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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