It’s said that “a rising tide lifts all boats”. That cute expression became a knee-jerk mantra for many US economists in the 1980s and correlated well with equally popular trickle-down euphemisms. The prevailing wisdom was, of course, that tax breaks for the wealthy enabled them to invest more which would surely help the lower classes. And indeed, it appeared to work… for a while.
Something happened on the way to that Utopian sea of rising yachts and junks. Deregulation and lax oversight allowed national corporations to become multinationals. This, too, was seemingly good… except that any multinational corporation could– and many did— lose allegiance to the very regions and people that enabled it to catch the high waves in the first place. Reincorporations in tax havens like Bermuda became popular in the late 1990s and early 2000s. Ostensibly to enhance shareholder value (another common claim), such moves also served to further distance corporations from their roots… and undermine the communities in which those corporations once anchored. Ironically, many of those communities had established tax abatement zones to entice some of those entities, and with the loss of business they of course suffered afterward.
It wasn’t just jobs and companies washing out of the US, either– so did investments. And therein lies the folly of trickle-down economics: they only work for a region if the investments directly benefit the region. People used to be able to say we benefitted from cheaper cost of goods– but even that rationale is undermined by current economic collapse.
I lost a great US-centric job in 2002 when my employer’s R&D was outsourced overseas– after they planned to reincorporate in Bermuda (later scrapped). I realized then that I was seeing the beginning of a lower standard of living for the USA. Sure enough, despite a brief upswing after 2003, it is happening here and now. The global financial meltdown is surely a factor, but I believe it is actually more of a symptom than a cause… a symptom of rampant greed and reckless planning designed to reward quarter-by-quarter thinking of opportunistic CEOs. Others view the situation in even harsher terms.
I just lost another beloved job (ironically, this time a global role) last month and see fewer opportunities now than I did in 2002 – 2003. Scary. But I also see that while my soon-to-be-former employer is shedding jobs in some regions it is adding jobs in others. Those regions are, not surprisingly, in areas with more potential for growth.
The trend is clear: the standard of living is quickly lowering in the older industrial nations, and slowly rising in developing nations.
Many people, self included, saw that as being inevitable years ago, despite the contrary statements by extreme global trade advocates. There was no avoiding it; an economy cannot go from net producer to net consumer without some setbacks. The oft-touted service-based industry is unsustainable. It doesn’t take an economist to recognize that selling services back-and-forth without net income from some sort of production can only last so long.
Ultimately, what’s happening now will be great for Central America, Asia, and ultimately Africa, but it sure can suck to be a US citizen right now. Just ask any of the hundreds of thousands recently losing their livelihood to some unknown worker in another land. The economic tide that once “lifted their boat” has now left it stranded on a sandbar.