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.

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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

The Price of Cheap: The Hidden Cost of E-Commerce

For years “energy independence” has been the catch-all solution promoted by politicians, talk radio hosts, newspaper columnists and others who point out that the U.S. is short on oil refining capacity. Nonetheless, petroleum production facilities are not only in the process of downsizing in response to a weak economy, but permanently so the Los Angeles Times reports in “Oil companies look at permanent refinery cutbacks” [March 11, 2010].

The oil industry, which as recently as 2007 broke so many profit records that allegations of collusion and price-gouging surfaced, is singing a different tune: Limiting supply to increase sagging profit margins is the solution, analysts say, for losses induced by everything from fuel efficient cars to retiring baby boomers who no longer commute to and from work.

And to think: Just a few years ago SUVs, with their paltry ~13 mpg, were the rage from Coast to Coast. Could it be that Cash for Clunkers, unintentionally so, was a little too effective — or are oil industry insiders selling Americans up the river when they can least afford it? Whatever the case may be, nothing says Green like fuel-efficient automobiles and the beginnings of an alternative energy infrastructure. Even so, the picture the LAT paints is far from complete. The Perfect Storm of tightening supply, increasing commodity prices, rising taxes and further job losses looms on the horizon.

Hang on to your hat! The price of life is going up.

Cutbacks and closures of community services nationwide are not cited as a reason for oil refinery cutbacks, but they are egging on these emergent economic norms: Sales tax revenues are down nationwide, and for an increasing number of locals that can only mean an unpalatable combination of higher taxes and limited services. The upshot? Even less incentive for our consumer-driven economy to spread the money around. Local and state governments from California to Michigan are banking on the hope that when the economy rebounds the Red Ink will stop flowing.

Will it?

Even if the demographic shifts associated with baby boomers retiring en masse were not inevitable, a grossly underestimated component to this trend looms larger by the day: e-commerce.

It’s no secret to Internet-savvy folks transversing state lines in search of tax-free online bargains that virtual shopping can be a real moneysaver — and a timesaver to boot. Amazon, for instance, is a leading go-to place for everything from books to home and garden products. Not only are purchases tax-free for many shoppers but free shipping offers often seal the deal.

Never before has the oft-repeated refrain “Shop locally!” encountered so many challengers.

Macintosh computers aren’t cheap now, but they were downright expensive when I purchased my first Apple computer nearly 20 years ago. Back then, it was not unusual to spend $4-10K on hardware alone (CPU, monitor, printer, scanner). The solution? Peruse ads in the back of nationally-distributed computer magazines. There I located a tax-free bargain on the opposite side of the country. Even with the cost of shipping factored in, I saved several hundred dollars foregoing traditional “brick & mortar” retailers. And it wasn’t for lack of local buying options, either: There were plenty of places vying for a slice of the personal computing revolution: Computer City, CompUSA, Circuit City, Fry’s Electronics and Best Buy, just to name a few. Notice what happened, however: All but the latter two succumbed to market forces. Is this because our collective appetite for new and improved technology has diminished? Absolutely not. Americans are more likely to own a personal computer hooked up to a high-speed Internet connection than ever before.

So what changed?

Competition amongst conventional retailers has diminished as more and more players drop out of the market. This makes comparison shopping on the Internet — where a greater number of competitors are in reach — more attractive by the day. Just as Big Box Retailers threatened mom & pop establishments, the Internet is the newest bull in the china shop. To cite just one example, antique stores in downtown areas nationwide have increasingly succumbed to online venues, and bars and restaurants — among the few types of businesses that rely on irreplaceable foot traffic — have sprung up in their wake.

Just how many bars and eateries can a local economy support?

The profound yet oddly imperceptible economic influences wrought by the Digital New Age are numerous: Even as more people embrace Internet shopping, surviving B&M retailers have responded by limiting their in-store selection in favor of just-in-time inventory, of which an increasing percentage is available exclusively online. Shopping at the click of a mouse is both novel and convenient, to be sure, but nonetheless a form of “special ordering” reminiscent of the old-time General Store method of awaiting out-of-town deliveries.

Except that most of us aren’t living in remote outposts.

