BUSH ADMIN AGAIN BALKS AT CONFRONTING CHINA

Where political channels have failed to successfully pressure the Bush administration to take action against unfair trade practices in China (currency manipulation, human rights violations, failure to meet WTO commitments, and so on), many are looking to alternative legal channels. A Number of groups have legal suits on deck to be filed with the US Trade Representatives office seeking remedy for unfair trade practices.

Seeking to pre-empt such a suit, the US Trade Representative Robert Zoellick remarked yesterday at a press briefing, "There's really no WTO obligation not to have a fixed exchange rate," which would seem to obviate any kind of trade remedy action against China in the WTO.

Perhaps. But China's continued currency manipulation is in violation of its commitments under the IMF Articles of Agreement:

Article IV, Section 1.iii clearly states: "Recognizing that the essential purpose of the international monetary system is to provide a framework that facilitates the exchange of goods, services, and capital among countries, and that sustains sound economic growth, and that a principal objective is the continuing development of the orderly underlying conditions that are necessary for financial and economic stability, each member undertakes to collaborate with the Fund and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates. In particular, each member shall...avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other members." (Emphasis added).

The IMF charter could not be more clear in recognizing how such currency manipulation constitutes an unfair trade practice, which China is bound not to do.

The question of appropriates venue for legal action aside, China is violating international economic agreements to gain unfair competitive advantage--at the expense of the United States, as well as other developing countries who compete for a share of the US market.

PRESIDENTIAL-SPEAK

Rhetorician extraordinaire David Kusnet will be doing a bi-monthly column called "Stump" in The New Republic.

Kusnet will focus on the rhetoric of the 2004 presidential campaign.

WHAT I'M READING TODAY: State Department Report on Human Rights Practices 2003

Since the brouhaha over the trade and jobs issue that erupted when Bush's chief economist Greg Mankiw accidentally revealed to America how economists view the world, the global punditocracy has responded to the call of duty, circling their wagons and decrying protectionist China bashers.

Just out of curiousity about what these "China-bashers" are charging (that Chinese exports are being subsidized through egregious human rights violations, etc., etc.), I went straight to the source. No, not The Nation. I'm talking about that bastion of knee-jerk liberalism and ire of conservatives everywhere, Collin Powell's State Department.

Here's what I found out about what is going on in China:



The report mentions no less than 40 times by my count (I may have missed some) the cheery sounding reeducation-through-labor camps widely used in China (and it ain't talking about an AFL-CIO activist training). Rather, Chinese citizens (some 250,000 of them) were confined without judicial process and force to work "in facilities directly connected with penal institutions...[or in some cases] they were contracted to nonprison enterprises. Facilities and their management profited from inmate labor." Who were these prisoners? Activists for religious freedom, democratic reform, labor rights, women's rights, people who fall out of favor of the party, people who protest to demand back pay for wages that are withheld (more on this below), and generally people who rake too much muck. "Chinese prison management relied on the labor of prisoners both as an element of punishment and to fund prison operations."

"In 1992, the U.S. and Chinese Governments signed a memorandum of understanding (MOU)...express[ing] the intention of the governments to cooperate to assure that Chinese prison-made products were not exported to the United States. However, Chinese cooperation under the MOU and SOC has been poor," meaning, of course, we have no way of knowing whether all those cheap wares adorning the shelves at Walmart are made by compulsory labor. (Regardless, the mere existence of forced labor undermines the rights and protections of all workers in China and the countries with which China trades).

In case you were wondering, China has not ratified the ILO core labor standard prohibiting forced compulsory labor, although they are bound to it via other treaties and, not to mention, the UN Universal Declaration of Human Rights. US law (Section 301(d) of the Trade Act) specifically regards such human rights violations as an unfair trade practice.

But wait, there's more. It is common practice in China to keep workers in "bondage" by withholding their pay (which is by default forfeited if a worker decides to quit). Since workers in China have no right to associate freely in trade unions, to bargain collectively or to strike (all also established as universal human rights), they have little recourse but to submit to this exploitation. Even so, spontaneous "protests by workers seeking unpaid wages continued throughout the country" are common place throughout China. Protesting workers have resorted to blocking roads and railways, to threatening suicide, and even to self-immolation. (The reason we don't hear too much about it is because it is illegal in China to photograph and film labor protests, or even groups of unemployed people standing around).

This is just the tip of the iceberg: human trafficking, children sold into forced labor, women sold into prostitution, workers exposed to dangerous chemicals and unsafe working practices, and so on. It is really horrifying reading. Don't read it right before bedtime as I did. This little excerpt from the report kept me up for hours last night:

"Some students worked in light industrial production within or for their schools. In March 2001, an explosion in Jiangxi Province at an elementary school that was also used to manufacture fireworks killed 42 persons, most of them schoolchildren who worked to assemble the fireworks."

All this comes just from the 2003 report, but the State Department has reports posted on its website going back to 1993.

So, as this government report clearly proves, all those whacky China-bashers are protectionists looking out for their own self-interest in their effort to send America back to the economic dark ages. End of argument.

MY PASSION FOR THE PASSION

I think Bertrand Russell said it best in his lecture, "Why I Am Not A Christian," and I won't try to improve upon him here:

Defects In Christ's Teaching

Having granted the excellence of these maxims, I come to certain points in which I do not believe that one can grant either the superlative wisdom or the superlative goodness of Christ as depicted in the Gospels; and here I may say that one is not concerned with the historical question. Historically, it is quite doubtful whether Christ ever existed at all, and if He did we do not know anything about Him, so that I am not concerned with the historical question, which is a very difficult one. I am concerned with Christ as He appears in the Gospels, taking the Gospel narrative as it stands, and there one does find some things that do not seem to be very wise. For one thing, he certainly thought his second coming would occur in clouds of glory before the death of all the people who were living at that time. There are a great many texts that prove that. He says, for instance: "Ye shall not have gone over the cities of Israel till the Son of Man be come." Then He says: "There are some standing here which shall not taste death till the Son of Man comes into His kingdom"; and there are a lot of places where it is quite clear that He believed His second coming would happen during the lifetime of many then living. That was the belief of his earlier followers, and it was the basis of a good deal of His moral teaching. When He said, "Take no thought for the morrow," and things of that sort, it was very largely because He thought the second coming was going to be very soon, and that all ordinary mundane affairs did not count. I have, as a matter of fact, known some Christians who did believe the second coming was imminent. I knew a parson who frightened his congregation terribly by telling them that the second coming was very imminent indeed, but they were much consoled when they found that he was planting trees in his garden. The early Christians really did believe it, and they did abstain from such things as planting trees in their gardens, because they did accept from Christ the belief that the second coming was imminent. In this respect clearly He was not so wise as some other people have been, and he certainly was not superlatively wise.


The Moral Problem

Then you come to moral questions. There is one very serious defect to my mind in Christ's moral character, and that is that He believed in hell. I do not myself feel that any person that is really profoundly humane can believe in everlasting punishment. Christ certainly as depicted in the Gospels did believe in everlasting punishment, and one does find repeatedly a vindictive fury against those people who would not listen to His preaching -- an attitude which is not uncommon with preachers, but which does somewhat detract from superlative excellence. You do not, for instance, find that attitude in Socrates. You find him quite bland and urbane toward the people who would not listen to him; and it is, to my mind, far more worthy of a sage to take that line than to take the line of indignation. You probably all remember the sorts of things that Socrates was saying when he was dying, and the sort of things that he generally did say to people who did not agree with him.

You will find that in the Gospels Christ said: "Ye serpents, ye generation of vipers, how can ye escape the damnation of hell." That was said to people who did not like His preaching. It is not really to my mind quite the best tone, and there are a great many of these things about hell. There is, of course, the familiar text about the sin against the Holy Ghost: "Whosoever speaketh against the Holy Ghost it shall not be forgiven him neither in this world nor in the world to come." That text has caused an unspeakable amount of misery in the world, for all sorts of people have imagined that they have committed the sin against the Holy Ghost, and thought that it would not be forgiven them either in this world or in the world to come. I really do not think that a person with a proper degree of kindliness in his nature would have put fears and terrors of this sort into the world.

