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December 31, 2004

Income Instability (Peter Gosselin Does Very Good Department)

Peter Gosselin continues his excellent LA Times series about income instability and its consequences:

Peter Gosselin: By last Christmas, the Saab and Volvo were long gone. The big clapboard house with the wraparound porch was headed for a sheriff's sale. As the last vestiges of wealth were being stripped away, John and Kim Ryan couldn't help but be startled at how far they had fallen. The two had risen so quickly in the world. Now in their late 40s, both were products of small-city Iowa, both the first in their families to go to college. John landed a job straight out of law school with the electric utility where his father was a unionized power-plant operator. Kim Ryan traveled the country recruiting students for a local college.

Along the way, the couple made a few mistakes. In the early 1990s, they purchased their home before selling a smaller one, saddling themselves with two mortgages for a time. Neither saved enough. "I'm kind of embarrassed we didn't take better care of the money," Kim Ryan said. But nowhere in the hundreds of pages of dunning notices and legal briefs on file with the U.S. Bankruptcy Court is there evidence of some wild investment or irresponsible career move. Nowhere is there a hint of unbridled spending. "They look like you and me," said Elizabeth Warren, a Harvard Law School professor and co-author of a book on the rising rate of personal bankruptcy in America, who reviewed the Ryans' court files at The Times' request.

In fact, what happened in the Ryans' case -- an economic implosion triggered by a succession of layoffs for John and a medical crisis for Kim -- has become increasingly common among the nation's working families during the last 25 years. Setbacks such as job losses and prolonged illnesses have always taken their toll, of course. But they haven't always packed the economic punch they now do. Since the 1970s, the odds that a family will see its income chopped in half when hit by this kind of shock have nearly doubled to more than 20%, according to statistics generated by The Times in cooperation with researchers at UC Davis. "Working families stand a good chance of sustaining big blows to their incomes even from fairly commonplace events," said UC Davis economist Marianne E. Page, who with colleague Ann Huff Stevens helped The Times with its analysis. "The odds of suffering a sizable setback have grown considerably in recent years."

Throughout this series, The Times has sought to make sense of an American paradox: why so many people report being less financially secure even as the nation, by many measures, has grown far more prosperous. The answer, the newspaper has found, lies in the shifting of economic risks from the broad shoulders of business and government to the backs of working families. Over the last quarter of a century, many safeguards that people once counted on to shield them from financial harm have been weakened or completely lost. These include formal protections such as guaranteed corporate pensions and state and federal unemployment benefits. And they include informal ones, like the loyalty that employers once showed their workers by offering secure jobs with relatively little prospect of long-term layoff. Other cushions that families like the Ryans have relied on, such as the financial stability that comes with a college education, also have eroded....

During the early '70s, the inflation-adjusted income of most of those in the middle of the economic spectrum -- making about $50,000 a year in today's terms -- bounced up and down by no more than $6,500 annually. By the beginning of this decade, those fluctuations had climbed to as much as $13,500, the newspaper's figures show. At the same time, the increase in volatility has been far greater for the working poor, while even top earners haven't been immune from ever-larger income swings.

To supplement these findings on income volatility, the paper looked at specific income-rattling experiences. In conjunction with Page and Stevens at UC Davis, it explored how frequently a representative sample of families was hit by any of seven common but potentially destabilizing events. They were: divorce or separation, a decline in a spouse's work hours, death of a spouse, birth of a child, retirement or disability of the main breadwinner, unemployment and serious illness. The Times then assessed what fraction of the families touched by any of these episodes suffered a 50% or greater decline in their annual income. For every type of setback, the size of the group that took such a huge financial hit climbed substantially between the 1970s and 2000. This occurred even though the odds of at least one of these events befalling a family over the course of a decade remained fairly constant, at about 1 in 5. For example, among families in which the head of the household was unemployed for two months or more, 13% watched their income shrink by at least half during the '70s. But in recent years, that number surged to 27%....

