MELBOURNE -(Dow Jones)- Globalization will lower the real wages of unskilled workers in advanced economies with or without the free flow of labor between countries, Bank of England Governor Mervyn King said Thursday.
King said the flow of labor from Eastern European countries to the U.K. has accelerated the growth of the labor force there.
However, a decrease in real wages in developed countries will occur regardless of efforts to cut back migration, he said.
"The impact of globalization, in terms of the impact on real wages, will occur anyway through the movement of free trade in goods and services, even if we limit migration," he told a Melbourne Center for Financial Studies luncheon in Melbourne.
"The downward pressure on the real wages of the unskilled in advanced economies doesn't require migration to bring it down - trade will do the same."
King said that while economists see benefits in the free trade of goods and services and the free flow of capital, it is up to governments to set their own policies on labor flows as migration raises "deeper policy issues".
Governor Mervyn King needs a few basic lessons. First off, the present situation of WTO managed trade is far from "free" trade. WTO managed trade is made possible by among other things enormous borrowing in the part of the United States. Now, I would agree that bad trade deals are a bigger factor than immigration in reducing wages and disposable income in developed countries (probably by a 2-1 ratio).
However, these insane, unsustainable trade deals aren't the only possible arrangements here. Furthermore, there are big productive factors in the developed economies other than wages. How returns to property and wealth is distributed is largely a matter of political consensus. There is no particular reason for enormous returns to real estate or legal activities like we have seen in reason decades. Other arrangements could be made by a fundamental change in political consensensus and different policy decisions. As Paul Craig Roberts has pointed out, the well to do have been among the most common targets of genocide in the last century. If "leaders" like Governor King are unable or unwilling to really work at making a world that works both for a larger number of its citizens and improves the situation of citizens of their own countries, then there is every possibility that at some point Governor King will learn the same lessons as other members of failed elites that didn't tend to business learned.
What no one has done yet is put together a viable political and economic ideology in the west that involves immigration restriction, containment of concentration of wealth and political power and guarantees of balanced trade.
We have a clear existance proof in the existence of Japan that a country can be viable in the world economy, restrict immigration and maintain high levels of wealth equality.
If the West develops similar aspirations again, statements like Governor King's come to be seen as completely out of line.