globalization

Why Move Jobs From Democracies To Thugocracies?

Dave Johnson — Mon, 21 Mar 2011 14:24:39 -0400

"Free trade" treaties like NAFTA have wiped out entire regions of our country and left entire segments of our population without good-paying jobs -- or in so many cases with no jobs at all. And they have had similar results with our trade "partners." We can see that now. So why are we even talking about doing more of these treaties?

Democracy vs Thugocracy

Democracies set up protections for their people. Democracies protect wages, rights, safety, dignity and the environment. The so-called "free trade" agreements we have been getting into allow companies to get around the borders of our democracy, pitting their employees against the exploited people living under thugocracies with few or no protections at all.

But these treaties have brought vast wealth to a very few, and maybe that was the point all along. Now with the NAFTA and China trade record clear, the DC/corporate elite and Wall Street/Chamber of Commerce multinationals are pushing new trade treaties with South Korea, Columbia, Oman and Panama. Their goal seems to be to make the rich even richer while making things even worse for the rest of us.

NAFTA - "Case Study In Failure"

Ian Fletcher writing at Huffington Post in, More Free Trade Agreements? When NAFTA Failed?,

How have our past trade agreements worked out? Above all, how's the grand-daddy of them all, NAFTA, doing?

Unfortunately, NAFTA is a veritable case study in failure.

How is NAFTA working out for us?

For the four years prior to NAFTA's implementation in 1994, America's annual deficit with Canada averaged a modest $8.1 billion. Twelve years later, it was up to $71 billion.

Our trade with Mexico showed a $1.6 billion surplus in 1993 but by 2010, our deficit had reached $61.6 billion.

Fletcher cites the Economic Policy Institute to detail the dramatic loss of jobs we have suffered. But not just jobs, also wages.

NAFTA has eliminated some 766,000 job opportunities--primarily for non-college-educated workers in manufacturing. Contrary to what the American promoters of NAFTA promised U.S. workers, the agreement did not result in an increased trade surplus with Mexico, but the reverse. As manufacturing jobs disappeared, workers were down-scaled to lower-paying, less-secure services jobs. Within manufacturing, the threat of employers to move production to Mexico proved a powerful weapon for undercutting workers' bargaining power.

And how is NAFTA working out for Mexican workers? It turned low-wage workers into even-lower-wage workers.

In reality, the income gap between the United States and Mexico grew (by over 10 percent) in the first decade of the agreement. This doesn't mean America boomed; we didn't. But Mexico slumped terribly.

In NAFTA's first decade, the Mexican economy averaged 1.8 percent real growth per capita. By contrast, under the protectionist economic policies of 1948-73, Mexico had averaged 3.2 percent growth.

... Mexican workers can often be hired for less than the taxes on American workers; the average maquiladora wage is $1.82/hr. The maquiladora sector is deliberately isolated from the rest of the Mexican economy and contributes little to it. Workers' rights, wages, and benefits are deliberately suppressed. Environmental laws are frequently just ignored.

Mexican agriculture hasn't benefited either: NAFTA turned Mexico from a food exporter to a food importer overnight and over a million farm jobs were wiped out by cheap American food exports, massively subsidized by our various farm programs.

[. . .] Between 1990 and 1999, Mexican manufacturing wages fell 21 percent.

How have our other free-trade agreements worked out? Fletcher again, (please go read his entire post, and take a look at his book, Free Trade Doesn't Work: What Should Replace it and Why, as well)

FTA is not America's only free trade agreement, of course. But our other agreements tell similar tales. We have signed 11 since 2000: with Australia, Bahrain, Chile, Colombia, Jordan, Korea, Oman, Morocco, Singapore, Panama, and Peru. (El Salvador, Nicaragua, Honduras, Guatemala, and the Dominican Republic were lumped together in the Central America Free Trade Agreement or CAFTA.) Every agreement but one has coincided with greater American deficits.

Not such a great record. Let's not do more of this.