Some financial industry executives and Bush administration officials suggest that the rise in bankruptcies reflects profligacy among Americans. They are particularly incensed about Chapter 7 bankruptcies, which let people effectively wipe out their debts after forfeiting most of their assets but not their future earnings. These critics of the law want to change it by making it harder to go bankrupt. A Chapter 7 filer is a predatory borrower, Assistant Treasury Secretary Wayne A. Abernathy suggested in a speech last year, someone who "in a calculated way borrows as much as he can, with little thought of paying it back, or in some cases, with no intention of paying it back."

But Warren, the Harvard law professor whose Consumer Bankruptcy Project has conducted extensive surveys of bankrupt families, believes that fundamental economic change -- rather than moral laxness -- is behind the increase in filings. "People's jobs have grown more unstable," she said. In many communities, "the basics of middle-class life -- a good house in a good neighborhood with good schools -- have gotten so much more expensive. That's what is knocking families off their financial blocks." Warren said that, in interviews for her project, people described the extraordinary lengths to which they would go to avoid filing for bankruptcy. "For the overwhelming majority of these families," she said, "bankruptcy is a humiliating admission that they just can't make it in the middle class."

In the Ryans' case, the couple initially refused to file for Chapter 7. Instead, they filed for Chapter 13, under which they agreed to reimburse their creditors the full amount due them, but with the payments stretched out over four years. For a time, the plan worked. John was hired by a Pittsburgh-based division of Philip Services Corp., a rapidly expanding Canadian firm that was pushing into environmental work. Kim pieced together part-time employment on her way to a full-time teaching job.... Then, in January 1998, the Ryans' world was shaken anew. Just weeks after moving into elaborately renovated offices atop the 54-story One Mellon Bank building in downtown Pittsburgh, Philip, like Chambers before it, disclosed that it had accounting problems. The company eventually filed for bankruptcy protection, and John was laid off for the third time in five years.

As it turned out, being unemployed again wasn't the worst thing that would befall the family. In April, Kim suffered a miscarriage, which led to tests. In June, she was diagnosed with cervical cancer. "I was so scared," Kim said. "I couldn't believe that we had to declare bankruptcy. Then I got cancer, and the bankruptcy didn't matter."...


UPDATE: Matthew Yglesias finds and reacts very negatively to a Washington Post story that reads like a second-rate knockoff of Gosselin:

Matthew Yglesias: Blaming The Brown People: The highlight is that jobs are less secure than they once were, and that even when you have a job, you're likely to bear more risk in terms of needing to pay for your own health insurance and save for your own retirement, rather than having these things taken care for you by your employer. Strangely, though, the article seems to just assume that the only possible reason anything could be worse in any way is that "foreign competition" is to blame. The authors, in other words, take semi-seriously the claim that everything's fine, but they don't seem to even consider the possibility that things might be un-fine for reasons that have nothing to do with Chinese, Indians, or Mexicans competing us out of our less-risky former economic structure.

The main thing that seems to me to be happening is that we have higher rates of job turnover than we used to, for reasons that have more to do with technological change and policy shifts away from an economy dominated by regulated monopolies and oligopolies. These policy shifts have brought about a lot of benefits, but one of the costs of job churn is that it's made defined-benefit pensions and employer-based health care less viable. At the same time, industries without strong unions offer workers less bargaining power and therefore a worse deal. But the issue here isn't that service-sector jobs are "worse" in some metaphysical sense than are manufacturing jobs. Rather, the manufacturing sector is older, and largely became unionized at a time when labor law was friendly to organization. Sectors that have arisen during the prolonged period in which the legal environment has been hostile to unionization tend not to have unionized workforces and hence produce "worse" jobs.

In both cases, though, the answer isn't to go pining away for the good old days. Among other things, those good old days barely existed. The 1970s were hardly the salad years of the US economy, and if you go much further back than that you're talking about an economic structure based on the systematic exclusion of women and African-Americans from broad swathes of social and economic life -- hardly a model we're going to return to. Instead, you need a public sector that responds to the realities of short-tenure employment. Offering health care as a universal guarantee rather than a contingent factor of employment. Boosting, (rather than, as the president proposes, reducing) the public sector's role in offering some measure of guaranteed retirement security. Legal changes that make it easier to unionize new workplaces, so that the jobs we will, in fact, have will be good jobs, rather than having the country fight a hopeless rear-guard action to save the good jobs of the past. Indeed, it seems to me that the Lou Dobbs theory of the economy -- blaming trade and immigration for dislikable elements of the contemporary scene -- is a very dangerous toxin that's extremely counterproductive to sound social democratic goals. By focusing the ire of suffering people on various brown-skinned types both at home and abroad, this brand of pseudo-populism distracts attention from the policy shifts that could actually help and the powerful actors that stand in the way of those shifts. Chinese peasants and India's aspiring professional class are not the bad guys here.

