A conservative decries the cheap-labor conservatives

As usual, Paul Craig Roberts is on the money:

As India and China rise to first world status, the US falls to third world status where the only jobs are in domestic services.

This has enormous implications for the US balance of payments. Americans' consumption of manufactured goods is heavily dependent on foreign manufacture, whether that of foreign firms or that of US multinational firms that supply their American customers from offshore. How does an economy in which employment growth is concentrated in nontradable domestic services pay for its imports with exports?

Since 1990 the US has been paying for its imports by giving foreigners ownership of its assets. In the last 15 years foreigners have accumulated $3.6 trillion of America's wealth.

America has been able to pay for its consumption by giving up its wealth because the dollar is the world's reserve currency. As America's high-tech and manufacturing capabilities decline and its red ink rises, the dollar's role as reserve currency must end.

When the dollar loses its reserve currency role, America will not be able to pay for the imports on which it has become dependent. Shopping in Wal-Mart will be like shopping at Neiman Marcus.

Until recent years, US companies employed Americans to produce the goods that Americans consumed. Employment supported sales, and sales supported employment. No more. By their shortsighted policy of moving US jobs abroad, our corporations are destroying their American markets.

Economists give assurances that the dollar's decline and fall will bring jobs and industry back to the US. Once Americans are as poor as Indians and Chinese are today, the process will reverse. Multinational corporations will locate in America to take advantage of cheap labor and unserved markets. By becoming poor, the US can become rich again.

You might want to ask the economists and our "leaders" in Washington why we should put ourselves and our descendants through such a wrenching process.

I recently finished reading T.R. Reid's book The United States Of Europe: The New Superpower and the End of American Supremacy. The book describes the many ways in which the now largely united Europe is kicking American butt. And they're doing it with high taxes, high wages, universal health care, and an extensive welfare state that everyone takes pride in. Asians are currently making stuff they can't afford to buy, and Americans are buying stuff they no longer make. Only in Europe are people able to afford their own products! Henry Ford was onto something back when he introduced the $5 workday at his factories in 1914, much more than most laborers were getting at the time.

Ford also realized that if workers had more leisure time to go with their increased income, they would become more voracious consumers.

"The more well-paid leisure workmen get, the greater become their wants," Ford said. "These wants soon become needs. A workman would have little use for an automobile if he had to be in the shops from dawn until dusk."

Ford was actually quite a nut, and a bit of a Nazi, and twenty years later he had hired thugs beating up union organizers. But he had an early vision of a successful wealthy society, as opposed to one where workers are ground to dust. Another Michigan business mogul, W.K. Kellogg, introduced the six-hour workday at his cereal factories in 1930:

[Kellogg] was later able to say, "The efficiency and morale of our employees is so increased, the accident and insurance rates are so improved, and the unit cost of production is so lowered that we can afford to pay as much for six hours as we formerly paid for eight."

One of my favorite books, Affluenza, describes how America in the 1920's faced a choice--either go the Ford/Kellogg route of high wages and general wealth, or keep with the cheap-labor conservative ways of near slave labor. From the 1930's through the 1960's, some progress was made in the direction of higher wages and shorter hours, but since then the trend has been largely reversed. "Globalization," "free trade" and outsourcing are all a part of the way this is done. The result, of course, is a huge wealth disparity, with the wealthy few controlling almost all of the wealth of society. Europe has deliberately chosen to pursue the opposite path, and they now work some 400 hours per year less than Americans, on average. And they're succeeding. Ford CEO William Clay Ford, Jr. says that Ford's Volvo division is more profitable than the domestic Ford and Mercury divisions, even though they're paying the high Swedish wages, the high Swedish taxes, and the long Swedish vacations. The reason, Ford says, is that health care is handled by Sweden, not by Ford. But in many other ways, the European model is outperforming ours, at least in terms of the general welfare. (One thing that struck me reading Reid's book--Europeans are almost entirely non-religious, while America is in danger of becoming a theocracy. But European society seems much more "Christian" than American society in terms of taking care of the poor, weak and ill-fortuned.)

To round out this rambling post, I'll send you to Dave Pollard's How to Save the World blog, where he explains the choice between low- and high-wage economies in an article called The Wal-Mart Dilemma. I especially like his diagram comparing the two methods of running an economy: