Ultimately, in a global economy, most of the world must be just barely
above subsistence level. As countries such as China raise there
standard of living those on the US and Europe must drop to compensate.

I don't think so. Currently, Chinese government is trying many things
to boost internal consumption. Things like many long stretch of
holiday weeks to allow people to travel far and away to spend money.
Basically, China cannot rely on foreign market to cure China
unemployment problem; the foreign market is simply not large enough
for all the products from China. China will have to cure the problem
by increasing domestic consumption. With China already in WTO, this
means US companies have a chance to get a piece of the increasing
Chinese market. The key is to sell products that match the need in
that market. US can sell raw material to China, or US can sell
finished products from highly automated factories (to keep cost down).

This will be a win-win situation. There will be short term pain both
in China and in other countries. In the long term, the global market
will be bigger. When we add the growing India market into the mix, the
global market will be even bigger. And when we add a recovering Russia
into the mix, the global market will be bigger and bigger...

Of course, US would lose the opportunity of gaining Chinese market
share to other countries if US was only concerning of what market they
would lose instead of what market they would gain. Luckily, this
doesn't seem to be what is happening considering the fact that large
number of US companies are actively marketing in China.

Jay Chan