It is true that the Post story is--well, given the state of the Post these days, I can't say shockingly bad. But I certainly wouldn't hire the authors for any purpose.

The story starts out talking about Teresa Geerling, a woman with a high-school diploma who used to make $16 an hour plus $2 an hour in health benefits working for American Airlines, but was laid off and now makes $14 an hour as a nurses' aide. Then we are told that her predicament is the result of "technology and global economic forces," but that "economists and scholars" say that "the new structure ultimately will create many kinds of jobs as yet unimagined, in fields such as education, health care and science," and that today's "new era requires that workers shoulder more responsibility and risk on the way to financial security, economists say." But these economists and scholars are not named, save for John McCarthy of Forrester Research who says something very different--that "you have to take the leap of faith that the economy will evolve and there will be this innovation economy that comes."

Then we are told that "tomorrow's middle-class jobs are likely to be enhanced variations of today's lower-wage jobs.... 'You can't be some kid who is good with a computer and get that job anymore,' said Anthony Carnevale, senior fellow at the National Center on Education and the Economy. The successful job seeker will be 'someone who can do the computer stuff but also knows the business.'... [T]echnology savvy, analytical thinking and interpersonal skills that could be the magic formula for U.S. workers..."

And by this time you are wondering what this has to do with Teresa Geerling and her problems. And the answer is: nothing. And there is not even a pretense of analysis. There's nothing like Gosselin's argument that rising incomes have been accompanied by rising risk and hence the chance of rapid downward mobility has increased; no argument that the weak labor market of the past four years has put downward pressure on lots of people's wages; no argument that rising health costs are putting pressure on a broken benefits-financing system; no argument even about what the restructuring of the labor market is--other than that it is the result of "technology and global economic forces"; the closest the Post piece comes to even trying to tell its readers what is going on is a plug at the end for America to invest more in education.

The Post would have served its readers much, much better if it had simply reprinted Gosselin's series.

Posted by DeLong at December 31, 2004 12:56 PM

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Comments

"But these economists and scholars are not named, save for John McCarthy of Forrester Research who says something very different--that "you have to take the leap of faith that the economy will evolve and there will be this innovation economy that comes.""

Just ask the British a century ago how well that worked out for them over the long haul. Its funny how many folks who describe themselves as members of the reality based community on foreign policy matters also subscribe to this faith-based neo-liberal bull.

Posted by: Joe Blow at December 31, 2004 01:09 PM


It is incorrect to say the weak labor market of the last four years has put downward pressure on many people's wages. The problem is more severe than that. Real median wages have declined every year since 2000. I have not seen a report for 2004 yet, but even if it is up slightly it will still be below 2000.

Posted by: Dan at December 31, 2004 01:13 PM


From: Whence I Sit by Ken Melvin...............

No accident, this correlation twixt lower wages and higher rates of return for investors. Businesses contract jobs out to avoid paying benefits thus unfairly maintaining unreal profits. Buildings built, coffee served, and beds made by illegal immigrants force wages down; deprive American working class people of jobs. Silicon Valley billionaires sub out their firm’s janitorial work to contractors who pay illegals less than a living wage with no health benefits. Their health care, as with Wal-Mart employees is paid by the taxpayer. In the main, only wealthy Americans benefit from the employment of illegal immigrant workers. Working mothers and fathers, students, small businessmen, and especially poorly educated blacks and whites would be better off if such employment were stopped.

