Globalization and development

UNCTAD's Globalization and Development: Facts and Figures, 2012 has been published. You can read the whole report here.

Whistleblower Accuses IT Giant Of Immigration Fraud

It's bad enough that American jobs are being shipped overseas because of globalization. It's even worse when cheap foreign labor is being imported into the United States with the complicity of the federal government. Here is CBS News with the details:

We've all had this happen: you call an American company's 800 number for help, and end up talking to someone in a foreign country. It's called outsourcing. American firms do it because foreign labor can be cheaper.

But now, one company is being accused of bringing those lower-paid workers to the U.S. illegally and that may be costing Americans jobs.

The allegations are the subject of a federal probe and CBS News has been investigating this story for months. The allegations have been made against a giant Indian information technology firm called Infosys. The charges are coming from inside the company, from an employee who has never spoken publicly before.

Jay Palmer is a principal consultant at the company called Infosys. He is also the whistleblower whose charges sparked the federal investigation. Palmer says Infosys, the global high-tech giant, engaged in a systematic practice of visa fraud, a charge the company denies.

Palmer said the first thing to catch his attention was an employee that had been in the U.S. from India several times before.

"He came up to me and he was literally in tears," Palmer said. "He told me he was over here illegally and he didn't wanna be here. He was worried that he would get caught."

Palmer says he began digging into how and why Infosys seemed to be bringing in large numbers of workers from its corporate headquarters in Bangalore, India, into the U.S.

Palmer says at first, most came over on H-1B visas. These visas are for people with specialized talents or a level of technical ability that can't be found among American workers.

When asked if all the people had some special expertise that couldn't be found in the U.S., Palmer said, "Absolutely not. Not even close. Many of them is what we call freshers. People that would just come over, whoever they could get to come over. Whoever got accepted for a visa."

Many of the people brought in, in fact, didn't know what they were doing at all, Palmer said. "There was not a project or program that I was involved in that we did not remove somebody because they had no knowledge of what they were doing," he said.

So then what's the motive to bring them in? You could hire an American who is trained in that particular discipline and do better.

Palmer said, "It's purely profit."

Palmer says the Indian workers on his team were paid substantially less than an American would have made in the same job.

When the U.S. State Department began to limit the number of H-1B visas, Palmer says Infosys began using another type of visa, the B-1. The B-1 is meant for employees who are traveling to consult with associates, attend training or a convention. But Palmer says the employees were brought in not for meetings, but for full time jobs.

Palmer said the jobs were in "Everything from coding software to testing software to fixing software to installing."

So why would Infosys do this? And what advantage did it give them in the marketplace?

Palmer said, "They could outbid everybody or underbid everybody on every contract (because they were paying less.) For example...if I'm gonna pay you $15,000 a year why would I pay an American or a legal worker $65,000 a year? It makes no - it's just economics."

And Palmer says the B-1 workers never paid U.S. taxes because they received their salaries from India.

"They're basically a lot of times being paid on a cash card or a debit card where money was put in their account," Palmer said. "And the fact is, is they're just taking that money out and they're never paying U.S. taxes."

Infosys may not be a household name to many Americans, but in the technology business, the company is a powerhouse. It is one of the biggest consulting firms in the world with more than $6 billion in revenues last year alone, and 145,000 employees in 32 countries. But the bulk of its business comes from the U.S., re-engineering the computer systems of some of the biggest names in corporate America.

Federal officials say Infosys employees have 6,000 B-1 visas good for 10 years. Palmer says if just half of those employees were working on U.S. soil that would earn the company more than $150 million a year more than if they paid Americans the prevailing wage.

Infosys declined CBS News' repeated requests for an on-camera interview with a company executive or with chief executive officer and chairman S.D. Shibulal. But the company's chief financial officer, V. Balakrishnan, has denied the charges on Indian television, saying, "I think we are very clear that we have not violated any of the rules. We believe we have a strong case."

Infosys did give CBS News a statement saying, in part, "Any allegation or assertion that there is or was a corporate practice of evading the law in conjunction with the B-1 visa program is simply not accurate, and we will vigorously defend the company against any false allegation to that effect."

