Coming Soon? Brace for 80% Less Salary or $2-a-Day Pay

She’s the world’s wealthiest woman you’ve never heard of and she’s saying something you probably wish you hadn’t: “Gina Rinehart, world’s richest woman, makes case for $2-a-day pay“,the Los Angeles Times reports.

The Australian mining heiress has a problem. The cost of running a mining operation in Australia cannot compete with Africans willing to work a continent away for $2 per day.

There’s a certain elementary logic to Rinehart’s argument. If the two nations are selling raw materials at vastly different prices because of vastly different costs of labor, her operation loses. In a worse-case scenario, it might not even make sense to go on operating. From Rinehart’s perspective, profit is the objective and benevolence is a job — never mind if the jobs she creates fails to compensate workers well enough to keep the lights on. She’s precariously positioned on that slippery slope so common to today’s political and trade debates: It could be worse: no jobs.

The world’s richest woman has a point. But it doesn’t pass the sustainable-future test.

Some 25-years ago when global “free trade” was hawked by conservatives and liberals as a win-win for business interests and the world’s impoverished alike, the promise was to “raise all boats”. Indeed, in many ways it has. Rural Third World peasants — depending on how one looks at it, born into a harsh or bucolic life — have left land and sea to toil in immense factories, working 12 or more hours for dimes a day to sew our garments, assemble our toasters and televisions, print our books and increasingly, even, to can our food. As a result: An entire generation of aspirational laborers now shares the dream of a more affluent life in the big city — pay no mind to the slums. If not reality, it’s hope that keeps the wheels of progress rolling.

Perhaps out of nostalgia for the past we downplay the social, economic and environmental ramifications of the world’s most populous nations, China and India, following our same choppy path to progress. We were once like them: Fearless, youthful economies, willing to strip entire mountains and topple entire forests for a fast buck (and in some parts of the country, we still are). Still, what needs to be asked at this juncture in the global trade game doesn’t get its due but is having its way with us just the same.

Who says our Third World trade partners must start where we did — to make the same mistakes from child labor and water unfit to drink to the foreign-policy blunders of a voracious economy jockeying for access to other nation’s natural resources?

Whether by romanticism or a misread of history, those of us in the First World rarely pause to question if the type of progress the world has made is the kind of progress that can or must continue unchecked and unchallenged, unrefined and unexamined.

Isn’t the benefit of progress chiefly that it can be shared?

The task, seemingly, was straightforward. Before formalizing trade relationships, establish common human rights, currency and environmental rules of play so as not to touch off the dreaded “race to the bottom”. Instead, we apparently assumed the influx of Western money would do the talking for us, free markets, democratize governments and civilize those who would seek to exploit others.

The massacre of demonstrators in Tiananmen Square, in its time, should have signaled the intellectual and political free-trade hopefuls that something was amiss. The 21st Century ushered in yet another reminder: the promise of the Arab Spring evaporated into something resembling less the democracy we had hoped for, more the sectarian rule we feared. Still we persist in the hope against hope that opportunity, for its own sake, is the best policy.

What if it’s not?

The cracks in the globalized foundation are beyond dispute now: The American Dream is under siege like never before. Europe is straining under the yoke of a common currency and uncommonly high debts. Yet China, for all its recent effort to dominate world trade, is not to blame. The threat of being pulled under by emergent economic powers that share little in common with our political value system is largely a beast of our own creation: Made in the USA.

Presidential candidates, in the worst economy in decades, remain paradoxically vague. The culprits underlying greater income inequality and the perception of lessening opportunity are catchalls: Apparently, just about everything in the West is too pricey: labor, taxes, regulations — even minimum wage. And with 7 percent of American workers represented by unions, on AM talk radio and elsewhere, they nonetheless shoulder the lion’s share of the blame.

With no shortage of conjecture — too often the kind that builds on stereotypes and divides friend, family, “haves” and “have nots” — it is long overdue to put economic dogmas to the test. Can the United States of America, one of the few and the blessed nations to become a freedom- and living-standard envy of the world, afford to downplay diminishing wages, increasing personal and government debts, a widening gap between the rich and the poor, monetary policy that punishes savers, severe trade deficits, and the unrealized hope that the educational and ecosystems can keep pace with these changes and challenges?

