December 15, 2003

Behind the Numbers

The Washington Post's David Finkel tries to look behind the employment numbers at the real state of the economy:

washingtonpost.com: At Recovery's Dawn: But just as "sparkle" can be a euphemism for housekeeping, "recovering" can gloss over the reality of what for millions of Americans having a job has come to mean. More people are working part time than ever: Last month, for the first time, the number exceeded 25 million. More are classified as "involuntary" part-time, meaning they would rather be working full time: 4.9 million in November, an increase of 600,000 from a year ago and 1.6 million since the recession began in March 2001.... In addition, more people are cobbling together a working life of two or three part-time jobs to keep up with bills. More jobs come without benefits, the chance for mobility and the security of long-term stability. Wages for most workers are not keeping up with inflation. The number of manufacturing jobs has declined 40 months in a row. The average time spent looking for work is now more than 20 weeks. And many people remain not working at all. Even with the addition of those 328,000 jobs, the total number of jobs is still 2.35 million lower than before the recession....

In Frankenmuth, at 1515 S. Main St., Hill is a perfect reflection of this reality. Fifty-one years old, she had been, over the course of her life, a housewife, a seamstress, a nurse's aide, a bank teller, and was working in a mall card-and-gift shop, thinking about management, when she quit to take care of her aging parents. That was just before the recession. Last year she put them into assisted living, and as 2003 began, her savings gone, her furnace broken, her house so cold she had to move in with relatives, the time had come to go back to work. She'd never had difficulty finding a job and started hopefully. By midyear, after so many rejections, she had become one of America's 450,000 "discouraged" workers, which is a euphemism for giving up, and by year's end she finds herself -- just like the economy -- recovering....

There were necessary concessions to make. She wanted full time. She got part time. She wanted a wage high enough to get her furnace fixed this winter. She got $7 an hour, which means 51/2 hours of work just to pay back the $38 she borrowed to buy work shoes. She wanted sales. She got cleaning. But it is a job nonetheless, and as a Thursday gets underway, Bronner's newest permanent employee is nothing but enthusiastic. Before going to work she painted her fingernails red so they would match her Bronner's shirt, and as her shift begins she is listening intently as two other Sparkle members give her the lowdown on what's ahead.

"Whatever's dirty, we clean it up," says Karen Cooper, 59, seven years on the job. "When there are bloody noses, we have to wear double gloves."

"Kids throw up," warns Bonnie Barker, 63. "A lot."

"We have to protect ourselves," Cooper says. "I worked in the motels, they gave you nothing. A pair of Playtex gloves. One pair."

"Poop on the floor," Barker says. "And the walls."

"If we have 15,000 people in one day, and one throw-up job, that's not bad," Cooper says.

"Oh, I imagine," Hill says. "I imagine."

"Wait till Saturday," Cooper says, the voice of experience. "You'll be amazed."...

It is 2.1 acres of sales space. It is 50,000 different items. It is 500 Nativity sets, 800 Hummels, 700 animated Santas and snowmen, 350 decorated trees. It is Christmas lights, everywhere. It is a two-minute-long snowfall of soap flakes every half-hour by the main entrance where the tour buses are lined up before the doors even open, and Christmas music, nothing but Christmas music, 361 days a year.

This is what Hill has been hired into: 361 opportunities a year to work. The 2.1 acres have to be vacuumed. The soap flakes occasionally leave carpet stains. The tour buses are jammed with people who make beelines for the bathrooms, and then seem to think the way to dispose of toilet tissue is to leave it on the floor. But at this moment, as she looks around, that's not what Hill is seeing.

"Beautiful, isn't it?" she says.

Friday morning now. One day closer to Saturday and whatever that will bring. "Just wait," Cooper keeps saying, as if the 2 million people who visit Bronner's a year will all show up at once. But Hill's concern this morning is her mother. Eighty-seven years old, she is being given a surprise birthday party on Saturday afternoon. Hill and her sisters began planning it weeks ago. Then Hill got this job. Then she got her work schedule. The party is at 1. She's working till 2. "Can't you get time off?" one of her sisters asked.

