The Two Faces Of The Global Economy


Supposing there were a central being whose concern was running a good world economy.

This being might rightly notice that “If I can cut (labor) costs without destroying the customers, I could make more profit.”

This is the issue being discussed in my previous posts, Low Wages And High Unemployment Are Paralyzing The Global Economy and The Labor Market Is Not Self-Regulating; Governments Must Support Worker’s Fight For Higher Wages.

It occurred to me that the reason why people might be so resistant to the ideas in these posts is because they are focused on the other, equally valid face of the global economy.

The central being posited above might also rightly notice that “If I can raise the buying power of the customers without increasing my (labor) costs to profit killing levels, I could make more profit.”

There is a range in the middle between extremely low wages and no customers and extremely high wages and no profits where the economy can do well.  Adjustments to keep the economy in this range should always be sought.

However, when you reach or pass the extremes of low wages, no customers or high wages, no profits, then you have to recognize which boundary you are at to apply the proper remedy.  If you apply the proper remedy for the wrong boundary, this leads to further disaster.

To convince people to let you apply the proper remedy for the boundary you are at right now, you have to assure them that you know there is the other extreme and you are not proposing to go there.

Rather than construct your rules and enforcing mechanisms to address only the boundary problem you now face, it would be best if you could come up with rules that recognize the full spectrum of conditions that do occur and adjust themselves accordingly.  This is a very difficult task.  However, if you do not  have a clear picture of what are your goals, then you might not see what is wrong with the changes you propose that only address the current problem.

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