Global Economy

China: Smart Intern, Stupid Question

Eric Lotke — Mon, 23 Nov 2009 13:56:08 -0500

A really smart student intern I’ve had the privilege of working with (Jonathan Flack, GWU 2010) asked a really stupid question. “Why,” he asked, “Do we give China everything it wants? Why don’t we challenge them?”

This intern knows what’s going on. He knows about our $2 trillion trade deficit, the manipulation of the Yuan, and dumping of steel pipes in the US markets. Of course, he also knows about human rights and Tibet. But most importantly, he knows that economically China is eating our lunch.

He wants to know why our government doesn’t do something about it. He wants to know why we don’t take them on, rather than giving them the Olympics.

It didn’t take long for him to understand the answer. China isn’t the only winner in this U.S. trade imbalance. US corporations win big too.

-- Nike opens up sweat shops, makes sneakers in China for cheap, and sells them in America for $90 a pair. Who wins? Nike.

-- Nortel and Sun help China develop web censoring equipment. Who’s it good for? Nortel and Sun.

Our approach to China sadly indicates whose side our government is really on. The people need change. Big Business likes the status quo. The Obama administration is wrestling with priorities. Even my intern sees who’s losing.

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PS: What if we don’t change the status quo? Check out my novel, 2044. 2044 starts where George Orwell’s 1984 left off. The problem isn’t Big Brother; it's Big Brother, Inc.

Hani Mhanna

Hani Mhanna — Sun, 22 Nov 2009 01:54:23 -0500

Mind over market individual who is practical and highly spiritual. In the midde of authoring my book which contains an action solution (financial/social/Convergence of religions) parallel plan for the current global crisis.

Winners and Losers: Wall Street Trumps the Real Economy

Eric Lotke — Wed, 15 Jul 2009 10:06:24 -0400

The irony is killing me. Two stories run next to each other in today’s (July 15, 2009) Washington Post. Together they show the triumph of the pseudo-economy over the real economy.

Page A12 carries an article called, The Trickle-Down Effect: An Auto-Parts Maker Fades in the Fallout From Detroit. It’s about a man whose auto-parts supply company used to employ 225 people. Now it’s down to three, two of whom are breaking down machinery to sell as scrap metal.

Don’t get sad yet. He just got an order from GM for $250,000 worth of new parts, and a promise to pay $150,000 for work already rendered. Hooray! But no. His shrunken company doesn’t have money to buy raw materials or workers to fire up his production line. He can’t fulfill the order. And the banks won’t lend him the money.

Now you can get sad. But here’s the irony.

Page A16 carries a different story. Goldman Sachs Earnings Easily Surpass Expectations. "[T]the decimation of its Wall Street rivals allowed the investment bank to romp across the financial landscape, buying low and selling high. ” Now it’s on track to pay record bonuses.

Buying low and selling high is smart trading, of course. But does it add value to the real economy?

While Goldman “romps” the little auto parts supplier is going out of business. On Wall Street, paper value led to paper gains and record bonuses. In Detroit, real machinery is worth more as scrap metal. Page A12 followed by A16. The irony is killing me.

PS: Don’t worry. I bet GM can get parts from suppliers in China who get low-interest loans from government banks.

2044: Big Brother Inc.

Eric Lotke — Fri, 22 May 2009 11:13:26 -0400

I just finished a new novel, 2044.

2044 starts where George Orwell’s 1984 left off. The problem isn’t Big Brother and the leviathan government. The problem is Big Brother Inc., and the all-powerful marketplace.

Orwell was right for his time, of course. Europe lay in smoking ruins, and the statist Stalin peered over the wall with his Big Brother mustache. Orwell sounded the alarm.

But history didn’t unfold that way. The government didn’t take over. It got taken over. Nowadays the commercial sector is in control. Everything is produced en masse and for profit, from clothes to music to political campaigns. Amazon.com knows what I read. Microsoft makes me write with Windows™. ToysRUs tells my kids what they want.

