Competition gone bezerk

“Companies [today] are competing with everyone from everywhere for everything.” So say the authors of Globality, a new book about the latest phase of globalization. The Economist quotes those words approvingly in its most recent report on globalization, “A Bigger World.”

Both the book and the Economist favor the global economy as it is, not as it should be. They reflect the perspective of a leading economist, N. Gregory Mankow, former chairman of the Council of Economic Advisors. He holds that when you invoke ethics or morality, you leave the economics department and go over to the philosophy department.

Over at LaSalle University in Philadelphia, a professor of economics, David George, has published a fascinating study, "On being ‘competitive’: the evolution of a word." Diligently, he tracks the six-decade-long evolution of “competitive” as the label for a limited characteristic, or idea, into a universal ideal with frequent perverse results. For example:

“Amazingly, the firm that is least able to be described as ‘competitive’ by the old definition (a single firm in a sea of many firms) now is most able to be described as ‘competitive’ under the new definition (a victorious or most [competitive] firm).”

Most significantly, George shows that "competitiveness" has acquired an excessively high positive value in the business and the public mind. This poses a serious temptation to the Obama administration as a priority goal of its global economic policy. If Obama succumbs, he would be continuing the disastrous policies of the Bush administration.

Let’s leave the world of Real-World Economics Review, where George’s study appears, for the real world where the consequences of the new meaning of competitive are often very perverse. What does it mean to be competitive with everyone from everywhere for everything? When unfettered competition drives economic policy?

It means, as some Southern senators have proposed, cutting the wages of Detroit auto workers to the level of those who work for Japanese-owned non-union plants in the South. It means, too, something that pro-competitive advocates won’t discuss: gradually bringing the wages of all American workers, white- and blue-collar employees, in line with the wages of workers in China and other competitive countries in our bigger world.

But it also means far more than that. American workers cannot be truly competitive until they meet many more conditions of the bigger world, such as:

—cutting or eliminating company health care benefits, a process that has already begun.
—reducing government inspection of labor conditions, another process that is far along.
—trimming private pension plans, also well under way
—eliminating on-job discrimination programs against women and minorities

Those are just a few examples of the consequences of modern competitiveness, of how the “competitive” bandwagon imperils the whole range of human achievements gained (despite stiff resistance) in the United States.

No wonder globalization is in crisis. Competition has gone bezerk.

The sage of Singapore, Lee Kuan Yew, saw it coming. In a special section of the Economist 15 years ago, he predicted what globalization held in store for the United States. “America’s top 10% will enjoy the highest incomes in the world. But the wages of its less-educated citizens will drop to those of workers in the developing countries.”

That trend did not disturb Lee, a self-confessed social Darwinist. He and his government vigorously opposed any global regulation that would, for example, put limits on employing under-age boys and girls full time in factories.

Pope John Paul II extolled a different approach. In an address to more than 200,000 people on May Day eight years ago, he declared: “Globalization is a reality present today in every area of human life, but it is a reality which must be managed wisely. Solidarity too must become globalized.”

Which brand of globalization will the Obama administration follow? I wish I knew.


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Corruption in politics and in business

Reflecting on the stranger-than-fiction scandal in the Illinois governor’s office, Virginia’s political scientist/philosopher, Larry Sabato, published this comment on his Website two days ago:

A system of government or politics can be at least as corrupting as human nature itself. We have studied politicians in close proximity for years, and as much as it may disappoint the cynics, we have not found politicians to be venal as a class. While there are a number of individual exceptions, most professional politicians, especially those already in public office, want to do good or seek to do the right thing, if doing good is an option that does not result in their political demise.

However, if the "normal and customary" practices of campaigning engaged in both parties are seedy, and if a candidate believes "everybody's doing it, and if I don't do it, I may lose," then most politicians will suspend their ethical codes. They will willingly accept a distasteful means that ensures what they regard as the good and essential end of their continued power. In other words, otherwise ethical people are put at a disadvantage by a corrupting system and almost forced to do unto others as they are being done to.

Strict ethicists will correctly argue that the truly honorable person would not stoop to conquer, whatever the provocation. Yet reasonable reformers must keep in mind that the professional politician has a "power gene" in his or her genetic code that overrides all usual inhibitions to achieve victory or maintain power--and genetic engineering, however advanced it may become, will never be able to change that reality.

That analyis, first published in 1996 in Dirty Little Secrets, which Sabato co-authored with Glenn Simpson, is relevant today beyond the political scene.. Reread those paragraphs with business people replacing politicians. And change the kind of DNA involved: replace victory or maintain power with competitive drive.

After making those changes, you have a pretty good insight into today’s Wall Street scandals and how unregulated competition corrupted even many otherwise ethical people.

But the Sabato/Simpson closing sentence above is too pessimistic. Serious time behind bars can be a great deterrent, if seriously applied to enough guilty politicians and business people.


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The global durability of sweatshops – II

Life for garment workers in Bangladesh is a daily struggle for survival. A 2006 study by a British human rights group, War on Want, documented the “shameful” labor conditions at six factories producing clothes for three leading British retail chains. Now, a new War on Want study finds that nothing has changed in two years. Still the order of the day at those factories are extremely low wages, poor working conditions, arduous hours (up to 80 a week), and a “fierce” management opposition to unions.

“In fact,” says John Hilary, executive director of the War on Want, “given the damaging effects of the global food crisis, workers are now in an even worse position than they were before.”

Two of the retailers, Tesco and Asda, were founding members of the Ethical Trading Initiative, set up 10 years by companies, NGOs, and unions to improve labor conditions. The largest of the three, Primark, joined in 2006. In a press statement, Primark called the latest charges unsubstantiated and claimed that the practices of its suppliers are continually audited.

The new report, “Fashion Victims II,” criticizes the government and the retailers for relying on “the voluntary approach of ‘corporate social responsibility’” as the answer to sweatshops. Now War on Want insists that it is time “to stop companies from using sweatshop labor” by passing legislation regulating the operations of United Kingdom companies both in the UK and abroad.

War on Want’s Website supplies a sample letter to Members of Parliament urging them “to regulate UK companies and allow workers to seek justice in the UK.” In the United States, it is time to send the same letter, with Americanized changes, to members of both Houses of Congress and to the White House.

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The global durability of sweatshops

Even after 15 years of antisweatshop campaigns and corporate social responsibility programs, sweatshops are still alive and well throughout the global economy, both in developing and developed countries. So says Garrett Brown, a health and safety expert who speaks from the perspective of a California state OSHA inspector and a coordinator of worker rights projects in Mexico, Central America, Indonesia, and China since 1993.

Brown made that assessment last month in an address to a conference of industrial hygienists in Tampa, Florida. Although he focused on the state of on-the-job health and safety, he also presented an overview of how workers are faring in today’s global production and distribution system. Among the specifics he cited were these:

—Most factories in the global system have a constantly shifting work force. In China, for example, “good” factories have annual turnover rates of 35-40 percent; “bad” factories have turnover rates of 90 percent or more.

—China’s contract factories often have two worksites: a “trophy factory,” clean, well lit, and code compliant for the benefit of visiting clients and monitors, and the “shadow factory” nearby where production actually occurs under sweatshop conditions, outside the purview of monitors or government inspectors.

—Another way used to game the system, in China and elsewhere, is to maintain three different books on financial accounting and the wages and hours of worker: one for internal use only, one for the government, and one set for outside monitors of compliance with codes of conduct. Some large factories producing for (say) four international brands may provide four separate books, each customized for the code of conduct requirements of the specific clients.

Even “high road” employers, the minority with corporate social responsibility (CSR) programs, have made only slight improvements in their treatment of workers, according to Brown. He blames their “schizophrenic” business model of trying to maximize implementation of codes of conduct while also exerting pressures to minimize production costs.

In his Tampa talk on November 10, Brown described this schizoid scenario as typical:

On Tuesday. a brand’s CSR staffers lecture the factory manager to obey all the country’s labor laws and regulations and to meet old and new requirements of the brand’s code of conduct, or else—. On Thursday, the brand’s buyers tell the manager to maintain the same product quality while requiring him to cut contract costs by x percent this year and by xx percent the next, or else—.

The main purpose of Brown’s presentation was to encourage occupational health professionals to be educators and advocates to improve health and safety in the global supply chains.

“Industrial hygienists,” he said, “can take the lead in this effort within our own companies, especially transnational corporations with global supply chains; within our professional associations; as citizens, constituents, and consumers; and as champions of a ‘big picture’ perspective and a pro-worker approach.”