The way in which we order our lives, policies and expectations — particularly the role of technology in creating vs. displacing jobs —- must be examined.

Do we produce for the sake of producing and compete for the sake of competing — or should technical and economic progress exist for the sake of improving quality of life? Should our definition of success hinge on that of the few, the highly talented, educated and well connected — or that of the ordinary, everyman in his and her capacity to “take personal responsibility and care for their lives“, as candidate Mitt Romney put it?

Buffeting the chaotic sea of public opinion are prevailing cultural assumptions surrounding old, individualistic aims confronted by new, inadequate financial realities. Our grandparents’ generation was one in which a single breadwinner could support a household working a blue-collar job. Today, particularly in high-cost areas of the country, the gainfully employed, college educated — even childless —- struggle. Others launch seemingly successful households, by all appearances living out the American Dream, only to do so at their parents’ and in-laws’ expense. In other words, instead of one or two breadwinners sustaining a single-family household, increasingly “it takes a village”.

For a culture steeped in tales of striking out on one’s own at a tender age with nothing but the clothes on one’s back, rising from rags to riches in the process, social immobility isn’t a reality we are prepared to accept.

In 2005, for the first time in US history, the average household owed some 130 percent of their annual income, writes Nan Mooney in “(Not) Keeping Up with Our Parents“. Is the cost of a refrigerator or an Internet connection really to blame for our slipping grasp? Does an iPhone or a gym membership endanger retirement planning or place individuals and families one crisis away from financial ruin?

To hear the pundits talk, yes. Americans, who fewer than 30 years ago left public universities without crushing debts, who worked jobs they did not expect to lose, who steadily ascended the income ladder, building equity in their homes and money on their investments, do not seem to fully appreciate how radically things have changed in the 13 years since we fretted over Y2K, crossing the threshold into a new millennium. American families lost nearly 40 percent of their wealth between 2007 and 2010 alone. Grocery prices are on the rise, too. Gasoline represents nearly 10 percent of consumers’ monthly spending, nearly double what we spent in 2004 — and still the price at the pump edges closer to the suffocating $5-per-gallon mark. Healthcare premiums for families have climbed nearly 90 percent in the past decade, Mooney writes. Colleges are turning away students and career changers eager to enroll even as they push the ones they do admit into two- and six-figure debts, crimping graduates’ spending power for decades. Real inflation — as tabulated by the pre-globalization formula that through the late ’80s accounted for rising food and energy prices — reveals still more about why consumers “remain cautious” month after month, quarter after quarter.

Opportunities that were possible for the children of middle- and working-class parents fewer than 15 years ago are increasingly the province of those born to the political elite, successful entrepreneurs, doctors, lawyers, media personalities, sports stars and celebrities.

That’s not the America most of us grew up in. And it’s not the state-of-affairs most wish to pass on to the next generation.

It is not without irony that the very people who have suffered current-day financial realities the least shout from the highest bully pulpits, insistent that little has changed that a solid work ethic can’t overcome. Who are these people who would have us believe that our eyes and ears deceive us? They are our talk radio hosts, our well-heeled TV commentators; they are our retired parents or grandparents who have successfully cleared the home stretch — they are even our siblings and peers that went into dentistry rather than information technology, finance rather than teaching.

Except they’re wrong.

In her 2008 book Mooney asks: “Why the dramatic change? The economics are simple and well documented. We’re earning less and having to pay for more. Earnings for college graduates have remained stagnant for the past five years, but the cost of housing, healthcare and education have all risen faster than inflation. The share of family income devoted to ‘fixed costs’ like housing, child care, health insurance and taxes has climbed from 53 percent to 75 percent in the past two decades.”

The math doesn’t add up. From little more than 25 percent disposable income comes saving for a rainy day, cash for job retraining and the presumably “irresponsible” act of personal spending — stimulating the economy the old-fashioned way. And yet for increasing numbers of Americans, even those unscathed by a long spate of unemployment, lurks the sinking suspicion that more pain than gain this way comes. According to Rasmussen Reports, just 14 percent of the Americans surveyed in July 2012 — a new low — are of the opinion their children will be better off than they were.