Then Christ says, "The Son of Man shall send forth His angels, and they shall gather out of His kingdom all things that offend, and them which do iniquity, and shall cast them into a furnace of fire; there shall be wailing and gnashing of teeth"; and He goes on about the wailing and gnashing of teeth. It comes in one verse after another, and it is quite manifest to the reader that there is a certain pleasure in contemplating wailing and gnashing of teeth, or else it would not occur so often. Then you all, of course, remember about the sheep and the goats; how at the second coming He is going to divide the sheep from the goats, and He is going to say to the goats: "Depart from me, ye cursed, into everlasting fire." He continues: "And these shall go away into everlasting fire." Then He says again, "If thy hand offend thee, cut it off; it is better for thee to enter into life maimed, than having two hands to go into hell, into the fire that never shall be quenched, where the worm dieth not and the fire is not quenched." He repeats that again and again also. I must say that I think all this doctrine, that hell-fire is a punishment for sin, is a doctrine of cruelty. It is a doctrine that put cruelty into the world, and gave the world generations of cruel torture; and the Christ of the Gospels, if you could take Him as his chroniclers represent Him, would certainly have to be considered partly responsible for that.

There are other things of less importance. There is the instance of the Gadarene swine, where it certainly was not very kind to the pigs to put the devils into them and make them rush down the hill into the sea. You must remember that He was omnipotent, and He could have made the devils simply go away; but He chose to send them into the pigs. Then there is the curious story of the fig-tree, which always rather puzzled me. You remember what happened about the fig-tree. "He was hungry; and seeing a fig-tree afar off having leaves, He came if haply He might find anything thereon; and when he came to it He found nothing but leaves, for the time of figs was not yet. And Jesus answered and said unto it: 'No man eat fruit of thee hereafter for ever'.... and Peter.... saith unto Him: 'Master, behold the fig-tree which thou cursedst is withered away.'" This is a very curious story, because it was not the right time of year for figs, and you really could not blame the tree. I cannot myself feel that either in the matter of wisdom or in the matter of virtue Christ stands quite as high as some other people known to History. I think I should put Buddha and Socrates above Him in those respects.


The Emotional Factor

As I said before, I do not think that the real reason that people accept religion has anything to do with argumentation. They accept religion on emotional grounds. One is often told that it is a very wrong thing to attack religion, because religion makes men virtuous. So I am told; I have not noticed it. You know, of course, the parody of that argument in Samuel Butler's book, Erewhon Revisited. You will remember that in Erewhon there is a certain Higgs who arrives in a remote country, and after spending some time there he escapes from that country in a balloon. Twenty years later he comes back to that country and finds a new religion in which he is worshipped under the name of the "Sun Child"; and it is said that he ascended into heaven. He finds that the feast of the Ascension is about to be celebrated, and he hears Professors Hanky and Panky say to each other that they never set eyes on the man Higgs, and they hope they never will; but they are the High Priests of the religion of the Sun Child. He is very indignant, and he comes up to them, and he says: "I am going to expose all this humbug and tell the people of Erewhon that it was only I, the man Higgs, and I went up in a balloon." He was told, "You must not do that, because all the morals of this country are bound round this myth, and if they once know that you did not ascend into heaven they will all become wicked"; and so he is persuaded of that and he goes quietly away.

That is the idea -- that we should all be wicked if we did not hold to the Christian religion. It seems to me that the people who have held to it have been for the most part extremely wicked. You find this curious fact, that the more intense has been the religion of any period and the more profound has been the dogmatic belief, the greater has been the cruelty and the worse has been the state of affairs. In the so-called Ages of faith, when men really did believe the Christian religion in all its completeness, there was the Inquisition, with all its tortures; there were millions of unfortunate women burned as witches; and there was every kind of cruelty practiced upon all sorts of people in the name of religion.

You find as you look around the world that every single bit of progress of humane feeling, every improvement in the criminal law, every step toward the diminution of war, every step toward better treatment of the colored races, or ever mitigation of slavery, every moral progress that there has been in the world, has been consistently opposed by the organized churches of the world. I say quite deliberately that the Christian religion, as organized in its churches, has been and still is the principal enemy of moral progress in the world.


How The Churches Have Retarded Progress

You may think that I am going too far when I say that that is still so, I do not think that I am. Take one fact. You will bear with me if I mention it. It is not a pleasant fact, but the churches compel one to mention facts that are not pleasant. Supposing that in this world that we live in today an inexperienced girl is married to a syphilitic man, in that case the Catholic Church says, "This is an indissoluble sacrament. You must stay together for life," and no steps of any sort must be taken by that woman to prevent herself from giving birth to syphilitic children. This is what the Catholic church says. I say that that is fiendish cruelty, and nobody whose natural sympathies have not been warped by dogma, or whose moral nature was not absolutely dead to all sense of suffering, could maintain that it is right and proper that that state of things should continue.

That is only an example. There are a great many ways in which at the present moment the church, by its insistence upon what it chooses to call morality, inflicts upon all sorts of people undeserved and unnecessary suffering. And of course, as we know, it is in its major part an opponent still of progress and improvement in all the ways that diminish suffering in the world, because it has chosen to label as morality a certain narrow set of rules of conduct which have nothing to do with human happiness; and when you say that this or that ought to be done because it would make for human happiness, they think that has nothing to do with the matter at all. "What has human happiness to do with morals? The object of morals is not to make people happy."


Fear, The Foundation Of Religion

Religion is based, I think, primarily and mainly upon fear. It is partly the terror of the unknown and partly, as I have said, the wish to feel that you have a kind of elder brother who will stand by you in all your troubles and disputes. Fear is the basis of the whole thing -- fear of the mysterious, fear of defeat, fear of death. Fear is the parent of cruelty, and therefore it is no wonder if cruelty and religion have gone hand-in-hand. It is because fear is at the basis of those two things. In this world we can now begin a little to understand things, and a little to master them by the help of science, which has forced its way step by step against the Christian religion, against the churches, and against the opposition of all the old precepts. Science can help us to get over this craven fear in which mankind has lived for so many generations. Science can teach us, and I think our own hearts can teach us, no longer to look around for imaginary supports, no longer to invent allies in the sky, but rather to look to our own efforts here below to make this world a fit place to live in, instead of the sort of place that the churches in all these centuries have made it.


What We Must Do

We want to stand upon our own feet and look fair and square at the world -- its good facts, its bad facts, its beauties, and its ugliness; see the world as it is and be not afraid of it. Conquer the world by intelligence and not merely by being slavishly subdued by the terror that comes from it. The whole conception of a God is a conception derived from the ancient oriental despotisms. It is a conception quite unworthy of free men. When you hear people in church debasing themselves and saying that they are miserable sinners, and all the rest of it, it seems contemptible and not worthy of self-respecting human beings. We ought to stand up and look the world frankly in the face. We ought to make the best we can of the world, and if it is not so good as we wish, after all it will still be better than what these others have made of it in all these ages. A good world needs knowledge, kindliness, and courage; it does not need a regretful hankering after the past or a fettering of the free intelligence by the words uttered long ago by ignorant men. It needs a fearless outlook and a free intelligence. It needs hope for the future, not looking back all the time toward a past that is dead, which we trust will be far surpassed by the future that our intelligence can create.

WATER, WATER EVERYWHERE

But not a drop to drink in the capital of the free world. Clean water, pillar of civilization, is becoming ever more scarce due to a combination of corruption, bureaucratic ineptitude and neoliberal acrimony for investments in critical public infrastructures.

The DC Water and Sewer Authority is warning that children under the age of 6 and pregnant women should not drink the water. In lieu of clean water, DC WASA is offering children under the age of 6 and pregnant women free tests for lead poisoning. So I guess it evens out, more or less.

CULTURE WAR: CIVIL RIGHTS FOR GAYS

It's times like these that I ask myself WWCD? That's right, What Would Cato Do?

At the same debate in the summer of 2002 where I heard Grover Norquist say that Nazi Germany and the school board of Des Moines, Iowa are the same form of totalitarian government, I heard Cato Chairman William Niskanen orate on the principles of limited government and individual liberties established in the US constitution.


A public service announcement from your local school board.

Cato, of course, is a well known shill for corporate America and a close ally of the Bush administration, providing the bulk of its pseudo-intellectual rhetoric for tax cuts, privatizing Social Security, and generally deconstructing the social fabric painstakingly built in the years since America's gilded age.

This is by no means an endorsement of Cato, but--right or wrong--Cato has largely stuck by its ideological underpinnings (for example, Cato supports decriminalization of illicit drugs).

Now the Republicans, the party of non-interventionsit government, want to greatly expand the government's powers to curtail individual civil liberties by amending the very document that it purports establishes limits on the power of government to intrevene in the lives of individual Americans. Truly twisted.