Check out the fights over the new federal budget. Look what the insurance and pharmaceutical industries are doing to health care reform, and how the good old Military Industrial Complex grows the defense budget. Watch giant agribusiness conglomerates dress up like family farmers and milk the government for subsidies. 2044 follows the pattern to the endpoint.

The heroes of 2044 are two overworked professionals who spend long days at the office and short nights in tiny apartments. Malcolm Moore is an engineer who designs security devices for the titanic Tentek Corporation. Jessica Frey is a lawyer who defends such corporations in court. Both are single and both are lonely — though Jessica has a six-year-old son, her sperm-banked answer to isolation.

The story begins when Malcolm discovers a cheap, easy way to take the salt out of seawater. Fresh water is scarce enough right now. By the year 2044, people will die and countries will go to war for water. A microorganism that takes the salt out of seawater could benefit literally billions of people.

But it also threatens business interests who are happy the way things are. Malcolm’s effort to persuade Tentek to sell his discovery gets him fired. His effort to strike out on his own gets him branded a terrorist. People who assist him are harassed, jailed and even killed.

It’s an exciting ride. The action scenes are fun and the politics of terrorism are haunting. There are even touches of humor and occasional references to 1984 — like the corporate merger that creates the new Big Brother Inc., with its happy slogan, “Big Brother is looking out for you.”

I like it, anyway. But then I wrote the thing.

It started some years ago with the idea of a private sector sequel to 1984. The idea didn’t go away, and eventually I stopped waiting. I decided to do it myself. My precise inspiration: “You’ve read a lot of crappy books. You can probably write one that’s no worse.” So I did. And it turned out pretty good.

Publishing it was a different story, though. A story about consolidation in the publishing industry (someone could write a novel about that!), the devotion to proven authors, and the aversion to unhappy endings (true to the original, I’m sorry to say).

So I took the self-publishing route around industry bottlenecks. Now you can buy 2044 direct from the publisher or at Amazon.com, of course. You can read Chapter One for free on my web page or, if you ask me nicely, I’ll send you a PDF (though I kept the purchase price almost as low as the printing costs). If you have any other ideas for outreach or distribution, I’m all ears.

Now it’s onward, back to my nonfiction life (and the outline of a new novel, uplifting with a happy ending). Meanwhile, enjoy the book.

Opportunities Missed At The G-20

Isaiah J. Poole — Mon, 06 Apr 2009 10:47:33 -0400

The debate over how well President Obama did at the G-20 summit last week—and certainly the debate over who touched who first in the encounter between First Lady Michelle Obama and Britain's Queen Elizabeth—doesn't address the most important question of all: What did working families around the world get out of the summit? What could they have gotten?

Co-director Robert Borosage's assessment of the summit of global leaders is that this was a major missed opportunity. "The G-20 leaders chose to agree to agree. The Europeans avoided bold new stimulus commitments. The British and Americans avoided bold new regulation of the financial community. Clearly, the leaders decided to let the crisis decide whether new steps are necessary."

Putting off the difficult questions for another day only risks hobbling recovery in the United States and throughout the globe. It also means that whatever happens in the coming months that will look like recovery will still contain the rot of the flawed economics of the past, and will therefore implode again.

A more promising and more consequential summit would have tackled the agenda in the Global Unions London Declaration put forward before the summit by the International Trade Union Confederation and the Trade Union Advisory Committee. That agenda, endorsed by the AFL-CIO, called for the following:

A coordinated international recovery and sustainable growth plan with maximum impact on job creation focusing on public investment, active labor market policies, protecting the most vulnerable through extended social safety nets, and ‘green economy’ investments that can shift the world economy onto a low-carbon growth path.
Nationalization of insolvent banks immediately so as to restore confidence and lending in the financial system and beyond this establish the new rules and mechanisms to control global finance with full stakeholder engagement. Combatting the risk of wage deflation and reversing the growth of income inequality by extending the coverage of collective bargaining and strengthening wage setting institutions so as to establish a decent floor in labor markets.
Preparing the ground for a far-reaching and ambitious international agreement on climate change at the international climate meeting in Copenhagen, in December.
Establishing a legal benchmark of norms and instruments for such international economic and social institutions as the World Bank, the International Monetary Fund and the World Trade Organization, and institute reforms that bring them under more effective and accountable global governance.

