|Stormtrooper lucky cat (credit).|
Global economy, right? Developed economies lose manufacturing to developing economies. Developed economies struggling. Developing economies booming. So the manufacturing jobs go to Asia and economies there do well, while jobs are lost in the West. So wages are lower in developing economies, right? So workers in developed economies are in effect competing for jobs against workers in Asia. So the lower wages in Asia are pulling down the wages in the West. Does this make sense? Ergo recession in the US and Europe."Yes," said a friend on Facebook. OK, so I'm not a finance expert or an expert in trade. It's just a question. I asked it because there are things happening economically in the world that I don't understand. And you need to. Why? Because everything's connected. Every economy is affected by the recession in Europe and by continuing slow growth in the US. Australia's is. For example, on the day the results of the recent European elections were revealed in the media, Monday, the stock market here dropped by two percent. A lot of people in Australia own stock, so it's everyone's problem, not just one that belongs to a few market traders and a few more large companies that are listed on the ASX. We all need to know, for example, what is going on in Greece.
The French election result is more clear-cut. It was a presidential election, for a start, so one person was elected. The Greek parliamentary elections are more complex. You need a government. No single party won enough seats in the chamber to form a government, so there will now be negotiations between the various contenders so that that can happen. The first try didn't work out with the right-wing New Democracy failing to get enough support from the other parties. Now the baton has been passed to the left-wing Syriza, which will try to form a government. From my standpoint living on the other side of the world the issue that arises is one of legitimacy. Syriza is a new party and it got 16.8 percent of the vote, so it represents a significant proportion of Greek opinion. I conclude that a lot of Greeks are very unhappy with the EU bailout and the conditions attached to that. For their part, stock market traders are unhappy with Syriza having so much influence in Europe now. This tells me a lot about the lineaments of the issue. A lot of Greeks object to changes to their way of earning a living proposed by the EU and the IMF.
But what are those changes? What have Greeks risked losing that made them so unhappy that they gave support to a new, left-wing party that is opposed to the way global capital works? How do I judge the Greeks? What should I think of them? The author Michael Lewis went to Greece asking the same questions and came to the conclusion that Greeks don't like paying taxes. And so investors in Australia have their prosperity put at risk because Greeks, by and large, don't want to fulfil their social obligations? How valid is this notion?
These Greek elections place an obligation on the media to follow up on Lewis' book, which was published in 2011 under the auspices of US magazine Vanity Fair. But the problem with Greece is compounded by a recession in Europe generally. And that, in turn, is compounded by continued weakness in the US economy. The Greek thing is one part of a bigger puzzle. Australia's stock market is largely trending upward and the two-percent drop we've seen in the last few days does not necessarily mean a major, sustained downturn is going to happen. Nevertheless, people in Australia need more information, in an accessible form such as Lewis' book, about how the global economy has changed in the past decade. Which brings me back to the Facebook quote at the start of this post. And the image that accompanies my post; lucky cat can be found in many Asian shops, and represents a desire for good fortune.
One thing is certain: democracy and capitalism do not necessarily work together. Greece shows us this. So does China, where there is no democracy and the economy is due to grow at about eight percent this year. In the Australian media China is handled in two ways. On the one hand journalists are quick to focus on human rights issues. There's nothing inherently wrong with that approach. One the other hand they talk about how China's economic influence is good for the Australian economy. The mining boom, the two-speed economy, etcetera. But there has been little talk about how regular Chinese people are being employed. Because of this lack of information it's hard to understand which jobs are being done in China and which ones are being done in major Western manufacturing centres, such as Europe and the US. What has been lost?
How is it that China has ramped up its economy over the past decade but Western economies have been slow to adapt? Maybe retraining and reskilling in the West takes more time than does building a factory in China. What kind of skills do Europeans and Americans need to get in order to engage with the new, global economic reality? Can businesses do anything? Do governments have something to contribute? How should Australian businesses react in order to benefit from this major economic shift? Who are these people in China with jobs? What do they need? Where are the opportunities for Western companies to do business in China so that these companies can start hiring more Europeans and Americans?
Australians need the media to help them understand more about how China works. We can't rely on the spin published by Chinese government media agencies, it doesn't make any sense. We need to know about peoples' lives in China. What do they aspire to? What is the real relationship between the individual and the government? How does that work?