I’ve been having trouble explaining to liberal co-workers that there isn’t really an “Upper” or “Lower” working class. They insist that class as a relation to means of production is outdated and it makes more sense to measure it by income. What’s the most effective way to explain to them why this doesn’t work?
PPP adjusted takes into account the “domestic basket of goods”. Consumer goods, housing, and food are extremely cheap in the US compared to the global south. Example:
In his study of Walmart, Nelson Lichtenstein reports: “Wal-Mart argues that the company’s downward squeeze on prices raises the standard of living of the entire U.S. population, saving consumers upwards of $100bn each year, perhaps as much as $600 a year at the checkout counter for the average [US] family…. ‘These savings are a lifeline for millions of middle- and lower-income families who live from payday to payday,’ argues Wal-Mart CEO H. Lee Scott. ‘In effect, it gives them a raise every time they shop with us.’” Lichtenstein, 2005, Wal-Mart: The Face of Twenty-First-Century Capitalism (New York: New Press).
In other words, cost savings resulting from outsourcing are shared with workers in imperialist countries. This is both an economic imperative and a conscious strategy of the employing class and their political representatives that is crucial to maintaining domestic class peace. Wage repression at home, rather than abroad, would reduce demand and unleash latent recessionary forces. Competition in markets for workers’ consumer goods forces some of the cost reductions resulting from greater use of low-wage labor to be passed on to them.
Perhaps the most in-depth research into this effect was conducted by two Chicago professors, Christian Broda and John Romalis, who established a “concordance” between two giant databases, one tracking the quantities and price movements between 1994 and 2005 of hundreds of thousands of different goods consumed by 55,000 U.S. households, the other of imports classified into 16,800 different product categories. Their central conclusion: “While the expansion of trade with low wage countries triggers a fall in relative wages for the unskilled in the United States, it also leads to a fall in the price of goods that are heavily consumed by the poor. We show that this beneficial price effect can potentially more than offset the standard negative relative wage effect.” They calculate that China by itself accounted for four-fifths of the total inflation-lowering effect of cheap imports, its share of total U.S. imports having risen during the decade from 6 to 17 percent, and that “the rise of Chinese trade … alone can offset around a third of the rise in official [US] inequality we have seen over this period.”