So, WWCD?

MORE ON THE FLEDGLING US HAMBURGER SECTOR

Dedicated public servant and Bush's newly appointed Assistant Secretary for Manufacturing.

Late last week I wrote about how Bush's Council of Economic Advisors Chairman Greg Mankiw wanted to reclassify flipping hamburgers as a manufacturing activity in order to boost those pesky shrinking manufacturing jobs numbers.

Now Congressman John Dingell is throwing in his two cents about whether government statistics should count McDonald's as a manufacturing industry.

I think I got stuck inside the new Assistant Secretary's head on the playground one time...

FACTS ON SPECIAL INTEREST MONEY: KERRY V. BUSH

Thanks to Brad DeLong for tipping me off to this site called the Annenberg Political Fact Check.

As you may know, the Bush campaign recently released a libelous internet attack add calling John Kerry unprincipled for his acceptance of special interest money (why on the internet? because legitimate TV stations would not air such tripe).

While most of the media picked up on the attack, most of them missed the point that the attack ad was riddled with misleading, misquoting and decepitve statements.

"While it is true that Kerry got $640,000 over the past 15 years from individual lobbyists, that's only one type of special-interest money. And the Bush campaign itself has reported raising $960,000 from individual lobbyists in the past year alone.

The Bush campaign's internet screed conveniently ignores other forms of special interest money, namely PACs that give way more money than individual lobbyists. Oh yeah, by the way, Kerry raised $73,784 through PACs for his presidential campaign. Bush got over $2 million in PAC money for his campaign, and he doesn't even have a primary contest.

If one looks at all the special interest money pouring into the Senate, Kerry actually ranks 92 of 100, which "puts him on a different planet from President Bush."

CLASH OF IDEAS

I was poking around the Amazon.com website today and noticed that the market Leninists over at Cato have a recommended reading list on the topic of globalization. Not to be outdone, I created my own list whcih can be seen here.

I have read a lot of books on globalization, and most of them are crap, or what my political economy professor likes to call globaloney. A lot of them are written by idealogues and/or cranks from a wide-range of political persuasions, others are more well-intentioned but ill-informed or apologisms.

Here, I've tried to put together a list of some real gems that made me think beyond the conventional wisdom and outside the confines of economic science.

LAND REFORM, THE CAPITALIST WAY

Flagrancy to reason has an interesting treatise--fueled by Hernando DeSoto--on the uncomfortable confluence of interests between free marketeers and Kautskian agrarian reformists in the effort to return land to the masses.

De Soto's idea, in essence, is that poor people are poor because they are not rich, by which he means they don't own capital (for most people around the world, their most substantial investment of capital is place where they live). Because these people cannot lay claim to the productive uses of this capital, they systematically get the shaft in terms of economic and human development opportunities via their socioeconomic relationship with owners of capital entailed by their landlessness. Thus, the poor remain mired in poverty. Most Wobblies and raving Nation readers would have no problem agreeing with this analysis.

The reason most people can't lay claim to this source of wealth, DeSoto argues, is the incomplete development of a system of property rights rules, which are at heart a political issue over the choice of the institutional regimes to underpin market exchange. His solution, to expand property rights--dividing property into ever smaller parcels--to offer people the protection and reward of their share of property.

DeSoto's is an interesting idea, and refreshingly pragmatic in the debate on global poverty and micro-level development, however the smaller chunks of property there are, the easier they are to trade (just look at the trading volumes of the S&P 500 futures and the e-mini futures), and the more vulnerable small property holders are to the asymmetrical power of large market actors, which produces what I like to call gentrification. Nuf said.

So, DeSoto, close (and the right direction), but no cigar.

MaxSpeak, You Listen: NADER '04

"Nader has had eight years to create something beyond a personal PR machine to show for his efforts...I am not averse to third party efforts, but Nader's outfit is not a party. His autocratic disinclination to submit to any broader political discipline is obvious, since he has disdained the very Green Party that endorsed him in 2000...His campaign is a mistake and an unfortunate sink for progressive energies. We should be able to do much better. If you are willing to bear another four years of Bushism, you should want something substantial to show for it. What did you get from Nader after the 2000 election?"

Well put, Max.

BABY STEPS TO GLOBAL FINANCIAL EMPIRE

Citigroup, the world's largest financial services company, is buying into the South Korean market. Citi's ability to make such direct investments in Korea's financial sector is the direct result of the sweeping structural reforms unrelated to the short-term liquidity problem South Korea faced during the Asian financial crisis that Korea was forced to accept as a condition for an IMF assistance package.

According to Deryck Maughan, chief executive of Citigroup International: "There are a whole series of markets... that are now opening to foreign
direct investment. What we have accomplished in Mexico with Banamex or
Poland with Handlowy we feel we can accomplish in a number of Asian
countries."

Then US Treasury Secretary and now Director and Chairman of the Executive Committee at Citigroup Robert Rubin, incidentally, oversaw this structural transformation of the Korean economy.

Citigroup's expansion into South Korea is eerily reminiscent of their expansion into Mexico in the wake of the reforms extracted from Mexico in the Rubin master-minded bailout of the Peso in 1995.

Aside from Citi's global civic worth, which I've often documented, the globalization of financial enterprises raises a number of sticky concerns. Multinational banks have been shown to be a major instrument in the transmission of financial crises around the world through otherwise dis- or distantly connected economies. They also have been shown to reduce the level of credit available to consumers and domestic small and medium-sized enterprises--the building blocks of economic development.

MALAYSIA BUCKS THE CONSENSUS



Washington Consensus, that is. In a marked move of unprivatization, Malaysia's Perusahaan Otomobil Nasional, makers of the Proton, may buy back Mitsubishi's 15.8% stake in a joint venture with this state-owned company ahead of regional trade liberalization in 2005 w/in ASEAN.

Note the different spins given to the same story in the WSJ and in the FT .

The market fundamentalists over at the WSJ writes about Mitsubishi offering up its stake and in so doing creating more competition in the Malaysian market. The somewhat less fundamentalist marketeers at the FT write of Proton disposing of Mitsubishi's share. Given this move, Proton may be rather optimistic about its prospects in a liberalized market. So, who has the upper hand in the deal?

The WSJ writes: The proposed sale underlines Mitsubishi's diminished role in Proton, which increasingly has sought to cut its dependence on its Japanese partner by acquiring auto-engineering concerns such as the Lotus Group International of Britain. Proton, for example, has begun making its own engines, which it previously bought from its Japanese partners.

Malaysia, whose deployment of capital controls staved off most of the Asian flu afflicting most of its regional neighbors in the late 1990s, seems quite pleased with its with industrial policy as well. Proton may have succeeded in appropriating more advanced technologies from its partner, but it will remain to be seen how the state-owned firm will fare when the tarrifs come down.

GLOBALIZATION IN PICTURES



Ode to the Monroe Doctrine.

Peter Daily, has a good take on the roots of the current situation in Haiti--in a sort of New York Review of Books unabridged style.

INSIDE BASEBALL: STATISTICAL POLITICS OF JOBS

The government collects labor statistics through two major surveys each month: the Current Population Survey--a survey of 60,000 households used to determine the unemployment rate--and the Current Employment Statistics Survey--a survey of establishmnets used to determine the number of payroll jobs.

A statistical phenomenon is at work in the current job-loss recovery. The population survey is showing more employment growth than the establishment survey, mainly because of overzealus estimates of population growth from undocumented immigration (the Census bureau is almost certainly overstating immigration, particularly when considering the tightened restrictions and militarization of US borders in the post-9/11 era, and the economic slowdown which dampens the incentive to migrate).

Pause here and imagine you are Karl Rove. Which jobs number would you choose to emphasize? Now remember, the one showing lower numbers (the establishment survey) is the one that was designed to measure jobs for the purpose of evaluating economic policy.

Guess which one the administration chose? That's right, the rose-tinted household survey, a move that startled even Alan Greenspan to comment on such a disingenuous use of statistics:

The Federal Reserve has just thrown cold water on the household data. It concludes that the gloomy payroll data is essentially accurate and that the household survey is probably off base.

"I wish I could say the household survey were the more accurate,'' Alan Greenspan, the Fed chairman, said in his testimony at a House hearing on Feb. 11. "Everything we've looked at suggests that it's the payroll data which are the series which you have to follow.''

THANKS...

to Barbee for the technical assistance today with the website. Globalize This! and all its readers are grateful.