A Better Way

Trade doesn't have to be used to pit people against each other. It can be used to lift each other up. We can instead negotiate treaties to demand that the thugocracies offer better wages and protections, or they can't sell to us. Or if they do sell to us as add a tariff that undoes any advantage they get from mistreating their people, and use the money to strengthen our infrastructure and competitiveness in world markets. We can use trade to lift the world for the benefit of all instead of to exploit the world for the benefit of a few.

What "Free Trade" Has Cost The World

Dave Johnson — Mon, 14 Mar 2011 23:55:37 -0400

If you take a job away from someone who is paid a reasonable wage because they enjoy the protections and prosperity of democratic government, move it across a border, and give it to someone living under a thugocracy, forced to work for pennies with no protections whatsoever, it should be just plain obvious that the worker on our side of the border and the worker on the other side of the border are not going to be better off. And when you do this on a massive scale it just stands to reason that most people on both sides of the border are going to be worse off.

But propaganda being what it is we were somehow convinced to try a worldwide experiment in taking good jobs from democracies and turning them into bad jobs in thugocracies. Now, of course, the experiment has run its course and we can see the results.

Worker Against Worker

Setting worker against worker enabled a few people to get really, really really wealthy and powerful and use that wealth to become even more wealthy and powerful. Our country is in decline, burdened by massive trade deficits because the ones with vested interests in cheap labor won't let us won't take on the mercantilists, burdened by budget deficits because those vested interests have bought low taxes and government subsidies, our infrastructure crumbles because multinational business leaders refuse to invest here, with no more need of us as workers, and the resulting hollowed-out middle class can't consume anymore. Other countries also suffer from similar stresses.

Out of this situation a new global elite has emerged, contemptuous of democracy and government and any power but the power of their own money. In country after country, these top few won't share the proceeds with their own, either, while they keep the world from approaching solutions.

In January's post, Establishment Realizing: When You Close The Factory We Can’t Make A Living, I wrote about how "the establishment," or as bloggers call it, "The Village" or "Versailles," are starting to realize that our trade policies just might not be working for us. Of course, they come to this realization only after our trade deficits approach the trillion mark, after we have lost millions of manufacturing jobs, after we have closed tens of thousands of factories, after we have lost the tech manufacturing industry, and after we have abandoned hopes of leading in green manufacturing as well...

(We're still waiting for them to realize that tax cuts do not increase revenue, that spending more on military than all other countries combined might contribute to deficits, that our too-big-to-fail financial sector is capable of causing problems, that the climate really is changing, that allowing corporations to pump money into politics means the end of democracy... but hey, a dollar spent by a vested interest on a politician apparently is a dollar very, very well spent.)

In the Washington Post, Steven Pearlstein recently reviewed Dani Rodrik’s “The Globalization Paradox,”

It is dogma among economists and right-thinking members of the political and business elite that globalization is good and more of it is even better. That is why they invariably view anyone who dissents from this orthodoxy as either ignorant of the logic of comparative advantage or selfishly protectionist.

But what if it turns out that globalization is more of a boon to the members of the global elite than it is to the average Jose?

Right, what if?

In “The Globalization Paradox,” Dani Rodrik demonstrates that those questions are more than hypothetical — that they describe the world as it really is rather than as it exists in economic theory or in the imagination of free trade fundamentalists.

. . . The starting point of Rodrik’s argument is that open markets succeed only when embedded within social, legal and political institutions that provide them legitimacy by ensuring that the benefits of capitalism are broadly shared.

And a unicorn. And a rainbow.

The paradox, as Rodrik sees it, is that globalization will work for everyone only if all countries abide by the same set of rules, hammered out and enforced by some form of technocratic global government. The reality is, however, that most countries are unwilling to give up their sovereignty, their distinctive institutions and their freedom to manage their economies in their own best interests. Not China. Not India. Not the members of the European Union, as they are now discovering. Not even the United States.

In the real world, argues Rodrik, there is a fundamental incompatibility between hyper-globalization on the one hand, and democracy and national sovereignty on the other.

Clyde Prestowitz threw a one-two punch at free trade after Senator John McCain claimed that the iPhone and iPad are Made in America. In Why isn't the iPhone made in America? at Foreign Policy magazine, Prestowitz wrote,

John McCain provided some good laughs and made himself look stupid on a recent ABC news interview by telling Diane Sawyer that the iPhone and iPad are great examples of products that are made in America.

