Let Me Explain to You How This Income Distribution Thing Works

Take two charts;

One showing US Corporate profits as a percent of GDP are at an all time high;


A second showing that wages as a percent of national income has gone down seemingly at the expense of corporate profits going up;



This would be enough to send your average leftist into a hissy fit about the evils of corporations and how Bush is evil and how Haliburton is forcing children to eat squirrel carcas in the inner-city just to survive.

Of course "intellectual honesty" doesn't matter jack to the left, additionally, nothing brings them to a voracious psychological orgasm than a good outlandish conspiracy theory, and thusly instead of finding out the true cause of this deviation, they opt to feel sorry for themslves and go into their knee-jerk default "Bush is Hitler" and "Corporations are Evil" modes.

So it seems once again, we are in desperate need of another "Economics for Idiots Lesson" 102.

What is interesting and triggered my desire to make this post is in a recent and phenomonal survey by The Economist, it shows you this divergence from corporate profits and wages is not just relegated to the US. It's happening across the entire developed world.

Corporate profits are taking a larger share of ALL developed nations' incomes



And wages are taking up a smaller share of ALL developed nations' incomes.



thereby lessening the credibility of the leftists' argument that Bush is behind all this (although, no doubt some will insist Bush is FOISTING this effect on foreign nations as well - remember, sophomoric-college-age-conspiracy-theory-induced psychological orgasms are much more fun than the truth).

Thus, there must be some other force, some variable affecting this change, transferring a higher and higher proportion of national incomes to corporations and taking it away from the workers.

This is the variable that the left doesn't bother looking for, nor wants to look for, because they have what seems to be CONCLUSIVE PROOF that corporations and Bush are out there throwing old people through the jet engines of Air Force 1 and sucking out the blood of minorities at night because they're vampires (which sadly isn't too much more outlandish that some theories Kos is pushing).

However, we being of a higher-caliber and way more sexy human;

Junior,
Deputy,
Aspiring and
Everyday

Economists,

know the merits of pursuing the truth and thus look for it.

Sexy savvy as we all are, we know that one of the major forces in the past 5 years that has had an effect on every aspect from the housing market to the cost of clothes has been China and to a larger extent the developing world. But beyond clothes and housing, one area of the economy where China, India, Mexico and other developing nations have had an effect on has been the labor market. And the most prominent among their effects has been the issue of outsourcing.

Any industrial or laboring job has been outsourced to China and India and other countries where labor is a mere fraction of the bloated hourly wage of their US Union counterparts. Why fix a plane with Northwest Airlines mechanics that are paid $67,000 + benies when that plane can be flown to Thailand and fixed by Jamil for $15,000/ year and no benies? Why pay some textile union worker $25/hour in Vermont when Chang can do it for $2/hour in Xinghua? And why pay Steve in Chicago $14/hour to answer phones in a call center when Punjab will do it for $3/hour?

This is what is causing the divergence from wages and corporate profits. For no longer do corporations have to pay hefty American wages, further inflated by the greed (and stupidity) of unions, then can go to Bangalore and get the exact same service for a mere fraction of the cost resulting in not only increased profits, but lowering (or at least) stagnating wages here in the US.

Of course the question is whose theory is more likely to be true?

Captain Capitalism's theory that China and outsourcing is the cause for increased corporate profits and stagnating domestic wages;

or

Socialists' theory that George Bush is scheming with Corporate America to further impoverish the lower classes while enriching his buddies (while the entire time heaving Grandma into engine #3 fo Air Force 1.)

The irony here of course is that there is another variable that exposes the democratic party for unbelievable hypocrisy, for it isn't just the Chinese and Indians we're outsourcing our jobs to, there's also Mexico.

Whether in Mexico or not, whether legally here in the US or not, it doesn't matter. Because of the proximity to the US, Mexican labor offers the same advantages as does Chinese labor, but closer to home. Additionally they also boost corporate profits while depressing worker's wages here.

But notice how the democrats treat Chinese and Indian labor DIFFERENTLY than Mexican labor.

They'll lash out at the "outsoucing of our economy to China and India." They'll complain about unfair labor practices in foreign nations. They'll complain that corporations are going overseas.

But will you hear them complain about Mexican labor? Will you hear them take just as hard of a stance against illegal immigration as they do anti-outsourcing?

And there's the hypocrisy. For you see fellow democrat stalwarts, lower-income earning Americans, and especially you union folks, the Chinese can't vote in American elections because they'd have to cross the Pacific. But Mexicans just need to cross the Rio Grande. And once here, eh, who's to tell them they can't vote or work, because they are potential future democrat voters. And that trumps any desire to help you people out.

Now truthfully, I'm all for labor, foreign or domestic, legal or illegal, Chinese of Mexican, no matter how we come by it because there actually are some benefits to foreign labor. The left won't dare mention these benefits because it detracts from their conspiracy theories, but again we noble economists are a bit more interested in the truth.

One, the prices of goods comes down.





We'll of course blast Wal-Mart for paying market wages. We'll blast the Chinese for taking away our jobs. We'll banish Wal-Mart from Chicago. But I often wonder when the left is going to get around to thanking Wal-Mart and the Chinese for bringing down prices for everything under the sun thereby boosting the purchasing power of people, especially the poor, and thus effectively doing more for the poor than any government social program ever could (remember those drug prescriptions?)

Two, for you credit hogs that insist on just borrowing money instead of working for it, you can thank China for financing all of our deficits, keeping interest rates low and artificially boosting the price of your house so you can withdraw EVEN MORE money from the equity of your house to help you live beyond your means and pay for crap you don't need.

Of course, there is a drawback to this. What is effectively happening is that China and India are becoming the Factories of the world, while the US and its western counterparts are effectively becoming the Malls of the world. We won't produce the wealth, but boy, we sure like consuming it. Thusly, I like to further analogize;

China and India are becoming the father of the family, putting food on the table, housing over our heads etc., while;

the US and western nations are becoming the trophy wife and spoiled brat suburbanite princess with Daddy's credit card. Producing no wealth, but spending all the money.

And while this may work out on your favorite episode of Desperate Houseditzes, in the long run it is not sustainable.

The solution?

Oh, you leftists are not going to like the solution. For it gets back to what I've been saying all along;

America has got to get back to what it historically has done best; be the leader of the world in innovation and technology.

For it is not working harder or longer that makes a country great. It is working smarter. It is replacing work altogether with automated processes that frees up our time to pursue other pursuits. It's developing cell phones so we an produce GDP on the road and tractors so we can produce 100 times the food than we do by hand. It's completely overhauling the way things are done with faster and more efficient methods so that instead of being like Ethiopia and digging a ditch with our hands, we're rerouting trading systems from the comforts of our own air conditioned office and producing 900 times the wealth in the same amount of time.

And the catalyst for this creation and innovation?

Sorry lefties, it ain't the bastions of traditional employment for you guys. No philosophy degree will help bring about the US getting back its competitive edge. No sociology degree with entice Samsung to build their next semi-conductor plant here. And certainly no political science degree will ever, EVER do anything to make us a more attractive destination for foreign investors.

It's the sciences.

Engineering, physics, mathematics, chemistry, computers, biology.

Alas, it seems the developing world is going to kick our ass in that department too.



But don't worry, I think if we protest loud enough like the French for higher paying jobs and lifetime employment, we'll no doubt hold on to our position as the wealthiest nation in the world...that and Selma Hayek will date me.