Fletcher On Free Trade—But Not, Alas, Immigration

from vdare.com
November 19, 2010

National Data, By Edwin S. Rubenstein

Ian Fletcher (email him) is an Adjunct Fellow at the San Francisco office of U.S. Business and Industry Council, a Washington think tank. An economist with impeccable academic and private sector pedigrees—Columbia, University of Chicago, hedge funds, private equity groups—he is refreshingly, perhaps uniquely, skeptical of his profession. “We can’t trust the economists”, he writes, adding that while the public holds the economics profession in highest regard, “What economists say to the public is often very different from what they say to one another”

 Fletcher has written an elegant, easy-to-read critique of one of the most cherished myths in economic theory—the supremacy of free trade. (Free Trade Doesn’t Work: What Should Replace It and Why, by Ian Fletcher, U.S. Business and Industry Council, 2010. 323 pages.)

Fletcher believes that our chronic trade crisis stems from bad policies that mainstream economists told us were OK.

He is hardly the first to say this. Debunking free trade dogma has become a cottage industry in America, employing journalists, retired CEOs, and even a few economists whose paycheck does not come from a corporate beneficiary of free trade. But few bring Fletcher’s historical, psychological, and economic insights to this undertaking. (One hopes he will follow the free trade book with one on immigration or sub-prime mortgages.)

The theory of free trade originated with David Ricardo, a British economist of the early nineteenth century. He believed in two interrelated concepts: specialization and comparative advantage. According to Ricardo, each country should produce only those goods in which it excels—i.e. can make with comparatively less labor and capital than its trading partners—and import everything else. The theory implies that an advanced economy, say the United States, should import some goods from lower cost producers, say China, in order to free up our workforce to produce more valuable goods instead.

Advocates claim free trade is the natural state of affairs: Left to their own devices capitalists will achieve this international reallocation of production automatically. Their natural drive for profit steers them to the most valuable industry. Any policy other than free trade just saddles them with higher costs and fewer profits than they would otherwise incur.

But the public is blissfully unaware of the degree to which this theory full of holes. Enter Fletcher. He shines a laser beam on the unrealistic assumptions, dubious conclusions, and changing circumstances which, taken together, undermine the received free trade dogma.

In several chapters Fletcher lists and explains the fallacies underlying free trade. My selective, slightly modified version:

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The Great Recession’s Toll on Long-Term Unemployment

How many of the new jobs will be shipped overseas, or filled by illegal immigrants?  An important statistic no one wants to think about. rng...

from the Brookings Institution
November 05, 2010 —

     The October employment numbers, released today by the Labor Department, show tentative progress toward recovery. The U.S. economy is creating jobs for the first time in four months, with an increase of 151,000 jobs last month. The private sector added 159,000 jobs, continuing ten straight months of private sector job growth.
     For the past few months, The Hamilton Project has examined the “job gap,” or the number of months it would take to get back to pre-recession employment levels (while absorbing the 125,000 people who enter the labor force each month). In this month’s posting, we also explore the impact of the Great Recession on the length of unemployment for many American workers and find that the number of long-term unemployed has risen sharply since the Recession began.

     The Rise in the Number of the Long-Term UnemployedThe data confirm the story that we have seen in the papers and on every news channel about the long-term unemployed. Out-of-work Americans are experiencing longer spells of unemployment than in any recent recession; half of all unemployed workers in October have been unemployed for more than 21 weeks.
     Furthermore, the most recent data indicate a quarter of the unemployed had been out of work for more than a year, while 10 percent have been unemployed for at least 2 years. A longer-term perspective is available from the March CPS in the graph below, which reports the number of weeks of unemployment for the 25th, 50th and 75th percentiles of the unemployed population since 1980:

     It is important to understand this rising trend in the long-term unemployed, as there are a series of consequences that have been shown to follow workers who experience these extended spells of unemployment long into the future. For example, job skills depreciate, job networks are depleted, and workers become discouraged. The longer a worker is unemployed the less likely he or she is to find a new job and the more likely he or she is to find only a lower-paying job.
     There are also other, less obvious, consequences of long-term unemployment. According to research by Sullivan and von Wachter (pdf), in severe downturns, job displacement can lead to significant reductions in life expectancy of 1 to 1.5 years. Further, research by Oreopoulos, Page and Stevens (pdf) shows that the children of these workers are also hurt as they earn less when they become adults and enter the labor force.
     This all suggests that the historically long durations of unemployment we are now experiencing will likely have a negative effect on the employment and earnings recovery of many Americans, even as the wider economy recovers.