Community against community? Worker against worker? First, the Nation’s manufacturing plants moved from the northern and western states to the southern states in order to avoid paying union wages. Union workers could follow if they were willing to move, take a pay cut, and give up their union. Else, they could scrounge around for work where they lived or go on welfare, while someone else did their job for less pay. What’s the net? Was the nation better off with more good jobs in the south and people unemployed in the north? No one really complained. Reagan was elected and reelected. The plants started to move out of the south to Mexico. What’s the net now? Mexicans working the jobs for barely subsistence wages while the Americans who once did the work in the north and then the south are unemployed. The same can be said of jobs sent overseas. Nation against nation? The corporations have survived, profits still flow to America’s wealthy; so far, so good, huh?

Posted by: Ken Melvin at December 31, 2004 01:18 PM


John landed a job straight out of law school with the electric utility where his father was a unionized power-plant operator. ... In fact, what happened in the Ryans' case -- an economic implosion triggered by a succession of layoffs for John and a medical crisis for Kim -- has become increasingly common among the nation's working families during the last 25 years.

Succession of layoffs for the lawyer? Strange.

Posted by: a at December 31, 2004 01:50 PM


Oh, it is free-trade Party line again. How droll.

Posted by: a at December 31, 2004 02:03 PM


"The Post would have served its readers much, much better if it had simply reprinted Gosselin's series."

Republicans are in near total control of Washington, and the Post possibly has to choose to be a whore or be irrelevant. Or, on economic and some political issues, become a mouthpiece for the Party or lose access and advertising and die. They may be allowed some criticism on foreign policy.

Posted by: bob mcmanus at December 31, 2004 02:03 PM


"the new structure ultimately will create many kinds of jobs as yet unimagined, in fields such as education, health care and science,"..."[T]echnology savvy, analytical thinking and interpersonal skills that could be the magic formula for U.S. workers..."

Kinds of jobs now unimagined ... magic formula...

Its over. Its been over for a while, the "superpower" status, the invulnerable "world's largest economy" We're so rich, but somehow we're too poor to do so many things.

450 Humvees a month, after a year at war where they're blown up every day. Is this the mighty USA that armed the free world? Built ships, planes and tanks for the USA, Britain and Russia all at the same time?

We have to cut the VA benefits? Pell grants? Section 8 vouchers? The national score for proficiency in math is 33% for 8th graders?

The president takes 3 DAYS to get in shape to appear in public after the greatest natural disaster in 50 years? Yes, actions speak much louder than words.

The Soviet Union fell apart when it could no longer maintain the lying and pretending required to cover the internal contradictions of its economy, and we are in the process of falling apart too.

A future based on hopes of things uninmaginable and magic formulas discovered by high school boys. Is this the best we can do?

Posted by: pragmatic_realist at December 31, 2004 02:31 PM


John McCarthy of Forrester Research who says something very different--that "you have to take the leap of faith that the economy will evolve and there will be this innovation economy that comes."

An inovation of what kind? That we will no longer need food and shelter? That nano-machines will live on our skin and weave our clothing for us? That we will find a way to reverse gravity so water will flow uphill and produce endless hydro electricity?

What "unimaginable" jobs will we find to do to make us on this continent irreplacable when each country will do what it does best.

We will concentrate on "intellectual property" because the others are too stupid and can't be educated to write sitcoms and video game code.

Shall we make movies and video games for all the peasants of China? Shall we all go on road tours with rock bands and sell CDs in Indonesia? Oops, I guess not there for a while.

Posted by: pragmatic_realist at December 31, 2004 02:44 PM


"An inovation of what kind? That we will no longer need food and shelter? That nano-machines will live on our skin and weave our clothing for us? That we will find a way to reverse gravity so water will flow uphill and produce endless hydro electricity?"

Back in 1998 Greenspan gave a lecture at Cal about the apparently rather provocative idea that there is no new economy, that just like the bad old days people make things, distribute those things, and buy those things. Technology may have changed the way those things are made, distributed, and sold, but fundamentally there's really nothing new going on here.

As you suggest though, what is new is the extent to which an ever increasing share of the world's work can be done in low wage countries, and the increasing hollowness of the notion that we can rely on innovation to grow our way out of this conundrum. It worked (at least for educated, white-collar professionals) between the 1970s and 1990s primarily because there weren't a whole lot of Indians and others in the developing world who could write code, animate video games, or do financial analysis, but now there are Mr. Clinton's "jobs of the future" are now increasingly the jobs of the past.