The Website of the Maquiladora Health & Safety Network, which Brown coordinates, has the full text of his Tampa presentation at http://mhssn.igc.org/PCIH08_GBrown.pdf, as well as a wealth of other information on the global production system and the need to reform it.



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Exposing the High Costs of Trade

International trade is a Good Thing. Our opinion leaders say it is. The Washington Post says it is. So trade is clearly a win-win process, right?

No, sorry. It isn’t.

“The trade story is not win-win but rather good news-bad news,” Economist John Bivens explains in a new book, Everybody Wins, Except for Most of Us, subtitled “What Economics Teaches about Globalization.”

Trade, he writes, is “good news for national incomes, bad news for many if not most individuals and families.” Why? “Because trade “redistributes their income away from them and up the income ladder.”

That’s not a secret. It’s a truth “predicted by standard economic theory and proven by empirical studies,” Bivens points out. Economic integration across borders does make countries “a bit richer,” but its “more powerful effects [are] on the distribution of income within each economy.”

Cheerleaders for free trade, however, fail to make the basic distinction between trade’s effect on national income and on family income

Bivens not only clearly explains the theoretical distinction but also calculates its practical effect on American workers in dollar terms. He finds that for a full-time median-wage earner in 2006 the annual trade-related losses totaled about $1,400; for a typical household with two earners, the loss was $2,500. He goes on:

“These losses are as high or higher than other economic costs commonly presented as much more damaging to American families, such as the cost of health care, spikes in gasoline and fuel oil prices, the cost of a child’s four-year college education, or the funds needed to remedy a possible shortfall in the future of Social Security.”

Does the incoming Obama administration fully understand what is at stake?

That’s not yet clear.

Clearly, Obama and some of his key people do understand that globalization is a serious issue, but it is another matter whether they grasp the gravity of the real harm to ordinary American workers (as well as to workers in poor countries) – and how globalization impacts specific problems, like health care. Without such an deep understanding, it will be easy to be frozen into inaction by charges of “protectionism.”

A foreign trade union friend asked me the other day whether I had a “channel” to the Obama administration. I don’t. If I did, I’d try to get Obama or his chief economic advisor to read at least the executive summary of Everybody Wins Except for Most of Us, just published by the Economic Policy Institute.


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Big Business and the UN

That’s the title of an article of mine to be published in the December 1 issue of America, the Catholic weekly magazine published in New York. It describes a new United Nations initiative, headed by Harvard Professor John Ruggie, to make the UN Universal Declaration of Human Rights more universal in the global economy.

A different and longer version of the article will appear in my forthcoming book, Justice at Work: Globalization and the Human Rights of Workers.

Another article of mine, titled Buyer’s Remorse, Spatulas and the Conscience of the Consumer, was published in the August 4 issue of America.

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Pro-Obama think tank on trade reform

The Obama administration is getting some strong advice from the Center for American Progress, a think tank headed by transition co-chair John D. Podesta. Among other things, the advice deals with creating “a new and different trade policy –- one that takes a strategic approach to making globalization more inclusive and sustainable.”

How to implement that approach is the subject of a Center report by Ira Shapiro, a former general counsel in the Office of the U.S. Trade Representative (USTR), and Richard Samans, a senior fellow at the Center for American Progress.

Their newsiest recommendation:
-- Resist the temptation to lead a revival of the collapsed “Doha Round” of the World Trade Organization (WTO)
-- Do remain a “committed leader” of the multilateral trading system, while also making “new trade arrangements” within the WTO and outside of it.

Their most intriguing recommendation concerns “the special case of Asia” and how the United States could regain “its economic position” there. The report suggests that the Obama administration “reach out to the more advanced countries in Asia as potential partners in a vanguard, global club of advanced economies that agree to pursue deeper economic integration through both free trade and basic consistency of structural, regulatory, and exchange rate policies and institutions.”

“Basic consistency” would include comparable labor, environmental, consumer, and investor protections, the report emphasizes. It envisions that the pioneering members of this arrangement would be the United States, Australia, Singapore, South Korea, and Japan, and that it might serve some nations’ self-interest to have “a counterweight to China’s increasing economic and political clout.”

Whether that particular idea flies or not, the report makes a reasonable case for a “more flexible approach” that regards fundamental policy consistencies as “a sounder organizing principle for [free trade agreements] than geographical proximity or bilateral ties.” The approach thus departs from a founding principle of the current trade regime: that all countries, whether democratic or dictatorial, are treated the same and get the same trade rights and privileges.

Here is what the report says about several of the current trade issues facing the new administration:

NAFTA: Because of global changes in the 15 years since the North American Free Trade Agreement went into effect, “it is perfectly appropriate” for Canada, Mexico, and the United States not only to evaluate the agreement but to explore other topics of mutual interest (e.g., better regulatory coordination on food safety).

Colombia FTA: Before this can be ratified, Colombia will have make “sufficient progress” in ending violence and in prosecuting those engaging in violence.

South Korea FTA: South Korea must address impediments to U.S. beef and auto exports

Presidential trade promotion authority: Without it (including some version of “fast track”), other nations won’t take U.S. negotiators seriously, but this executive power needs to be balanced by a strengthened role for Congress, even to the point of it helping choose countries for trade agreements.

The report, part of a book titled “Change for America: a Progressive Blueprint for the 44th president,” is aimed at the Office of United States Trade Representative (USTR) and what it should do about “responding to the changing global challenge.”

For the new President, the “blueprint” in the 17-page trade section is obviously subject to change because of competing priorities, not only within the ten-chapter book, but also because of the financial debacle that happened after the book was drafted.

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Remembering a Monstrous Evil

Yesterday was the 70th anniversary of Kristallnacht, the night that Hitler launched a massive attack against Jews throughout the German Reich. We, about 100 of us from the Northern Virginia Hebrew Congregation and neighboring St. Thomas a Becket Catholic Church, met in the Jewish sanctuary last night to try to help make sure that Kristallnacht is not forgotten.

“Kristallnacht,” the Night of Broken Glass, is a feeble term for the unbelievable horrors that occurred all through the night of November 9, 1938, and the following day. In a massive outburst of Nazi-provoked violence and terror in Germany and Austria, Jews found themselves attacked by many of their own neighbors, their homes wrecked, their synagogues destroyed, while police stood by. It was the beginning of the Holocaust.

Two panelists--Nicole Rubloff, a member of the Hebrew congregation, and Father John Langan, S.J.. Georgetown University professor of philosophy and Catholic social thought--reviewed Kristallnacht and its causes and effects..

What they did not satisfactorily answer—at least not for me—is how this “monstrous evil” (Father Langan’s term) could have happened in Germany, one of the most advanced societies in the world. The panelists tried their best, of course, and so did some audience members, but they were really trying to explain the unexplainable.

For me, the discussion left unshaken my long held fear that what happened in Germany could happen anywhere, though not necessarily in the same form against the same victims. No country should feel so great, so smug, to think that it is completely safe from the possibility of a massive outburst of virulent hate.

That fear is based partly on what I know of myself. Had I been a German living in Germany at the time, would I have joined in the Kristallnacht horrors? I feel fairly certain I wouldn’t have. Would I have publicly expressed outrage? I feel less certain about that.

Would I have been among the millions who saluted and cheered Hitler at Nazi rallies? I hope not. More important, would I have dared to help organize people to oppose the Nazis and their madness? No, I’m afraid not.

It could be that I am too harsh on myself in my introspections, and that I am overgeneralizing. I hope so.

The event last night was the 26th annual “Interfaith Dialogue” sponsored by my parish and our neighboring Hebrew Congregation. Last night’s crowd of 100 was one of the largest of the five or six that I lave attended. As usual, almost every one there was above 40, most of us well above 40.

For information about Kristallnach, see the website of the United States Holocaust Memorial Museum.

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A 'tipping point' for fair-trade policy?

In the North Carolina elections for the House of Representatives November 4, Democrat Larry Kissell, a civics teacher who had worked in textile factories for 27 years, defeated a five-term Republican incumbent, Robin Hayes, who had cast one of the two last-minute votes that passed the Central American Free Trade Agreement (CAFTA) in 2001.

That other decisive pro-CAFTA vote had come from Phil English, a veteran Republic congressman from Erie, Pa. He too lost his seat this month to a Democrat, Kathy Dahlkemper.

For Todd Tucker, research director of Public Citizen’s Global Trade Watch division, those two victories are part “of an unprecedented shift in the U.S. political landscape away from the disastrous trade and globalization policies of the past.” For the division’s director, Lori Wallach, the 2008 election was “a veritable tipping point for fair trade issues.”

