manufacturing

The Washington Times Was Against Protectionism Before It Was For It

Dave Johnson — Mon, 16 Nov 2009 15:00:48 -0800

President Obama is visiting Asia, and is blasted over and over about America's supposedly "protectionist" policies.

"China on Monday accused the United States of increasing protectionism..."

Think about it, the country with the massive trade surplus accuses the country with the massive trade deficit of being "protectionist." Call it The Audacity Of Projection.

Our trade opponents have learned that all they have to do is shout the word “protectionist” and their American enablers will quickly run from doing anything that might help American companies and workers. But what happens later, when the consequences start hitting home? Do the "free trade" shouting, foreign-competition enablers take the blame and accept responsibility when Amercan dollars are spent overseas and American workers lose jobs and American factories close? Who could have known that they would point the finger at the President instead of themselves?

Here is what I am talking about:

On February 8, 2009, during the debate over the stimulus package, the conservative Washington Times joined the "free trade" chorus, denouncing the package's proposed "Buy American" requirements as the same kind of "protectionism" that conservative mythology says caused the Great Depression: EDITORIAL: How to cause a depression,

...Tucked within the economic stimulus bill the House passed last week was a clause requiring state and local public works agencies to buy American iron and steel for their reconstruction projects, and the Senate expanded it to all manufactured goods.

[. . .] The stimulus bill has a way to go before it reaches Mr. Obama's desk, but if strong "buy American" mandates are present at that time, he will have no choice but to veto the bill. Otherwise, he will be forever known as Barack H. (Hoover or Hawley) Obama.

Conservative free-traders got what they demanded. In response to these and other cries of “protectionism!” the Senate backed away from the Buy American clause, changing it to vague language requiring that the money be spent in ways consistent with existing treaties.

Since this wording gives the President some discretion in how the money is spent conservatives started demanding the President spend it ... outside of the country. For example, a Washington Times editorial on March 24, EDITORIAL: The Mexican-American War of 2009, ended by blasting President Obama for wanting American stimulus dollars to stimulate America's economy:

"Wasn't Mr. Obama going to be the "international" president who was going to get the rest of the world to love us? The path to improving relations does not involve destroying jobs in other countries as well as in our own."

So now it turns out that many stimulus dollars are being spent according to the wishes of the "free trade" conservatives, with money to purchase wind turbines creating jobs in Europe and China, and who could have known, the very same free-trade conservatives are JUST OUTRAGED that President Obama is sending American stimulus dollars out of the country! For example, a Washington Times editorial on November 13, EDITORIAL: Stimulus creates jobs in China, begins,

Of the $1 billion in clean-energy stimulus money spent since the beginning of September, $850 million has gone to foreign wind companies. It doesn't take a bunch of experts at a hastily planned "jobs summit" to discover this isn't the way to bolster employment in America.

Indeed, the 11 U.S. wind farms that received stimulus money from the Treasury have imported 695 of the 982 wind turbines to be installed, creating 4,500 jobs overseas. That's far more overseas work than the stimulus money has created in the United States.

Yes, how DARE they not require that American stimulus dollars be spent in America! This from the very same Washington Times editors who earlier in the year demanded exactly that.

Who could have known that conservatives would attack President Obama for the consequences of giving in to conservative demands??!! The Washington Times was against protectionism before they were for it. Call it The Audacity Of Hypocrisy.

The lesson to be learned here is to stop listening to these conservative, "free trade" clowns. They are only interested in making the rich richer at the expense of the rest of us and will say whatever advances that goal. We should start just doing what is right for the country, our workers, our factories, our companies and our jobs.

New Unemployment, Old Solutions

Eric Lotke — Fri, 06 Nov 2009 09:09:34 -0800

Today’s unemployment data contain gloomy news. Gloomy, but expected. The interpretation of the data is even worse.

First, the data. Unemployment rose to 10.2 percent last month, breaking the double digit barrier. Most people expected it to happen, though the job loss (190,000) was a bit worse than most economic forecasts (175,000). We can maybe be happy that the October job loss wasn’t as high as September (263,000), but this modest deceleration doesn’t mean much to the 15.7 million people without work, the 9.3 million people working part-time but looking for full-time, or the 3.2 million people who are discouraged or marginally attached to the work force and barely even looking anymore. Nearly 20 percent of the workforce isn’t where it wants to be.

In other words, it’s bad. You don’t need me or the Bureau of Labor Statistics to tell you that.

The interesting part is where it’s bad and what to do about it.