Both Kerry and Bush spoke a great deal about the importance of "retraining," but retraining for what exactly? What do we tell the 40-something out of work programmer with a masters in computer science - go learn how to cut hair? What do we tell the 50-something out of work MBA - go become a housekeeper? Nearly everyone I know is highly educated, and many of them have multiple degrees in allegedly useful things. Yet so many of them are barely scraping by, teaching part-time at the local community college and working at a restaurant on weekends, writing code part-time and doing some graphic design work under the table. I'm so tired of neo-liberal bs.

Posted by: Joe Blow at December 31, 2004 03:10 PM


Blaming foreign competition for increasing income fluxtuations in america is daft. The US is closer to being an autuarky than any other first-world nation, and foreign trade makes up shockingly low percentage of US GDP. Take Germany as an example. The german economy is more involved in the global economy than the US is by a factor of several hundred percent, as can be seen by the fact that German exports, out of an underlying economic basis of some 80 million people are larger than US exports in absolute terms. And they don't have this problem. It is in the end a question of politics, ultimately if the US wants both a uber-flexible labour market, and social peace, you are going to have to crib a sheet from the scandinavians and adopt "flexicurity" Which means designing basic govenment funded services with the expectation that everyone is going to use them and pay for them through taxes. Means testing was invented by satan himself.- it creates expensive red tape and erodes broad political support for nessesary programs.
I would strongly recommend singlepayer healthinsurance, and the universal tax credit (is that the proper english name?) Old idea: Everyone, regardless of income gets a basic (small, but enough to live for. If you are frugal.) amount of money credited to their bank account by the government every month regardless of their income,and yes this includes Bill Gates, and pays taxes on all income they earn. Heck: make it a flat tax with no deductions: Much harder for lobbyists to mess with. For people with significant incomes this works out exactly like a standard deduction, and for people on transfer incomes it increases their financial incentive to seek work. With meanss tested benefits the goverment tap turns off if you get work; withe the tax credit your income invariably goes up the more you work. Above a certain income level you are paying in more tan you get back, but there are no perverse incentives and *very little paperwork*.

Posted by: Thomas at December 31, 2004 03:24 PM


"The german economy is more involved in the global economy than the US is by a factor of several hundred percent, as can be seen by the fact that German exports, out of an underlying economic basis of some 80 million people are larger than US exports in absolute terms. And they don't have this problem."

Could it be because Germany lavishes its manufacturing and other export sectors with illegal subsidies, and America leaves its manufacturing sector to the whims of the market? I wonder...

"France, Germany and Italy led EU members in subsidies dished out to companies, according to a state-aid scoreboard from the European Commission which was revealed Friday by a spokesman."

"In 2002, a total of 49 billion euros in subsidies was given to EU countries' manufacturing, coal, transport, fishing, and agriculture industries as well as the service sector."

http://www.eubusiness.com/afp/040416191140.e81z5h5j

If America played by the same rules as Asia and to a lesser extent Europe, using illegal subsidies and currency manipulation, we too would have a strong and dynamic export sector, and would be losing a whole lot less jobs across the board to other countries.

Posted by: Joe Blow at December 31, 2004 03:58 PM


Globalization doesn't explain the problems of the American worker. After all, the American economy continues to grow. The problem is the way the pie is being divided up: we've had a class war, and the rich people won. Globalization may have had a role in enabling that win, but the fact is that it didn't make it inevitable. What made it happen was American politics.

Posted by: RT at December 31, 2004 04:33 PM


"If America played by the same rules as Asia and to a lesser extent Europe,"

Look at American trade policy from a Canadian perspective and you might see that the USA is pretty good at manipulating the rules in its own favor.

Posted by: sm at December 31, 2004 05:04 PM


"Look at American trade policy from a Canadian perspective and you might see that the USA is pretty good at manipulating the rules in its own favor."