The October Job Gap
     In past months, we have updated the job gap, which is the number of jobs the economy needs to add in order to return to pre-recession employment levels while absorbing the 125,000 people who enter the labor force each month.

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U.S. economy now five million jobs below full employment

Excellent article but solution at end is disappointing to say the least as it calls for fiscal stimulus and lending by the banks to restore employment.  Malarkey!  End offshoring, outsourcing and illegal immigration and you'll have full employment, and it won't take four years....rng

from bloggingstocks.com
Posted Mar 9th 2009 12:10PM by Joseph Lazzaro

     The number "5 million" doesn't seem like much in a world of billions and trillions.
     But it's a lot when you're talking about the U.S. job market. That's because five million represents the number of jobs the U.S. economy would have to create to achieve what the U.S. Department of Labor calls "full employment."

     Full employment is a condition in which every adult who wants a job can secure one: It's characterized by both GDP growth and adequate bargaining power for potential employees.

U.S. unemployment rate: highest since 1983

     What's the job market like currently? Well, to borrow a phrase from CNN's immortal Larry King, "We ain't exactly at full employment, right now."
     The U.S. economy lost another 651,000 jobs in February, with the nation's unemployment rate soaring to 8.1% from 7.6% in January, the Labor Department said. It's the highest unemployment rate for the U.S. since 1983.
     Further, the U.S. economy has now lost more than 4.4 million jobs since the recession started in December 2007 and a staggering 2.4 million in the past four months.
     There are now 12.5 million people officially unemployed, the Labor Department said. Most economists don't view the official number of people unemployed as indicative of true joblessness because the statistic does not include those unemployed who have given up looking for work. Add those and the number of unemployment probably is closer to 15 million, and the jobless rate easily exceeds 10%.
     In addition, there are now 8.6 million people forced to work part-time because they were unable to find or their employers would not grant them full-time work. Add those part-time workers to the unemployment rate and the percentage of people underemployment/unemployment approaches 15% -- light years away from full employment.
     Further, some may view the 5 million job deficit as a minor hurdle, but it is not, economists say. Consider this statistic: the United States economy must create 100,000-125,000 jobs per month, just to keep the unemployment rate from rising. Another stat: at a normal rate of job growth, 200,000 jobs per month -- or at least what labor statisticians viewed as normal before the globalization era -- it would take four years for the U.S. economy to achieve full employment: four years.
That would mean the U.S. would not resume a normal unemployment rate -- between 3.5-4.5% -- until 2013. It would take a shorter time if the U.S. experienced above-trend job growth -- for example 300,000 jobs created per month -- during a robust recovery.
     For investors, all this fussing about job growth is definitely not merely an academic exercise. It's almost impossible for corporate revenue and earnings to grow in a sustained way without job growth, as job growth drives a myriad of bull indicators: household formation, consumer spending, consumer confidence, business confidence -- even business decisions to undertake expansions and/or launch new projects.
     In addition to robbing the nation of GDP output (and corporate revenue and earnings), unemployment, as most investors know, exacts a tremendous human toll, and leads to increases in both state and federal social services costs, due to increased unemployment insurance claims, home foreclosure-related costs, and Medicaid expenses, among others.
     Unemployment also does not occur in a vacuum. Of course, one can never predict with 100% certainty the winds of political sentiment, but history has demonstrated that in the modern era, sustained, high unemployment rates have almost always led to political power gains for the Democratic Party, followed shortly thereafter by economic and social reform. The periods of greatest economic and social change in the United States have occurred during high unemployment periods.
     Essentially, the American people, casting aside the drawbacks of the American economic system -- corporate capitalism -- remain very supportive of it, until unemployment starts to rise. At that point, the American people begin to question their sacrifices for and investment in the system, if they're not experiencing a vital benefit, namely: jobs.
     It's at that point that the American people say, 'Fix the system,' or 'Correct the problem,' which propels both economic and social reform: the system adjusts, and then GDP growth and job growth resume their merry path. At least, that's been the historical pattern: here's hoping for a repeat.
     Economic Analysis: Indeed, full employment is a long way away. Further, along with fiscal stimulus, an essential required to achieve full employment concerns fixing the banking system to get credit -- the lifeblood of the economy -- flowing more freely. Credit is essential because it enables businesses to expand, which leads to increased hiring.

