08/29/2007 11:19 am ET Updated May 25, 2011

A Sad Benchmark: Chinese Communists Teach American Capitalists Econ 101

There's something really, well, sad about America having to learn its lessons about the free market from communist China. But hey - a lesson is a lesson, right?

In a business section story, the New York Times reports on the shocking - shocking, I tell you! - news that wages actually rise when the supply of labor tightens and the laws of supply and demand are permitted to actually work.

Here's an excerpt:

"Chinese wages are on the rise. No reliable figures for average wages exist; the government's economic data are notably unreliable. But factory owners and experts who monitor the nation's labor market say that businesses are having a hard time finding able-bodied workers and are having to pay the workers they can find more money."

This is pitched to us, of course, as horrific news, namely because underneath all their rhetoric about wanting to help bring prosperity to the world, corporate executives were banking on "China's vast population supply[ing] a nearly bottomless pool of workers" which they hoped would mean "so many people would be seeking jobs at any given time that wages in this country would be stuck just above subsistence levels." Unfortunately for the profiteers, the basic free market laws of supply and demand are kicking in (though let's be clear: China still has a way to go - the worker in the article now makes just $263 a month, and the country's lax labor/wage laws will continue to exert downward pressure on wages there).

Now, I know - if you are an American, you might find this connection between supply of labor and wages strange and unfathomably hard to believe - like a conspiracy theory or something out of a sci-fi movie. That's natural. You live in a country where The Great Labor Shortage Lie is regarded as an unquestioned economic axiom. This is a place where corporate CEOs and their right-wing toadies in Washington bemoan a supposedly tight labor market here as an excuse to outsource jobs and to pass immigration laws designed to create new classes of low-wage indentured servants. These same CEOs and politicians, of course, have no explanation for why wages continue to stagnate - even though domestic worker productivity steadily rises. All we know is that labor is supposedly tight, wages stagnate - but CEO salaries continues to skyrocket to 364 times the average worker's paycheck.

There's a few things going on here in America that explain this seemingly incongruent trifecta of a tight labor market, high productivity and nonetheless stagnating wages.

First, - the labor market isn't all that tight. As the Center for Economic and Policy Research shows, official government statistics purporting to show a super-low unemployment rate do not count all sorts of people who are unemployed. So the labor market still has a lot of cushion in it.

Second, thanks to a raft of Clinton and Bush-backed trade deals that include no enforceable labor, wage, human rights or environmental protections, we have an economic system that actually rewards employers for shipping American jobs to other countries where labor/wage/human rights/environmental exploitation is a viable way to cut costs. Workers who are lucky enough to have decent jobs here in America know that companies can now credibly threaten to just pick up and leave - and that reality has hurt workers' bargaining power. Its harder to demand a raise if you know it means you'll probably get canned.

Finally, this same threat-aiding trade policies and a politically connected professional union busting industry has helped crush the labor movement. And as the data shows, workers who are organized to bargain collectively not only secure better wages for themselves, but lift up all wages - union and non-union - in their industries.

Thus, we have now arrived at a seemingly absurd and quite pathetically sad point in our history. On the front page of the New York Times business section - the publication of record for America's free market fundamentalists - Chinese communists are teaching us American capitalists a lesson about how the free market is supposed to work.

Cross-posted from Working Assets