, with one incapable of surviving without the other. Separating capital from its private owners doesn't work, as states like the former East Germany learned when they nationalized their industries.

The capitalist is flexible, and has become truly restless

The workers' handicap, in a nutshell, is that the same symbiotic relationship doesn't apply to labor and workers. Although workers can be prevented from traveling across national borders, no border guards can keep someone else from taking their jobs. In retrospect, perhaps the true wonder of the post-World War II world is the fact that the countries of the West have managed for decades to control outsiders' entry to their labor markets.

The nations traded all kinds of goods, imported and exported everything under the sun, from bananas to television sets, from gasoline to steel, and money was transferred back and forth. Workers, though, were never exported and imported. Although West Germany brought Turkish guest workers into the country for many years, they were soon subject to the same rules and conditions as German workers.

Nor were there any especially significant differences between the labor markets in Europe and America. The companies headquartered on opposite sides of the Atlantic were competitors, not rivals. They paid wages, not charity. Children were children and not workers. Civil society passed laws to ensure civilized relations between workers and manufacturers, so that the two groups, despite decades of exploitation and class struggle, eventually discovered that they had more in common than they had once assumed.

Communist leaders in Eastern Europe eyed the West's tête-à-tête between labor and management with suspicion, but declined to become a part of it. They traded raw materials and goods with the West while keeping their distance from its labor and capital markets. The countries of the Third World also seemed to exist on a different planet, with Western disinterest and their own powerlessness ensuring their exclusion from the process we now call globalization.

But all of that has fundamentally changed. The chasm between the West and the rest of the world has not only been filled, but now resembles a bridge. The capitalists are storming across that bridge, looking for adventure and making full use of their newly acquired freedom to travel. They tour the most remote places on earth, their factories are popping up everywhere and jobs are readily following.

In 1980, the sum of all countries' direct investments, that is, the funds a given nation invests outside its own borders, amounted to only $500 billion. The old-school capitalist tended to be more of a stay-at-home type.

But his successor is of a different breed altogether. Total worldwide direct investment has jumped to $10 trillion, an increase of almost 2,000 percent in only 25 years. The capitalist is flexible, even restless in many cases, and now expects jobs to mimic his own wanderlust. The old-school entrepreneur was a patriarch and was often even more of a nationalist than his fellow citizens. The modern capitalist is a frequent flyer many times over; he is both at home and an outsider wherever he goes. Calling him a nationalist couldn't be more off the mark.

Trading labor like silver or silk

Jobs now follow the capitalist on his travels throughout the world. They leave the West, only to reappear elsewhere. They turn up in an Indian software company, a Hungarian toy factory or a Chinese automotive engine plant. Despite frequent claims to the contrary, jobs don't simply disappear into thin air. Instead, they are replaced by technology or by workers located somewhere else.

The unheard of has happened, something no one really expected. A global labor market has developed, a market that is expanding daily and palpably changing the way billions of people live and work. People today are connected through an invisible system of conduits, people who don't know each other and, in some cases, aren't even aware of the existence of the country in which their counterparts live.

This is precisely what distinguishes today's globalization from the trading nations of the past, the colonial empire and industrial capitalism of the mid-19th century. For the first time in history, a largely homogeneous economic system has developed that encompasses all production factors. Capital, raw materials and human labor are traded just as silver and silk were in the past.

Many of the things we once took for granted have become less than certain. Power and wealth are being redistributed, and so is opportunity. Although we all see the world, we see it from widely differing perspectives.

The newcomers in the global labor market look ahead with optimism and great expectations for the future. For the first time, many are able to bring home wages that are more than just a pittance. For them, the global labor market holds unbelievable promise.

But the new era is far less promising for millions of workers in the West, dispelling the optimism of the early years. Many will leave the labor market in the coming years. Even in places where Western workers are presumably able to hold their own, wages are declining -- not drastically, but bit by bit each year. Suddenly workers find themselves confronting a sensation they have never felt before, at least not to this extent: insecurity.

http://www.spiegel.de/international/...436976,00.html

And now the coup de grace!

The Asian workforce in Europe is the fault of Asians!

How Globalization Drives Down Western Wages (2)

>>Return to Part 1
For its detractors and supporters alike, the development of a global labor market is a process of historic dimensions, a process that becomes all the more palpable when one considers the unusually large masses of people surging onto this market. In the 1970s, 90 million workers from Hong Kong, Malaysia, Singapore, Japan and Taiwan became part of an economic system previously dominated almost entirely by the Western Europeans, Canadians and Americans. The Asian Tiger states were greeted with considerable astonishment and the Japanese with the deep respect they deserved. But these newcomers in the global labor market were merely the vanguard of the modern age.

