A Poverty Generation Machine
5) The Low Wage Poverty Trap
Survival 101 - not available at the campus bookstore - posits that the lower the wage, the more labour is offered. This is why many low income workers have to work multiple jobs to make ends meet. Of course, this behaviour is the opposite of what conventional economics would suggest. Generally the supply curve indicates that the higher the price (wage) the more quantity/hours are offered and at lower prices/wages less is offered. This low wage poverty trap is of course on display across the developing world and is now well entrenched in the developed world as well. Taken together with point #4 - the commoditization of labour - and it's a lethal combination. We live in a world awash in a virtually unlimited supply of low wage undifferentiated labour that only increases in supply as wages fall. It's a robber baron's wet dream, and it fully explains why there have been no Third World countries able to bootstrap their way out of poverty in the past 20+ Davos Summits (aka. years). Unfortunately, on the other side of this fiasco, a lot of economists will have to lose their tenure and otherwise fight for an ever-dwindling supply of faculty positions at ever-dwindling salaries, before they finally "get it" and the text books are rewritten to account for this supply "anomaly".
Wage Deflation is The Third World's Primary Export
Clearly Globalization morphed into a Ponzi scheme when the poorest people started subsidizing the wealthiest people via suppressed wages and profits and resource and environmental degradation. This transfer of wealth however represents a loan which will never be repaid but yet is an ongoing transfer of funds that can end at any point in time rendering the developed nations bankrupt. More importantly, within the developed nations, the solvency of the average taxpayer and citizen is being constantly eroded as wage deflation takes its inexorable toll. When one company outsources its jobs, it increases its profits, when every company outsources at the same time, they destroy the economy. So debts are now accumulating against an ever dwindling wage base. And yet the entire scheme is solely dependent upon a developed world consumer continuing to borrow to spend - whether directly or via sovereign borrowing. Had the developing nations allowed their wages and currencies to rise, there would have been offsetting demand to pick up the slack from the developed world. However, that never happened. The bottom line is that globalization has made attempts by Central Banks and governments to prop up their economies, totally futile. They are fighting against the corporate sector which is importing deflation from foreign countries.
The Collapsing Empire of Greed