World's looking flat, but volcanos simmering

Read some interesting thoughts today at "The Daily Reckoning"--Bill Bonner is chiding Thomas Friedman's idea that "The Earth is Flat", that globalization has carried us into an entirely new world of opportunity:

"Thanks to modern technology and the spread of robust American-style capitalism (to say nothing of the protection racket run by the empire's military forces), we all play on the same level field of global commerce. We also wear the same clothes...talk the same language (English), share the same political ideology (humbug democracy), and worship the same God (mammon)."

Of course Friedman's "Flat Earth" is an important part of what's happening--most of our high tech toys, and even our clothes, are manufactured in China, or other points east. China makes 'em, we buy 'em. We go deeper into debt, but China lends it back to us, at pretty low interest (for now). We need them, but they need us just as bad. For awhile now, we've had it pretty good. The toys get cheaper, and even if we don't earn any more money, nowadays it's easy to be a debtor: our government borrows from China and Japan, our household borrows from HEL (Home Equity Loans).

But Bonner cautions there may be unstable forces of tectonic scale simmering beneath this apparently "flat" world we've become so fat and happy in.

One big instability is increasingly skewed wealth distribution. Within the U.S. and the rest of the "first world", the business owners and investors are getting richer, benefiting from globalized markets. But most of the workers, from auto assemblers to pilots to IT pros to filmworkers, are seeing their incomes stagnate and decline.

I was struck by something called the "Gini Index", which is a measure of income disparity:
"Economists measure wage equality with way they call a Gini Index. At zero, people all earn the same thing. At 100, the rich get all the income.
Currently, in Japan the Gini Index is 25. In Europe, it is 32. In America, the index is at 40, and in China, it is at 45."

If the Gini index is a measure of instability, it's striking how close we are to China on that measure.

Bonner concludes:
"In America, low-level earners can't get ahead because they have no bargaining power. They are competing with a billion workers in Asia willing to do the same work for less than one-tenth the cost. And in China, there is also growing income inequality between those who have joined the global economy and those who have not. Some 500 million people live in coastal cities in China and participate in modern commerce, but there are another 700 million who still live in the countryside. While the cities grow richer, the poor in China are left behind, like America's industrial workers.

In short, the world is not getting flatter at all. It is getting flatter in some areas, and steeper in others. There is less difference between China's industrial workers and those in America, but the difference between the globalized wage slave and the capitalists who employ them is growing.

Beneath the surface of Friedman's flat Earth, the pressure is growing -either in China or in America and sooner or later, it is bound to explode."

(Bill Bonner is one of many contributors to "The Daily Reckoning", a free daily newsletter on economics, investments, politics, etc. @ www.dailyreckoning.com