IBOGAINE

Ibogaine is back in the news, which some of you might remember as the potent mildly hallucinogenic stimulant on which Hunter Thompson alleged Ed Muskie was hopped up during the 1972 Democratic primary campaign.

Apparently, ibogaine has been found useful in treating drug addiction, and the Journal of the American Medical Association agrees.

Never had ibogaine, but I have read . Don't be fooled by Hunter's drug swilling persona and Ralph Steadman's tripped out illustrations, this is some of the best writing on American political campaigns ever. Period. (It's so good it helped me land my political operative wife).

THE NUTS AND BOLTS OF TRADE DEFICITS

Huge container ships steam into this port every day loaded with clothes and shoes, furniture and video games, electronics and aircraft parts made in Asia.

On their return trip, those same ships often cross the Pacific half empty, bearing chemicals, meat, grain and engines and routinely stuffed with hay or scrap paper.

"This is what the nation's trade imbalance really looks like," said Mark Knudsen, the deputy director of the Port of Seattle. "We've got so much empty cargo space, it pays to ship over hay for Chinese animals, or scrap paper to be recycled into packaging for Barbie dolls."

John MacArthur interviewed stevedores for his seminal book, The Selling of Free Trade and found much the same thing.

America may no longer be a manufacturing dynamo, but that scrap paper recycling promises to be a real growth industry.

WHERE'S THE JOBS?



This NYT article on the state of manufacturing jobs made me rather nostalgic. No, not for "boxgate" and the theatrics of China trade political economy, but for 1980s Wendy's ads:



The administration's desparation on the issue of jobs and manufacturing is not even funny anymore. It's pathetic. Earlier this week, the Council of Economic Advisors' Greg Mankiw waxed philosophic on the nature of manufacturing, echoing earlier pronouncements in the ERP:

"When a fast-food restaurant sells a hamburger, is it providing a service or combining inputs to manufacture a product?"

Would a hamburger by any other name taste but as sweet?

The statistical classification for manufacturing activities is admittedly not-so-lucidly defined as enterprises "engaged in the mechanical, physical or chemical transformation of materials, substances or components into new products."

Um, yeah. When they start trying to pass off minimum wage earning burger flippers as phantom manufacturing jobs, you know they are in deep (political) trouble, and we are all in deep trouble.

Check this pretty little picture:



The solid line represents the US manufacturing trade balance (the amount we export less the amount we export), which has been in deficit pretty steadily since the early 1980s. The dashed line represents the US current account deficit, which is edging up over 5% these days, a threshold where many economic studies show is the breaking point for a major financial crisis. As this picture shows, the current account deficit is driven almost entirely by the deficit in manufacturing (looking at the rest of trade, our trade surplus in services--which has been shrinking, too, in recent years--and our surplus in agricultural exports--aided by our dismal agricultural policy that is impoverishing much of the world--roughly pay the bill for American oil imports).

Those manufactured goods--and I don't mean the hamburgers--that we no longer make, but instead import from China, are driving our country to financial ruin. It's no wonder the Bush administration wants to hide the fact.

TELL NADER NO: Don't Run in '04

Email him here: info@naderexplore04.org

VIEW FROM THE SOUTH

South Africa, that is:

"Measured by progress made towards a just and peaceful world order, 2003 is thankfully over and best forgotten. Especially depressing was the spectacle of the richest, most scientifically advanced human beings on the planet lapse into a kind of high-tech barbarism. It was a year that saw the world's only superpower, on an increasingly unhinged score-settling mission, lose its democratic compass and all but opt out of the human family."

I AGREE WITH PAT BUCHANAN

Well, on a lot of what is written here, anyway. I don't expect to make any habit of this.

In the latest issue of American Conservative, Buchanan takes on war monger and military-industrial shill Richard Perle for his latest screed, An End to Evil: How to Win the War on Terror.

While a serious global threat that must be faced, international terrorism does not warrant the response of permanent war that Perle and other scions in the Bush administration's inner circles want to bring us. The book purports itself as a manual for victory in the war against terror, a crusade to rid the planet of 'evil.'

Buchanan responds:

"But no nation can “end evil.” Evil has existed since Cain rose up against his brother Abel and slew him. A propensity to evil can be found in every human heart. And if God accepts the existence of evil, how do Frum and Perle propose to “end” it? Nor can any nation “win the war on terror.” Terrorism is simply a term for the murder of non-combatants for political ends."

To paraphrase Buchanan, a sentiment with which all liberals would agree, the hawkish inner circle of the Bush administration is delusional, radical and exhibiting self-destructive tendencies. Yes, that much we all knew. But how strange to hear it from Buchanan's lips.

ALL THE PRESIDENT'S JOBS

DeLong and Maxspeak are keeping the blogosphere up to date on the inside baseball facts of Bush's "Jobs-gate."

Meanwhile, Josh Marshall is keeping us abreast of Scott McClellan's desparate hand waving on the issue.

Between the WMDs, the National Guard story, and now "Jobs-gate" the Bush campaign is looking at a three-theater war.

TOO GOOD TO BE TRUE?

My dad, proud Prius driver and avowed enemy of the petro-industrial complex, sent me this:



I sh@# you not, this car runs on air. It has zero pollution (from operation), has a top speed of 110 km/hr (about 68 mph), and a tank of fuel (compressed ambient air) costs $2. Oh, and the MSRP ranges from $8-10,000.

Look out Detroit, Houston, Riyadh, Baghdad, etc.

AND THEN THERE WERE TWO

Adios Dr. Dean.

What now? Pundits are pondering the potential of a Dean-Edwards alliance, which might really throw a spanner in the works of John Kerry's campaign, but I doubt it.

Maxspeak thinks the demise of Dean may liberate some erstwhile Kucinich supporters who had heretofore opted for Dean out of pragmatism (the oxymoron of pragmatic Kucinich supporters aside).

Despite the close results in WI, the two way horse race is a figment of the media's imagination and need for a horse race story. Look at the exit poll results:

45% of Edwards voters were Republicans (Wisconsin has open primaries), which goes a long way to explain Edwards' mushrooming numbers in Tuesday's primary (as opposed to Edwards reigniting a Democratic base).

Granted even these Republican-bloated results creates a psychological effect that will boost Edwards supporters in upcoming Super Tuesday states and will spur a wave of fundraising in the coming days, his performance with Democrats does not bode well for future contests that are not open primaries (like most of those on Super Tuesday). But more importantly, the close result provides the media a hook with which to spin stories about a resurgent Edwards.

It's all good, though. The more the contest for the Democrat's nominee is dragged out, the more Democratic voters will be invigorated and the more earned media exposure Democrat candidates will get bashing Bush.

**UPDATE--Correction: I was a bit hasty in claiming that none of the Super Tuesday states are open primaries. I have it on good authority from a political hack friend that 7 of the ten states on Super Tuesday have primaries open to Dems and Independents but not registered Republicans, while the other three are open only to registered Democrats.

HE USED TO BE THE PRESIDENT'S PHYSICAL FITNESS AMBASSADOR

Now Arnold wants to convert the California State Capitol into a smoking club:

"The governor's spokeswoman, Terri Carbaugh, explained that Mr. Schwarzenegger wants to create an informal meeting and schmoozing area where he can smoke cigars with lawmakers and other power brokers."

Oh good, that's all the government needs is Arnold to be making policy with his cronies in smoke-filled rooms.

IS NOTHING SACRED?

Johnny Cash has been departed for less than 6 months, and already people want to cash in on his fame.

'Ring of Fire' for a hemorrhoids commercial?

Oy vey.

MY COLLEGE ROOMMATE,

who shall herein be known as Rufus, has a new blog (what he likes to call a livejournal). It doesn't have anything to do with economics or politics, but it does offer an invaluable glimpse inside one of Seattle's most creative minds.

Here is one of Rufus' observations:

"Gillian Welch's new CD, Soul Journey, is really not as bad as it sounds."

Enjoy.

GLOBAL HOMOGENIZATION OF CULTURE

"The world's languages are disappearing at a "catastrophic" rate that makes the extinction of plant and animal species seem sedate, linguists told the American Association for the Advancement of Science meeting in Seattle.

"It is difficult to overstate the importance to science of documenting endangered languages," said David Harrison, an expert in Siberian languages at Swarthmore College in Pennsylvania. "Each language that vanishes without being documented leaves an enormous gap in our understanding of some of the many complex structures the human mind is capable of producing."

