Brookings Study Highlights the Continuing Critical Importance of Manufacturing in the United States Economy

August 26, 2012 by

Below is an excerpt summarizing important findings of the Brookings study:

Manufacturing matters to the United States because it provides high-wage jobs, commercial innovation (the nation’s largest source), a key to trade deficit reduction, and a disproportionately large contribution to environmental sustainability. The manufacturing industries and firms that make the greatest contribution to these four objectives are also those that have the greatest potential to maintain or expand employment in the United States. Computers and electronics, chemicals (including pharmaceuticals), transportation equipment (including aerospace and motor vehicles and parts), and machinery are especially important. Productivity and wages vary greatly within as well as between industries. In any industry, manufacturers that are not already at the top have room to improve their performance by adopting “high-road” production, in which skilled workers make innovative products that provide value for consumers and profits for owners.

American manufacturing will not realize its potential automatically. While U.S. manufacturing performs well compared to the rest of the U.S. economy, it performs poorly compared to manufacturing in other high-wage countries. American manufacturing needs strengthening in four key areas:

· Research and development.

· Lifelong training of workers at all levels. n Improved access to finance.

· An increased role for workers and communities in creating and sharing in the gains from innovative manufacturing.

These problems can be solved with the help of public policies that do the following:

· Promote high-road production.

· Include a mix of policies that operate at the level of the entire economy, individual industries, and individual manufacturers.

· Encourage workers, employers, unions, and government to share responsibility for improving the nation’s manufacturing base and to share in the gains from such improvements.

Reference:

Helper, Susan, Timothy Krueger, and Howard Wial. “Why Does Manufacturing Matter?: Which Manufacturing Matters?: A Policy Framework.” Metropolitian Policy Program at Brookings. Www.brookings.edu, 22 Feb. 2012. Web. 26 Aug. 2012. <http://www.brookings.edu/~/media/research/files/papers/2012/2/22%20manufacturing%20helper%20krueger%20wial/0222_manufacturing_helper_krueger_wial>

Read the full report in pdf format on the Brookings website.


Filed Under: Economy, Report, United States Tagged With: , , ,

Latest EPI Report – Growing U.S. trade deficit with China cost more than 2.7 million jobs between 2001 and 2011

August 23, 2012 by

Excerpt from the Latest Report of the Economic Policy Institute on Job Loss From US Trade With  China

Read the Full Report on the EPI Website

Report | Trade and Globalization

The China toll

Growing U.S. trade deficit with China cost more than 2.7 million jobs between 2001 and 2011, with job losses in every state

By Robert E. Scott | August 23, 2012

Briefing Paper #345

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Briefing Paper: Growing U.S. trade deficit with China cost 2.8 million jobs between 2001 and 2010

Since China entered the World Trade Organization in 2001, the extraordinary growth of trade between China and the United States has had a dramatic effect on U.S. workers and the domestic economy, though in neither case has this effect been beneficial. The United States is piling up foreign debt and losing export capacity, and the growing trade deficit with China has been a prime contributor to the crisis in U.S. manufacturing employment. Between 2001 and 2011, the trade deficit with China eliminated or displaced more than 2.7 million U.S. jobs, over 2.1 million of which (76.9 percent) were in manufacturing. These lost manufacturing jobs account for more than half of all U.S. manufacturing jobs lost or displaced between 2001 and 2011.

Supplemental Table A: Jobs displaced due to U.S. trade deficits with China, by congressional district, 2001–2011 (ranked by share of jobs displaced) [PDF] [Excel]

Supplemental Table B: Jobs displaced due to U.S. trade deficits with China, by congressional district, 2001–2011 (sorted by state and congressional district) [PDF] [Excel]

Supplemental Table C: U.S. trade with China, by industry, 2001–2011 [PDF] [Excel]

The more than 2.7 million jobs lost or displaced in all sectors include 662,100 jobs from 2008 to 2011 alone—even though imports from China and the rest of the world plunged in 2009. (Imports from China have since recovered and surpassed their peak of 2008.) The growing trade deficit with China has cost jobs in all 50 states and the District of Columbia and Puerto Rico, as well as in each congressional district.

Among specific industries, the trade deficit in the computer and electronic products industry grew the most, and 1,064,800 jobs were displaced, 38.8 percent of the 2001–2011 total. As a result, many of the hardest-hit congressional districts were in California, Texas, Oregon, Massachusetts, Colorado, and Minnesota, where jobs in that industry are concentrated. Some districts in North Carolina, Georgia, and Alabama were also especially hard-hit by job displacement in a variety of manufacturing industries, including computers and electronic products, textiles and apparel, and furniture.

But the jobs impact of the China trade deficit is not restricted to job loss and displacement. Competition with low-wage workers from less-developed countries such as China has driven down wages for workers in U.S. manufacturing and reduced the wages and bargaining power of similar, non-college-educated workers throughout the economy. The affected population includes essentially all workers with less than a four-year college degree—roughly 70 percent of the workforce, or about 100 million workers (U.S. Census Bureau 2012b).

Put another way, for a typical full-time median-wage earner, earnings losses due to globalization totaled approximately $1,400 per year as of 2006 (Bivens 2008a). For a typical household with two earners, the annual cost is more than $2,500. China is the most important source of downward wage pressure from trade with less-developed countries because it pays very low wages and because its products make up such a large portion of U.S. imports (China was responsible for 55.3 percent of U.S. non-oil imports from less-developed countries in 2011).

