So lets tackle what is a very controversial topic.
Many barrels of ink has been spilled on both side of the debate, although admittedly more on the cons side in the past few months. Amongst the top few reasons for opposing, restraining or even rolling-back Outsourcing and Global trade is the mercantilist trade/currency policies followed by the largest trading partner (China), collapse of the middle class in America due to outsourcing of service jobs to India / manufacturing jobs to China and un-sustainable trade deficits.
These issues/challenges highlighted are valid and true. There is no denying the fact that China is following a mercantilist trade and currency policy that depresses its currency by 40% (estimated by most respected economists), thereby not only exacerbating trade deficit with US but also ‘stealing’ export income of other countries. During the go-go growth years, people complained but accepted this as everybody was growing. Now that we are saddled with slow-to-nonexistent growth for the next few years (if not the decade), this is rapidly becoming a worldwide diplomatic issues with potentially ugly consequences.
Further, the great recession has exposed the decimation of the middle class in America. Easy money and loose credit camouflaged the reality of declining real wages and increasing disparity in wealth over the past decade, which has now come spectacularly undone. Loss of manufacturing and service jobs, for long the mainstay of the middle class in US, is creating economic havoc in an economy that depends on consumer spending and political system that encourages everybody to have the American Dream of ever-rising prosperity with each generation. The fall-out of this will be extremely consequential and potentially nasty
Unsustainable trade deficits, primarily a function of the first 2 factors, introduces another challenge to the policy makers. Ever increasing trade deficits, supported by ever increasing re-investments by trade surplus countries, creates easy money outside the control of feds and distorts credit pricing in the economy. This was the primary fuel of the enormous credit bubble that led to the current great recession and certainly needs to be tamed/controlled going forward.
Many barrels of ink has been spilled on both side of the debate, although admittedly more on the cons side in the past few months. Amongst the top few reasons for opposing, restraining or even rolling-back Outsourcing and Global trade is the mercantilist trade/currency policies followed by the largest trading partner (China), collapse of the middle class in America due to outsourcing of service jobs to India / manufacturing jobs to China and un-sustainable trade deficits.
These issues/challenges highlighted are valid and true. There is no denying the fact that China is following a mercantilist trade and currency policy that depresses its currency by 40% (estimated by most respected economists), thereby not only exacerbating trade deficit with US but also ‘stealing’ export income of other countries. During the go-go growth years, people complained but accepted this as everybody was growing. Now that we are saddled with slow-to-nonexistent growth for the next few years (if not the decade), this is rapidly becoming a worldwide diplomatic issues with potentially ugly consequences.
Further, the great recession has exposed the decimation of the middle class in America. Easy money and loose credit camouflaged the reality of declining real wages and increasing disparity in wealth over the past decade, which has now come spectacularly undone. Loss of manufacturing and service jobs, for long the mainstay of the middle class in US, is creating economic havoc in an economy that depends on consumer spending and political system that encourages everybody to have the American Dream of ever-rising prosperity with each generation. The fall-out of this will be extremely consequential and potentially nasty
Unsustainable trade deficits, primarily a function of the first 2 factors, introduces another challenge to the policy makers. Ever increasing trade deficits, supported by ever increasing re-investments by trade surplus countries, creates easy money outside the control of feds and distorts credit pricing in the economy. This was the primary fuel of the enormous credit bubble that led to the current great recession and certainly needs to be tamed/controlled going forward.
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