Tuesday, November 30, 2010

Stuck in the Middle

We look at China with its slave wages and rampant pollution and cheap products and wonder how we can compete and still avoid sinking to their level. We must, we think, only trade with countries who maintain the same high wage and environmental standards that we do. That way, cheap Chinese goods will not be a temptation (except via smuggling).

Well guess what? Over in the EU, they are already discussing us the way we discuss China--as a problem dragging them down.

This week, Russian Prime Minister Vladimir Putin went to Germany to propose that Russia and EU form a multi-continent free trade zone. This seems sensible for both the EU and Russia. Russia is the EU’s third-biggest trade partner. The EU is by far Russia's main trading partner, accounting for 52.3% of its overall trade turnover in 2008 Trade between the two economies was accelerating until the economic crash.

But a big appeal for everyone concerned and why Putin delivered his message in Germany, with whom we have a large trading deficit, is that forming a trade union would allow them to discard the US dollar as reserve currency.

Why should US currency be a big issue now? 600 billion reasons, namely the quantitative easing that will devalue the dollar and make our exports cheaper in Germany. Germany is not wild about that. Nor is China, but that was the point. Yet we can't affect one without affecting the other. We are stuck in the middle.

Here is another way we are stuck in the middle. We look at Asia and congratulate ourselves for our labor and environmental practices. But here is what the rest of the world sees when they look at our labor practices.

We give average workers no paid sick leave and no paid long-term illness leave. In other countries these are matters of right, as well as health care and more generous unemployment and retirement benefits. English media says more than our own media about how US workers have a raw deal and how our media enables our condition. But fewer benefits also gives the US a competitive advantage that Europe views much the way we view China's: they don't want to be dragged down to our level.

Right now we are stuck in the middle between prosperity and poverty, but the middle will not hold forever. We have to choose sides. Right now we still have a choice. And we can talk all we want about noble ideals, but the rest of the world is going to look at what we do, not at what we say. And as Vladimir Putin has shown, if we don't choose where we want to be, the rest of the world will choose for us.

By the way, my first source for the Putin news was not CNN or WaPo or even Rachel Maddow, but a blog called www.creditwritedowns.com. Check it out and follow @edwardnh on Twitter.

1 comment:

  1. The Germans have their Unterwaschen in a bunch over cheap dollars because exports are the backbone of their economy. The Russians, on the other hand, create almost nothing of value; they export natural resources while Germany supplies Russia's corporations and wealthy elite with cool stuff that actually works, like machine tools, Mercedes and Porsches.

    The United States is still the 800 pound global economic gorilla. US GDP is nearly three times the size that of Japan, the next largest economy. Germany needs competitive access to U.S. markets to survive. I suspect the Russians want to prop up oil prices.

    That said, you are absolutely right. The American mantra has become "cheap at any cost." This Wal*Mart mentality is hollowing out the middle class, eroding our quality of life, and turning the United States into a twenty-first century banana republic. The Germans ought to be pissed.