The biggest job losses in October were in construction (62,000) and manufacturing (61,000). In the last year, these sectors have lost over 2.5 million jobs between them. Job losses in these sectors hurt worse than most other sectors. Manufacturing jobs have a bigger economic “multiplier” than other sectors, creating more jobs and more economic activity around them. Manufacturing creates jobs “downstream,” as production workers buy sandwiches from restaurants; and “upstream,” as steelworkers and coal miners work to provide raw material. The benefits of construction obviously count for more and last longer than just the construction itself. Anybody who doesn't live in a cave knows that.

But manufacturing and construction are losing more jobs than any other sector. Health care and temporary jobs are the only positive — if we can cheer sickness or a temp job.

Source: Bureau of Labor Statistics

This isn’t just a temporary blip. Construction is sinking from the burst of the housing bubble and general economic doldrums. Manufacturing is suffering from long term structural declines and a trade policy that favors imports over domestic production.

The solution leaps out from the data. These two sectors respond most clearly to public sector investment. During this downturn, we can build roads, rail lines and bridges. During this downturn, we can fix school roofs and turn temporary trailers for overcrowded schools into permanent classrooms for eager students. During this downturn, we can build the windmills and install the solar cells to move us towards energy independence. During this downturn we can rebuild a productive economy for the future.

Source: Bureau of Labor Statistics

Maybe a quarter of the 800 billion stimulus package pushed in this direction. We need more. First, we need more stimulus. Good old-fashioned Keynesian stimulus during the downturn. Put people to work laying those rail lines and fixing those school roofs.

Second, we need to make sure the money stays in our own economy. We can’t ask American taxpayers to foot the bill or expect American workers to cheer when the windmills of the new energy economy are imported from Spain. It’s no gift to our economy to fix the water main with pipes imported from China that were dumped in US markets at below market costs, driving our own domestic pipe industry out of business. We can do better. We need to do better.

I’ll close with the thing we don’t need, the interpretation I warned against in the beginning. The Associated Press story about today’s unemployment data put it this way: “A robust economic recovery won't be sustainable if consumers don't pick up their spending.”

Wrong wrong wrong. The debt-driven consumption economy was the problem. The solution is not for consumers without jobs to start spending again. The solution is to rebuild our economy. From the ground up. The old fashioned way.

Green Shoots. For Whom?

Eric Lotke — Thu, 05 Nov 2009 09:43:58 -0800

Today’s “Productivity and Costs” data from the Bureau of Labor Statistics contain what looks like good news. Productivity increased at a 9.5 percent annual rate during the third quarter of 2009, the largest gain since 2003.

The Associated Press called it “sizzling.” The New York Times said we “surged.”

It’s good news and I’m happy about it. I especially like the 4.0 percent increase in outputs, led by a 12.4 percent increase in the manufacturing of durable goods. It almost starts to look like green shoots in a gray economy.

But keep the cork in the bottles. The hours worked last quarter dropped by fully 5.0 percent. The productivity gain came from doing more work in fewer hours. In the durable goods sector, the hours worked dropped a full 7.2 percent. The increase in productivity is fundamentally about people working harder.

And people aren’t getting paid for their hard work. Real hourly compensation rose only 0.2 percent last quarter. So if somebody is pocketing the gains from 9.5 percent increase in productivity, it isn’t the people working on the lines. Yes, they’re happy to have jobs. Yes, it’s nice to see any gain at all after a decade of decline in wages and income. But no, we don’t want to recreate the bubble that popped. We need to make sure these gains are widely shared and that the people doing the work reap their fair share of the benefit.

Source: BLS

Wall Street's War Against the Real Economy & We, the People

Dave Johnson — Wed, 04 Nov 2009 03:00:15 -0800

At a meeting with bloggers before last week's Building The New Economy conference, AFL-CIO President Rich Trumka talked about how we have developed two economies, one real and one financial. As he said, originally the financial sector was designed to support the real economy by providing capital as needed for building manufacturing facilities, public infrastructure, etc. But in recent decades the power of Wall Street has twisted that relationship until the real economy now feeds the financial economy.

As I have been writing about, for decades the real economy has been "financialized" by the Wall Street types -- sold off piece by piece providing short term profits for a very few. We lost more than 50,000 manufacturing facilities in just the last decade! If you sell your house you might have some cash in your own pocket for a while but your family doesn't have a place to live and the present state of our economy demonstrates the long term cost of this kind of short-term thinking: a few Wall Street types have a bunch of cash and the rest of us don't have an economy anymore.