What's at stake? Languages contain "complex cognitive structures not found elsewhere. They also embody a highly specialised knowledge of the environment - medicinal plants, animal behaviour, weather signs, hunting and gathering techniques - and a rich pre-literate oral tradition."

Some people have argued that the wrold's cultural diversity contains built-in limitations on the progress of globalization.

But what happens when cultural products become traded commodities? Intellectual properties in the form of music, movies, television programming, brand name clothing, etc. as well as the rights of foreign investors to buy telecommunications infrastructure and media outlets are all at the center of the current global trade agenda. One highlight of which the USTR boasts in the recently signed FTA with Australia are the "unprecedented provisions to improve market access for U.S. films and television
programs over a variety of media including cable, satellite, and the Internet."

Prior to this FTA, Australia maintained cultural content rules much like those in Canada to ensure the preservation of their cultural identity amid a tidal wave of English language culture from the US and the UK (special priviliges for the Canadian rules of cultural origin were carved out of NAFTA). Granted that the currently predominant cultures in Australia and Canada represent successful cultural colonization of indigenous peoples in their respective parts of the world, but looking forward the agreement is a harbinger of what is to come should the current language on TRIPs and services trade become part of the WTO or proposed FTAA.

Some market fundamentalists imagine a competitive market where the supply of world cultures meets the demand from individual consumers, neatly allocating cultural resources and cultural consumption based on individuals tastes and preferences. It's cute that people can think this way, but the propagation of cultural products plays by the same rules as any other commercial industry: the power and ability to monopolize distribution channels--which proposed TRIPs and services trade rules aim to ensure--determines market outcomes.

ELECTRONIC VOTING: PART III

The Center for American Progress has the straight dope.

ENDING AIDS: ONE STEP FOR MAN...

South Africa's Mail & Guardian reports that the AIDS rate for youth (under 20) fell from 22% down to 15% since last November. How did they do it? An aggressive education and outreach programs to provide anti-retroviral drugs.

Of course, provision of AIDS medicine was only made possible through a concerted global campaign waged by civil society groups and despite the best efforts of PhRMA to equivocate on the language of the Doha ministerial declaration.

GIANT SUCKING SOUND: ASIA

The NYT reports this morning that Japan, too, is exporting to the world through China. The $124 billion in US imports from China, of course, are not all from Chinese companies (47 percent of Chinese imports are transactions between a multinational and one of its subsidiary companies). American, Japanese, Taiwanese and European based multinationals, who have flooded China with foreign direct investment in recent years, are using China's cheap labor and favorable export environment as a platform for selling to the US.

While American companies have tended to send their higher value-added processes to China, importing intermediate components for assembly in the US (witness Dell), the Japanese are keen on guarding their firm-specific assets in technology and proprietary manufacturing techniques. Japanese workers will still be "designing the main components that distinguish electronic products," the so-called brain jobs." However, the article notes that Chinese engineers are closing the taltent gap, indicative of the offshoring of white-collar jobs in the US that is now sparking blowback in the US.

The NYT quotes a Citigroup analyst in Japan who claims to have the answer to jobs shifting overseas, be it from Japan or the US: "Job creation via deregulation is key." Intereseting position (more on Citigroup here).

Rather than international trade based on classical comparative advantage--that is, where two countries specialize production based on relative efficiency and trade for the good at which they are less efficient--we may be witnessing the beginning of international trade based on absolute advantage, whereby the lowest cost producer will dominate no matter what the relative efficiencies. This would be quite a different world than most advocates of free trade describe, and a world that would call for markedly different approaches to trade policy.

With a college educated labor force in China approaching the size of the total US population, it's plain to see that whatever technical advantage the US economy currently has is likely to erode quite rapidly. Yikes.

MEASURING BUSH

South Knox Bubba assesses Bush's accomplishments in honor of President's Day.

OH LORD

I've written before about what kind of global corporate citizen Citigroup has been through the years: laundering money for the Russian mafia, Mexican drug cartels, and Middle East terrorists; underwriting the South African Apartheid regime; spawing financial crises throughout the developing world; lobbying the government to deregulate the financial industry and then rewarding the Treasury Secretary (Robert Rubin) and the number two official at the IMF (Stanley Fischer) with cush executive jobs; and so on.

Now, the WSJ reports, the Bush administration is granting Citigroup monopoly rights for all import-export financing in Iraq.

I'll say it again: Oh Lord.

FT: RICH NATIONS SET TO REJECT PLAN TO BOOST AID

...despite the best efforts of Bono.

Rock stars. Is there anything they can't do?

AND THEY'RE OFF

The Bush campaign announced late last week that they are ready to get aggressive, and they did on Sunday when Bush waved the flag at the start of the Daytona 500. As most media outlets were quick to point out, the President pro tem's appearance constitutes more than just ceremonial duty, he was courting a key voter demographic demeaningly called "Nascar Dad's".

Here is how the Financial Times describes Nascar Dads:

"The average fan of stock-car racing is a white middle-aged man with an above-average income and more than likely to have children under 18...The sport's origins lie in the south, where drivers once took their souped-up sedan cars around the backroads to bootleg moonshine."

Nascar Dads, as a political prize, are markedly unlike the "soccer mom's" of yore or the "office park dad's" with whom the DNC flirted briefly (and unsucessfully) in 2002. These groups conjured images of hard working parents struggling to raise families in an era of growing economic insecurity for America's middle-income households. They represented a set of policy interests related to kitchen table economic issues and the fragmentation of social space spawned by the suburbanization of the American population, the stagnation of median wages and the increase in hours worked.

Whereas soccer mom's were heralded as national heros deserving ofpublic support for their commitment to work and family, Nascar Dads are a demographic derisively constructed on men's passion for sport and "moonshine" which distracts from the rather daunting anxieties and challenges they face as a socioeconomic class in America today. And thus one can see why Bush would need to woo these people in order to secure re-election. These are the people who have been left behind by Bush's maldistributed tax policies, by the pain of recession and the job-loss recovery, by his efforts to slant the playing field for corporate interests--at the expense of Nascar Dads--at every turn.

The rapacious spread of the Nascar Dad story begs the question of whether the Bush team actually planted this message. By my count, the WP, the NYT, USA Today, the WSJ, and CNN all also ran stories today on this newest entry in America's political lexicon.

Where the national media goes, so too will all other media outlets follow. You can expect a rash of pundits and analysts spewing conventional wisdoms on Nascar Dads in radio talk shows, and the local evening news throughout the country profiling these same Dads. Nascar Dads, as a news item, meshes nicely with the media's desire for political stories wrapped up in sporting metaphors and their desire to distill political discourse to a lowest common denominator (whether accurate or not). Factor in the major commercial/advertising appeal of Nascar, and the story becomes a news trifecta.

While the Nascar Dad label smacks as condascending, if not patently offensive, it does conveniently divert the political dialogue away from debates on specific policy issues and Bush's failures/successes to the Nascar phenomenon and Bush's folksy swagger. I'm wondering whether it could backfire on him, though. As Howard Dean found out, Southerners for some reason don't like to be labeled as slack-jawed red necks. Go figure.

**UPDATE: Charlie Cook of National Journal had this to say:

"But this business about the "NASCAR dad" being the swing voter group of the 2004 election, or any other national election, is one of the dumbest ideas I've heard in my 32 years in and around politics...This is Bush's absolute strongest group, unless you put a Texan qualifier in there. NASCAR dads haven't voted Democratic in a presidential election since Moby Dick was a guppy."

So there goes the Nascar Dads debate.

BRAD DeLONG HAS HIS CAKE AND EATS IT, TOO

The mounting discontent in the american labour market over offshore outsourcing, Prof. DeLong argues, would be diffused if Bush had done his job by enacting a real stimulus rather than his euphamistically titled ("Jobs and Growth") tax giveaway to America's fabulously well-to-do:

"If we had a healthier labor market and stronger aggregate demand there would be little concern about outsourcing"

Come on, Brad. What the Bush tax and the defense mounted by Brad and his ilk for text book free trade have in common, is that they are both supply-side effects. Free trade is good, orthodox trade theory suggests, because it means that goods and services will be supplied at lower cost. But when the jobs go overseas, with lower employment and lower wages for those fortunate enough to work, the US economy suffers on the demand side--even though the goods are cheaper, people can't buy them.

In the mid 1990s, Alan Greenspan marveled that inflation was under control because American workers, fearful of their jobs moving overseas, were too cowed to demand wage increases. In the global open economy, from where is the aggregate demand growth going to come?