These conclusions about the jobs impact of trade with China arise from the following specific findings of this study:

  • Most of the jobs lost or displaced by trade with China between 2001 and 2011 were in manufacturing industries (more than 2.1 million jobs, or 76.9 percent).
  • Within manufacturing, rapidly growing imports of computer and electronic products (including computers, parts, semiconductors, and audio-video equipment) accounted for 54.9 percent of the $217.5 billion increase in the U.S. trade deficit with China between 2001 and 2011. The growth of this deficit contributed to the elimination of 1,064,800 U.S. jobs in computer and electronic products in this period. Indeed, in 2011, the total U.S. trade deficit with China was $301.6 billion—$139.3 billion of which was in computer and electronic products.
  • Global trade in advanced technology products—often discussed as a source of comparative advantage for the United States—is instead dominated by China. This broad category of high-end technology products includes the more advanced elements of the computer and electronic products industry as well as other sectors such as biotechnology, life sciences, aerospace, and nuclear technology. In 2011, the United States had a $109.4 billion deficit in advanced technology products with China, which was responsible for 36.3 percent of the total U.S.-China trade deficit. In contrast, the United States had a $9.7 billion surplus in advanced technology products with the rest of the world in 2011.
  • Other industrial sectors hit hard by growing trade deficits with China between 2001 and 2011 include apparel and accessories (211,200 jobs), textile mills and textile product mills (106,200), fabricated metal products (120,600), furniture and fixtures (80,700), plastics and rubber products (57,600), motor vehicles and parts (19,800), and miscellaneous manufactured goods (111,800). Several service sectors were also hit hard by indirect job losses, including administrative, support, and waste management services (160,600) and professional, scientific, and technical services (145,000).
  • The more than 2.7 million U.S. jobs lost or displaced by the trade deficit with China between 2001 and 2011 were distributed among all 50 states, the District of Columbia, and Puerto Rico, with the biggest net losses occurring in California (474,700 jobs), Texas (239,600), New York (158,800), Illinois (113,700), North Carolina (110,300), Florida (106,100), Pennsylvania (101,200), Ohio (95,900), Massachusetts (92,700), and Georgia (87,300).
  • Jobs displaced due to growing deficits with China equaled or exceeded 2.2 percent of total employment in the 12 hardest-hit states: New Hampshire (20,400 jobs lost or displaced, equal to 2.94 percent of total state employment), California (474,700, 2.87 percent), Massachusetts (92,700, 2.86 percent), Oregon (50,200, 2.85 percent), North Carolina (110,300, 2.67 percent), Minnesota (72,300, 2.66 percent), Idaho (18,200, 2.65 percent), Vermont (8,000, 2.43 percent), Colorado (57,800, 2.38 percent), Texas (239,600, 2.26 percent), Rhode Island (11,800, 2.24 percent), and Alabama (43,900, 2.20 percent).
  • The hardest-hit congressional districts were concentrated in states that were heavily exposed to growing China trade deficits in computer and electronic products and other industries such as furniture, textiles, apparel, and durable goods manufacturing. The three hardest-hit congressional districts were all located in Silicon Valley in California, including the 15th (Santa Clara County, which lost 44,700 jobs, equal to 13.77 percent of all jobs in the district), the 14th (Palo Alto and nearby cities, 32,700 jobs, 10.20 percent), and the 16th (San Jose and other parts of Santa Clara County, 29,000 jobs, 9.55 percent). Of the top 20 hardest-hit districts, seven were in California (in rank order, the 15th, 14th, 16th, 13th, 31st, 34th, and 50th), four were in Texas (31st, 10th, 25th, and 3rd), two were in North Carolina (4th and 10th), two were in Massachusetts (5th and 3rd), and one each in Oregon (1st), Georgia (9th), Colorado (4th), Minnesota (1st), and Alabama (5th). Each of these districts lost at least 11,400 jobs, or more than 3.7 percent of its total jobs.

The job displacement estimates in this study are conservative. They include only the direct and indirect jobs displaced by trade, and exclude jobs in domestic wholesale and retail trade or advertising; they also exclude re-spending employment.1 However, during the Great Recession of 2007–2009, and continuing through 2011, jobs displaced by China trade reduced wages and spending, which led to further job losses.

Read the Full Report on the EPI Website

© 2012 Economic Policy Institute


Filed Under: Facts, Trade, United States Tagged With: , , , ,

Free Trade with China? No, Gracias

August 9, 2012 by

Global Geopolitics & Political Economy / IPS

By Marcela Valente

BUENOS AIRES, Aug 8 2012 (IPS) – There is little likelihood that South America’s Mercosur trade bloc will take up China’s proposal to establish a free trade agreement, at least in the short term. Experts and industrialists fear an invasion of cheap Chinese goods, and unequal competition.

Although the sources consulted by IPS agreed that trade and investment between Mercosur (Southern Common Market) and China will continue to expand, they said a free trade deal was unrealistic under the present circumstances.

Chinese Premier Wen Jiabao expressed interest in such an agreement on his Jun. 25 visit to Buenos Aires, in a videoconference with Presidents Cristina Fernández of Argentina, Dilma Rousseff of Brazil, and José Mujica of Uruguay.

The four leaders welcomed the idea of forging closer trade ties between Mercosur and China.

Paraguay, Mercosur’s fourth founding member, has been suspended from the bloc since that country’s legislature removed President Fernando Lugo in a lightning-quick impeachment trial on Jun. 22.

At any rate, Paraguay is facing the dilemma of maintaining diplomatic relations with Taiwan or agreeing to cut off ties in order to negotiate with Beijing.

The fifth full member of Mercosur, Venezuela, had not yet been admitted to the bloc at the time of the videoconference. It officially joined on Jul. 31 in Brasilia.

