The Mobility of Capital and the Future of Labor Market

Some people worried about the economic growth, some unemployment. Current argument around government debt and deficit, worker's unemployment benefit, and long term economic prospect are all based on the same assumption that economic models of the old days, no matter which side, would work tomorrow and the day after.

However, the economy of the 1930s or 1980s will not come back and repeat itself. Things have changed dramatically, particularly the mobility of capital. The literature of globalization has described the cause and effect of such mobility. In order to "attract investment", government everywhere lowered their barrier and triggered the liberation of capital. Now capital is truly "liquid" and moves in unconventional and unexpected ways that only "financial professionals" could possibly understand and sometimes control it.

Liquid means flat, for even a slight difference would lead to the flow (eventually flood). And since the dams are not working, any field without a wall is destined to be flattened. Such is the situation of world labor market equalization, some called it "race to the bottom", indeed.

The new phenomenon since the acceleration of the speed of capital is the increasing temporariness of jobs for young people. In order to circumvent the employment legal regime of the welfare state so that labor cost can be repressed, more and more temps are hired in more and more outsourcing companies. Older people with family and mortgage can hardly accept such positions, but young graduates can and sometimes single family must.

In any given event, there are so many temps, interns, and specialists, it is almost impossible to tell who's who or who's the real deal and who's not.

Since the dawn of capitalism, people seek to curb and master the system to at least give some stability of life. Historically, such stability was achieved in the expenses of others: slaves, workers, women, indigenous, colonized, developing and so on. Capital has allied with many forms of power to pitch one group of people against another. Now, its velocity is putting workers in the developed country against the workers in the developing.

This new feature of capital is the blind spot of some of the leading economists. They are in a employment trap. If they utilize traditional weapons against unemployment, lower interest rate, high entrance barrier, more government stimulus, they might not get what they want. Instead, those policies may bring in another storm. The opposite wasn't true either. Cutting budget now, particularly state and local benefit no one and will surely lead to higher unemployment and lower consumption. Perhaps, that's where the government should get smart, knowing where to increase spending and where to cut so that job creation could be maximized.