OLEC: Global Cartel For Labor
In today's globalized economy, manufacturing and other labor-intensive jobs are increasingly out-sourced, moved to developing countries, where people come cheap and social safety-nets do not exist. This leaves workers in the industrialized countries out of a job and puts them before the choice of accepting a lower wage or not to work at all.
Henry C.K. Liu believes that the reason for this is a fundamental imbalance between the bargaining position of capital as personified by multinational corporations and that of labor personified by all of us collectively, regardless of where we live. Labor, says Liu, does not have sufficient bargaining power, because the principles of free trade allow production to move to places where "the price is right", while restrictive immigration laws do not allow people to move where the best job offers are.
The result is decreasing compensation for labor and increasing profits for the large conglomerates world wide. While this may seem great for capital, it also leads to economic contraction, simply because hardly anyone has enough money to buy what is being produced. OLEC, a cartel of "Labor exporting" countries on the model of the petroleum exporting countries' OPEC, could re-establish the balance between labor and capital, says Liu.
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After reading the first part of Henry C.K. Liu's article "World Trade Needs a Global Cartel for Labor - Background and Theory", I commented as follows:
"Liu puts a fresh viewpoint up for discussion for the first time in decades. If policy makers don't pay attention, the current decline will continue and we will end up in God knows what ghastly place, because we weren't able to think. Henry C.K. Liu helps us think on the subject of economy, which is praiseworthy all by itself.
But he also shows up a real way to reverse the downtrend, one that gives hope.
It is tempting to say that all he does is prop up a system that needs to be replaced. But replaced with what? We need to look at all the options, and Liu's suggestion is certainly worth examining.
Liu's proposal is firmly grounded in today's economic realities and that may not be to everyone's liking. There are those hoping that the present system may collapse to give way to ... something better. But there is no agreement of what such a better system could be. My view is that Liu's essay is highly interesting as it can stimulate our thoughts to eventually find a sensible way towards positive change.
The essay, which comprises a series of articles, has been published in Asia Times and it is also available on Liu's own site:
See also related:
The Coming Rebalancing of the Chinese Economy - Stephen Roach
China is sending the world an important message: A key mid-course correction in its development model is coming - a shift away from export- and investment-led growth to more of a consumer-driven dynamic. This change will not be abrupt but it will be an increasingly dominant characteristic of the Chinese growth outcome over the next five years. It is aimed, first and foremost, at providing greater stability to the Chinese economy. It will also have profound implications on the global economy and world financial markets.