As each factory closes and its jobs are eliminated the companies that supplied machines, parts and supplies also go away. The effect on those of us still employed (for now) has been profound as we work longer hours for less pay and fewer benefits with ever-higher stress levels. A few get ever richer, the rest of us have ever-lower standards of living and quality of life. And our country's ability to bounce back becomes ever more compromised.

Along with others at CAF I have been exploring how We, the People became the servants of Wall Street and what to do about it. The post Companies As Buy-And-Sell Commodities - Workers, Customers and Country As Costs laid out the pattern of company buyouts and takeovers since Reagan. Here is the company-buyout pattern that has turned into a machine with no human concerns:

buying up good companies, shedding and outsourcing the workers, cutting their pay and benefits, outsourcing and cheapening the product or service, fleecing and mistreating the customers, closing the offices and factories and running up debt.

The post Caught In A Machine That Grinds Us Up talked about the incentives that created this inhuman machine:

I have described here a destructive, unsustainable system that creates company- and society-breaking machines. These exist because of the economic and social incentives that our government has set up and we allow to stay in place. Breaking unions, stealing pensions, outsourcing jobs and squeezing customers all depend on government not enforcing laws and regulations – especially labor, consumer and environmental rules. …

Certainly there is no incentive at the top to stop this. This system helps a wealthy few get ever wealthier and not feel the consequences. The people who do this are celebrated as "successful." And if they don’t like the resulting devastation to the economy, community, country and world they can just hop into their private jet or yacht to retire to their private island or tax haven.

This is conservative economics and the long-term consequences. Since Reagan supposedly stopped government from "picking winners and losers" our government has indeed been picking winners and losers with Wall Street winning and the rest of us losing. This brought about a concentration of wealth so severe that a very few now control almost all of the wealth of the country.

Over and over again we see the consequences of conservative economics and Wall Street domination: Short-term profits for a very few with devastating long-term consequences for the rest of us.

We see these consequences now as the economy supposedly enters “recovery” – Wall Street is reaping vast profits and paying astonishing bonuses – enabled by taxpayer dollars – while the taxpayers themselves face loss of houses, raises or jobs, pensions, health care, etc. Gains for a few at the expense of the rest of us.

Wall Street vs Costco

Just as with the private equity game, Wall Street and market ideology has been at war with any part of our economy that benefits customers or workers. For example, in 2005 the NY Times took a look at Wall Street’s war against Costco, How Costco Became the Anti-Wal-Mart. The complaint? Costco treats its customers and workers well. The article quotes one after another Wall Street “analyst” complaining that Costco is “altruistic” or “overly generous.” One makes it clear, saying the company “could force employees to pick up a little more of the burden.” In their eyes a business serving customers or employees is wrong. From the article,

Some Wall Street analysts assert that Mr. Sinegal is overly generous not only to Costco's customers but to its workers as well.

Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. One analyst, Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder."

The head of Costco explained that they take a longer-term view:

Mr. Sinegal, whose father was a coal miner and steelworker, gave a simple explanation. "On Wall Street, they're in the business of making money between now and next Thursday," he said. "I don't say that with any bitterness, but we can't take that view. We want to build a company that will still be here 50 and 60 years from now."

And how does he do for himself?

Despite Costco's impressive record, Mr. Sinegal's salary is just $350,000, although he also received a $200,000 bonus last year. That puts him at less than 10 percent of many other chief executives, though Costco ranks 29th in revenue among all American companies.

"I've been very well rewarded," said Mr. Sinegal, who is worth more than $150 million thanks to his Costco stock holdings.

So in 2005 Wall Street’s short-term view of how Costco should operate was to squeeze the workers, cheapen the products, fleece the customers and grossly overpay the CEO. Costco did none of that, and now it is 2009 – the long term. How is Costco doing? I looked over their annual report and they are going just fine. According to The Motley Fool,

The retailer of pianos, coffins, and, yes, 30-pound jars of mayonnaise -- along with hundreds of other goods in bulk -- has managed to continue growing during the recession, impressively avoiding any layoffs in the process.

By the way, last year Sinegal’s salary was still $350,000. And a week ago US News and World Report wrote about Sinegal that he still “has a habit, which sometimes irks stockholders and almost certainly annoys his competitors, of taking excellent care of his employees.”

So Costco, a real company, was under attack from Wall Street for providing actual service to customers and actual pay and benefits to employees who were actually in the United States. And Costco came out OK through the 2008 financial crisis and aftermath.

