Thursday, October 21, 2010



[Editor's Note: It's fashionable to blame foreign trade — especially with China — for America's huge decline in manufacturing jobs. But is it true? According to economist Arthur Macewan it's much more complex than that. Macewan, a professor emeritus at the University of Massachusetts, answers reader questions at Dollars & Sense magazine, under the name "Dr. Dollar." Here a question and his answer from the progressive magazine's September-October issue.]

Dear Dr. Dollar: Many times I have read (in writings by former Secretary of Labor Robert Reich, for example) or heard it said (by President Obama, for example) that technology is eliminating more manufacturing jobs in the United States than rising imports. Is that true? — Kevin Rath, Oakland, Calif.

The former labor secretary and the president are right — at least if by “technology” we mean all sources of increases in output per worker, whether by greater use of machinery, work reorganization, or plain old speed-up.

Consider the years from 1990 to 2007. In this period, the supply of manufactured goods in the United States (production plus imports) roughly doubled (in inflation-adjusted, or “real,” terms). Had the share of imports stayed the same and had productivity (output per worker) stayed the same, employment too would have roughly doubled (assuming workers worked just as many hours, an issue I will come back to below). But that’s not what happened. In 2007, manufacturing employed about 76% as many people as in 1990, 13.431 million as compared to 17.695 million.

In fact, both productivity and the share of imports in total supply increased substantially between 1990 and 2007. Output per worker in manufacturing rose dramatically, by roughly 88% in real terms. Imports rose from 27% of the total supply of manufactured goods in the United States in 1990 to 48% in 2007. So the amount of domestic output, instead of doubling along with the doubling of supply, increased by only 43% (in real terms).

To figure out which of these factors—productivity or the share of imports in total supply—had the larger quantitative impact on employment, let’s look at two fictitious cases that allow us to examine each factor separately:

Case 1: Productivity increases by 88%, but the share of imports stays the same. If supply doubles, domestic output will also double. Employment will rise, but only by approximately 6% because with an 88% increase in productivity, each worker is yielding a larger output. Only 6% more workers are necessary to produce twice as much output.

Case 2: The import share increases from 27% to 48%, but productivity stays the same. If supply doubles, domestic output will rise by 43% (as it actually did). And if productivity stays the same, employment would therefore also increase by 43%.

It is clear that the increase in productivity had a quantitatively larger impact in limiting employment growth than did the increase in the share of imports.

Job-loss in manufacturing presents serious problems. Some people lose their jobs and most are unlikely to get jobs that pay equivalent wages, even if overall employment picks up. These people suffer, and so do their families and communities. More broadly, the strong unions that developed in manufacturing are weakened, undercutting the economic and political strength of all working people.

But these negative impacts don’t have to take place. There is no good reason why we have to accept the choices of cutting foreign trade or cutting jobs, of reducing technological change or reducing jobs, or, for that matter, of destroying the environment (e.g., off-shore drilling and clear cutting of forests) or destroying jobs. Instead we can find ways to prevent the costs of economic changes from falling on workers, their families, and their communities.

One positive step would be to assure that productivity gains yield shorter work-weeks with no cut in pay—that is, no loss in the number of jobs. After all, this has happened before. Also, we need to establish the conditions for rebuilding strong unions in all segments of the economy—for example, by passing the Employee Free Choice Act and assuring that the National Labor Relations Board does its job. In addition, we need an array of good social programs such as, “Medicare for all” so people don’t lose their health care benefits when they lose their jobs. Likewise, better support for education and training programs for all workers—not just those affected by imports—are essential to facilitate their adjustment to change.

There may be good reasons to place some restrictions on technological changes or foreign trade—for example, when they generate environmental destruction, when they place workers in danger, or in conditions of virtual slavery (in the exporting countries). When we are forced to choose between the gains from trade or technology versus the well-being of workers directly affected, most often we should choose the well-being of the workers. The real solution to these problems, however, is to find ways to change the choices.

Whatever steps we take, we need to recognize that foreign trade is not the only cause—not even the quantitatively most important cause—of the decline in manufacturing employment

By Simon Butler

A strong agreement at Copenhagen was scuttled by the rich nations’ refusal to commit to deep emissions cuts.  No legally-binding agreement to cut greenhouse gas emissions will be made at this year’s big United Nations climate conference in Cancun, Mexico from November 29 to December 10.

And that’s just the way the rich nations want it. Few world leaders are even expected to turn up to the Cancun talks. For months, key players have tried to dampen down public hopes that the summit will mark a shift away from business as usual.

The British Guardian columnist George Monbiot wrote on September 20 that it was time for climate action campaigners to accept the UN process was dead.

The huge threat posed by dangerous climate change, and the need for an urgent response, may make this painful to admit for some. But the facts speak for themselves.

A September 21 AFP article reported that top US climate negotiator Todd Stern said bluntly: “No one is anticipating or expecting in any way a legal treaty to be done in Cancun this year.”