But one of Palmer's most serious allegations is that top company executives not only knew of the alleged fraud, but wanted to expand on it to increase profits. Palmer says during a 2010 meeting at Infosys' corporate headquarters in Bangalore the practice was discussed with a group of executives, including a senior vice president.

Palmer told CBS News, "There was some conversations about how to increase the share price, which is - in America is the stock price. So it's really about getting people over no matter what the cost or whatever. And you know, I think that's the first time I heard the term, you know, 'Americans are stupid.'"

If Palmer is telling the truth here, and I am inclined to believe that he is because as a whistleblower against a multi-national corporation he is the one who has placed his ass on the line, that assessment is absolutely correct, Americans ARE stupid. Forget for a moment whether or not Infosys is committing visa fraud. If they are, the company should obviously be vigorously prosecuted. What's even more outrageous is that at a time of record high unemployment, the U.S. government agreed to grant 6,000 visas for Infosys employees to come to work in the U.S. in the first place.

Does anyone still need to be shown a more glaring example of how the federal government now represents the interests of multinational corporations over those of the American people? There is NO justification for the U.S. to be importing cheap foreign labor, even if it was being done legally, when so many people are struggling to find work. It is all being done in the name of globalization, which was always a scam to enrich the elites at the expense of everybody else. We can only hope that these outrageous charges will be thoroughly investigated and the vigorously prosecuted if found to be accurate. But I'm not holding my breath on that last point.


Bonus: But don't worry, President Hopey-Changey feels your pain...he really does

Guess What, "Hunger Games" Fans, You Actually Live In "The Capitol"

In a rare example of keeping up to the minute with our mindless pop culture, I actually spent this past Saturday night at a screening of The Hunger Games. Normally, I steer well clear of such mass produced tripe, and am actually proud to say I've never laid eyes upon Avatar, Titanic, the second Star Wars trilogy or any of the Harry Potter or Twilight flicks. But the wife has read the entire set of Hunger Games novels, and sometimes you do what you have to do to maintain domestic tranquility.

That said, I didn't hate the movie as much as I thought I might. It was actually better made than most of the garbage that comes out of Hollywood these days. My two biggest quibbles with it were that the supposedly hungry denizens of District 12 actually looked pretty well fed, and the violence was far too tamed down for such a horrific premise. Yeah, I know they needed to ensure they didn't get an R rating so that the teenyboppers could flock to see it. Mission accomplished in that regard, I guess. At least I saw it at my local art house theater, which meant that the audience was not all teenagers and that there were no blaring advertisements on the screen for the 25 minutes we sat waiting for the previews to start. At this point, I'll take any small favors I can get.

The plot of the film has become culturally omnipotent, so I won't rehash it in great detail here. It involves a future dystopia in which The Capitol long ago won a war and now subjects the 12 outlying districts to its will through brute force. The outlying districts are forced to provide the resources which allow the denizens of the The Capitol to live in decadent luxury. Every year in order to reassert The Capitol's authority, The Hunger Games pit 24 teenagers (12 boys and 12 girls) chosen by lottery against each other in a brutal fight to the death as part of a Survivor-on-steroids type reality show.

It's not surprising that this theme would have great appeal to American moviegoers, since the plot is not substantially different from that of the original Star Wars. The Capitol is the Evil Empire, and even though there is not yet a rebel alliance (to be formed in the inevitable sequels, I gather) the main character, Katniss, is a scrappy, tough and resourceful rube from the provinces just like Luke Skywalker.

The theater itself was sold out for my show, and the audience not surprisingly seemed to eat up what was on the screen. As a culture, we just never seem to tire of watching the underdog overcome long odds in a battle against the forces of evil. Yet the thing I couldn't help but wonder as I observed my fellow patrons, especially as we were filing out after the film was over and half of them already had their eyes glued to their cell phone displays, is that none of these people seem to realize that in the real world it is THEY who are the spoiled, easy living citizens of The Capitol, reveling in a seeming cornucopia of luxury in a world plagued by mass deprivation, and ironically distracted from reality by so called reality television shows.

