Should we protect the worker or the product?

The first globalising influences were the European empires, which stretched their trade empires from one side of the planet to the other. Through these, the empires were able to start influencing markets and economic conditions from the other side of the planet. It didn’t matter if the next village sold good bowls in Szechuan, because the English may sell better ones at the port.

This expanded greatly into the Opium wars, where the British were selling Opium in China and actually fought a war over their right to continue doing so.

The global production line followed, where items were created in different places, materials in different places, and they were all brought together in some single location to be pieced together at the end. The intermingling of trade and economies had started in earnest many hundreds of years ago.

But technology restricted quite how much of an impact any of these entities could have. A sailing ship and a horse and cart could only do so much. Cost is a factor as you can’t move an enormous amount this way without incurring a great cost. Certainly, it was a revelation at the time, but a factory in Guangzhou is still in a better position to supply Beijing than London.

The 20th century saw an enormous change; technology became such that moving goods was getting easier almost by the day. Because of that, the European empires initially flourished. In the aftermath of WW2, this fell to the United States.

The United States entered the post-war period as a gigantic manufacturer, with virtually no domestic destruction. Only a small portion of its population had died in the war, and it was almost exclusively soldiers in the military. It was ready to step into the new role of economic hegemon of the world. This, along with their extremely robust union movement of the time, meant that while jobs existed in massive numbers, so did worker bargaining power. So together those things drove the United States to have an extremely high standard of living for regular blue-collar workers.

The United States drove the push for liberalised trade, especially from the 1960s onward. The push was always to sign free trade agreements because it meant more and more countries would become reliant on the US and they would have more committed “clients” so to speak for their enormous manufacturing base.

But over the course of the latter 20th century, a few different things happened.

Firstly, a number of countries, particularly in Asia, revived considerably. Much to the dismay of liberal and free-market advocates, Communist China grew at an astounding pace, though they were vindicated when at the hands of Deng Xiaoping it grew much faster once driven toward the market. Japan also, whose mainland had largely survived intact from the war due to there being no landings. In India there was no fighting, so the Indian economy was able to keep developing.

The simplest thing, when faced with that issue, is to simply cut worker expenses, so that’s what they did.

Basically, the rest of the world started to catch up. Moreover, the West’s financial controls started to loosen more and more as time went on. Neoliberalism was starting to rear its head after decades of “Socialism Lite” as was the case in the 1940s-1960s. Big business had wanted to go back to the “better” time of lower wages and protections for workers. They’d had to sit down and be quiet during WW2 because of the war, but afterward, they grew back into their own.

It was a slow thing, and far more complicated than I’m describing, but the west slowly shifted to the right. As trade became more competitive because the rest of the world recovered, it was less easy to make huge profits and still pay your workers well.

The simplest thing, when faced with that issue, is to simply cut worker expenses, so that’s what they did. Free trade remained a must, but the protections for workers became less primary. Unions were devalued and business was made most important. The right-wing had always thrived on these ideas, but it was brought out in full force during the 1970s in the US. The idea being that more business means more jobs, means more money. But the two things never really aligned in that way as they were supposed to.

They rarely do.

With free trade remaining (and the protections gone) businesses were free to continue making money, through freezing wages, automation and moving overseas to cheaper labour markets. This has created is an interest recursive loop, as the right wing continually advocates for freer and freer business, stating that any remaining issues are derived from the state and unions.

This now leads us to the conflict between globalisation and nationalism.

The concept behind the new nationalist push is about protectionism. Vote for economic liberal parties because they’re often the most ostensibly “nationalist”. Be it the Republicans, the Liberals here or the UKIP and Conservative parties in the UK. They talk about keeping jobs in the country, and pushing national industry, but it runs anathema to the right wing’s actual position. The right is and always has been about empowering big business and letting it behave as it likes, which means automation, moving work overseas and people like Clive Palmer spending $30 million on an election campaign when he still owes a great deal of money to the workers of Queensland Nickel who have gone without their entitled pay.

