The majority of Americans want their elected leaders to know that globalization isn’t working for them. Democratic politicians have heard the message and are now taking a few first steps to better regulate America’s integration into the global economy. The November elections—when 37 House and Senate seats changed from “free trade” to “fair trade”—created a Democratic majority that needed to… return to article
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Reader Comments (30)Page 1 of 1 pagesThere’s NOTHING “free” about free trade as it is currently practiced. It is nothing more than a plan to enrich already wealthy elites around the world. Sure, there are the basic economic priciples of comparative advantage and Pareto optimality, but these textbook theories do not come to fruition in reality. Free trade is nothing but a scheme that makes it easier for corporations to find cheaper labor and lax enforcement of environmental standards usually under the protection of an authoritarian regime. No modern economy got that way DUE to free trade, most had protective tariffs and other governemental intervention (like Japan, for example) during their development.
One good thing about free trade though, is that it is actually helping to unite the Democratic Party. Many of the newly-elected “Blue Dogs” ran as ANTI-free traders joining their more progressive brethren.
Posted by lams712 on May 7, 2007 at 9:20 AM lams,
Don’t get too excited about the Democrats — they are united and have been united on free trade for decades. They are united with Republicans, Wall Street and Big Business and listen only to lobbyists and forked-tongue economists.
“The November elections—when 37 House and Senate seats changed from “free trade” to “fair trade”—created a Democratic majority that needed to stake out a new position on trade.” is just semantics. There will be talk of tariffs (Currently China taxes our goods at 25% and we tax them at 2.5%.) hearings and a load of BS leading up to the election. We’ll hear about how CEOs are making too much. Workers are weighed down with premiums, etc. Then, like Social Security and Medicare it will be buried once again.
“...rather than NAFTA being a win-win-win for Mexico, Canada and the United States, wages of workers in all three countries have stagnated since it was implemented.”
I have written to congress, unions, financial publications since NAFTA was up for a vote in 1993 — nobody gives a damn.
NAFTA was initiated by Bush the First and pushed through by Clinton. The American Jobs Creation Act of 2004 was a PR bipartisan boondoggle, creating jobs without regard to Americans and placating European complaints about US gov. subsidies.
The real meaning of free trade is the freeing of transnational corporations from U.S. restrictions protecting our workers — ESHA, EPA, minimum wage, and a whole load of pension and health care benefits. 401(k) plans were instituted for corporations NOT workers.
A few in congress have tried to raise the issue but it goes nowhere — too many powerful people are many huge fortunes the way it is.
For fair trade we would need to require foreign imports to be made under U.S. type restrictions, the insurance and pharmaceutical industries to be completely overhauled, and prevent the conflicts of interest so prevalent with corporate directors who give each other fortunes at the expense of shareholders and citizens.
Instead we’ll continue to gamble U.S. lives with uninspected food, counterfeit drugs and other goods which took decades to assure safety. Continue to exploit cheap labor here and in their home countries. For a few dollars or even a few cents off prices we are endangering the health and safety of millions of people.
I have yet to hear any candidate in either party seriously address these problems. I doubt if many at the top in government are even aware of just how bad is becoming.
Posted by whattheheck on May 7, 2007 at 10:27 AM whattheheck:
You are absolutely correct in your critique of the Democrats. What I was saying is that many of the newly elected “blue dogs” are now actually against free trade joining the progressives against deals like NAFTA. Of course, there are still too many Dems on the side of corporations rather than the people, including much of the Democratic leadership.
I agree with everything you have said regarding “free” trade. In 1993 I was a college student arguing with my economics professor over whether or not NAFTA would lead to more jobs and higher wages. I wish I could tell him to his face “I TOLD YOU SO” in light of the fact that wages in all three NAFTA countries have been stagnating for 14 years now. (I still got an “A” in the econ. class even though the professor disagreed with me).“I have yet to hear any candidate in either party seriously address these problems. I doubt if many at the top in government are even aware of just how bad is becoming”
I think John Edwards and Dennis Kucinich are the only ones even making free trade an issue.
The mainstream media though, is what has really let the people down. It seems that both “liberal” and conservative outlets either portray free trade as something only positive or they don’t discuss trade issues at all.
Posted by lams712 on May 7, 2007 at 1:09 PM lams,
I never had an econ class, but forty years in business gives a pretty good idea of what is workable. When NAFTA was first proposed I suspected it was another case of our elected people swallowing what the experts said with no thinking on their part. That or worse yet, they realized it was good for their contributing base and screw the rest of us. Probably some of each.
In the mid 1980s a client whose company was buying fasteners from Asia told me he saw them dumping plating solution out the back door into a rice paddy — think of how many people this must have effected in twenty years just to make a few cents more on a package of screws.
I have read about a dozen books related to globalization. Perhaps the most disturbing is, “Who Will Tell the People?” by Richard Grieder. Mexicans who come here to do the dirty work at cheap wages are still better off than those who work for some U.S. corporations in their home country.
I know many people who have been adversely affected by the offshoring — some are now luckily retired like me, but others have a long stressful time ahead. I have two sons in their forties, one has lost his job twice so far and the other had two people let go last week leaving the whole office on edge. They know the statistical work they do could go to India any time.