In the House of Representatives, 33 new “fair traders” won, for a net gain of 26, meaning that in January 2009 the new House will have about 140-150 “hardcore free traders” from both parties, according to Global Trade Watch’s count. In the Senate, five new fair-trade supporters were victorious, notably North Carolina state Senator Kay Hagan, who ousted GOP Senator Elizabeth Dole. The outcome of several other Senate and House races may increase those numbers.

The latest details are reported in a Global Trade Watch report, “Fair Trade Gets an Upgrade.”

Those numbers, impressive as they are, aren’t the only indicators of whether U.S. trade policy will become worker-friendly. A major clue will come from President Obama’s choice for U.S. Trade Representative, the senior official with a great deal of leeway in interpreting and enforcing U.S. trade policy.


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No more false choices. . . .

. . . is the title of a perceptive op-ed article in today’s New York Times by two of Senator Obama’s economic advisors. They debunk three widely held “false choices” facing the economy, and then propose alternatives to the either/or categorization. One important polarizing dichotomy they target is “free trade versus protectionism.”

The article’s special significance is that it is written by Robert E. Rubin, a former U.S. treasury secretary who is currently a Citigroup executive, and Jared Bernstein, a senior economist at the Economic Policy Institute. The two express agreement on trade as follows:

“With respect to trade, the choice is not trade liberalization versus protectionism. Instead, as trade expands, we must recognize that protecting workers is not protectionism. We must better prepare our people to compete effectively and help those who are hurt by trade—not just displaced workers, but those who find their incomes lowered through global competition. This means investing more of the benefits of trade in offsetting these losses, through more effective safety nets, including universal health care and pension coverage.”

But the two economists then go on to disagree on a key issue:

“Beyond that, while we share a commitment to helping workers deal with our new global challenges, one of us (Mr. Bernstein) would advocate provisions in trade agreements that are intended to protect workers, both here and abroad, and the other [Mr. Rubin] would have considerable skepticism about the likely effectiveness of those provisions for our workers.”

In other words, since we are facing “new global challenges” in international trade, Bernstein advocates addressing them domestically and globally. Rubin, even while recognizing new global challenges, advocates addressing them only domestically, with better U.S. safety nets.

Two apparently different approaches. Can either work effectively?

The domestic approach, concentrating on U.S. measures alone, could work if U.S. legislation were globalized, truly globalized. That would mean adding a worker-friendly dimension to a wide set of U.S. laws. Tax laws, for example, would provide incentives for businesses to invest in the United States instead of abroad. Tariffs would be raised to cover more than the cost of building and maintaining our sea and airports, but also some of the cost of new safety nets. Corporate laws would be revised to make U.S.-based multinationals accountable for their treatment of workers in foreign countries, both those on their own payroll and those on the payrolls of contractors of the multinationals.

Rubin is right to be skeptical about labor provisions added to trade agreements, if he has in mind the provisions in existing agreements and the limited provisions adopted so far (as in the Peruvian free trade agreement). But Bernstein seems to favor a broader approach, one that would “protect workers, both here and abroad.”

To be serious about meeting the new global challenges facing workers here and abroad, it is pitifully inadequate to improve only the labor chapter of a trade agreement. The whole trade agreement, every single chapter of it, must be analyzed from a brand new perspective, one sharply different from the prevailing paradigm among negotiators.

At present, all trade agreements, including overall accords on the scope of trade agreements, are dominated by negotiators who have this objective uppermost in mind: How can we protect the rights and interests of business and business organizations in the global economy? The resulting document, whether bilateral, regional, plurilateral, or multilaternal in reach, is then judged by that one-sided standard.

That standard needs to be balanced by another: How can we also protect the rights and interests of workers and their organizations in the global economy? To its great shame, the World Trade Organization, like its predecessor bureaucracy, has steadfastly refused to put that question on its agenda. Worse, the WTO’s bosses, the political leaders of the world’s nations, are complicit in that shameful taboo.

Let me propose an addition to the list of economics false choices. The issue of what approach to take under the new global challenges is not global versus national. The most effective approach is to work at both.


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Why the fixation on the Dow?

One out of nine workers in the United States is either employed or underemployed. Together, they number 17,136,000 men and women.

Did you see that number flash on your TV screen? And how often, if ever, have you seen a TV chart on how the real median income of American families dwindled in the past eight years while CEO compensation soared?

But you can hardly turn on a TV without learning the latest movement of the stock market. You see repeated shots of the Dow’s fluctuations in real time, as though the board on Wall Street were monitoring the nation’s health.

Even as an indicator of the economy’s health, the Dow index is very imperfect. The media obsession with it is a distraction that obscures how the economy is hurting ordinary American workers.

Remember, most people (51.4 percent of American households) don’t own stock in any form, and two-thirds of those with stock own less than $5,000 worth. The media track their interests superbly well. But what about the 66 percent of the country’s civilian population 16 and over who are in the labor force? That adds up to 154,000,000 men and women. Yes, many own some stock, but all of them, including the workers who own stock, depend on their jobs for their earnings, not on Wall Street.

The Economic Policy Institute regularly issues analytical reports based on labor data collected by the U.S. Bureau of Labor Statistics and other sources. The information in the first paragraph is drawn from an October 15 EPI “snapshot” report.

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Giving People Some Voice in Policy

John Ruggie, the UN general secretary’s special representative for business and human rights, has appointed Gus Ryder, general secretary of the International Confederation of Trade Unions (ITUC) to a global leadership group to advise him how to ensure that businesses worldwide respect human rights.

The group’s 15 members also include Kofi Annan, former UN general secretary and Mary Robinson, the former president of Ireland who also served as UN High Commissioner for Human Rights and is now executive director of the Ethical Globalization Initiative. The 13 other members are leaders from business, diplomacy, and civil society around the world.

Ruggie, a professor at Harvard’s Kennedy School of Government, has a UN Human Rights Council mandate to provide concrete guidance for governments, businesses, and other “stakeholders” on how they can make the UN Universal Declaration of Human Rights more universal in the global economy.

Ryder, 52, born in Liverpool, heads the world’s largest trade union body with a membership of 168,000,000 working men and women in 155 countries. The biographical list distributed with the September 22 announcement says that Ryder’s work “is based around the ITUC’s belief that our globalized world requires effective global governance.”

The UN has long debated how active it should be in promoting human rights in business. Ruggie succeeded in ending the stalemate in June this year, when he won the unanimous endorsement of the Human Rights Council for a three-year project seeking to embed human rights in the policies and practices of multinational corporations.

He succeeded because he made special efforts to consult business leaders across the globe. His new leadership group, which includes a former secretary general of the International Chamber of Commerce, Maria Livanos Cattaui of Swtzerland, continues that outreach.

(For background on this UN initiative, click here for one of my blog articles. For others, see “categories” in the right-hand column of this page, and click on John Ruggie.)

Is there a lesson here for Secretary Paulson?

U.S. Secretary Treasurer Paulson would be wise to follow Ruggie’s example. Paulson, a former top dog on Wall Street, is leading the bailout of Wall Street. In any other situation, that would be considered a conflict of interest. And it is indeed a conflict of interest, but it is unfortunately made necessary by the longtime practice of letting groups of wealthy insiders monopolize the nation’s financial policy.

The current crisis is evidence of how badly they have blundered. Appointing an advisory group of independent outside experts might be a start at making sure that the Paulson team dedicates itself exclusively to the national interest.


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What the Presidential debates have ignored

While the administration and media focus on the Wall Street debacle, they ought to pay attention also to the steadily deteriorating situation on Main Street. They should start cracking down on unfair trade practices that already cost Americans 5,600,000 jobs last year, and are costing millions more this year.

“Ending unfair trade practices can significantly improve the fundamentals of the domestic economy and restore sustainable broadly shared growth of jobs and income,” says Robert E. Scott, director of international programs of the Economic Policy Institute (EPI).

A new briefing paper authored by Scott reports that the net job loss due to the massive trade deficit has jolted all 50 states and the District of Columbia. The hardest hit of all, with a 7.5 percent loss in employment, is Michigan , where the McCain campaign recently suspended its presidential campaign.

“Elimination of the U.S. trade deficit over the next few years can create millions of new jobs in manufacturing and other trade-related sectors of the economy and help the domestic economy recover from the devastating effects of the current downturn,” Scott wrote in the October 2 briefing paper.

Strangely, the U.S. unbalanced trade policy did not come up in the two Presidential debates so far. Are the moderators filtering out the public’s questions?


You can find the text of the EPI briefing paper at http://www.epi.org/content.cfm/bp222.