In a Friday Rant I posted last June 17th entitled, "Unlike in the Movies, in Real Life Americans HATE the Underdog," I wrote:

...it’s in the international arena where America most behaves like the Evil Empire, to the cheers of domestic Star Wars fans everywhere. The empire’s legions roam the globe, dropping drone missiles on top of any goat herder’s wedding party in countries where the locals are unfortunate enough to be living on top of vital energy resources and actually have the audacity to insist that they should be allowed to live their lives free of American meddling. You’d think, given our alleged love for the small fry, Americans would be outraged at this injustice and demand that our military stop butchering civilians in our name, but you would of course be wrong. Instead we plaster yellow ribbons on the back of our cars, drape an American flag on anything that doesn’t move quickly enough and warble “Proud to Be an American” at top volume during every ball game.

I was at the time, of course, thinking about the Iraq and Afghanistan Wars. And now, here comes The Hunger Games, which could very easily be taken as a sharp commentary of how globalization and neoliberal economics, enforced at the point of a drone missile if need be, are designed to ensure that much of the the many Districts' (read: world's) resources continue to flow to the decadent Capitol (read: America). The Hungry are actually those billions of the world's poor living a subsistance-level existence in countries where the economy largely functions either to extract the raw materials or build the cheap consumer products so loved by those queued up in line to watch The Hunger Games.

Granted, the movie has been given such a slick Hollywood sheen that it is really difficult to take seriously as anything other than mere popcorn entertainment. Nevertheless, it just continues to amaze me how the American populace is collectively so lacking in self awareness that it cannot apparently even sense the inherent contradiction of always rooting for the cinematic equivalent of "terrorist insurgents" to overthrow the Evil Empire.


Bonus: "Lay down your money and you play your part...everybody's got a hungry heart"

Thermo Fisher Scientific (Wisconsin) To Lay Off 150

There wasn't a lot of detail to go with this mass layoff notice. Here is htrnews.com with the story:

Thermo Fisher Scientific gave official notice Tuesday that layoffs at its downtown manufacturing facility likely will begin on May 12.

The layoffs of approximately 150 employees are expected to be completed within six months and will be permanent.

Thermo Fisher announced in December that it would be closing the wood manufacturing plant at 1316 18th St., after announcing the closure of its Columbus Street steel manufacturing plant about two months earlier.

Although I take note of this tidbit from the December story:

Around 190 additional workers in Two Rivers will be looking for jobs next year. The second of two manufacturing plants owned by Thermo Fisher Scientific, the lab equipment maker is closing. Earlier this year, the company said it was closing its steel manufacturing plant by year’s end and moving the jobs to Mexico. Around 120 workers were affected. Jobs from the now closing wood manufacturing plant are being moved to Texas. “Our leadership team continuously evaluates our business operations in an effort to increase efficiencies and improve our global competitive position," Thermo Fisher Scientific Director of public relations Ron O'Brien said in the press release. The company says about 150 non-manufacturing jobs will remain in Two Rivers.

So I guess it isn't too hard to conclude that globalization and corporate greed are the (usual) suspects here.

Globalization and the dairy farmer

Adam Davidson has a really nice account of the impact of globalization and financial market engineering on the humble dairy farmer. He writes about how milk production went from being a local to an international market by chronicling the travails of one small New Jersey milk farmer Robert Fulper,

For most of the 20th century, dairy farming was a pretty stable business. Cows provide milk throughout the year, so farmers didn’t worry too much about big seasonal swings. Also, at base, dairy-farming economics are simple: when the cost of corn and soybeans (which feed the cows) are low and milk prices are high, dairy farmers can make a comfortable living. And for decades, the U.S. government enforced stable prices for feed and for milk, which meant steady, predictable income, shaken only by disease or bad weather...

But by the early aughts, to accommodate global trade rules and diminishing political support for agricultural subsidies, the government allowed milk prices to follow market demand. People in other parts of the world — notably China and India — also became richer and began demanding more meat and dairy products. Animal feed, especially corn and soybeans, became globally traded commodities with all the impossible-to-predict price swings of oil or copper. Today Robert can predict his profit or loss next month with all the certainty that you or I can predict the stock market or gas prices. During my visit, Robert said that his success this year will be determined by, among other things, China’s unpredictable economic growth, the price of gas (influenced, of course, by events in Iran and Syria) and the weather in New Zealand (a major milk exporter), where a drought can send prices skyrocketing.