For two decades, successive US governments have fought against any legally-binding climate treaty. The US is the only nation in the world to not sign on to the existing Kyoto protocol treaty.

But this year, UN officials have also downplayed hopes for much progress at Cancun — or beyond.

On June 9, Associated Press reported that UN climate chief Christiana Figueres said: “I don’t believe that we will ever have a final agreement on climate, certainly not in my lifetime.” (JS: She's 54.)

Figueres’s statement marked a shift in the UN’s rhetoric — and a win for the big polluting nations bent on sabotaging strong climate action.

Before the December 2009 UN climate talks in Copenhagen, UN officials urged member nations to agree to a new, binding treaty to replace the existing Kyoto protocol, which expires in 2012.

A strong agreement at Copenhagen was scuttled by the rich nations’ refusal to commit to the deep emissions cuts demanded by the world’s least developed nations.

Developed nations also led a charge to kill off the Kyoto protocol, which requires rich countries to make bigger emissions cuts than poor countries.

Copenhagen ended in a stalemate. Many poor countries refused to endorse the so-called Copenhagen Accord that was proposed by the US, China, India and South Africa. Most rich nations, including Australia, supported the accord.

By contrast, developing countries have insisted that cuts of 40%-50% by 2020 are needed.

The Guardian reported on August 4 that the Stockholm Environment Institute and the Third World Network had released a study that found various loopholes in the accord would actually allow emissions to rise by as much as 9% by 2020 (on 1990 levels).

The accord also proposed a global warming target of a 2°C temperature rise above pre-industrial levels, despite the call from the Association of Small Island States to limit warming to a safe level of less than 1.5°C. founder Bill McKibben said in a December 19 statement that the Copenhagen Accord was “a declaration that small and poor countries don’t matter, that international civil society doesn’t matter, and that serious limits on carbon don’t matter”.

Yet this year, the rich countries have pushed to make the Copenhagen Accord the basis of Cancun negotiations.

The April 11 London Observer revealed that European Union (EU) and US diplomats had threatened African countries with cuts in humanitarian aid unless they dropped their opposition to the accord.

The same month, the US suspended its climate aid programs to Bolivia and Ecuador because the two countries had refused to back the accord.

Preliminary UN climate talks held in August in Bonn, Germany, ended without any positive news. After Bonn, the EU’s climate action commissioner Connie Hedegaard said: “These negotiations have, if anything, gone backwards,” reported on August 9.

Another round of talks in the Chinese city of Taijing, the last before Cancun, ended on October 9. Ironically, Taijing was not the first-choice venue. The conference was supposed to take place on the Chinese island of Hainan. But in the days before the talks opened, the island was hit by a freak, nine-day rainstorm, which caused the worst flooding in 50 years.

The October 11 China Daily said the rains affected 2.5 million people and forced the evacuation of 336,000 residents. Local crops were wiped out, vegetable prices rose by 30% and medicine supplies ran low.

Yet the rich nations were unmoved. The head of Bolivia’s delegation, Pablo Solon, told on October 6: “We don’t see any kind of movement [at Taijing] from developed countries to increase the level of emissions reduction.”

Instead, several developed nations, including Australia, Japan, Russia, New Zealand and Canada, used the meeting to announce “they want to do away with the Kyoto Protocol,” said the October 11 Malaysian Star.

It is clear the existing framework will not allow for the urgent action required. Much greater struggle is required against the powerful forces that rich nations’ governments are in bed with.

This article appeared Oct. 17 in Australia's Green Left Weekly.

By Economic Policy Institute (Oct. 20)

Not all Americans are living longer than they were a generation ago. In 2006 (the latest figures), the top income half of men who reached age 65 were expected to live another 21.5 years, but lower half income of  men had a median life expectancy of only an additional 16.1 years — a difference of five years and four months.

While life expectancy for higher-income men increased more than five years between 1986 and 2006, life expectancy for lower-income men rose little more than a year over that same 20-year period.  Lower-income men in 2006 had shorter life expectancies than higher income men had a generation ago.

These data, from the research paper "Trends in Mortality Differentials and Life Expectancy for Male Social Security-Covered Workers," by Average Relative Earnings,  were presented Oct. 5 at the America’s Fiscal Choices conference co-sponsored by EPI. During a panel on Social Security and overall retirement security, experts Nancy Altman of Social Security Works and Teresa Ghilarducci of The New School stressed that raising the retirement age would reduce benefits, particularly for those lower-income workers with shorter life expectancies, who depend on Social Security for the bulk of their income. They also stressed that workers are often unable to choose when they retire and must stop working when they are no longer able to perform physically demanding jobs, or when they suffer a layoff and cannot find work.

The America’s Fiscal Choices conference focused on the best policies for strengthening the economy and reducing the deficit. Panelists stressed that without Social Security, the economy would be in much worse condition, since the program lifts 19 million people out of poverty.