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It’s a crisis of trust

Fear, fear in general. and a deep fear of losing more. That’s how I hear some TV pundits diagnose the continuing bad news from the stock and credit markets.

But I agree with the market analyst who blamed the present crisis on a lack of trust. How can you do business with others when you have found that you can’t really trust them?

The $700,000,000,000 bailout is supposed to prime the system’s pump, but can it do so if the public doesn’t trust those who have run, and still run, the system that they so badly mismanaged.

Nearly 10 years ago Free Press published Trust: the social virtues and the creation of prosperity by Francis Fukuyama. Economic life, Fukuyama maintained, depends on social trust, the unspoken, unwritten bond between fellow citizens that facilitates transactions and underpins collective activities. He warned that the U.S. drift toward greedy, overly self-centered individualism holds more peril for the future of America than any competition from abroad.

I wonder how many of our best business schools have their students, the future business leaders of America, read a book like Trust. Or like Lying by Sissela Bok.




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A Transnational Cultural Lag

The number of people working for foreign subsidiaries of multinational corporations headquartered in the United States and other industrialized countries has nearly quadrupled in the past quarter century. The increase—from 21,524,000 to 81,615,000 workers—includes only people on payrolls, not the uncounted hundreds of millions more employed by the contractors and subcontractors of the multinationals.

Those figures are reported in the latest annual report of the United Nations Conference on Trade and Development (UNCTAD), titled “World Investment Report 2008: Transnational Corporations and the Infrastructure Challenge.” As is common outside the United States, UNCTAD prefers the term transnational corporations to multinational corporations.

It’s not just a semantic quibble. Transnational expresses the realities more fully.

Take General Electric, the world’s top non-financial corporation (ranked by assets). It has 765 foreign subsidiaries or affiliates that have 164,000 employees and a total of $442,278,000,000 in assets. Thus, GE is more than a company with separate branches located in a multitude of countries (160 in all). GE is a cross-border production, marketing, and distribution system whose global presence and activities are better captured by being called a transnational. (For most of the data, click here, and scroll to table 3.)

Ditto for the estimated 79,000 transnationals in the world and the 790,000 foreign affiliates they control. Each contributes to an assortment of global production, marketing, and distribution chains, in which the foreign affiliates hold at least $68,716,000,000 in assets—33 times more than they held 25 years ago.

Those foreign affiliates also exported $5,714,000,000 in goods last year—eight times more than in 1982. The UNCTAD report does not include how much of this was intra-firm trade, or cross-border trade between two units of the same transnational corporation. Government agencies in the past have estimated that intra-firm trade accounts for 40 percent of international trade. (It follows that cross-border trade within GE and other U.S. based transnationals accounts for a large chunk of the U.S. trade deficit—a fact ignored in official U.S. news releases on trade imbalances.)

UNCTAD reports are rich in significant data that are seldom mined by the media. Very little of the above information and analysis is contained even in UNCTAD’s own news releases on the new 411-page report, which was issued on September 29.

The trends outlined in the report are examples of the magnitude of global changes in the past quarter century, changes that, together, make the 21st century global economy different in kind, and not just in degree, from the 20th century international economy.

Have the rules of this new world been adapted to that great change? That’s a fundamental question. It is not addressed in this report.

Human Rights for Workers has addressed the question before, and will again. Briefly: Yes, global rules have been improved to protect the rights of businesses and their organizations. No, they still do not cover the rights of working men and women and their organizations. The international labor market, for most of the world’s working men and women, is still a lawless jungle.

A University of Chicago sociologist, the late William Ogburn, had a term for this sort of situation: cultural lag, meaning the tendency whereby a society’s values and habits fail to keep pace with technological and other forms of significant material change. He held that cultural lag often caused social “disequilibrium” until society adjusted to the changes of modernization. That failure to adapt explains why globalization has fueled so much distrust and so many protests.

Congress will soon hold hearings on the financial debacle and the $700,000,000,000 in public money allotted to rescue Wall Street. Those hearings—and the needed curative legislation—must not ignore the transnational cultural lag and the disequilibrium it causes.


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The Lingo and the Ideas Behind the Bailout

Imagine this. You find yourself in a theater watching a drama in which the actors speak various foreign languages that you don’t understand. You’d walk out, right?.

That imaginary situation helps explain people’s reaction to the great Bailout drama. It’s all Greek to them. They’d walk out, except in this case they -– we -- can’t. We’re not in the audience but on the stage.

We are all participants, one way or another, in this real-life crisis, but few among us really understand the lingo or the ideas it hides. So what’s happening is a mystery to us. Yet we are faced with a clear warning from the highest authorities of the land: there will be dire consequences to all of us if we don’t agree to their solutions.

We are told to trust the proposed $700,000,000,000 proposal of the President and his experts from Wall Street. But these are the very guys that brung us here. No wonder people are frustrated and negative and skeptical.

At least, and at the very least, we need to get some demystification of the insider jargon of the authorities. So I was glad to see the Washington Post start to make a contribution toward filling that urgent need. On September 26 the Post business section ran two useful features:

--“A Glossary of Terms Behind the Terms Behind the Headlinez,” with definitions of 17 terms, and
--“Q&A: The Crisis and Your Pocketbook,” with answers to two questions, the second one from a homeowner who is keeping up mortgage payments but asks “Why should my tax money be used to help fix a problem I did not create?”

On September 28,I wrote the Post ombudsman, Deborah Howell, a letter of congratulations on this initiative. I resisted telling her it’s about time. In a positive mood, I suggested that both columns should run at least once a week, because the crisis won’t be over soon.

I made these other suggestions on the Glossary of Terms:

First, define more terms. For example, derivatives, credit market, bond market, securities, asset backed securities, Federal Reserve Bank, highly leveraged, credit crunch, and other terms that are being used on TV and in your paper. Make distinctions: e.g., the difference between the capital market and the credit market.

Second, continue defining the terms you've already explained, expand them, and reword some to make them more understandable. For example, liquidity. Use a definition that explains a bank chairman's statement [which the Post quoted]: "We're drowning in liquidity."

Also, provide an Internet way for readers to question your definitions and ask for others.

Regarding the Question and Answer column, I wrote:

I hope that you answer more of the questions that you encourage readers to submit to your Website [washingtonpost.com/yourmoney]. Surely there are more than two. And don't shy away from answering questions more fully. For example, your answer to question 2 neglects an important point: If Congress fails to approve a solid rescue plan, the resulting crash would hurt even families who keep up their mortgage payments, according to the Bush administration. If you don't believe the Bush administration, explain why you don't.

To be responsible, you ought to acknowledge that it was a failure of strong regulation that has brought us to the brink. The guilty should be held responsible, yes, but most of what they did was perfectly legal because no laws outlawed such actions.

I should have added these points, but didn’t:
-- The unethical, corrosive behavior is still legal.
-- And it is being taught in some of our best business schools, according to Peter Morici, economist at the University of Maryland. In fact, on his own shelves, he has a copy of a text being used, he said in a TV interview.
-- How about an investigative report on how the ideas taught in our business and economics classes contribute to financial crises, past, present, and future?

Update: A September 30 email from Ombudsman Howell said: “I’d like to put this in my weekly memo to the staff. OK?”

OK.

Further update: For a good discussion of the Bailout quandry, see the Weblog of economist Dani Rodrik here.

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Global power without matching obligations....

...That’s how I diagnose the current financial crisis. (See update on next page.)

Government bailouts (i.e., taxpayers) may satisfy the markets for a while, but the appetite of these “markets,” especially the elite that rules the capital markets, is insatiable. Sooner or later, they will return to their old habits unless the multi-billion dollar rescue operation curbs the irresponsible power they now have. Fundamental reforms are necessary.

Can you imagine the hilarious operetta Gilbert & Sullivan would have written about this debacle? Take what they would have done with the antics of one leading player, the U.S.-based American International Group Inc., the world’s largest insurance company that dabbles in non-insurance businesses.

Under the unregulated global freedom granted it, AIG has expanded into 130 countries and territories, with some 100,000 employees worldwide. Now AIG’s expansion itself is deemed to make it “too big to fail,” and somehow qualifies it to turn to American taxpayers for a two-year loan it needs to survive -- $85,000,000,000. In return, says the September 16 AIG press release, “American taxpayers will receive a substantial majority ownership interest in AIG.”

Well, as an American taxpayer, thank you very much, AIG. But I didn’t ask to own you.

I just hope that the guys who negotiated this deal for me and other surprised American owners will do what they failed to do before: match AIG’s powerful rights with corresponding responsibilities and accountability.

