How to Fix the Economy III: The Big Picture

This post was originally posted on 2011/07/23

The increasingly globalizing world economy, trade, and shift of industrialized and industrializing countries’ (US, Western Europe, more advanced Asian countries) manufacturing bases to cheaper producing countries of often less development have greatly contributed to the decreasing US jobs of low, medium value added  goods, the kind of jobs that have mainly supported US middle class. As a result of this trend of global market economy and industrialization in conjunction with the US market economy and industrial structure skewing toward increasingly relying on domestic consumption, the major source of US domestic employment has shifted away from the tradable sector (that includes manufacturing goods, engineering, computer design etc.) toward the non-tradable sector (that includes sectors such as construction, retailing, restaurants, hotel, etc.).” Dr. Spencer points out this US employment shift from the tradable sector to the non-tradable sector.

This global and US trend of industrialization and employment have (a) increasingly eliminated US middle class jobs that hire low-medium educated workers to produce low-medium value added products; (b) increased US jobs of producing high value added, tech/skill/information-intensive goods that hire highly educated workers (This trend appear to have contributed to the increasing concentration of US wealth/resources into the high-income group but minimal effect on creating and increasing the number of employment to replace the lost employment that has resulted from the shift of US manufacturing to foreign countries); and (c)  these shifts increased jobs in non-tradable sector that hire low-medium educated workers and pay lower wages with less fringe benefits, which have increasingly lowed the living quality and standard of middle class people in this country.

The combined effects of this global and domestic industrialization and employment trend, along with the troubles in US social, economic systems that have drained/shifted wealth/resources from the low/middle class to the high income class that had culminated to the US housing, health care, and financial markets crisis and the current great recession comprises current condition of anemic economic recovery and continuously high unemployment. What is needed is to fix the fundamental problems in the economic and social structure of US domestic and global market system.