Full Employment The golden age is in us

Nifty article but doesn't catch the sheer cold bloodedness of the problem in America where Greenspan, in the late mid 1980's, before and after he was head of the Federal Reserve, called for deliberately raising unemployment to keep workers from asking for raises and benefits.  The claim was that wage raises caused inflation and, of course, there's been no inflation in America since then.  The key again is end offshoring, outsourcing and illegal immigration and let the employers compete for workers.  A surplus of labor leads to national misery, a shortage of labor leads to national prosperity.---rng

from n+1
by Benjamin Kunkel
4 June 2010

The inherent right to work is one of the elemental 
privileges of a free people.
—FDR, radio address, 1937

Of all classic capitalist problems—income inequality, imperialism, the class character of the state, and so on—mass unemployment has probably been the one to trouble living Americans least. From the establishment of FDR’s war economy through the end of the so-called golden age of capitalism in the early 1970s, the US matched other major economies in functioning at close to full employment (at least as the term is defined by economic orthodoxy, on which more later). In the troughs of recessions, the unemployment rate might touch 7 percent, but otherwise it wavered between about 3 and 5.5. And even with the onset in 1973 of what Robert Brenner, in the commanding economic history of the period, called the long downturn—a decline across the system in rates of growth and profit, persisting to this day—the US touted a distinctly better record of job creation than its main European rivals. The average unemployment rate for the ’70s came to slightly above 6 percent; for the ’80s, above 7; and for the ’90s, just below 6—a marked deterioration since the end of the golden age, but not bad by international standards. The years from 1997 to 2006 saw an average stateside rate below 5 percent, achieved though this was with the decisive aid of serial financial bubbles.

Europe meanwhile has never dispersed the cloud of structural unemployment that settled over the ’70s. France, Germany, Italy, and Spain registered unemployment rates around 10 percent as late into the last expansion as 2004, and last year’s recession has erased most gains since then across the Continent. The situation remains far worse in poor countries, whose vast cities have never gathered into formal paid employment the populations displaced from the land by the postwar commercialization of agriculture. As a result, some two-fifths of economically active humanity now ekes out its subsistence in an “informal sector”—essentially a euphemism for unemployment—often marked by salvage, racketeering, and violence.

to read complete article

A&M sociologist sees shift in immigration trends He says Chinese may replace Mexicans in unskilled labor

Hmmm, this is a toughie. Chinese immigrants replacing Hispanic immigrants for American jobs? I will have to think some more on this issue. -----lee

Contains the usual false assertions that Americans won't do the jobs they did for decades when wages were decent.  Also, suspiciously low number of immigrants given.-----rng      

By JEANNIE KEVER

Updated 07:51 p.m., Saturday, November 19, 2011

     Dudley Poston, a sociologist at Texas A&M University, began to study China in the early 1980s, when that country started sending larger numbers of students to the United States. Helping a handful of Chinese students learn the demographics of their own country was contagious; most of his scholarly work now involves the Asian nation. Poston says his work, coupled with research from Princeton University's Mexican Migration Project showing a dramatic drop in illegal immigration from Mexico, suggests Chinese immigrants may replace those from south of the border as the go-to workers for landscaping, construction, agriculture and other unskilled labor here. Poston discussed the theory with Chronicle reporter Jeannie Kever. The conversation has been edited and condensed.

     Q: Why might Chinese immigrants overtake Mexican immigrants in low-wage, unskilled jobs here?

     A: Mexico for decades has supplied our country with low-wage laborers, legal and illegal, but that's grinding to a halt. Increased border surveillance and high unemployment are keeping people away from the United States. Other things are holding people in Mexico. They have a lower unemployment rate than we do. And what a lot of people don't realize is that their fertility is dropping to 2.2 children per woman. It used to be six or seven children a few decades ago. There are fewer young people available (to take jobs), and fewer mouths to feed. There are about 4 million or 5 million undocumented Mexican immigrants in our country (and about 11 million illegal immigrants total). They pick up garbage, work construction, agriculture - all the things in big cities that the local people don't want to do. Who's going to do that work? There's already a network of migration from China to our country; probably 200,000 to 300,000 undocumented Chinese are here. They're mainly on the East Coast, in Houston and Los Angeles. They're mainly doing restaurant work. Undocumented Mexicans are much more visible.

For more ...