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Remember, a full employment policy lifts all boats....rng

Wow, does this hit home!!! Maybe getting that college degree wasn't such a great idea after all.  But it's all right, what we need is a good economic policy and some people with a little common sense. ----lee

Cory Doctorow at 10:25 PM Wednesday, Jul 7, 2010 

Dismal news about the American "jobless recovery" in yesterday's NYT. I've always thought the phrase "jobless recovery" illustrates the perfectly idiotic cognitive dissonance at play in financial thinking. If the thing you use to measure the health of your economy has gone up, but no one has a job, then surely you are measuring the wrong thing to gauge the health of your nation.

The outlook this time is not so clear. Starved for jobs at adequate pay, the millennials tend to seek refuge in college and in the military and to put off marriage and child-bearing. Those who are working often stay with the jobs they have rather than jump to better paying but less secure ones, as young people seeking advancement normally do. And they are increasingly willing to forgo raises, or to settle for small ones. "They are definitely more risk-averse," said Lisa B. Kahn, an economist at the Yale School of Management, "and more likely to fall behind."

In a recent study, she found that those who graduated from college during the severe early '80s recession earned up to 30 percent less in their first three years than new graduates who landed their first jobs in a strong economy. Even 15 years later, their annual pay was 8 to 10 percent less. 

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ABOLISHING (SMALL TOWN) AMERICA: FREE TRADE WIPES SMALL TOWNS OFF THE MAP

An older column by the late (and very great) columnist, Sam Francis...rng

By Sam Francis

From vdare.com

Feb. 21, 2002

Back in 1993, when the propaganda campaign for passage of the North American Free Trade Agreement was swinging, there were three main reasons offered as to why NAFTA should pass. It would help reduce illegal immigration from Mexico; it would help modernize the Mexican economy, and it would help Americans by removing trade barriers. Not one turned out to be true.

The effect on immigration is obvious enough: Immigration ever since has been bigger than ever. The "Mexican modernization" myth went south during the Mexican peso crisis a few months later. As for the impact on Americans, NAFTA has been pretty much a zilch as well, except perhaps for the mega-corporations that benefit from it. But how much of a zilch NAFTA and similar globalization measures have been is made a little more clear in a recent report in the New York Times. What NAFTA and similar agreements mean is probably the extinction of America's small towns.

"All along the nation's back roads," the Times reports, "hundreds of towns ... are teetering in the recession, and some worry that they may never recover." [NYT, Changes in World Economy on Raw Materials May Doom Many Towns February 16, 2002] The reason the Times offers is sound: "Since the last recession, in the early 1990's [before NAFTA], China, Russia and the former Soviet republics have charged into the world's commodity markets. At the same time, new trade agreements have erased quotas and tariffs that long insulated United States industries from competitors." NAFTA is not explicitly mentioned, but what other "new trade agreements" can you think of that have been adopted since the early 1990s?

As a result, small American towns wither. In Brady, Texas, farmers who relied on the export of angora wool "are victims of low prices and competition from New Zealand and Argentina." For Bartow, Ga., "high production in countries like China have led to an oversupply and plunging prices" and the consequent devastation of the town. In Loving, N.M., which is near the "nation's largest deposits of potash, a basic ingredient of fertilizer," the agricultural recession and Canadian potash competition is destroying the farming economy on which the town relies. "The mining companies say most of those jobs may be gone for good."