WHY BLAME TERRORISTS...

when the US government itself is so accomplished at dissemanating WMDs?

The US Dept. of Energy has spread 35,000 pounds of highly enriched uranium fuel around the world since the 1950s, the WSJ reports:

"Starting with the "Atoms for Peace Program" in the 1950s, the U.S. began leasing the uranium fuel, requiring nations to return it. After 1964, the U.S. began to sell the fuel."

Is the world getting more dangerous, or are we just getting dumber? Here's what the DOE Inspector General had to say on the matter.

Oh, and you have to love the creativity of government bureaucrats. This is the snappy name they chose for the program for recovering the errant nukes: Foreign Research Reactor Spent Nuclear Fuel Acceptance Program. That's really catchy...and fun to say.

SECURING LOOSE NUKES

After a presidency spent actively thwarting international non-proliferation efforts (not to mention turning a blind eye on the detriorating situation in Russia and the nefarious escapades of his dictatorial cronies), Bush is proposing to do something about the spread of nuclear technologies and fissile materials.

Here is how the Financial Times guages the plan:

"President George W. Bush's proposals for policing the global traffic in nuclear material would demand an unprecedented degree of international co-operation if they are to foil the sort of black-market network that was supplying Libya and North Korea, according to non-proliferation experts." (Emphasis added).

In what I hope can be the first ever Globalize This! readers' opinion poll, please post your comments on the likeliness of the Bush administration finding success in this cooperative effort.

THE YEAR IN TRADE 2003

Here is the rest of the complete, though abbreviated, picture of US trade.

THE NEW TRADE POLITICS

"I can already hear free-traders sigh. In the long run, they will say, free trade benefits everyone. But in the long run, as John Maynard Keynes once said, we are all dead. In the short run, the growing prosperity gap between investors and employees is altering the American landscape on trade questions...In Tennessee, 71 percent of the voters said that "U.S. trade with other countries" took more jobs from the state; only 12 percent said trade created more jobs. In Virginia the comparable figures were 55 percent and 19 percent."

Say what you will about E.J. Dionne, he tends to have his finger on America's political pulse. And unlike a lot of pundits and columnists, Dionne tends to resist the impulse to talk out of his ass about subjects on which he has no knowledge (unlike many of his cohorts at the Washington Post).

AY CARUMBA!

The 2003 US trade data were released this morning. The merchandise trade deficit is up 14% over last year to $549 billion.

Particularly troubling is the continued deterioration of the US trade deficit in advanced technology products, which fell from a $16.6 bn deficit in 2002 to a $27.4 bn deficit in '03. Trade with China led this decline in the advanced technology trade position, with the bilateral deficit falling from $11.8 bn to $21.1 bn. Yikes.

More to come...

BUSH JOBS PROMISE AIMS TO BEAT THE STREET

While the Bush jobs forecast for 2004 has been widely characterized as delusionally unrealistic, a survey of economic forecasters conducted by the WSJ due out tomorrow paints a rather sober jobs picture. On average, they predict payroll employment will grow by 155,000 jobs a month through November 2004.

That's better than a swift kick in the nuts, but it won't be enough jobs to even absorb all the new entrants to the labor market, let alone to re-employ those who have lost jobs or to reinvigorate the droves of discouraged long time unemployed who have given up looking for jobs.

Maxspeak has the lowdown--and a great picture--on the Bush administration's diminishing jobs expectations.

GLOBALIZATION IN PICTURES

From the BBC:



"Bangladeshi police beat Ahsanullah Master, a senior leader of the opposition Awami League, during a general strike in Dhaka."

MAESTRO ON THE DOLLAR:

"Against a broad basket of currencies of our trading partners, the foreign exchange value of the U.S. dollar has declined about 13 percent from its peak in early 2002. Ordinarily, currency depreciation is accompanied by a rise in dollar prices of imported goods and services, because foreign exporters endeavor to avoid experiencing price declines in their own currencies, which would otherwise result from the fall in the foreign exchange value of the dollar. Reflecting the swing from dollar appreciation to dollar depreciation, the dollar prices of goods and services imported into the United States have begun to rise after declining on balance for several years, but the turnaround to date has been mild. Apparently, foreign exporters have been willing to absorb some of the price decline measured in their own currencies and the consequent squeeze on profit margins it entails."


Yes, but just who absorbs the cost of adjustment is wholly a political issue, as witnessed by last weekend's row over the crptic G7 ministerial statement. Yes, the dollar has come down, but nearly as much as it needs to. And the cost of this adjustment has been borne almost entirely by Europe (and to an extent Mexico and Canada). But the countries that are causing the imbalances are those in Asia with fixed and managed exchange rates, who incidentally account for about half of the overall US trade deficit (and even more if we net out oil imports).

Here is what the FT had to say about Japan today:

"The government last year spent an unprecedented Y20,000bn intervening in foreign exchange markets and made clear at last weekend's Group of Seven meeting that it was prepared to continue."

The Yen has hit a high of Y105 versus the dollar; I just heard a Japan analyst say at a brown bag lecture that by Japan's fundamentals the exchange rate should be around Y50 (a lower Yen value means a stronger currency).

In order for the dollar to return to sustainable levels and to stave off the threat of a dollar-induced global financial crisis, the dollar must fall against these Asian currencies, primarily the Yuan and the Yen. Unfortunately, the Bush administration continues to show its unwillingness (or perhaps ineptitude) at engaging in effective international financial diplomacy.

BUSH'S TEETH REPORTED FOR DUTY IN ALABAMA

The White House is in a losing battle over this whole AWOL thing. I don't have the time to fine-tooth comb all the evidence, so my observations are based more on the process as it unfolds rather than the veracity of particular pieces of evidence.

President pro tem Bush was emphatic in last Sunday's now monumental MTP interview that he did his duty in serving in the National Guard. More than whether he showed up or not, or used his family's political influence to doctor records, the interesting question American's should be asking themselves and the White House just how exactly George Bush defined his duty.

Bush's sense of duty seems to amount to showing up and getting a check for attendance next to his name. Contrast Bush with John Kerry, whose service in Vietnam and sense of duty has earned him widespread accolade from democrats and conservatives alike, inspired a veterans brigade to take up the cause of his presidential campaign, and brought out even lifetime Republicans alongside whom Kerry fought in support of the Senator. Kerry's sense of duty pervaded his service and earned him the respect of servicemen and women across the board.

How many of Bush's National Guard cohorts have come forward to validate his claims and to stand by the president's side at his time of need? Bush's performance and commitment was so lackluster that his superiors can't even remember if he showed up! But whether Bush showed up or not, that the service he offered and the commitment he expended has faded into oblivion demonstrate that the President took his duty lightly at best.

Which brings us back to this morning's Washington Post article: while some were giving their lives for this country and others were serving in the National Guard to avoid a war they opposed on principle (Bush supported the Vietnam war), Bush was galavanting around Alabama getting free dental exams on the taxpayers dime.

The more superfluous evidence the White House puts forward, the worse this is going to get for Bush. It makes him look desparate and insincere. Sincerity, after all, would have produced the men and women with whom Bush served and built lasting bonds of mutual respect, not dental records.

SPINNING YARNS WITH GREG MANKIW (AND JUST SPINNING WITH ROBERT ZOELLICK)

Brace yourself, this is a long post. I've been chewing on this one for a few days. Feel free to bookmark this one and come back later...

Busy day at work, what with the Economic Report of the President out earlier this week. CEA Chairman Greg Mankiw made quite a gaff in a press conference Monday afternoon:

"Outsourcing is a growing phenomenon, but it's something that we should realize is probably a plus for the economy in the long run...[just the] latest manifestation of the gains from trade that economists have talked about for centuries."

Oops! That may very well be what orthodox trade theory says, but damn...you say that in an election year--or at all--in politics.

This little gem is merely one among many in this year's ERP. I'll paraphrase two others:

1. The loss of manufacturing jobs is due to a cyclical downturn, productivity growth and a statistical anamoly that counts some service workers as manufacturing workers--not from offshoring.

2. Thought the trade deficit with China is growing, it has no effect on the overall trade deficit.

These two points, when viewed in context of Mankiw's statement, foreshadow the climax of Presdient Bush's 471 page novel of economic fiction at the end of the report: an outline of the Bush administration's international trade liberalization agenda. What's not on the agenda is perhaps more interesting than what is on the agenda--manufacturing.