At the last Mercosur summit, held in the Argentine province of Mendoza four days after Wen’s visit, the governments of Argentina, Brazil and Uruguay agreed to strengthen cooperation with China.

They also approved a proposal to send a joint trade mission this year to China ‘s commercial hub, Shanghai.

But they did not elaborate on the Asian giant’s suggestion of freeing up trade, which analysts agree will be a long, complex process.

Mauricio Mesquita Moreira, an Inter-American Development Bank (IDB) expert on international trade, said the conditions are not in place for reaching a free trade deal in the near future.

“On one hand, Argentina and Brazil have industries that are highly vulnerable to competition from Asia. And on the other, the state still has too much of an influence in the promotion of industry in the Chinese economy for Mercosur to accept a liberalisation of trade,” the Brazilian economist told IPS.

“The smaller partners, Uruguay and Paraguay, lack industrial structure, and could benefit from an agreement with China. But being in Mercosur also gives them benefits such as privileged access to the bloc’s larger markets,” he said.

Mesquita Moreira was in Buenos Aires this month to present a study carried out by the IDB together with experts from the Asian Development Bank Institute, which analyses the future of ties between Asia and Latin America.

The study recommends an increase in trade and investment between the two regions.

Argentine economist Guillermo Rozenwurcel, director of the Centre for Research on Economic Development in South America (IDEAS), said “the Chinese proposal is not viable in the least, over the next 10 to 15 years.

“The presidents gave a diplomatic response to the Chinese interlocutors, to show that they had listened to the proposal. But until the playing field is level, there are few prospects for real discussions on free trade,” he told IPS.

Rozenwurcel also said there was little “political margin” for considering the question.

On the other hand, “there is a challenging and complex, but possible, outlook” for boosting trade, investment and scientific and technological cooperation between this region and Asia, he added.

According to the study by the IDB and the Asian Development Bank Institute, trade between Latin America and Asia has grown by an average of 20.5 percent a year since 2000, to 442 billion dollars today.

With that sharp increase over the last 12 years, China, Asia’s biggest supplier of imports to Latin America, is now the region’s second largest trading partner, after the United States.

But the pattern of trade between the two regions is based mainly on exports of raw materials from Latin America and sales of manufactured goods from Asia, experts point out.

Abeceb, a private consultancy in Argentina, reported that trade between Mercosur and China climbed from 10.3 billion dollars a year in 2003 to 77.9 billion dollars in 2011, and could reach 200 billion dollars by 2016.

But Abeceb also noted that in the same period, Argentina’s purchases of manufactured goods from Brazil such as textiles, capital goods, plastics or pharmaceutical products fell as a result of competition from lower-cost imports from China.

In the case of textiles, for example, 56 percent of Argentina’s imports came from Brazil in 2003, but today that proportion is less than 23 percent. Meanwhile, purchases of textiles from China grew from two to 34 percent of the total.

And while footwear imports from Brazil fell from 79.2 percent to 37.5 percent between 2003 and 2011, purchases from China rose from 12.6 to 36 percent in the same period.

The president of Argentina’s toy industry chamber, Miguel Faraoni, said a free trade accord between Mercosur and China “would be very counterproductive.”

“Competition is impossible due to the differences between the policies of each one. China produces between 75 and 80 percent of the toys sold around the world, which means it would be an unequal fight,” he said.

Faraoni said the share of locally produced toys sold on the domestic market has gone up from 10 percent in 2002 to 50 percent today. He also noted that the number of foreign companies producing toys in Argentina has increased.

“Production, employment and investment in machinery and new technologies have grown, and we are exporting eight percent of what is produced to the region and to the Latino market in the United States,” he said.

Faraoni stated that Argentine industry could compete in terms of price and quality with Brazil, “which has the same rules of the game,” but that “opening up the market to China would reverse the gains made in the last few years.”

All rights reserved, IPS – Inter Press Service, 2012.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Featured, Latin America, Trade Tagged With: , , , ,

A New Essay on the Neoliberal Order

June 12, 2012 by

Neoliberalism and the Neoliberal Order – Regressive Economics on a Global Scale

An essay on real economics by Alan F. Fogelquist

Real Political Economy

By Alan F. Fogelquist

This essay discusses some of the main characteristics of today’s neoliberal political and economic order. Other terms exist to describe the same general set of institutions and policy prescriptions, but neoliberalism is a convenient expression for designating them in one word that is now widely used and understood.

Neoliberalism is now used as a generic term to characterize an economic ideology that favors unrestricted “free” markets, “free trade”, macro-economic stability, and a set of related economic policies. Neoliberal ideology favors unrestricted freedom of private corporations to pursue profit, the privatization of public enterprises and services, and the elimination or reduction of public or government control, regulation, and guidance of economic activity.

Read the full essay on the Real Political Economy Site


Filed Under: Economic Crisis, Economic Policy, Economy, Noteworthy, Trade Tagged With: , ,

U.S.: Tea Party Loses in Fight with Big Business

May 17, 2012 by

Global Geopolitics & Political Economy / IPS

By Jim Lobe*

WASHINGTON, May 16, 2012 (IPS) – For leaders of the right-wing populist "Tea Party" who have bragged about their growing influence – if not domination – of the Republican Party, the past week’s battle over the future of the U.S. Export-Import Bank (Ex-Im) has been a humbling experience.

It’s also been a reminder of the power enjoyed by Big Business, the corporate empires with globe-straddling interests, in both major parties in Congress.

While bipartisanship is an increasingly rare commodity in Washington these days, the interests of U.S.-based multinational corporations is something both Democrats and Republicans can agree on.

