In part one we discussed the troubling issues in Europe (in case you missed it, you can read it here).
The story of Japan is really a story that begins with globalisation.
According to the Oxford Dictionary, globalisation is described as:
“The process by which businesses or other organizations develop international influence or start operating on an international scale.”
It is, in a nutshell, international trade, and one of the things it’s done is add huge swathes of the global workforce to the world’s economy.
I bring up globalisation because of what it’s done to the global labour supply.
Realise this labour supply wasn’t Joe-middle-class-Sixpack with a Beemer, a two story house in the suburbs, and a white picket fence.
When most people think of this workforce, they picture small brown people in shabby clothes toiling in sweatshops in China, India, Bangladesh, Vietnam, Cambodia, etc.
And by and large that’s it.
We’re not talking about Joe Sixpack. No, this was Amit in Bangladesh with 45 kids, working 29 hours a day, and paid the equivalent of a Happy Meal at Mackers.
And when we got such a massive disparity in costs, market forces went to work and did what market forces do.
The supply of goods produced exploded, and the cost of labour on a relative global basis fell.
I guess we could call this a labour supply shock, and what this did was it helped keep wages suppressed in developed markets while those in developing markets rose. This is how Amit raised his living standard so he can afford his 5th wife.
Now, the flip side of suppressed wages in the developed world was, of course, ever cheaper imported goods as the cost of those has plummeted. Declining real wages in the developed world have been cushioned by deflation in consumer goods.
…click on the above link to read the rest of the article…