The destruction of the Middle Classes commences

Malcolm.

julieq wrote: »

You can hold back the tide for a while with political measures - the French are very adept at attempting that - but frankly when capital can move around the world at the click of a mouse, protectionism in the job market or anywhere else is going to fail.

Protectionism is not the monopoly of the west.

http://www.google.co.uk/search?hl=en&q=china+protectionism&meta

Sir_Humphrey

What the admirers of China ignore is that a lot of their growth is down to western consumer debt. People seem to be forgetting trade imbalances which are as unsustainable as anything else. They also ignore the fact that some of the processes in China are only sustained by pretty brutal dictatorship methods.

Also, Chinese workers are showing signs of being sick of their lot.

julieq

No, protectionism is tried in all sorts of places, but it only works where you have pretty much total control over the population's consumption. If you're too uncompetitive to be a net exporter you're in a negative sum game and eventually you leech so much money the whole house of cards implodes.

That's pretty much why France and Germany have spent most of the last 50 years increasing European integration around their model. They're creating an internal export market in which regulation for "consumer protection" is used as a barrier, the control mechanism to stop cheaper imports. That's great for them, as they have a reasonably productive workforce and can just about hold their own globally as well as having easy access on their terms to the whole of Europe. But if you don't have a productive workforce, which by and large we don't in the UK, then it's a recipe for disaster.

But in fact globalisation and offshoring is causing that to unravel too. No company taking a responsibility to its shareholders seriously (i.e. any publically listed company) is going to ignore the potential for reducing costs by offshore some or all of its operations, wherever it's based.

ILW

marklv wrote: »

I agree. This is happening already. The insane mania for outsourcing will destroy British middle class jobs, just as working class jobs were destroyed in the 1980s by Mrs Thatcher. The middle class will disappear, leaving a veneer of super-paid lawyers and doctors, while the only ones to benefit will be the very senior management. A huge flood of Chinese and Indians will work, either in their home countries or in the UK, to do jobs that British workers used to do for a fraction of the British salary costs. British graduates will be reduced to working as shop assistants or serving at Burger King. This is the future.

Never understood why someone with a degree thinks they should by right, earn more than than someone without. In the end you will earn what you are worth to your employer.

Pete111

To go back to the OPs original premise re outsourcing.

Many companies are having second thoughts about this. Firms have found that the cost benefits are often far less than envisaged and the degredation of service + extra admin sorting out problems that result from the new process flows going across continents rather than floors of a building become a real millstone.

We started outsourcing a couple of depts in 2008 with a view to roll out a bigger scheme. The extra rollout is now cancelled as the original pilot was so problematic (despite going with a costly and top end outsourcing provider). From discussing with my peers in HR across various industries, we are not alone in trying it and deciding it's not much cop....

Pennywise

I've never understood why any sane person thought that the "bubble" of relatively high living standards in the UK won't burst.

Why should a UK factory worker have a nice house, car, foreign holidays, consumer goods, etc., when someone just as intelligent and trained, doing the same job in another country is living in a shanty town, or a flat, or shared room.

Let's face it, for a few decades, we've been living on borrowed money and our "wealth" has been nothing but an illusion.

We're all wanting to "improve" the working conditions of those in third world countries, but no-one seems to realise that the money/wealth has to come from somewhere to do that, which basically means a shift of wealth away from the Western economies towards the eastern and third world economies.

It's just common sense. As globalisation continues, wealth will even out across different countries - the historically richer countries such as the UK will lose out, the historically poorer countries will win. Long term, in theory, it should average out.

The trouble is that we've all been sold a lie - i.e. that we can help end world poverty and ease the suffering of those in third world countries by "growth". That's nonsense - unless we get to the stage where martians bring down wealth to the planet, the overall "wealth" of Earth is fixed - all we can do is move that wealth around from one country to another. If we are to improve the wealth of the third world, that means a reduction in living standards in the successful economies. It's about time the politicians faced that fact and then were honest enough about it.

Malcolm.

julieq wrote: »

No, protectionism is tried in all sorts of places, but it only works where you have pretty much total control over the population's consumption.

Is currency manipulation not protectionism?

Chinese and German exporters seem to benefit from artificially low currencies.

julieq

I think that's probably a fair assessment [EDIT - regarding the decreasing fashion for outsourcing], but in the general case there are benefits. The problem often comes from not having designed products and processes around the outsourcing, what tended to happen is that a process designed to work internally just got banged out to a contract manufacturer without being thought about in the new context. I've seen products transferred at massive cost that went obselete 2 years later because of predictible issues and achieved nothing apart from complicating the engagement contract, that's all about gung ho management and poor risk analysis, which I'm afraid is endemic in the West now.

We also went badly wrong with China by essentially dropping prices of items we sold them to the floor for fear of not getting market share. That's just subsidising their industry at our cost. They just smiled and took the goods. I'd have done the same.

That doesn't mean that the problems are insoluable. To take an example, Ebay or Amazon were not bad just because they were part of the dot com bubble. They were intelligently run operations that understood the new paradigm and designed themselves accordingly rather than trying to shoehorn in ways they used to work.

But what is undeniable is the quality of the degree educated Chinese. They're hungry for opportunities, and they are frighteningly good in comparison with the output of our education system, who often need a lot of help even with very basic stuff. And there are a lot more of them than of us.

julieq

The euro is not artificially low. It's pretty strong, it's just had a relative dip recently because of the Greek crisis. You can get into arguments about whether that was manipulated by Merkel, but that was opportunistic rather than structural.

On the other hand, China pegs its exchange rates. It can do that because it controls to a large extent the aspirations of its population with regard to consumption. There'd be a massive "ripoff Britain" outcry if we banged a tariff on cheap goods or increased duty on ebay purchases from Hong Kong. It's the price you pay for living in a liberal democracy I'm afraid.

StevieJ

Pennywise wrote: »

I've never understood why any sane person thought that the "bubble" of relatively high living standards in the UK won't burst.

Why should a UK factory worker have a nice house, car, foreign holidays, consumer goods, etc., when someone just as intelligent and trained, doing the same job in another country is living in a shanty town, or a flat, or shared room.

Let's face it, for a few decades, we've been living on borrowed money and our "wealth" has been nothing but an illusion.

We're all wanting to "improve" the working conditions of those in third world countries, but no-one seems to realise that the money/wealth has to come from somewhere to do that, which basically means a shift of wealth away from the Western economies towards the eastern and third world economies.

It's just common sense. As globalisation continues, wealth will even out across different countries - the historically richer countries such as the UK will lose out, the historically poorer countries will win. Long term, in theory, it should average out.

The trouble is that we've all been sold a lie - i.e. that we can help end world poverty and ease the suffering of those in third world countries by "growth". That's nonsense - unless we get to the stage where martians bring down wealth to the planet, the overall "wealth" of Earth is fixed - all we can do is move that wealth around from one country to another. If we are to improve the wealth of the third world, that means a reduction in living standards in the successful economies. It's about time the politicians faced that fact and then were honest enough about it.

Your whole post is based on the assumption that the pie will remain the same size, whereas IMHO when 3rd world countries improve their lot then the pie will be much bigger. I am sure your arguments were used in the 18th and 19th century to explain why the middle and upper classes should not share their wealth with the poor.