The Dark Side of Globalization

Few argue these days that
globalization of markets is anything other than great
for the American consumer. And, it is true. Chinese
products made with 50 cent an hour employees and lax
environmental and labor laws have allowed manufacturers
to deliver goods and services cheap. Companies that have
been able to export their production or services
overseas have stomped their competitors like narcs at
biker rallies.

But, globalization hasn't stopped
with prices. Wage rates have been affected, too. They
are being 'globalized"-- a nice of saying 'lowered."
Indeed, for the last several years, the average worker
in the U.S. is making less considering inflation.So, how
has Joe Lunchbucket survived with fewer dollars to spend
buying cheap Chinese
merchandise?

Plastic.

No cash? No problem.
Banks line up with their credit cards to lend money at
19% and more if they can get it. Average credit card
debt has grown to $8,650.00 per family. And, if credit
cards get maxed-out, there are lenders who will allow,
even encourage, consumers to pull the equity out of
their homes -- $160 billion this year alone.

How
long can it last? With increases in adjustable-rate
mortgage payments, higher minimum credit-card payments,
higher costs to heat homes, and less home-equity to
extract since all the equity has already been extracted,
some experts have predicted a consumer slowdown in 2006
saying the consumer is tapped out. Maybe true, maybe
not. Never underestimate the spending desires of the
American consumer.But whether the consumer slows down in
2006, he has to slow down.

The continuing
downward pressure on wages (discussed in my last post)
eventually has to result in wage-earners (80% of the
working population) being unable to afford goods and
services, no matter where they were made or how cheap
they are. Because if Joe doesn't have a job, or his job
barely keeps the rent paid, and the equity has already
been fully drained from his home and his credit cards
are maxed, the American Dream migrates quickly into the
American Nightmare that day when Joe just can't buy
stuff anymore

And, because 66% of the U.S.
economy is driven by Joe's heroin-like spending habits,
a slowdown (whenever it happens) will affect
everyone-employees with no jobs or jobs that don't pay a
living wage, corporations with too much inventory and
too little demand, and investors who weep as stock
prices plummet. But, hey, this is the season to be
joyous! The siren of the mall calls and draws us ever
closer to the rocks disguised as shopping
bags.

Advice? If your company has not
provided financial education to your employees,
including the dangers of debt, the advantages of saving,
and the necessity of budgeting, consider offering that
education up as a gift that will keep on giving long
after the plasma TV has faded.