Is the US outsourcing social instability as well as gang violence?

In 2006 Felipe Calderon became Mexican president and promised to tackle his country’s illegal drug trade. 50,000 soldiers were deployed to fight gangsters.  More than 28,000 people - 4,000 in the second quarter of 2010 alone - were murdered.

Worse is what the drug trade has done to the rule of law in Mexico.  Corruption and violence are commonplace; the entire system of law enforcement has been undermined.

But dealers aren’t selling drugs to Mexicans.  Almost the entire $13 billion-a-year drug trade is with consumers in the US.

American’s insatiable appetite for recreational drugs has caused trauma and carnage to others.  Each of the world’s big illegal drug producing countries, as well as distribution entrepôt, have become economically and socially unstable off the back of American consumer demand.

The US maintains the fiction that local consumption is the fault of outside supply.  Such economic affects aren’t limited to the illicit drugs trade.  Gratefully accepted new jobs in call centres in India and textiles cities in China wouldn’t exist if not for consumer demand in the US.

Tragically, alongside outsourced low-wage manufacturing work are the consequences for home-grown social and economic choices.

When Americans demand that companies expend less energy and create less pollution in production then manufacturers find alternative places to do so.  China’s emergence as the world’s largest energy consumer is on behalf of American shoppers.

Since 2008 the US has issued almost $3 trillion in currency in a series of spurts known as “quantitative easing”.  At the other side of this market for supply is China, now with over $3 trillion in US dollar reserves.  As fast as the Americans print, as fast as the Chinese buy up the paper.

The two countries are in a high-stakes game of Chicken. 

Americans enjoy the benefits their state provides but want to pay less tax.  The more they need to borrow to finance this deficit, now heading over $14 trillion, the more they need to spend as a proportion of gross state revenues to finance the repayments.  However, all America’s debt is priced in dollars.  If the US dollar can devalue then their net debt will go down.  This way Americans neither have to wear the hair-shirt that usually comes with accumulating insurmountable debt (as the British, Greeks and Irish are now doing) nor do they have to feel the consequences of their actions.

The Chinese, with such a big stake in on-going US consumption, refuse to accept how over-reliant they are on the strength of the US economy, and so they buy up that debt in order to maintain their currency parity with the US dollar.

When the world’s biggest consumer and biggest producer are locked in stasis then it is the rest of the world that has to feel the effects.

Think about it like this.  Say you have ten people to feed and one person eats 20% of the food.  If food availability drops, but the big eater refuses to accept a proportional decrease, then everyone else has to eat significantly less to make up the difference.

If neither the US nor China will accept the consequences of their choices then everyone else is subjected to much greater fluctuation and uncertainty.  It is a gross simplification to hold America solely responsible for social instability elsewhere.  Riots in France and Greece are certainly a result of an inability to face up to the economic chaos they’ve created.  However, plenty of countries are working hard to ease their economic crises and their pain is made worse by the trampling of the world’s spoiled and petulant giant.

The global economy will grow.  There will, once more, be food and treats for everyone.  However, in outsourcing its self-inflicted misery onto others who already bear the painful burden of their own mistakes, America is storing up a great deal of resentment.