Pardon me if I wonder whether they will really do so

“AIG was not too big to fall, but too connected,” writes the Financial Times. Remember that the well connected men who arranged the AIG bailout, and are still making more and more bailouts, belong to the ailing system that they are supposed to cure.

They themselves are creatures of Wall Streets. They are immersed in its culture. They may be right in warning that we are at the brink of unprecedented disaster and that we must respond as they ask. But must we be unquestioning in accepting direction from the types of Wall Street insiders who brought us to that brink?

UPDATE

Now, late Saturday, these same insiders have persuaded the President to ask Congress for the power to pay up to $700,000,000,000 for the troubled assets of unspecified financial institutions. This unprecedented bailout, unless amended by Congress, is a one-sided deal in the familiar pattern of dispensing huge national resources to private entities without requiring any responsibilities beyond the minimal one of ultimate repayment of taxpayer money (if possible).

The proposed deal requires careful and calm scrutiny, unmarred by charges again that those seeking to defend the common good are somehow lacking in patriotism.


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Worker rights as an economic asset

Protecting worker rights as part of trade policy can be good for the economy. So says report just released by a Washington think tank, the Center for American Progress.

“The promotion of labor standards, alongside environmental protections, should be an integral part of the future U.S. trade agenda,” says the report titled “Labor Rights Can Be Good Trade Policy.”

The authors, Christian E. Weller and Stephen Zucconi, warn that, to be effective, the worker rights provisions of trade agreements must be enforced with “positive incentives for moving toward better labor standards, and negative incentives, including sanctions, when benchmarks are not met.”

Nearly a third of the 34-page report consists of data buttressing their points, including the fact that “stronger labor rights are correlated with smaller trade balances,” for instance, and that U.S. trade is more balanced with countries that have better worker rights.

Yet improving standards won’t, by itself, produce impressive results. That’s a crucial point emphasized in the Center report. Adopting global labor standards, Weller and Zuicconi insist, is a “key”(but not the only) element in a “broader” progressive international policy agenda to grow the global middle class.

In other words, improving labor standards in the North American Free Trade Agreement, as Senator Obama advocates, is a necessary but not sufficient reform. The Center study does not draw that specific conclusion, but I think it follows logically from a realistic assessment of the negative impact that NAFTA.as a whole has on the situation of workers in Canada, Mexico, and the United States

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Prejudice against Obama

“The Obama campaign would do well to print signs to post prominently in its offices: ALWAYS SUBTRACT SEVEN PERCENT!”

That advice comes from Andrew Hacker, a political science professor at Queens College, in a September 25 New York Review of Books article titled: “Obama: The Price of Being Black.”

Hacker’s seven percentage point subtraction from pro-Obama poll results is based on the “Bradley effect,” named after Tom Bradley, the black mayor of Los Angeles who lost his 1982 bid for governor after every poll showed him ahead of his white opponent. Results in other elections indicate that many white voters don’t tell pollsters the truth about their feelings against black candidates.

Senator Barrack Obama faces another little discussed hurdle in his historic race for the White House. In a reversal of the decades-old trend to make the voting franchise universal, Hacker writes,

“…Now strong forces are at work to downsize the electorate, ostensibly to combat fraud and strip the rolls of voters who are ineligible for one reason or another. But the real effect is to make it harder for many black Americans to vote, largely because they are more vulnerable to challenges than other parts of the population.”

Hacker describes in detail how some new state and Federal rules – even “the amiably titled Help America Vote Act” –have the effect of placing a heavier burden on blacks to exercise their right to vote. One of his sources is “Restoring the Right to Vote” by Erika Wood, a 34-page publication of the Brennan Center for Justice of the New York University School of Law, which can be accessed here.

Hacker’s analysis does not mean Obama is bound to lose. It is, however, an alarm bell to unprejudiced whites, among whom a greater get-out-the-vote effort will be needed. At least seven percentage points greater.

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Who's the greatest of all?

Whatever the political orators might say, the United States has some keen competition these days from the world’s industrialized countries. Or as a press release of the Economic Policy Institute puts it, the United States has lost its bid for the gold in some crucial categories.

In per capita income, the U.S. comes in second to Norway, but even that high rank comes at a cost: longer working hours than in 19 other industrialized countries.

Currently the top one-tenth of the U.S. population collects 8.1 percent of the income. No wonder that the United States has the highest rate of inequality and the highest rate of poverty among its 19 peer countries.

Those data are from a chapter on international comparisons in The State of Working America 2008/2009, published by the Economic Policy Institute. The book is the 11th edition of what the Financial Times has called the “most comprehensive independent analysis of the U.S. Labor Market.”

“The message here for other countries is ‘Think twice before emulating the U.S. model,’” said Heidi Shierholze, author of the international chapter. “Many peer countries have caught up with or surpassed U.S. productivity while achieving much lower levels lof poverty, inequality, and unemployment.”

For more information, check EPI at http://www.stateofworkingamerica.org/.


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How taxpayers subsidize CEO greed

8/26 UPDATE on income and poverty: next page

Why should the nation’s top CEOs worry about the American economy? After all, they’re doing fine – fabulously so. Last year their pay packages – at $10,500,000 each -- averaged 344 times the pay of typical American workers.

The top 50 hedge and private equity fund managers did better by far. Last year their compensation averaged 19,000 times that of typical workers.

What’s more, thanks to tax and accounting loopholes, average American taxpayers subsidize excessive CEO compensation to the tune of $20,000,000,000 a year.

Those are among the revelations in “Executive Excess: How Average Taxpayers Subsidize Runaway Pay,” a report released (August 25) by two think tanks, the Institute for Policy Studies and United for a Fair Economy. The report documents the five most direct tax subsidies that benefit executives at Wal-Mart, Target, the Citadel Investment Group, and other large corporations.

Another think tank, the Center on Budget and Policy Priorities, on August 21 issued a helpful report on “What to watch for in the new Census income and poverty numbers.” It was timed for the August 26 Census Bureau release of findings on household income and poverty for 2007.

Those 2007 figures may well mark “the most disappointing economic recovery on record from the standpoint of low- and middle-income households,” the Center warns. “For income or poverty levels to show long-term progress, rather than merely recover from the damage caused by the last recession,…the median income for working-age households would need to rise above $58,721, and the poverty rate would have to fall below 11.3 percent.”

Stay tuned.

UPDATE 8/26

The 2007 figures, as released in the new Census report, were:
-- Poverty rate: 12.5%, above, not below, 11.3 percent
-- Medium income for working age households: $56,545, below, not above $58,721

“This is unprecedented,” Robert Greenstein of CBPP, said in a statement. “Never before on record has poverty been higher, and median income for working age households lower, at the end of a multi-year economic expansion than at the beginning. The new data add to the mounting evidence that the gains from the 2001-2007 expansion were concentrated among high income Americans.”

What’s the outlook, since the economy is still in a slowdown? Greenstein’s answer:

“The 2007 levels – already disappointing because they are worse then for the 2001 recession – are likely to constitute a high-water mark for the next few years. This suggests that significant pain may lie ahead for many Americans.”

For a podcast on these developments, click http://www.cbpp.org/8-26-08pov-audio.htm



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Race matters in the race for the White House

Whenever the TV flashes the very first news about mass shootings in a school or a mall, I say a silent prayer that the shooter is not black. It is an instinctive reaction, because I’m a worrier. I know how wildly prejudice can assert itself.

The 1995 Oklahoma City bombing, which killed 168 people and injured more than 500 others, kept me worrying until the killer turned out to be Timothy McVeigh, a young white U.S. Army veteran. I didn’t hear anyone say, “Oh those white people. And they want us to trust them.”

What if the Unabomber, the mad genius Ted Kaczysnki, or Jerry Dahmer, who dismembered and ate his victims, had turned out to be black? Fortunately, we weren’t tested.

This November the racial attitudes of Americans will face a massive public test in the Presidential race. The New York Times ran a pre-test with CBS News a few weeks ago, and the result is not inspiring. On August 9, a Times article analyzed key answers to the poll:

“When whites were asked whether they would be willing to vote for a black candidate, 5 percent confessed that they would not. That’s not so bad, right? But wait.

“The pollsters then rephrased the question to get a more accurate picture of the sentiment. They asked the same whites if most of the people they knew would vote for a black candidate. Nineteen percent said that those they knew would not…This universe could be substantial. That’s bad.”

In his article’s final paragraph, Columnist Charles M. Blow writes: “Think racism isn’t a major factor in this election? Think again.”

And he reaches that conclusion without knowing the answer to a question that the poll didn’t pose: Would most people you know vote to put a black woman in the White House? Pollsters skip that question because it is considered too sensitive to ask whether whites prefer a white First Lady to one who is black. The race of the First Lady shouldn’t matter, even though Cindy McCain is constantly there at her husband’s side as a not-so-subtle reminder of the choice.

