Thomas Palley

General Motors and Ford have both recently announced plans to restructure their parts supply arrangements, the result of which will be the loss of thousands of middle-class manufacturing jobs. These plans involve slimming down the number of suppliers, as well as forcing domestic suppliers to match the lowest global price (the “China price”) if they wish to retain business. Read the rest of this entry »

There is a famous theorem in international economics – the Stolper-Samuelson theorem – that says when a rich capital-abundant country (such as the U.S.) trades with a poor labor-abundant country (such as China), wages in the rich country fall and profits go up. The theorem’s economic logic is simple. Free trade is tantamount to a massive increase in the rich country’s labor supply since the products made by poor country workers can now be imported. Additionally, demand for workers in the rich country falls as rich country firms abandon labor-intensive production to the poor country. The net result is an effective increase in labor supply and a decrease in labor demand in the rich country, and wages fall. Read the rest of this entry »