Such giants as the Boeing Company, backed by the U.S. Chamber of Commerce (USCC) and the National Association of Manufacturers (NAM), not only coaxed a three-year extension for Ex-Im operations out of Congress supposedly preoccupied with reducing the federal deficit, they also got an increase in lending authority from 100 billion dollars last year to 140 billion dollars by 2014.

"The three-year extension and healthy increase in lending level sends the right message to our foreign competitors," said John Hardy, the president of the Coalition for Employment Through Exports (CEE), one of an alphabet soup of business associations that lobbied for the extension.

"American companies that export have the support of their government to level the playing field and help make those sales," he added.

Created in the early days of Franklin Roosevelt’s "New Deal", Ex-Im has survived and prospered under Republican and Democratic administrations alike. This despite occasional complaints on the right side of the political spectrum that its operations amounted to government interference in the free market, and, on the left, that it amounted to "corporate welfare", a phrase ironically adopted by then- Sen. Barack Obama to describe the bank when he was running for president in 2008.

As originally conceived, Ex-Im’s mission has been to create jobs at home by financing sales of U.S. exports to buyers overseas. Over the years, it has become a model for similar institutions, called export credit agencies (ECAs), established by other export-hungry industrialised countries.

In recent decades, its single biggest beneficiary by far has been Boeing, the giant Chicago-based aerospace firm, which has long depended on Ex-Im’s support in its competition with Europe’s Aerobus Industries. Last year, the bank provided 11 billion dollars in financing for Boeing’s foreign customers – nearly a third of its total financing of nearly 33 billion dollars in deals in 2011.

While much of the bank’s opposition in the past has come from Democrats who have described it as a corporate giveaway, not a single Democratic lawmaker in either house opposed its extension this year. This is in major part because it was successfully depicted as a key jobs programme at a time when official unemployment exceeds eight percent and could jeopardise the re-election of Democrats, from President Barack Obama on down.

"With our trade deficit and job situations, exports keep both labour and liberals quiet," said Robert Borosage, founder and president of the progressive Campaign for America’s Future.

But the re-authorisation, with higher lending limits, also fits perfectly with Obama’s two-year-old "National Export Initiative" which calls for doubling U.S. exports from 1.57 trillion dollars in 2009 to more than three trillion dollars in 2015.

Opposition to the bank this year came from the right, particularly from the "Tea Party" Republicans, who won dozens of seats in Congress in the party’s 2010 landslide, and their wealthy backers, including the Club for Growth, a coalition of 527 right-wing and libertarian organisations which raises money for like-minded candidates, and Heritage Action for America, the lobbying affiliate of the far-right Heritage Foundation.

Stressing Ex-Im’s origins in the New Deal – whose many government programmes are viewed as "socialistic" or worse by Tea Party adherents and donors – right-wing critics have argued that it constitutes a destructive interference in the free market similar to the "bank bail-out" that followed the September 2008 financial meltdown on Wall Street.

By funding the bank, argued Sen. Jim DeMint, who is widely considered the de facto leader of the Tea Party in the Senate, "Washington sends competitors the signal that the easiest way to get ahead isn’t to make better companies, but to lobby Congress for special taxpayer benefits."

"And so a vicious cycle emerges. Washington’s attempt to centrally manage the economy only transfers wealth from taxpayers to corporations, it takes those corporations’ eye off the ball, dulling our economy’s competitive edge and slowly making America less and less competitive in the increasingly competitive global market," he wrote in the Washington Examiner in March.

But a month-long multi-million-dollar lobbying campaign mounted by Boeing and the big business associations apparently worked its magic, and, when the votes were counted in the more Tea-Party-heavy House, only 93 members – all Republicans – out of the total 435 members voted against re-authorisation. That was slightly more than a third of the 242 Republican House members.

"In the end, the vote appeared to show that old guard business groups still have muscle in the Tea Party era," the ‘New York Times’ observed.

One week later, the Senate voted by a 78-20 margin to extend the Bank’s charter through 2014. Of the dissenters, 19 were Republican, while the 20th was Sen. Bernie Sanders, a self-described democratic socialist who normally votes with the Democratic caucus.

"It shows the limits of Tea Party power in the Republican caucus," Borosage told IPS. "For all the talk about how they control the caucus, when the business community talks, they seem to get rolled."

The reauthorisation was applauded by the business lobby, with U.S. Chamber of Commerce President and CEO Thomas Donohue saying, "When other countries are providing their own exporters with an estimated one trillion dollars in export finance – often on terms more generous than Ex-Im can provide – failure to reauthorise Ex-Im would amount to unilateral disarmament and cost tens of thousands of American jobs."

In addition to Boeing, other big recipients of Ex-Im’s largesse include KBR (previously known as Kellogg Brown & Root and owned by Halliburton, Inc.), the global engineering, construction, and private military contracting company; General Electric; and Caterpillar, Inc.

*Jim Lobe’s blog on U.S. foreign policy can be read at http://www.lobelog.com.

All rights reserved, IPS – Inter Press Service, 2012.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Economy, Featured, Politics, Trade, United States Tagged With: , ,

Select Bibliography on the Global Political Economy

June 15, 2011 by

This bibliography is being refined and revised.   A new more concise and revised version with commentary and specific recommendations may be presented at a later date.


Filed Under: Book Review, Economic Crisis, Economic Policy, Economy Tagged With:

Is it America vs. Poor Nations in Trade? No.

