This is one article. No doubt there’s more. But the stats tell a story. Which indicates that a lack of attention to local industry and skills retention has a cost.
The issue for us, being that NZ, as any developed country, simply can’t compete on labour costs with the developing world. What’s the outcome?
Protectionism is not the answer. But neither is globalism.
This piece argues that the middle class in America is systemically being wiped out.
The reality is that no matter how smart, how strong, how educated or how hard working American workers are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world. After all, what corporation in their right mind is going to pay an American worker 10 times more (plus benefits) to do the same job? The world is fundamentally changing. Wealth and power are rapidly becoming concentrated at the top and the big global corporations are making massive amounts of money. Meanwhile, the American middle class is being systematically wiped out of existence as U.S. workers are slowly being merged into the new “global” labor pool.
Hi Cl.Cu there is something even more ’sinister’ going on in the background facilitating the destruction of the US middle class, and the associated dismemberment of American manufacturing and industry.
It is this:
Multinational corporations – often US based ones – have been systematically transferring deep engineering, manufacturing, operations and management competencies and know-how into low labour cost countries.
This usually at the expense of their homeland workforce. Now, this is not something which just happens to far away companies in far away lands. The exact phenomenon happened recently in Dunedin where long time experienced engineers and managers from F&P were sent overseas to transfer Fisher & Paykel knowledge+systems, set up and skill up Thai and Mexican facilities, ahead of Dunedin jobs being lost and the Mosgiel plant shutting down.
Normally, it would be impossible for a low wage low tech low-industrialised nation like China (or Mexico) was 25 years ago to learn to assemble, test and package say an iPad. It is very difficult for a country to develop that kind of deep knowledge itself in a short amount of time because of the technical expertise, complex systems development and operational experience required.
But countries like China have been given or otherwise deliberately obtained that expertise and competency from foreign corporations (e.g. F&P). These corporations have willingly led this technology transfer into China etc. in order to pursue the high profits that their shareholders/investors i.e. the asset and capital wealthy have been demanding.
In other words, the competition between corporations to absolutely maximise their earnings at any cost in response to overwhelming investor pressure has in effect meant that the wealthy asset holding class has required their corporations to decimate the employment prospects, jobs and neighbourhoods of their working class friends and neighbours.
This is an interesting video with some insights into the issues facing the US
“The New Economy is a Hoax”
http://www.youtube.com/watch?v=H02jk1oMJoU&videos=5M61fy9yq40
Like anything I guess if there is too much of it, it disappears. “Middle class” (or incomed as I prefer to label it) has widened too broadly now everyone deems that they are a part of it, when in reality most of the middle incomed are just stone cold broke and can’t pay the bills as they come in.
I remember about 30 years ago watching a news item on TV. I remember it because someone on the show made a rather startling statement: He said that the price of labour on a global scale was zero.
Capitalist fundamentals must reduce first world nations to third world status. A very small (less than 1%) group of people at the top who own everything, a smallish (5 to 10%) middle class and everyone else living on the bones of their arse at the whim of the less than 1%. It is such conditions that bring about revolution and we’ve been heading that way ever since the 4th Labour government implemented Rogernomics.
John Michael Greer has an article up about the US becoming a third world state.
Which sounds remarkably like NZ.
and previous govts, and this current one do nothing to stop it.
So much of our incomes go on taxation or stealth taxation we can’t dig ourselves out of the hole created.
Nothing has been done to lift incomes in this country, or create higher tech jobs to create wealth for individuals and signing a free trade agreement with China has killed any hope common kiwis have of creating something better for themselves.
It appears the only job a kiwi can get to create wealth for themselves without needing a qualification is to become a politician!
Well the true “middle classes” in America was built on debt and reliance on a burgeoning vote your own middle class welfare system that extended to “mortgages for everyone”. When that collapsed you were left with an entire majority thinking they were wealthier than they actually were…..
That’s where NZ kicks in. Most NZ “middle classes” are dirt poor on a first world global relativity scale, their “fortunes” built on debt, credit card and mortgages.
Politicians have fuelled this my allowing such a group to vote themselves more middle class welfare and therefore masking the actual problem.
Not a result of capitalism, but more of a voting system that encourages such bribery of the majority of the electorate with pro-loan housing schemes and welfare for families.
Gotta disagree. In the 1950’s and 1960’s the NZ middle class earnt their way.
And don’t forget that NZ was right up there with Australia and Singapore in terms of income per capita right through to the 1980’s.
The changes NZ made in the mid 80’s with Rogernomics and then Ruth Richardson’s further right lurch – tax cuts – cuts to labour laws – full sclae free marketeering was the bravery this country needed, BUT in exactly the wrong direction.
Australia and Singapore, whom we spent 80 years ahead of or equal to though most of the 20th century, have spent the last 20 years far surpassing us in economic activity because we turned the wrong way.
So bringing up tax and benefit levels in this context is a total free market red herring. It is the wrong turn direction of the mid 1980’s and early 1990’s. It is the recipe which led to NZ falling far behind Australia and Singapore.
Further Mark and Cactus, neither of your responses address the issues of multinational corporations first transferring technology, than transferring jobs, out of their home countries, due to investor (the asset/capital wealthy class in society) pressure.
I reckon if the government passes a law it could solve this.
DTB- revolution is overdue- the problem is how do you convince the 80% at the bottom to stop fighting amongst themselves and go after the real enemy- the 1% who own everything?
Fisher and Paykel gone,
Something has to be done, that’s why it’s important that we cough, 
, build our own trains and own our own dairy industry so that we can have something here with the work and profits going to this country 
Ahhh, profits Spud, a dirty word for some. Careful now, remember the profits go to the controlling elite in this country.