The ERP's treatment of manufacturing jobs is rather misleading. The demise of manufacturing predated the onset of economic recession by two and a half years, amid the strongest economic expansion (fueled by massive investments in business IT equipment), when financial crisis enveloped Asia in April 1998, sending a flood of devalued imports our way.

Yes, manufacturing productivity is consistently higher than productivity in other (service) sectors of the economy (that's why so many people are concerned about keeping a mfg industry in the US--lose the productivity, lose the prosperity). Productivity comes from learning to do things more efficiently, or by applying new technology. Productivity can also come from reducing labor costs by producing things offshore, thereby reducing the number of hours it takes to produce the same output (someone else is making the input, though their hours don't count in the tally because one firm buys them from another firm).

The trend toward manufacturing firms outsourcing business services is true enough. Employment statistics comiled from the BLS's establishment survey makes it difficult to tell how much this is true. The BLS survey classifies workers by the industry in which they work, not by the occupation. So a lawyer working for Kubota tractors in Dearborne, MI is a manufacturing worker, and so on. Firms can focus on their core manufacturing competencies and simply contract out for all the other business functions that need to get done. By the ERP's argument, the total number of jobs remains relatively constant, although the mix between those classified as manufacturing and those as services are shifting. So don't worry about. (There is also a discussion of more manufacturing work being done by temporary workers--which is a service categroy--like that's good news for the economic security of American workers).

But wait, it turns out those service sector jobs being outsourced by manufacturing firms are actually geographically tied to manufacturing activities (called aglommeration economies). That is, without the manufacturing there is no need to have manufacturing services. This makes sense, why hire a firm to run your payroll when you have no employees?

On the issue of China trade, the ERP admits that China's share of the US trade deficit is rising, up to 22% in 2002 and going higher (the 2003 # comes out on Friday morning). But not due to offshoring? Over 47 percent of imports from China in 2002 was trade between "related parties"--that is between a multinational corporation and its subsidiary. In 1998, less than 18 percent of imports from China were between related parties. So you would have to be on crack to say that the increase inthe trade deficit with China has nothing to do with outsourcing.

But hold these thoughts for a moment.

While Mankiw was giving poetry readings over at the JEC , the White House dispatched Robert Zoellick, the USTR, over to the Pacific Rim for a little song and dance. On Sunday/Monday, the USTR announced completion of a new trade deal with Australia. The trade deal didn't make much of a splash--Australia has as good or better labor and environmental standards than the US. Who's to complain?

The USTR won't take any chances, though. They were touting: "More than 99 percent of U.S.
manufactured goods exports to Australia will become duty-free immediately upon entry into
force of the Agreement." Big deal. Exports to Australia are a whopping $13 billion, imports $6.5 billion. Tariffs were already wicked low. If anything, proximity to East and Southeast Asia might make Australia a major export platform for China, et. al.

So what did the US get, then? American pharmaceutical companies got a commitment that Australia wouldn't re-export to the US at below market prices prescription drugs purchased in bulk by its Pharmaceuticals Benefits Scheme (a la Canada). American investors will get new protections that make NAFTA's Chapter 11 look like a jaywalking ticket. Australia agreed to "state-of-the-art" intellectual property rights (here's a great article by Joe Stiglitz on IPRs and trade) that among other things will allow intellectual properties to trump internet domain name ownership rights (so if you owned the site www.disney.au, your're screwed).

Then why do it? For one, that's all that the Bush administration is trying to get out of international trade deals, which is made abundantly clear in Chapter 12 of the ERP. Another reason is that Zoellick needed a win, big time.

Brief digression on the role of the USTR:

The USTR's job is to negotiate trade agreements. Period. And their success is measured purely by the number and size of the agreements that are negotiated. The more trade agreements, the better--irrespective of any economic consequences.

Also, the USTR is notoriously riddled with conflicts of interest. Since the dawn of time (weell, the dawn of the USTR), the USTR was a key post for industry and foreign government lobbyists to do the work of their clients from within the walls of government. The smart USTRs even created cottage industries for themselves. Carla Hills, Papa Bush's USTR wrote Chapter 11 into NAFTA, and then set up a law firm to sue the US, Mexican and Canadian governments under Chapter 11 on behalf of big corporations who don't want to be bothered with public health, environmental and anti-trust laws.

Charles Lewis of the Center for Public Integrity has written an excellent history of conflicting interests in the USTR (America's frontline trade officials : Office of the United States Trade Representative, 1990), but this really pre-dates the era of big trade deals and the hijacking of the democratic process for making trade policy by moneyed interests.

Enter Robert Zoellick, the economic technocrat and Republican apparatchik who rode out the Clinton years by bouncing around a host of corporate and corporate-funded academic posts, a natural choice for the Bush administration's point man on trade. Zoellick epitomizes what is wrong with the governance of trade. Registered with the Department of Justice as a foreign agent to represent the interests of foreign governments and businesses before the U.S. government and consultant to major multinational corporations (including Enron), Zoellick is on the cutting edge of technocratic elites who waft between public service and private plundering.

Which brings us back to Australia, manufacturing and the economic fiction of the ERP. While the Bush administration is arguing that manufacturing is a dinosaur industry and that government should not pick winning industries. Instead, the Bush administration will pick fights at the behest of their patrons, at the expense of broader American economic interests.

MORE ON ELECTRONIC VOTING

A number of people have asked me for more information about this whole electronic voting scam that I've written about a few times (here and here).

True Majority is launching an organizing campaign around this issue and there is also a campaign underway at Verified Voting, who has a lot of information on the subject.

MILITARY MAN DOUBTS BUSH

Came across this interesting little opinion on military.com (credit the assist to Drudge--sort of--not one of my frequent reads).

There is a lot of room for optimism here. I think Bush will go down in a ball of flames in November (it's not going to be easy, though).

Came across this link today: a handy clearing house of information for those intending to invite themselves to the RNC 2004 convention in New York City:

Our simple goal is to make the demonstration, not the convention, the big story of "RNC 2004." Together, we can tell the Republicans not to even think about trying to get elected on the graves of 3,000 people!

We're all New Yorkers on August 29, 2004!

A number of other groups are gearing up to be uninvited guests of the Republicans:

United for peace and Justice
Counter Convention
RNC Not Welcome
Run Against Bush

CHILD LABOR: GOOD OR BAD?

Most people wouldn't bat an eye at the notion that societies would want to limit the exploitation of children as laborers. Not The Economist.

The International Labor Organization, and multilateral institution under the auspices of the UN, has outlined four core labor standards: prohibition of forced (slave or prison) labor, the right to free association and collective bargaining, prohibition of discrimination in pay and employment, minimum ages for work and protections against "the worst forms of child labor." These have been recognized in the UN's Universal Declaration of Human Rights some fifty years ago. Note that the United States even today has failed to ratify some of these rights.

While most see child labor as abjectly abhorrent, The Economist (and many neoclassical economists) are more sanguine on the topic:

"Child labour, of course, is as old as human history. Until relatively recently, parents viewed children as economically useful and, especially in farm-based economies, had them milking cows or sowing seeds as soon as they were old enough to do so."

Yes, but today's child laborer is not Ragged Dick shining shoes on the streets of New York. Milking the cows is markedly different than say operating industrial machinery in the manufacture of consumer electronics or Kate Spade hand bags (both of which rely on small, nimble fingers).

"Should rich countries attempt to enforce a ban in poorer countries as well? On the face of it, no."

The Economist argues that child labor is the best of a bad situation. Parents send their children to work to augment household income--it is an act of desparation. without work, children would be (and are) at risk of other forms of exploitation: prostitution, drug trafficking, military conscription, etc. While these are all prohibited by the ILO core labor rights with regards to child labor, the sad reality is that exploitation of children in all its forms still continue.

The question of whether to force a ban or not, then, is somewhat of a false dichotomy (though it fits quite nicely into their editorial agenda of unregulated globalization quite nicely--they would like to see all labor standards kept out of international economic agreements). Poverty and child labor are (in economic terms) endogenous--that is poverty is associated with child labor AND child labor is associated with poverty with mutual causality. Since economic theory sees child labor as retarding long term economic growth by impeding large sections of the child population from gaining the education (aka human capital accumulation) necessary to fuel innovation and increasing incomes, poverty and child labor create a viscious cycle.