But then, what we call Wall Street came out of this OK as well. Thanks to their stranglehold on our political and economic systems Wall Street came out of all this enriched and emboldened, using taxpayer dollars to pay bonuses and increase their lobbying. Many of the individuals who might have looted and destroyed companies and communities are rich and gone, others are still collecting bonuses. As far as the public sees, few of them have faced negative consequences for what they did -- virtually guaranteeing that such activities will continue.

Lessons

What lesson should we take away from this? Costco is a rare exception to the new rules. How many companies can get away with ignoring the demands of Wall Street that they cheapen the products, squeeze the employees and drain their surrounding communities? Why do we allow a system that enriches a very few in the short term while harming the rest of us, and how do we change this? Why do we tolerate IBG-YBG, the "I'll be gone - you'll be gone" take-the-money-and-run attitude that understands that there are no consequences when you take as much as you can from everyone else?

Now that Wall Street and short-term, unsustainable profit-taking have brought us to inevitable collapse, where do we go from here? Well obviously too-big-to-fail is just too big and that is a starting point. We were forced by their size to bail out these institutions, actually making them even bigger, and now they use our money to lobby against taxpayer interests, lobby for more bailout dollars, lobby against compensation curbs and taxes, lobby against politicians who want to change things, against rules to protect consumers, and anything that might change the short-term destructive approach. Using our dollars to do this - did I mention? We should break them up, like England is doing. But our government is, for whatever reasons, not doing so.

The recent Building The New Economy conference provided some guidelines that we can follow as we look for paths out of this. Take a look at the blog posts from conference participants that try to tackle these questions. (There is also a highlights video and should be more video when available.) The themes from the conference included the need for the Obama administration to develop a national industrial/economic policy, a rebalancing of trade, increasing the manufacturing that we do IN the U.S., a new emphasis on increasing research and development, modernizing and maintaining our infrastructure, an infrastructure bank to finance public projects, improving education and access to education including vocational education, and passing the financial reforms currently before Congress.

And how about using taxpayer stimulus dollars to actually stimulate OUR economy?

So how do we reign in Wall Street? Leave a comment.

Balance of Trade and Share of Global Manufacturing

Natasha Chart — Fri, 23 Oct 2009 07:10:53 -0700

Last time, we looked at manufacturing output per capita in the world's largest 20 economies. Taking at a smaller set of countries this time, I wanted to see how their ratio of exports to imports measured up against their share of global trade and the percentage of national GDP generated by their manufacturing industries over the last 30 years in five year intervals stepping back from 2008.

Included are China and the US, and five other countries with roughly US-equivalent standards of living: Canada, France, Germany, Japan and the United Kingdom.

The chart below puts the relative size of a country's manufacturing sector next to its export strength and share of world GDP. Looking at the balance of trade figures, only Canada, China and Germany are doing better at selling more than they buy than they were 30 years ago. Yet the three listed countries with a positive balance of trade, China, Germany and Japan, all have manufacturing sectors in excess of 20 percent of GDP. Of those, it's encouraging to see Germany having steadily improved their balance of trade while setting themselves up to meet their Kyoto emissions targets early.

There are countries that are in the business of "cashing out their intellectual assets" through outsourcing, and those who aren't. Productivity gains that decrease the manufacturing job pool aren't the only problem with keeping productive industries up and running.

Next time we'll take a look at how some of these measures compare with the number of manufucturing jobs.

By The Numbers

All figures, such as GDP and manufacturing GDP are from United Nations statistics. The world GDP and world manufacturing figures used to calculate the first row in the table were arrived at by adding entries for GDP and manufacturing output for all countries respectively, then using that number to calculate the percentage of global output generated by manufacturing activity. These figures have then also been used to calculate figures throughout the chart as described below.

(I have issues with the term 'world GDP', but it seems to get the point across.)

For each country, there's an export/import ratio, calculated by using UN reported figures for total exports and imports. Numbers greater than one indicate a positive balance of trade, numbers less than one indicate that a country is buying more than they're selling.

The following three rows for each country allow you to compare the percentage of national GDP generated by manufacturing, the percentage of global manufacturing output their national industry represents, and then their GDP as a percentage of world GDP.

Regarding China, as noted in this article about the largest manufacturing countries from 1990-2008, China's UN-reported data doesn't separate out manufacturing from mining and utilities. Figures for China's manufacturing sector are therefore inflated, as are the ratios calculated from them. The Curious Cat entry suggests that through 2005-2007, the manufacturing share of this figure should have been 78%, so we can guess that their recent numbers, at least, are off by a little over 20%.

