How globalization & immigration result in more poverty & inequality - simple analogies

Trying to understand economic phenomena can be complicated and difficult for most people to understand, so sometimes it can be helpful to use simple analogies.

Many have the feeling that globalization is somehow "draining away" the United States' wealth, but cannot explain precisely how it is happening, in economic terms. And immigration from other parts of the world seems to be increasing poverty levels in the country, but again most who suspect that would have difficulty explaining the precise economics of how exactly it is causing that.

In science, there is the principle of gas pressure. If you have two chambers containing gasses of different pressure, and you open a valve to allow gas flow between those two chambers, very soon the air pressure between the two chambers will equalize. They might have started off different, but they will end up the same.

This is known as "equilibrium". There will always be some gas steadily flowing back and forth between the two chambers. But when one chamber has much more air pressure than the other, there will be a much stronger flow of gas going in one direction.

In the case of the United States, the country is much wealthier and has higher per person living standards than many other parts of the world.
That is why so many immigrants want to come to the United States, and that is why it is cheaper to move jobs that once were in the United States to other countries.

But there is also a saying that the rich get richer and the poor get poorer. Wealth tends to attract more wealth. If an individual is already wealthy, it is easier to get more wealth.
So this is like a competing phenomena, the opposite of the first.

We could maybe use the analogy of a black hole. A black hole is an immense and concentrated collection of mass. It sucks and pulls in more mass, growing bigger. And when it gets bigger, it then attracts matter with even more force than before.

So we have two competing forces. Wealth levels tend to equalize between two different economies, two different countries, or two different groups of people. But at the same time, there is a tendency for wealthier individuals to consolidate more wealth.

You might think these two different effects might just cancel each other out (and to a little extent they do) but it is not so simple as that.
What the combination of these two effects results in is an increased level of inequality in society.

Wealth is being drained away, and wage levels are going down, but at the same time individual persons with large amounts of money are benefitting.

It has been observed (or pointed out) that while Globalization may reduce the level of inequality between different countries, it increases the level of inequality within individual countries.

 

Americans and the west like cheap ****. End of story.

 

This comes from a United Nations report:
"Income inequality between countries has improved, yet income inequality within countries has become worse."
https://www.un.org/en/un75/inequality-bridging-divide

This comes from the World Bank:
Theorist Eric Maskin: Globalization Is Increasing Inequality

From the International Monetary Fund:
"Within-country inequality has risen in most countries. While the progress in the reduction of global inequality over the last thirty years has been remarkable, within country inequalities have increased, especially in advanced economies. Over the past three decades, more than half of the countries and close to 90 percent of advanced economies have seen an increase in income inequality"
https://www.imf.org/en/Topics/Inequality/introduction-to-inequality

 

You know manufacturing (and unions) built the middle class. You could join it with a high school education, but now, producing a car for example takes 1/3 the number of workers thanks to robotics and that percentage of workers will steadily drop. There are lots of jobs that pay 15 dollars an hour and there are a lot of millionaires. The world needs to adjust to that fact.

 

And you know that "Free Trade" deals, such as NAFTA, destroyed unions, taking away their leverage and allowing factory management to pick up and outsource in response to demands for higher wages.
In earlier times, it was well known that immigration was used to bust union strikes.
(There's even an old thread that touches on that here: Even Cesar Chavez was against excess immigration - Apr 2012 in Immigration )

 

Ridiculous analogies which fail completely in any sort of economic simplification. I suspect it was designed to completely obfuscate the readers to make them more amenable to your final "increases the level of inequality" conclusion, for which you completely fail to provide any rationale whatsoever. You just suddenly pull it out of the blue. You introduce a physical fact/truth/reality and imply this is an equivalent to globalization without any factual basis or explanation. Basically, mixing physical truth with unsubstantiated baseless economic opinion. Economic opinion which you have failed miserably to establish any plausible link leading to your conclusion it causes "inequality". You would have been better served to have just stated, "In my opinion Globalization causes inequality here in the US." and left it there. And you would still be wrong.

 

And you are ignoring changes in technology like robotics and container shipping. One extreme example is North Atlantic cod is caught by Scandinavian countries, deboned in China and sent back for sale in Scandinavian countries, all made possible by container shipping. It changed world economics.

 

When the powerful steal the foreign aid money that floods in to help the country, obviously, the inequality increases within those countries. Funny thing about third world autocracies, they believe the aid from the rest of the world is designed to enrich just them.