I really have little hope this will change. Lou Dobbs has been reporting on the selling of the U.S. middle class for a couple of years, but I have yet to learn of any affect other than to give folks a chance to vent.At one time I thought when the unions started getting pinched there would be a backlash — not so.
It looks a lot like the way the holocaust developed, just segment by segment over a long enough time that organized resistance was way too little and too late.
Moberg calls for more training. Training to do what? We can’t all go into nursing. My neighbor’s daughter was let go after 19 years with a company and retrained to computers. After two years as a temp she was finally hired full time with benefits. Within a year the company was sold and left town, but not before she was fired again.
I switched to computers at age 52 and managed to work to age 67 when my last client left.
The problem is at the top with our economic policies favoring the big guys with the big bucks. Unless there is a major reversal and emphasis on safety, health and a genuine concern for all people there will be sad times ahead.
Posted by whattheheck on May 7, 2007 at 2:34 PM The Chamber of Commerce is the biggest pro-Free Trade Lobbying body in Washington. The Chamber of Commerce promotes fast track legislation which will push through at least the last pending 4 trade deals. The Chamber of Commerce responds to multinational, national, regional, and local business interests. They are one of the largest lobbying groups, along with the NRA, in DC. Our seemingly benign local Chambers are undermining the people, the jobs, the economy of not only USA wokers but workers worldwide. Perhaps its time we acknowledge the power of local Chambers of Commerce and scrutinize their actions on legislation. What does the Chamber of Commerce have to do with global trade? Perhaps the Chamber has as much influence on Free Trade as the Democrats and the unions. Quite honestly, what is the Chamber of Commerce’s policy on Free Trade, NAFTA, DR-NAFTA, CAFTA?
Posted by Wethepeople on May 7, 2007 at 5:41 PM NAFTA, et al sucks. The Green Party, up here in Canada, is for withdrawing from (or possibly renegotiating) NAFTA. They would (and do) get my vote on that policy alone (as well as for many other worthy ideas).
Posted by David in Canuckistan on May 7, 2007 at 6:39 PM Whattheheck, what do you think of Congressman (and possible presidential candidate) Ron Paul ?
Posted by David in Canuckistan on May 7, 2007 at 11:12 PM Wethepeople,
Over my forty years in business I was approach every few years by the local Chamber of Commerce. Although I investigated the organization, I never saw any reason to join. What I observed here I would expect goes for the top as well.
They were pro-whoever can advance their personal careers. Each one followed the same pattern — They had lots of meetings, sought media time to announce formation of the latest task force, primarily pushed membership expansion and left for a larger city as soon as advantageous.
When we had serious problems such as a racial discrimination lawsuit in our school system, they were silent. When our manufacturing jobs began to be exported, they listed all the advantages (no disadvantages). Their biggest and best solution to anything was to hire an “expert” to tell us the obvious.
This was followed by a PR campaign, with new slogans and a call for more involvement by more local people in telling everyone what a great place this is to work.
------------------
David,Ron Paul: Even though I agree with him on some issues (hate crime designation, gun control) he strikes me as an alarmist. I suggest he take a deep breath and think more before issuing alarming, simplistic statements and solutions.
• Foreign troops gathering at our borders to enforce martial law
• Iraq — We march in so let’s just march outThis gets the media attention, but is pretty shallow, IMO. I hope to hear better, more thoughtful views before the elections. (Not just from him ,but the rest also.)
Posted by whattheheck on May 8, 2007 at 8:08 AM I like Dennis Kucinich on Fair Trade. Scrap NAFTA, FTAA, the WTO, and the rest and go for bilateral trade agreements as we have always done. The size of the US domestic market, which would grow if the middle class had more income, is leverage enough to get a fair deal. We also need to create more high paying jobs in the US. Foreign Direct Investment in the US is declining due to low effective demand in the US consumer goods market so we import everything and purchase it from Walmart which is the engine of the new economic model followed by the current administration.
The Walmart driven “low road” of late global monopoly capitalism is destroying America. Walmart is a template business which is a retail engine pulling the manufacturing train. Walmart is effectively a manufacturer whose vast and diffuse core of vendors have nominal independance. It powerful innovation is the global supply chain which reduces manufacturers to vassels of a giant monopsonistic retailer, with whom they are functionally linked, and whose specifications they must follow on pain of elimination from the market. In the words of labor historian Nelson Lichtenstein, “...the company has transformed thousands of its supplier firms into quaking supplicants who scramble to cut their costs and squeeze the last drop of sweated productivity from millions of workers and thousands of contractors.”
No discussion of global trade issues can possible exclude mention of Walmart as a global economic phenomenon. Its 6,775 stores worldwide (including Sam’s Club) and more than 1.7 million workers dominate the global retail market. With nearly $350 million in sales revenue as of FY ending Jan. ‘07 and over 11% growth over the following year, Walmart’s growth keeps increasing. Though its stock prices have declined from a high in the fourth quarter of ‘06, it has retained its value and continues to attract shareholders.
