GLOBALIZE THIS!

Friday, June 18, 2004

CREATIVE DESTRUCTION

Sure, some people will be displaced by the churning from global trade liberalization. But this is so they can be reallocated to more productive, higher-value endeavors where they will increase economic welfare and making everyone better off. Right?

That's not what the Bureau of Labor Statistics seems to be saying in their Occupational Outlook Handbook. This is nothing new--just happened to be poking through the webiste this afternoon.

Retail sales, customer service reps (highly outsourcable), food prep and fast food workers, cashiers, janitors, waiters, orderlies, receptionists, security guards, home care providers, landscapers...not exactly high wage, skill-intensive, upwardly mobile occupations.

Viva comparative advantage!

¶ 6/18/2004 03:19:48 PM

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MODANNA? JEW?

The NYT wonders.

If she really were a Jew, she wouldn't have that tatoo. Disfiguring one's body (the gift of g-d) is most explicitly forbidden. For a non-Jew wannabe Jew, though, one might not get a tattoo for no other reason than to respect those who were forced to wear these tattoos.

¶ 6/18/2004 11:40:09 AM

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5.1% AND CLIMBING

The US current account deficit hit $144.9 billion in the 2004Q1 (seasonally adjusted)--or $579.6 bn at an annual rate. The latest figure is the worst the current account has ever been.

Research from the Federal Reserve Board of Governors found that industrialized countries with large current account imbalances typically saw the onset of adjustment triggered at a current account "adjustment" (a nicer word for punctuated financial crisis), entailing a spike downward in the dollar, a spike upward in interest rates, and declining investment and slowing of GDP growth. Ouch.

Today's numbers show that the US is well on this path. But fortunately for us in the US (not to mention the rest of the world, which is inextricably linked to the US import and financial machine) we have Asian guardian angels. In the first quarter of 2004 Japan and China bought up close to $190 billion in dollar assets, giving us the precious capital to finance our perennial indebtedness. Together, the two hold dollar reserves of more than $1 trillion!

Looking at it as thus, the whole global economy is a giant, tenuous pyramid scheme that we are all locked into. Growth is fueled by the United States' ability to consume ever more imports from the rest of the world, while US consumption is fueled by Asia's ability to keep feeding us this line of credit. So long as they do, the system works. (At least it will work at the level of maintaining the stability of the global trade and financial system--there are lots of individuals for whom this ain't working one bit).

Aside from the looming current account crisis, this system is turning the US into a wholly owned subsidiary of the rest of the world. Financing the current account and trade deficits requires us to sell off our stocks, bonds, factories, etc.--and their promises of future income and interest payments--which adds up to a sizeable chunk of our overall economy (25% in 2002). Many analysts on Wall Street and elsewhere see this number heading up to 40%, 50% and more in the very near future. We will know more about this on June 30 when the BEA releases these new numbers on the net international investment position.

¶ 6/18/2004 11:31:02 AM

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Thursday, June 17, 2004

NOT BUYING IT

CNN Poll:

Do you believe there was a connection between Iraq and 9/11?

Yes: 17% (696)
No: 83% (3518)

(as of 6/17/04, roughly 7:20 PM EST).

¶ 6/17/2004 07:23:25 PM

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SOLIDARITY COMES TO JAPAN

From the Detroit Free Press:

The president of the largest Japanese automotive union says he recently began pressing Toyota, Nissan and other automakers in Japan to stop "interfering with UAW efforts to organize" their U.S. workers.

In a recent interview with the Free Press, Yuji Kato, president of the Confederation of Japan Automobile Workers Unions (JAW), said he thinks the UAW and the Canadian Auto Workers union will eventually be successful unionizing plant workers at Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., but the unions need to overcome anti-union sentiment among U.S. managers and many workers.

"We have met with management in Japan concerning organizing of their plants in the United States and we asked them to let the unions in the United States and Canada, if that's what workers decide they want. From our conversations, I think the major reason the UAW can't organize them is because of the U.S. management's resistance and because so many of these plants are in the South, where there is an anti-union atmosphere," said Kato, speaking through an interpreter.

¶ 6/17/2004 02:30:13 PM

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Tuesday, June 15, 2004

SOCIAL SECURITY GETS HIP

And AARP hasn't totally caved to the corporatist agenda.