They — you — are not imagining things.

Dong Tao, a Credit Suisse economist, in a November 2010 CNN interview, put it bluntly: To “re-balance” the world economy the Chinese must consume more — and Americans must earn “at least 80 percent less salary”. Shocking though such a revelation may be, the mass media didn’t touch Tao’s statement with a 10-foot pole. The Internet, for all its reputation as a repository for everything ever said or written, is also a place where information disappears. (After a brief spate online, CNN’s interview transcripts for that conversation are nowhere to be found.)

The question that keeps making the rounds in this election year is this: Are you better off than you were four years ago?

In an era fraught with “tied hands”, domestically and globally, it may matter less who occupies the Oval Office — less than the pundits and partisans would have us believe, in any case. Why? Because there are no easy answers, no magic-bullet policy decisions, no quick fixes, no sure bets. Deficits are skyrocketing, money is devaluing, automation and rock-bottom Third World labor continues to undermine First World wages — and, increasingly, our counterparts in the Third World are sharing in the pain as the “sure thing” of Western consumerism ramps down.

The piper is calling.

The erosive economic forces with which we grapple are not personal or even particularly American — they’re global. The year ahead promises to be one in which corporate profits, propped up by deep payroll cuts and unprecedented infusions of liquidity into the realm of high finance, take a tumble as the reality of a weakening consumer class works its way up to Wall Street where, for the moment, the band plays on. The Federal Reserve will exhaust its bag of tricks while Democrats and Republicans, for all their efforts to deflect blame, continue to come up short on solutions.

The two parties have become so good at pointing fingers they’ve forgotten how to make the tough and unpopular decisions — to lead.

For all the uncertainty, it isn’t the election or the political grandstanding that deserves our sole concern. The public mindset matters too. Some three years post recession, one from which we never truly recovered, one wonders how long it will take for the gravity of this worldwide crisis to hold the attention of the percentage of the American population that doesn’t read newspapers, dismisses the “liberal media” out of hand, isn’t all that attuned to the world beyond their own backyards, and yet jumps, stubbornly and often at the price of great personal resentment, on the usual suspects — the freeloading, big-spending “lazy American” who assuredly wants little more out of life than to shamelessly shill for handouts. (Apparently slackers come in spades in Australia, too: Rinehart is purported to have said her fellow Aussies can make a respectable living if they drink and socialize less.)

The 47 percent of Americans Gov. Romney dismisses as “victims” in a May 17 fundraiser will nevertheless be his constituents should he become president. Will the nation’s would-be commander-in-chief acknowledge that years of kowtowing to special interests by those on both sides of the isle who claim the title of public servant has done more to victimize the nation than any basement-dwelling, election-day skipping, moocher ever could?

Seemingly, not.

Former comptroller general, David Walker, put it best during his “Fiscal Wake Up Tour“, documented in the 2008 film “IOUSA”. With the backing of the nation’s best-known liberal and conservative think tanks, he warns that the United States faces the prospect of increasing taxes, dwindling services and a lack of funds for basic expenditures like national defense. His is a prescient call to action issued well before the controversial implementation of TARP and the $16 trillion-dollar deficits of today.

The future is here, ready or not.

The throws of crisis are not the time to launch a witch hunt in search of easy targets. Ours is a time to ask not what one can do for oneself but for the good of one’s country. Over 200 years into the American story, individualism is alive and well — the self-made desire to have more, do more, be more. And yet national pride in this age of global trade and travel, passe though it may seem in today’s climate of privatizing nearly every source of shared glory, deserves its due too. Patriotism, after all, is an inclusive notion. Rather than rationalize a climate of infighting and backbiting, perhaps it’s time we began in earnest to watch each others’ backs.

In the interest of a more perfect union, we’re gonna need all the cohesion we can get. And when tough people encounter tough times, seeing the best in ourselves — one another — is the American way, too.

###

RESOURCES

Where Free Market Economists Go Wrong | Reason

So-Called Free Trade — Bad Policy and Wrong Debate | Huffington Post

What Money Can’t Buy: The Moral Limits of Markets | Amazon

Myths of Free Trade: Why American Trade Policy Has Failed | Amazon

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