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I doubt that there was ever any illusion that if financiers could arbitrage labor rates between nations that they would. Hence the expectation always was that l
by Merrill 7y ago
I doubt that there was ever any illusion that if financiers could arbitrage labor rates between nations that they would. Hence the expectation always was that living standards among nations would tend to equalize.
Post WW II the US had about 50% of the global GDP. The situation was huge inequality between nations. That was politically untenable and the solution was seen to be development of other nations' economies. Some of this was accomplished with things like the Marshall Plan and some with programs of foreign aid to underdeveloped countries.
However, the US taxpayer would never support a large enough foreign aid budget to really solve the problem. On the other hand, free trade could be sold politically, companies would export capital and know how to lesser developed countries, and the problem of inequality between nations could be ameliorated. Of course, it was at the expense of the US worker whose standard of living stagnated from the '70s onward. But the bet was that other nations would develop slowly enough, US consumers would enjoy cheap goods, business would make lots of money, and that US standard of living wouldn't actually decrease significantly for a politically potent group.
Of course, there aren't enough resources in the world for all 7.5 billion people to enjoy US standard of living. Therefore, the implication of greater equality of standards of living between nations is less equality of standards of living within nations. Less inequality internationally implies greater inequality intra-nationally.
And that is exactly what has happened. The world, including the US, will tend towards the situation in India where there is extreme wealth and extreme poverty side by side.
- NTDF9 7y agoYup. I don't think most people today realize what a one-time event American wealth was after world war 2. After WW2, the rest of the developed world was destroyed and the under-developed world was colonies. Today, they all have woke citizens working hard to reach a developed lifestyle. Which means America has to compete, hard!
- shantly 7y agoIt was sold as "rising tide lifts all boats" (implication: boat = person, and "all" = "nearly all, at least") and "everyone benefits under free trade, trade barriers always make people worse off, it's just a fact, what don't you even know Ricardo?" Never mind that "all boats" was, in the best case, "all GDPs", not individual incomes, and "everyone" was... well, the average of all GDPs, actually, so also not actually every individual, and still with a pile of caveats for even that to be true. In point of fact nothing about all this said that even most people would benefit, if you either 1) applied common sense, or 2) actually looked at their sources. source: figured out the common sense reasons this was BS when I was in like 4th or 5th grade watching the China-MFN debate & vote on CSPAN (god I was a nerd); later did the reading and learned that yes, my elementary school intuition mapped closer to reality than the crap they sold us.
- mdorazio 7y agoImportant to note also that "tend to equalize" can just as easily mean "the top comes down at the same time the bottom goes up" as "the bottom rises faster than the top". By most big measures, the world is more equal than it was 30 years ago, but that came at the cost of stagnating a significant chunk of the global "top" (ex. the US middle class).