The Domino Effect Between Housing & Jobs

The ruling elite never seem to understand that without money we can't buy their products.  Or is it that they just don't care? (be sure and link to the excellent website drivefordecentwork.org, but they are too focused on government creating jobs.  It's end the offshoring, outsoucing and the illegal immigration if you want to save America.)---rng

Good infographic on "how a housing crisis becomes a jobs crisis" from Tim Logan of the St. Louis Post-Dispatch.   

http://bloximages.newyork1.vip.townnews.com/stltoday.com/content/tncms/assets/v3/editorial/c/94/c94dba1e-e692-11e0-9557-0019bb30f31a/4e7df2c10c730.pdf.pdf

"...The purchase of a house sets off a long chain of events.  The money spent to buy it and to live in it ripples through the economy, creating jobs. From a locksmith on Main Street to an investment banker on Wall Street, furniture factories to City Hall, people earn a living off that one transaction."

to read complete article

Thanksgiving To All VDARE.COM Readers! “Thank God There’s No More Of Us.”

     The self-hating Americans are at it again. The American left appears has a bottomless pit of self-loathing and it pops up its ugly head during the Christmas season(excuse me, holiday season). This influential group will only be silenced when they have passed away of old age and we can appreciate once again, the season in all its spiritual beauty. Until then, we will have endure.  --------lee


Good article that skewers the usual stream of snide, uninformed stupidity that has become the hallmark of liberal discourse.---rng

By James Fulford on November 23, 2011

     There’s a typical piece liberal hate-America snark in the New York Times today from Paul Krugman, celebrating Thanksgiving by calling the Pilgrim Fathers “illegal immigrants.”

“Think, for a minute, about what happened on the original Thanksgiving. (Yes, I know that there are doubts about what really happened, but never mind.)
Here’s how it went down: a bunch of people got together, with each group bringing what it could — the Wampanoag brought deer, the Pilgrims apparently shot some birds, etc.. Then everyone shared equally in the feast — regardless of how much they brought to the table. Socialism!
Worse yet, many of the lucky duckies benefiting from the largesse of this 17th-century welfare state were illegal immigrants. (That would be the Pilgrims).
We need to stop celebrating this deeply un-American event, and start celebrating something more in tune with the things that make America great, such as the Ludlow Massacre.”[Thanksgiving Is Un-American, NY Times, November 23, 2011, 11:15 am]

In fact, the Puritans experiment in socialism caused them to almost starve to death.[How Private Property Saved the Pilgrims, by Tom Bethell, Hoover Digest, January 30, 1999]

For more ...

http://www.vdare.com/articles/the-fulford-file-by-james-fulford-a-happy-thanksgiving-to-all-vdarecom-readers-thank-god-th

Why Full Employment Is Required to Sustain a Society That We're Proud to Live in

from alternet.org

by Eileen Appelbaum/for Boston Review

This article is part of Back To Full Employment, a forum on the possibilities for full employment in today’s economy.

Robert Pollin makes a compelling case for the centrality of full employment to the creation of a decent society, to the ability of individuals and families to live with dignity rather than despair, and to the overall health of an economy in which consumer spending is key to sustained growth. His capsule history of economic thinking on the causes of unemployment and the tradeoff between employment and inflation -- from Marx to Milton Friedman to Gösta Rehn -- is informative, and his main policy recommendations are difficult to argue with: increase employment in the United States by shifting $330 billion in annual spending from the military and fossil-fuel sectors to public and private investments in education and clean energy for a net gain of 4.8 million jobs.

I do have one quarrel with the analysis. Pollin observes the low unemployment achieved by the U.S. economy in the late 1990s despite globalization and accepts this as evidence that the United States doesn’t have to address its trade deficit to achieve full employment. But this was possible only in a bubble scenario. With a high trade deficit, either the public or private sector (the latter, in the 1990s example) must incur debt in order to maintain high employment. Reducing the trade deficit is essential to sustaining full employment without a repeat of bubble boom and bust.

for complete article

Occupy Wall Street costs local businesses $479,400!

So far, no sign that any of the protesters anywhere had the wit to ask for the end of offshoring, outsourcing and illegal immigration.---rng


Fewer business sales means possible layoffs, maybe loss of jobs. Therefore, remove "occupiers" to save jobs and save the Christmas season. Occupy "X" costs jobs. OK, not the best syllogistic logic but I think you get the point.   -----Lee protestors