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Harley-Davidson to build bikes in India

 Beyond the obvious market potential there is another major reason Harley-Davidson is building an assembly plant in India -- to bring down India's import duties which right now are so high Indian consumers pay double for fully assembled imported vehicles. Exporting just the parts to India could lower the import duty tariffs by around 80 percent according to Prakash.

And you thought protectionism and tariffs didn't work.  Be sure and show this article to all your congessmen and your friends. -----rng


from cnn.com
By Sara Snider CNN
Nov. 4, 2010

Harley-Davidson, the iconic American motorcycle brand with a cult-like following, has announced it has chosen to build its second assembly plant ever outside the United States in India.

The "complete knock down" plant or CKD is expected to be up and running in the northern Indian state of Haryana in first half of 2011. Parts made in America will be put together for the Indian market in Haryana.

"What we are doing is made in USA, assembled in India, which will have a positive job effect back home which is why we are driving this investment as quickly as we are," Anoop Prakash managing director for Harley Davidson India told CNN.The company is trying to expand its brand internationally from 30 to 40 percent by 2014 according to Prakash and India plays an important role in that.

"We see a distinctive credible growth story here, growth opportunity," he said.

India is the second fastest growing two-wheeler market in the world behind China. More than 10 million two-wheelers were sold in India in the 2009-2010 fiscal year. Beyond the obvious market potential there is another major reason Harley-Davidson is building an assembly plant in India -- to bring down India's import duties which right now are so high Indian consumers pay double for fully assembled imported vehicles. Exporting just the parts to India could lower the import duty tariffs by around 80 percent according to Prakash.

Harley-Davidson's story in India began in 2007 with a trade agreement that allowed India to export mangoes to America in exchange for allowing the United States to export Harley-Davidsons to India.

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Is the Federal Reserve Destroying the Dollar?

from americanthinker.com
November 14, 2010

By Fred N. Sauer

 If you think our economy is in bad shape now, just wait. To be sure, economic prospects for jobs and growth already are bleak, and the Obama administration has increased the national debt in less than two years from over$10.632 trillion in January 2009 to $13.561 trillion in September 2010, resulting in a record 30% increase in public debt.

But fear not. Some of our brightest leaders have got the perfect solution to all these problems:

Charles Evans, president of the Federal Reserve Bank of Chicago, called for the Fed to do more to charge up the economy, including a new program of U.S. Treasury bond purchases and possibly a declaration that it wants inflation to rise for a time beyond its informal 2% target. ...

The Fed is now considering whether to add to its $2.3-trillion portfolio of securities and loans by ramping up purchases of U.S. Treasury bonds, in an effort to drive down long-term interest rates and boost growth. ...

The Fed also needs to push down "real" interest rates, nominal interest rates minus inflation, to induce households and businesses to part with savings and borrow and spend more, he said.

It is hard to accept that the head of the Chicago Federal Reserve Bank, or any other Federal Reserve Bank president, or Ben Bernanke, the head of the whole system, believes that by driving long-term interest rates lower than they already are (thirty-year U.S. Treasury Note near 4%), one can convince anyone, much less one half of Americans who did not go broke, to want to borrow enough money to accelerate this economy. It is a preposterous concept.

The most probable outcome will be to ignite inflation. The U.S. dollar is the top reserve currency in the world primarily because of its reliability for maintaining its value. When the Fed, the fiduciary custodian of the world's current top reserve currency, tells all the holders of the dollar that they are going to deliberately depreciate it at 2% to 4% a year, a whole lot of people are going to be listening very closely. It is a little like yelling "fire" in a movie theatre. You want to be first to get out of the door.

