Question/Comment: Is the final answer to all these economic problems the fact that there are now too many people on Earth? For example, how can U.S. labor make any money when Chinese workers will work for a nickel an hour? In 1939, I worked for a dollar a day.
Paul Solman: Nope. There may indeed be too many people on Earth, given our current habits of resource use, and the amount of pollution those habits generate. And we could indeed be choking ourselves to death, and the more of us there are, the quicker.
But overpopulation is not a global economic problem in the sense you mean. Indeed, the more people there are, the GREATER the economic growth (although it does lead to the pollution problem mentioned above).
Consider that nickel-an-hour Chinese worker of yours. S/he’s earning that nickel by producing something people WANT. That “something” is extra wealth that would not otherwise have been produced when she was struggling to survive down on the farm, for example. Once she earns enough of those nickels, she’ll be in a position to buy something else. Someone will have to produce THAT something (good or service). And the more goods and services produced, by definition, the greater the economic growth.
The U.S. labor, of course, could suffer. If we can’t live on a nickel an hour, we’d better figure out some other way to produce some good or service for which others will pay a lot more. That’s the only way to preserve or improve our income. That’s why we’re urged to go to college and beyond: to acquire skills that we can then sell at a good price.
The connection of this process to today’s crisis is probably the following: that all the extra “nickel-an-hour” Chinese (and Indians and former Iron Curtain country workers, et al.) joined the world workforce pretty darn fast. They were generating NEW wealth, earning NEW income. A lot of that income was loaned back to us here in the U.S. It helped make money cheaper. It enabled us to live beyond our means. G.G.-BOAT (the Greatest Global BOOM Of All Time) became G.G.-BOAT (the Greatest Global BUBBLE Of All Time).
The rest, as they say, is history. Or as Steven Dedalus might put it, the nightmare from which we are trying to awake.