Jobless prosperity?

See earlier posts, such as equilibration can hurt. The author of the piece below is a heterodox economist at U Mass, Amherst. The comments are also worth reading.

NYTimes: ... Many journalists argue that globalization is partly to blame for historically low rates of job creation over the last year. Companies in the United States are simply less reliant on American workers – and American consumers – than they once were. Maybe they just don’t need us any more.

Few economists like this argument, but even some mainstream savants like Alan Blinder of Princeton University express concern about the effects of offshoring. And the effects of globalization extend well beyond job loss.

As Harold Meyerson pointed out in The Washington Post, a recent Standard & Poor’s report showed that our largest 500 publicly traded corporations get roughly 47 percent of their revenue from outside the country.

Writing in The Atlantic on “The Rise of the New Global Elite,” Chrystia Freeland provided a vivid anecdotal account of the same phenomenon, letting the chief executive of a green-technology company explain that most of his sales come from outside the United States, and, if he were starting from scratch, most of his workers would, too. A hedge fund manager tells her why the vigorous growth of a new middle class in China and India counterbalances the decline of the American middle class.

A recent Wall Street Journal article by Burton Malkiel warned against “home-country bias,” urging investors to hedge their bets on the American economy by tilting their portfolios toward emerging markets in developing countries.

A recent Time magazine article by Zachary Karabell referred to the new joblessness as a part of a megatrend toward globalization that we just have to live with.

So much depends on who “we” are.

During the 25 years after World War II, the interests of American investors and workers were closely, though not perfectly, aligned. Productivity increases were passed on in the form of higher wages that, in turn, fueled increasing demand for domestically produced goods and services.

Businesses willingly paid taxes to support public programs designed to improve the education, health and security of the labor force on which they relied.

Back in 1953, Charlie Wilson, the chief executive of General Motors, famously expressed the opinion (often slightly misquoted) that what was good for the country was good for General Motors, and vice versa. I doubt that was entirely true then, but it was certainly more true then than it is today.

Large corporations are no less patriotic now than they were then. But their economic incentives have changed. Facing intensified international competition, they have little reason to care about the nationality of their workers, consumers or investors.

Fans of globalization point to many economic benefits: lower-priced consumer goods, rewards for technological innovation and higher living standards for many workers in developing countries.

But however significant these benefits, the other side of the ledger reveals significant costs arising from political realignment and efforts to escape regulation and taxes.

Jobless growth is only one symptom of increased social conflict, intensified economic inequality and weakened democracy. The prosperity in jobless prosperity exists only for the rich.