"I said, 'I'm a new employee. I don't think I can ask,' " Hill says as she pushes a vacuum cleaner across the showroom floor. Her sister seemed surprised. How many times does a mother turn 87? How many surprise parties are left?

But how could Hill ask for time off when she's so new that she couldn't even answer Cooper's opening question to her this morning?

"You know the first thing we do, don't you?"

"Toilets?"

"No. Refrigerators. Always refrigerators."

So she did refrigerators. And then cleaned the break area where, yesterday, clocked out for lunch, she had hurried through a peanut butter sandwich while another Sparkle worker, Betty Stedry, talked about how much getting this job meant to her, that she had been out of work six months since being laid off, that she was at the point "when I was cutting back on my food," that when she got a callback from Bronner's "I came running, I mean it, running," that "I'm just so happy to be working."

"Me, too," Hill had said, and now, as her sisters prepare for a party, she is moving a vacuum cleaner across 2.1 acres, 14 inches at a time, thinking about how complicated the notion of work has become with each succeeding generation in her family.

First came her father -- 47 years at General Motors, from high school to retirement.

Then her -- married at 20, a baby boy when she was 24, a baby girl when she was 28, a divorce when she was 38, a patchwork of jobs after that, the constant in her life being a place she can't imagine leaving, no matter how hard she has to scramble to stay.

Then her children -- now 27 and 23 and gone. The daughter, unemployed, left a few weeks ago. The son, unemployed also, followed a few days ago. Both left for West Virginia and their father's trailer, hoping the opportunities for work would be better there.

She vacuums around a 15-foot-tall soldier that sells for $2,775, an amount equal to the value of 396 hours of her work. She vacuums past Stumpy the $8,900 singing tree and makes her way toward the personnel office, where this year's 2,000 job applications -- including one from a woman named Bonnie Sherman and one from a man named Jason Slatton -- are stacked in folders and file cabinets. It was two weeks ago when Hill first went into those offices to be interviewed, and her timing could not have been better. Sparkle was ready to hire, and rather than go back through applications, she was given the job.

"Let it snow, let it snow, let it snow," Stumpy the tree is now singing, and meanwhile, 10 miles to the south, Bonnie Sherman, 49, laid off two years ago and still unemployed, wonders if Bronner's is going to call.

"I mean it's not a lifelong dream, cleaning," Sherman says Friday afternoon, about the time Hill's shift is winding down. But she needs a job and says, "If I didn't have somebody to help me, I wouldn't have made it."

That would be a boyfriend, who makes $9 an hour putting brake fluid in gallon containers. The job she was laid off from, examining boxes of automobile parts for defects, paid $6 an hour. Fifteen dollars an hour meant an okay life, she says; $9 means they're trying to sell one of their vehicles, a truck whose engine gave out. "We have food. We get by," she says. "But we've racked up a lot of bills trying to get through."...

There is, however, a big flaw in the article. Yes, the number of workers part-time for economic reasons is unusually high. Yes, all other labor market indicators besides the unemployment rate seem to indicate that this feels like a (perhaps) 7.5% rather than a 5.9% unemployment economy. But Chris Hill's life today (and the lives of people who fill similar slots in our economy) is much the same as it has been for the past decade. Even in the biggest boom years of the 1990s it was still the case that 35% of America's workers made (inflation-adjusted) less than $10 an hour. The absence of benefits was a crisis a decade ago, when the Democratic Party tried to pass health care reform, and continues to be a crisis today. If you accept the Consumer Price Index as a good measure of the rate of inflation, some 37% of workers earned less than 10 2003-value dollars an hour back in 1973. (If you believe with Mike Boskin--as I do--that inflation has been overstated by roughly 1% per year, then back in 1973 perhaps 55% of American workers earned less than 10 2003-value dollars an hour.)

Posted by DeLong at December 15, 2003 12:03 PM | TrackBack

Comments

Brad Delong

The comments you added are most important. Please do continue. What worries me most is that income and wealth inequality appears to have stopped increasing as the economic growth of 90s persisted. There may have been some lessening of inequality from the middle of the 90s. Now, changes in tax structure added to the effects of the recession and slow recovery have likely increased inequality. Since our budget deficit is likely to threaten social benefit programs, I am quite worried.