March 21, 2011 by

Global Geopolitics & Political Economy

Ian Fletcher

Question: is there a fundamental us vs. them dynamic in America’s trade with the developing world? Is a sound trade policy for ourselves ultimately about nothing better than grabbing an economic advantage at the expense of other nations, especially poorer ones?

Some people certainly seem to think so.  To them, ending free trade sounds like a mere invitation for America to become a global economic bully boy.

But they’re wrong. The serious economic rivals of the U.S. and other developed nations are “big boys” whom nobody needs to cry over. We need not have ethical qualms about taking industries away from Japan.

This is true even of the advanced sectors of nations that are still poor overall, such as India and China, as it is not the Third World peasant sectors of these nations that meaningfully compete with us; it is the developed sectors of these nations, which are like islands of First World industry in the Third World. The yuppies of Bangalore are legitimate objects of our rivalry.

The real conflict in international trade isn’t so much rich nations vs. poor as mercantilist nations vs. non-mercantilist ones. Exposing the underlying economics that makes mercantilism work will tend to level the playing field between the former and the latter.

What Third World nations really need is things like, in the words of the International Forum on Globalization, a left-leaning group:

The right to control financial flows across their borders, set the terms of foreign investment, give preference to domestic finance and ownership, place limits on resource extraction, and favor local value-added processing of export commodities.

None of this is a particularly meaningful threat to American prosperity, so there is no reason for us to object.

The above-mentioned policies would bring significant benefits to poorer nations, but impose trivial or zero costs on us. Corporate interests in the U.S. will certainly complain—and doubtless dress up their complaints as the interests of the U.S. economy as a whole—but there is no reason to expect these policies to impose meaningful harm on America at large.

In fact, any U.S. strategy based on exploiting poor nations will be a waste of time for us. It is a low-quality economic strategy that will be outperformed by better strategies. We should be battling it out with Japan, Europe and the emerging technological powers in high technology, not fighting to keep cocoa processing from migrating to Ghana.

These facts all dovetail well with the kind of the economic nationalism America needs: not a predatory attitude of “America first and to h*ll with everyone else,” but an attitude that seeks the best for this country while accepting the right of other nations to seek the interests of their people, too.  If free trade is ended, the losers will be the trade-surplus powers from Beijing to Berlin, not starving children in Africa.

© Copyright 2011 Ian Fletcher. All rights reserved.

This article should not be republished or redistributed without the permission of the original author or copyright holder

Ian Fletcher is Senior Economist of the Coalition for a Prosperous America, a nationwide grass-roots organization dedicated to fixing America’s trade policies and comprising representatives from business, agriculture, and labor. He was previously Research Fellow at the U.S. Business and Industry Council, a Washington think tank, and before that, an economist in private practice serving mainly hedge funds and private equity firms. Educated at Columbia University and the University of Chicago, he lives in San Francisco. He is the author of Free Trade Doesn’t Work: What Should Replace It and Why.


Filed Under: Commentary, Development, Trade Tagged With:

Globalization in the Reverse Gear

December 14, 2010 by

Global Geopolitics & Political Economy / IDN

By Roberto Savio*

IDN-InDepth NewsViewpoint  
 
ROME (IDN) – Citizens all over the world are now being confronted with a series of hammering news releases by WikiLeaks’ revelations on how U.S. diplomats see the world and how the financial capital speculates about the weaknesses of states from Italy to Germany.

While developed countries have been carrying out massive cuts to their national budgets with sweeping layoffs, governments of the world had declared — even before COP 16 ended — that not much will be accomplished at the climate change meeting in Cancun, Mexico.

In light of these facts, we should start reflecting on three topics that are by and large absent from daily media. Is this absence due to the lack of capacity in the news system? Or is it because these topics are not part of the political debate, therefore they are not considered news?

Today we know that the increasingly commercialized system dealing with information — which is either sellable or useless, especially due to the media crisis — is progressively directed towards events and not processes, which are being increasingly left out of the information flow. It’s becoming too complex to examine the world, and the analysis is progressively restricted to a local level.

In other words, newspapers won’t write about what is not an ‘event’. And if a certain topic is not part of the political agenda, this new journalism won’t cover it.

Nevertheless, we should start reflecting on three topics that guide us through the reading of events: the U.S. hangover of post-unilateralism; social deficit versus fiscal deficit; and the reverting of globalization.

Let’s start with the easiest topic, the U.S.

It is clearer by the day, even for the American elite, that the United States is a country in decline. Until now, the majority of citizens have escaped from this reality by coming up with popular movements like the Tea Party, composed of white citizens that on the one hand want to reduce the role of the state so that the citizens can assume control of their own lives, and on the other, want the return of their country to a position of world leadership.

As Roger Cohen wrote in the New York Times, this cause is in the interest of the American people and is for the good of humanity. Obama will pay a high price for his role as modern mediator in the readjustment of the U.S. to this new reality. For example, his attempts to initiate dialogue with Russia or China have been received with great resistance.

The U.S. delegation went to Cancun without any support from Congress on environmental issues and through a tactical twirl, it goes from a constructive approach to a major controversy with China, an issue which will paralyze the real debate. Besides, the Republican Party will do whatever it takes to block the Obama administration in the next two years. The message is clear: Obama must not win the 2012 elections.

INEBRIATION AND HANGOVER

Meanwhile, the WikiLeaks revelations do not disclose anything new to specialists. They demonstrate two things: that the U.S. continues to be convinced that it must govern the world, even if George W. Bush is out of the picture, and that those who speak with diplomats tell them whatever they want to hear.

