Thursday, February 12, 2009

First Time in History: 50% of World is Middle-Class

For the first time in history more than half the world is middle-class—thanks to rapid growth in emerging countries (see chart above). Read about it in The Economist article "Burgeoning Bourgeoisie."

22 Comments:

At 2/12/2009 10:34 PM, Anonymous poor boomer said...

An American earning $10 per days is middle class?????

Are you serious?????

 
At 2/13/2009 12:06 AM, Anonymous Anonymous said...

Poor Boomer - who on earth in the US 'earns' $10 per day?

 
At 2/13/2009 5:24 AM, Blogger PeakTrader said...

Income itself doesn't measure true living standards. For example, in the U.S., real income rose at a slower rate in 2001-06 than 1993-98. Yet, U.S. living standards rose at a steeper rate in 2001-06 compared to 1993-98. Moreover, this steeper rise in U.S. living standards took place in a structural bear market, after an 18-year structural bull market (there were structural breaks in 1982 and 2000). The improvements in U.S. living standards were caused, in part, by massive efficiencies in production and increasingly larger gains-of-trade.

 
At 2/13/2009 6:50 AM, Anonymous t jefferson said...

Its to bad the U.S. had to ravage its manufacturing base to improve the worlds ratings.

 
At 2/13/2009 7:13 AM, Blogger PeakTrader said...

T, in manufacturing, the U.S. made up in value what it lost in volume (many export-led countries had to make up in volume what it lost in value).

Cato says quit whining about manufacturing decline
September 17 2007

The United States manufacturing sector is experiencing record growth, record profits, record output, record exports and record return on investment and is in no need of legislative or protectionist support from Washington, according to the Cato Institute. The United States is producing two-and-a-half times more output than China, despite the loss of three million jobs since 2000. Since the nadir of the manufacturing recession in 2002, U.S. manufacturing job declines have "leveled off to historic losses," says Cato.

The perceived ill health of the U.S. manufacturing sector is a "fallacy," says the institute's Center for Trade Policy Studies in a report "Thriving in a Global Economy--The Truth About Manufacturing and Trade." Between 2002 and 2006, the U.S. manufacturing sector's revenues increased by 22.5 percent to $4.99 trillion, and profits jumped by 49.5 percent to $353 million.

The National Association of Manufacturer's Frank Vargo's recent testimony before Congress "should be required reading for all lawmakers who are considering supporting trade legislation on behalf of manufacturers," according to Cato. Vargo said that it is "common to hear that U.S. manufacturing is on its last legs, that we have been hollowed out and that our production base has moved overseas. A look at the factory shipments and industrial production ... shows this is not true."

 
At 2/13/2009 8:16 AM, Anonymous t jefferson said...

The crisis facing U.S. manufacturers is one of the central economic challenges confronting the country. It stems in large part from our massive trade imbalance and disproportionately affects minorities. What is this crisis?

Since the United States joined the WTO, our trade deficit in goods has exploded, rising from $150.6 billion in 1994 to $817.3 billion in 2006.i In 2006, our trade deficit with China alone amounted to $232.6 billion,ii a deficit more than eight times larger than that of any other country.iii
Since December 2000, the United States has lost 3.2 million manufacturing jobs.iv
The U.S. manufacturing crisis results, in large part, from unfair practices by our trading partners. U.S. manufacturers face unfair import competition in the form of significant government subsidies,v currency manipulation,vi large-scale dumping in the U.S. market,vii and other market-distorting practices.

http://www.americanmanufacturing.org/issues/manufacturing/the-us-manufacturing-crisis-and-its-disproportionate-effects-on-minorities/

 
At 2/13/2009 8:17 AM, Anonymous poor boomer said...

Anonymous:

I do piecework (in addition to my minimum wage job) for $1-$2 per hour, so it is quite possible for an American to earn $10 per day.

 
At 2/13/2009 10:50 AM, Blogger QT said...

