Category Archives: Globalization

The Jobs That Weren’t Saved

Source: Sean Gregory, Time, May 18, 2017

…. If Trump’s Carrier deal was a reminder of how the bully pulpit could be used to make the private sector bend, Rexnord’s closure shows its limits–and offers a lesson in the challenges of reversing a global economic trend decades in the making. …. Some 19.5 million Americans held manufacturing jobs in 1979, an all-time high. By 1983, the figure was already down to about 16.7 million. By 2024, according to projections from the Bureau of Labor Statistics, just 7.1% of Americans will work in manufacturing.
The reasons are many, but the prime culprits are globalization and automation. In 1991, China accounted for 2.3% of the world’s manufacturing exports. In 2001, the country joined the World Trade Organization, and by 2013, China’s share of global exports was 18.8%, according to a 2016 study in the Annual Review of Economics. Countries such as Mexico and the Philippines have also increased their exports. Labor in these markets tends to be substantially cheaper than in the U.S., and trade deals like NAFTA make it easy for American companies to produce goods in far-flung locales. To economists, however, America’s shrinking manufacturing jobs have less to do with free trade than with robots. ….

The Globalization of Production and Income Inequality in Rich Democracies

Source: Matthew C. Mahutga, Anthony Roberts, Ronald Kwon, Social Forces, Advance Articles, May 25, 2017
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From the abstract:
Despite prominent and compelling theoretical arguments linking manufacturing imports from the global South to rising income inequality in the global North, the literature has produced decidedly mixed support for such arguments. We explain this mixed support by introducing intervening processes at the global and national levels. At the global level, evolving characteristics of global production networks (GPNs) amplify the effect of Southern imports. At the national level, wage coordination and welfare state generosity counteract the mechanisms by which Southern imports increase inequality, and thereby mitigate their effects. We conduct a time-series cross-section regression analyses of income inequality among eighteen advanced capitalist countries to test these propositions. Our analysis addresses alternative explanations, as well as validity threats related to model specification, sample composition, and measurement. We find substantial variation in the effect of Southern imports across global and national contexts. Southern imports have no systematic effect on income inequality until the magnitude of GPN activity surpasses its world-historical average, or in states with above-average levels of wage coordination and welfare state generosity. With counterfactual analyses, we show that Southern imports would have led to much different inequality trajectories in the North if there were fewer GPNs, and if the prevailing degrees of wage coordination and welfare state generosity were higher. The countervailing effects of GPNs and institutional context call for theories of inequality at the intersection of the global and the national, and raise important questions about distributional politics in the years to come.

Globalization and Executive Compensation

Source: Wolfgang Keller, William W. Olney, National Bureau of Economic Research (NBER), NBER Working Paper No. w23384, May 8, 2017
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From the abstract:
This paper examines the role of globalization in the rapid increase in top incomes. Using a comprehensive data set of thousands of executives at U.S. firms from 1993-2013, we find that exports, along with technology and firm size, have contributed to rising executive compensation. Isolating changes in exports that are unrelated to the executive’s talent and actions, we show that globalization has affected executive pay not only through market channels but also through non-market channels. Furthermore, exogenous export shocks raise executive compensation mostly through bonus payments in poor-governance settings, in line with the hypothesis that globalization has enhanced the executive’s rent capture opportunities. Overall, these results indicate that globalization has played a more central role in the rapid growth of executive compensation and U.S. inequality than previously thought, and that rent capture is an important part of this story.

Want to help free trade’s losers? Make ‘adjustment assistance’ more than just burial insurance

Source: Marina v. N. Whitman, The Conversation, October 24, 2016

…So what has made free trade – which still gets the support of most Americans – such a political pariah?

A major explanation is that there are losers as well as winners from its effects. The winners may be far more numerous, yet the impact on the losers, from lost jobs and lower wages, is more intense and personal….

….In other words, while the overall welfare effects of trade liberalization are generally positive, the impact on some subgroups, particularly the less well-educated, are negative and much larger.

And the United States is less generous than other rich countries in providing both reemployment assistance and income support to workers hurt by these changes.

The primary U.S. program aimed at mitigating this negative impact is known as trade adjustment assistance (TAA). That its intended recipients call it “burial insurance” sort of sums up its image problem…..

ISDS: Expanding Corporate Power to Attack Laws in Every State

Source: Public Citizen, Global Trade Watch, September 2016

At the heart of the Trans-Pacific Partnership (TPP) are new rights for thousands of multinational corporations to sue the U.S. government before a panel of three corporate lawyers. These lawyers can award the corporations unlimited sums, including for lost future expected profits, to be paid by America’s taxpayers. The corporations need only convince the lawyers that a U.S. federal or state law, court ruling or regulatory decision violates the extraordinary new rights the TPP would grant them. The decisions are not subject to appeal. This shocking process, called “investor-state dispute settlement” (ISDS), empowers multinational corporations to attack the laws we rely on for a clean environment, financial stability, affordable medicines, safe food and decent jobs.

The United States has largely avoided ISDS attacks because past treaties were with nations that did not have many investors here. But the TPP and a similar deal with European nations, called the Transatlantic Trade and Investment Partnership (TTIP), would change that. Under existing U.S. treaties, other countries have paid nearly $3 billion to corporations for toxics bans, water and timber policies, land-use rules regulatory permits, and more. Another $70 billion in claims are now pending against climate and energy laws, medicine pricing policies, pollution cleanup orders and other public interest policies.