It has shaped a new circular economic paradigm of export jobs, import cheap goods, stimulate foreign debt purchase through US Treasury securities to boost the dollar, cheapen and thus buy more imports, lose more manufacturing base, shrink domestic consumer goods market, send more jobs out, import more cheap goods, sell more debt to foreigners, boost the dollar and import more s**t, lower wages at home, shrink the domestic market............You get the idea.
Posted by cabdriverinchicago on May 13, 2007 at 1:42 PM Oh, bitch, bitch, bitch. Moberg is trying to sell magazines, but why are the rest of you so gullible?
From April 2006 to April 2007, we had a net loss of 134,000 manufacturing jobs, or about six-tenths of one percent. Those jobs averaged about $18 an hour.
In the same time frame, we had a net gain of over one and one-half million jobs, including over 1,100, 000 service jobs that paid $17.80 and hour or more.
http://www.optimist123.com/optimist/2007/05/bar_chart_of_wh.html
We are manufacturing more than we ever have, using fewer employees. And the American economy is no longer measured in tons of steel or cars produced, but in megabytes of data and technological growth. Whining about the loss of manufacturing jobs is like crying about the poor saddle makers and buggy whip manufacturers, whose families are starving, or whatever they are doing.
Instead of reading Moberg, try reading Steve Conover and Alan Reynolds. Then you won’t appear half so ignorant.
Posted by scorp on May 13, 2007 at 8:52 PM scorp,
“We are manufacturing more than we ever have, using fewer employees. And the American economy is no longer measured in tons of steel or cars produced, but in megabytes of data and technological growth. Whining about the loss of manufacturing jobs is like crying about the poor saddle makers and buggy whip manufacturers, whose families are starving, or whatever they are doing.”
Yes and no…
Manufacturing more than ever? Yes, the introduction of robotics has boosted productivity and eliminated huge sums which pension plans and health care for employees caused us to be noncompetitive globally.
But OUR manufacturing is now done largely by cheap, unregulated foreign labor in foreign locations. Last week an economist I went to hear said, “We have chosen to buy the cheaper priced goods and have no one to blame but ourselves.”
I quickly pointed out that “we” have no choice since even my newest American flag and the shirt on his back was no longer available with a Made in USA label anymore. The “choice” has been made for us by mutual agreement of legislators and CEOs.If the American economy is measured in megabytes of data and technological growth we are indeed in trouble.
The entire tech industry is…
• low in labor intensity
• highly expensive in R&D;and nearly impossible to protect in production
• short term marketable (each product obsolescent at birth)
• a commodity with rapidly decreasing value
• a never-ending training cycleIn 15 years I bought 11 computers, continuous software and hardware upgrades. But it the cost decreased rapidly — post tech decade.
In 1993 RAM upgrades cost me $45.50/MB and in 2003 cost $0.26/MB — compare that to HP/auto cost or bushel of corn.
Just because YOU may have been untouched so far doesn’t mean you can’t be affected by a “1001 days event”. The turkey assumes the farmer is his friend and benefactor. The farmer feeds and waters him each morning and provides a roof over his head for a thousand days.
Then — Happy Thanksgiving!
Posted by whattheheck on May 14, 2007 at 7:37 AM The current weakening of the Dollar is bound to increase US exports by making them more competitive on the global market while cutting imports. This is sure to balance the balance of trade deficit which is approaching $800 billion. Yet the US is still hemoraging jobs despite an increase in exports of autos and factory machine tools. Further, a drop in the dollar by to much could cause foreign investors in US debt like the Chinese to gradually shift their investments to the Euro which is more stable and increasing in value.
Though the US increased exports and has thus taken up some excess domestic industrial capacity, what has happened to an even greater extent is an inflow of many more billions in Foreign Direct Investment in domestic Mergers & Acquisitions in existing US fixed capital formation. According to the US Commerce Department, total cumulative FDI inflows in 2004 amounted to $1.5 trillion. By the first quarter of 2007, the total cumulative gross fixed capital formation in the US accounted for by FDI well exceeded $2 trillion an increase that exceeded the dollar value of the increase in US exports. About one fifth of total US exports derive from US subsidiaries of foreign firms. In addition, much of the increased sales of US goods may derive from foreign subsidiaries of US firms. In both cases the balance of payments gap is unaffected by the sale spurred by the weaker dollar.
The weak dollar hasn’t addressed the question of the loss of US investment. Currently, subsidiaries of foreign firms in the US employ over 5 million workers about a third of them in the manufacturing sector. Workers in this sector can expect to earn wages that are about a 30% above the national average. According to UNCTAD, 2006 was a record year for FDI inflows at nearly one and a quarter trillion since the 2000 record of $1.4 trillion. The US recieved the most FDI inflows for that year replacing the UK as the number one destination of FDI inflows in 2005.The US took in nearly $177 billion in FDI inflows in 2006, a year that saw a global increase of FDI inflows over 2005 by 34.3%. The increase in the US share was significant, over 10%.
The overall effect of the falling dollar on the US economy and employment picture is mixed. Effective bilateral trade agreements to replace NAFTA so as to defend labor standards both here and abroad will increase domestic US effective demand and keep jobs in the US rather than ship them abroad.