There's no question that trade agreements are rigged in certain instances to favor certain American industries and in some cases certain American companies within those industries, its also true that America effectively threw its manufacturing sector over the side a generation ago, and that illegal European subsidies give European manufacturing an unfair advantage over American manufacturing, and that illegal Asian subsidies and currency manipulation give Asian manufacturing an unfair advantage over American manufacturing. The net result is that the American worker suffers.

Since you bring up Canada, surely you know that thousands of both American manufacturing and "knowledge" jobs have been lost to Canada because of the lower value of the Canadian dollar, an equally skilled workforce, no employer health care costs, and parity in corporate taxes.

Its easy to cast America as the big bad demon behemoth of the global economy, but that's no more true today than it was of Britain a century ago. The American worker is taking it on the backside because of unfair subsidies and protectionism on the part of strong developed, and strong emerging economies in much the same way that the British worker took it on the backside because of unfair subsidies and protectionism on the part of strong developed, and strong emerging economies.

Posted by: Joe Blow at December 31, 2004 05:20 PM


pragmatic realist, as I was reading your first post I was thinking that you forgot to include "leaps of faith" to "jobs as yet unimagined" and "magic formulas" for your list of hopes for the future but then you managed to include it on your follow-up. Well done!

Two dots I would like to connect are:

"...the shifting of economic risks from the broad shoulders of business and government to the backs of working families."

and

"...executives and Bush administration officials suggest that the rise in bankruptcies reflects profligacy among Americans. They are particularly incensed about Chapter 7 bankruptcies, which let people effectively wipe out their debts after forfeiting most of their assets but not their future earnings. These critics of the law want to change it by making it harder to go bankrupt."

The rich and powerful have declared war on the middle class. They are looking to commandeer all the life boats as the Titanic (yes, it was thought the Titanic was indestructible too) goes down even as they look to scuttle her and send her to the bottom as quickly as possible.

Posted by: Dubblblind at December 31, 2004 05:25 PM


> Succession of layoffs for the
> lawyer? Strange.

Why would you consider that strange? The so-called "safe" "professional" jobs have not been safe since the early 1990s - they are now treated exactly as the blue collar jobs by the true elite. The only difference is that the blue collar guy expects to be laid off, and makes some preparations; the "professionals" (just hired help at a slightly higher hourly wage) are shocked every time it happens.

Only the few at the very top, who float from CEO office to CEO office regardless of what they do, have any security.

Cranky

Posted by: Cranky Observer at December 31, 2004 06:26 PM


I have been seeing people like the Ryans in my legal practice for some time now. The article does not convey the misery these people feel. What is amazing is the number of them who voted republican. They do not see any connection between their situation and the economy at large. Since the failure had nothing to do with the big picture, it must be solely their own fault, and they are seriously depressed.

Posted by: masaccio at December 31, 2004 06:48 PM


I have a feeling that the changes we have seen in the last few years are only the beginning. There are so many new technologies in the pipeline, and they all promise to increase productivity while eliminating many more jobs. If we don't throw the kind of resources into education and worker training that we did with the moon program or more, to train literally millions we WILL have to face the stark reality in just a few years that 50%-75% of all Americans are unemployable, at any price. Because silicon is so much cheaper than people are at following rules. For any non-creative, non-design job, machines will also do a much better job. So most of us, those who don't have MIT-level training or major artistic talent, will probably have to 'retire' early. Much sooner than we think. Even if we can't afford it. That will mean major social destruction as millions are evicted from their homes or suffer major stress as they try to live on next to nothing. The economy will implode too, if nobody can afford to buy anything except necessities.

I think that this is a much more serious issue than offshoring...


I'm not talking about robots, I'm talking about much less glamorous technologies, like voice-driven customer relations systems, decision support systems, autonomous computing and networking technologies, etc.

It's Taylor's 'Scientific Management' continuing with a vengeance..


Is an economy 'booming' when the people living in it are hurting?


We need new ways to measure the downsides of this heartless and shortsighted 'boom' economy or economists risk being burned at the stake in the not-so-distant future for lying to America about vitally important issues.

