After staying in the background for decades, both countries are now open to business with America and have added their low-cost labor forces into the world’s labor pool, not only dramatically decreasing wages of Americans but in fact pushing many of them out of employment.
American companies are forced to hire cheap foreign labor to remain favorable in terms of dividends and thus competitive for their shareholders. I f they do not, their dividends will remain low and stockholders will compare them to companies with low costs. The interesting fact is that these stock holders are not just huge corporate giants but average Americans as well. “The American middle class has become an army of investors whose tough demands are translating into more layoffs among their own ranks” (Meredith 2007: 193.2). In the short term this benefits investors but in the long run loss of jobs makes them worse off.
Another interesting phenomena paradox is the “Walmart” culture (Meredith 2007: 191.3). Walmat stocks abundant supply of cheap Chinese and India goods that benefits average consumers by giving them extremely low prices and a high range of products. So where Americans are being laid off as high cost factories in America shut down, they are at the same time benefitting as consumers.
The reading points out that while the globalized era is posing to be a huge threat, it is at the same time bringing lots of benefits. Trade with china keeps down interest rates and inflation in America. Chinese Government has the world’s largest dollar reserves which it buys in US treasury bonds in order to keep its own exchange rate stable (Meredith 2007: 194.2). Demand for bonds raises their prices and forces interest rates to remain low due to their negative relationship. This has led to average Americans to enjoy lower amounts of credit and a larger affordability for loan, enabling them to buy houses more often than before.