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Comment by majia | Hacker News Reader

I think the pie between the US and China is fairly divided. However, greedy US cooperates get most of the US share whereas Chinese government at least spent a fraction of the trade profit to lift hundreds of millions people out of property. When US middle class look at their newly enriched Chinese counterpart, they feel they are raped off.

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Well, it is true that globalization hurts the US middle class. Basically the argument in favor of globalization that economists use is that basically it is beneficial at a national level for the USA to exploit Chinese labor. The cost savings obviously go into the pocket of the executives. The people who lost their jobs get nothing. Obviously the same thing happens to every industry to varying degrees. Those who don't lose their jobs can still see their wages stagnate also known as deflation. The central bank then tries to combat the deflation by injecting money into the economy. It doesn't work: Inflation doesn't go up for anything other than housing, education or health insurance. That can only mean one thing. Prices that do not go up are not dictated by the local economy. If inflation would happen in the US and increase widget prices from $4 to $5 then production simply shifts to a country that can indeed produce the widget for $4.

If what I explained above is true, then it's time to rejoice. It means that the problems the middle class suffers from are temporary until every other country has been lifted out of extreme poverty. All we have to do is wait until the race to the bottom is over.

However if what I said is wrong, then it's time to be sad. There is no easy solution and the middle class might never get back on track.

Deflation and wage stagnation are not the same thing, indeed sometimes they are opposite. And I don't think their is a clear way to measure what potentially low percentage of the cost savings go to executives' pockets.

But certainly true that American workers are being squeezed, having to compete against more and poorer workers because of globalization and free trade policies.

> Chinese government at least spent a fraction of the trade profit to lift hundreds of millions people out of property

I was under the impression that those people were lifted out of poverty due to working higher-wage jobs in manufacturing rather than due to explicit wealth redistribution by the government.

While direct wealth redistribution isn't significant, huge spending on infrastructure on roads, railways, telecoms and education certainly helped. Without these infrastructure, people won't be able to build factories and work on higher-wage jobs.

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