Don't tell Lou Dobbs. It's unfortunate that this issue is perceived as a zero sum game.

Rather than considering that the size of the global economy can be expanded and that the success and innovation of other countries creates opportunities for everyone, one seems to hear consistently the preference for people in developing nations to live in grinding poverty lacking even the basic necessities of life such as clean drinking water as though their success will come at the price of our wellbeing.

T Jefferson,

Manufacturing jobs have been going down since 1970 largely due to mechanization and productivity gains. It is true that more labour intensive work has gone abroad but these were the low skill, low wages jobs. There are actually shortages in skilled manufacturing labour. Average age of a welder is 55 years, for example.

Poorboomer,

Time to upgrade your skills and get a high paying job...how about tool & die, welding, machinist...

Go for it.

 
At 2/13/2009 11:14 AM, Anonymous t jefferson said...

QT
You missed the unfair import competition part didn't you.

What kind of jobs and pay did the 3.2 million people get when they left manufacturing?

 
At 2/13/2009 11:22 AM, Blogger PeakTrader said...

T, actually, the explosion in international trade has helped the U.S. poor through lower prices and cheaper capital. Basically, there was a tremendous shift of wealth from savers, including foreigners, to borrowers, including lower income U.S. workers. Also, it has freed-up limited resources for emerging industries and older firms producing goods with market power, along with providing cheaper capital for small business start-ups. There are laws against dumping, including the tariff imposed in the early 2000s to protect the U.S. steel industry.

The U.S. share of global manufacturing has remained roughly constant for 25 years, although the U.S. lost millions of manufacturing jobs and U.S. negative net exports lifted foreign manufacturing output.

Your article states: "Since December 2000, the United States has lost 3.2 million manufacturing jobs...“{s}ince 2001, over 300,000 black males have lost jobs in the manufacturing sector." It's possible there has been a disproportionate share of minorities in overpaid union jobs.

When unions were most powerful, in the 1960s, union workers were grossly overpaid, while non-union workers were grossly underpaid. The disparity has narrowed substantially, while real compensation has increased 70% since the mid-1960s.

 
At 2/13/2009 11:25 AM, Anonymous Anonymous said...

t jeff,

When my friend(s) were laid off from GM, many years ago, they went in to Construction (carpenter) and Nursing (ER staff).

One retired (the carpenter) at 53 years old and the others make $40+ per hour working 3 twelve hour days a week. By choice. When they need more money (for fun stuff) they work more.

It's quite amusing to see rugged looking mountain type men working as Nurses. But, it gets them the pay they need and the time off to enjoy our hobbies together. We spend 8 weeks a year abroad hunting and fishing.

Not a bad career change I'd say.

 
At 2/13/2009 11:54 AM, Anonymous t jefferson said...

Peak Trader
Ya unions are terrible. I remember when my Dad left a non-union shop as a tool maker and doubled his pay with health care at a union shop. We even went to the the movies once a week after that. The real goss overpaid people are the highly productive educated Executives that just shuffle stuff around. Eyes roll.

 
At 2/13/2009 12:38 PM, Anonymous Anonymous said...

T,
And then your Dad lost his job because the union made his company's products uncompetitive.

 
At 2/13/2009 12:50 PM, Blogger QT said...

T Jefferson,

You are right. I have not addressed your concerns with regard to balance of trade, currency manipulation or government subsidies.

With regard to balance of trade, Adam Smith argued that many countries with negative trade balances but continue to prosper despite dire predictions. From what I have read on this subject, there appears to be proponents on both sides of the issue. I do not share your concerns about trade imbalances, however, we may not know for another 25 yrs.

With regard to currency manipulation, China has allowed its currency to appreciate in recent years albeit not as much as the U.S. would like. Many developing nations peg to the U.S. dollar as a way of creating currency stability. We also have to view this issue from their perspective ie. fear of currency swings & double digit inflation.