Please do comment further!

Posted by: anne on December 15, 2003 12:50 PM

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http://www.nytimes.com/2003/12/01/business/01jobs.html?ex=1071637200&en=a5eec1f3f059cd59&ei=5070

The Pain of Coping When a Job Is Snatched Away
By JILL ANDRESKY FRASER

THREE years ago, Susan Sullivan, then 34, and her husband, Peter, 44, were thriving. The couple, both marketing professionals, worked hard and enjoyed a combined income of about $250,000 a year.

Then, within two weeks of each other in the spring of 2001, the Sullivans lost their jobs, right about the time that she became pregnant. Unable to find work, they moved from Newton, Mass., a pricey Boston suburb, to Worcester, to cut their living expenses. With job prospects slim, they began entrepreneurial ventures: she, a marketing consulting firm, and he, a computer network security firm. Their daughter is now almost two. With combined yearly earnings of about $20,000, they have cut their spending to the bone and make ends meet with food stamps and credit cards.

"We had about $40,000 in savings, but we spent that a long time ago," Ms. Sullivan said. "Now we owe more money in credit card bills than I ever would have believed possible. We don't spend money on anything at all that isn't a complete necessity. Your whole way of thinking changes. The other day I was so excited: I got a credit card offer for a new card that will give us a long period with zero percent financing."

The Sullivans are scarcely alone. There were, on average, 8.4 million unemployed Americans in 2002. By October, according to the most current statistics from the Bureau of Labor Statistics, their ranks had grown to 8.8 million. One out of every four had been looking for a job for 27 weeks or longer, up from one out of five a year earlier....

Posted by: anne on December 15, 2003 12:54 PM

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Bob Herbert - NYTimes 12/15/03

"Despite the loss of more than two million jobs over the past three years, and the fact that nearly nine million Americans are officially unemployed, the Bush administration has refused to support a Christmastime extension of crucial unemployment benefits.

"Worse, the administration is trying to implement a regulation that would deny overtime protection for more than eight million men and women.

"Efforts to get an increase in the pathetic $5.15 minimum wage continue to fail. The benefits from productivity increases that have resulted primarily from an incredible squeeze that employers have put on workers are not being shared with workers. Health and pension benefits are in a downward spiral."

Posted by: anne on December 15, 2003 01:08 PM

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Really? You agree with Boskin that the CPI is overstated by 1% a year? I'd love to hear you expand on this, and in particular explain how you respond to Dean Baker's critique. (The Baker critique is, as I understand it, that if inflation is overstated by 1% per year, real growth must be understated, implying that real GDP must have been much, much lower in the relatively recent past relative to today's GDP than the unadjusted CPI would imply.) Do you think that the CPI overstatement is a recent phenomenon? Or were we that much poorer in the past than today?

Posted by: Jesse R on December 15, 2003 01:27 PM

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"Really? You agree with Boskin that the CPI is overstated by 1% a year?"

This puzzles me as well, for the same reasons. Are we not allowing enough for quality improvement in products and introductions of new products? Now, how much better off am I ACP? That is, after cell phone.

Posted by: anne on December 15, 2003 01:58 PM

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There was an article today on IBM outsourcing 4700 programming jobs to India and China.
http://www.salon.com/tech/wire/2003/12/15/outsourcing/index.html

I think this behavior on the part of American companies is somewhat traitorous, given that a big part of what the American military for is to secure the freedom of American companies to make a buck overseas.

Posted by: camille roy on December 15, 2003 04:45 PM

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Great post, Professor DeLong.

Personally, I found Chris' life story touching. After all, she is one of the true faces of America. Faces that Holliwood and TV channels do a great job at distracting our attention from. I have not seen any movie about America -the real America- for a long, long while. (Except for American Beauty perhaps.)

Perhaps the establishment doesn't want us and Chris to know how many Chris'es there are out there, and how HARD their life is. As for economics, I put this in my folder about the stagnation of the real median income during the last decades... Perhaps it's PK who captured it best when he entitled one of his books "The Age of Diminished Expectations."