Country	Indicator	1978	1983	1988	1993	1998	2003	2008
World	Mfg/GDP Ratio	25%	23%	23%	20%	19%	17%	17%
Canada	Ex/Im Ratio	1.02	1.15	1.03	1	1.05	1.11	1.05
	Mfg/GDP Ratio	17.5%	15.8%	17.5%	14.7%	16.9%	15.4%	13.0%
	% World Mfg.	1.6%	1.9%	2.0%	1.7%	1.9%	2.1%	1.9%
	% World GDP	2.3%	2.7%	2.5%	2.2%	2.1%	2.3%	2.5%
China	Ex/Im Ratio	0.93	1.1	0.92	0.92	1.27	1.08	1.14
	M-Mfg-U/GDP	44.6%	38.2%	38.0%	38.8%	39.3%	40.3%	41.5%
	% World Mfg.	4.1%	4.3%	3.5%	5.0%	7.4%	10.6%	17.3%
	% World GDP	2.3%	2.6%	2.1%	2.5%	3.5%	4.5%	7.2%
France	Ex/Im Ratio	1.03	0.95	0.95	1.05	1.11	1.04	0.91
	Mfg/GDP Ratio	21.0%	18.6%	16.6%	14.7%	14.6%	12.7%	10.7%
	% World Mfg.	4.5%	3.6%	3.7%	3.8%	3.9%	3.6%	3.0%
	% World GDP	5.4%	4.5%	5.1%	5.1%	4.9%	4.9%	4.7%
Germany	Ex/Im Ratio	0.91	0.88	0.99	1	1.05	1.13	1.15
	Mfg/GDP Ratio	28.5%	26.5%	26.5%	21.3%	20.6%	20.2%	21.0%
	% World Mfg.	8.8%	7.0%	8.1%	8.6%	8.1%	7.8%	7.4%
	% World GDP	7.8%	6.1%	6.9%	8.0%	7.3%	6.6%	6.0%
Japan	Ex/Im Ratio	1.18	1.14	1.28	1.32	1.21	1.16	1.01
	Mfg/GDP Ratio	28.8%	28.1%	27.0%	24.3%	22.5%	21.0%	21.3%
	% World Mfg.	12.0%	11.8%	17.8%	21.2%	15.6%	14.1%	10.1%
	% World GDP	10.5%	9.6%	14.9%	17.2%	12.9%	11.4%	8.1%
UK	Ex/Im Ratio	1.06	1.04	0.87	0.97	0.97	0.92	0.9
	Mfg/GDP Ratio	24.6%	22.2%	21.0%	18.4%	17.2%	12.5%	12.1%
	% World Mfg.	3.5%	3.7%	4.0%	3.6%	4.5%	3.7%	3.1%
	% World GDP	3.5%	3.8%	4.3%	3.9%	4.9%	5.0%	4.4%
US	Ex/Im Ratio	0.88	0.84	0.8	0.91	0.86	0.68	0.72
	Mfg/GDP Ratio	22.7%	19.6%	19.4%	17.1%	16.6%	13.6%	13.0%
	% World Mfg.	22.2%	24.5%	22.0%	22.8%	25.9%	23.6%	17.7%
	% World GDP	24.7%	28.5%	25.8%	26.2%	29.1%	29.5%	23.3%

G-20 Manufacturing: A Look At The Numbers

Natasha Chart — Mon, 19 Oct 2009 21:16:51 -0700

It's fairly common to refer to the world's wealthier nations as industrialized nations, though with the advent of outsourcing and widespread export-oriented development strategies, that term isn't as precise as it used to be. Then even if it were precise, discussions of global economic issues often involve numbers that we're ill-prepared to digest and have little to compare to; all the numbers just sound ridiculously large. This is an attempt to quantify industrialization and break it down for comparison among the 20 largest national economies.

So below are the manufacturing output and gross domestic product data for 19 members of the G20, excluding the European Union (which isn't a country,) and including Iran (which would be in the G20 if they were on better terms with the U.S.) broken down per capita and relative to each other.

The countries are ranked in order of their manufacturing:population ratio, or the per capita manufacturing share of GDP. The population figures can be compared to further add some perspective on how relatively industrial different nations are, and how productive (or industrialized) their economies are.

Relative productivity is also important to an understanding of manufacturing as a global industry because manufacturing job pools haven't only been shrinking within countries as investors and managers pit countries against each other on cost. In fact, the global pool of manufacturing jobs has been shrinking, at least in part because of increases in productivity.