They're not. And given the amount of high technology production in his state, McCain should certainly have known better. The fact that he didn't does make you wonder about what, if anything, they know in the U.S. Senate.

Prestowitz goes on to explain that while the iPhone is manufactured in China, parts, software, design and other components are made all around the world, not necessarily for low wages. He concludes,

So if America actually did produce the stuff it says it is good at producing, it wouldn't have a trade deficit with Asia for which China is the proxy at all. It would have a trade surplus and 20-40,000 more jobs than it has.

Prestowitz looks at a smaller picture here of the back-and-forth of trade with the US and China. Design, software and other capital and technology intensive components are not made in China. But the bulk of the jobs are in China. This could work for everyone if people there were paid enough -- and allowed by their government -- to buy things made here. That would be trade and everyone would be better off. But trade isn't really the point of "free trade."

Then, in It's not just the iPhone that America doesn't make, Prestowitz conitinues,

Okay, so yesterday I explained not only that John McCain was wrong to say the iPhone is made in America (as you already knew), but also that most of you were wrong to think it is made in China. I went on to show that the phone is only assembled in China from high-tech parts that are mostly made in Japan, South Korea, and Taiwan. I further explained that production of these parts is not labor intensive, but capital and technology intensive.

In other words, these parts are just the kinds of products American economists, Silicon Valley venture capitalists and entrepreneurs, and Washington political leaders always say America is the best in the world at making. ... Then I left you with the question of why, if America is so good at making this stuff, it doesn't.

[. . .] it was believed that unilateral free trade (keeping one's markets open, even in the face of protectionism by one's trading partners) was a winning proposition. Thus, there was no need to be concerned about things like subsidization of key foreign industries or loss of capability in these fields, and hence no need for trade measures that might upset delicate geopolitical relationships.

This economic doctrine has been based upon the assumption of Anglo/American economics that economies of scale either don't exist in most traded products and industries or are relatively unimportant. That this assumption is dramatically and demonstrably wrong and not accepted by most of the non-Anglo world has not deterred its application to the making of much American and global trade policy.

In other words, it doesn't work. But we already knew that. We can see it all around us. And it is us who have to live with the results.

VICTOR ESTEBAN

VICTOR ESTEBAN — Mon, 02 Feb 2009 22:30:21 -0500

Falling Apart, Falling Behind

Eric Lotke — Thu, 04 Dec 2008 12:53:40 -0500

Previous posts and our report have discussed how America is falling apart. Collapsing bridges, high unemployment, and so forth. In this post I discuss how we are falling behind.

China recently announced an economic stimulus package worth $586 billion, roughly 7% of its gross domestic product and the largest in its history. The Washington Post describes the plan as response to “increasing social unrest due to factory closings and rising unemployment.”

The plan is being compared to the New Deal. It will “ease credit restrictions, expand social welfare services and launch an infrastructure spending program that would include the construction of new railways, roads and airports.”

This is on top of China’s already aggressive plans to expand high-speed and freight rail nationwide. China has opened at least one new subway system every year for the past six years.

Meanwhile Europe announced a stimulus plan worth $256 billion, or 1.5% of the European Union’s gross domestic product. Every member state will define its own part, but they are generally heavy on public works.

"The goal of the fund is to mobilize workers, jobs and resources," said Spain's Prime Minister, Jose Luis Rodriguez Zapatero. The lion's share of Spain’s $14 billion plan is for new construction and upgrades of existing public buildings, infrastructure, parks, schools and sports facilities

Denmark is ahead with an economy built around “flexicurity,” a generous system of carefully monitored unemployment benefits and training for displaced workers, designed to smooth transitions caused by international trade. The system costs fully 5% of Danish GDP, but former Prime Minister of Denmark, Poul Nyrup Rasmussen, thinks it’s worth it. “Active labour market policies help the unemployed to find work and increase their skills through training in periods between jobs. The idea is to make the journey from the old job to the new job as short, as easy and as productive as possible.”