The West's workers have become a minority

The Chinese joined the club a short time later, followed, in the wake of the collapse of the Soviet Union, by Eastern Europeans and Indians. Within what amounts to little more than a blink of the historical eye, some 1.2 billion additional workers entered the labor market. This massive influx has led to a sharp shift in the balance of power: The West's 350 million well-trained, but expensive workers, who until recently were responsible for a large share of global production, became a minority virtually overnight.

As if this expansion of supply alone weren't impressive enough, high birth rates in the world's rising economic powers are responsible for ever-growing numbers of new workers eager to enter the global labor market. They want jobs, and they'll do whatever it takes to get them. Despite the fact that no new states have entered the global labor market in the past decade, an additional 400 million people have. Another 200 million, according to the United Nations International Labor Organization in Geneva, are also eager to work but unable to land a job, no matter how poorly paid. Far from being unemployable, this vast army of unemployed is essentially made up of workers on hold.

The world's stock prices flicker across bank computer screens. The stock prices of American and European companies are assimilated within minutes, sometimes even seconds. If computer screens were installed at the unemployment office showing wages in various countries, many would be surprised by what they would see. The same leveling of prices can be seen in the global labor market, just in slow motion.

The addition of billions of willing workers has set off a process that will soon change the fundamental structure of Western societies: wages and, at the same time, standards of living of ordinary laborers are approaching the same level. In a bitter twist of irony, capital now ensures that the old leftist demand of equal wages for equal work is actually being put into practice. Only this time, those equal wages are being applied around the globe and to the detriment of Western workers.

Labor for $3 a day -- and less

The phrase wage scale autonomy is gaining a whole new meaning. In the past, employers and employees in the West negotiated wages independently of the state. In times of labor inflation, however, employers are able to set wages independently of the trade unions because, after all, there are millions of workers who are willing to underbid their fellow laborers. Wages are rising in Eastern Europe and Southeast Asia and falling in the West, while those in China and India steadily remain at some of the lowest levels worldwide. Of the roughly 3 billion people currently active on the global labor market, about half earn less than $3 a day, which means two things: First, these people are dirt-poor and, second, their poverty wages are forcing down the wages of other, better paid workers. The fates of those at the lowest end of the wage pyramid are linked to those in the middle.

One of the greatest mistakes made today is to believe that the millions of migrant workers in China and unionized workers in Wolfsburg and Detroit have nothing to do with each other. This may seem to be the case, but it isn't. The typical Chinese migrant worker probably has no idea where Wolfsburg - Volkswagen's hometown -- is, while German and American autoworkers may have only the vaguest notion of what it means to be a migrant worker. Nevertheless, their biographies are inextricably linked.

The migrant worker, who often lives in cage-like hovels and works, without any legal safeguards whatsoever, for a company that supplies parts to a Chinese auto plant, competes with a full-time but unskilled laborer in that same Chinese plant. Their wages are not significantly different because the migrant worker wants nothing more than to capture the Chinese full-time worker's job. Local business owners are constantly tempted to replace their full-time workers with migrants. Willingly or unwillingly, the two sets of workers are in bitter competition for the same wages.

Of course, the unskilled but full-time worker does his best to escape this wage competition. His goal, at a minimum, is to become a skilled worker in the Chinese auto plant, and he is willing to do just about anything -- work overtime, attend training courses, refrain from demanding higher wages -- to achieve that goal. After all, success will one day allow him to join the privileged class of young, well-trained Chinese. The full-time, unskilled laborer sees the migrant worker the way he is seen by the established skilled worker -- as a fierce rival. To make headway, he is willing to accept even the lowest entry wage, especially in a country that lacks the kind of organized labor organizations that might otherwise dissuade him from doing so.

Once the unskilled Chinese laborer achieves his goal and has a few years' experience under his belt, he becomes a rival to autoworkers in Detroit and Wolfsgburg. Although the two groups -- Chinese skilled workers and Western, unionized autoworkers -- remain strangers, they are now irrevocably linked from an economic standpoint. The wages and performance of the two sets of competitors are now stored on the computers of top executives in their respective companies. The rivals butt heads, but only as statistics. When it comes to making investment decisions, they always stand in direct competition.

Abandoning the promise of a rising standard of living

There is a glut of workers on the new global labor market. Eighteen million Europeans are now unemployed. Add to that the women who have opted to retreat into family life and the older workers who are being sent into retirement against their will, and Europe's real unemployment figure surges upwards to about 30 million. This European army of the unemployed is equal to the populations of Berlin, Paris, London, Madrid, Brussels, Rome, Lisbon and Athens put together. German sociologist Ulrich Beck refers to these people as the "structurally superfluous."

