How Globalization Drives Down Western Wages
By Gabor Steingart
Asia is fast developing into an economic powerhouse, with China and India gradually transforming themselves into the new masters of the universe. Meanwhile, the West faces the prospect of losing the globalization game, as European labor is devalued -- by the millions.
Editor's Note: The following essay has been excerpted from the German best-seller "World War for Prosperity" by SPIEGEL editor Gabor Steingart. SPIEGEL ONLINE is publishing a series of daily excerpts from the book.
The capitalist is a logical creature -- he invests his money where he can expect the greatest return on his capital. Whether it's building a factory in the tropics or digging a tunnel in the permafrost, the capitalist is mainly interested in expanding his assets. After all, the most important objective of capital is to multiply. Were it to do the opposite -- if it decreased -- no one, not even workers, would be better off. Indeed, shrinking capital usually leads to a decline in jobs. Words like mismanagement, crisis, restructuring and layoffs quickly find their way into the newspapers.
Whether jobs will survive a crisis is ultimately determined by a single, remarkably straightforward question: Can invested capital be turned into more capital? No capitalist would be interested in looking on as his investment shrinks from one day to the next, otherwise he'd quickly cease to be a capitalist.
Workers have a better reputation, although they're just as likely to go where the jobs are. If they are left to migrate freely, they'll go where the pay is good and where they can expect a reliable standard of living. Southern Italians migrate to northern Italy, eastern Germans to western Germany and South Americans to North America. Millions of people are constantly crossing oceans and continents for the sole purpose of getting closer to what they are convinced is the promised land.
But the great injustice is that capital is welcome almost everywhere, while workers are not. Tricks and incentives are used to attract investment worldwide, but countries routinely close their borders to migrating workers. In some cases, they even call upon their militaries to keep out potential troublemakers.
There is also another aspect in which labor and capital differ. Capital and the capitalist are a single entity. They are essentially joined at the hip, with one incapable of surviving without the other. Separating capital from its private owners doesn't work, as states like the former East Germany learned when they nationalized their industries.
The capitalist is flexible, and has become truly restless
The workers' handicap, in a nutshell, is that the same symbiotic relationship doesn't apply to labor and workers. Although workers can be prevented from traveling across national borders, no border guards can keep someone else from taking their jobs. In retrospect, perhaps the true wonder of the post-World War II world is the fact that the countries of the West have managed for decades to control outsiders' entry to their labor markets.
The nations traded all kinds of goods, imported and exported everything under the sun, from bananas to television sets, from gasoline to steel, and money was transferred back and forth. Workers, though, were never exported and imported. Although West Germany brought Turkish guest workers into the country for many years, they were soon subject to the same rules and conditions as German workers.
Nor were there any especially significant differences between the labor markets in Europe and America. The companies headquartered on opposite sides of the Atlantic were competitors, not rivals. They paid wages, not charity. Children were children and not workers. Civil society passed laws to ensure civilized relations between workers and manufacturers, so that the two groups, despite decades of exploitation and class struggle, eventually discovered that they had more in common than they had once assumed.
Communist leaders in Eastern Europe eyed the West's tête-à-tête between labor and management with suspicion, but declined to become a part of it. They traded raw materials and goods with the West while keeping their distance from its labor and capital markets. The countries of the Third World also seemed to exist on a different planet, with Western disinterest and their own powerlessness ensuring their exclusion from the process we now call globalization.
But all of that has fundamentally changed. The chasm between the West and the rest of the world has not only been filled, but now resembles a bridge. The capitalists are storming across that bridge, looking for adventure and making full use of their newly acquired freedom to travel. They tour the most remote places on earth, their factories are popping up everywhere and jobs are readily following.
In 1980, the sum of all countries' direct investments, that is, the funds a given nation invests outside its own borders, amounted to only $500 billion. The old-school capitalist tended to be more of a stay-at-home type.
But his successor is of a different breed altogether. Total worldwide direct investment has jumped to $10 trillion, an increase of almost 2,000 percent in only 25 years. The capitalist is flexible, even restless in many cases, and now expects jobs to mimic his own wanderlust. The old-school entrepreneur was a patriarch and was often even more of a nationalist than his fellow citizens. The modern capitalist is a frequent flyer many times over; he is both at home and an outsider wherever he goes. Calling him a nationalist couldn't be more off the mark.
Trading labor like silver or silk
Jobs now follow the capitalist on his travels throughout the world. They leave the West, only to reappear elsewhere. They turn up in an Indian software company, a Hungarian toy factory or a Chinese automotive engine plant. Despite frequent claims to the contrary, jobs don't simply disappear into thin air. Instead, they are replaced by technology or by workers located somewhere else.
The unheard of has happened, something no one really expected. A global labor market has developed, a market that is expanding daily and palpably changing the way billions of people live and work. People today are connected through an invisible system of conduits, people who don't know each other and, in some cases, aren't even aware of the existence of the country in which their counterparts live.
This is precisely what distinguishes today's globalization from the trading nations of the past, the colonial empire and industrial capitalism of the mid-19th century. For the first time in history, a largely homogeneous economic system has developed that encompasses all production factors. Capital, raw materials and human labor are traded just as silver and silk were in the past.
Many of the things we once took for granted have become less than certain. Power and wealth are being redistributed, and so is opportunity. Although we all see the world, we see it from widely differing perspectives.
The newcomers in the global labor market look ahead with optimism and great expectations for the future. For the first time, many are able to bring home wages that are more than just a pittance. For them, the global labor market holds unbelievable promise.
But the new era is far less promising for millions of workers in the West, dispelling the optimism of the early years. Many will leave the labor market in the coming years. Even in places where Western workers are presumably able to hold their own, wages are declining -- not drastically, but bit by bit each year. Suddenly workers find themselves confronting a sensation they have never felt before, at least not to this extent: insecurity.
source:
http://www.spiegel.de/international/...436976,00.html