Saturday, 7 April 2012

Wave goodbye to the Western Way of Life? But which Western way of Life?

The initial impetus for this analysis was today's (Friday) release of the US Department of Labor's data for March re employment (see a press report by BBC News) as well as a phrase from a statement by the US Secretary of Labor Hilda L. Solis on March employment numbers: " we need to invest in community colleges and job training programs that prepare our workers for 21st century jobs".

21st century jobs? Studies have showed that the biggest bulk of jobs creation in the US has been in low-skill - low pay jobs such as carer and related.

Plus the US medical sector (mostly private as opposed eg to Europe) has been a job creator even in the midst of the US economic crisis. Please note the continuing resistance by lobbies and others to Obamacare, even without the original public option.

Please also note my view that the No 1 target of the so called "Euro crisis" is not the Euro but the so called European Social Model which is inter alia based on public health insurance and healthcare services.

Take also 8 minutes to listen to my theory on the fundamental causes of the US subprime crisis.

You may also want to read my February 3 post "If GDP per capita in USA, EU, China, India was to converge then ..."

Ms Solis argued inter alia: "We've added nearly half a million manufacturing jobs since February 2010. This week, major U.S. carmakers announced that their U.S. sales rose last month to the highest level in at least four years.... the industry has seen a complete turnaround, adding more than 230,000 jobs since the summer of 2009".

Yet for decades now, manufacturing jobs have been moving East. before China entered the WTO on December 2001, Japan was the main target of complaints by US lawmakers. Since China, a 1.3 billion entity still in communist political mode but with a capitalist model of economy in operation in recent years, has entered the "WTO trade game", the impact on the US and the EU (especially the Eurozone with its inflation phobia that has led inevitably to a hard Euro in most of the 10 years since the intro of the Euro notes and coins on January 1, 2002) is even more remarkable!

Are environmental policies and tools, prompted by global warming, the "wooden walls" (see Ancient Greek history) that will save Western world manufacturing and related jobs?

How about the so called "Western Way of Life"? First of all, what is it? Is it the European Social Model (watch it being destroyed in Greece and other PIIGS as well as in the UK) or the US "success or bust" model (aka venturing without a safety net)?

So what if US unemployment remains above 8% (with more low skill - low pay jobs) and EU unemployment is soaring? As long as the financial - health insurance - healthcare sector is doing well in profits and in jobs ......

Note also the recent initiative of the 5 BRICS countries/economies to stand up to the current "world order". as well as India's refusal to allow its airlines to fall under the EU's  transport CO2 emissions trading scheme.

Plus, as long as listed companies are reaching financial results expected by analysts ..... Times are too financial and too jobless. Or is it because US and EU GDP per capita is starting to converge with China's via "free trade" etc? Growth without jobs (or with low pay jobs)? It's called productivity by some,isn't it? Look at what's happening with Greece's internal devaluation experiment!

And look at how the prices of things are rising in EU member Bulgaria as well as non-EU Albania (prices of food in Tirana are reported to be as high a in pre-crisis Athens) in spite of the fact that salaries in Bulgaria and in Albania have risen only a small fraction compared to the rise in the cost of living! Within the EU, people from the new member states have/are trying to partake in the western way of Life by moving. Romania's 2011 census reported a 12% drop in population compared to the previous one, leaving the country with just over 19 million inhabitants compared to 22 million only a few years ago. Trade or migration?

At the global scene, people are trying to partake in the Wsstern Way of Life either via economic migration (in spite of it being discouraged or outlawed by most destination countries) or via trade.

So as billions of people, in China, in India in other BRICS and other countries around the world (and in "New Europe") are making a rightful claim to the Western way of life, that way of life disappears. Means it was not viable to begin with, ie it was only meant to work for a % of the world, an elite?

In the "old days", eg in Ancient Sparta, the Spartans exploited an 8-fold population of the neighbouring Messinians as helots (slaves). To protect against their uprising, they (the Spartans) became soldiers for life and their state a military one. Compare that to the Athenians. But the Athenians' wall, built by Themistocles, the same Athenian who masterminded the win in the battle of Salamis, turned against them during the siege by the Spartans during the Peloponnesian War when an outbreak of the plague (be it Typhoid Fever or other, see killed 33% of the population, including Pericles.

The world as we know it via History, be it Rome, Middle ages Europe, etc, Charles Dickens' England, etc was mostly a world were elites enjoyed things the masses could not (that 99%).

It can be argue that the industrial revolution and the ensuing mass production techniques provided for a certain way of life for a much wider % than just the elites. To get a rough idea: One can calculate the 99% based on the whole world for this period, ie the Western world as the area of the planet where the elites lived (the 1%, 1% of 7 billion is 70 million, the combined population of the US, Canada and the EU is around 800 million, thus the world's 1% elite is 9% of USA+Canada+EU! Rough calculations, but indicative of the West - rest of the world divide.

In any case. it was in the early 1990s in Brussels that one day my secretary noted that she was seeing beggars in the streets and that was a new thing, in her eyes. I replied that people in need were always present, but in distant parts of the world. Now the "segregation" was diminishing. It seems to me, 20 years later, that I was right. More and more rich people are not in the "West" and more and more poor people are in the "West" compared to the industrial age. A new phase has been on, for some time now.

But does one more poor person in the West make for one less poor person in eg Asia, via trade? Not necessarily, because that value foregone by an average Belgian may not be pricked up by an average Chinaman but by a Western company producing in China (some 50% of China's exports are still not made by Chinese firms in China but by "Western" companies).

Yet, instead of the West's states and welfare systems helping Americans and Europeans adjust to the earthshaking relocation of value (not people) from the West to other parts of the planet, a Euro crisis is used as an excuse for cutting down that European Social Model and passing many fillet parts of it to the private sector. Instead of America getting a public option, Europe is losing its own "public option". That was the main game changer of the last 2-3 years.

No wonder many Europeans, especially, and for now, South European ones, are experiencing a sense of vertigo. The economic poles are shifting. It is 2012.

Food for thought:

a) Can capitalism work to make everyone better off (ie with a minimum number of "losers")?
b) Is modern finance as we are experiencing it in recent years a core element of capitalism?
c) Is China capitalist, communist or both?
d) Is the real "problem" economic immigration or trade?
e) Can "Devaluation" take place successfully in the West to allow for the growth of the rest of the world? By "devaluation" I mean a wider equivalent of the "Greek experiment", ie a reduction in wages that is met by a reduction in the cost of living as well. In Greece. it does not seem to be working. Wages are falling but the prices of most goods and services is not.  Take another example. London real estate prices. Can the London economy sustain them? What will happen after mid-August?

In recent years I have talked to many persons who experienced the Soviet Union and the Iron Curtain first hand not only as children but as adults as well (eg until the age of 25 or 30+). Almost all miss the certainty that existed regarding the basics: a job, basic food on the table, a roof over their heads, access to free healthcare.

I will wrap up this post with a piece from Gary Hart's speech at the MIT auditorium in 1984 (I was there): The enemy in South America is not communism, it's poverty.

Draw your 2012 analogies!

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