You've got to be kidding me.... US real wages have stagnated since the 1970s. We've already crashed through the ground floor, there is no more room to move lower.
If price levels in the USA were slashed in half and income taxes were abolished, it still wouldn't be incentive enough to compete with outsourcing in many cases.
Strict tariffs may also need to be applied in certain cases to selective countries/industries. But like I said, they do not have to be applied uniformly and indiscriminately. You can slap a tariff on Chinese automotives while retaining free trade with Europe.
Trade is always a form of war by other means. How do you think China managed to modernize and overhaul its army and build its own fighter jets in the past 10 years?
Indeed. Political power activity and economic activity are inseperable. China, Japan, Korea, the Arabs, and even the Germans understand this. The Anglo world finds it to be an unpleasant proposition, but it will have to acknowledge it....
Well, there could be several explanations for that, and we'd need to look at each industry specifically. Also, that the real US wages are falling, doesn't mean that these are
only
US real wages that are falling and not global real wages for that profession - yet again, we'd have to check each profession specifically. You shouldn't forget how technological development and the overabundance of skilled workers factor in. But for the sake of the argument and so as not to go into microdetails, I'll agree to your statement.
I believe, the picture you draw is due to US gov't's Neokeynesian approach to the problem of unemployment.
And the reason for that is exactly what I said - the US government is taking the wrong approach to the problem. Instead of decreasing taxes, social insurance dues, etc. to decrease corporate labor spending (pre-tax) to lower unemployment and make the US workers more competitive, they de facto rob the worker by decreasing his after-tax income in real wages.
But the decline in real wages is not serious enough and doesn't really solve the problem of current and future unemployment and US labor inability to compete with foreign nationals, it merely alleviates it, allowing the 'all is quite on the labor front' picture to be drawn for the general public.
Well, let's take a look. These taxes are what actually discourages hiring US nationals - all the extra costs, that are piled up on a salary of a hired US worker. Some prefer to fool themselves, that since such taxes are divided between employer and employee, the estimation should also be done for only half of the tax since that's what the company is additionally spending. While anyone who has actually worked, knows that employees negotiate net, not gross amounts - effectively, all the payroll taxes are paid by the company, since they also have to compensate for the income, that the US worker will have to pay back to the state. So let's do a quick estimate
Let's take a a single 40 000 USD guy (not too much, not too little) living in Chicago.
25% Federal income tax
12.4% Social security tax
2.9% Medicare tax
5% Illinois income tax
3% Chicago income tax
I don't know, how the tax base is estimated in each instance here, but even with these crude numbers, one can see, that the company will have to provide additionally for at least 40% of different payments in taxes, and for a US worker to receive a net salary of 40 000 USD, the company has to assign a salary of 56 000 USD.
And thus, yes, ONLY getting rid of extra taxation, when you have a difference in wages in manufacturing between, say, the US and Poland apprx. 4 times (
ftp://ftp.bls.gov/pub/special.requests/ForeignLabor/pwind3133naics.txt
) won't make US worker competitive overnight, but it would help tremendously against such countries like Korea or Greece and will allow for more jobs to remain at home - besides, as I've already mentioned, its not only wages, that count, when a company decides between hiring locally, or outsourcing.
But in the long-run, we can expect that some sort of a global median salary to be established for each industry. That will simply become the new reality - I mean, is it really so heartless to say, that producing chairs is an untenable business in New York, where the cost of pretty much everything - from land to food to rent - is a killer?
Is it really illogical to presuppose, that a country where land costs are extremely high will see a lot of its business moving production facilities abroad?
International trade is about the exchange of goods with the biggest cost-to-value ratio done locally. In your description, one of the sides in trade would never engage in trade willingly, since it would 'loose the war'.
By opening up to international trade, creating free economical zones with extremely cheap labor, drawing companies from all over the world to establish plants and factories.
That had little if any to do with tariffs.
They had to outsource all the quality manufacture jobs too - China was the biggest importer, not exporter, of machinery at first.
I have no idea, what you are talking about. Every attempt of the Arabs and other oil exporting countries to maintain a lasting agreement on oil volume output failed. Economics prevailed every time.
Well, we both agree that America's Keynesian approach is not helping to solve the problem. And while I endorse many Austrian School ideas for domestic economy I believe their major weakness is international trade. You could see this in Ron Paul's election campaign, where all the major anti-establishment bases were covered
except
how to help balance out the trade deficit and restore gainful employment to Americans.
For an example of the blind spot I'm describing among the modern Austrian economics acolytes, consider this article:
http://mises.org/daily/1762
There are a few things that stick out about "Stephan Karlssen's" economic analysis:
1.
Growth
is naturally the highest economic ideal. Here, strangely, there is no argument with the Keynesians. I doubt Mises himself would have penned an article like this, but here we have it without second thought:
Of course, nobody ever said that deficits reduce
growth
. Much of his following "rebuttal" is attacking a strawman.
The fact that "economic growth" is accepted at face value as the highest economic ideal proves how far the modern Austrians have gotten from Mises' legacy. Mises knew very well that unchecked growth (a boom) necessarily leads to bust-- which is the economy's natural way of cleaning up malinvestment. The article simply praises all "investment" as strictly positive while ignoring the fact that "high growth" through [mal]investment is also highly correlated with high volatility.
Hence if you looked at the all-important growth statistics one would conclude that between 2001 and 2005 the USA economy vastly outperformed the German economy, which is of course false. The American economy reached impressive "growth" and "investment" levels primarily through a wild rush of speculation, in which a small band of investors made out with a fortune right before the malinvestments collapsed and took the rest of the economy down with them. This is only evident after the crash readjusts the economic scenario; hence the current "recovery" will look great until an even worse failure 10-20 years down the road. Which leads to my second note,
2. As finance replaces industry, the income disparity increases as wealth becomes concentrated not in workers or even industrial barons but in a small coterie of investment managers. I advise you to look at the Gini Index for countries around the globe, and note the relatively privileged status of Germany and Japan versus the United States. Also note that the United States' "best" (most equitable) Gini Index numbers come from the "Baby Boomer" era when America was the mightiest industrial power in the world.
Finance is not simply "bad" and of course investment is a necessity. But when financial services dominate the economy every other industry becomes subordinate to its will; abstract money-expansion unconsciously becomes the willed goal of economic activity. Karlssen says this much later in the article:
I would ask you under which category you think America's "investments" fall into.
No. I don't think America should care about producing chairs. It should care about producing (or at least having the capacity to produce) automobiles, electronics, aeronautics, alternative energy sources, etc. High value, high demand products that require skilled labor.
Of course, "free trade" is not a benign force that is good for everyone. Primarily it helps the country that has the the most and the cheapest products to "dump" on the rest of the world. That country was Britain throughout the 19th century, and it is China today.