American

By CANDICE M. GIOVE

Last Updated: 1:26 PM, November 13, 2011

Posted: 12:52 AM, November 13, 2011

     It makes no cents.
     The Occupy Wall Street movement has cost surrounding businesses $479,400 so far, store owners said.
     A Post survey of a dozen restaurants, jewelry shops, beauty salons, a chain store and mom-and-pop establishments tallied almost a half-million dollars lost in the 53 days since the Zuccotti Park siege began on Sept. 17.
     “We’re done with them!” barked one Broadway business owner. The restaurateur -- who requested anonymity for fear of reprisals -- said his profits drained as soon as campers moved in.
     “My customers used to take food to eat in the park, but now they can’t,” he lamented.
     With clogged streets, aggressive signs and stories of predators and criminals lurking among the knot of protesters, business owners and managers say shoppers are not taking the risk of coming to the area.
    “They think the protesters are violent,” said Jewelry 21 manager Danny Nia.
     It’s worst on Saturdays, when protesters parade up and down Broadway all day long, the businesses said.
     “When they march on the sidewalk, everyone runs away,” said Mike Rauach, owner of VIP Men’s Suits on Broadway. “They kill business.”
     Some businesses have suffered higher staffing costs. Stubborn occupiers, for example, often hold impromptu meetings inside coffee shop Pret a Manger, forcing workers to stay hours past closing time.
     “They’d keep asking for 20 minutes, 20 minutes,” one worker complained.
     And the coffee shop has lost loyal customers who now can’t find a place to sit.
     “But we can’t tell [OWS protesters] to leave,” the worker added.
     The movement costs the dozen businesses just over $9,000 a day.
     That figure doesn’t include money spent on toilet paper, cleaning supplies and repairs, businesses said, as the tent dwellers turn bathrooms into personal washrooms.
     On two separate occasions the owner of the Essex World Cafe has rolled up his gate to find someone had defecated on it overnight.
     “It must be a good place for them to hide,” the owner cringed.
     Next door at Ho Yip, a Chinese restaurant, filthy clothes and underwear carpet the bathroom floor, the manager said.
     “I have to pick it up,” the manager groused.

For more ...

Washington spars over government regulations

     I wish the media powers that be, would also focus on the industrial policies from the federal government that have allowed companies to dump domestic workers in favor of overseas workers.  ----lee

By Charles Riley @CNNMoney October 27, 2011: 5:17 PM ET

     NEW YORK (CNNMoney) -- Onerous government regulations are either strangling the U.S. economy and killing job creation ... or they're not.

    

     In Washington, there is no middle ground.

     On Monday, the White House called the idea that an uncertain regulatory environment was holding back hiring a "commonly repeated misconception."

     If new regulations were a significant drag, the consequences would show up in data that measure business profits, workforce trends and investment levels, the government contends.

     But that's just not happening, the Treasury Department said. 

     Republicans offered up their own evidence on Thursday, railing against "massive amounts of red tape raining down from the administration."

Regulation: Not the job killer GOP says

     In a blog post, Republican members of the House Financial Services Committee cited a Gallup poll in which 22% of small business owners identified complying with government regulations as the most important issue they face.

     "One of the biggest failures of the Obama Administration is its determination to rely upon theoretical academics rather than listen to those who deal with the reality of the administration's actions," the blog post said.

For more ....

Jobless rate drops to 9.0% (updated)

Rick Moran
November 4, 2011

     I guess when you're at the bottom, any positive news is cause for hope.

     Or, if you're a partisan and need to spin anemic job numbers to make it appear that the economy is "gaining some momentum," it makes perfect sense that you would willingly put lipstick on a pig and take the sow to the prom.
     Unfortunatately, you're only fooling yourself.
Reuters:

U.S. employment rose less than expected in October, but a drop in the jobless rate to a six-month low of 9.0 percent and upward revisions to prior months' job gains pointed to a strengthening labor market.
Nonfarm payrolls rose 80,000 last month, the Labor Department said on Friday, missing economists' expectations for a gain of 95,000.
However, figures for August and September were revised to show 102,000 more jobs than previously reported. In addition, the decline in the jobless rate from 9.1 percent in September came even as more people entered the labor force.
While job growth last month was less than expected, details of the report suggested the economy was gaining some momentum.
"It's not a game-changer but when you take into account the upward revision to prior months and the drop in the unemployment rate, it's a step in the right direction," said John Canally, an economist at LPL Financial in New York.
"It's about in line with the growth you're seeing in the economy but it's not enough to break us out of the range we're in."

For more:

Black unemployment: Highest in 27 years

     Identity Alert!!!!

    

     If I were black, I would be sorely upset by these figures and even more upset by the President's apparent indifference. 

-------lee

By Annalyn Censky @CNNMoney September 2, 2011: 3:13 PM ET

     NEW YORK (CNNMoney) -- The August jobs report was dismal for plenty of reasons, but perhaps most striking was the picture it painted of racial inequality in the job market.
Black unemployment surged to 16.7% in August, its highest level since 1984, while the unemployment rate for whites fell slightly to 8%, the Labor Department reported.
     "This month's numbers continue to bear out that longstanding pattern that minorities have a much more challenging time getting jobs," said Bill Rodgers, chief economist with the Heldrich Center for Workforce Development at Rutgers University.
     Black unemployment has been roughly double that of whites since the government started tracking the figures in 1972.
     Economists blame a variety of factors. The black workforce is younger than the white workforce, lower numbers of blacks get a college degree and many live in areas of the country that were harder hit by the recession -- all things that could lead to a higher unemployment rate.

