With the US Presidential Election on the horizon, the CAIC has turned its sights this week to US relations. Consultant Rodger Varley shares his thoughts on globalisation and the USA.
As is often the case, many of our financial gurus/economic pundits, reflect the ‘establishment elites’ status quo view of the Western World that the USA must forever be satisfied with years of ‘marginal GDP Growth’ (avg. 1.4% since 2009 –v- 3.4% 1950-2008), and workforce participation (rate down to 62.6% in May 2016 from 66% in 2008), while curiously admiring the Far East and in particular, China’s consistent GDP growth at 7% + as though it is some God Given ‘order’ of world affairs -- it isn’t!
While such a view, may indeed have satisfied a few of such ‘elites’, it appears to not have satisfied the mass of working peoples prospects in USA, who progressively have become relatively ‘poor’ compared with their historical position, with real incomes ‘flat lined’ for the past 18 years, while the middle classes continue to shrink at an alarming rate.
Ironically, it is the ‘purchasing power’ of the US ‘consumer’, the majority of which is indeed the very same working people whose wage prospects have been ‘flat lined’ for decades and whose jobs have disappeared, that have funded this global phenomenon described by the financial elites, as being ‘good for them’!
How has this state of affairs arisen? The financial gurus, will tell us no doubt, it’s the ‘productivity’ of say Chinese workers vs US workers, who ‘folk law’ has it either work harder, or more plausibly, work for less money. This assumption however, fails to recognise the reality that the direct wage component of manufacturing has diminished over time and that it is largely driven by investment in advanced technology/equipment which drives labour costs down, facilitated in large part via the ‘economies of scale’ i.e. Western purchasing power ‘given away’ through either ignorance, neglect, or a combination of both.
Nor do these same ‘globalists’ recognise that WTO rules and regulations, have consistently been abused /not followed by China and others, who have consistently manipulated their currency/devalued, to the extent for example that it is estimated 4.0% of USA GDP has been ‘given away by not implementing already existing WTO rules. By the USA simply invoking existing WTO rules, this position can/should be reversed.
How does all this affect Caribbean economies? - Well the first thing to recognise is that an ‘impoverished’ America does nothing to help the Caribbean; in fact, the corollary is obviously true.
If the American economy can be restored to the level of growth it historically enjoyed i.e. in excess of 3.4% i.e. pre-2008 level regularly, then the opportunities for CARICOM products/exports to share in that restored prosperity will be or should be ’doubled’ from present levels.
The Caribbean therefore has more of a vested interest in the outcome of the US Election than they might think. The most important benefit of a change in US government, would be a President who actually understands these things, and is prepared to actually correct the unfair and restrictive trade practices that others have for decades taken full advantage of, and provide the Caribbean with a rich source of ‘pickings’ in the process.