Fareed Zakaria and Nick HanauerBy Eric Antoine Scuccimarra
Fareed Zakaria wrote an article in the Washington Post a few days ago about globalization. The article argues against Trump-style protectionism, saying that globalization and free trade are not the problem, but national policies are the problem. As an example he asks what if instead of the US spending $14.2 trillion on multiple wars over the last three decades that money had been invested in American industry and infrastructure. He also mentions that most of the profits from globalization have ended up on Wall Street (or in the pockets of a small number of billionaires) as opposed to benefiting the general population.
After having read several books recently about the problems with globalization I was struggling to reconcile the very valid points made in those books with my personal sense that removing borders and barriers can't possibly be bad. After having read an article by Nick Hanauer called The Pitchforks Are Coming... For Us Plutocrats I was finally able to reconcile the confusion in my head.
Mr. Hanauer says that the growing income inequality is destroying the capitalist system. As an example he uses himself - he says he makes about 1,000 times the average American income, but he doesn't buy 1,000 times as many products. I imagine it would be very difficult to spend that much money. When the corporations move their production offshore they reduce their costs, but they keep the profit and distribute it to their officers and investors instead of distributing it to their labor force. While Henry Ford used to believe that each of his workers should earn enough to buy one of his cars, today the offshore laborers producing goods are lucky to earn enough to be able to feed their families. So where does the extra money go? It goes into the hands of the CEOs who pay themselves outrageous salaries (331 times the average worker's salary), and into the hands of investors and into Wall Street banks.
Mr. Hanauer says that this model is unsustainable because if this trend continues soon the only people who will be able to afford to buy products are the very wealthy, and they don't need to buy enough products to sustain the whole economy. He believes that if it continues soon the people will have no choice but to rise against the plutocrats with pitchforks.
In 2015 the wealthiest 62 people on the planet had the same amount of wealth as the poorest 3.5 billion. This year that number has gone down to the wealthiest 8 people, meaning that those 8 people have as much money as the poorest 3.5 billion combined. If you give one of the poorest 3.5 billion people an extra couple dollars each they would likely spend it on essentials like food, clothing, housing, healthcare, so that money gets recirculated back into the economy. The wealthiest 8 people probably don't really need anything that they can't already afford, so if you give them a couple million dollars each (as Trump plans to do with tax cuts) are they going to spend that money back into the economy or are they going to put it in the bank with the billions they already have there?