Faced with such uncertainty and globalization, financial market innovation could not have been far away,

In the last decade, dairy products and cow feed became globally traded commodities. Consequently, modern farmers have effectively been forced to become fast-paced financial derivatives traders... There are ways to manage, and even profit from, these new risks. The markets offer a stunning range of complex agricultural financial products. Dairy farmers (or, for that matter, anybody) can buy and sell milk and animal-feed futures, which allow them to lock in favorable prices, hedge against bad news in the future and so forth. There’s also a new product that combines feed and milk futures into one financial package, allowing farmers to guarantee a minimum margin no matter what happens to commodity markets down the road.

However, the impact of these innovations, ostensibly aimed at hedging dairy farmers against the risks arising out of globalization, have not been on expected lines,

The Fulpers, like most people, are too busy with their day jobs to truly monitor the markets. But dairy farming has its own 1 percent: that tiny sliver of massive farms, with thousands of cows, that make the biggest profits and are better equipped to pay agriculture-futures experts to help them manage risk. They continue to invest and grow. Unable to keep up with the changes, many smaller farms have gone out of business in the past decade.

This story has parallels across sectors and countries. As countries open up their borders and globalize, occupations and livelihoods become exposed to greater risks. Inflation (for consumers), price volatility (for producers), and job losses (for employees) are some of the commonplace sources of the resultant uncertainty that adversely affect all three categories of people. In order to mitigate them, financial instruments get concocted and peddled. However, irrespective of their real utility, these products, by their inherent nature, are out of bounds for the vast majority of people who are worst affected by the vagaries of globalization.

So, in its balance sheet, globalization has the potential to leave vast numbers at the bottom of the income ladder deeply vulnerable. It therefore becomes important to carefully calibrate the pace and sequence of opening up individual sectors within national economies so that its negative externalities can be minimized. One of the most powerful policy levers to promote such calibrated globalization is to establish a universal social safety net.

In the final analysis, a cushion against the external shocks inflicted by globalization for those affected - both by way of a universal social safety net and some livelihoods training support - is the best insurance policy for globalization itself.

Globalization Porn: American Axle (Michigan) Lays Off 300

More globalization-related bad news for the auto industry and the Detroit area. Here is The Oakland Press with the details:

American Axle & Manufacturing Inc. has laid off 300 blue-collar workers from its manufacturing complex at I-75 and Holbrook along the Detroit–Hamtramck border.

The workers were idled Feb. 25 when the American Axle’s labor agreement with the United Auto Workers ran out. Negotiations between the company and union have stalled and the workers were left without any kind of severance package, according to former UAW official familiar with the discussions.

American Axle had announced last summer it planned to close the complex, which in the late 1970s employed as many as 8,000 workers. The company’s headquarters is still on the site but the layoffs mean no more blue-collar work is done inside the Holbrook complex.

Of course, they keep on the management jackals who don't actually produce anything while the real work will now be done abroad:

The union blamed the shutdown on AAM’s unwillingness to negotiate a fair labor agreement.

“This is an indication that hard-working people are sick of constantly helping companies through concessions and back to profitability and companies refusing to share in that,” said UAW Vice President Cindy Estrada, who directs the union’s American Axle Department said last summer.

“Here is a business that started out as an American company providing good-paying jobs to 6,000 employees. As a result of the hard work of these employees, it has grown to an international company with 32 factories worldwide,” said Estrada. “All of this success was achieved off the backs of the original 6,000 hard-working Americans.”

However, American Axle has said it needs further labor concessions, including reducing the pay of active workers, to remain competitive in what has become a global market. Work done at the complex is being shifted to Mexico.

Globalization--the most effective union busting tool ever devised. If these assholes were at all honest, they would change the name of the company to Mexican Axle.


Bonus: Speaking of Axl, remember when he was young, thin and could still ROCK?

Foxconn Versus An American Online Retail Warehouse

By now, the reported conditions at Foxconn, the Chinese manufacturer of Apple products, has become a worldwide story and an embarrassment to everyone involved. Not that it has at all slowed down the purchasing of iCrap or anything, but at least it has served to call attention to the appalling conditions workers in other countries are required to endure in order to make the cheap goods American mindless consumer zombies so crave.

