We can see that a U.S. labor price that is higher than elsewhere only survives when the U.S. labor production is marketable elsewhere at prices high enough to provide for that high labor cost in the product. Ween the product becomes available in say, China from Chinese factories at Chinese labor costs, that product will not be imported to China to be sold at higher prices resulting from high U.s. labor costs. Simple.
America became rich exporting products otherwise unavailable. Now, there is worldwide competition at lower prices. America is an ex-monopolist that cannot compete any more. And it is not only China, India, Mexico, Indonesia et al that compete with the U.S. and Europe; it is the whole world.
The United States had two choices: Either move ahead to new levels of technology that could only be obtained from American suppliers, continuing the past pattern, or reduce U.S. labor costs to compete with foreigners. The second choice has been made for us by our leaders and it is presently reducing labor costs and likewise, living standards of American laborers. Thus the moribund U.S. and European economies. Well, and reliance upon too much debt, of course.
The approved cure for this unadmitted retreat is supposed to be conversion of what was a production economy to what is called now a consumer economy. That is an economy where consumer spending somehow keeps all afloat. When consumers (everyone) start to save money, say for retirement instead of spending it to hype the economy, they are become villains, a drag upon the necessary spending. Add government taking a slice of consumers’s money to spend for them, saving them the trouble … And substituting government beneficiaries for whoever the consumers might have rewarded with their money.
Neither government nor consumption produce wealth,both consume it. So neither can sustain an economy.
The consumer spending economy is a simple fallacy that supports government taking and corrupting the use of money earned by true producers. It is a scam, spread by economists who are political prostitutes. Consider reality:
Say the economy is moribund. Say the government wants to stimulate it, per the prescription. Then say that the economy is limited to just one business enterprise, a micro-economy small enough to understand. The little enterprise isn’t ding well, it needs more business and more income. So in its wisdom, the government will help by taking more of its inadequate money supply, handing back some and using the rest for political purposes. This is expected to improve the little business. Sure …
The only way government can truly help an economic enterprise is by taking less and leaving more decisions to the managers; i.e. by less regulation. Of f curse, those are the last things any government wishes to do; governments are about control, right?
And that is why governments always grow and as they do, economies always diminish in productivity and thereby, wealth. Simple.
But we are expected to believe that, by multiplying businesses up from one to multitudes, the facts somehow change, creating something from a larger number of nothings. Sure. Believe it if you choose …