Globalization carries a bias against labor

Apologists for America's wealthy claim that workers should not be concerned about the incomes of the rich because “wealth is not a zero-sum game.” In other words, the huge incomes of our top 1 percent are irrelevant, even though workers are not keeping up with inflation.

Actually, it's a totally relevant relationship. Those who claim that wealth is not a zero-sum game are the same ones who watch the incomes of working-class Americans like predatory hawks. They know very well that when workers make more money, corporations make less profit, investors get lower returns on their investments and the top corporate executives receive lower bonuses. Therefore, they support economic policies that keep wages stagnant, even when corporate profits are skyrocketing.

Globalization — which allows corporations to pit the nations against each other in offering lower wages and worse working conditions — has resulted in a huge worldwide wealth and income disparity between the rich and everyone else.

For a quick insight into this issue, go to the Wall Street Journal website and search “wage inflation.” You'll find recent articles with these worrisome concerns:

• Some areas of the U.S. could have “upward wage and inflation pressure, even with high unemployment rates nationally. An unemployment rate somewhere between 6.5 percent and 8 percent could be inflationary in this environment. … As unemployment starts moving toward that range, the Fed will need to start moving toward raising interest rates.”

• At the World Economic Forum's meeting at Davos, “several of India's largest companies pointed to pressures from rising costs. One key area of price growth: wages that make it costlier for companies doing business there.”

• “Given that this year has also seen a wave of big wage increases for manufacturing workers, could China now be facing the risk of spiraling inflation, where higher wages and higher prices feed off each other?”

• “Economists argue that the economic recovery (in the United Kingdom) remains patchy and the still-weak labor market means the prospects of a wage inflationary spiral look remote.”

Understand what these reports mean in terms of our nation's and the world's economic policies. Politicians in the U.S., China and India fear rising wages will aggravate inflation, and therefore their economies should be cooled down. Because wages in the U.K. are still stagnant, they're not seen as a threat, at least not yet.

In other words, governments are concerned only with the inflation caused by rising incomes of those who actually work for a living. Inflation is of no concern to politicians if it results from increases in the value of stock markets, the growing incomes of investors or the exploding incomes of corporate executives. According to today's standards, these events are merely characteristics of a good economy.

In addition, politicians of all nations now realize that if wages go up, multinational corporations will either have to share more of the wealth with their workers or they'll have to raise prices. This means that if a nation doesn't implement anti-labor policies, it will lose the competitive battle for industries and the jobs they provide.

Therefore, to prevent wage inflation and yet protect the economic advantages of multinational corporations and their investors, politicians must make sure wages remain stagnant. They do this by manipulating interest rates, changing monetary policy, removing trade barriers based on wage differentials, implementing regressive tax policies and, in general, destroying the power of workers to negotiate for higher wages.

From roughly 1932-80, the U.S. implemented policies that gave reasonable protections of workers against the powerful economic interests of the wealthy. From 1980 to today, it has been reversing those policies.

When the U.S. — a nation that once created a vibrant middle class and a reasonably prosperous poor — abandons its respect for those who work for a living, how can we expect good outcomes when we adopt the standards of other nations that have a history of abysmal labor policies?

Chuck Kelly is a retired management consultant living in Burnsville and is author of “The Destructive Achiever: Power and Ethics in the American Corporation” and “Farewell Fantasyland: Time for Political and Economic Reality.” He can be reached at cmk@farewellfantasyland.com.

Return to Kelly's home page, In Defense of Democratic Capitalism