It shouldn’t matter, and yet I think is does. Remember, I’m a worrier.


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Business and Human Rights To the Fore

An International Seminar on Business and Human Rights will be held in Paris December 4 and 5 to celebrate the 60th anniversary of the UN Universal Declaration of Human Rights.

Mary Robinson, former UN High Commissioner for Human Rights and chair of the Ethical Globalization Initiative, will chair the two-day seminar. Speakers will include Irene Khan, secretary general of Amnesty International, and John Ruggie, the UN General Secretary’s Special Representative on Human Rights and Business.

The purpose of the seminar, according to its announcement, is to review progress made on business and human rights and to “chart developments ahead.” Participants are expected to include “business, political, civil society, and trade union leaders as well as diverse learning from around the world.”

The December seminar is different from a “multi-stakeholder” consultation to be sponsored by the Human Rights Council at a date not yet determined. Its purpose, under the mandate for Ruggie that the Council adopted in June, is “to discuss ways and means to operationalize” the conceptual and action plan that the Council also adopted in June.

In the words of that mandate, the consultation will bring together Ruggie, “States, and business representatives and all relevant stakeholders, including non-governmental organizations and representatives of victims of corporate abuse.”

The agendas of the two meetings overlap, without duplicating each other. Many leaders will participate in both events.

As described in its newly released paper, Amnesty International, whose French branch belongs to the steering committee organizing the December seminar, endorses the work of Special Representative Ruggie and also offers him a full agenda of work that still needs to be done.

One important area is that of “extraterritorial dimensions of the state duty to protect,” which Ruggie has already studied at length. Amnesty urges him to plunge in further, and explains why:

“The protection of human rights is undermined, because both company structure and globalized company operations facilitate corporate evasion of state jurisdiction…The legal framework regulating TNCs has not kept pace with the realities of globalization. This is in contrast to economic law, which is increasingly protecting economic interests beyond individual states’ jurisdictions.”

“Amnesty International,” it says in its paper, “is skeptical of the arguments of group that oppose extra-territorial regulation on the one hand, while fully supporting the development of international law and enforcement mechanisms in the areas of trade and investment on the other.”



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Solzhenitsyn: We beg you to interfere

I heard him speak 33 years ago, but I still remember his riveting voice and presence. My memory of the great Alexandr Solzhenitsyn, who died Sunday in Moscow, is aided by something I wrote about the powerful address I heard him deliver.

The article in which I quote him appeared in the December 1993 issue of Blueprint for Social Justice published by Loyola University-New Orleans under the title Human Rights: Ten Objections Answered. The first of those ten objections was this one: “To raise human rights issues internationally is to meddle in the internal affairs of other sovereign countries.”

I began my answer with Solzhenitsyn and his answer:

I have never heard a more devastating rebuttal to this objection than the one given before 2,000 guests in the Washington-Hilton ballroom in Washington, D.C., the evening of June 30, 1975. The speaker was Aleksandr Solzhenitsyn, author of The Gulag Archipelago and himself a former stonecutter in the Soviet Union’s Gulag.

The AFL-CIO sponsored Solzhenitsyn’s address at a time when the Carter Administration deemed it highly impolitic for the nation’s capitol to host a large public forum for such a vigorous critic of the Soviet Union. Senior government officials were conspicuously absent, but a few lesser lights from the State Department like myself, in response to a printed invitation from the AFL-CIO, attended without asking for permission.

Although Solzhenitsyn spoke in Russian, he did so with such feeling that his charisma carried over into the English translation. No part of his message evoked warmer applause than this one: “On our crowded planet there are no longer any internal affairs. The Communist leaders say, ‘Don’t interfere in our internal affairs. Let us strangle our citizens in peace and quiet.” But I tell you: Interfere as much as you can. We beg you to come and interfere.”

I went on to develop my own answer, applying it to similar objections then made by the People’s Republic of China. Among other things, I wrote: “China is sovereign, but so is the United States. There is nothing in divine or human law saying that the United States must permit the products of forced labor – which can range from socks to Diesel engines – to enter the U.S. from China. The United States can exercise its sovereign right to prevent such imports.”

To this day, the U.S. government has not been effective in preventing such imports from Communist China.


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WTO Isn't Keeping Up with the World

So once again global trade talks have hit a stone wall. Once again the Washington Post sheds tears over the latest collapse in negotiations. A July 30 Post editorial finds it “particularly dismaying” that the People’s Republic of China cast a veto on the World Trade Organization’s latest proposal to save the so-called Doha Round.

Those ungrateful Chinese! After all, “U.S. supporters of Chinese inclusion in the WTO [including the Post] argued that drawing China into a system of multilateral give-and-take would mute its nationalistic tendencies. Evidently, the Chinese see the matter differently. They, and the world, will be poorer because of it.”

Well, the Chinese are not the only ones who see matters differently from the Post.

“Don’t cry for Doha,” says the title of economist Dani Rodrik’s July 30 Weblog. He writes: “There was not a whole lot at stake to begin with for poor nations as a whole…Panicky statements about dire consequences and protectionist spirals will be more damaging than the actual effects of the collapse of the trade talks.”

Be assured: robust world trade will continue, regardless. Robert Wade, professor at the London School of Economics, explains why. In a letter published in the July 26 Economist weekly, he writes:

“There is almost no chance that the global economy would become less integrated as a result of ‘failure’ [of the Doha talks]. The producers of most goods and services in the major economies are much more integrated into complex cross-border systems than between 1914 and the 1930s, when the world economy did become less integrated.”

The WTO suffers from a much bigger failure than the current one in Geneva. The overall failure is this: the world trading system has simply not kept up with the world. That’s not an opinion; it’s a fact.

One example: today's global system, as patched together in the 20th century, ignores the radical changes in information technology since then and therefore does not outlaw the trade barriers erected by China (and other repressive countries) against the free flow of information.

I've written an account of how this particular failure troubles me personally. My article is published in the August 4 issue of America under the title “Buyer’s Remorse: Spatulas, Yahoo, and the conscience of a consumer.” Click here. It is part of my collection of evidence that the WTO has not kept up with the world as transformed by globalization.


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Media Blind Spot: Public's Trade Concerns

“For each item I name, please tell me how important it will be in your vote for president this year.” Pollsters for the Washington Post and ABC News put that request to a national sample of registered voters, and went on to name 17 “items.” Foreign trade (or a synonym, such as globalization) was not among the 17 topics.

I found that strange. The article reporting the poll results on the front page of the July 16 Post also ignored the topic. The second headline over the article said: “Economy Remains the Top Concern.” Indeed, 92% of the respondents rated “the economy” as either extremely important or very important.

In a story on its political blog, Caucus, a day earlier, July 15, the New York Times reported the results of its own poll, this one co-sponsored with CBS News. Its July 15 story, headed “Iraq Still a Dividing Line,” did not cover a question the pollsters asked of registered voters, “What do you think is the most important problem facing the country today?” The answers, available on the Times Website, ranked “economy” as the most important. Again foreign trade or an equivalent term was not on the list of choices, 24 in all, presented to voters. {The Times drew on the same poll findings for a front-page political story on July 16 devoted to the Obama candidacy and the racial divide.)

These four media giants -- The New York Times, the Washington Post, CBS News, and ABC News – have a heavy influence on the news agenda of other media, small and large, across the nation. Therefore, they have a special responsibility to report public opinion fully and accurately, especially on issues that may affect the outcome of a historic election.

On the face of it, the Post and the Times failed to do so in these two polls. Why?

The designers of these two polls may have lumped the public’s concerns about trade into the broad “economy” category. If so, that is careless, at best. The media themselves don’t cover free trade as part of their reporting on (say) “The #1 issue – the economy,” as the CNN series on this theme is called. (According to a new CNN poll, 51 percent of Americans consider foreign trade "a threat to the economy.")

By email and phone, I asked the Post and Times to explain the omission. I suggested the possibility that free trade might have been lumped into the economy category. No response.

David Sirotta, author of The Uprising: An Authorized Tour of the Populist Revolt Scaring Wall Street and Washington, describes the fair trade movement as “one of the most encouraging transpartisan developments of the last few years” – a movement “ignored by the media (and, frankly, much of the blogosphere).”

No such blindspot here. But what explains the media’s?


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You Are Not An Auto Worker, Or...