A policy solution focused on boosting wages for the general world population might create enough demand to reverse that trend in declining manufacturing employment. Though in the current recession that seems unlikely. A U.S. Census Bureau report indicates that median U.S. income dropped 3.6 percent from 2007-2008, suggesting that a decline in consumer spending power was in full swing before the financial meltdown and subsequent tightening of the credit markets.

The next post in this series will look at the balance of trade as compared to national manufacturing and productive output for seven countries, including the U.S., China, and a selection of five countries with living standards comparable to the U.S.

G20 (w/o EU, +Iran)	Population*	2008 GDP**	2008 Mfg output**	Mfg:Population	Mfg:GDP
Germany	82,140,000	3,649,468,713,255	767,173,986,290	9,340	21%
Japan	127,704,000	4,910,691,611,512	1,044,573,591,840	8,180	21%
Italy	59,855,000	2,303,058,798,157	381,043,924,161	6,366	17%
United States	304,060,000	14,096,716,929,022	1,830,682,964,800	6,021	13%
Canada	33,311,000	1,502,198,148,431	195,141,329,938	5,858	13%
United Kingdom	61,399,000	2,666,266,099,179	323,014,231,511	5,261	12%
France	62,048,000	2,856,528,838,542	306,279,105,638	4,936	11%
South Korea	48,607,000	929,123,721,319	230,763,192,037	4,748	25%
Australia	21,374,000	1,016,897,316,528	100,814,383,824	4,717	10%
Mexico	106,350,000	1,081,683,289,858	196,798,970,122	1,850	18%
Russian Federation	141,800,000	1,676,587,800,343	256,176,482,781	1,807	15%
Argentina	39,876,000	333,322,390,163	70,904,305,110	1,778	21%
Turkey	73,914,000	741,448,415,136	117,362,508,155	1,588	16%
Saudi Arabia	24,646,000	467,600,800,000	38,736,800,000	1,572	8%
Brazil	191,972,000	1,595,497,752,838	237,337,404,166	1,236	15%
China~	1,325,640,000	4,327,024,438,542	1,399,427,894,063	1,056	32%
South Africa	48,687,000	276,445,740,280	46,691,753,078	959	17%
Indonesia	228,249,000	510,779,261,184	139,528,690,939	611	27%
Iran	71,956,000	346,611,390,279	36,510,371,841	507	11%
India	1,139,965,000	1,253,859,848,115	188,135,054,712	165	15%

Resources

* - 2008 population data (pdf); World Bank figures
** - 2008 GDP and Manufacturing output in current US dollars; United Nations figures
~ - UN manufacturing data for China isn't separated out from mining and utilities, used a 78% multiplier on the UN-supplied figure.

Fed Chief Says Trade Imbalance Helped Cause Crisis

Dave Johnson — Mon, 19 Oct 2009 11:51:01 -0700

Here is some news for you: Fed Chief Cites Trade Imbalances’ Role in Crisis,

Ben S. Bernanke, the chairman of the Federal Reserve, said on Monday that global trade imbalances played a central role in the global economic crisis and warned that both the United States and fast-growing Asian nations needed to do more to prevent them from recurring.

[. . .] Asian countries needed to rely less on exports and more on their consumption at home for their economic growth. One way to increase Asian household consumption, he said, would be for countries like China to increase social insurance programs and reduce the uncertainty that currently hangs over many consumers.

In July I wrote a post asking, Did Free Trade Cause The Recession?,

For many years the world has suffered under a “free trade” regime that eliminates good paying jobs in every country, sending the work to countries that keep wages low and restrict workers' ability to organize for a better life. The profits went to an already-wealthy few and the inequities increased, wealth concentrating massively at the very top.

And now consumers around the world have run out of money. This is not a surprise. Did these trade policies cause the recession?

Bernanke's job is to see the issue in terms of money flows. Regular people see it as jobs. They can turn out to be the same thing, if the money flows are shared and reach the regular people. But when they don't and are concentrated among a few, be it a wealthy few corporate insiders or a country that is trying to take over all of the world's manufacturing for itself, regular people lose.

Bernanke is urging China to start consuming. This can mean jobs here - IF China adjusts its currency and starts to let their people buy things we make. Of course, that could also mean sucking up what is left of the planet's resources if it isn't managed in a thoughtful way.

He is also urging America to reduce our budget deficit. Of course, the huge budget deficit comes straight from the Reagan/Bush tax-cuts-for-the-rich. Is he endorsing a return to the 90% top tax rate that led to a stable economy in the past? If so this solves a lot of problems, reducing the incentive for executives to think short term, rebuilding the reliance of companies on local infrastructure. as well as funding that infrastructure again.