Posted by: Jean-Philippe Stijns on December 15, 2003 08:59 PM

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Jean-phillippe Stijns:

As movie references go this is by now a bit old, but perhaps you might look up "The Music of Chance", starring, if I recall, James Spader, Mandy Patamkin and Charles Durning, among others. It's perhaps a bit recondite, but a better "representation" of contemporary American working life in the medium I don't know of.

Posted by: john c. halasz on December 16, 2003 02:09 AM

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From 1993 through 2000, the poverty rate in America fell from 15.1 percent to 11.3 percent--a reduction of 25 percent, the biggest eight-year decline since the 1960s. As with income, the most vulnerable groups recorded the biggest gains. The poverty rate among blacks dropped by fully a third under Clinton; among Hispanics, the drop was just over 30 percent. For both groups, the poverty rate in 2000 was the lowest ever recorded. Poverty dropped faster for female-headed households than it did for married couples and was, by far, at the lowest level ever recorded. Children registered the greatest gains of all. Under Clinton, poverty among children fell by nearly 30 percent, to the lowest level since 1978. During Clinton's tenure, the number of children in poverty fell by 4.1 million--compared with just 50,000 during the expansion under Ronald Reagan. Meanwhile, home ownership among African-Americans and Latinos rose to the highest levels ever recorded.

Under Clinton, the federal tax burden on families at the median income and below fell markedly. A single mother who left welfare for full-time minimum-wage work would have come out ahead by only $2,005 in 1986; by 1997, largely because of the expansion of the EITC, work was some $7,100 more valuable than welfare. That support for work lifted millions of additional families out of poverty under Clinton. Once the EITC and other government income supports (such as food stamps) are added in and state and federal taxes paid are subtracted, the poverty rate in 2000 stood at just 8.7 percent overall and only 11.1 percent among children, the Census Bureau found.

-Brownstein

Much of the gains under Clinton have eroded under Mr. Bush. Clinton had fiscal programs target low income earners. Mr. Bush has implemented trickle down. It is clear which policy is better for low income Americans and better for the American economy as a whole.

Posted by: bakho on December 16, 2003 05:38 AM

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The only way, or perhaps I should say the best way, out of this state of affairs with so many (large) percentage points of American workers making less than ten dollars an hour is to eliminate those jobs, either through re-organization of work or automation (which is a special case of re-organizaiton any way) and increase tax revenues through increased productivity.

Then Hill can be retrained to take care of people very much like her mom for a better pay and a more stable set of employment circumtanstances. And Hill's children can go (back?) to college to learn new skills.

But that would mean increased taxation, that would mean expanded social programs, that would mean a shift towards socialism, a set of circumtances that capitalists dread, they do every thing they can to postpone it, defer it.

What do you do when you don't like the way productivity goes up and you like even less the probable consequences of that?

You export capital, where productivity is lower, and profits are easier -- especially after-tax profits!

And war is a form of capital export -- in fact, it is probably something like the very first profession in that sense; war is very probably the earliest form of capital exports.

And I think the Republicans understand all that extremely well, through gut feeling, at least.

Posted by: Bulent Sayin on December 16, 2003 06:36 AM

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I caught this following quote on Mexico and the NAFTA from Business Week. I think zizka will enjoy the parallels lost on our tax reductions are always best friends on the far right:

Such dithering is proving costly for companies. Grupo México, the world's third-largest copper producer, is considering moving its refining operations across the border to Amarillo, Tex., where it pays just 4 cents per kilowatt-hour of electricity, compared with 8.5 cents in Sonora. "Politicians are completely ignoring the impact that high energy prices are having on the country's productive companies," says Juan Rebolledo, Grupo México's vice-president for international affairs.

Energy is just one of many critical reforms that have stalled. "There's a shortage of engineers, middle management, and executives," says William Spurr, president of the North American transport division of Bombardier. The Canadian company has a locomotive and subway-railcar manufacturing operation in the central Mexican state of Hidalgo and is expanding its workforce there by two-thirds, to 2,000. "There's a very good talent pool, but if I opened a plant in India, I'd have all the engineers and technicians I need." If Mexico wants to hold on to its value-added jobs, it must "develop education and enlarge its pool of knowledge-based workers."