Economic growth rates have slowed since 2004 from more than 3.5% annual average GDP growth rate to 2.2% (the last several quarters have averaged around 1% due to high energy prices and lower real income growth and consumption) According to the FED, total industrial capacity utilization rates have equalled the annual average since 1972 of about 81%. Durables are currently at about 78% capacity which is quite low historically. The total industrial average for industrial capacity utilization for the period of the mid-1990s, a period of relatively high economic growth was over 85%. A redistribution of income and wealth from the highly concentrated levels currently seen will spur demand for labor intensive industrial investment in the US and increase GDP growth. So would a lessening of the total trade imbalance so that more foreign investment is drawn into job creation and not treaury debt purchases.
Posted by cabdriverinchicago on May 15, 2007 at 7:15 PM WTH -
Manufacturing more than ever? Yes, the introduction of robotics has boosted productivity and eliminated huge sums which pension plans and health care for employees caused us to be noncompetitive globally.
But OUR manufacturing is now done largely by cheap, unregulated foreign labor in foreign locations. Last week an economist I went to hear said, “We have chosen to buy the cheaper priced goods and have no one to blame but ourselves.”
Do you see the contradiction in what you have just said?
“Manufacturing more than ever? Yes ... “
“But OUR manufacturing is now done largely by cheap, unregulated foreign labor in foreign locations.”
“In 1993 RAM upgrades cost me $45.50/MB and in 2003 cost $0.26/MB ... “
Not to worry. If you can’t find someone who will charge you $45.50/MB for RAM, call me and I assure you I will solve your problem, if that is what you really want. Meanwhile, while we were losing 134,000 low-tech manufacturing jobs in 2006, we gained over one and one-half million service jobs, over two-thirds of which paid as much or more than the low-tech lost manufacturing jobs. If you can see a problem here, your discernment is superior to mine, but I doubt that.
The entire tech industry is…
• low in labor intensity
• highly expensive in R&D;and nearly impossible to protect in production
• short term marketable (each product obsolescent at birth)
• a commodity with rapidly decreasing value
• a never-ending training cycleSo why is R&D;so expensive? Every cent of R&D;costs go to people: entrepreneurs, financiers, researchers, logisticians, whatever. For that matter, trainers are also paid more than low-tech production workers. Low-tech manufacturing jobs belong in China (or wherever), just as they belonged in Japan thirty years ago.
It is absurd to suggest that manufacturing should be maintained in the USA, at higher than necessary cost, while high-tech, better paying jobs go begging. You need to refine your thought processes, which have led you into major error.
Posted by scorp on May 16, 2007 at 11:25 AM The US isn’t really chasing away high tech investment. More and more of it is emerging all the time. Manufacturing investment in consumer goods seem to be very profitable for many foreign firms since there is hundreds of billions of dollars worth of it. They weak and falling dollar is promoting it all the time. We stand to benefit from the jobs if nothing else.
Posted by cabdriverinchicago on May 16, 2007 at 1:58 PM cabby,
Your economic views show a reasoned and rational approach, yet we see such a different picture, you and I.
You quote:
“According to the US Commerce Department...”
“According to the FED...”I believe it stems from your acceptance of “official” government data. You may be getting it directly from BLS or US Census websites, or like most people through the big 3 networks, cable news or mainlining the hype at CNBC, but…
I almost totally disregard any and all of these sources — especially the short term data.
My personal business experience working with company execs on financial reports and knowing their concentration on share price, the buddy system of mutual personal benefits and willingness to do anything to cut expenses (read dump employees) has made any of their comments as worthless as those of government.
--------------• “The current weakening of the Dollar is bound to increase US exports by making them more competitive on the global market while cutting imports.”
About all we have left to export is agriculture. Other reported exports include those to former US based facilities and “US products” which never touched a US shore.
---------------------------------• “...a drop in the dollar by to much could cause foreign investors in US debt like the Chinese to gradually shift their investments to the Euro which is more stable and increasing in value.”
They already have begun doing this.
----------------------------------• “Currently, subsidiaries of foreign firms in the US employ over 5 million workers about a third of them in the manufacturing sector. Workers in this sector can expect to earn wages that are about a 30% above the national average.
Can you give a specific example of this ?!?
--------------------------------------• “Effective bilateral trade agreements to replace NAFTA so as to defend labor standards both here and abroad will increase domestic US effective demand and keep jobs in the US rather than ship them abroad.”
• “A redistribution of income and wealth from the highly concentrated levels currently seen will spur demand for labor intensive industrial investment in the US and increase GDP growth.”
What in the world makes you think either of these will EVER happen?
Both major parties, virtually every major US corporation, and foreign companies are enthusiastically doing all they can to continue down the current path!
---------------------Here are a couple of sources I find informative.
http://www.contraryinvestor.com/moprinter.htm
http://www.ntrs.com (Paul Kasriel’s free commentaries)
Posted by whattheheck on May 16, 2007 at 1:58 PM Scorp,
Do you see the contradiction in what you have just said?