     But even excluding those factors, blacks still are hit with higher joblessness.

Unemployment rate, state by state

     "Even when you compare black and white workers, same age range, same education, you still see pretty significant gaps in unemployment rates," said Algernon Austin, director of the Race, Ethnicity, and the Economy program at the Economic Policy Institute. "So I do think the fact of racial discrimination in the labor market continues to play a role."
     About 155,000 blacks got jobs in August, but the group's unemployment rate still went up because those jobs weren't enough to make up for all the people who started looking for work during the month.
     However, the gain for whites of 211,000 jobs was enough to bring their unemployment rate down.

For more ...

California Unemployment, Poverty Contribute To 'Post-Industrial Hell'

"California dreaming ....."
  ------lee

By Lance Williams 
10/12/11 08:28 PM ET                          
     Since the recession began, times have been tough in California – everybody knows it. The economy is in a protracted stall.
     But it took economists at California Lutheran University’s Center for Economic Research and Forecasting to describe, in hyperbolic language, the depth of the problems that have beset the Golden State since the stock market started to tank in the summer of ’08.
     “California,” writes center director Bill Watkins, “is fast becoming a post-industrial hell.”
That’s true “for almost everyone except the gentry class, their best servants and the public sector,” he writes.

For more ...

Job Creation and the Taxation of Foreign-Source Income

This is a story with a moral, and the moral is--get out of the WTO now!  Also, end offshoring, outsourcing and illegal immigration.---rng

By Daniel Mitchell, Ph.D.

January 26, 2004

     The World Trade Organization (WTO) has ruled that portions of U.S. tax law--specifically, the Foreign Sales Corporation/Extraterritorial Income (FSC/ETI) Act--provide an impermissible "export subsidy." This creates a bad news/good news situation.

     The bad news is that the WTO is interfering with America's fiscal sovereignty by insisting that      Congress repeal the FSC/ETI legislation or run the risk of more than $4 billion of compensatory tariffs on U.S. exports to European Union nations. The good news, however, is that this creates an opportunity for lawmakers to enact much-needed tax reforms, especially reducing the tax on income earned by U.S. companies abroad so that they can compete on a level playing field with foreign-based firms.

     Worldwide vs. Territorial Taxation    

      The U.S. tax code currently places American companies at a competitive disadvantage by taxing them on income earned abroad. This policy of "worldwide taxation" can subject U.S.-chartered companies operating overseas to tax burdens several times larger than those imposed on their foreign counterparts, most of which come from countries with "territorial taxation" (the common-sense policy of taxing only income earned inside national borders).

     America's high corporate tax rate--the second highest in the developed world--exacerbates the anti-competitive impact of worldwide taxation, and American companies competing in low-tax jurisdictions like Ireland or Hong Kong are the most adversely affected. As the example in Table 1 indicates, U.S. companies can face an enormous additional burden because of America's worldwide tax regime.

     Some lawmakers are concerned that moving toward territorial taxation would encourage companies to relocate jobs and factories from America to low-tax countries. The high U.S. corporate tax rate is an incentive for companies to create jobs and expand operations in jurisdictions with better tax law--or would be if they did not also have to pay the high U.S. corporate tax rate on overseas earnings.

     Does this mean that worldwide taxation protects American jobs by making it more difficult for U.S. companies to produce overseas? Absolutely not. Worldwide taxation can--and does--limit the ability of American companies to compete abroad, but it does not affect the decisions of non-U.S. companies. In other words, bad U.S. tax law may prevent an American company from taking advantage of a profitable opportunity to build a factory in a low-tax jurisdiction, but this simply makes it easier for a company from another country to exploit that opening. And since a foreign-based company can ship goods into the U.S. market under the same rules as a U.S. company's foreign subsidiary, worldwide taxation does not insulate America from overseas competition. It simply means that foreign companies get the business and earn the profits.

     How Worldwide Taxation Destroys Jobs    

     By placing U.S.-based companies at a disadvantage in world markets, America's worldwide tax system harms the U.S. economy and undermines job creation. This is because companies with foreign operations are more likely to purchase raw materials and intermediate goods from their home countries. The Organization for Economic Co-operation and Development estimates that every dollar that a company invests overseas yields two dollars of additional exports for its home country.