Posted by: Nicholas at December 31, 2004 07:53 PM


John and Kim were overextended, and Peter Gosselin forgot to use that term in his article. They stopped making mortgage payments on a big, pretty house amid the best seller's market in real estate in years. They put their daughter in a private school with no good prospect to pay the tuition. None of this detracts from Gosselin's thesis, but little about the Ryan's example supports it, either. I disagree that it is a well written article.

Joe Blow: If you can't figure out how and what manufacturing sectors in this country are subsidized by the government, and evidently you can't, then you shouldn't address the issue. Ever hear of Boeing? Lockheed?

Posted by: George at December 31, 2004 09:19 PM


"Joe Blow: If you can't figure out how and what manufacturing sectors in this country are subsidized by the government, and evidently you can't, then you shouldn't address the issue. Ever hear of Boeing? Lockheed?"

Which explains why aerospace is one of the few thriving segments of American manufacturing. When was the last time you (or anyone) bought a television set or stereo manufactured in the US? How much of the domestic passenger car sector has been lost to Japan over the past thirty years? What about small appliances? And textiles...how many pairs of pants, or suits, or jackets do you own that were manufactured in the US? If you can't figure out that Washington told most of our manufacturing and textiles sector to go to hell beginning in the 1970s, and that it has cost literally millions of Americans a decent livelihood, then perhaps you shouldn't address the issue. And if you know and either think its a good thing or don't care I have three words for you: go f*** yourself.

Posted by: Joe Blow at December 31, 2004 09:39 PM


By the way, I am a hearless right-wing shill, and a complete idiot.

Posted by: George at December 31, 2004 09:49 PM


Look Joe Blow; I testify (brother) to your righteous anger. But I have to ask, just what would you have us do, exactly?

If the US erects barriers against foreign manufacturers and service providers, well frankly, they can get on one helluva lot better trading amongst themselves, thank you very much. They don't need us, anymore. They've figured out that they can make stuff cheaper and they're well on the way to figuring out that they can design stuff cheaper too.

Rule of law, democracy, capitalism; all that stuff works, man. It really does! And the more the rest of the world applies it, the better it looks to them.

Sure, imports represents a relatively small part of overall US economic activity at the moment, but the policy prescriptions you're (implicitly) advocating lead us, in a very short period of time, into a situation were we aren't making anything we can sell them at a price they want to pay. And we end up spending way more for stuff they can make dirt cheap (or stuff we need really, really badly.)

Your sentiments are a hammer on the nail. But what are you gonna *do* about it?

What the "neo-liberals" are sayin' is, "Dude! Look! It's gonna happen. It's reality, man. Let's figure out a plan to deal with it."

Posted by: Paul G. Brown at December 31, 2004 10:02 PM


For me the problem is that the very political conditions that bring about liberalized trade are simultaneously those that prevent any remediation such as well-intentioned, non-laissez-faire-worshipping neoliberals may propose to deal with the victims. Leaving an ever-expanding parade of the insecure...

Posted by: Mandos at December 31, 2004 11:00 PM


In Great Britain,(Ireland) the richest country in the world at the time (the 19th century) something like six million people starved to death.

{Well, 1 to 1.5 million...]

Many said that it was justified, a good thing..

"Survival of the fittest"

Meanwhile, Ireland exported food (under guard)

Similar episodes happened, in fact, ARE happening, in other countries...

The capacity of human beings for greed and lack of empathy are mind-boggling...

Posted by: Howard at December 31, 2004 11:59 PM


Even if German industries get more subsidies from their government than USA ones, they pay more in taxes than those in the USA. And they pay more to their workers.

DSW

Posted by: Antoni Jaume at January 1, 2005 04:29 AM


And these days virtually all starvation happens in african countries that are protectionist as all hell. So does most poverty.

Mandos possibly has a point as regards the US, but everybodys favorite example of succesful social-democratic politics, scandinavia, is in fact also a bastion of both free trade and flexible labour markets so the association is not carved in stone, and fighting free trade because it is sometimes associated with other, and odious, policies is a waste of political energy - You should be fighting the odious policies directly. Fight for unionisation. Fight for universal healthcare. Fight for a higher minimum wage. Fight for statefunding of higher education and the abolition of all special treatment in university admissions, including "legacies". Reinstate the inheritance tax. Prohibit corporate taxbreaks. All they do is distort the economy, empty governent coffers, and provide huge incentives for corporations to try and corrupt the political process. Those are battles that can be won and will serve the average american well. Protectionism is simply one more way for US companies to increase profits by sending a lobbist with a suitcase of money to washington, instead of actually trying to become better at what they do.