To be fair, the government struggles under a huge handicap: Its finances have been sapped by a $100 billion bailout of the banking sector after the peso crisis. Even under those circumstances, officials have managed to boost the number of high school graduates from 20% of students before NAFTA to 28%. Plus, the number of science and engineering college grads has nearly doubled over the past decade, to 73,300 last year. Yet that number still pales next to India, which graduated 314,000 students in those subjects, while China handed out diplomas to 363,000. Congress has so far foiled Fox's efforts to raise taxes to pay for improved education. As it is, Mexico has one of Latin America's lowest tax collection rates.

http://www.businessweek.com:/print/magazine/content/03_51/b3863008.htm?mz

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I think this behavior on the part of American companies is somewhat traitorous, given that a big part of what the American military for is to secure the freedom of American companies to make a buck overseas.

Posted by: camille roy on December 15, 2003 04:45 PM

camille roy, why exactly should we think this time is different? Are the people in Minneapolis who trade with people in Topeka to be put in chains? Is the greater distance to China and India supposed to change the relationship to trade shown between Topeka and Minneapolis in some strange way? Are there going to be no more technological changes from this point forward? Have we seen the last technological improvement of consequence? Why exactly are we supposed to believe the same changes won't result in job shift this go around? What is different this time?

Posted by: Stan on December 16, 2003 07:05 AM

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"Is the greater distance to China and India supposed to change the relationship to trade shown between Topeka and Minneapolis in some strange way?"

oh, blah. Why is this so hard to see? Surely the fact you and so many others cannot see the OBVIOUS is because of the deforming effects of ideology, in this case the FAITH-BASED ideology of free trade and free markets.

We live in a world whose national borders and political institutions are secured by nation states, with armies. Remember? We live in one! It's called 'The United States'! And in the real world, freedom to trade is NOT (so sorry!) a feature of NATURE. It is an attribute supported by political systems, governments, who keep standing armies even when they're not engaged in war. Now why do these keep these armies, I wonder. Perhaps it is only to secure employment for legions of young men. Or perhaps it is also to secure NATIONAL economic interests (including corporate interests) which are better protected with an implicit threat of force.

It seems to me that economists are overly infatuated with their statistics, and do not see the forest for the trees.

There are political questions related to free trade which are unaddressed, and I find that frustrating. I am not asserting I know the answers to these questions, but at least I am willing to assert questions!!

In a free-trade world in which American companies are free to out-source American prosperity and destroy (potentially) the middle-class, do those companies deserve the protection of the nation state system & particularly our government? If corporations are stand-ins for individuals, what is their obligation as citizens? Can they be have their 'citizenship' stripped? Why not? What would be the consequences?

Posted by: camille roy on December 16, 2003 08:37 AM

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Suppose American companies did not open "call centers" in India. What would happen?

Carrefour, the French retail chain, would do precisely that sooner or later.

Suppose you outlaw that in US.

Then they eventually do that retail call center off-shoring in Europe, thereby reducing cost of living in Europe, thereby increasing Europe's capacity to attract investment relative to America.

American retailers, then hard-pressed, lean on Artifical Intelligence research and development and completely eliminate call center jobs.

End effect, you lose call center jobs in America any way.

Standing in the way of productiviy improvement is not a good idea at all.

You support productivity improvement, and also support a more equitable distribution of positive value added differential thereof. That's the way to go.

If you don't believe me, ask the automotive industry about what happened in 1970s.

Posted by: Bulent Sayin on December 16, 2003 09:34 AM

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Camille Roy raises a crucial point when she asks whether corporations are entitled to the protection of the nation-state. There is a brilliant discussion of the impact of corporations on colonialist expansion in Africa, in Hannah Arendt's The Origins of Totalitarianism.

Corporations are merely aggregations of capital, deployed by people for their own ends. As a legal matter, for most purposes, corporations are regarded as persons, and are endowed with many of the same rights, if not all, as people. The confusion between the metaphor of corporation as person/human, and the reality of corporation as strategy for making money, gives rise to many anomalous results, including the bizarre notion that corporations are entitled to First Amendment protection, and are entitled to lobby.

