Showing all posts tagged: free markets

Why Free Trade And Global Markets Are Unsustainable And Unethical

Offshoring work — manufacturing, services, agriculture — from more advanced countries with older and aging populations to emerging countries with younger populations has led to a dramatic destabilization of the world’s economy, and threatens to bankrupt the most advanced.

Consider China and the US. Many companies here have shifted manufacturing jobs from the US to China, because workers cost less in China. This wage differential is partly the gap between direct payment for work done, but a large part is the gap is the non-existent social services of China, and the cost benefit of dropping older workers in the US who not only are paid more, but who have higher health and pension benefits.

Of course, China is itself playing along. It is generally the younger citizens there that are lured from the countryside to manufacturing jobs in the cities, here they have low pay and zero benefits. This keeps costs down, attracting lots of cash flow, but basically none of it put aside for these youngsters’ old age.

By moving the work, the companies benefit in both ways, and both countries are left holding the bag for the future health and pensions for their citizens. Here in the US, our day of reckoning is approaching quickly; and in China, it is farther down the road, but at some point the Chinese will demand a social net, and China will not have paid for that.

In effect, both US and Chinese citizens are being screwed by the companies who profit from the labor and demographic arbitrage. It is only the business elite that benefit.

Ted Fishman, As Nations Age, a Chance for Younger Nations

The problem for China is that it is rapidly approaching the point after which it will no longer be the relatively young country we see today. In 2015, China’s working population below the age of 65 will begin to shrink. Meanwhile, the number of people over 65 will be rising to 300 million by 2050, a threefold increase. Richard Jackson, the director of the Global Aging Initiative at the Center for Strategic and International Studies, notes that China will be older than the United States within a generation, making it the first big national population to age before it joins the ranks of developed countries. One of China’s biggest fears, expressed repeatedly in public pronouncements, is that it will grow old before it grows rich.

To avoid this fate, China is doing all it can to lure the world’s production and capital while its work force is young. In large part, it does this by denying meaningful pensions and health care to its people today. Not only do the vast majority of elderly Chinese have little more than their meager savings, but today’s workers have pensions so measly as to be irrelevant. To keep the cost of manufacturing in China low for the rest of the world, the young Chinese work force is, for now, rarely provided more than token pensions, health care or disability insurance. In aging, developed countries, older workers with long tenure are usually at their peak in terms of pay and the cost of their benefits. Here in the United States, for example, health care costs for workers who are between 50 and 65 are, on average, almost two times what they are for their peers in their 30s and 40s. When the median age of workers climbs in the United States, so does the cost of insurance their employers must buy for them. China’s leadership clearly believes its young workers would lose their allure if the future costs of old age were added to their costs today. When state-owned companies trimmed their ranks of tens of millions of workers following the country’s transition to a market economy, older workers — many only in middle age — were often let go with small pensions and replaced by younger workers. So what China offers now is workers with short tenure and negligible benefits (as well as something of a free social safety net in the form of all the relatively young, physically fit grandparents who move in with their children to care for their grandchildren).

The GOP likes to talk about health care and other social benefits in an extremely narrow way. To them, it’s a morality play starring the individual and the state. We are each supposed to make out own way, and take responsibility for our retirement, our health, and that of our dependents. Government is supposed to stand aside, with social services privatized, and unchecked corporations are incented to take advantage of open global markets, moving jobs wherever. The mystical association of free markets and human destiny seems to be behind most GOP dogma.

But the GOP is ignoring the larger context, or actively lying about it. We live in a world where the primary context for our personal lives is not in our own hands. We are victims of the chicanery of titantic business sectors that buy off politicians and slough hundreds of thousands of workers in one country while hiring hundreds of thousands elsewhere, and stealing from both. We are in the shadows, under the feet of giant businesses that act in concert to arbitrage demographics, and bankrupt the societies that allow them to exist.

The Democrats have allowed the GOP to frame this debate as one based on how much money is being spent by the government on these social services, and whether individuals have a claim to funds — for health care and pensions — that the state can accrue through taxation. Instead, the debate should be — and will be soon — about letting corporations and their owners rape us demographically, just as they have historically raped us ecologically and financially, and not paying back to the societies that allow them to thrive.

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