The true extent of shrinking wages in Europe only becomes evident when one considers the unemployed and the employed together. Those who choose to see only the employed are blind to the scope of the problem. In reality, total wages are declining at a much faster rate than income statistics suggest. A decline in wages is taking place on the global labor market that no one in the West expected. After all, the promise of the postwar years was that rising wages would bring growing affluence. But it was a promise that was abandoned practically overnight. Indeed, if there were such a thing as a global labor office, its computer monitors would show wages in the West on a steady decline.

No one should expect a rapid rise in incomes in the Far East or Eastern Europe, where the fact that millions of farmers and slum dwellers are still waiting for industrial employment creates an additional downward pressure on wages. Wages in the Far East are increasing at a substantially lower rate than the West would like to see. According to the Munich-based economic research think tank IFO Institute, even an immediate wage freeze in Western Europe wouldn't be particularly effective. Even if wages increased steadily in the Far East and India, in 30 years incomes in these countries would still be only half as high as they are in the West. The truth today is quite simple: Workers in Europe and America who are unable to provide better justification for their wage levels than collective bargaining agreements, the high cost of living and the Western tradition of balancing capital and labor will find themselves locked out in the future.

Contrary to some views, this will by no means lead to a global loss of industry jobs. As long as the number of goods produced, sold and consumed grows, there will be no loss of jobs. Indeed, at the beginning of the 21st century, the world economy is experiencing one of its greatest growth spurts of the past few decades. Despite the Internet and despite the increasing use of automation, the number of industry jobs continues to rise, and yet the distribution of labor has changed considerably as a global labor market has developed. Where labor is needed is now only of interest to those who are unsuccessful in their efforts to enter the labor market. But even though the labor market has lost its borders, Western workers have no choice but to remain where they are.

http://www.spiegel.de/international/...6976-2,00.html

It's not a level playing field.
The article points out that the Western nations can't match Asia for labour or cost.
I think a free-trade agreement would be brilliant.
What's wrong with Europe wanting to keep it's position in the world?

Originally Posted by Ray

Ah well, it is sometimes a good feeling that we can give a scare to the Europeans who have done so well so far on our resources and capital under the colonial times!

Ahh, ain't payback a bit*h!!!

Originally Posted by crooks

It's not a level playing field.
The article points out that the Western nations can't match Asia for labour or cost.
I think a free-trade agreement would be brilliant.
What's wrong with Europe wanting to keep it's position in the world?

Nothing wrong.

The reality is they just can't.

Ahh, ain't payback a bit*h!!!

The problem with a NA/Europe free trade zone will be France. France still believes itself to be a global power. It wants to do things its way, just like the US. The difference is we are actually a global power, not a wannabe who dwells in the past.

France will be the downfall of Europe.

No, america trying to DOMINATE an alliance would be it's downfall.

Your from california, go vote democrat.

And the Freanch gave your nation it's freedom, so be a bit more gratefull

Viva la France!

Originally Posted by crooks

No, america trying to DOMINATE an alliance would be it's downfall.

What, like NATO?

Your from california, go vote democrat.

WTF LOL is my reaction to this comment.

Gunnut is not a sheep, you know.

And the Freanch gave your nation it's freedom, so be a bit more gratefull

The French of 200 years ago assisted them in doing so.

The French of today is a different matter.

Vive le European Revolution!

La caramba (whatever that means. My slogans for revolution comes from all Tintin comics)

Originally Posted by crooks

No, america trying to DOMINATE an alliance would be it's downfall.

No, a multilateral world will be our downfall.

Originally Posted by crooks

Your from california, go vote democrat.

You're in Ireland, go have a bitter.

Originally Posted by crooks

And the Freanch gave your nation it's freedom, so be a bit more gratefull

Debt repaid, 3 times.

Originally Posted by crooks

Viva la France!

A dying nation with a dying language.

Originally Posted by gunnut

A dying nation with a dying language.

About the only thing that France ever did right was create New France, and they even botched that one up..Luckily the British were nice enough to let the french language and way of life alone in Quebec.

Pretty soon France will be all muslims, and Quebec will become the lone french nation.

In fact in the more remote areas of Quebec, such as Gaspe, the French spoken is the old french from the pre-revolution era!! And Quebec is doing a pretty fine job of preserving the french language in that province, even if it means trampelling over the rights of English along the way...

Originally Posted by Ray

So everything wrong in Europe is Asia's fault.

You naughty little Asians you