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Thursday, September 07, 2006

"Globalization" for Americans is Really About Income Distribution - by Mark Weisbrot

"Globalization” is one of the major challenges facing American workers – which includes not only factory and office workers but more than 80 percent of our 144 million-person labor force. But it is widely misunderstood. Most of the people writing and talking about globalization for the major media know little about economics, and of the few who know something, most are dodging the most important issues.

The central issue for Americans facing the global economy is income distribution. Whether it’s international trade or investment, or immigration, the main impact on most Americans’ lives has been on the distribution of income. And that distribution has gotten dramatically worse over the last 30 years: the rich have gotten a lot richer, the poor have languished, and the middle class has shrunk.

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From 1972 to 2001, the bottom 20 percent of wage and salary earners got only 1.6 percent of the increase in this income over the three decades. The majority got less than 11 percent. But the richest one percent received 18.4 percent of the increased income – vastly more than went to the majority of Americans.

The “managed globalization” designed by our political leaders has contributed very much to this upward redistribution of income. The key word here is “managed.” It is not, as the pundits argue, simply the result of market forces combined with technological changes in communication and transportation.

The architects of the global economy have not thrown their friends and neighbors – the doctors, lawyers, executives and other professionals – into brutal international competition with the tens of millions of highly-educated, English-speaking people who would be willing to do their jobs at half the salary. That is why, for example, our doctors earn twice as much as their counterparts do in the rich countries of Europe.

Instead, our political leaders have devoted decades of careful and often protracted negotiations to rewriting the rules of international commerce so that the nearly three-quarters of Americans that do not have a college degree would face lots of global competition. Partly as a result of these changes, the real wage for most workers in the US has barely grown over the last 30 years – about 9 percent – while productivity, or the amount that is produced by an hour of labor, has grown more than 80 percent.

Immigration policy follows the same rationale – foreign citizens who want to work in restaurants or as construction laborers can do so by the millions, but the same is not true for foreign dentists or engineers.

The result of this “protectionism for the few, international trade and competition for the many” has been exactly what economists would expect: the gains from a growing economy have gone increasingly to the protected and privileged few.

Of course, managed globalization is only part of the story. Political and legal changes have undermined the bargaining power of organized labor and its membership has steadily fallen. Health care costs have been allowed to spiral – the United States now spends about twice as much per person as other developed countries and has worse health outcomes – and these burdens are increasingly shifted to employees. And the tax code has been rewritten to favor the upper classes.

The Federal minimum wage, in terms of purchasing power, is now at its lowest point in half a century. The majority of Americans have so little influence in our political system that despite the overwhelming support for an increase, the party that controls Congress believes it can get re-elected in November while refusing to even allow a vote on the issue. We shall see.

Reform in all of these areas will be necessary if this country is ever to return to an economy in which most Americans share in the gains from economic growth.

Mark Weisbrot is Co-Director of the Center for Economic and Policy Research, in Washington, DC
"Globalization" for Americans is Really About Income Distribution


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