• “Manufacturing more than ever? Yes ... “• “But OUR manufacturing is now done largely by cheap, unregulated foreign labor in foreign locations.”
There is no contradiction.We may be manufacturing more (the we being US companies), but it is not benefiting the country as a whole. The employees have been the first losers, but any gains made in buying the cheaper imported goods will soon be far exceeded in welfare cost and the taxes to pay for them.
• “In 1993 RAM upgrades cost me $45.50/MB and in 2003 cost $0.26/MB ...
Which would I rather have?The lower price which you see as a plus is double-eged.
Those who must continue to upgrade both hardware and software (the Bill Gates perpetual cycle of obsolescence) can do it for less . Manufacturing autos, dishwashers and nuts and bolts made middle class jobs for millions of people since WW2, which would you rather have, gainfully employed people or cheaper products?• “...trainers are also paid more than low-tech production workers. Low-tech manufacturing jobs belong in China (or wherever), just as they belonged in Japan thirty years ago.”
You talk a lot about low-tech manufacturing — like what? Machinists were making $40/hr in my city. Assembly line workers were making $40,000 and up annually. Sure the robotics made us more competitive, but who is going to carry the people who have been dumped in their prime earning years? You and I and our kids will.
• “It is absurd to suggest that manufacturing should be maintained in the USA, at higher than necessary cost, while high-tech, better paying jobs go begging.”
The promise when NAFTA was being touted was the low-tech, low-pay jobs would go. That would have been bad enough, if true, since the least educated citizen would have been a burden to the rest of us. However, as you must have heard by now, our radiologists are losing work to India, our accountants likewise along with many other higher paying jobs still here which are going to people on work visas willing to work cheaper than our recent tuition debt laden college grads
.
Last month Citicorp announced the export of at least 10,000 jobs (just a start) and Circuit City fired 3400 people, “Not because they weren’t go workers, but because we need to hire people willing to work for less.” The average pay was $11.50/hr. (The Circuit City CEO and President. got $10 million each last year.)• “Meanwhile, while we were losing 134,000 low-tech manufacturing jobs in 2006, we gained over one and one-half million service jobs, over two-thirds of which paid as much or more than the low-tech lost manufacturing jobs. If you can see a problem here, your discernment is superior to mine, but I doubt that.”
I don’t know where you get this stuff, but the only service jobs I’ve heard of which are needing large numbers of trained people are in health care. Picture a former GM assembly line guy about age 55 wiping asses and cleaning up vomit. Once again you are thinking low-tech only.
• “You need to refine your thought processes, which have led you into major error.”
We’ve had this debate before and neither of us has been swayed in the least by the other’s comments. You believe in government data — I do not.
Much of my opinion is based on anecdotal evidence from people who I know. More comes from the many globalization books I’ve read — both pro and con. This is info from real life as opposed to the empirical evidence of statistics. Statistics the veracity of which is largely based on guesses and estimates by faceless bureaucrats. Often comparing relatively short time spans and small samplings.
We may have finally run out of bubbles to finance the reckless US consumer-based global market run-up. Tech has become too cheap to carry us. Housing is tanking. Unless there is some way to bubblize commodities I think we will soon realize a frightening global slowing.
We’ll see.
Posted by whattheheck on May 16, 2007 at 6:29 PM WTH,
Some of what you say is probably true. I know that jobs are hemoraging at a quickening pace. Somehow manufacturing investment is making its way here in durables (autos) and consumer goods (much of it food processing). I read in a report from a feature in the economist that about $4.5 trillion in manufactured goods were produced in the US economy in 2006 yet only about 12% of the US GDP is in manufacturing. The $4.5 trillion figure is about a third of the US GDP for that year meaning that about $3 trillion in manufacturing done here, the vast majority of it in dollar value, is done by US subsidiaries of foreign firms which means that much of the larger figure is part of foreign counties’ GDP. In addition, even though a small proportion of foreign direct investment is in manufacturing, about 40% of US workers in manufacturing work for foreign owned subsidiaries. Thus, higher wage employment is increasingly dependant on foreign direct investment.
Your observation that much of US exports aren’t from the US is valid. The weak dollar will eventually not have a positive effect on the US economy.
Posted by cabdriverinchicago on May 16, 2007 at 7:38 PM Cabby,
Yes, increasingly foreign firms are operating in the US — not all good and not all bad. The auto companies were among the first. Foreign autos began a surge back in the 1970s when US quality was at a low ebb and gas was rapidly rising in price. Good product at the right time. They have gained market share ever since.
In 1974 I sold my one-year-old Pontiac LeMans and bought a VW Beetle. I have owned 6 VWs to date, my 1991 Jetta GLI is still fun and economical. VW only lasted a few years in the US (My 1984 GTI was made in Pennsylvania.), but Toyota and Honda have stayed and expanded.
Consider this: The Japanese auto plants are non-union, so they still have an edge over US auto companies. Ford and GM are in deep trouble and Chrysler has just been sold again. Unions are justifiably nervous. Yesterday I read Cerberus plans to cut pay by 30% and benefits are in jeopardy.