U.S. data strongly support the link between foreign operations and exports. An academic survey found that every dollar of overseas production by U.S. affiliates generates an average of $0.16 in exports from the United States. According to Commerce Department figures, U.S. companies sold $232 billion worth of American-produced goods to their overseas affiliates in 2000. This is impressive, but exports surely would be much higher if U.S. companies competing abroad were not hamstrung by worldwide taxation. Territorial taxation would allow American companies to win a larger share of foreign markets, and this would then translate into higher U.S. exports and more U.S. jobs.

     Furthermore, companies generally build factories in other countries in order to serve foreign markets--not to produce goods for America. According to Commerce Department data, nearly 90 percent of the output from U.S.-controlled foreign companies is sold to foreign consumers. This explains why two experts found that shifting to a territorial tax system would not influence where U.S. firms locate their factories. The Council of Economic Advisers also reviewed the research and found no support for the notion that jobs and exports suffer when U.S. companies invest abroad.

     Some politicians think that multinational companies hurt the U.S. economy. In reality, however, companies that produce at home and abroad generate more than 21 percent of U.S. economic output, produce 56 percent of U.S. exports, and employ three-fifths of all manufacturing employees--about 9 million workers. These numbers would be even higher if these companies were not hindered by an onerous tax code.

     Conclusion    

     Worldwide taxation places U.S. companies at a competitive disadvantage reducing their share of the global market. This limits the degree to which U.S. companies can benefit by operating in low-tax jurisdictions, but it does not discourage foreign companies from building new factories in jurisdictions with good tax law or exporting products to the United States. In other words, worldwide taxation neither limits competition from factories in low-tax countries nor restricts imports. Instead, it impedes U.S. companies' ability to maintain profitable operations in foreign countries.

For more ...

Senate delays jobs bill to take on China Defies Obama on top priorities

By Stephen Dinan
The Washington Times

Tuesday, September 27, 2011

     President Obama is still pressing Congress to pass his jobs-stimulus bill immediately, but Democratic Party leaders in the Senate once again have delayed taking a vote on the legislation and instead will take up a bill to punish China over its currency valuation.
     Senators late Monday passed a bill to keep the government open into the next fiscal year and then adjourned for the rest of the week, but Majority Leader Harry Reid, Nevada Democrat, said when they return they’ll take up the China measure rather than Mr. Obama’s jobs plan.
     “I don’t think there’s anything more important for a jobs measure than China trade,” said Mr. Reid, who is the chief Senate sponsor of Mr. Obama’s plan, but who said taking on China is a bigger priority right now.
     Mr. Obama sees it differently.

For more ...

Census: Recession taking toll on young adults

Of course you can always be an "intern" and pay for the privilege of doing an entry level job for free for six months.  This is what happens when you let theory (free trade) override common sense and experience.  Call you Congressperson or favorite Presidential candidate and demand an end to offshoring, outsourcing and illegal immigration.  Do it now!---rng


By HOPE YEN
Associated Press

Sep 22, 6:26 AM EDT

WASHINGTON (AP) -- Call it the recession's lost generation.

     In record-setting numbers, young adults struggling to find work are shunning long-distance moves to live with Mom and Dad, delaying marriage and buying fewer homes, often raising kids out of wedlock. They suffer from the highest unemployment since World War II and risk living in poverty more than others - nearly 1 in 5.

     New 2010 census data released Thursday show the wrenching impact of a recession that officially ended in mid-2009. It highlights the missed opportunities and dim prospects for a generation of mostly 20-somethings and 30-somethings coming of age in a prolonged slump with high unemployment.

     "We have a monster jobs problem, and young people are the biggest losers," said Andrew Sum, an economist and director of the Center for Labor Market Studies at Northeastern University. He noted that for recent college grads now getting by with waitressing, bartending and odd jobs, they will have to compete with new graduates for entry-level career positions when the job market eventually does improve.

"Their really high levels of underemployment and unemployment will haunt young people for at least another decade," Sum said.

Richard Freeman, an economist at Harvard University, said young people "will be scarred and they will be called the `lost generation' - in that their careers would not be the same way if we had avoided this economic disaster."

The latest figures also show a rebound in the foreign-born population to 40 million, or 12.9 percent, the highest share since 1920. The 1.4 million increase from 2009 was the biggest since the mid-decade housing boom and could fuel debate in this election season about immigration strategy.

Most immigrants continue to be low-skilled workers from Latin America, with growing numbers from Asia also arriving. An estimated 11.2 million people are in the U.S. illegally.

For more ...