Making all of that stuff is just half the battle, of course. It also has to be shipped and then delivered to the customer. Increasingly, the purchases of the products has been made online, which means traditional "brick-and-mortar" stores are slowly being replaced by giant online retail warehouses. Mother Jones human rights reporter Mac Mclelland recently went undercover to work for one of these warehouse behemoths, and what she found were working conditions not much better than those at Foxconn. The resulting article, enchantingly titled, "I Was a Warehouse Wage Slave," is well worth reading in its entirety.

Helpfully, The Atlantic Wire boiled down McClelland's story point-by-point to compare her experience with the reported conditions at Foxconn:

Hours

China: The Foxconn employees work 12 hour shifts with two one hour breaks.

America: The standard shift is 8 hours, but "working more than eight hours is mandatory," explains McClelland, who ends up working 12 hour days during peak season. During that day she gets two fifteen minute breaks, as well as a 29 minute and 59 second lunch break. McClelland often took these precious seconds for anxiety filled pee breaks, she explains.

We lose more time if we want to pee—and I do want to pee, and when amid the panic about the time constraints it occurs to me that I don't have my period I toss a fist victoriously into the air—between the actual peeing and the waiting in line to pee in the nearest one of the two bathrooms, which has eight stalls in the ladies' and I'm not sure how many in the men's and serves thousands of people a day.

Wages

China: After the most recent raise, our Foxconn workers get $285 per month, which comes out to about $10 per day.

America: Though she got hired at "elevensomething dollars an hour" McClelland says she will make $60 in her 10.5 hour day, which comes out to about $5.71 an hour. That's about $1.50 dollars less than both the Federal and Mississippi minimum wages. Her plight isn't unique either, according to this stat she dug up: "The Bureau of Labor Statistics found that more than 15 percent of pickers, packers, movers, and unloaders are temps. They make $3 less an hour on average than permanent workers," she writes.

Job Security

China: One Chinese worker told CNN that turnover at the factory is high due to dissatisfaction and that those who speak out are dismissed.

America: Criers get sacked. "Well, what if I do start crying?" McClelland asked a seasoned worker. "Are they really going to fire me for that?" "Yes," she says. "There's 16 other people who want your job. Why would they keep a person who gets emotional, especially in this economy?" And those who manage to perform don't have much of a chance of promotion, workers stay temporary for years.

Physical Abuse

China: After months on the line, even young workers complain of permanent physical damage.

America: Here's what McClelland learned during training: "People lose fingers. Or parts of fingers. And about once a year, they tell us, someone in an Amalgamated warehouse gets caught by the hair, and when a conveyor belt catches you by the hair, it doesn't just take your hair with it. It rips out a piece of scalp as well."

Emotional Issues

China: The mind-numbing labor has led to mass suicides, encouraging Foxconn to implement a counseling center for troubled workers.

America: "Is somebody going to be mean to me or something?" McClelland asked a woman at the local chamber of commerce. "Oh, yeah," the woman responded.

Work Atmosphere

China: The Fair Labor Association called the plant pristine, much better than other factories in China. Yet, the work entails 12 hours of the same action, over and over. The job is solitary and silent, besides the machinery.

America: Less dull than Foxconn labor; more physically exhausting. "I have been hired as a picker, which means my job is to find, scan, place in a plastic tote, and send away via conveyor whatever item within the multiple stories of this several-hundred-thousand-square-foot warehouse my scanner tells me to," explains McClelland.

Justification for the Job

China: Many flock to these jobs because it's better than the options elsewhere. Some argue that this type of work has improved the entire country's quality of life.

America: The American job market isn't great, people will take what they can get. "'How's the job market?' a supervisor says, laughing, as several of us newbies run by. 'Just kidding!' Ha ha! 'I know why you guys are here. That's why I'm here, too!'"

I haven't seen figures to back this up, but I would gather that these kinds of warehouses have been among the biggest "job creators" in America during our great and glorious jobs recovery of these past two years. Reading McClelland's eye opening article, and recognizing that the low paid worker drones represent the new normal in our economy, how can anyone expect consumer spending, the supposed backbone of the economy, to return to where it was before the Great Recession began?