¶ 6/15/2004 02:50:32 PM

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REPUBLICANS ARE STATISTICALLY IGNORANT (P<.05)

At least two of them are, anyway. David Winston of Roll Call--hyped by Matt Drudge--proves he does not understand basic concepts of statistics, namely methods of statistical sampling. Just because a sample population does not reflect demographic trends in the population as a whole does not mean that a sample is biased. (In this instance, Winston gets his panties in a ruffle because the sample of a recent LA Times poll included 38% Democrats and 25% Republicans).

Here is how statistics work:

Some small portion of a population is chosen as a sample. Statistics are applied to the sample and the results are used to state something about the original population. Choosing a sample so as to replicate exactly the demographic attributes of the population in which one is interested is what statisticians call biased sampling because hand picking a sample to reflect the underlying population biases the results. When each member of a population has an equal chance of being selected for a sample, statisticians call it unbiased sampling even if it is not a perfect representation of the underlying population.

I do not have enough information on the sampling methodology of the poll in question, though it does appear to be unbiased. The composition of the sample, however, certainly does raise questions as to the statistical significance of the results.

While not biased, the results of the poll probably mean, in the words of Kurt Vonnegut, doodley-squat. This would be a fair way to criticize of the poll. Crying partisanship is not.

I'm still putting my money on the Iowa Electronic Market as the predictor of choice in who is leading the race for the White House. Markets do tend to aggregate information.

¶ 6/15/2004 12:24:56 PM

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NO ONE KNOWS OUTSOURCING

Anyone who touts numbers about the extent of outsourcing is blowing smoke. This is my preliminary conclusion drawn after pouring over the BEA's statistics: U.S. International Services: Cross-Border Trade and Sales Through Affiliates, 1986-2002. In particular, I wanted to see what the trade data revealed as to payments to India for service imports.

Look here and you will find a whole lot of nothing. By this I don't mean that there is no offshore outsourcing to India or elsewhere, but that the data available allow no statistical inferences to be drawn. Here's the low down on the data:

The BEA publishes detailed services trade and services sales through affiliates data annually in the October Survey of Current Business.

Total trade in services with India, both receipts and payments, are not reported for the period 1986-2001.

The BEA breaks down the data for unaffiliated trade by country into super-industry level categories: Computer and data processing services, Data base and other information services, R&D and testing, as well as Royalties and license fees. For the most part, payments to India (service imports) in these categories are negligible both in the levels and as a share of total service imports. Payments for computing and data processing services spike up in 1998 from $8 million to $97 million, and then to $132 million in 1999. But in 2001 and 2002, the data show a tapering of these imports. Even so, at its peak, computing and data processing imports only comprise 1% of the total imports for this category. R&D and testing imports have grown to be a sizeable share of the total, from less than 1% in 1995 to 8.1% in 2002.

Only in 1998 does the BEA begin reporting data for unaffiliated Royalties and license fees at a level of detail to show payments/receipts for “General Use Computer Software.” From 1998-2001 payments to India post less than $500,000 each year, and in 2002 the data is suppressed. Royalty payments/receipts between affiliated firms accounts for the vast majority of trade in royalties, however these data are only distinguished by the national origin of the parent and subsidiary, not by the category of service.

The data for affiliated trade in services, it appears, are not directly comparable to the unaffiliated data. (The spreadsheet I put together for you shows payments to foreign MNCs from their majority-owned US affiliates). Whereas the unaffiliated data are classified by the type of service being traded, the affiliated data are classified by the industry of the transacting firm. The industrial classification also means that from 1986-1996 data are classified under the SIC system and 1997 and after data are classified using the NAICS system. For example, under the SIC coding, the most relevant category seems to be “Computer and Data Processing,” but under NAICS the relevant categories include “Software Publishing Industry,” “Data Processing Services,” and “Computer systems design and related services.”

India is not included in the country data, nor do the categories allow us to get at much specificity for India. Outside of Europe and the Western Hemisphere, data are reported under the heading “other countries,” which is further subordinated into Japan and Australia. In other words, the closest we can get to India is all of Eurasia, Africa and the Pacific less Japan and Australia. Also, a lot of the data are suppressed. Even so, payments to the residual of “other countries” seems pretty small relative to the payments to all countries.

What can we learn from this exercise? First, and if nothing else, the data for services trade are pretty poor and sparse. Look at the series for computer and data processing services for India. The fact that the series shows a peak in 2000 and a declining trend thereafter should be the first clue that something screwy is going on and the data is not capturing what is really happening on the ground. Second, these data do not support any conclusions about the current or potential future impact of outsourcing. But once again, even my grandma could tell you that this offshore outsourcing of service work thing is going to be big. See this Washington Post panel of non-crank business academics for more on this topic.