The Green side of the coin is that fewer and fewer products for which there is inadequate demand are oversupplied to the market, thereby limiting the so-called carbon footprint associated with building and transporting more widgets than there are consumers willing to purchase them. But the environment is not the sole beneficiary. By limiting supply, prices and profit margins are maintained throughout the supply chains. What this means for the rest of us is that the “red tag sales” retailers offer to move an oversupply of product are likely to become increasingly few and far between. Prices between the remaining chain stores are generally pennies apart, and sales leaflets that would appear to advertise discounted deals are increasingly listing regular prices.

This trend presents both an irony and a threat to bargain hunters: B&M retailers that have grown in popularity as consequence of recession-induced thrift include Ross, TJ Maxx and Marshalls — retailers that specialize in discontinued, overstock and out-of-season merchandise offloaded by department stores and boutiques. As mainstream retailers par down inventory, the number and quality of inventory available to discount retailers and Internet shopping sites alike are likely to diminish for the foreseeable future. Consequently, just as demand for bargain bin deals heats up, supplies may be harder to come by. Similarly, as consumers become conditioned to shop for “everything else” online, the convenience, expediency and tax revenue benefits of shopping locally are lost. Eventually, the advantages of web-based commerce — what with United States Postal Service cutbacks, shipping cost increases and the inevitable legislative move to tax online shopping — suggests that this bargain hunters’ paradise may amount to little more than a tool of necessity in the years to come.

Even the Internet cannot overcome a fundamentally flawed economy.

So how do our novel new shopping habits dovetail with the news that oil refiners may permanently shutter facilities? For one, less incentive to drive to the mall. Or to go antiquing in a nearby community. And if you do? Fewer places to shop, fewer products and brands in stock, and fewer still mom & pop establishments. The list of nationally-recognized retailers to meet their demise in the Globalized Era is staggering: Broadway, Fedco, May Company, Woolworth’s, Best, Service Merchandise and Marshall Fields; Circuit City, Linens ‘N Things, The Sharper Image and The Good Guys — to name but a few.

To be clear, traditional retail in some shape or form will never be eliminated. But the trend of online shopping at the expense of local sustainability seems likely to accelerate as retailers respond by narrowing their shelf offerings to match lessening in-store demands. In the even longer term, conventional shopping may again become a destination — traveling long distances to reach large, diverse retail centers that are fewer and further between. The town-by-town, city-by-city retail landscape of today may become a thing of the past, not unlike the drive-in movie theater whose heyday has come and gone. Movie rental stores seem to be the next in the obsolescence line, edged out by inexpensive DVDs sold in discount stores, video-on-demand services and novel new competitors such as Netflix. How much more “local color” will fade from our towns, cities and communities until there are few signs of life outside the ‘net — but for the cookie-cutter ubiquity of fast food joints, liquor stores and dry cleaners?

Be careful what you wish for.

The shift in the way we shop not only impacts our gasoline consumption but just about everything we take for granted close to home: from schools, parks and public safety to the ability to find a suitable last-minute gift in a mass market environment increasingly lacking in diversity. This trend, in turn, suggests an increasing number of commercial real estate vacancies and even fewer sales tax revenues for local municipalities. As retail and warehouse job opportunities erode in much the same way manufacturing jobs did in the 1980s and 1990s, even low-skill service sector jobs are likely to dwindle — all of which adds up to a torrent of Red Ink.

Is it possible to become too good of a bargain hunter? Victims, if you will, of our own success?

As a “starving student” I never would have given it any thought, yet we do, indeed, have the power to harm our communities simply by making a habit of shopping online. It’s not that making a few online purchases here or there will topple the economy, but it is fundamentally shifting the game just as surely as the trend of paperless electronic bill paying has sent the USPS into a tailspin. More ironic still, online shopping — to the extent that it is powered by coal — isn’t much Greener than the conventional sort. According to a CNN report, the more energy efficient consumers perceive their electronics, products, services and transportation sources to be the more resources we consume.

Our entire landscape, physical and economic, is in the midst of gargantuan change. Whether such change represents the evolution of a new, Green economy remains to be seen. It could just as easily represent another largely unanticipated wrinkle in the lockstep march of globalization: Economic “desertification” wherein those who live adjacent to an oasis of innovative upstarts, manufacturing plants and retailers will thrive, whereas the vast majority of Americans, even those who live in highly populated areas, will find it increasingly necessary to shop online because it is no longer profitable for retailers to maintain local operations and/or no longer feasible — as gasoline supplies contract and crude prices increase — to transport durable goods great distances from port to shelf.