Is this the future of work in America? I'll let McClelland tell you herself:

"This really doesn't have to be this awful," I shake my head over Skype. But it is. And this job is just about the only game in town, like it is in lots of towns, and eventually will be in more towns, with US internet retail sales projected to grow 10 percent every year to $279 billion in 2015 and with Amazon, the largest of the online retailers, seeing revenues rise 30 to 40 percent year after year and already having 69 giant warehouses, 17 of which came online in 2011 alone. So butch up, Sally.

This is the logical endgame for the globalist consumer economic model--the hideous big box stores giving way to massive online retail warehouses staffed by wage slaves little better off than their counterparts in China who make the products. Looked at from this perspective, we should be thankful that the end of the cheap oil era is going to destroy globalization as it becomes too expensive to ship cheaply made products everywhere on the planet. As peak oil author Jeff Rubin says, your world is about to become a whole lot smaller, and this is exactly why you should embrace that idea.


Bonus: I'd like to dedicate this song to Mother Jones human rights reporter Mac McClelland for a job very well done

Appelton Papers To Lay Off 330 Ohio Workers

Once again, your job is only of value to the company as long as they can't figure out a way to do things cheaper by replacing you. Here is the Dayton Daily News with the details:

The 400 employees at Appleton Papers Inc.’s plant in West Carrollton were not prepared Thursday for the news that three-fourths of them stand to lose their jobs following a $3 billion deal with a Canadian supplier.

The workers were “flabbergasted, heartbroken, taken by surprise,” said Jim Allen, president of Local 266 of the United Steelworkers, which represents plant workers. “We were knocked down.”

I'll bet. So what was the reason behind the decision?

Appleton plans to let go of 330 workers and cease making paper at the West Alex Bell Road plant following a 15-year deal with Domtar Corp., based in Montreal.

Domtar will supply Wisconsin-based Appleton with most of the uncoated base paper it needs to make thermal, carbonless and other specialty paper products, negating the need to make the base paper at the West Carrollton plant.

About 100 employees would remain at the plant to run its thermal paper coating operations, Appleton said.

Mark Richards, Appleton’s chairman, president and chief executive, called the move a “competitive necessity.”

“Our employees have never wavered in their dedication to excellence and to serving our customers,” Richards said. “What has changed is the economics of the industry in which we compete.”

“Nonintegrated” paper mills — mills that don’t produce pulp from logs or wood chips gathered on site — are “distinctly disadvantaged and no longer competitive,” the Appleton release added. The local mill must purchase pulp and recycle waste paper.

The idea that nonintegrated mills are less efficient is not new. But Van Dan Brandt said the cost of pulp, driven by worldwide demand, is higher than ever.

Since 2005, 25 nonintegrated mills in the U.S. have closed, including four in Ohio, Van Den Brandt said.

NAFTA - the gift that just keeps on giving.

C&D Technologies to Lay Off 120 in Milwaukee

Looks like we can gain blame globalization and "free" trade for this layoff notice, as reported by BizTimes.com:

C&D Technologies Inc. will relocate some of production from its Milwaukee facility to a plant in Reynosa, Mexico.

While the Milwaukee facility will remain, the move eliminates 120 local jobs. About 100 employees will remain at the plant, 900 E. Keefe Ave.

The corporate FlackSpeak is strong with this one:

The company completed a comprehensive business evaluation and cited “intense competitive pricing pressure” as the reason for moving its power system product lines to Mexico. C&D said many of its competitors have also moved production to Mexico for cost reasons.

“This was a difficult decision but one that is sound and will allow us to continue production in Milwaukee,” said Jeffrey Graves, C&D president and chief executive officer. “Over the last five years, we have invested over $20 million to modernize our Milwaukee facility, streamline production, remove costs and improve efficiencies. Over the past several months, we were able to structure a solution that keeps C&D here and will help us realize those efficiencies. We’ve been a part of this community since 1999, and my hope is that we will be able to continue to make a business case for staying in Milwaukee in the years to come.”

You know what else would have allowed you to continue production in Milwaukee, asshole? Not moving your production to Mexico just so you can line your golden parachute.

