The really question about TPP is; "Do we need to sell our stuff to the 5 Billion in the Pacific rim"

[Donald Ian Rankin]

85. Because it's getting harder for the first world to exploit the third (and ex-second).

Wages in the first world are artificially high, and wages in the third world are artificially low, because the terms of trade between the two are massively biased in favour of the former.

On average, people in the first world consume much more stuff than they produce; people in the third world produce more stuff than they consume.

Globalisation is making that inequality harder to sustain. Somewhere[1], Paul Krugman has a fascinating chart of how wealth, or possibly income, at each global centile, has changed in the past 30 or 40 years. I think it would surprise most DUers. It has the significant gains in the top 5 or 10 percent, and small gains between about the 70th centile or so and the 90th or so - which is where people who are middle class or poor by American standards sit - which I'm sure will come as no surprise. But then from there down to about 5 or 10%, the gains are very much larger again, and at the very bottom they're small. So the chart looks a bit like a fish swimming left, with a pointy nose, fat body, thin tail and tail-fin.

What I guess (and I use the word guess advisedly; I cannot stress enough that this is idle armchair-economist musing rather than an educated opinion) this shows is that the two categories of people who have been benefiting most are workers outside the first world, who are becoming able to compete with first-world workers on less rigged terms, and employers, who benefit from that more competitive labour market. The people who are losing out are the people who are rich by global standards but poor by first-world ones, and the very poor in places with no employment even now.

Average living standards have been rising. The underlying reason American workers are not benefiting as much from that as workers in other places is that global inequality has been falling, and all but the very poorest Americans are net beneficiaries of that inequality.

There is a lovely, comforting lie that the main economic competition is between the American poor and the American rich, and it's obvious which side of that one should be on. But the truth is that the really significant competition is between the poor in America and the even poorer in other countries.



[1] I've just tried and failed to find it, so this bit is from memory, and the details will definitely be wrong. If anyone knows the chart I'm talking about, please link it, and I'll correct accordingly