The Times: “We can’t compete with China on wages and are living beyond our means. We must retrench before we grow again
Two numbers — $135 and $12 — explain why Britain’s and Europe’s economies are stagnant or shrinking. Pundits and economists have lined up with suggestions about how to stimulate our economy: more quantitative easing; clever schemes such as “funding for lending”; while others say enough of austerity, let’s stop the cuts. But all that assumes that growth is the natural order of things.
None of these proposals will solve our problems because they ignore the two numbers $135 and $12. The first is what the average worker in the West earns per day; the second what the average worker in urban China earns.
This inequality in pay is the main reason our economy is in peril. What entitles the rich world’s 500 million workers to salaries ten times greater than the 1.1 billion workers in urban bits of the developing world who toil and study so much harder, let alone nearly 100 times greater than the 1.3 billion adults who live in rural poverty?
In the global marketplace it is now impossible to preserve well-paid jobs for Westerners. Many of those jobs have gone or are going south or east. In the 1950s the most successful company by market capitalisation was General Motors. In 1955 it employed nearly half a million Americans and 80,000 foreigners. Today Apple, the world’s biggest company, employs 4,000 Americans and more than 700,000 overseas contractors. And in jobs that have not moved, wages are under severe downward pressure: US high- school dropouts now earn less in real terms than their dropout grandfathers.
It was not always like that. For 55 years after the Second World War annual growth in jobs in Western economies was about 2 per cent and real wages grew by about 3 per cent year after year. The idea that we would all earn more without having to work harder, and that there would be jobs for our children, became a democratic “right”. But this right is now broken because, starting in 1990, developing nations ditched the failed socialist and Marxist policies that kept them poor. Since 2000 China’s economy has quintupled — while jobs, wages and GDP growth over the cycle for Western economies was, with few exceptions, negative.
For the first time in centuries we have to compete on a level playing field. We cannot compete on wages. Do we have other advantages that will protect our living standards? Aren’t Europe’s workers better educated? More creative? No: 10,000 science PhDs graduated from Chinese universities last year. In 1995, global patents granted to China amounted to 0.5 per cent of the total; in 2010 it had reached 9 per cent and is rising exponentially. Our best universities are educating many future business leaders and scientists of developing countries. Our advantage in physical and intellectual capital is eroding fast. What the developing world does not create, it can steal; the global value of counterfeit and pirated goods is forecast to rise by $1.5 trillion by 2015.
Most importantly, we consume more and invest less. China’s investment levels (however misdirected some of those investments may be) have risen to almost half of GDP, while the West is at about 15 per cent and falling. The truth is that Western nations have been living beyond their means. Our build-up in total debt — corporate, individual and government — has now become an enormous overhang. The UK is more indebted than Greece, Spain or Italy and only Japan and Ireland’s total debt per head is greater than ours.
So how do we get out of this mess?
…”
By Jon Moynihan, , 15 August 2012 | PA Consulting Group
via The Times – $135 – $12 = the pay gap the West can’t bridge, 15 August 2012 | PA Consulting Group.
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- https://chindia-alert.org/2012/05/29/chinese-wages-see-double-digit-growth/
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- https://chindia-alert.org/2012/04/26/china-offshores-manufacturing-to-the-u-s/
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Analyst Presents A Terrifying Vision: THE DECLINE OF THE WEST (businessinsider.com)
- The 11 Graphs That Allegedly Prove That the West Is Doomed (theatlantic.com)
- Now Apple’s Manufacturing Is Leaving China (forbes.com)
CHINDIA ALERT: You'll be living in their world, very soon 