Today it was announced there are no plans to cut benefits or wages. (Tomorrow, or this afternoon, plans could change.)My point in all of this recent history?
As soon as the US auto companies leave for foreign lands and unions are kaput — no more Mr. Nice Guy at Honda/Toyota — they can lower their employee costs.
Whether pro union or not isn’t the issue — globalization has put our US long-loved lifestyle on a downward spiral (except for the elite class). Any labor intensive job will eventually reach a global average.
The additional bad news is that the low-labor intensity, high tech jobs require education and skills beyond the reach of the majority of individuals. The rising costs of education, importing of foreign well educated job competitors is putting parents whose jobs are falling in quality in a real bind.
Last month at a discussion of the book The World is Flat, by Thomas Friedman, I met a man in his 50s whose two sons are now in college. He was employed for 20 + years at a local hardware manufacturer until 5 years ago. He has had six jobs since — each at lower pay and now with no benefits. His health insurance premium is outrageous.The official numbers don’t include the stress levels of people like him.
Posted by whattheheck on May 17, 2007 at 7:18 AM Toyota and Kia are taking over the US market in autos. Toyota recently surpassed GM in global sales. In 2006, only 57% of new vehicles sold in the US were from US companies down from 87% in 1970. According to a recent report Toyota has NEVER closed a US plant. While Ford and GM have terminated over 46,000 employees last year and will close 26 North American plants over the next five years, Toyota plans to open more plants and hire more US workers. Over 60% of all cars Toyota sells in North America are manufactured here. Toyota employs over 38,000 people in North America and has invested nearly $17 billion in manufacturing facilities. Toyota has recently become the world’s leading car manufacturer surpassing GM. Toyota is also the leading foreign based manufacturer in the US.
Toyota has followed a general trend in foreign direct investment which has emerged over the past decade and a half. Most big corporations invest and manufacture in the markets they wish to increase their share in over time. Global merchandise trade has been eclipsed by FDI.
Foreign direct investment accounts for about $1.5 trillion in investment in the US but only employs about 5.5 million US workers or less than 4% of the total workforce. Though foreign subsidiaries are far more productive with greater output per worker and contribute disproportionately to US exports. Still, they don’t compensate for the net jobs and income lost by US firms locating abroad and outsourcing despite the fact that foreign firms tend to pay well above the average US wage particularly manufacturing firms. Lean production techniques and efficiency makes FDI less labor intensive so the employment effect is less.
The general direction of manufacturing investment is to cut workers with technology. Over the past 35 years, manufacturing output in the G-7 countries has increased more than 300% while employment has dropped by about 25%. Because of lean production, manufacturing will no longer be the high wage industry it once was and will not sop up unemployment with GDP growth.
The global distribution of wealth is likely to worsen over time. Trade issues are not as important as FDI which is the core of globalizations dynamic in the last couple decades.
Posted by cabdriverinchicago on May 19, 2007 at 2:47 AM cabby,
What is your point? That FDI is good? OK. But what is the net effect on U.S. workers and consumers?
“Trade issues are not as important as FDI which is the core of globalizations dynamic in the last couple decades.”I beg to differ — big time!
China’s tariffs on U.S. imports are ten times ours on theirs — 25%/2.5%.
U.S. manufacturing firms who were my clients began moving operations (jobs) to Asia in the mid 1980s. All of those companies have now left our city. We are a city of 150,000 and lost 10,000 very well paying mfg. jobs in ten years. This has adversely affected approx 25,000 individuals directly and thousands more by trickling down — barbers, dentists, real estate — virtually everyone except the CEOs who are rolling in dollars.The increased productivity due to automation was unavoidable. The exodus of whole companies or divisions was immediate, calamitous and ignored (or worse, cheered) by politicians, the local and national media and economists.
The savings of cheap goods to consumers has a hollow ring, if you are now an entrepreneurial handy man. (Which by the way, does not show in the phony 4.5% unemployment figure.)
Let me know if you here anyone running for president who is aware of this.
Posted by whattheheck on May 19, 2007 at 7:20 AM WTH,
One of the things that is being pointed out with increasing frequency today is that the lowering of US tariffs is not so much on behalf of Chinese exports as US exports from China with a lot of US corporate value added. US tariffs are lowered so as to allow US corporations to resell what they manufacture abroad in the US competitively. This is where Walmart makes a killing. The UNCTAD has repeatedly pointed out that more than a third of all international trade is between parent companies and their overseas subsidiaries. Thus, FDI is the key issue not “trade.”
I agree that anywhere between five to ten million jobs, mostly in manufacturing, have been lost and/or shipped overseas in the past thirty years. WTH we seem to agree on “free trade” especially since I concur that Walmart’s cheap goods and the supposed $100 billion they claim to save the US consumer in a year doesn’t compensate for the money they drain from the economy in low wages, small business failures, lost union jobs and the businesses that create them that include good wages and benefits, and the lost overall tax revenue from all of this massive domestic economic decline.
Globalization just seems to increasingly generate far more losers than winners.
Posted by cabdriverinchicago on May 20, 2007 at 2:46 AM cabby,
It looks like we are only debating the definition of “trade”.