Secretary of State Hillary Clinton made a written petition to gather all kinds of private data about the political class of several countries, from their bank accounts to their private activities. No American government official would ever dream about requesting such information from American citizens, and the CIA has formal restrictions in this domain, from none other than the American Congress.

At the same time, not a single document, within the thousands released, reports any kind of criticism or disagreement with U.S. diplomats from the representatives of those countries.

Like it or not, the vast majority of U.S. citizens are still living, if not in inebriation, then at least in the hangover of the unilateral world in which they have been living since World War II. We are currently living in an increasingly multilateral world, where not only China and India but also a series of countries considered in the past as Third World, from Brazil to Indonesia, begin to have their own voice and line of action in the world’s governance.

If one is not aware of this hangover, it will be extremely difficult to understand and process relations with the U.S.

When China becomes the most industrialized country in the world, around 2025, the U.S. process of conversion to reality should have been concluded. The path that this process will take is largely unpredictable. Today, it’s following surreal characters like Sarah Palin, who has considerably increased her popularity in the public opinion polls, surpassing Obama.

The second topic is more complex, but easier to summarize, since it’s obvious to everyone. Today, the primary preoccupation of governments is to react against speculative capital, which is stronger than the protective measures they can apply. The general opinion is that capital speculation will continue to persist in countries where the financial system has structural weaknesses.

Therefore, the conclusion is that the fiscal deficit must be reduced by cutting the government budget at any cost. Within this pattern, massive layoffs, cuts on social services, education and health, increasing the age of retirement and using pension funds to save financial institutions are seen as modernizing measures and acts of political wisdom.

Nobody, except German Chancellor Angela Merkel in a timid manner, has mentioned the unprecedented paradox in which we find ourselves today: speculators who play against countries will charge them if they win and will be compensated by them if they lose.

The last calculations show that a worldwide investment of $12 trillion was made to save the financial system. As part of the emergency plan, the U.S. Federal Reserve alone distributed more than $9 trillion in short-term securities, which accounts for more than the entire American economy. Citigroup received $1.8 trillion, Merry Lynch $1.3 trillion, Morgan Stanley $1.4 trillion and Bear Sterns $960 billion.

During the month of December, Wall Street will distribute $179 billion in bonuses and prizes. The Federal Reserve, which is printing $600 billion to defend its economic manoeuvring, declared that it would create almost 700.000 new jobs. According to this logic, if creating a job costs about $1 million, which financial institution will provide the capital to eliminate unemployment?

The logic of capitalism considers the very idea of eliminating the risks of a market system as a dramatic mistake. This has always been the argument used against leftist economic thought. But now, these policies are not being carried out by the left, but by whole political establishments. The fiscal deficit has priority over the social deficit, which should normally be the first political concern.

The number of jobless is rising, and some theorize a new economy where unemployment becomes the norm. Since the fall of the Berlin Wall, we are unarguably witnessing an increase in wealth that is being distributed extremely disproportionately, concentrated in the hands of the richest 2% of the world’s population.

This process does not know ideological or political differences. Last year, China received 37 times more private investment than Brazil. Today, China has 89 billionaires, against India’s 20.Two decades ago, neither of these countries even had billionaires. Are we facing a new legitimization of the financial system or the incapacity of the political system?

REVERSED GLOBALIZATION

We arrive to the third topic: reversed globalization. It’s not a mystery that economic globalization was set up by the north to continue their gains through finance and trade.

Henry Kissinger designed globalization to be the new stage of U.S. supremacy. Washington took the steering wheel of globalization from the UN system, which was restricted to the areas of assisting development, providing humanitarian aid, and supplying social and technical services such as health and education — all things that do not turn a profit.

Trade is not part of the UN as it belongs to the World Trade Organization (WTO). Finance simply does not have governance organs and it goes where grow this without any ideological consideration.

The globalization of transport has made markets accessible to the South, something unthinkable in the past. WTO director Pascal Lamy observes that sending a container 100 Km, from Marseille to Avignon, costs the same as sending it from Bangkok to Marseille, a 9,400 Km transfer from the other side of the world.

Lamy also points out that talking about a product in terms of nation is consistently more improbable. Telephones, TVs, cars, are almost always assemblies of several factories all over the world with different trade licenses and non-local technologies. The European Union discovered this when trying to block China’s imports, concluding that the majority of their products were in fact products of relocated European companies.

It is not a coincidence that we hear more about these new "emergent economies", recently admitted into the G20, whose weight matters for international processes. They are not only China, India and Brazil, but also Indonesia and South Africa.

In the 15th century, countries in the North represented 20% of the world’s gross product (WGP), against 80% of what were later called underdeveloped countries, China alone holding about half of this figure. During colonialism the North’s share jumped to 30% of the WGP in 1820, and 60% in 1913 with imperialism. Since 1950, it decreased to 40% while countries in the South grew to 60% of the WGP.

In other words, without access to cheap primary sources and privileged trade agreements with the South, inhabited by more than 5 billon people, can the one billon inhabitants of the North maintain their lifestyle and their privileged use of the planet?

Aren’t we entering a new era of reversed globalization that will end the privileges of the North? It is time to ask this question.

* Roberto Savio is founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News [Filed Under: Commentary, Development, Economic Policy, Geopolitics, Security Tagged With: , ,

Latin American Governments Asked to Protect Middle Class

December 14, 2010 by

Global Geopolitics & Political Economy / IDN

By Richard Johnson

IDN-InDepth NewsAnalysis 
 
PARIS (IDN) – The burgeoning middle class is an engine of economic growth in Latin America, but its high vulnerability poses a serious threat to sustainable progress. Latin American governments will therefore do well to ensure that those who are contributing to the region’s growth do not fall down the economic ladder.

