The Self-Destructive Race To The Bottom Line

Global warming is not the only thing America seems to be delusional about. A globalization and trade strategy that makes no sense is the other.

This race to the bottom line is self-destructive. We either do not understand the core of economics or we are just plain drunk with capitalism.

The core of economics is not costs, or even demand and supply - those are results themselves of something else. The core of economics is the balance between desire and efficiency.

If you kill desire then you undermine growth through stagflation. If you attempt to satisfy desire with no care to efficiency then you destroy wealth with inflation.

Lower costs for lower costs sake may or may not impact efficiency. But taken to its natural extreme, it will surely undermine desire because it creates a cycle of undervaluing of effort and work by using benchmarks arising from dissimilarities. Someone whose work is valued less and less in the market place, will have less and less desire or wherewithal to consume.

A worker in India is not the same as a worker in the US. The worker cannot be evaluated as a separate entity from his environment. The environment in the US is a richer one for living created by effort at different levels - innovation, legislation. These over time come to reflect the values of the society. They feed into each other synergistically and mutually add value.

It is the same for India, or for any other society you may take. But the resultant labor resource are a reflection of that society and reflect those differences. We either comprehend the value of those differences and protect them or we do not. Because those differences represent progress and what set developed societies apart from under or developing societies.

And what are these differences? Well, lets take one simple one.

Day care in the US has become a part of mainstream economic activity. More people now pay for day care in the US than 50-60 years ago. Why? Because more women now go out to work, to produce, to add to the GDP. No longer can you leave little Tom with aunt Mary next door.

In India, and less developed countries, they still have the luxury of "auntie" day-care. To American workers, children day care comprises of costs that are a welcome expense that is a part of the economic system. To the Indian worker, children day care comprises favors that are a welcome convenience of the social system.

See why you have to be careful when you talk about free-trade. Free trade yes, but not at the expense of your own progress. That is just plain short-sighted and serves nothing else but false dogma.

So what is the solution to this mad rush to the bottom line where American workers are being battered back to the stone age?

Don't tell me the solution is more or better education. That is a solution yes, but not for the above problem.

Technology has become more of a change agent than education will ever be. That is because people can learn only so many new skills over a productive life-time to keep up with how fast technology is changing the landscape. Yes, in an overall sense the society will benefit from the learning of new skills - meaning a new wave of college grads, etc, will contribute new skills and so on. But that is not the problem. The problem is the displacement of still valuable skills by a rush to pay less and less for them by moving jobs where it is seemingly possible to do so.

The US either want a middle class or it does not. If it does not, then all the US worker is doing is producing his way out of a job. The better he gets, the more valuable he becomes. The more valuable he becomes, the more valuable his environment in terms of incremental taxes for schools, roads, etc and the added value to services and goods. But too bad, the more valuable he becomes in this society the less valuable he gets to the function of increasing the corporate bottom-line. Now the corporate bottom-line is out of sync with the society's bottom line.

The social-economic link above that has played such a huge role in how the society has developed, is now out of sync. Should we now go back to "auntie" day care? We don't know. And most likely, we never will.

So the workers in India who have this as a social convenience, does not have it as a true competitive advantage out of anything they have done, but as a result of the progress of the American economic system. Because if that system did not progress beyond "auntie" day care, the American worker would probably not be that expensive for American business. So maybe that is where we need to go back to after all. Maybe we are not so smart or developed after all.

Now we are really upsetting the balance between desire and efficiency. We are killing the desire of the American middle class by our attempts to increase efficiency with lower costs. There is a better way.

And yes, the very sound of it is ugly to some. Tariffs.

Tariffs, used correctly, are not trade protection. They are trade enhancements. They are supposed to maintain the desire / efficiency balance, because there is no such thing as "Free trade". Societies differ, that difference factors into the economic equation. Free trade assumes that is not so. Unfortunately it is so and until it is not so, there is no such thing as Free trade.

Now, if the damn politicians were only smart enough or courageous enough to think this through. I wont hold my breath.