Nationwide, the TPP would roughly double U.S. exposure to ISDS attacks and a TTIP would quadruple the exposure, spelling an unprecedented increase in U.S. ISDS liability. Under all existing ISDS-enforced pacts, the total number of firms that can currently launch ISDS cases against the U.S. government is about 4,100 foreign corporations that own about 9,829 U.S. subsidiaries. The TPP would newly empower more than 3,682 additional corporations in TPP countries that own more than 10,085 subsidiaries here, to launch cases against the U.S. government. The TTIP would newly empower more than 12,100 European Union parent corporations that own more than 26,961 U.S. subsidiaries, to go to the panels of corporate lawyers and demand U.S. taxpayer compensation.

How could your state be threatened? Click the map above to find out.
Related:
Trans-Pacific Partnership (TPP): Expanded Corporate Power, Lower Wages, Unsafe Food Imports

Frustrated with Democrats, white working-class voters turn to Trump

Source: Emily Mills, Jimmy Miller, Lian Bunny, Center for Public Integrity, August 25, 2016

….In economically struggling communities like Mahoning County – where most steel mills have closed – many white, working-class Democrats are voting for Trump, registration records and 2016 presidential primary results show….

…..In Tennessee, after a clothing factory outsourced jobs and operations to Mexico, a county that voted Democratic in the 2000 and 2004 presidential elections went Republican in both 2008 and 2012.
In Mahoning County, Ohio, as its county seat Youngstown labors under the loss of the steel industry, more than 6,000 voters have switched from Democrat to Republican this year.

Similarly, frustration over closing steel mills and rising health care costs has swayed nearly 5,400 voters to switch parties in Westmoreland County, Pennsylvania.

And in one Kentucky county where residents frustrated with the demise of the coal industry voted about 31 percent Republican in the 2000 presidential election, they voted more than 72 percent Republican in 2012, even though a majority of its voters remain registered Democrats…..

…..In the March 2008 primary, just under 14 percent of registered voters in Mahoning County – where Youngstown is located – voted Republican. During this year’s state primary in March, more than 48 percent of the county’s registered voters cast a Republican ballot, and poll workers had to print additional Republican ballots. More than 6,000 voters then switched from Democratic to Republican this year…..
Related:
Trump a Working-Class Hero? A Blue-Collar Town Debates His Credentials
Source: Richard Fausset, New York Times, August 26, 2016

The talk gets heated in Youngstown, Ohio, when residents discuss whether a New York billionaire’s ideas can revitalize a struggling Rust Belt town.

How work can lead to suicide in a globalised economy

Source: Sarah Waters, Jenny Chan, The Conversation, August 16, 2016

….Workplace suicides are sharply on the rise internationally, with increasing numbers of employees choosing to take their own lives in the face of extreme pressures at work. Recent studies in the United States, Australia, Japan, South Korea, China, India and Taiwan all point to a steep rise in suicides in the context of a generalised deterioration in working conditions…..

It’s Tax Not Trade (Stupid)

Source: Edward J. McCaffery, USC Gould School of Law, USC CLASS Research Papers Series No. CLASS16-20, USC Law Legal Studies Paper No. 16-22, July 19, 2016

….The simple fact is that globalization and free trade are good for economies, as Adam Smith taught us in 1776 and as a decent high school economics class can prove today. The trouble in America is that the gains from trade are not being shared. The rich who can live off their capital or wealth rather than by the sweat of their brows are the big winners from globalization; workers are the big losers.

Spreading the wealth from those who benefit most from social changes to those who are harmed by them is the responsibility of our tax system. Yet tax has failed miserably in this role. In fact, tax as it now stands is not even designed to collect from the wealthy. And no candidate — on the right, left, or middle — has any serious plan to change this fact. Indeed, Trump and his fellow Republicans continually vow to cut taxes on the wealthiest, further benefitting globalization’s winners while adding to the pain of its losers.

In sum, tax not trade is what ought to be changing, and rich Americans, not workers worldwide, ought to be paying more to help their fellow citizens…..

The Surprisingly Swift Decline of US Manufacturing Employment

Source: Justin R. Pierce and Peter K. Schott, American Economic Review, Vol. 106, no. 7, July 2016
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From the abstract:
This paper links the sharp drop in US manufacturing employment after 2000 to a change in US trade policy that eliminated potential tariff increases on Chinese imports. Industries more exposed to the change experience greater employment loss, increased imports from China, and higher entry by US importers and foreign-owned Chinese exporters. At the plant level, shifts toward less labor-intensive production and exposure to the policy via input-output linkages also contribute to the decline in employment. Results are robust to other potential explanations of employment loss, and there is no similar reaction in the European Union, where policy did not change.

Who’s responsible for child slavery?

Source: Al Jazeera, Inside Story, June 12, 2016

Almost one in 10 children wakes up each morning and goes to work. These children slave away in factories and fields, and as maids and sex workers. United Nations declarations specifically guarantee the rights of a child to be protected from economic exploitation. But vague laws, or sometimes a complete lack of legislation, mean that millions of children find themselves at work when they should be at school – often in hazardous conditions. At least 168 million children around the world work, with more than half of them in dangerous conditions, according to the International Labour Organization. Almost 80 million children are working in the Asia-Pacific region. That’s equivalent to the entire population of Turkey. And one in five children in Sub-Saharan Africa has a job. That’s almost 60 million children. The agriculture business is the biggest employer. Sixty percent of child labourers – nearly 100 million children – tend to farms and animals. But a lot of children, around 66 million, are also working in the service and industry sectors. What does it take to end child slavery?