My view is that the companies now exporting to the US from their own cheap labor foreign facilities claimed they needed to go there in order to compete in the global market — which is all about trade. These trader (traitors) to our people are getting richer every day at the expense of the US middle class. The illegal workers here are making other employers profit by being paid sub-minimum wages and taking work from the lowest economic rungs.
Millions were let go over the past 15 to 20 years. First the lucky ones were bribed into taking early retirement. If the carrot didn’t do it they were threatened with losing their health and retirement benefits. Now they are just “honestly” dumped for “...people willing to work for less.” — Circuit City last month.
Globalization didn’t need to generate problems this sweeping. It has been enabled by the ignorant (those who stick to out of date textbook theories) and the ignoring (those for whom it has had no obvious effect thus far).
We are being led into the world of internationalism, not by the usual military dictatorial despot, but by the more insidious technique — “Hey little girl, want some candy?” approach — “Lower cost consumer goods” (the Wal-Mart cycle)— “Raising the standard of living for the masses” (Take a look at Mexico’s’ US employees living conditions, “Who will tell the People?”, by Richard Greider.I first began to see the signs of the deflation of American jobs in the mid 1980s when some of my manufacturing clients began buying and reselling their products from Asia.
What we are involved in is a Reverse Auction. “The lowest bidder gets my business. (until a lower bid comes along).
I had a client say, “Since computers make it so easy to do artwork these days, why can’t you charge us what it costs to have our secretary do it?” (I had been in graphics for thirty+ years at that time and had done work for them for over twenty.)I told this corporate officer, “I have an idea which can save your company hundreds of thousands of dollars annually — If talent is unnecessary and experience doesn’t count, I am willing to be your CEO for half of what he was paid this year.”
Posted by whattheheck on May 20, 2007 at 6:55 AM Cabby and Heck disagree here and here, but seem both aghast at the disappearance of ‘Real Jobs and Careers ‘ in the US ?
I recently saw a french film, “Ma Mondialisation” , based on interviews, and travels to China, with a french CEO .
His company was based ina valley full of such hi-tech enterprises, but now most have already been bought up by international Pension Funds, and the machines sold to India and China.
He now has , within 5 years , to transfer ALL the production processes to China. Hitherto, he kept some back in france, the most hi-tech bits, but now he will have to transfer all of it .
A sensible nationailistic (!) economomic policy would be to hold on to what we have , at least for a time, but the current trend is to give it all away .
Crazy, but that is the current form of “capitalism” . Short-term gains for a handful, and misery , poverty, and uncertainty for their fellow-citizens.
Posted by frog on May 20, 2007 at 7:11 PM Hi Frog,
So you’re seeing the same thing there. I guess while there is “no honor among thieves” they are perfectly willing to adopt each other’s techniques when it comes to personal gain. This will apparently continue until the masses reach equilibrium globally.
A former local machine tool exec had an article in our paper yesterday which clearly shows what we average people got in return for real jobs.
It reminds me of the story of Jack and the Beanstalk — complete with a scary giant at the other end.
http://www.rrstar.com/apps/pbcs.dll/article?AID=2007105200016WTH
Posted by whattheheck on May 21, 2007 at 7:01 AM Sharrod Brown and Denis Kucinich both advocate replacing NAFTA and other free trade agreements, which have only enriched large transnational corporations by shifting jobs to low wage areas to cheapen labor and increase productivity, with more democratic bilateral agreements that respect higher labor and environmental standards. The US market is the largest in the world with over a quarter of the world GDP. This should motivate manufacturers who want special agreements, trade gaurantees and export quotas to uphold certain standards. The TNCs have collectively to much power and basically run the WTO and write the trade and investment provisions of free trade agreements like NAFTA. Let new agreements replace the free trade ones using rewards for fair treatment in the large, sought after US market as an incentive. This could reverse certain trends. With a reversal of some of the negative effects of globalization could come higher incomes and more FDI in the US given a greater amount of effective demand to absorb output. So far lean production and the yearly loss of jobs is shrinking consumer demand and rapidly slowing the US economy’s growth.
Posted by cabdriverinchicago on May 21, 2007 at 7:57 AM cabdriver,
It’s good that some legislators at least recognize there is a problem — Sen. Byron Dorgan is the most vocal advocate for the American worker who I have heard and read.
I think it is way to late to undo the damage.Too many companies have left the country, too few experienced workers are available to teach the skills and then, the original problem is still going to be there — trying to compete with those who are now producing far cheaper than we can. Not just because of the cost of labor, but due to the uneven load our companies carry the others do not — EPA, OSHA, etc.
Posted by whattheheck on May 21, 2007 at 12:18 PM Hi cabby
Just found this by a professor of accounting at my old uni --http://www.ukwatch.net/article/britain_and_the_next_enron
The power of those TNC’s is breathtaking, is it not . Your economic logic is perfectly correct, IF our legislators actually had our interests at heart , or even a modicum of enlightened self-interest. . Horrible old Henry Ford paid his workers sufficient for them to buy his cars .