But if it is just more short-term thinking for short-term profits at the long-term expense of the rest of us, it will just be more of the same. And if the Wall Streeters remain in charge of the decision-making, this is what will happen. Sigh.

Shorter CBO, Media: 'We Need Science Classes'

Natasha Chart — Fri, 16 Oct 2009 00:55:41 -0700

It's remarkable how often economists ignore physical reality. Whether they're suggesting that economies can act as perpetual motion machines or suggesting that resource availability is meaningless to economic growth, I'm always prompted to think they should make science classes a mandatory part of the economics curriculum.

This week is no different, as the Congressional Budget Office director, Doug Elmendorf, testified that the US economy would barely notice changing environmental conditions such that we should be more worried about potential economic damages and job losses caused by climate mitigation.

The already desertifying American Southwest has cost the agricultural sector billions of dollars every year, just in California, and wildfires are expected to increase as a result. Increased floods in the Midwest have cost farmers and municipalities dearly, as well as costing the federal government aid dollars sent to clean up disaster areas. Those are just two projected impacts of climate disruption, drought and flooding, that have been happening at a minor scale compared with what will occur during projected changes.

In fact, the Midwest is also expected to get heat waves within our lifetimes that would prevent corn crops from setting seed. Does Elmendorf live in a cave that this prospect means nothing to him?

Elmendorf really doesn't see the US economy being much affected by such events increasing in magnitude, spread across the entire globe? The killer heat waves, coastal inundation, environmental refugees, reduced water supplies, none of that will put a dent in the smoothly purring economic engine we've got going here?

Preposterous.

Ignored by the media headlines reporting Elmendorf's testimony, (and in fairness to Elmendorf, not entirely in context) is that the shift away from fossil industry jobs to clean energy jobs will result in a net gain of jobs. Also ignored is that the CBO scoring methods count energy efficiency promotion [and puppies!] as a cost without any economic benefit, in spite of the fact that it would save industry and consumers billions of dollars while lowering emissions dramatically.

And let's get back to that jobs issue. An analysis by Greenpeace International and the European Renewable Energy Council indicated that an emissions reduction target of 50% below 1990 emissions by 2050 would lead to a global net gain of energy sector jobs by 2030. And that's in comparison to a baseline, status quo scenario that has the global ener gy sector losing jobs, especially in nuclear and coal.

That's right. If we do nothing, nuclear and coal industry jobs will be lost anyway, and there won't be enough clean energy sector and efficiency employment to make up the difference.

Consider that per MegaWatt (MW) of capacity, solar creates 15-30 jobs and nuclear, 0.4-0.9 jobs. Bringing up the rear, climate-busting coal creates around 0.18 jobs per MW.

Adding in that nuclear energy is ridiculously expensive and that it would be a decade before we saw any new capacity, its opportunity costs are too high to compare favorably with solar power. Even if you solved its huge water needs and the waste disposal problems. Those are big 'ifs'.

Looking at wind power, the European Wind Energy Association estimates that an installed MW creates around 0.4 jobs, so it does as well as nuclear power once it's up and running. But it's created good manufacturing jobs in recent years, and has a construction employment rate of 2.57 jobs/MW [pdf]. Even in industry-devastated Michigan, a 10 percent state renewable electricity standard is bringing new wind turbine manufacturing jobs, which also highlights the fact that every state stands to gain jobs [pdf] from investment in clean energy and renewables.

Further, clean energy jobs pay well without requiring a college degree. Considering the often ruinous expenses of getting a degree these days (trust me) it's important that living wages be available without taking on that expense.

To protect existing fossil energy industries is to protect industries that are destroying our home and that are already losing jobs. A failure to invest in clean energy is a failure to protect our future interests in the necessities of life and dignified employment. It's also a failure to invest in a growth industry, one that created jobs faster than the rest of the economy even in the face of limited federal attention and huge subsidies for its competition.

If the CBO and the media are incapable of looking at the facts and recognizing the truth of the situation, they need to go back to school.

Manufacturing And Outsourcing -- What Were We Thinking?

