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INTERNATIONAL FINANCE AND INEQUALITY (PART II)

August 19, 2017

INTERNATIONAL FINANCE AND INEQUALITY (PART II)

Thus we have such situations as a Florida tomato grower, who recently lamented that he could not compete with Mexican tomato growers and might have to go out of business because he had to pay $10 or more an hour for labor while his competition in Mexico paid $10 a day for labor. So can he go to his political friends and demand a tariff on Mexican tomatoes? Won’t work – NAFTA – and besides, the price differential is purely a function of wage differential and not some subsidy or other practice of protectionism by Mexico of a domestic industry. We would have a trade court loser, and speaking of conspiracy theories, I only have to wonder if Wall Street banks and their captive multinational corporations are backing the Mexican tomato growers and pocketing a share of the wage differential to their own bottom lines.

Back to the academic – there is a mainstream trade theory that trade liberalization puts downward pressure on First World wages, labor and environmental standards, and particularly on unskilled workers in First World countries, which in turn gives impetus to First World employers to relocate where wages, labor standards and environmental standards are lower, and so it’s off to Mexico, China or wherever in search of such lower and cheaper wages and standards, all perhaps financed by big Wall Street banks who have huge pools of capital (and more via leverage) on hand. I think such theory is real and not just theory based on empirical proof on hand not only in the case of tomatoes but also that of automobile assembly, air conditioners and the like. Boeing, for instance, a giant defense contractor which lately has had very profitable years but has paid no taxes, farms out wings for some of its aircraft to China. This is the same Boeing where in a recent speech, Trump ended it with the following: “God Bless Boeing!”, thus adding divine approbation to a giant and profitable corporation which pays less taxes than I do.

We who are relentlessly demanding higher wages for American labor beset with forty years of wage inequality have a problem. How do we demand that Mexico and other countries from whom we import goods and services which have cheap labor regimes increase their wages so as to reduce the pressure on  wage rates of American workers? We don’t vote there, yet their policies vitally affect ours in matters not only of labor but taxes, environmental standards and the like, so I think the answer is to have new objectives set forth in criteria for lending by the IMF and new regulation of American capital currently roaming the globe in search of profit without regard to its effects on American workers.

Such an unlikely announcement of policy would, of course, doubtless raise cries of lost freedom, dictatorship, it’s our money, we’re sick of Big Government and other such libertarian cries for a continuation of access to profit making at the expense of working Americans who have been consigned to an underperforming economy marked by tepid demand as a result of domestic wage inequality, but I here note that Mexico and China have sovereignty and Wall Street banks and multinational corporations do not.

I have no clue as to what such a reforming set of regulations would look like in aligning international movements of capital with America’s real interests, i.e., a fair and equitable sharing of the income of our economy among all of us who helped provide such income and not just to the bottom lines of the rich and corporate class, and it may be a pipedream, but increasingly, it is obvious to me that we should have been regulating capital movement as recommended by Keynes long before the neoliberals arranged for the perfect storm of great wealth, no regulation, and freedom to go anywhere to make a buck.

But we didn’t, so now we are faced with a tardy attempt to institute new policies on regulatory control of capital that speaks to the public good as well as to the bottom lines of the rich and corporate class. Such a reform process necessarily involves trade as well as investment practices, so reform will not be easy nor will it be soon but, as Keynes predicted in 1944, it will be necessary if our social cohesion is to remain intact and an economy that is performing for the benefit of all of us, so let’s get on with it.      GERALD       E

 

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