Full employment: Don’t give it up without a fight

An oldie but ultra goodie.  Must read.---rng

from Economic Policy Institute

REPORT | Jobs, Wages, and Living Standards

By Dean Baker and Jared Bernstein | January 2, 2002

Share this article:

Introduction

As the unemployment rate began to tick up in recent months, comments like these began appearing in the press:

“…the economy is moving to a more normal, sustainable unemployment rate after a period of rapid growth.” -Neal Soss, chief economist at Credit Suisse First Boston, quoted in the Washington Post, May 5, 2001

“Unemployment, despite thousands of recent layoffs across a wide range of sectors, is still well below the rate commonly associated with stable inflation and growth.” -New York Times editorial, June 28, 2001

Important policy-making institutions echo these sentiments. According to the Congressional Budget Office (CBO) – the scorekeeper for budget battles for more than two decades – the recent rise in unemployment is simply a return to normal. It views the sustainable unemployment rate as being 5.2%, more than a full percentage point above the 3.9% low hit last year. The influential Organization for Economic Cooperation and Development takes a similar position.

These may sound like the measured, reasonable views of cautious analysts, but, as we see it, they are misguided positions with worrisome consequences. The cost of taking these ideas seriously is high, and it is a cost that falls disproportionately on the working class. In fact, in terms of living standards, working families have no better ally in today’s economy than full employment, and maintaining it should be our foremost goal.

Those who advocate settling for unemployment rates above the low and sustainable rates achieved toward the end of the last recovery are wolves in sheep’s clothing, engaged, perhaps unknowingly, in a subtle breed of class warfare. If, when the economy picks up steam again, we settle into unemployment rates that prevailed over the 1980s and early 1990s, we will be consigning middle- and low-income working families to the raft of economic problems that beset them over these years: stagnant incomes, falling wages, and growing inequality.

What is full employment?For our purposes, full employment means that virtually everyone who wants a job has one. It doesn’t mean that there are no unsuccessful job seekers, i.e., that the unemployment rate is zero. It allows for frictional unemployment – the notion that a small share of the workforce is seeking jobs and will soon find them. Aside from that, at full employment the number of workers seeking jobs matches up neatly with the needs of employers; the supply of and demand for labor are in equilibrium, and the labor force is fully utilized.

Unfortunately, some groups of disadvantaged persons in the country have very high “structural” unemployment rates, meaning that their unemployment rates are consistently many times that of the overall rate. Yet, as we will show, these are the very persons helped the most by full employment.

to read complete article(highly recommended)

Free trade-in theory and practice

excerpted from New American

WRITTEN BY BRIAN FARMER

THURSDAY, 08 SEPTEMBER 2011 00:00

...So goes the theory, but the example above illustrating the mechanics of comparative advantage makes a number of assumptions that are not altogether realistic in the real world:

• Transport costs are ignored.

• There is full employment in both countries.

• Costs are constant and there are no economies of scale.

• There are only two economies producing two commodities.

• Each commodity is of identical quality in both countries.

• Factors of production are perfectly mobile within each country, in order to allow production to be switched without cost.

• Factors of production are immobile between countries, in order to maintain each country’s comparative advantage.

• There are no tariffs, quotas, or other trade barriers.

• All buyers and sellers know where the cheapest commodities can be found at all times.

• Governments do not impede or distort the marketplace through their domestic tax and regulatory policies — or if they do, the two countries are equally impacted.

Flaws in Free Trade

Those assumptions (and that list is by no means exhaustive) lead to a number of significant flaws in Ricardo’s theory that are all too often overlooked or downplayed by its adherents and, therefore, the predicted benefits do not occur to the extent forecasted, when put into practice.

In fact, transport costs do enter into the final price of a product, and transport costs can vary greatly, depending on the weight or bulk of a product. Also ignored is the cost of economic damage done in the process of manufacturing something. A classic example is environmental pollution, which has an economic cost that is not reflected in the price. Goods from a country with lax pollution standards will be relatively cheap, relative to a country with strict pollution laws. Practicing free trade in such circumstances benefits a country such as China, but harms both itself and other countries, because pollution crosses national borders.

In addition, because of cheap products made in countries with lax environmental standards, countries with burdensome environmental restrictions will be adversely affected in the way of employment. Of course, it could be argued that a country heavily burdened by taxes and regulations should work to get rid of, or at least ease, that burden, rather than work to further block foreign competition. Nonetheless, such a country will suffer the loss of businesses and jobs if it removes its international trade barriers prior to easing its tax/regulatory burden. But as the list above clearly illustrates, not all factors are related to government interventionism.

The theory of comparative advantage asserts that, within any country, free trade will cause factors of production to be reallocated from economic sectors with a comparative disadvantage to economic sectors with a comparative advantage. But this process will break down if factors of production cannot readily reorganize. For example, if labor cannot easily move from an industry in decline to an industry on the upswing, due to mismatching skills, then free trade will lead to increasing unemployment. And that brings us into conflict with the assumption that full employment always exists in every country. The doctrine of comparative advantage not only assumes that workers and their skills are perfectly interchangeable, but also assumes that the up-and-coming industries will always be willing and able to immediately employ any and all displaced workers. Look around and see if that is happening in your area!