If you are holding a ten-year U.S. Treasury Note yielding 2% and the Fed assures you that inflation is going to increase by 2%, you have a potential problem. Any prospective buyer of your Treasury will want to make at least 4% to compensate him for the new inflation. Thus, he will not want to pay you as much for your ten-year U.S. Treasury Note as you paid for it. When you paid $1,000 for your ten-year U.S. Treasury Note, you got it with a 2% interest payment. Because your new buyer requires at least a 4% interest payment, he will pay you only $833 for your $1,000 bond. You will lose $167, or 16.7% on the transaction. If inflation increases by 4%, your bond will be worth only $696, and your loss will be $304, or 30.4%. 


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Schumer pushes to bring back overseas jobs

Interesting timing--the Democrats had two years and a chance to lock up Congress and the White House for 20 years by ending outsourcing, off shoring and illegal immigration, thereby creating full employment and mass prosperity.  Instead, they blew all their political capital on, in Senator Kucinich's words, "a $50 billion gift to the insurance industry," called ObamaCare.  I think the Democrat's commitment to the working and middle classes and full employment is as phony as the Republican's commitment to ending abortion.  ---rng

It's a good start, but it lacks teeth and I suspect commitment on the senators side and much less from corporate leaders.  This legislation needs alot more incentives and more penalties. Although, I have not seen the particulars of the proposed legislation, I should hope it also targets preserving strategic industries for national defense, as these are also targeted for takeover by Chinese firms. ------lee

From timesunion.com
Thursday, September 23, 2010 at 5:25 PM
 by thomasfrank in New York business

Sen. Charles Schumer, D-N.Y., on Thursday introduced a bill aimed at encouraging businesses to move overseas jobs back to the United States.

The Creating American Jobs and Ending Offshoring Act would provide 24 months of payroll tax breaks for employers that replace workers abroad with employees here at home. The legislation would also end incentives that Schumer described as encouraging companies to outsource jobs overseas.

“Manufacturing jobs have left New York at an astounding rate for places that have no work rules, no environmental rules and no wages rules, and it’s time to level the playing field,” Schumer said on a conference call.  “By rewarding the companies that bring jobs back to America, this legislation puts the incentive back where it should be.”

According to the New York State Department of Labor, 85,400 New Yorkers – 5,600 of which in the Capital region – have lost their manufacturing jobs since August 2007.

The new legislation would

_Provide businesses with relief from the employer share of the Social Security payroll tax on wages paid to new U.S. employees. To be eligible, businesses must certify that the U.S. employee is replacing an employee who had been performing similar duties overseas.

_Prohibit a firm from taking any deduction, loss or credit for amounts paid in connection with reducing or ending the operation of a trade or business in the U.S. and starting or expanding a similar trade or business overseas.

The bill could be considered on the Senate floor as soon as next Tuesday. In addition to Schumer, sponsors of the legislation include Senate Majority Leader Harry Reid, D-Nev., Sen. Richard Durbin, D-Ill., and Sen. Byron Dorgan, D-N.D.

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How a New Jobless Era Will Transform America

The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come.  Lee-----

By Don Peck

How should we characterize the economic period we have now entered? After nearly two brutal years, the Great Recession appears to be over, at least technically. Yet a return to normalcy seems far off. By some measures, each recession since the 1980s has retreated more slowly than the one before it. In one sense, we never fully recovered from the last one, in 2001: the share of the civilian population with a job never returned to its previous peak before this downturn began, and incomes were stagnant throughout the decade. Still, the weakness that lingered through much of the 2000s shouldn’t be confused with the trauma of the past two years, a trauma that will remain heavy for quite some time.