The nationalist, right-wing vote is supposed to be about a vote for keeping work inside a country. Keeping businesses unentangled by red tape, an ability to thrive and pay for employees, thus injecting money back into the state. But right-wing parties are almost all laissez-faire economic parties. This means they are funded by wealthy businesses owners to promote policies of no restrictions. This means skilled, high paying work and materials being sourced from the cheapest location, which is probably China or India.

So, we have realistically, two options. One is to reverse the clock and disentangle the global economy so that we’re back to being protectionists. But that means we can’t sell our goods into the world anymore either, so you’ll never see the kind of wealth that leads to the west’s high point again.

The concept seems to be that with more employment comes more wealth, so if you can keep a high employment rate that’s all that matters. But how good is it, if you’re living in the US and all you can get is service work at Walmart with no benefits or insurance of any kind? All the high paying work has been outbid by India and China.

So, we have realistically, two options. One is to reverse the clock and disentangle the global economy so that we’re back to being protectionists. But that means we can’t sell our goods into the world anymore either, so you’ll never see the kind of wealth that leads to the west’s high point again. In fact the rest of the world may just take that mantle, while we shrink into our isolation, leaving China and India to become the new trading hegemons of the 21st century.

We may get our own internal trade, but that’s a tiny fraction of what we require to maintain that same level of wealth we had. It’s an option, but it’s not a very good one.

The other thing is we can make our trade agreements more equitable, which is actually a major point in favour of protectionism. As there are a number of trade agreements, such as China’s “developing” status with the WTO that renders its enormous advantages. If we could push for more even trading between countries, that would certainly make things a bit easier. But on top of that, you still have a world where you’re caught in the hands of the lowest bidder, because the standard of living is simply lower, or the laws allow a government to undercut more established countries’ own labour laws. Simply by making healthcare insurance not mandatory, or a 10% company tax rate, or no overtime pay — the list goes on — you can effectively make your economy more appealing to a business looking to set up production.

It’s not about evil, or maliciousness; shareholders demand growth, businesses cannot always deliver growth with products, so they have to cut costs instead. Sometimes the easiest cost to cut is wages. Likewise, countries need to encourage investment, but it’s not something that simply happens, they have to make it cost-effective, making it a good deal. A business picks your country for a variety of reasons, but probably the biggest one is price. If you cost less, you have a very good shot at securing that business. Unfortunately, again, profit (or a saving) usually comes out of wages.

So what’s the alternative, to a world that only grows more ruthless and competitive by the day?

No more national competition. Instead of 192 sets of labour laws, have one set. Instead of 192 economies, have one. Instead of 192 different countries undercutting each other to entice business and sell out the employed, one economy with one set of rules.

What this means, is that the state is no longer enticed to crush unions, because they don’t need to try and compete with un-unionised countries. Instead, they can enable and work with them and business together. The triangle formed by the regulator, and the two sides of the “bargain” are effectively the position the US was in in the 1950s. With no real competition and no one to consider, the entire conversation was an internal one, and it was a time of unprecedented prosperity because of it.

Food for thought: if you took the current global GDP of 75.4 trillion US dollars and divided it by the world population (including babies etc) of 7.6 billion, you’ve got 10,714. That’s about the GDP per capita of Georgia or Dominica. But you’ve also got to account for the enormous sums being held onto by the extremely wealthy, or assets being stored in places where they can’t be taxed, or general loopholes that are exploited every day. Consider that the actual global wealth is estimated at 317 trillion in 2018 (Credit Suisse), what would happen if you imposed a 20% accrued wealth tax on the richest 1% of people?

They own half of all global wealth, so 10% of 317/2? You probably wouldn’t do it so flatly, but to give an idea, that’s $6.7 thousand dollars for every working adult in the world. Further, something like that may encourage the tremendously wealthy to divest themselves of some of their holdings, selling them to others and de-monopolising the markets. None of this would be even thinkable in a competitive national environment, but it’s all the sorts of things that could be discussed in a growing, single economy.

There are also theories such as Mundell’s Nobel prize-winning optimal currency areas, that suggest growth would be enormous in this equitable space, but again, the first battle would just be to see the potential before us, of a singular economy.

Whether you think the human race should go forward or backwards, the simple truth is we can’t remain where we are.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
The Big Smoke

The Big Smoke

We’re not journalists, we’re you.