Breakingviews in the New York Times explains that factory workers in the US are wildly overpaid.
It’s possible to run the numbers to show that American manufacturing workers should take average real wage cuts of as much as 20 percent to get into global balance.
The authors, Edward Hadas, Martin Hutchinson and Antony Currie, seem to have a vague idea that fixing this might be hard on workers. They allow for the possibility that US workers might be worth a bit more than Indonesians or Taiwanese, which is why it only takes a 20% wage cut to bring the global system back into balance. They suggest that the alternative to huge wage cuts is global depression, and the best alternative is inflation and dollar devaluation.
And something like that is going to happen. Working Americans get screwed. Their wages fall, and their heath care costs are headed up. Savers get screwed. Inflation, low as it is, is higher than interest rates on savings accounts. Small investors get screwed by the likes of Goldman Sachs.
What’s missing from the list? I don’t see any sign that the rewards to giant capital and rich investors should go down. Apparently, they are immune from the haircut rule: in a financial disaster everybody takes a haircut.
The financial elites are insulated from the disaster they caused. They break the system and wreck the lives of the people whose sweat created the capital, but they don’t pay. Congress and the Administration want to look ahead. No new taxes on the rich. No Tobin Tax, which we know would be a great idea, because markets would react badly. No serious regulation of too-big-to-fail businesses.
I’m sure we all feel better that some people are safe from the financial disaster. Maybe a colleague of Hadas, Hutchinson and Currie, Paul Sullivan of the NYT, can write up an explanation of how hard it is on the rich that somewhere other people are hurting so they can maintain their lives and suck up some cool cars with all that cool bonus money.