Perhaps we’ll save the planet. But will we save ourselves?

Economic experts would likely argue that this is the free market at its finest — and to point out, rightfully so, that such shakeups have occurred with every major technological advance. But such observations do not get at the crux of the question: Are we entering a time in this Globalized Era at which the rate and scope of change may exceed our ability to fully appreciate the ramifications? Will a collective deer-in-the-headlights reaction render legislatures unable or unwilling to craft economic policy conducive to a successful transition?

Put another way, we can’t predict where we are headed because we have never before been there. Consequently, our best attempts to plan for the future are likely to come up short — and all the more so when motivated by the desire not to shake fragile consumer confidence. Conventional wisdom, after all, views the phenomena known as market concentration — a diminishing number of viable businesses competing for our dollar under increasingly deregulated conditions — as the hallmark of “efficiency“. Prices are lower and demands are met so no harm, no foul the argument goes. But the more apt question, the one too few of us appear to be asking — not unlike the way in which financial firms and economists alike underestimated the phenomena of “irrational exuberance” prior to the Great Recession — is whether we’ll fumble the transition because we have failed to appreciate that it is possible to take a “good idea” too far.

Call it wrong and we not only risk a double-dip recession but a generational lifestyle realignment in which a college education, white picket fence, an automobile in the garage, a chicken in the pot, and 2.5 children in the home move increasingly out of reach.

By some counts, the time to have invested in an alternative economy is some 30+ years overdue. By a more conservative measure, we’re nearly 15 years behind the 8-ball both in terms of minimizing harm to human welfare and the climactic shifts associated with the over-use of fossil-fuels. By other accounts, the solutions proposed thus far are recklessly unworthy of widespread adoption.

And that’s why a benign practice so seemingly unrelated to the permanent loss of petroleum refining capacity — shopping online — may evolve into the straw that breaks the camel’s back. The desertification of our consumer-driven economy in the absence of a fully viable way to fill the economic vacuum may very well be a phenomena we do not come to appreciate until the list of “usual suspects” no longer explains a still-lagging outlook years from now.

Of course, there will be oases in this Brave New economic landscape. But the increasing concentration of those jobs in fewer areas of the country nonetheless portends harm to communities that rely upon traditional manufacturing and retail access. And that’s not the only casualty of our worship of all things economically efficient. The otherwise worthy aim of Greening the planet may lose its luster if it comes to mean the absence of opportunity: Restricted access to goods and services. Restricted markets. Restricted tax revenues. Restricted growth. Quite possibly even the best and most innovative entrepreneurial ventures will be forced to settle for a mediocre definition of success in the event that consumers, lacking in discretionary incomespurn new products and services in reaction to lost or stagnating wages.

Will we realize the “price of cheap” before the solution to state and local tax revenue losses shows up in the form of massive tax hikes? That is the question. None of this, of course, even begins to account for the tax hike incentives that exist as a result of a decade-plus worth of war-driven Federal deficits, TARP bailouts, unsustainable trade deficits, and the empty coffers long-predicted of Social Security, among other entitlements — just as baby boomers begin to draw them down.

Even as the storm clouds gather over a still-ailing economy, a recent TIME magazine article echos a common refrain: American innovation, writes Barbara Kiviat in “The Workforce: Where Will the New Jobs Come From?” [March 19, 2010], will offset job losses in time. Let’s hope the Green 21st Century jobs we’ve been told to bank on aren’t a case of too little, too late.

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Resources

All About: ‘Green’ Shopping | CNN

The Fight Over Who Sets Prices at the Online Mall | StarNewsOnline

The Death of Retail | The Entrepreneur Network

New Tack for Taxing Online Sales | Durango Herald News

Killing America’s Jobs Machine | Roanoke Times

The Recession could Reshape State Governments in Lasting Ways | Stateline.org

Comparing Online to “Brick and Mortar” Shopping | Buzzle.com

The Broken Society | New York Times

Customers Want it Cheap, Workers Pay Heavy Price | China Daily

The Price of Cheap Imports: What does America Make besides Policies? | WaterWorld

The Slippery Slope of Price Fixing | E-Commerce News

Sales Tax on the Internet: Who Pays, Who Doesn’t | Yahoo!