...a garment worker, or a steelworker, and so you’re not all that worried about globalization, except for its effect on others. That’s because you’re a school teacher or a nurse, or a roofer, and so you personally feel safe – after all, your job can’t be moved overseas, and you think foreign trade is no threat to you.

Don’t be so sure. Remember: you, too, are living in the global economy. You may think you are remote from its human impact, but you aren’t. Few people are.

That’s a fact. And it’s a fact that many millions of us Americans don’t quite understand. Douglas J. McCarron, president of the United Brotherhood of Carpenters, wants to make sure that his 520,000 union members are not among those uninformed millions. He wants carpenters, millers, piledrivers, and other workers in the building trades to know how they, too, are exposed to globalization’s repercussions.

So the Carpenters’ Brotherhood has joined with the Economic Policy Institute (EPI) to produce a multimedia education project in the form of a 13-minute Web presentation titled “Globalization: How Carpenters are being hurt by global trade.” For the presentation, click on the Carpenters Website: http://www.carpenters.org.

“You can’t build an office tower in China and ship it to New York or Las Vegas, but that doesn’t mean our jobs are safe,” McCarron says in the opening segment. His point is developed in detail by Jeff Faux, founder of EPI and author of The Global Class War.

Fortuitously, the same subject is treated in a recent EPI brief, “Trade, Jobs, and Wages,” by EPI staff economist L. Josh Bivens. He answers the brief’s subtitle, “Are the public’s worries about globalization justified?” with a firm Yes. His five-page paper is full of insights ignored in the current economic debate.

One is contained in these paragraphs on how job losses caused by trade deficits impact even the wages (to say nothing about working conditions) of workers in non-traded sectors:

“While job-loss caused by rising trade deficits is the most visible effect of globalization, its impact on workers is a concern to an even much larger group of workers. Even if trade flows begin to balance and there is less job loss in the future, the integration of the U.S. economy with those of its low-wage trading partners will pull down wages for many American workers, and will contribute to the ever-rising inequality of incomes in the U.S. economy.

“While global integration is usually ‘win-win’ between countries, it can still translate into steep losses for tens of millions of workers in the U.S. economy. Crucially, this wage loss is not restricted to just workers in sectors exposed to trade, but is experienced by all workers who resemble those displaced by imports in terms of education, skills, and experience…Landscapers may not get displaced by imports, but their wages do indeed suffer from job competition with import-displaced apparel workers.”

Bivens brief is a primer that should be read by national lawmakers and especially by the Presidential candidates being fed simplistic (and wrong) economic advice.


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Foreign Trade as 'Threat to the Economy'

“What do you think that foreign trade means for America? Do you see foreign trade more as an opportunity for economic growth through increased U.S. exports or a threat to the economy from foreign imports?”

In response to that question, 51 percent of Americans said that foreign trade is “a threat to the economy,” according to a CNN/Opinion Research Corporation poll toward the end of June. It was the first time in 12 CNN polls since 1992 that a majority of Americans reported a negative view of trade.

In the June poll, 41 percent – a 16-year low -- rated foreign trade as “an opportunity for economic growth.” Four percent volunteered that it was “neither”; 2 percent, “both.”

The poll listed 15 issues and asked respondents to rank them according to their importance in choosing the President in November. “The economy” was tops, with 58 percent deeming it “extremely important.”


CNN’s July 1 news report on the poll was headlined “Majority against free trade,” although the survey question referred to foreign trade. Questions about “free trade” in recent polls have been similarly negative. The CNN poll, phrased more generally, may mean that the public suspicion of free trade is morphing into something more serious.

For the results of a Pew Research Center poll on this issue in April, see “More Bad News about Globalization.”

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U.S. Investment in Vietnam and Human Rights

The governments of the United States and the Socialist Republic of Vietnam will soon launch negotiations for a treaty to protect American investment and investors in Vietnam. The proposed treaty, called a BIT for Bilateral Investment Treaty, offers a natural opportunity to include human rights provisions, but so far there is no sign that the present U.S. administration plans to do so.

The 40 BITs that the United States already has with other countries do not have any human rights provisions. A new BIT with Vietnam could change that pattern, however, if Congressional advocates of international human rights get mobilized.

According to a report adopted unanimously by the UN Human Rights Council in June, the present BIT pattern creates an “imbalance” that weakens the host government’s obligations on human rights. The report, authored by Professor John Ruggie of Harvard, states:

“Investor protections [under BITs] have expanded with little regard to States’ duties to protect [human rights], skewing the balance between the two. Consequently, host States can find it difficult to strengthen domestic social and environmental standards, including those related to human rights, without fear of foreign investor challenge, which can take place under binding international arbitration.”

A joint U.S.-SRV statement on June 25 announced the decision to initiate the BIT negotiations. Separately, it also “noted the benefit of an open and candid dialogue on issues relating to human rights.” But it said nothing about the impact that U.S. investment in Vietnam – topping $12,000,000,000 in 2007 – has on the rights of Vietnamese workers and others.

The U.S. will use its standard “model agreement” as the starting point for negotiations with Vietnam. It defines “investment” so broadly that it includes patents, copyrights, trademarks, and other forms of intellectual property rights, and lays down strong enforcement mechanisms, including access to international arbitration for the investor.

Another “model BIT” has been developed by a Canada-based NGO, the International Institute for Sustainable Development (IISD). After extensive research, IIISD found that existing BITs are “one-sided instruments” that guarantee extensive protection of of the rights of foreign investors but without any corresponding investor responsibilies. The IISD model corrects that imbalance. (See “Linking Global Rights with Responsibilities": scroll down to the next-to-last item.)

Congressional concerns about this issue is reflected in the Trade Reform, Accountability, Development, and Employment Act, introduced on June 4. Among its provisions is that BIT protections of investor rights could no longer override a country’s efforts to protect the rights of its own workers.

It is probably too late to enact that bill into law, but it’s not too late to hold hearings on the proposed U.S. Bilateral Investment Treaty with Vietnam. Up till now, Congress has rubber-stamped BIT after BIT without drawing any public attention. It’s time to let the sunshine in.

Both Senators Obama and Clinton have pledged to review the labor provisions of trade agreements under a Democratic administration. They don't have to wait that long. They can insist that the Senate review the proposed BIT with Vietnam for its impact on the human rights of Vietnam's workers.

So one big question is: Will Congress rubberstamp the U.S.-Vietnam BIT without studying how it impacts the rights of Vietnam's working men and women? Another is: Will it rubberstamp that BIT without studying how facilitating more investments to Vietnam will facilitate the transfer of American jobs to the Socialist Republic of Vietnam?

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To Embed Human Rights in Multinationals

Australia’s Parliament has agreed to a policy fostering the integration of human rights into the operations of Australian multinational enterprises. The Parliamentary motion to that effect, adopted on June 23, had the support of the government and all political parties, major and minor.

The United States would benefit from a similar initiative. Australia’s decision grows out of factors that also resonate in the United States: an increased awareness 1) that some multinationals are engaged in behavior overseas thatis not tolerated at home, and 2) that present international rules don’t cope with the problem. (See “Where business and human rights intersect” by Andrew Hewett, executive director of Oxfam Austratlia.)

In Canberra the policy calls for “the development of measures to prevent the involvement or complicity of Australian companies in activities that may result in the abuse of human rights.” In Washington, legislation calling for the same thing probably could not be enacted this year, but a bill, and hearings on it, would serve as a helpful preparation for action by Congress and the new Administration next year.

Australia’s decision follows in time, and in spirit, a report on a “Framework for Business and Human Rights” adopted on June 18 by the UN Human Rights Council. That report, authored by Professor John Ruggie of Harvard, outlines a three-pronged plan to realize the State duty to protect human rights, the business responsibility to respect human rights, and the joint obligation to establish better access to remedies for human rights violations.

Under this plan, the most difficult challenge arises from what Ruggie calls “weak governance zones,” the areas where the government is unable or unwilling to exercise its authority and in which multinationals have expanded and prospered. The Ruggie report, recognizing the importance of filling this vacuum, puts all options on the table, including home State regulation of the multinational corporation’s foreign operations.


Traditionally, that option – “exercising extraterritorial jurisdiction” of business -- is a No-No. After extensive study by experts, Ruggie identified this consensus: international law does not require home States to regulate corporations abroad, but does not flatly prohibit it (i.e., permits it under certain circumstances), and there is an increasing tendency to encourage it.

As a stakeholder in the global economy, the government of Australia is beginning to take advantage of the latitude it has to exercise a duty it has at home and abroad. The United States, with a much larger stake, should do likewise.