The corresponding assumption regarding the factors of production is that they are not internationally mobile. If they were, then productive resources would be located wherever in the world they could be used with the most relative efficiency. This international movement would optimize the world economy, but would not necessarily benefit a particular country, because it would have lost its comparative advantage to the country holding an absolute advantage. An assumption that may have been at least partially plausible during Ricardo’s time is no longer true today. As explained by economist Paul Craig Roberts:

The international mobility of factors of production is a new phenomenon. It permits first world businesses, seeking lower costs, greater profits, and a stronger competitive position, to substitute cheap foreign labor for the entire range of domestic labor involved in the creation of tradable goods and services. Only labor involved in non-traded goods and services is safe from foreign substitution. It is not yet possible to package hair cuts, surgical operations, dentistry or home repairs as internationally tradable services.

The known necessary conditions for free trade to be mutually beneficial do not hold in today’s environment where factors of production are as mobile, if not more so, than traded goods. What we are witnessing is not trade based on comparative advantage but the flow of first world factors of production to cheap Asian labor where the productivity of capital and technology is highest.

[I] do not dispute that global gains might exceed first world losses. Nevertheless, the flow of factors of production to absolute advantage in place of comparative advantage vitiates the case for free trade — that it produces mutual gains to the countries involved. What we may be witnessing is global capitalism destroying national sovereignties, leading to a global government.

Thus we have the awkward situation that Americans experience today, when cheaper foreign-manufactured goods replace goods that used to be produced here: Corporations and investors like the higher profits, consumers like the lower prices, but workers don’t like the resulting job losses. Because most consumers are also workers, there is no guarantee that, under free trade, they will gain more as consumers than they lose as workers.

IOUs, such as corporate and government bonds. As the United States has moved from a manufacturing economy to a service economy, it has put itself into a precarious situation. Because we have not been willing to protect various manufacturing industries, America can no longer produce goods in sufficient quantities to offset the amount of goods that it imports. And much of what we do “produce” is not exportable: How does one export the output of a retail sales clerk, a fast-food restaurant server, or a bartender? With every month that goes by, we are told that America has racked up yet another monstrous trade deficit. Common sense should tell us that this situation is unsustainable because we have only a limited number of assets that we can sell off, and we cannot afford to service an unlimited amount debt. But based on the dogma of comparative advantage, that is what blind faith in unrestricted free trade has brought us.

While the theory of comparative advantage can be a useful tool for economic analysis, it is simply not logical to use it as proof that unlimited free trade all of the time with every country in the world is good for America. That could only be true if all of the associated assumptions about comparative advantage were actually valid in the real world, but they are not. In fact, the way the world works nowadays means that those assumptions move further away from reality with every passing day. 

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The Dangers of Outsourcing to Foreign Countries

This article was written four years ago.  Shocking numbers and statistics.  Please remember that your economic misery is not caused by personal failings on your part, but caused by official government policy.  The powers that be want a high unemployment rate to turn you into scared little rabbits, who will work for whatever they want to pay, in any sweatshop they choose.  Are you going to let them get away with it?---rng


from socyberty.com
by Heather Wood in Economics, April 15, 2007

Read more: http://socyberty.com/economics/the-dangers-of-outsourcing-to-foreign-countries/#ixzz1X21c3kak
The drawbacks of outsourcing work to foreign countries.

     According to a report put out by the Bureau of Economic Analysis, the median income in 1969 was equal to $33,072. Almost thirty years later, that figure stood at $35,172. In twenty years time, incomes have only risen approximately $2,000. Given the much higher cost of living, this report shows how we are working harder to earn less. The rising cost of fuel, cars, heating, electricity, the advent of cable and the Internet, all play a large part in the difference in costs of living. It is no wonder that more couples are forced to work and the day of the stay-at-home parent is coming to an end.
     Today, the average unemployment rate stands at 4 ½%. Alaska, Michigan, and South Carolina have the highest unemployment rates, each set at more than 6%. One of the largest contributors to the national unemployment rate is outsourcing work to foreign countries.
     According to Goldman Sachs, between 300,000 to 500,000 jobs have been lost to date. The company estimates that this will lead to a loss of 6 million jobs over the next ten years. With 140 jobs located in the United States, this may not seem like a lot, but it would be similar to eliminating every job in Arizona. That is a significant number of jobs to be eliminated.

Most of the outsourced jobs are in these related fields:

• Business Applications
• Communication Services
• Data Operations
• Help Desks
• IT Infrastructure
• IT Security
• PC Management
• Specialized Manufacturing
• Websites

Many companies are outsourcing jobs to other countries. A small list follows.