I'll have more to report on this after the Brookings Institution convenes all the usual eggheads to sort out this puzzle.

¶ 6/15/2004 11:00:53 AM

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Monday, June 14, 2004

READING NAFTA

Man, these guys thought of everything.

Chapter 4, Article 15:

Goods wholly obtained or produced entirely in the territory of one or more of the Parties means:

[among other things] goods taken from outer space, provided they are obtained by a Party or a person of a Party and not processed in a nonParty...

Just in case Mexico tries to slap a tariff on our moon rocks. Now that's free trade!

¶ 6/14/2004 03:19:02 PM

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CHINA KEEPS RAKING IT IN

The FT reports, via (PRC) China's Ministry of Commerce, that FDI inflows to the mainland totalled $25.91 billion in the first five months of 2004 (or an annualized rate of $62.2 bn, ignoring seasonal factors).

I'm a little unclear on where they found this press release. It seems from the english version of the MofCom site that the most current statistical release on FDI is for the first five months of 2003, not 2004. (Sorry, my zhongwen is quite not yet up to the level of navigating Chinese economic statistics). The closest thing I found was a number for $19.62 bn, Jan-April. In the same period last year, FT reports, China attracted $23.27 bn, and the MofCom reports $53.5 bn for 2003. Compare this with inflows of $82 bn for the US in 2003.

There's a big question whether these data are directly comparable--and questions on the integrity of the Chinese numbers. In 2002, a major (in China) scandal erupted when it was discovered that provincial authorities were all cooking their GDP numbers. Looking at a part-year cut in the Chinese numbers is problematic given that China does not subscribe to the IMF's statistical data disemanation standards (SDDS), and China only reports balance of payments data on an annual basis. How accurate can China's numbers for Jan-April '04 or Jan-May '04 be given that the US Bureau of Economic Analysis will not even release its Jan-Mar '04 numbers until this Friday morning (June 18th)?

Regardless of the precision of such data, the relative magnitudes of the FDI inflows is jaw-dropping enough. With US GDP currently running at $11.5 trillion (2004Q1, annualized rate) and China's GDP running at $1.76 trillion (at market rate*), it doesn't take an econometrician to see that China is coming up fast on the United State's economic prowess.

*Given that China actively undervalues its currency to gain competitive advantage in international trade, market rates likely understate China's $-denominated GDP. Therefoire, many analysts prefer to assess China's GDP in terms of purchasing power parity (PPP). Viewed this way, China's economy is gigundo, and on track to surpass the US economy by 2015.

¶ 6/14/2004 11:28:03 AM

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Sunday, June 13, 2004

THE PERSISTENCE OF PUBLIC MEMORY

Reaganpallooza ain't just a gelusion of grandeur; it's artful dysmnesia--a concerted campaign to reprogram public consciousness with the conservative revisionist history:

In the case of Ronald Reagan, the past week has seen an exceptional effort to use the prolonged period of mourning to shape the historical picture of the former president for the next generation.

...For Reagan partisans, the motives are obvious. This will be their last chance to make the case for their hero's greatness before a national audience. The same team that stage-managed Reagan's most famous moments in office choreographed last week's "legacy-building event," as one former official was quoted in the Wall Street Journal as calling it, from handing out 50,000 American flags to bystanders to timing the seaside sunset backdrop for the late president's interment. For the media, sensitive always to the charge that they are too liberal, the Reagan obsequies provided a superb opportunity to demonstrate fairness, or perhaps latent conservative sympathies, by showing that cable channel and network anchors could also envision a fifth face on Mount Rushmore or a new visage in place of Alexander Hamilton's on the $10 bill.

For Reagan partisans, the motives are obvious. This will be their last chance to make the case for their hero's greatness before a national audience. The same team that stage-managed Reagan's most famous moments in office choreographed last week's "legacy-building event," as one former official was quoted in the Wall Street Journal as calling it, from handing out 50,000 American flags to bystanders to timing the seaside sunset backdrop for the late president's interment. For the media, sensitive always to the charge that they are too liberal, the Reagan obsequies provided a superb opportunity to demonstrate fairness, or perhaps latent conservative sympathies, by showing that cable channel and network anchors could also envision a fifth face on Mount Rushmore or a new visage in place of Alexander Hamilton's on the $10 bill.

WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH

Read more here.

¶ 6/13/2004 05:03:13 PM

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