Dave Johnson — Sun, 11 Oct 2009 10:10:38 -0700

I'm reading a a review of"Capitalism: A Love Story" at naked capitalism, and came across this,

"I grew up in small towns dominated by manufacturing plants, and I remember that they were prosperous, optimistic, and stable. People who had good jobs at the local mill were not the top of the social order; that was reserved for businessmen and successful professionals, like doctors and lawyers. But they could afford decent homes, creature comforts, vacations, and send their kids to college (not the fanciest, often a state school unless they got a scholarship, but their children could nevertheless hope to do better than their parents). But that had started fading by the 1970s as America’s economic dominance started to slip. Moore clearly is pained at the loss of the America that was (while pointing out it depended on the special circumstances of our post World War II political and manufacturing dominance) and our naivete in trusting in an economic model that has been been turned against the common man."

Remind me, why did we think it was a good idea to stop manufacturing things in America? Why did we outsource the jobs? Why doesn't our government have an industrial policy -- a plan to keep us economically strong?

Looking back at the past few decades I'm not really clear on this. I feel like we are waking up from that scene in Moore's movie where the hypnotists are mesmerizing their victims, looking around at the economic devastation that is the aftermath of decades of conservative economic rule and wondering, What were we thinking?

Anti-Worker Policies Actually Anti-Prosperity

Natasha Chart — Fri, 09 Oct 2009 12:55:55 -0700

This chart from the Bureau of Labor Statistics' report on occupational outlooks, with data from 1996-2006 and projections from 2006-2016, shows job numbers for goods-producing industries. You can see the precipitous drops in manufacturing, as well as the declining rate of increase for construction. The job sectors where people make things, including apparel manufacture and all other production work, are doing poorly and are expected to continue to do poorly.

The bright spots are in health care and the service industry, occupations whose work products are in most all cases consumed locally out of necessity and can't be traded to other countries. We're making less, but we still have to buy from somewhere. The only good news for the average American in that equation is that the dollar has long been the world's reserve currency and so we aren't generally hit with bad exchange rates. Though as Ian Welsh points out, the push to use a basket of currencies to buy oil shows, the dollar will probably lose its unique status in 12-16 years.

It isn't because American workers can't make things, in fact, they're pretty good at it. It's that the political dominance of a so-called 'free' trade ideology has prevented politicians from enforcing fair trade rules of the kind they're allowed under international trade agreements, but that are DOA in Washington, DC. Rather, the American investment class stopped wanting to put up with pesky demands that workers be paid fairly, that environmental protections be part of industrial practice, that safety and health standards be kept high.

Yet as noted in the Harvard Business Review, losing manufacturing capacity means losing innovation capacity. It turns out that the process of making things is in itself instructive and leads to new ideas. As Welsh says, there's very little that can be bought exclusively from America, in dollars, that can't be purchased somewhere else in another currency.

There are some who try to be rosy about the US' rapidly eroding production capabilities, but there's little to be genuinely happy about outside the health sector. In theory, those health services could be used to attract overseas visitors and generate international trade, but the first movers in medical tourism have probably already got us beat both in controlling costs and having welcoming travel policies.

Further, where we have been keeping or gaining manufacturing jobs, they've been among a growing force of temporary workers that have no union representation and consequently, lower pay and (usually no) benefits compared to permanent employees. Companies say the want flexibility, but in a vicious cycle, shifting all the costs of flexibility to the indebted American workforce decreases their collective ability to be customers of the businesses they're working for.

The US consumers' purchasing ability is one of the few remaining reasons to keep the dollar as a global reserve currency, and this too is being undermined by the shift away from manufacturing employment that generously rewarded labor investment.

As it's now good news that we're simply losing jobs at a slower rate, we can't expect to continue the optimism-fueled consumption of previous years. Indeed, we are now relying on government stimulus for increases in home and durable goods purchases, rather than on sustained job growth or wage increases that keep pace with inflation.

What did the US workforce do to deserve this? Only be world leaders in productivity, increasing output even as employers shared less of those productivity gains with employees while actively harassing employees who try to form a union and opposing pro-labor policies from the largest business organization in the US, the Chamber of Commerce.

The United States has as capable and inventive a population as any other country, a workforce that has proved able to adjust to many new opportunities and industries. If a business or economic theory can't turn our work into abundance, that's on them, and some businesses are waking up to it.

As a case in point, the same Chamber of Commerce has so heavily opposed using climate change as a chance to create new industries and employment opportunities that even their member businesses are seeing through this self-defeating spin and leaving. Chamber-supported policies that oppose sharing prosperity downwards and flexibility upwards have undermined household, environmental and national well-being at a time when we're losing our ability to paper over this decreased resilience.

Let's hope that in the end, the US government will choose American workers over proponents of an ideology that wastes their talents.