The answer then is to end poverty, for which The Economist has a neat solution: more deregulation of international trade and capital flows, which have been so successful in ending poverty. Oh wait, no they haven't. This recommendation is based on the findings of a recent study out of Dartmouth University attempting to test the relation between trade and child labor. While the paper, I think, makes some promising headway in the empirics of measuring this relationship, it also has some problems with how it measures countries' "openness" to trade (see a longer discussion on this issue here) and the data it uses for child labor, which are rather unreliable measures (surprise, countries tend to lie about their incidence of child labor and therefore it must be measured by proxy through such things as primary school enrollment rates, etc.).

(Stay tuned for more on the openness issue later. It's a commonly misunderstood notion that is used indiscriminately in public and technical commentary on globalization to the advantage of pro-deregulation advocates).

WHAT HAPPENED ON SUNDAY'S MEET THE PRESS?

I have been digesting and discussing the President pro tem's appearance on MTP with my inside-the-beltway political operative friends for a few days now, and we're still struggling to assess the fallout.

As noted earlier, many conservative/Republican pundits were dismayed at Bush's performance. Here's a representative response from Peggy Noonan. My Spidey sense is so acute for Bush administration mischief that I don't feel I can get an accurate read on how regular people and less rabid critics of the President are reacting to his performance.

First instincts told me that the interview was neutral to slightly negative for Bush. Other friends more astute in the world of political communications argued that the interview was intended only to re-ignite Bush's political base left reeling after a few weeks of heavy coverage in the Democratic primaries and the major blow of David Kay's testimony that Iraq has no WMDs or WMD programs. He knew he would never satisfy detractors and that those who loved/hated him would still love/hate him no matter what he said. If this was the case, why not just send out a direct mail piece? Bush must have been reaching for the middle ground (if any still remains in the American polity)--and it seems to have slipped through his bumbling clutches.

Though the Bush stumbled and paused slack-jawed for uncomfortable periods of time before answering some questions, I am starting to see where his MTP performance is succeeding in establishing boundaries that will henceforth guide the public disourse on the Bush presidency.

Take the issue of intelligence leading up to the Iraq war. Bush has commissioned an inquiry into how the intelligence on Iraq went so wrong, spawning a debate about the politics of the commission and the date when the commission will report. His story is that he was presented bad intelligence, but made good judgements and leadership decisions in the interest of protecting the American people ("the most solemn responsibility" of his office) based on flawed intelligence.

But the intelligence is really a non-issue. It was previously well reported (both prior to the war and before the discourse shifted with the Kay revelations) that the intelligence on Iraqi WMDs was ambiguous, nuanced, inconclusive, etc. Yet Bush told the world that there was "no doubt that the Iraq regime continues to possess and conceal some of the most lethal weapons ever devised." So, it's not that the intelligence was bad, but that the intelligence wasn't really there or was manipulated or trumped up to sell the war. No matter how much the intelligence gathering and analysis process is scrutinized and tortured, it still won't reveal that the Bush administration pushed for war without evidence that would justify a war even under their murky doctrine of pre-emption.

Commissions are the best means available to Washington politicos to bury/kill an issue without looking like they are burying/killing an issue.

BUSH ADMIN BALKS AT SECURING LOOSE NUKES

What is holding up an agreement between Russia and the Bush administration to destroy weapons grade plutonium from decommissioned missiles? Two things, according to the NYT:

First, Bush wants to make sure that the companies contracted to build the facilities where plutonium is transformed into fuel for nuclear power plants are protected from "almost all liability in case of accidents involving the release of radioactive material." This is a non-starter for the Ruskies.

Then there is the money issue:

"The Bush administration's budget plan for the Energy Department, released last week, said groundbreaking for a conversion factory planned for South Carolina had been delayed from July of this year until May 2005."

How much would it cost? About $2 billion. Seems like a pretty sound investment, to me at least, when weighed against the potential cost of invading countries to seize WMDs or the cost of a nuclear attack by terrorists or rogue states.

TREASURY SECRETARY JOHN SNOW REPORTS FROM THE G7



"Turning to the poorest countries, I emphasized today that creating an environment that allows private businesses to flourish should be a higher priority on the development agenda. We all agreed that the World Bank and regional banks should work to improve investment climates and direct more resources to the private sector."

...as opposed to directing resources at fighting poverty and AIDS, and at making critical investments in education and public infrastructure for water and sanitation.

"Our commitment to combating terrorist financing continues."

...including slaps on the wrist for Bank of America, Bank One, Barclay's Bank, Bank of New York, Deutsche Bank, and JP Morgan Chase for laundering money to the Sudan, Iran, Libya and North Korea. The stiffest fine: $34,623.25--a drop in the bucket for any of these multinational financial empires. Many of these fines were assessed after "voluntary disclosure," meaning that the companies knew it was wrong to launder money, knew that they may be aiding and abetting terrorists, but did so anyway because they knew they would make a healthy profit even with the fines. No criminal charges pending. Bang up job, John.

On the issue of China's ongoing manipulation of its currency for competitive advantage, Secretary Snow managed to marshall the G7 ministers into its strongest language yet condmening China's harmful beggar-thy-neighbor economic policies:

"We emphasize that more flexibility in exchange rates is desirable for major countries or economic areas that lack such flexibility to promote smooth and widespread adjustments in the international financial system, based on market mechanisms."

WOW! If I was China, I'd be quaking in my sandals. I can't believe they would just lay out this ultimatum in such bold, striaght forward terms. I guess the Bush administration really means business now when it comes to China's mercantilist ploy to siphon American jobs and productive capacity.

"I DON'T WANT TO SOUND LIKE A BROKEN RECORD, BUT..."



"...if I said anything more it would only confirm the very serious charges levied by my critics."

Okay, I made up that second part. If you happened to miss Bush's performance on Meet the Press this morning, you will also miss in the transcripts to the President pro tem stumbled through the hour-long interview with some pauses so uncomfortably long it left many conspiracy theorists wondering whether Karl Rove was prompting him through a hidden ear piece.

Bush offered the same canned answers we've heard dozens of times from him and other administration officials over the past few years. No surprise there. What surprised me was how readily Bush trembled under the uncharacteristically restrained questioning by Tim Russert. While not a softball interview, it was by no means a hostile one. Yet Bush's growing unease through the course of the interview was strikingly apparent even though it was conducted on Bush's terms and on his own turf. Given the way the President's house of lies is beginning to show cracks, I guess it's a moral victory for the White House that Bush didn't ground into a double play.

Even the conservatives at NRO were unimpressed by the President pro tem's performance on MTP this morning, Cal Pundit reports.

Globalize This! celebrates Black History Month.

TiVo AND JANET'S BREAST

One more glimpse of our free-market Orwellian society.

A MODEST PROPOSAL FROM PASCAL LAMY?

The FT reports that the European Trade Commissioner is studying ways to allow governments to ban imports from countries that do not agree with their national values and/or standards, what he dubs a national "collective preference."

Without knowing the details, it is clear prima facie that such a proposal runs counter to WTO rules, which allow for import restrictions only specific instances and based on a preponderance of scientific evidence (a burden of proof that has been hard to acheive in the WTO dispute settlement mechanism).

It's hard to see this as anything but a retrenchment of European interest in a multilateral trading system, no doubt over issues of Europes agricultural policies and its citizens' preferences for non-GMO food. And it is certainly a BIG monkey wrench in the works of the current round of WTO negotiations. Watch for the trade punditocracy to converge on Pascal Lamy, villifying him for squashing the development hopes of the world's poor by denying them a new trade agreement.

The pro-poor, pro-development discourse that has emerged around the Doha round of negotiations is an interesting development in trade politics in the West, and makes a compelling argument for most compassionate swing voters who are confused and unsure about what globalization actually means. Unfortunately, the pro-poor line of argument is really, really bunk, as I've argued elsewhere.

It should be noted that resistance to the current WTO negotiating agenda actually originates in the developing countries. Why? Because the advanced countries, and the U.S. in particular, want to force them to relinquish all the policy tools of economic sovereignty, to adopt stricter than Western style intellectual property rights, to spend millions overhauling customs systems to suit Western preferences, and to grant special rights and privileges for foreign investors--all in exchange for a few crumbs of tariff reductions and faster phase-in schedules. Even the most rose-tinted evaluations show developing countries actually losing income from these policy proposals.

The agriculture subsidies issue, while important, is particularly misguided in the discourse. Subsidies are both symptom and disease in a American-European agriculture policy that impoverishes the world's farmers. It's a complicated but compelling argument, and anyone who wants to know more than the average neoclassical economist about agriculture trade policy should check out this report from Daryll Ray at the University of Tennessee.