Posted by: Thomas at January 1, 2005 05:55 AM


Ah, but correlation is not causation. I have to ask a few questions that may be obvious to some of you but not to me. Pardon my lack of erudidition?

1. Virtually all starvation in African countries? And can you directly and necessarily connect this to protectionist behaviours? Do these countries prevent American subsidized agricultural imports? Do these countries produce for export, or for their own internal economy? ie, have these countries held on to food security? Can you also account for the poverty in countries on which a neoliberal agenda has been imposed?

2. Your Scandinavia example is curious. I'm a Canadian, and Canada manages an export-driven economy with stronger social programmes than does the US. But its clear that after NAFTA was signed, a slow erosion of these programmes has occured. Is a slow erosion occuring in Scandinavia, or are their programmes getting stronger? How do they defend the expense of their programmes against cheap foreign competition?

These seem like a lot of questions, but if you look closely there are really only two that I have stated in many ways for your delectation.

Posted by: Mandos at January 1, 2005 08:43 AM


1: africa: The protectionism is one of very many economic policies which most african nations are doing wrong, so they'd probably still be poor without it. Not as poor. but poor. Part of the problem is that some of these states are so fucked up that the tarrif is the only tax which they can collect with any effitiency which leads to stuff like pesticidetreated mosqitonets being taxed to the heavens despite being both vital to public health and a product which can't be made at all domestically.

2: Our social programmes are doing fine, and all our fiscal balances are in the black. Norways fiscal balances are ridiculously far into the black. When was the last time you heard of a governent running double-digit surpluses? Norway is. Joining the EU common market has paid of in spades. Cheap foreign competition ? Yhea! Cheap stuff! I mean do you think we ship stuff overseas for fun? Well. Okay, we do, but apart from foreing aid and linux, the entire point of an export sector is to have money to buy imports with.
When corporations threaten to move unless we take paycuts, and they do occasionally do that, we tell them "so move already". Our unions can spot a deflationary idea when they see one, snd are not having any of it.

Defend the expense? Huh? Having the local labour force move further and further into sectors in which we hold competetive advantages (even if we have to bloody well invent the damm sector! Se: windmills. Also Linux. And: lots of other stuff) makes them easier to fund, not harder, because it increases the average productivity of our workers - and that means more taxes in the state coffers.

Posted by: Thomas at January 1, 2005 04:10 PM


No one has addressed the issue of salaries in corporations. While the guys at the top are collecting millions a year, the bottom workers are falling farther and farther behind. It didn't always used to be like this. The gap was much smaller and you didn't see corporate CEOs collecting $90 million in salary while the janitor made $12,000. If wealth in this country were being spread around a little more equitably, I don't believe we would be seeing as many problems.

Posted by: Gail at January 1, 2005 06:42 PM


'Could it be because Germany lavishes its manufacturing and other export sectors with illegal subsidies, and America leaves its manufacturing sector to the whims of the market? I wonder...'

Well I wonder too, Joe Blow. Are these illegal subsidies anything like the no-bid contracts Haliburton and subsideraries are getting? Wait I know, the whims of the market are the were reported by Arthur Andersen when they audited Enron or Worldcom in the 90's?

Posted by: linnen at January 1, 2005 09:07 PM


"In 2002, a total of 49 billion euros in subsidies was given to EU countries' manufacturing, coal, transport, fishing, and agriculture industries as well as the service sector."

EU economy is of similar size as US economy, so if this is correct, we are talking about 0.5-1% of the economy. In USA we have price support programs for agriculture --- and other subsidies, below market leases to lumber and mineral companies, subsidies to companies producing arms etc. Most likely we have as much subsidies as EU.

Actually, most subsidies are illegal in EU. I suspect that the notorious regulations from EU headquarters in Brussels have some protectionist effect.

Posted by: piotr at January 1, 2005 10:23 PM


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