Increasingly I am reminded of Tuchman’s “The March of Folly” , in particular the chapter on how the brits managed to lose a particular colony . Very careless . I just heard Robert Reich welcoming the Chinese buying up a Private Equity fund in the US, and assuring the BBC interviewer that “of course precautions are in place to prevent them buying up ‘strategic industries’ ... “
My foot, they are. The frogs are just as bad in exporting know-how, so no schadenfreude there.
Monsieur Heck
Your sad story from the Register yet another reminder of what we have lost, and are still losing .( I read it this winter and thought of you in the snow . )I forget which of us told the other about Dorgan, last year or even before, but important he exists, and is not completely alone . There are many millions of us without much of a voice all over the world, even in China, who agree. . Becoming the factory for the world without an EPA etc is an ecological disaster for them, too .
I understand that some States are well ahead of the Federal Govt on a number of issues, and ‘somehow’ maintaining a hard core of knowledge and skills for the future could be a part of that ?We can’t put the clock back, but we can think hard about how to fight this . As usual most of the Pollies are way behind many of the People, but this article does show the beginnings of a rethinking of previous assumptions . It is all so obvious to us out in the real world.
Dismantling EPA /OSHA and equivalents are on the agenda for the TNC’s, as we see from appointments of “business interests” to head up government Agencies US and UK .
I dislike and distrust our new President, but I would not be overwhelmingly surprised if he came up with some serious new ideas on “Globalisation” . So far he has said everything and its opposite to get elected, but now we will see if his hints on the subject were more than bullshit .
Posted by frog on May 22, 2007 at 4:13 AM cabby 20may
Walmart employees on food stamps another example of draining the economy…
Posted by frog on May 22, 2007 at 4:17 AM Frog,
The EIGERlab mentioned in the article is a nanotech company billed as “A Factory in a Shoe Box”.
My efforts to influence my state representative, our mayor and the local business writer have been met with either indifference or outright hostility. All I asked was, “If we were unable to stop the loss of manufacturing by a company like Ingersoll, (who made machines so massive they had to be assembled at the purchaser’s location) how can we protect this new miniature business?”
“Dismantling EPA /OSHA and equivalents are on the agenda for the TNC’s, as we see from appointments of “business interests” to head up government Agencies US and UK .”
Why am I not surprised the big money boys want to return to the dangerous, environmentally damaging and unhealthy conditions (but oh, so profitable — short term)?
It took generations to institute those protections for not only workers, but all mankind, now and future generations. (PROTECTION is the word which brought ire down on my head — “Your protectionist views,” as I recall.) Pat of the pro-gloabization sales pitch was to be our improving of emerging countries working conditions. BS!
Unless there is a global revolt against the spread of this insidious epidemic — a buyers’ strike, enlightened investors’ boycott, an evangelical appeal for fair treatment of everyone, what I fear we will see is…
• Increasing exploitation of employees everywhere
• A greater contrast of incomes with middle class shrinkage, lower class increasing and an expansion of the international elite
The equilibrium I mentioned earlier was not equalization of wealth (I’m a genuine conservative — nothing “neo” here.). The kind of equalization which will create a global balance.
• Allow large numbers of people to buy the cheaper made products.
• So they can pay increased taxes…
...to maintain increased welfare necessary for the survival…
...of those being exploited…
...to create the lifestyle of the privileged elite.Good grief, Charlie Brown! We’re exchanging our Middle Class and returning to the Middle Ages!
Posted by whattheheck on May 22, 2007 at 7:47 AM The real issue is fair trade not “free trade” as defined by large TNCs. Walden Bello, the executive director of Focus on the Global South, points out that the dollar value of global trade had increased from about $124 billion in 1968 to well over 10 trillion by the late 1990s, a roughly 17 fold increase. The WTO was not needed to increase world trade by removing international “barriers” as in the early post-WWII era. It was needed by the US to give its own corporations a boost at a time when their hegemony was threatened. In the 1960s, about three quarters of the largest multinational corporations were US domiciled. By the time the WTO came into existance this proportion dramatically fell to about a quarter.
The WTO helped remove the various global impediments to US corporate foreign direct investment and other corporate activity. TRIMS (Trade Related Investment Measures) allowed components for assembly to be imported duty free into low wage manufacturing areas like the industrial cities of southern China and the more than 3,000 Maquiladores of northern Mexico so that durable goods can be assembled by cheap labor and shipped back to the US with a low tariff to be sold competitively in US domestic markets. This is why a third of all world trade is intra-firm trade between parent company and overseas affiliate. TRIPS (Trade Related Intellectual Property) allows US corporations to dominate patents on things like plant life and GM seeds allowing Monsanto and five other firms to control the entire world market in GM seeds which are used by more and more farmers in an increasingly concentrated food market dominated by those who use the seeds.
Global trade is about foreign direct investment and corporate control circumventing democratic control and the enforcement of the labor, environmental, and consumer quality and safety standards made in various countries around the world. Fair trade agreements that replace WTO “free trade” would reempower people and restore the benefits of world trade to them.
Posted by cabdriverinchicago on May 27, 2007 at 7:51 AM Page 1 of 1 pages -
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