The dangers of this are everywhere apparent. As a simple example, many people believe that the war in Iraq is about oil profits. Given the enormous influence of Halliburton and Bechtel on the origins, and the conduct of the war and its aftermath, this is not totally unreasonable, if unprovable. The idea that we might have gone to war, and killed a lot of people, to profit huge aggregations of capital, is too hard to bear, and so it is dismissed in what passes for polite conversation.

The same thing is true about political contributions and lobbying by corporations.

The benefits of free trade are constantly explained by a corps of economists. They describe the plight of those who face job shifts in their own language, which ignores the plain fact that these are real people, with families and a stake in a community. They offer solutions, knowing that this administration does not intend to effectuate any of them. They offer no solutions to the inequities of the distribution of wealth that these “job shifts” impose, because those would interfere with the free market.

Arendt would say that these solutions turn citizens into anonymous masses, easily manipulated by the offer of work of any kind. But at least IBM will live happily ever after.

Posted by: Masaccio on December 16, 2003 09:47 AM

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Things look to get worse once efficient cleaning robots become available- then there won't be any cleaning jobs whatsoever.

Posted by: non economist on December 16, 2003 10:17 AM

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Paul Krugman once said something to the effect that NAFTA had absolutely no effect on unemployment in the US because the unemployment rate was controlled by Greenspan and the Fed. If we were not near the liquidity trap, this would be the case today. Employment opportunities would be more plentiful and we would not be having this discussion. We would not be near the liquidity trap if we had a decent fiscal policy that stimulated employment.

As noted above, by 1997 work was some $7,100 more valuable than welfare. This makes unemployment all the greater loss of income. This makes the need for jobs policies and unemployment benfits all the more important.

Wealthy legacies such as Bush have no clue that their bankrupt trickle down ideology has real adverse effects on real people.

Posted by: bakho on December 16, 2003 10:46 AM

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The American economy in the last 15 years exhibits the paradoxical state that in aggregate there is very little progress in average living conditions while the economy has grown dramatically. Few professional economists are willing to tale a stab at what many average people know intuitively is the cause.

During the 1990s, the U.S. immigrant population experienced its largest increase ever - about 11.3 million people. As a result, the foreign-born share of the population jumped from 7.9 percent in 1990 to 11.1 percent in 2000. Most of these new immigrants are at the bottom of the economic ladder. They work for very little pay and they contribute greatly to corporate profits. However they also depress wages and consume far more social services than they pay in taxes.

In the long run this immigration is probably good for the country IF these immigrants assimilate as previous generations did. If they maintain a strong cultural identity they will unfortunately become a target if the economy ever enters a depression.

BTW: Depression is another word professional economists never use anymore. However unlikely it could happen here. All it would might take would be a dollar panic, a sickening climb in interest rates, a repricing of oil in terms of a hard currency, and well you get the picture.

Posted by: Mikel Sichel on December 16, 2003 10:50 AM

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camille, perhaps the existence of political borders does not fundamentally alter the trade relationship as you think? Maybe, just maybe, the direction of most negative distortions from political borders run in the opposite direction from what you assume is obvious?

I can assure you that you are 180 degrees off in your assessment of the usual economic effect of national borders. Economic history has shown that narrowly focused domestic interest groups are much more likely to use our own political system to give us the once over than foreigners. Blaming Canada is simply great political cover to prevent closer inspection of what is happening. Nothing like a border war to quiet the opposition.

I highly recommend that you study the concepts of comparative advantage, opportunity costs, and trade balance accounting.

Posted by: Stan on December 16, 2003 11:06 AM

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The benefits of free trade are constantly explained by a corps of economists. They describe the plight of those who face job shifts in their own language, which ignores the plain fact that these are real people, with families and a stake in a community. They offer solutions, knowing that this administration does not intend to effectuate any of them. They offer no solutions to the inequities of the distribution of wealth that these “job shifts” impose, because those would interfere with the free market.