This is the upshot of a new report titled ‘Latin American Outlook 2011′, published by the Development Centre of the 33-nation Organisation for Economic Cooperation and Development (OECD) based in Paris. The OECD members include Chile and Mexico, and its Secretary-General Angel Gurria is a Mexican.

The study points out that in Chile, 39 percent of the population within the middle income group does not contribute to any pension scheme. This goes up to 52 percent and 67 percent in Brazil and Mexico, respectively, and to an astonishing 95 percent in Bolivia.

This is because sizeable sections of the middle income groups work in the informal sector. Since informal labour goes hand-in-hand with low social-protection coverage, fewer than half of these workers will benefit from a social safety net when they get old or lose their jobs, explains the report.

There is normally a direct correlation between a sizeable and relatively prosperous middle class and long-term growth, greater equality and less poverty. "However, high levels of labour informality, low coverage of social-protection programmes and limited fiscal resources to improve public services could cancel-out the possible benefits in Latin America," notes the study.

Consequently, reducing the economic vulnerability of Latin Americans who have reached a middle income level and ensuring that more people in the region can move up into this level are "worthy objectives of public policy".

Education is the surest way to lift children to higher social and economic levels, but the ability of education systems in Latin America to boost social mobility remains very limited in comparison to other countries, finds the report.

As the quality of the education received is closely linked to the socio-economic background, the study points out that a Latin American with illiterate parents is ten times more likely to be illiterate than he is to finish university.

To hedge the risks arising from the present situation, the OECD Development Centre asks governments to consolidate the position of the middle sectors by extending social-protection, foster upward social mobility through education, and strengthen the "social contract" by improving the quality of public services such as health and education.

The report pleads with policy makers in the region to protect the most vulnerable people within these middle sectors by: extending social pensions; compulsory (or semi-compulsory) affiliation for the more educated self-employed; greater flexibility regarding contributions and withdrawals; and matching defined contributions (transfers made by the state to an individual’s pension plan).

Greater opportunities can also be created for upward mobility through more and better education by investing more in early childhood development; increasing the quality of public education, through measures such as better administration of schools, a modern system of evaluation, better recruitment and training of teachers as well as better incentive systems; and financing tertiary education through grants and loans.

RESILIENCE

While drawing attention to the vulnerable situation, the OECD Development Centre study also praises the resilience of the Latin American economies.

"The 2009 global crisis affected Latin American economies strongly. Their deeper integration into the international markets for both trade and finance had the negative consequence of spreading the crisis to the region. But while they undoubtedly suffered, the performance of the region’s economies was surprisingly strong particularly when compared to past crises, and this time their medium-term prospects have emerged largely unscathed."

The report adds: "China’s sustained demand for the commodity exports of the region and the timely monetary action of the international community, including IMF (International Monetary Fund) liquidity provisions, are two external factors that are undoubtedly part of the explanation."

However, positive internal factors played a major role too including greater macro policy resilience, stabilised aggregate balance sheets and, for some countries at least, the ability to adopt counter-cyclical fiscal policies. Stronger financial institutions too were a factor, the result of financial sector reforms in most countries over the last decade.

Nevertheless, important challenges for the future remain: Sustained macroeconomic stability now needs to be institutionalised. Policies pursued based on the knowledge that good times are inevitably followed by bad have been demonstrably rewarded by a rapid recovery and strong performance.

"But once economies start growing this experience can start to fade. Sustainability of both external and fiscal balances needs to be secured against political pressures for short-term gains," cautions the report.

In the near term, warns the study, interest-rate and currency risks remain important obstacles for domestic financial development. These risks will need to be addressed through public action such as regulation and education.

The report adds: "The conclusion is that there is no room for complacency. Global economic prospects remain highly uncertain. Although initial response to the crisis has depleted resources and reduced the scope for future action, there is still room for policy action on both the fiscal and monetary fronts."

Combining this with citizens who now appreciate and acknowledge the fruits of sustainable macroeconomic policy brings the chance for the region to improve and further institutionalise structural macroeconomic policy, predicts the OECD Development Centre. (IDN-InDepthNews/09.12.2010)

Copyright © 2010 IDN-InDepthNews | Analysis That Matters

This article should not be republished or redistributed without the permission of the original author or copyright holder.


Filed Under: Economic Policy, Featured, Latin America, Politics Tagged With: ,

G20 Urged to Stop Globalization of Poverty

November 16, 2010 by

Global Geopolitics & Political Economy / IDN

By R Kim

IDN-InDepth NewsAnalysis 
 
SEOUL (IDN) – While praising the South Korean government for putting development on the official agenda of the G20 Seoul Summit, civil society organizations from around the world say they are "deeply concerned about the government’s emphasis on ‘economic growth-oriented development’ as it does not incorporate the values of democracy, human rights, ecological sustainability and gender equality."

Therefore, they cannot but ask the question: ‘development for whom’. "Such a framework which aims to boost the demands in the developing countries seems to serve more the interests of the developed countries rather than that of the developing countries," some 80 civil society organizations and labour unions said in a statement .

The statement emerging from what was described as the ‘alternative summit’ ahead of the Seoul Summit of world’s major economies, said: "Capitalist globalization and the globalization of poverty, which have dominated the world for the last 30 years must be transformed into an alternative system that is just and equitable."

The joint statement said: "Another world — one which has overcome neoliberalism and the power of capital — is possible. Let us move forward towards a fair and ecologically sustainable society through solidarity between national and international social movements."