• Cisco Systems
• Dupont
• General Electric
• IndyMac Bancorp
• Marriott Hotels
• Penske
• Proctor & Gamble
• Unilever
• Wachovia
• Wyeth

     Low labor, production, and energy costs in many countries including China, Japan, India, and Mexico is causing companies to shut their factories within the United States and open new factories in foreign countries. This leads to the loss of jobs within the United States, a lower standard of quality, and resentment by those who are living within the United States and are sick of seeing jobs go overseas.
     In 1994, NAFTA (North American Free Trade Agreement) was passed by then President Bill Clinton. His goal was to open the trade routes to all countries. Unfortunately, it led to many plants moving across the borders to Canada and Mexico. While outsourcing had begun in the 1980s, it grew by leaps and bounds in the latter part of the 1990s. Jobs went overseas to China, Japan, and India and the economy began to falter as American’s lost their jobs and suddenly faced living on minimum wage as higher paying jobs went to these other countries.

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US economy created no job growth in August, data show First time since 1945 that government has reported net monthly job change of zero

     ZERO. Remember that number when you go to the voting booth in November of 2012. ----lee

msnbc.com news services

September 2, 2011

     WASHINGTON — Employment growth ground to a halt in August, as sagging consumer confidence discouraged already skittish U.S. businesses from hiring, keeping pressure on the Federal Reserve to provide more monetary stimulus to aid the struggling economy.

     Nonfarm payrolls were unchanged last month, the Labor Department said Friday. It was the first time since 1945 that the government has reported a net monthly job change of zero. The August payrolls report was the worst since September 2010, while nonfarm employment for June and July was revised to show 58,000 fewer jobs.

     “The bottom line is this is bad,” Diane Swonk, chief economist with financial services firm Mesirow Financial, told CNBC Friday.
     Despite the lack of employment growth, the jobless rate held steady at 9.1 percent in August. The unemployment rate is derived from a separate survey of households, which showed an increase in employment and a tick up in the labor force participation rate.
     While the jobs report underscored the frail state of the economy, the hiring slowdown probably will not be seen as a recession signal as layoffs are not rising that much.
     A strike by about 45,000 Verizon Communications workers helped push employment in the information services down by 48,000. Allowing for the decline from the Verizon strike, private payrolls would have risen by 62,000.
    
     A rough month
     "August was a pretty rough month for the economy," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pa. "We saw financial markets tighten. I think businesses sort of responded by putting hiring on the back burner," he said before the release of the report.

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Generation Vexed: Young American Working Class

     Generation Vex---this is not your grandfather's depression. -----lee
If these kids and their worried parents would get out and organize, march and demonstrate for an end to outsourcing, offshoring and illegal immigration, they would have decent jobs and decent futures.  It's worth the effort folks!---rng

Written by Brian Koenig

Friday, 26 August 2011 16:32

     Burdened with economic uncertainty, high unemployment, and a volatile investors’ market, young Americans are desperately seeking job security — while anxiously chasing the "American Dream." The economy simply isn’t what it was when they first entered the job market, or when they were finishing high school or working for their college degrees. The entire economic, financial, and social class system has changed. Indeed, the entire country has changed.
     They’re not Generation X, or Generation Y. According to the Los Angeles Times, they’re "Generation Vexed" — a struggling generation of "young Americans [aged 20 to 29] who are downsizing expectations in the face of an economic future that is anything but certain." As a result, "Career plans are being altered, marriages put off and dreams shelved." Young Americans are trapped under a stagnant economic umbrella, and, lamentably, they are left with no foreseeable escape.
     Twenty-year-old Alicia Thomas, a political science major at UC San Diego, thought she had the next 10 years of her life planned out: career at a nonprofit organization; married at 24; her first home at 26, and then children. But as the economy remains stale and the financial markets herald an unpredictable fate, achieving her American Dream seems a distant vision.
     "I've changed my major so many times, not knowing which will help guarantee a stable income, health insurance and the ability to put my kids through college," said Thomas. "It's made me realize that I could have my degree and be networking, but it would still be a challenge to find a well-paying job."
     Indeed, the "Vexed" generation is a social class in itself, a despairing class, and their perception of the future is anything but favorable. A Gallup poll in May posed the question:

In America, each generation has tried to have a better life than their parents, with a better living standard, better homes, a better education, and so on. How likely do you think it is that today’s youth will have a better life than their parents — very likely, somewhat likely, somewhat unlikely, or very unlikely.

     According to the poll, only 44 percent of Americans believe it is likely that today’s youth will have a better standard of living than their parents — the lowest recorded in nearly three decades.

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