The unemployment rate hit 10 percent in October, and there are good reasons to believe that by 2011, 2012, even 2014, it will have declined only a little. Late last year, the average duration of unemployment surpassed six months, the first time that has happened since 1948, when the Bureau of Labor Statistics began tracking that number. As of this writing, for every open job in the U.S., six people are actively looking for work.
All of these figures understate the magnitude of the jobs crisis. The broadest measure of unemployment and underemployment (which includes people who want to work but have stopped actively searching for a job, along with those who want full-time jobs but can find only part-time work) reached 17.4 percent in October, which appears to be the highest figure since the 1930s. And for large swaths of society—young adults, men, minorities—that figure was much higher (among teenagers, for instance, even the narrowest measure of unemployment stood at roughly 27 percent). One recent survey showed that 44 percent of families had experienced a job loss, a reduction in hours, or a pay cut in the past year.
There is unemployment, a brief and relatively routine transitional state that results from the rise and fall of companies in any economy, and there is unemployment—chronic, all-consuming. The former is a necessary lubricant in any engine of economic growth. The latter is a pestilence that slowly eats away at people, families, and, if it spreads widely enough, the fabric of society. Indeed, history suggests that it is perhaps society’s most noxious ill.
The worst effects of pervasive joblessness—on family, politics, society—take time to incubate, and they show themselves only slowly. But ultimately, they leave deep marks that endure long after boom times have returned. Some of these marks are just now becoming visible, and even if the economy magically and fully recovers tomorrow, new ones will continue to appear. The longer our economic slump lasts, the deeper they’ll be.
If it persists much longer, this era of high joblessness will likely change the life course and character of a generation of young adults—and quite possibly those of the children behind them as well. It will leave an indelible imprint on many blue-collar white men—and on white culture. It could change the nature of modern marriage, and also cripple marriage as an institution in many communities. It may already be plunging many inner cities into a kind of despair and dysfunction not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years.

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Deindustrialization Why manufacturing continues to decline

     This thesis addresses most of the main concerns of economists like Paul Craig Roberts, but fails to mention that for some companies and industries, shifting to financial services---making money but by renting money---has helped accelerate deindustrialzation in the US. -----lee

Around 1970 the U.S. entered a new phase in which manufacturing, the engine of American prosperity, began to falter. The problem, felt particularly in the North, sometimes came with little warning to workers, as factories suddenly closed or moved to less unionized areas, such as the Sunbelt and overseas. More typically, however, there was a gradual reduction in Northern jobs as corporations failed to invest in improved plants and technology.
     The U.S. lost 9 percent of its manufacturing jobs between 1967 and 2001, but in the industrial heartland--the Northeast and the Midwest--the loss reached more than 40 percent. Because of phenomenal increases in output per worker, manufacturing output rose sharply. But as the chart shows, a steadily decreasing proportion of American workers was employed in manufacturing. This process is markedly similar to the historical decline of farming, in which a progressively smaller number of people produced an expanding volume of goods.
     The traditional argument for the cause of deindustrialization is competition from low-wage labor in developing countries. But according to a theory proposed by Robert Rowthorn of the University of Cambridge and Ramana Ramaswamy of the International Monetary Fund, deindustrialization is a natural consequence of economic progress in all developed economies. In their view, imports from developing countries have a relatively minor role; rather, faster productivity growth in manufacturing as compared with services plays the major part. Because factory procedures can be standardized more readily than those in the office and the store, manufacturing productivity rises far more quickly than productivity in the service sector. As manufacturing becomes more efficient, service industries absorb an increasing proportion of laid-off factory workers. This process is consistent with the tendency of middle-class consumers in affluent societies to spend an increasing portion of personal income on services as their appetite for goods nears satiation.
A theoretical implication of the Rowthorn-Ramaswamy thesis is that aggregate productivity growth of all sections of the economy could slow as workers shift to the less efficient service sector, a circumstance that could lead to a slowdown in the growth of living standards. A second implication is that as unionized factory workers shift to the service sector, which tends to be lower-paying and nonunionized, income disparities will increase--a result that apparently has happened.
     Rowthorn states that in the U.S. the decline in manufacturing jobs has been unnecessarily accelerated by policy decisions, a position long held by American labor economists. Thomas Palley of the AFL-CIO, who accepts the logic of the Rowthorn-Ramaswamy thesis, believes that the absolute decline in U.S. manufacturing--2.5 million jobs in the last third of the 20th century--traces to, among other things, the perpetuation of an overvalued dollar, which makes it difficult for American goods to compete overseas, and to a U.S. policy that opens domestic markets while offering manufacturers incentives to move abroad.
Policy at the local level may have exacerbated the trend toward destabilization. New York City in the 1950s had the largest concentration of manufacturing jobs in the country, but the natural forces of deindustrialization were reinforced by the city's post-World War II policy of favoring "clean" businesses such as banks and brokerage houses. And so, instead of encouraging the preservation of well-paying factory jobs, the city promoted the biggest office-building boom on the planet. The number of manufacturing jobs, meanwhile, fell from almost a million in the 1950s to about 200,000 in 2001.

