The Economic Collapse blog comments today on widening inequality in the USA (http://theeconomiccollapseblog.com/archives/the-one-percent-gigantic-government-gigantic-corporations-massive-wealth-inequality-in-america/comment-page-1#comment-78618).
I think it's time to review who's really benefiting from globalisation. As I have said on that site:
Of course there's going to be widening inequality if the working class is undercut by foreign labour. This would happen even if the 1% didn't get richer.
But the dirty secret, I suspect, is not the economic destruction of the US (and UK, and just watch Europe) by outsiders, but the way that most of the international wealth transfer from globalisation has ended up where the money started.
James Kynge's book "China Shakes The World" says that only 15% of the end price goes to the Chinese manufacturers, the rest is captured by the middlemen - the importers, dealerships and supermarket owners.
America is cannibalising itself and throwing the bones abroad.
INVESTMENT DISCLOSURE: None. Still in cash (and index-linked National Savings Certificates), and missing all those day-trading opportunities.
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6 comments:
It's going to be interesting to see the form of the new global currency - SDRs? Will it be cashless?
The scheme on manufactured goods works like this: they are produced and shipped from China at say 10% of home production. En route, they are theoretically transferred through the Caymans (or similar countries), where the price goes up to 90% of the home production cost. That way, the tax man only sees a small proportion of the profits. Sadly, even the stockholders don't seem to get much, it's going to the CEO's and such.
Can you show us the sources to get definite evidence of this, Padders?
Sorry, I heard the scheme described by a writer on National Public Radio some time ago.
That is exactly what large EMS companies do (EMS = "Electronics Manufacturing Services"). The customers have outsourced their production to China-based EMS companies (naming no names since large consumer electronics companies have deep legal pockets) and they buy back their own designs through subsidiary companies of the EMS in the Caymans or Mauritius or wherever. Production is of course in China, in what are essentially sweatshops - you may recall Foxconn HonHai installing nets to catch the falling workers who try to commit suicide by jumping off the roof - and the goods turn up in the west, not touching the domicile of the "company" handling the transaction, and incurring only minimal customs duties.
Interesting things are happening in China though. They have recently introduced "VAT" (really an export tax) on exports of some critical raw materials such as metals - this can be as high as 17% - which in short means they get to monopolise raw materials, thus satisfying their strategic goals, since it becomes very economic to ship raw materials into China, but not out. Smart, eh? In the case of metals they have in addition to VAT also introduced export quotas - which are naturally only available to Chinese companies - thus allowing them to do 2 things: 1. undercut western-owned factories in China which do not have access to the quotas, and 2. prevent companies outside China getting their hands on key raw materials such as rare earths.
In the end, even the middlemen are going to get fucked here. Through the outsourced production the Chinese steal the IP and once they control the bulk of production they are slowly ratcheting themselves up the food chain. Of course all western politicians are so completely fucking stupid they don't see what is going on here. The guys in the western corporations see what is happening but feel they have no choice but to go along with the whole racket; they can either go bankrupt in the short term trying to fight it while their competitors pile in, or they can go along with it hoping the shit doesn't really hit the final fan until they retire or move on.
Thanks, SW - and one day it'd be nice to get the smoking-gun evidence that (for quite understandable reasons) you don't feel able to reveal here.
Grim dilemma. Conscience time?
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