Do all of the Chinese imports directly compete with American goods? One would expect that a developing nation would create goods with higher labor content where they have a comparative advantage while the U.S. would concentrate on more sophisticated manufactured goods like medical instruments, or pharmaceuticals where the U.S. has a technological advantage. There are also goods imported from China that are inputs into higher end finished goods like furniture. Not everything that China exports is necessarily a bad news story for the U.S.

With regard to government subsidies, the Chinese government runs most industries. From their perspective, they see their industries as unable to compete against the U.S. on many measures ie. capital investment, productivity, workforce education, technology, innovation, energy efficiency. Joining the WTO is the most significant sign of progress on this front. China will now have to abide by international trade rules.

I am inclined to think that improvements in developing nations may be more positive than negative. Economic changes will create opportunities for workers. Rather than hoping to return to a golden age of manufacturing, it may be better to assist workers to transition to new jobs through enhanced education utilizing the power of the internet.

 
At 2/13/2009 1:10 PM, Blogger QT said...

T jefferson,

The other reason that I am optimistic is that economic opportunity creates a compelling alternative to terrorism.

 
At 2/13/2009 4:05 PM, Anonymous poor boomer said...

QT -

I would love to upgrade my skills, where do I sign up?

 
At 2/13/2009 4:17 PM, Anonymous poor boomer said...

PeakTrader -

My consumption of goods, other than food, is quite minimal. Approx $150 per year on clothes, some fuel and electricity, and some odds and ends (soap, etc), and that's about it.

Almost all of my food is produced domestically, as is the electricity I use. My (largely imported, of course) petroleum consumption is limited basically to my use of public transit and what little I buy that is petroleum-based.

This supposed cheaper capital hasn't trickled down to me to any meaningful extent, as far as I can tell. Sure I'd like to start a small business - my future surely does not lie in employment - but that is still out of reach.

 
At 2/14/2009 12:57 AM, Anonymous Thomas said...

That's right - you stupid Americans. It says India and China middle class is growing and the U.S. middle class is dying.

 
At 2/14/2009 11:07 PM, Blogger OBloodyHell said...

> Poor Boomer - who on earth in the US 'earns' $10 per day?

Future tense -- He's talking about after Obama gets through with us...

 
At 2/15/2009 12:03 AM, Blogger OBloodyHell said...

> > Its to bad the U.S. had to ravage its manufacturing base to improve the worlds ratings.

"Jefferson" -- since your namesake wanted an agrarian utopia, not an industrial giant, what are you complaining about?

Mor relevantly, we didn't "ravage our industrial base". We abandoned it for the time being, that being the most sensible thing to do -- the world is well along the way towards the third economy -- IP & Services.

Under the IP&S economy, 2-5% of the work force produces the manufactured goods used by the rest, just as 2-5% of the workforce produces the agricultural products used by the rest. Roboticization takes over manufacturing in almost the exact same way that mechanization took over farming.

At this point, there are enough nation-states out there who haven't gotten wealthy enough to benefit from this, however, and so their labor supply is cheap enough that they are still somewhat comparable to robots, and it's better to let them bootstrap themselves by using said labor to earn enough to move forward on their own. There are some things it's better to use robots on (cars, for example, and a fair number of high-tech goods), but there are plenty of places where labor which might be done by robots is better to be done by people who would like to earn enough to enrich themselves and their families (so much for Marx's idiotic notions).

After a few generations of improving fourth-world conditions anywhere that the government isn't f***ing things up (NoKo and Zimbabwe come to mind), more and more of such drudge work can be taken over by robots and these peoples can gain the necessary education and training to contribute in IP & Services instead.

The USA, on the other hand, is already well past that point -- "manufacturing jobs" are not done in the USA because that's not where any money is to be made. If you make it here you LOSE money.

See This. And This. And This.


More critically, you need to grasp the Principle of Comparative Advantage, and why it's generally stupid for Americans to be making anything which would be better done by a robot or "cheap overseas labor".