Many of these issues were tacked at the Global Progressive Forum in Brussels, a parallel conference to the G-20 that featured progressive politicians and thinkers from around the world. Borosage was a participant at the forum.

The GPF was an opportunity to hear leaders not only take on though issues but hear bold and promising ideas on such topics as making fair trade a reality, bringing the green economy to the developing world and getting international trade and economic organizations better serve the needs of countries at the bottom of the economic ladder.

Nonetheless, Robert Kuttner, one of the keynote speakers at the conference, wrote in The Huffington Post that "people felt that this global economic crisis should be their moment—but that the politics has not yet caught up with the economics."

"What was missing at the G-20 was a true revolution in the thinking of the global financial and political elites." he wrote. "And that will not happen without either more inspired leadership at the top or more pressure from below."

Last week's G-20 failed to spark the level of united global action needed to accelerate the recovery and start the process of rebuilding the new economy. But there will be more opportunities to push for more forceful global action, and the progressive movement can prepare for the battles ahead with improved coordination between labor and other progressive groups in the United States and their compatriots in other parts of the globe. There are a wealth of good ideas out there—you can capture some of them in the archived material on the Global Progressive Forum website. The building blocks are there for a truly global progressive movement, and it's never been more needed than today.

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.

A New Dark Age

Philip Palij — Wed, 26 Nov 2008 22:23:56 -0500

I wouldn't describe this piece as left or right wing just 'independently harrassed', a world weary look at some high level social and economic changes taking place around us of which the financial emergency is part

Thursday, 27 November 2008

From: Dan Denning at the Old Hat Factory: The Daily Reckoning Australia

Paris, France - Melbourne, Australia

What to make of the world today? You have interest rate cuts in China, bombings in India, wretched economic data in America, onerous taxes in Great Britain, and a new era of deficit spending in Australia. If this were a Bad News Digest, we would have to print an extra edition today.

Let's start with the news in China...............

The central bank there cut one-year interest rates by over one percent to 5.58%. The rate cut is on top of the US$586 Billion spending plan unveiled earlier in the month. Chinese factories, especially in Guangdong province, are being shuttered by owners in the face of much slower demand for consumer goods from America. Workers are idle, and not happy.

Now the problems get thorny for China's central planners. GDP is still forecast to grow at 5.5% in 2009. But remember China is in the midst of one of the great population migrations in human history. Millions of farmers have left the countryside for work in the cities. China's economy must crank out new jobs at the rate of 7% a year for those relocated people, or face the unpleasant side effects.

What are those side effects? Well, unemployment is the obvious one. But it's really the social instability generated from millions of unemployed with no viable economic options. No jobs in the city? Too bad. No jobs in the country? Too bad.

It makes you wonder whether the project of concentrating large populations in urban areas promotes instability, or whether it makes people easier to control. For the stability and legitimacy of national governments, it's an important question. Can they effectively govern AND deliver basic services to large cities?

On the one hand, getting food and water and energy to mega cities is a massive logistics challenge. Then there is the matter of policing those areas. Throw in some protests by the unemployed and you see how fragile urban economies/living spaces might actually be in the future, and how sensitive to numerous disruptions (violent and non-violent alike).

On the other hand, with big arterial roads that can be closed down and road blocks set up at key nodes in road networks, cities become more like vast outdoor prisons in times of crisis. Nobody gets in and nobody gets out without the proper papers.