Arendt would say that these solutions turn citizens into anonymous masses, easily manipulated by the offer of work of any kind. But at least IBM will live happily ever after.

Posted by: Masaccio on December 16, 2003 09:47 AM

Masaccio, economists on this site have given a number of policy "solutions to the inequities of the distribution of wealth that these “job shifts” impose." Those policy solutions are generally designed to avoid interfering with the market because markets are generally more efficient than political means for allocating resources. (The only other known distribution means is traditional gift exchange.) Markets also generally allow greater freedom than politically managed allocations.

Most of the developed world lives in democracy. Voters have responsibility for keeping themselves informed. If democratic politicians are chosing inappropriate policies, it is the responsibility of informed voters to remove them from office. Couldn't Arendt check with economists to see why they say what they say? I would love to hear his explanation for why economists have less clue on the subject than he does. His basic assumption seems to be that there are better solutions. Why would he know?

Posted by: Stan on December 16, 2003 12:09 PM

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"The only way, or perhaps I should say the best way, out of this state of affairs with so many (large) percentage points of American workers making less than ten dollars an hour is to eliminate those jobs, either through re-organization of work or automation (which is a special case of re-organizaiton any way) and increase tax revenues through increased productivity."

They way to increase productivity is to unionize the low-wage jobs. When Wal-mart pays more for labor it will employ labor more productively.

Posted by: camille roy on December 16, 2003 12:19 PM

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Stan, Hannah Arendt was a woman. As for the rest of what you say, well, she is no longer here to answer. As for whatever economists say, let's not forget that they not all say the exact same thing, and a lot do their work from a perspective that is not the worker one.

DSW

Posted by: Antoni Jaume on December 16, 2003 02:20 PM

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Stan; I will offer the following as an oversimplification of a very complicated book. Arendt argues that in the early days of capitalism, through the 1870’s, the wealthy ignored the nation-state, which really could not seriously affect them. As capitalism reached its expansionary limits inside of individual nations, capitalists began to see that governments could be used to further their own ends. So, they encouraged their governments to invade and colonize Africa and other disorganized areas. They did this by essentially subverting the government. The effect was to set up spaces for the capitalists to work safely to grab natural resources and sell them elsewhere.

This, among other things, led to the creation of large classes of people who were not necessary to the productive systems of early-stage capitalism. The wealthy controlled the governments, which took no action to protect this group of people. They sank from their status as productive workers to a class she calls “superfluous people”. They had no place in society, and were cut off from the institutions that had protected them.

The wars of the early 20th century, and the First World War made this worse. Germany never really recovered from its defeat, and the masses of superfluous people were a natural breeding ground for fascism, which at least offered some kind of hope of a job. The defeat of Russia and the Revolution deepened the misery there. The Depression added another layer of abuse.

These forces are among many she identifies as leading to the rise of totalitarian states.

I know that many people of good will offer solutions to the problems created by free trade; and I read them here. But we have to be honest. This administration has no intention of doing anything to help. Neither will Congress. Many people apparently truly believe that taking action is bad.

I offer these comments because I think that there are serious consequences to the blind support of free trade in the current setting.

Posted by: Masaccio on December 16, 2003 03:18 PM

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"Things look to get worse once efficient cleaning robots become available- then there won't be any cleaning jobs whatsoever."

But that's good! How could this be a bad thing?

I mean a society in which no one does a cleaning job because machines do it must be a society better and more affluent than one in which x percent of people do the cleaning jobs.

Posted by: Bulent Sayin on December 16, 2003 09:46 PM

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Brad, re your comment.


Am I missing something basic here? If the inflation rate has indeed been overstated by 1%, doesn't that imply that real gdp is understated by 1%? And, if so, isn't that a big deal with all sorts of other implications?