Bonus: "She hit me with technology"

Larry Summers Mocks Opponents Of Outsourcing As “Luddites”

Sometimes, it's a good thing to define your self by who your enemies are, or at least if not personal enemies, people whose worldview is diametrically opposed to your own. I've actually said about particularly loathsome professional colleagues I've worked with over the years who hated me, "If he/she actually liked me, it would cause me to wonder what I'm doing wrong."

In that spirit, I thought I would call attention to a recent article posted by the Republic Report about a horrible little toad and flat out psychopath who had some choice words for people who share my views on globalization:

Prior to joining the Obama administration as the director of the White House National Economic Council, Larry Summers faced a barrage of criticism after it was exposed that he received hundreds of thousands of dollars from major banks for a series of speeches he gave in in 2008. Despite this conflict of interest, the administration expressed full confidence in Summers’ role as a chief economic adviser to President Obama, telling the public that he was primarily interested in crafting economic policies that help “families across America.”

Summers has since left the administration, and is once again on the corporate speaking circuit. Last June, he appeared at the 2011 World BPO/ITO (Business Process Outsourcing/Information Technology Outsourcing) Forum, which took place in Jersey City, New Jersey. The Forum featured participation, attendance, and/or lectures from executives from many of the world’s top corporations — including AT&T, Pfizer, Coca Cola, Home Depot, and Morgan Stanley — in a number of meetings and presentations about outsourcing labor services.

Summers lectured as the closing keynote speaker for the event, and was introduced by Surya Kant, the North American president of Tata Consultancy Services (which is listed on the event’s website as a sponsor of his speech), a Mumbai-based company that specializes in outsourcing. According to excerpts of his remarks released by event organizers, the former chief economic adviser actually championed outsourcing:

For executives planning their strategies in light of the “new normal” economy, renowned economist Larry Summers has some important advice: “There are those today who would resist the process of international integration; that is a prescription for a more contentious and less prosperous world…We should not oppose offshoring or outsourcing.”

With the unemployment rate at 9.4 percent, Summers compared critics of the outsourcing of American jobs to “luddites who took axes to machinery early in England’s industrial revolution.” Unfortunately, the full of text of Summers’ remarks is mysteriously missing from the website — particularly odd given the fact that most of the other keynotes are posted online.

Well, if being a luddite is wrong, I don't want to be a technophile. Note the name of the conference in question: Business Process Outsourcing/Information Technology Outsourcing Forum. That's right, the one-percenters are so hot to offshore your job to cuts costs that they actually have professional conferences to discuss how to do it. The article goes on to relate an anecdote from the conference:

During another session, Amit Mukherjee, the president of Ishan Advisors LLC and an executive advisor at Babson College, asked attendees a pointed question, “How many people in this room agree with the statement that a free market in global sourcing is good for America?” As the audience’s hands shot up, he replied, ”Okay, so almost everybody agrees with that statement. Fair enough.”

Not "good for America," assholes. Good for the one percent. I desperately hope that someday the people of this country whose livelihoods are being sold down the river by you scumbags wake up to the point where it becomes physically dangerous to say such things in public.

Anyway, the article concludes by speculating on what Summers' next appointment is likely to be:

In recent weeks, there have been rumors that Summers will be nominated to head the World Bank — despite having signed off on a memorandum during his first tenure there that praised the advantages of dumping pollution in developing nations — by President Obama. One has to wonder if the administration is at all troubled by Summers’ continued advocacy on behalf of big corporations as it mulls once again installing him in a position of great influence.

Troubled by Summers' position on outsourcing? Why exactly would the administration that just rammed through the latest "free" trade agreements with Panama, Columbia and South Korea be troubled by that? President Hopey-Changey knows his dimwit base won't desert him no matter how many good paying American jobs he destroys. Even when they are sitting on the unemployment line with no prospects because their job got sent to China, they will STILL stupidly think he is on their side.


Bonus: Nothing personal, Panama

Is Globalization Now Blunting the Effects of Peak Oil?

Mish Shedlock of the Global Economic Trend Analysis blog posted a reader letter on Monday that included the chart above as well as some rather startling facts about the current trends in gasoline consumption in the United States:

As I have been telling you recently, there is some unprecedented data coming out in petroleum distillates, and they slap me in the face and tell me we have some very bad economic trends going on, totally out of line with such things as the hopium market - I mean stock market.