The G20 Seoul Summit on November 11-12 endorsed the ‘Seoul Development Consensus for Shared Growth’ and the ‘Multi-Year Action Plan on Development’, based on six core principles:

"First, an enduring and meaningful reduction in poverty cannot be achieved without inclusive, sustainable and resilient growth, while the provision of ODA (official development assistance), as well as the mobilization of all other sources of financing, remain essential to the development of most LICs (low income countries).

"Second, we recognize that while there are common factors, there is no single formula for development success. We must therefore engage other developing countries as partners, respecting national ownership of a country’s policies as the most important determinant of its successful development, thereby helping to ensure strong, responsible, accountable and transparent development partnerships between the G20 and LICs.

"Third, our actions must prioritize global or regional systemic issues that call for collective action and have the potential for transformative impact.

"Fourth, we recognize the critical role of the private sector to create jobs and wealth, and the need for a policy environment that supports sustainable private sector-led investment and growth.

"Fifth, we will maximize our value-added and complement the development efforts of other key players by focusing on areas where the G20 has a comparative advantage or could add momentum.

"And finally, we will focus on tangible outcomes of significant impact that remove blockages to improving growth prospects in developing countries, especially LICs."

The civil society organizations and labour unions argue that the "framework of neoliberalism and corporate globalization are responsible for the worsening of global inequality and poverty." Therefore they demand the cancellation of external debt of the "global south" to allow them to have real sustainable development.

They spell out a series of options detailing their arguments:

ALTERNATIVES TO NEOLIBERAL FREE TRADE

The joint statement says that for decades, the WTO (World Trade Organization) has forced countries around the world to open their markets. The volume of global trade has increased tremendously, but free trade, which follows the logic of profit, has destroyed local economies, agriculture and people’s livelihood.

It adds: The Doha Development Agenda (DDA), which covers not only industrial goods, but also agriculture, services and intellectual property rights, and seeks to expand the area of "free trade" will only worsen this situation, as will FTAs (free trade areas), which aim to abolish all kinds of regulations in order to maximize the rights of corporations and investors.

The civil society organizations are convinced that the G20 intends to protect the existing system, emphasizing the logic of free trade and urging a conclusion of the DDA. "We reject the free trade ideology, which glorifies the abolition of tariffs and regulatory measures. We need an alternative trade system that recognizes universal rights, including labour and civil rights and environmental standards. The right of governments to formulate policies appropriate for regional and national economies, and which protect public interests, must not be violated."

AGRICULTURE AND FOOD SOVEREIGNTY

The statement continues: "In the global food and agriculture regime, the transnational corporations (TNCs) try to take full control of everything from the seed to the food on the table. They also threaten food safety by the promotion of more chemicals in fertilizers and pesticides. Furthermore the big industrial farming TNCs are pushing the small scale farmers and peasants to become agricultural workers.

"Agrofuel production and speculation on food are seriously deepening the hunger problem adding to the 1 billion who are already suffering from hunger. Bilateral and bi-regional trade agreements like FTAs and EPAs do not value agriculture as a livelihood and way of life and instead treat it as an industry and source of profit. Furthermore, the recent cases of land grabbing and vicious policies have wrested the livelihoods from the small-scale farmers and their families and have occupied their lands."

The civil society organizations’ answer to solve these problems is food sovereignty. The reason: Food sovereignty is the people’s right to decide its own local food and agriculture production systems. Food sovereignty respects the small farmers’ right to produce sustainably and the consumers’ right to eat safe, healthy, and culturally appropriate food. The joint statement demands regulations on transnational food corporations on the national and international level to put an end to the commodification of food, land and agriculture.

PEACE AND DEMILITARIZATION

The statement points out that increasing military spending and vicious wars are main causes of the global economic and financial crisis. Governments should therefore invest, not in weapons and wars that exacerbate conflict and stimulate acts of revenge, but in relief for common people who have fallen victim to the economic crisis.

The total amount spent on the destructive wars in Iraq and Afghanistan was more than the $985 billion allocated by international financial institutions for emergency bailout funds in the wake of global financial crisis. Global military spending for 2009 amounted to $1.5 trillion.

"This amount of money could pay off more than one-third of the foreign debts owed by countries around the world, the statement says," adding: "Leading countries in the G20 have supported the wars in Iraq and Afghanistan politically and militarily despite popular public opposition to these wars. They must stop the war and withdraw their troops from Afghanistan."

GENDER EQUALITY

The statement points out bluntly: "The financial crisis is the crisis of women. The G20′s sound fiscal policy based on the measure to cut down on welfare spending will lead to increase in women’s unpaid care work and exacerbate feminization of poverty, thus resulting in shifting burden of the financial crisis on women."

Gender equality issue, therefore, should be considered as a cross-cutting issue within the G20 discourse, says the Gender Justice Action group which also signed the joint statement. In particular it asks the G20 to include plans to create decent job and social safety net for women and expand public fund investment on care service.

It urges the G20 to agree on financial transaction tax (FTT) and allocating 70 percent of that for antipoverty and empowering measures for women and the group alienated from the financial sector. Also, the G20 development agenda should integrate gender equality issue and be connected to the UN Millennium Development Goals.

The joint statement calls on the G20 to abolish neoliberal agricultural policies putting more women farmers into poverty, stop the wars worsening economic instability and increase women’s seats in the peace negotiation table, and establish the Gender Equality Working Group for integration of gender equality issue to the G20 agenda and to monitor its implementation. (IDN-InDepthNews/14.11.2010)

Copyright © 2010 IDN-InDepthNews | Analysis That Matters

This article should not be republished, or redistributed without the permission of the original author or copyright holder.


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