Posted by: rob on December 16, 2003 10:01 PM

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Just a small comment on the debate over free trade. Let us suppose that free trade results in a net increase in the available aggregate net surplus product- ( with qualifications, probably true, especially for advanced economies with both the greater degree of market power to negotiate the terms of trade and the internal differentiation and thus flexibility to take best advantage of the prospects). Let us also suppose that the winners from free trade in an economy were to compensate the losers in proportion to their losses, following the Hicks-Kaldor critereon or some other method. Now those agents or agencies advantaged by free trade and which therefore promote a "free trade" regime, under the supposition of compensation, would still marginally benefit from it, but given that their benefit is less, it seems reasonable to assume that their concerted advocacy for free trade would be less. This is something for genuinely disinterested advocates of free trade to consider: "free trade", in the absence of mythical compensation, is as much a matter of politico-economic competition and conflict within economies, as it is a matter of international relations between economies. There may still be aggregate benefits notwithstanding, but the costs of increased conflict and social polarization may be underestimated, ( especially given the hostility of economic theorizing to the political dimension, as if theoretical abstraction were tantamount to some sort of purity), whereas the full case for free trade must account for the mechanisms and pathways by which its benefits can be broadly distributed, so as to count as a socio-political good.

Posted by: john c. halasz on December 16, 2003 10:50 PM

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"Things look to get worse once efficient cleaning robots become available- then there won't be any cleaning jobs whatsoever."

But that's good! How could this be a bad thing?

I mean a society in which no one does a cleaning job because machines do it must be a society better and more affluent than one in which x percent of people do the cleaning jobs.

Posted by Bulent Sayin at December 16, 2003 09:46 PM

Bulent,

I can only assume you are being snarky here, because someone as intelligent as you knows very well how this could be a bad thing.

As you well know, when low skilled workers are displaced by technology, one of two things happens:

A) Displaced workers are "up-skilled", at government expense, and move up the "value chain".

B) In the absence of such policies, displaced workers pursue work in other low-skill industries, eroding wages for both existing workers and new entrants.

Given that worker training programs at both the state and federal level have been gutted since 2000 (the Working for America Institute has great info on this), we have seen alternative B here in the US. What results is a distributional shift from low-skill workers to their employers.

Consider a technology that boosts GDP by 1 percent and income inequality by 5 percent, with a real income loss at the lowest quartile. By your account, this would make a society more "affluent". By just about any other measure, literacy, health outcomes, life expectancy, crime, child hunger, etc., such a society would be demonstrably worse off. Such has been the case of the United States since 2000.

Given a policy to manage the distributional problems, such technology is indeed a "win-win". In the absence of said policy, the losses often outweigh the gains.

Posted by: david on December 16, 2003 10:57 PM

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But that's precisely my point, David: Always support higher productivity and always support more equitable distribution of value added gain that comes from higher productivity.

About a hudred years ago, most of the population toiled dawn to dusk just to feed themselves.

Today only one percent of US population produces all the food stuff the nation needs and then there is more left for exports, even with bribes to farmers not to work all the land they have. And farmers live pretty comfy lives. How? Thanks to technology, thanks to higher productivity.

How did it work at social and political level?

Remember the New Deal?

And perhaps it is time to renew the New Deal, due to additional productivity increase since then.

This is the angle through which one needs to look at matters of technology, productivity and work, not the angle of hindering productivity increase.

Trying to push back productivity, that's a dead end, believe me. It is self defeating. Competely self defeating.

Posted by: Bulent Sayin on December 17, 2003 01:31 AM

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I get to the end of this very edifying and erudite (except for where that guy didn't know Arendt was a woman) thread, only to discover an appeal to reshuffle the New Deal. Look upon the political reality, ye mighty, and despair!

Posted by: Melissa O on December 17, 2003 02:09 AM

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Melissa O:

I wonder what people were thinking about political reality just before the New Deal.

And just before 1789? And 1917?

What did people think about political reality not long before slavery was abolished?

No structure of political economy can stand for long in front of accumulation of productivity increase large enough to change that structure.

By the way we have amongst us an authority on economic history, no? What was his name again?

Posted by: Bulent Sayin on December 17, 2003 08:08 AM

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Melissa, I don't remember the names of an awful lot of artists either.

Posted by: Stan on December 17, 2003 02:03 PM

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Yo!

I was only joking about not remembering the name of Bradford Delong.

"Make no mistake!"

Posted by: Bulent Sayin on December 17, 2003 10:19 PM

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