One of my favorite Kossaks - Bonddad - has written a diary today The Harsh Reality of Free Trade on the challenge of globalization and the "genie out of the bottle" issue. I want to speak to the cultural implications in a political and cultural point of view.
The genie is out of the bottle but my concern is the unintended (or intended) consequences to all Americans.
There is an old aphorism in economics called Gresham's Law - in an economy, bad (or stupid or dishonest) money drives out good money. In a global free trade environment, economies that don't give a damn about the citizens and employees will drive out those that do. Why? below the fold
The US currently has 300 million (ballpark) citizens. This also includes:
The total number of preschoolers (under age 5) in the United States in 2005 was estimated at 20.3 million.
The number of elementary school-age (5 through 13) children was 36.1 million, with high-school age (14 though 17) children numbering 17.1 million.
From US Census data
Let's look at the competition.
In China:
There are 45 million children age 5-9, there are about 48 million 10-14 agre children, about 58 million 15-19 age children.
Total school age children - 151 million - 7 times the US population.
Graphic data here
In India:
116 million children under 5 years old; 284 million age 6 to 18
Tabular data here
So, just in China and India there are 436 million school age children - 150% of the total US population.
The Chinese have over 25 million college students - their 2007 entrance class was 5.4 million students. That compares to 17.1 million college age students in the US with an estimate of 2.5 million college graduates last year (data from College Board website). Total US college enrollment is about 9 million full time and 4 million part time enrollees.
What does this mean?
Well - assuming - and this is probably valid, that the children of high intelligence (for argument - let's take an IQ over 130) occur at a ratio of about 40 to 1 in the general population and the numbers hold for the US , China and India. That means that there would be approximately 1.3 million high end children in the US, approximately 3.8 million gifted children in China and 7.1 million in India.
The total high end talent population in China and India is 10.9 million - or over 30% of the total US educational population.
This is the problem with the Harsh Reality - the number of well educated and gifted people that China and India can produce dwarfs the US capacity. If the goal is to attract the high wage, high skill jobs - the retraining must compete with their resources.
This is where Gresham's Law comes in - if the Chinese and India economies (and governments) are willing to provide the resources to the world economy at lower wages and lesser protections than the US, with lower environmental controls - then the people who are willing to invest for return rather than equity (and I would not bet your 401(k) mutual fund isn't one of those investors) will go there. And that ability to attract investment at a lower internal and external cost will drive out other investments in the US.
And, unfortunately, the internet makes the competition worse. I have participated in IT projects where the client work is done from 9 AM to 3 PM on the East Coast of the US, the day's needs are written up and emailed to India. The specifications are therefore on the desk when the coders arrive at work in the morning. They code for eight hours, bundle it up and email it to the US. The code is there at 8 AM when the client walks in. You create a 24 hour work cycle with little downtime, no overtime and no shift work. All things being equal on wages and skills, this is a competitive advantage to overseas labor where the product being shipped is amenable to email delivery - no competitive advantage on transport time or cost.
This, unfortunately, means that in many environments the competitive standard will be the lowest wag and worker protection structure of any country capable of providing the resource. It means that without a comprehensive and coordinated set of rules and behaviors, the harsh reality becomes the harsh economy.
It also means that the US must on an effective value (i.e., real dollar per real foreign currency value inside that economy) basis spend just as much on the educational resources for everyone from birth to retirement - including all the retraining costs - as those competing economies.
This means that NAFTA and other such actions can only increase total benefits to all workers is by including protective rights for the competing workers as a protection to our domestic workers.
Without that, the harsh reality the downward spiral of US wages and employment. This is the dust bowl of the US economy.