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Numbers racket: Why the economy is worse than we know

This article is a bit dated but it provides a perspective on the current numbers racket and how the con is still going on. Read it and weep.  ----lee

By Kevin P. Phillips 

May 2008 

Almost four decades have passed since the United States scrapped its last currency ties to precious metals. Our copper and nickel coinage still retains some metallic value, but not nearly enough for the purpose of currency tampering—the historic temptation of inflation-plagued or otherwise wayward governments, including, at times, our own. Instead, since the 1960s, Washington has been forced to gull its citizens and creditors by debasing official statistics: the vital instruments with which the vigor and muscle of the American economy are measured. The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowing, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed. If Washington’s harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it actually is.

     The corruption has tainted the very measures that most shape public perception of the economy—the monthly Consumer Price Index (CPI), which serves as the chief bellwether of inflation; the quarterly Gross Domestic Product (GDP), which tracks the U.S. economy’s overall growth; and the monthly unemployment figure, which for the general public is perhaps the most vivid indicator of economic health or infirmity. Not only do governments, businesses, and individuals use these yardsticks in their decision-making but minor revisions in the data can mean major changes in household circumstances—inflation measurements help determine interest rates, federal interest payments on the national debt, and cost-of-living increases for wages, pensions, and Social Security benefits. And, of course, our statistics have political consequences too.An administration is helped when it can mouth banalities about price levels being “anchored” as food and energy costs begin to soar.

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Who Broke America’s Jobs Machine? Why creeping consolidation is crushing American livelihoods

Washington Monthly
March/April 2010

By Barry C. Lynn and Phillip Longman 

      If any single number captures the state of the American economy over the last decade, it is zero. That was the net gain in jobs between 1999 and 2009—nada, nil, zip. By painful contrast, from the 1940s through the 1990s, recessions came and went, but no decade ended without at least a 20 percent increase in the number of jobs.

     Many people blame the great real estate bubble of recent years. The idea here is that once a bubble pops it can destroy more real-world business activity—and jobs—than it creates as it expands. There is some truth to this. But it doesn’t explain why, even when the real estate bubble was at its most inflated, so few jobs were created compared to the tech-stock bubble of the late ’90s. Between 2000 and 2007 American businesses created only seven million jobs, before the great recession destroyed more than that. In the ’90s prior to the dot-com bust, they created more than twenty-two million jobs.

     Others point to the diffusion of new technologies that reduce the number of workers needed to produce and sell manufactured products like cars and services like airline reservations. But throughout economic history, even as new technologies like the assembly line and the personal computer destroyed large numbers of jobs, they also empowered people to create new and different ones, often in greater numbers. Yet others blame foreign competition and offshoring, and point to all the jobs lost to China, India, or Mexico. Here, too, there is some truth. But U.S. governments have been liberalizing our trade laws for decades; although this has radically changed the type of jobs available to American workers—shifting vast chunks of the U.S. manufacturing sector overseas, for instance—there is little evidence that this has resulted in any lasting decline in the number of jobs in America.

     Moreover, recent Labor Department statistics show that the loss of jobs here at home, be it the result of sudden economic crashes or technological progress or trade liberalization, does not appear to be our main problem at all. Though few people realize it, the rate of job destruction in the private sector is now 20 percent lower than it was in the late ’90s, when managers at America’s corporations embraced outsourcing and downsizing with an often manic intensity. Rather, the lack of net job growth over the last decade is due mainly to the creation of fewer new jobs. As recent Labor Department statistics show, even during the peak years of the housing boom, job creation by existing businesses was 14 percent lower than it was in the late ’90s.