With new leadership, the U.S. might well snap out of its doldrums. Our leaders no longer think the economy is fundamentally sound, nor do free market ideologues reject government intervention out of hand. The recovery packages are still under construction. But we are closing in on the change we need.

Safe Toys, Edible Food, Smart Globalization

Eric Lotke — Fri, 20 Jun 2008 10:08:44 -0400

Why is it that people who question globalization are treated like Neanderthals?

You’re a protectionist, critics charge. Globalization is here to stay; you can’t turn back the clock, you Neanderthal! Besides, look at all the great stuff we get for cheap!

Well, we can get a lot of great stuff. A lot of it is cheap. But sometimes the low price just hides costs elsewhere. Smart globalizers want to manage the process and make sure the price reflects the reality.

The Campaign for America's Future recently published two reports that reveal the seamy underside of globalization. Toxic Toys is about Halloween candy buckets and Barbie doll accessories imported from China and coated with lead-based paint. It’s about drinking cups with 39,000 parts per million of lead when the legal standard is 600 parts per million. Why the worry? The budget of the Consumer Product Safety Commission is half what it was in 1974 in real dollars. It’s staffed by former lobbyists and industry cronies who deny there’s a problem and obstruct efforts at reform.

Even people who don’t use toys tend to eat. Our second report, Eating Dangerously, examines the food industry and finds the same disregard for health. Since 1973, agricultural imports have increased by 78 percent while inspections decreased exactly the same 78 percent. Yet the FDA’s own research indicates that pesticide violations and infections from shigella and salmonella occur roughly three times as often in imported food.

The stories are painfully familiar. A million pounds of Chinese seafood sold in the U.S with carcinogens and antibiotics not approved for use in the U.S. Half a million pounds of cantaloupes consumed from Mexico and Costa Rica with salmonella contagion. Even cats and dogs aren’t safe. Melamine, a nitrogen-rich chemical used to make fertilizer and plastic, made its way into 60 million cans and pouches of pet food.

Tomatoes are today’s trouble. Are they from Mexico or Florida? Eventually we’ll find out. The problem remains the same.

If we were serious about global trade, we would charge something for the price of admission to U.S. markets. We can still open our doors to global trade. But trading partners need to take the melamine out of the pet food, the lead out of the children’s toys, and the pesticides out of the cantaloupe. Those are the standards we hold U.S. manufacturers to; if you want access to our market, you need to play by our rules.

That’s not Neanderthal. That’s smart.

Smart globalizers want to draft standards into trade agreements. They want to inspect enough cargo to provide a credible risk of detection or hold U.S. companies liable for distribution and sale.

The U.S. isn’t doing enough of that. Free market conservatives are in charge. Spellbound by the ideology of the marketplace, they ignore the obvious fact that markets need grown-up supervision. Historically, that’s the role of government. To create collective institutions that protect shared interests in ways that individuals can’t. Lead testing. Pesticide testing. Evaluating the carcinogenic properties of fertilizer.

We can build a government to serve our interests, or we can leave it to the logic of the market and race to the bottom.

Progressives want to evolve. Who’s the Neanderthal?

Manufacturing a Food Crisis

Brian Dockstader — Thu, 15 May 2008 15:08:29 -0400

How "free trade" is destroying Third World agriculture--and who's fighting back.

Surging oil and food prices fuel global inflation

Alex Carter — Wed, 16 Apr 2008 12:27:37 -0400

Soaring oil and food prices lifted inflation to record levels in Europe on Wednesday and posed a serious threat to governments worldwide amid expert warnings of social upheaval.

Global poverty to halve by 2015, Africa lags

Alex Carter — Wed, 09 Apr 2008 10:25:14 -0400

The world is on course to halve extreme poverty by 2015, but Africa will fall far short of the U.N.'s Millennium Development Goals, the World Bank and International Monetary Fund said on Tuesday.

Nils Humano

Nils Humo — Mon, 25 Feb 2008 13:43:04 -0500

Immigrants Come Here Because Globalization Took Their Jobs There

OurFuture.org Staff — Thu, 07 Feb 2008 09:43:57 -0500