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Hooked on the Presidency

Looking over the field of men anxious to run for President at the beginning of 1976, James Reston wrote in his New York column: “Once hooked on the Presidency, it is an appetite more addictive than dope.” In “Who’s Hooked?” an op-ed piece that the Times did not print, I diagnosed the media as suffering from the very same addiction.

“Although it is true, as Reston says, that the appetite for the Presidency ‘consumes men as physical as George Wallace of Alabama and as intellectual and promising as Gene McCarthy of Minnesota,’” I wrote, “it also consumes news reporters and dominates their output.”

I marveled at the volumes written and spoken in speculation about election outcomes months before the ballots were printed. Laid end to end, those words “would reach far into outer space, and several times around Mars, where they would have about as much meaning as they have here,” I wrote.

I marveled, too, at the armies of reporters and photographers following Presidential aspirants everywhere. “Partial demobilization of this entourage need not put reporters on unemployment compensation rolls,” I wrote. “They could find productive employment writing about problems – gut problems – that concern people.”

Obviously, that 1976 critique of mine, which I found while cleaning out some old files, holds true for the media today. Why this obsession with the Presidency?

Well, it is, after all, the most powerful job in the United States and the world. Okay, but this is a democracy. The excessive focus on the President adds to that power, and it crowds out other voices.

Just listen to the claims that Presidential candidates make. “Just elect me, and I’ll solve ______[fill in the current problems].” Nonsense, of course. Thank God and the constitution, the President is not all-powerful. Yet through obsessive attention to the Presidency, the media pays little attention to the other power centers that share in national decision-making on matters small and large.

Take trade policy. It is one of the most important issues being debated by John McCain and Barrack Obama. Yet the media generally covers it only superficially, and sometimes sensationally.


Even the late Tim Russert, for all his knowledge of the political scene, was weak in bringing much enlightenment to a complex issue like trade. In fact, he was probably at his weakest in the March debate between Hillary Clinton and Barrack Obama.

He introduced a series of questions on NAFTA not by quoting what Clinton or Barrack had said, but what Al Gore had said back in 1993: “If you don’t like NAFTA and what’s done, we can get out of it in six months.” He then asked: “Will the U.S. President say we are out of NAFTA in six months.”

Russert reformulated the question twice for Clinton (once because he was not satisfied with Clinton’s qualified No) and then once for Obama, to which Obama replied: “I will make sure that we renegotiate, in the same way that Senator Clinton talked about, [using] the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced….”

(For details, check my March 6 posting “The ‘Opting Out” NAFTA Distraction,” based on the actual transcript.)

Although Russert got his point “buttoned” up to his satisfaction, the hurried exchange did more to confuse than to enlighten the public on NAFTA. That’s par for the course in the media when dealing with trade issues.


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Hooked on Free Trade Religion

Then there’s the print media’s addiction to the present system of “free trade.” The worst offender of all, in my view, is the New York Times. Liberalization of trade is a sacred component of its liberal faith, promulgated throughout the paper, not only on the editorial pages but in the business section and in the weekly Magazine. Dissenters seldom get any space, not even in the news pages.

Also, facts embarrassing to the policy line get buried or ignored. In a national poll conducted in mid-June, 56 percent of voters surveyed said that NAFTA needs to be renegotiated. Even 49 percent of Republicans agree, according to a June 18 release by an independent polling organization, Rasmussen Reports. The story appeared on Fox News, but not in the New York Times.

On June 8 the New York Times Magazine ran its latest defense of free trade, “This Global Show Must Go On” by Tyler Cowen, professor of economics at George Mason University. Among other things, Cowen criticizes a proposed “’timeout’ from globalization” when the actual proposal is for a timeout in trade negotiations (there already is a de facto timeout, and world trade is actually accelerating, as Cowen acknowledges).

Another economist, Dani Rodrik, has written an economic response to Cowen in an article, “Globalization anxiety as mass hysteria?” on his Weblog. Here’s his first sentence:

“Those who are puzzled by globalization anxiety and attribute it to collective irrationality (see Tyler Cowen’s piece in the NYT) overlook a fundamental aspect of markets – their ‘embeddedness’.”

Read the full text here. Enjoy.

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Who Cares About Bangladesh?

I’ve been neglecting my Blog because I am working on a long-delayed project: writing the last chapter of a book. But in my email I just got a press release about Bangladesh, which has a special place in my heart because long ago I researched the plight of women workers in the garment industry there. The email told me that in Bangladesh it’s still the same old story of human exploitation.

Every time I think that the campaign against sweatshops is succeeding, I learn about a story like this one. The government of Bangladesh, with the help of an American law firm, continues to crack down on the rights of workers. I’ve stopped keeping track of how many times the International Labor Organization seeks to shame Bangladesh for its repressive activities, without any success.

The workers in the country’s booming Export Processing Zones have recently taken the initiative to form a union through which they hoped to protect their rights. But the government has again intervened to crush the worker initiative.

This latest chapter in a story that goes back 20 years is told in the press release just issued by head of the International Textile Garment, and Leather Workers Federation, Neil Kearney.

In his testimony before the ILO Committee on the Application of Standards in Geneva on June 6, Kearney described the workers’ plight and said: “Garment workers in Bangladesh, mainly women, cannot be allowed to drop further into serfdom.”

Accordingly, the committee censured Bangladesh, as it has many times before. Once again, Bangladesh provides evidence that U.S. trade legislation needs to be strengthened to protect the rights of hundreds of thousands of women workers in Bangladesh, who are essentially part of our labor force.

Who cares?

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Preparing Trade Policy Reforms

The United States will reform its trade policy no matter who occupies the Oval Office next year. That’s the prediction of Sherwood Brown (above, center), U.S. Senator from Ohio, long an advocate of fair trade.

Brown is leading a Congressional initiative to do the groundwork for that policy. On June 4 he introduced a bill to 1) review all existing trade agreements, 2) renegotiate those agreements based on that review, and 3) set the terms of new trade agreements.

The bill proposes policy requirements that broaden the protection of the public interest in trade and investment policy. For example, protecting the rights of foreign investors could no longer override a country’s efforts to protect the rights of its own workers.

Under current law and practice, President Bush has signed trade agreements on his own authority before sending them to Congress for approval under an expedited procedure that permits no amendment. Under Brown’s bill, the President could sign a trade agreement only after it gets the approval of both Houses of Congress.

The bill’s full title is the Trade Reform, Accountability, Development, and Employment Act of 2008, or TRADE Act for short. Although the bill is unlikely to be enacted this year, it should help develop an improved version for 2009.



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This UN Work Seems Back on Track

“We’ve had a train-wreck. Please get the train back on track.” That’s what a representative from a developing country told Professor John Ruggie of Harvard when he took over his job as Special Representative of the UN Secretary General for Business and Human Rights three years ago.

Now everything is back on track. At least it appeared to be on June 3 when Ruggie presented a report of his work to UN Human Rights Council in Geneva.

Back in 2005 two big stakeholders in globalization – the major international business organizations and leading human rights organizations – were sharply divided over what, if anything, the UN should do about ending human rights violations by multinational corporations. Now they seem to be on track together in supporting a proposal that Ruggie laid out in oral and written reports still under discussion by the Human Rights Council.

Ruggie has proposed an extension of his mandate in order to move “the discussion from the level of general principles to greater operational detail.”

I don’t yet have the Council decision, but in the meantime the full report and a massive amount of other material – much more than you’ll want to read – can be found on the Business and Human Rights website:
http://www.business-humanrights.org/Documents/RuggieHRC2008

I have doggedly covered this human rights controversy from its very beginning. A certain amount of doggedliness was needed to pursue a story almost completely ignored by the media. “Global Norms Put Heat on Business,” published on January 6, 2004, was the first of my 12 reports on my Human Rights for Workers website. Then, before this brief articlet, I had four detailed ones on this weblog. (See the "categories" list at the right and check the "John Ruggie" label.)

Three of them turned out to be the first media analysis of the report that the Council is now discussing. You’ll find them listed last (under Robert Senser, Human Rights for Workers) in the chronologically arranged “responses, commentary & related articles” at
http://www.business-humanrights.org/Documents/RuggieHRC2008

I have doggedly covered this human rights controversy from its very beginning. A certain amount of doggedliness was needed to pursue a continuing story almost completely ignored by the media. “Global Norms Put Heat on Business,” published on January 6, 2004, was the first of my 12 reports on my Human Rights for Workers website. Then, before this brief article, I had four detailed ones on this weblog.

Three of them turned out to be the first media analysis of the report that the Council is now discussing. You’ll find them listed last in the chronologically arranged “responses, commentary & related articles” at
http://www.business-humanrights.org/Documents/RuggieHRC2008

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