     The problem of weak job creation certainly can’t be due to increased business taxes and regulation, since both were slashed during the Bush years. Nor can the explanation be insufficient consumer demand; throughout most of the last decade, consumers and the federal government engaged in a consumption binge of world-historical proportions. 

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Jobless Recoveries Getting Longer and Longer…

A friend of mine attended high school in Washington D.C. in the early 50's, and he was told by the teachers that production would be so good that eventually they would only have to work 4 hours a day, but they would be paid the equivalent of a full day's wages---because the productivity would be so high.  So, memo to all the fat cats, we want FEP (full employment policy)now!  That means 3 percent unemployment or less.  Then, wages will be bid back up, our tax base will be restored, and you fat cats will make even more money, because everybody will have money to spend on your products. No borrowing or printing money to get FEP.  Just end outsourcing, offshoring and illegal immigration.  Or, in all probability, there will be no way to stop the confiscation of all your factories, and even your homes and personal wealth.  Just a friendly piece of advice.  rng-----

Just a friendly little graph to remind you it's not all China's fault.

----lee

February 2, 2010

Steve Roth at Asymptosis has a graph (originally from Calculated Risk) showing how jobless recoveries are getting longer and longer—in fact quite dramatically so. I think the primary reason for this is advancing job automation technology (see the post below), and I think there’s no reason at all to expect that this trend won’t continue and quite possibly accelerate in the future. Mainstream economists, of course, are oblivious—and by the time they start to see reality, things may get truly scary.

We’ve been hearing more about “jobless recoveries” over the years, but it’s pretty profound how rapidly the trend is increasing.

To read more...
http://econfuture.wordpress.com/2010/02/02/jobless-recoveries-getting-longer-and-longer/

Who's a basket case now? Don't worry, America, the IMF is eager to help solve your economic mess.

When a once sovereign, independent, industrious country is thought of as a basket case and in third world terms, you know are in deep trouble. God help us. -----lee.

from latimes.com

September 18, 2008

Rosa Brooks

Dear United States, Welcome to the Third World!

     It's not every day that a superpower makes a bid to transform itself into a Third World nation, and we here at the World Bank and the International Monetary Fund want to be among the first to welcome you to the community of states in desperate need of international economic assistance. As you spiral into a catastrophic financial meltdown, we are delighted to respond to your Treasury Department's request that we undertake a joint stability assessment of your financial sector. In these turbulent times, we can provide services ranging from subsidized loans to expert advisors willing to perform an emergency overhaul of your entire government.

As you know, some outside intervention in your economy is overdue. Last week -- even before Wall Street's latest collapse -- 13 former finance ministers convened at the University of Virginia and agreed that you must fix your "broken financial system." Australia's Peter Costello noted that lately you've been "exporting instability" in world markets, and Yashwant Sinha, former finance minister of India, concluded, "The time has come. The U.S. should accept some monitoring by the IMF."

     We hope you won't feel embarrassed as we assess the stability of your economy and suggest needed changes. Remember, many other countries have been in your shoes. We've bailed out the economies of Argentina, Brazil, Indonesia and South Korea. But whether our work is in Sudan, Bangladesh or now the United States, our experts are committed to intervening in national economies with care and sensitivity.

     We thus want to acknowledge the progress you have made in your evolution from economic superpower to economic basket case. Normally, such a process might take 100 years or more. With your oscillation between free-market extremism and nationalization of private companies, however, you have successfully achieved, in a few short years, many of the key hallmarks of Third World economies.

     Your policies of irresponsible government deregulation in critical sectors allowed you to rapidly develop an energy crisis, a housing crisis, a credit crisis and a financial market crisis, all at once, and accompanied (and partly caused) by impressive levels of corruption and speculation. Meanwhile, those of your political leaders charged with oversight were either napping or in bed with corporate lobbyists.

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