by J Scott Christianson, Columbia Daily Tribune Columnist
If you don’t know who Gisele Bündchen is, you probably suffer from the same malady I do: being hopelessly fashion-challenged and fashion-world ignorant.
It turns out Bündchen is the world’s richest supermodel, earning more than $30 million in the first six months of this year for her modeling services. But she recently made the economic news when she reportedly refused to be paid by Procter & Gamble Co. in U.S. dollars because Bündchen has lost confidence in the value of our currency.
You know your currency is in trouble when even supermodels are refusing to accept it.
A reduction in the value of the dollar has been on the horizon for some time, as year after year we have racked up ever larger trade deficits. Last year the U.S. trade deficit hit $764 billion, about 6 percent of the gross domestic product. This deficit has resulted in foreign interests purchasing U.S. debt at the rate of nearly $2 billion a day.
The last time the dollar hit such lows money could not be exchanged quite as easily as it can now. In a world where money can move across the world electronically in a matter of seconds, billions of dollars can be changed into euros or yen with the press of a button. The ability to quickly change currency could trigger a run away from the dollar and a run-up of inflation here in the United States. Controlled by computers with pre-programmed “stop-loss” orders to protect investors’ profits, it could all be over before we even knew what happened.
Frankly, I think some countries would like to see us suffer if the dollar loses its standing as the world’s de facto currency. Despite President George W. Bush’s campaign pledge to act with “great humility” when dealing with other nations, most of the world sees us as an arrogant, bullying nation with little concern about the effect of our policies on others. Karen Hughes, one of Bush’s longtime advisers, recently quit her job as undersecretary for public diplomacy and public affairs after a frustrating attempt to use her skills to promote a positive image of the United States in other countries. Apparently no amount of PR could compensate for the administration’s policies. Countries that have felt unable to stand up to our foreign policies might experience a good deal of schadenfreude as we fall on hard times.
Meanwhile, here in Columbia, our community and business leaders are bemoaning the loss of more jobs at the local 3M plant. Of course, our fair city is ringed with Wal-Marts and other big box stores in which just about everything is made by low-cost laborers in China and India. The benefit of globalism for the consumer is low-priced products. The cost of globalism for the consumer is job loss and wage stagnation. This has been part of the deal from the beginning of the North American Free Trade Agreement and the World Trade Organiztion. We shouldn’t be that surprised when we have to pay to the cost for our low prices.
For those in China and India, globalism has produced a lot of low- or even no-paying jobs in conditions reminiscent of 18th-century sweatshops. Last month Gap was caught off guard when it was reported that its apparel was being handmade by Indian children as young as 10. It turns out Gap had withdrawn contracts from 23 other foreign contractors for labor violations in 2007 before this latest incident made headlines.
I just can’t believe the sincerity of Gap’s CEO when she expresses shock at the poor conditions under which Gap’s products are made. As CEO, you should be able to read a spreadsheet. And when you look at what you are paying for your products, you should be able to understand that no subcontractor could make money producing products at the price you are paying unless they use child labor or some other shortcut to lower costs. Either the management and the accountants at Gap are idiots or they are simply willing to turn a blind eye to what the other side of their profit equation looks like.
Of course globalism has been great for the rich in our society. Our economy is breaking records for income disparity and the number of billionaires living in our country, many of whom seem to be having a hard time spending their money fast enough. Although upward mobility has become virtually impossible in our society, we can at least glimpse what the life of the rich is like by watching such educational programs as “The Real Housewives of Orange County” and “The Real Kids of Orange County.” Joy.
Call me an isolationist, but I would have preferred to pay more for my products and had that money stay here in Missouri and the United States rather than face another recession or depression in an economy that seems largely out of our control. But until we decide that the cost of low prices is too high, we’ll have to come to terms with a world in which the dollar isn’t worth as much and in which it is harder and harder to make those dollars in the first place.