... markets are harsh rulers. They punish non-economic behavior with a sharp slap of the invisible hand. There isn't any special immunity for the US. November, 2004.

It's been long maintained on this blog that the global marketplace, and not a nation-state or a collection of nation-states, is the sole remaining and dominant global power. In short, we live in Adam Smith's world and any talk of an American or Chinese Century is an outdated way of looking at the world. One of the inevitable consequences of living in a world dominated by markets (unmitigated or controlled by traditional social organizations like nation-states) is that artificial differences in wages and salaries between people of different nationalities will evaporate.

Here's why. In today's connected world, productivity is globally portable. This means that David Ricardo's foundational concept of comparative advantage is largely negated. Economists that maintain the opposite likely haven't experienced the realities of building and operating a global business (in contrast, I've built two). Without comparative advantage, there is no reason to pay a person in one country more than a person of equivalent education in another. Unfortunately, America (and the West in general) follow economic policies based on a deep faith in comparative advantage. That faith will prove disastrous as incomes in the West fall precipitously to equalize with incomes in the developing world.

So, on to the news. It appears that this crisis is serving as a form of punctuated change on this front since it is reseting expectations/assumptions -- which are, for all intents and purposes, the only barriers to full normalization of global incomes. For example, IBM is now offering US employees an option: you can be fired or you can move to India, Nigeria, Russia, etc and work there at local salaries/wages (CNN).

Big Blue is offering its outgoing workers in the United States and Canada a chance to take an IBM job in India, Nigeria, Russia or other countries. Only "satisfactory performers" who are "willing to work on local terms and conditions" should pursue the jobs, the document says. The company also will help with moving costs and provide visa assistance, it says.