GLOBALIZE THIS!

Thursday, June 16, 2005

WHO'S THE OBSTRUCTIONIST?

WaPo reports that Republican's are looking to pull back on social security privatization...for now. How to save face? Blame those pesky obstructionist Democrats:

President Bush has responded by dispensing his cautious calls for bipartisanship in favor of far tougher rhetoric that blames the Democrats for the stalemate. "On issue after issue, they stand for nothing except obstruction," Bush said at a GOP fundraiser Tuesday night. "And this is not leadership. It is the philosophy of the stop sign, the agenda of the roadblock."

How fitting that this Bushian rhetoric is delivered at a private gala fundraiser.

The reality, even Republican's are afraid to touch the third rail:

Finance Committee Chairman Charles E. Grassley (R-Iowa) has held 14 meetings with the panel's 11 Republicans to reach a consensus just on achieving solvency, he said, but they have yet to produce a deal. He has not even broached the idea of personal accounts, which he acknowledged to be the harder piece of the puzzle.

We know that Democrats are in practice no good at obstructing. The real problem is that Republicans can't even figure out there own plan to privatize Social Security without people thinking that the Republicans privatized Social Security.

Maybe that's why Americans by a 2-to-1 margin trust Democrats over the president to protect Social Security.

UPDATE: New poll out from NYT this morning:

Do you approve or disapprove of the way George W. Bush is handling Social Security?

Disapprove 62; Approve 25

¶ 6/16/2005 02:53:00 PM

0 comments

THE TRADE LEXICON EVOLVES

First there was outsourcing. But that didn't necessarily capture an accurate description of the phenomenon. So we got offshoring. But Lou Dobbs gave offshoring too much of a negative connotatin, so the globamaniacs countered. They invented world sourcing and tried to shift the terms of the debate to something ludicrously dubbed insourcing.

Now the good folk over at McKinsey Global Institute have opted to throw their hat into the name game ring (alongside their misleading analyses on outsourcing/offshoring/whatever you want to call it). Are you ready? Here it is: global resourcing, the process a company goes through to decide which of its activities could be performed anywhere in the world, where to locate them, and who will do them.

As it happens, McKinsey has a new report out on the "overblown" threat of offshore outsourcing. But they don't gives these reports away for free. So if you're like me and don't work for consultancies and the Fortune 500, you have to settle for reading about the report on FT.com.

There, you will learn:

The McKinsey report is the first to come up with authoritative estimates of how many service jobs could move from rich countries to poor ones.

I guess it depends how you define authoritative. Ashok Bardhan and Cynthia Kroll of Cal Berkeley's Haas School of Business released this fine research report back in October 2003.

Putting aside the promotional hyperbole, what does the McKinsey report say (at least according to the Financial Times)? The threat of offshore outsourcing is overblown because on their forecast trajectory offshored service jobs will only account for 1.2 percent of all service jobs in rich countries. Well that's misleading. Most service jobs can't be offshored. Plumber, retail clerk, janitor, nurse, security guard, landscaper, dentist, you name it--most of the jobs in every economy are service jobs, and most of those are geographically specific. A barber in Mumbai may earn one percent of what my barber in Dupont Circle gets, but I can't very well outsource my haircut.

As I've said before, the employment effects of service job offshoring appear small at present. But the employment level is the tip of iceberg in terms of the effects on the labor market. In the mid- to long-run it's easy to expect that workers dislocated by trade and offshoring will be re-employed elsewhere, but what does this do to distribution and wages?

Now that US manufacturing is moribund, and high-skill service jobs are at risk, where will workers dislocated by trade go? It is fairly easy to expect that, in an economy like the US, that displaced workers will in the mid- to long-run will be re-employed to other productive uses, and the Department of Labor's Occupational Outlook Handbook provides some guidance as to what that might be:

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.

Perhaps the most important threat of service offshoring is in fact the threat of service offshoring. As I wrote below:

When capital is freely mobile to locate investment/production anywhere of its choosing, communities will bid against each other in terms of wages and tax breaks in order to attract investment and jobs. This can result in eroded wages and social safety nets even if no trade or movement of production/jobs takes place. Even though this decline in living standards may be due to globalization, because no trade or foreign direct investment occurs, economists have a hard time measuring its effects.

It's really difficult to measure threats (what is a threat, how do we know when a threat has been issued, how do we know a threat is credible, etc.), but it is clear that just the mere threat of jobs moving overseas is enough to make workers cower, accept longer working hours, lower wages and benefits, and foresake the strength of unionization. Threats might hellp explain a substantial part of the heretofore unexplained portion of increasing wage inequality as well as the reason we have seen such large productivity growth in recent years combined with such low wage growth. In classical economic theory, workers should be paid according to their productivity (or even more than their productivity to evoke effort and overcome informational problems of adverse selection). The fact that we see a growing wedge between wages and productivity suggests that capital is capturing a larger share of income distributed between capital and labor.

¶ 6/16/2005 09:43:00 AM

0 comments

Wednesday, June 15, 2005

CHINA READY TO MOVE ON RENMINBI

From this morning's IMF Press Briefing:

China`s yuan trading band should be widened to 3%-5% around the official
benchmark rate in an initial stage of foreign exchange rate reform,
Finance News, a central bank-backed newspaper, said today, AFP reported
from Beijing. "The trading band can be further widened to 7%-10% when the
time is ripe," the paper said in an editorial. The report said that
conditions were right to start considering changing the yuan exchange rate
mechanism. It urged the government to work on making the yuan into a
convertible currency as the first step to establishing a market-oriented
managed-floating exchange rate system. Banks, companies and individuals
should be allowed to retain all or part of their forex income, the
newspaper said. It added that the best time to launch a currency reform
was when there was no strong "revaluation" expectation nor during large
fund inflows and big appreciation pressure, the newspaper said, without
elaborating.

Still wondering what a renminbi is?

¶ 6/15/2005 10:45:00 AM

0 comments

Monday, June 13, 2005

BUILDING EPISTEMOLOGICAL HEGEMONY: THE LONG VIEW

Heritage has interns, many, well payed interns.

The summer interns of the Heritage Foundation have arrived, forming an elite corps inside the capital's premier conservative research group. The 64 interns are each paid a 10-week stipend of $2,500, and about half are housed in a subsidized dorm at the group's headquarters, complete with a fitness room...Heritage has had interns, in ones and twos, ever since its founding in 1973. But it intensified its effort about 15 years ago, hiring a full-time intern coordinator. Another leap forward occurred in 1999, when a supporter, Tom Johnson, offered to donate an adjacent building. Mr. Feulner embarked on a $12 million fund-raising drive to renovate it and carved out space for 30 dorm rooms. For $10,000, donors could have their names in bronze on a dorm room door.

Hell, I'm making more than that as an intern this summer (though no dorm).

These people have some seriously good ideas...about how to win at politics at least, and they're playing to win--not just the vote on the next bill on the Congressional day book, we're talking social revolution.

We got our work cut out for us.

¶ 6/13/2005 10:46:00 PM

0 comments