Sadly, we believe events like those in Mumbai today accelerate us toward a global future where urban travel is permission-based, monitored by electronic surveillance (i.e. the GPS in your car also becomes a visa/passport which can be switched on and off by the authorities).

But that is all down the road. What's around the corner for China's economy and what does it mean for Australia? It means 2009 is shaping up to be a year in which governments pull out all the stops to keep the wheels of commerce greased and rolling.

"China's Chinalco hints at Rio Tinto buy," reports today's Australian. This comes after Rio's biggest fall on the Aussie share-market in 21 years. You'd think at these low prices Rio would be a screaming buy. But there's that little matter of debt.

No discussion of debt is complete without a check up on the United States of America, where consumer spending fell by 1% October, durable goods orders fell, and new home sales fell 5.3% for the month and 40% year-over-year, while prices are down 7% in the last twelve months.

That is the bad economic news. The stock market ignored all that and charged ahead. The S&P has had its biggest four-day run since 1933. It's now up 18% since November 20th. How about that for a bounceback?

The local market is weighed down by the worst-performing sector of 2008, basic materials. But that has not stopped it from opening up by almost three percent. Kevin Rudd's admission that a "temporary" fiscal deficit might be necessary could be contributing to the rally. Here's a hint though we doubt it will be temporary. And the conditions that have prompted it, though unique in their own way, have the same fundamental causes as previous crack up busts.

In fact, it's tempting to say that no one has ever seen a world crisis quite like this. Massive government bailouts...falling house prices...huge debt-to-GDP ratios...the inability of States to prevent terrorism within their own borders...an interconnected world-wide financial and economic crisis. Is it all new?

No. That part of it, the interconnected part, IS new. But the basic tension in today's world is not new. It's good old fashioned human nature and power politics. You could even say we are entering a new feudal period in world history. Whether it's a New Middle Ages or a New Dark Age is something time will have to sort out.

What's clear to us is that the politically powerful are using their influence to arrange government interference on their behalf. The financially weak are paying the price. Bankruptcies in the financial sector are prevented, partly so that rather than liquidating the mal-investment of the phony boom, debtors can be left on the hook and creditors (who get Federal money) will still receive interest payments from consumers.

Western capitalism, as Michael Hudson suggests, has been hijacked Wall Street-Washington oligarchs. Financial institutions are insulated from the free-market consequences of their credit orgy (failure and bankruptcy) by government bailouts. The Fed and the Treasury have stepped into keep Wall Street's asset values high, and transfer the liabilities to the public balance sheet, income-earning taxpayers will pay the bill for the next fifty years (if it's ever repaid at all).

Class-warfare...the 80-20 rule...human nature...it can go by many names. It's not new. And the world has always been interconnected. It's just today, the speed with which information is transmitted (and with which capital responds to the new information) is much greater than before.

It's a 24/7 great economic race to sort out the important stories from the noise, figure out what it means, and then, what to do (if anything). What it seems to be producing, however, is record confusion.... ...while the smoke clears to see how the global financial landscape will really change.

From the Ashes of Neoliberalism

Dennis Chin — Thu, 24 Jul 2008 11:51:12 -0400

The neoliberal agenda has had devastating consequences. To change course, we will need to challenge the values of individualism and competition, and reintroduce the values of community and cooperation.

Partisan Tangle Over Trade Pact With Colombia

Alex Carter — Fri, 11 Apr 2008 10:44:01 -0400

A drive by President Bush to win passage of a modest trade deal with Colombia erupted Wednesday into an angry partisan confrontation between the White House and House Democrats, with both sides using trade as a surrogate for an election-year battle over jobs, national security and the sinking economy.

The Private Sector: Too many imports could spoil stimulus plan

Roger Hickey — Tue, 29 Jan 2008 11:57:17 -0500

Before Fed Chairman Ben Bernanke decides on the next interest rate cut to stimulate the economy and head off a recession, he really needs to listen to ... Ben Bernanke. Mr. Bernanke made clear in testimony that American stimulus no longer encourages much more American production.