> It stems in large part from our massive trade imbalance and disproportionately affects minorities. What is this crisis?

No, it doesn't "disproportionately affect minorities", you idiot racist asshole. It disproportionately affects blacks. They are far from the only "minority" in this country. It doesn't affect Jews, it doesn't affect Catholics (well, maybe the illegal aliens where they intersect). It doesn't affect Indians, Chinese, Koreans, Japanese, Germans, French, Arabs, or any other group with the possible exception of those first-generation Hispanics who haven't had a chance to gain a good education (or second-gen ones who have rejected the principle of Getting a Good Education, like much of black culture unfortunately has).

In short, the ones it's f***ed and going to continue f***ing is anyone who refuses to get a good education, because, for the most part, a good education (which doesn't necessarily mean "college", it can include vocational schooling) is a key to being a productive member of an IP & S economy -- if you have no skills, you aren't going to be able to either create IP (even the most artistic forms of which tend more and more to require some measure of technical acumen at least) nor to provide a service (unless it's illegitimate like drugs).

So stop whining using "code" about how it "disenranchizes minorities", when what you're really talking about is how it actually requires some sort of effort on the part of the individual to actually develop on their own a vaguely desirable skill.

Because until you grasp that, and start acknowledging it, you cannot begin to address the actual nature of the problem, and have any semblance of a solution instead of a demand for a handout.

Americans shouldn't be "manufacturing". They should be doing what Americans do better than any other society in the world -- creating IP for the amusement and benefit of the people around the world.

Thanks to our unique nature as a melting pot, if it plays here, it plays anywhere. And thanks to our highly adaptable cultural attitude, if any other culture in the world demonstrates an interesting idea (be it "French New Wave", "The British Invasion", or "Hong Kong Cinema"), we can and will absorb it, tweak it, and make it readily approachable by most human cultures. We're incredibly good at that. It's why our IP sells (and is rampantly pirated) around the world, while everyone pretty much ignores the equivalent products of France and India, which sell fine to their own markets but don't sell well outside those niches.

America is the world leader in the creation of IP of all sorts for a reason. And calls for us to do something else for other reasons are generally stupid, ignorant, and show a complete failure to grasp that Principle of Comparative Advantage.

IP is what we do best.

And we should do it.

 
At 2/15/2009 12:17 AM, Blogger OBloodyHell said...

> I do not share your concerns about trade imbalances, however, we may not know for another 25 yrs.

QT, Japan has had a massive trade imbalance with the USA for decades. Whose economy has done well for the last 15, and whose has pretty much sucked?

The primary advantage to a surplus is when there is, literally, no other competition, such as the USA after WWII. Once you have competition, such as arose by the end of the 60s, it means far less. In the end, it means that one group of people is working for paper provided in return for goods created by the other people. The only thing that can be done with that paper is, at some point, to turn around and actually use it to buy something from that nation. And if you've been stockpiling it, it means you're going to do something relatively stupid: create a bubble, as different stockpiles of paper are used to obtain things that were held off on for all too long. And you wind up doing what the Japanese did in the early 1990s, buying things at far higher values than they ought to be bought for. With the exception of Sony/Columbia, much of what the Japanese bought with their stockpiled paper has been since sold at a substantial loss. This is one of the underlying reasons for the poorly performing Japanese economy of the last 15-odd years.

Th Chinese have a problem -- they can either buy American goods or they can sit on piles of paper as it inflates (slowly or quickly, time will tell) out from under them.

And to be honest with you, I suspect that, if they actually bought a substantial fraction of the IP they pirate -- and that is the most likely thing for them to buy right now -- they're'd be a lot less of a trade imbalance.

 
At 2/16/2009 5:08 PM, Blogger 1 said...

"That's right - you stupid Americans. It says India and China middle class is growing and the U.S. middle class is dying"...

Geez! What a clueless whiner...

"I would love to upgrade my skills, where do I sign up?"...

Ask Tom Daschle...ROFLMAO!

 

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