by John Brian Shannon
MY COMMENT ON PROFESSOR PAUL KRUGMAN’S ARTICLE BEGINS…
The great sucking sound that everyone is hearing these days is the sound of capital leaving the Western economies by the billions – perhaps trillions of dollars – over the past few decades.
Money goes where the investments pay the best returns – and these days that means the BRIC countries (Brazil, Russia, India and China) and other rapidly developing economies. As uncountable billions leave the Western economies, the jobs attached to those mega-billions go with them. Is it any wonder then, that some of the weaker Western economies have been in free-fall for some time? No, it is not.
A great deal of lamenting has been gone on in recent months – but the geomacro-economy has been changing and will continue to change as it reflects the new and evolving reality, for one simple reason – “If we continue to do what we have been doing, we can continue to expect the same results.”
And what is that result, exactly?
I quote Professor Paul Krugman – arguably the leading economist alive today: “An old routine plays out in Spain, with the banks getting help while the unemployed continue to suffer.” Read Professor Krugman’s excellent article here…
Our consumers demand lower-priced goods and services, so foreign nations have gratefully fulfilled those requirements – effectively transferring Western wealth to third-world nations in huge, glorious gobs of U.S. and European bank notes!
It is said in China these days that one must watch the sky carefully for all the Manna falling from Heaven – which is falling in the form of chunks of gold large enough to take out entire city blocks!
Lest you think this is a recent development, it all started in earnest about 1973 shortly before the Arab Oil Embargo, when oil prices suddenly shot up and Detroit’s thunderous, but thrilling V8’s became unaffordable for millions of workers in nations used to interstate highways serving distant suburbs, spirited driving on the autobahn, and long summer vacations involving hundreds of miles of travel.
Japan at the time and still to this day, exports huge numbers of cars to the West and enjoys a growing market share of (mostly) fuel-efficient vehicles – and the ones that can’t boast good fuel economy, can certainly brag about outstanding reliability and brand-loyalty.
Since the 1990’s, South Korea, China, Indonesia, India and others have also stepped up to fulfill the wants and needs of American and European consumers with everything from home appliances and personal electronics, to tools, clothing and just about anything else you might purchase. Lower labour rates and production costs in Japan, then Korea and now, China, India and Indonesia, allowed more R&D spending, better products and lower prices for consumers and business alike.
Of course, those are all great things. It has been a decades-long bonanza for consumers, businesses and even the governments of the Western world are able to lower their costs by purchasing cheaper and often, more reliable goods from Asia.
American and European corporations have gladly followed this trend and contributed mightily to those developing nations attempting to service the wants and needs of Western consumers. If you doubt me on this – just do a Google search on Apple Computer for just one of many examples of U.S. companies which have elected to have their goods manufactured in China or other rapidly growing nations, instead of the U.S. Check Apple’s stock price in 1990 (mostly U.S. production) vs 2011 (mostly Chinese production). Impressive by any standard but not unusual, in fact, this Western-inspired trend is well established and continues to this day.
One day soon, there will be no manufacturing capacity in the U.S., Canada or Europe. It is dramatically cheaper to have it all done inside the BRIC countries and export those products to the West. Costs are so low, that shipping millions of products thousands of miles across entire oceans, becomes a tiny factor of the final price paid at U.S. or European cash-registers.
The “real price” of that huge manufacturing shift continues to play out in the daily media – higher Western unemployment rates, longer welfare rolls, lower domestic production, real-estate bubbles, bank failures, bank bailouts and so far, about one decade of destroyed dreams for families and small businesses.
But, man, did I get a great deal at the mall today!