I’d have thought the bourgeois chattering classes and champagne socialists would be quaffing their Chardonnays at the thought of the demise of the middle class.
As long as the profits do go to this country then I don’t even care if it’s the controlling elite, better ours than Chinas
‘Protectionism is not the answer. But neither is globalism.’
Then what is ( – _ – )
New Zealand needs to generate a high degree of income through business and trade to enable it to provide the facilities and services that all New Zealanders deserve, its not that hard to understand.
At the present, the Key Govt is borrowing around $250M per week just to keep the country running and cutting back on the facilities and services available to the citizens (training, education, care for the elderly, community and disability services,…)
worst of both worlds
Loota, the productive sector does generate a level of trade and income, problem is, as has been discussed already, once companies hit a certain size or look at overseas markets, they either sell a stake or sell up completely. Isn’t that the crux of the issue?
“Australia and Singapore, whom we spent 80 years ahead of or equal to though most of the 20th century, have spent the last 20 years far surpassing us in economic activity because we turned the wrong way.”
So are you implying that we should begin a program of mining in national parks and extensive foreign investment by MNC backed by authoriterian anti-union laws?
NZ may have ‘earned’ their way in the 50s and 60s but the system was set up to favour producers over consumers. Unless you acknowledge the historical context of the changes then it somewhat detracts from your argument.
Not even the US was immune from competitive pressure as evidenced by their departure from the gold standard.
All up I think your neo-Muldoonist ideology is a dead end.
@Loota, your re-writing of history is as entertaining as ever, Rogernomics was required due to (and our earlier wealth based on) an illusion, namely that the UK was going to buy our dairy products at very high prices forever, we then based our whole economy on that fact and protected the rest of it for what was essentially make work jobs, after the UK joined the early European Union the whole flawed plan came unstuck…
Australia and Singapore have gotten ahead by practicing the principles of wealth creation as a nation, namely saving money and investing it and re-investing the profits via Australian Superannuation and Temasek and the Singapore Governmental Sovereign fund, this is the same thing wealthy people do and they have every right to insist on as high a returns as possible from their investments when they risk their money, just as you do if you save and invest your money…
F & P Appliances was going bankrupt, what would you have them do..? Go completely bankrupt and then have to fire all their employees NZ wide..? Or did they do the right thing by moving some operations overseas and reestablish a profitable largely NZ owned company…
The answer is not any form of protectionism it is to get compulsary superannuation and to teach financial literacy thoroughly… In NZ our “middle class” is spending $1.22 for every $1 they earn, in the US it is $1.37 and I recently read in the UK it has spiralled to $1.87… I’d agrue that if people who classified themselves as middle class were borrowing that much, to buy things they didn’t really need to live the lifestyle they wanted to, they were practicing something that was never sustainable and were never really middle class…
My cousin recently returned from England and said that almost every one she knew had huge mortgages they couldn’t afford, were up to their eyeballs in credit card debt (some as many as 10,000 pounds) at very high interest rates – compounding the problem which they had used to buy Plasma TV’s and go out partying, shouldn’t they have brought smaller places, prioritised their wants and put money away..?
Is it any wonder we are having to sell our countries to thrifty investors from Singapore, China and formerly Japan…
I expect that Labour would celebrate the loss of the middle classes except for the fact that it has been the middle classes that have funded labour’s social programmes.
JMH – I am not disagreeing with you that the NZ economy was in dire straits in the 1980’s. I am disagreeing with you that neocon Freidman inspired Rogernomics then the Mother of All Budgets were the right way to deal with it. That approach caused us to fall behind Singapore and Australia, countries we had been ahead of or kept up with for the 80 years before that.
In a way I see one of your comments as backing this up, and it is also a comment that I thoroughly agree with – we should have implemented extensive compulsory savings/investment scheme back then when Australia, Singapore etc were getting on the road with it.
Having that capital on hand that you can build your economy with is critical, as you have identified.
As for your F&P comment – ask around various appliance store chains, they will tell you that F&P made huge mis-steps with their Elba brand positioning, their marketing inability to move on from the days where F&P was the only whiteware in a store, numerous customer service, quality assurance and call centre issues, all in all, one management mis-step after another. Plus they paid their entry and mid level engineers sweet ** so engineering staff turnover was high.
So in my mind re: F&P – yes, off shoring was an answer but you asked the wrong question.
I don’t believe that NZ’ers show much brand loyalty to F&P these days or consider an F&P fridge freezer any better than a Samsung or Mitsibushi Electric one.
In Dunedin, some view Fisher & Paykel appliances now as just another foreign owned company which makes its products overseas.
Ditto Cadbury Dairy Milk chocolate, I know lots of people who can’t be assed buying Cadburys ever again since Dairy Milk production was shipped offshore, let alone the management palm oil debacle.
well surveys in the UK show most people still identify as working class – but that isn’t going to stop people saying things like “everyone thinks they’re middle class now” is it?
As previously posted in earlier threads, the global finance sector could go Tulipmania 2.0 any moment now. The chart is self-explanatory.
Interesting that Australia has survived the recession (never officially entered it) with stimulation from the Govt and strong unions… In this country that seems to be regarded as anti-christ like
One wonders why our policies of ever new ways of more holidays, time off work, suing the small business who employed you, more Govt compliance costs on the same, etc etc etc seems to not increase our national wealth which we seek to distribute. Do we have a Labour policy on increasing our national productivity (our even maintaining it..) prior to our policies to redistribution ??