This past week I actually had to reformat my graphs as the drop off peak exceeded my bottom number for reporting off peak - a drop of ALMOST 4,000,000 BARRELS PER DAY off the peak usage in our past for this week of the year.

The letter goes on:

An amazing thing to note is that in two out of the last three weeks gasoline usage has dropped below 8,000,000 barrels per day.

The last time usage fell that low was the week of September 21, 2001! And you know what that week was! Prior to that you have to go back to 1996 to have a time period truly consistently below 8,000. We have done it two out of the last three weeks.

Mish himself then rather blandly concludes:

A mild winter can explain part of the drop in petroleum usage (heating oil), but it does not explain the declines in gasoline usage or the overall trends.

Back on September 23rd of last year, in my post "Fear and Loathing in the Auto Industry: The Flacks Can’t See What’s Right in Front of Their Eyes," I highlighted a story about how annual American automobile sales remain mired more than four million below their peak in 2000, even after recovering over two million from the depths of the Great Recession. Moreover, with gas prices having remained above $3.00 a gallon for more than a year now, sales of smaller and higher mileage vehicles have increased as a percentage of the number of vehicles purchased. Additionally, back on November 21st of last year, in my post, "Peak Vehicle Miles Travelled Shows the True State of America's Economy," I highlighted a story about how for the first time since at least the 1960s, U.S. total vehicle miles traveled have dropped during the past four years.

Clearly, the explanation for less gasoline being used is that there are fewer cars now on the road driving fewer miles at a higher average of fuel efficiency. Greater efficiency, of course, is a good thing for the economy. The fewer miles travelled, however, not so much. Because so few Americans have access to adequate public transportation options, and those options are also being cut back and becoming more expensive as I have demonstrated in several previous posts, fewer vehicles miles travelled can only mean less real economic activity in a car centric society such as ours.

But wait, I hear you protesting. What about last Friday’s fantastic jobs report from the Bureau of Labor Lying Statistics? Wasn’t that an indicator of how we have finally turned the corner and are on the road to a full economic recovery? You gloom and doom peak oil pundits were saying all during last year that the return of world oil prices to triple digit territory was going to trigger another recession, yet it obviously hasn’t happened. So what gives?

Well, the flippant answer to that question is that it isn’t 2008 anymore. By that I mean it is now apparent that the global economy underwent a major adjustment the past four years and that $100-a-barrel oil is the new $30. That’s not to say the global financial market crash of 2008, the loss of seven million American jobs, the bailouts of the big banks and Wall Street and the various stimulus programs were not PAINFUL. They certainly were. But as things stand nearly four years later the adjustment is largely complete. The weaker banks, retail chains and other businesses have largely died off, and those that remain are so far better able to weather the storm of higher energy costs, even if many of them have seen the size of their operations reduced.

That’s all well and good, Bill. But what about the fact that the more dire predictions you peak oil types made back in 2008 that oil prices would top $200 or $300 a barrel by now haven’t come true? Clearly, you and numerous others in the movement owe us all an explanation for how you blew that call so badly.

The answer to that question, of course, is right there in those gasoline usage figures. Demand destruction globally, but in the United States in particular as the world’s largest oil consumer, has thus far prevented peak oil’s upward pressure on prices from getting completely out of control. Note, however, that the figure of four million barrels per day less usage almost perfectly mirrors the amount of reserve oil production capacity supposedly possessed by the world’s swing producer, Saudi Arabia. It’s pretty clear that had American demand not been reduced so dramatically, we would again be bumping up against the limits of world production capacity like we were in 2008 and $200 oil and $7.00 a gallon gasoline (at least) would already be a reality.

So what you’re saying is that if America continues along our current path towards economic recovery, and jobs continue to be created at the rate they apparently were in January, that we will soon see demand increase to the point where we’ll again be facing the prospect of $200 oil?

Not necessarily. Even if you take the BLS jobs numbers at face value and ignore the rise in structural unemployment resulting from people “exiting the job market,” there is still the thorny little problem of how the actual net number of jobs can increase so robustly even as the gasoline usage figures above have been dropping so dramatically. Those two data points seem on the surface to stand in direct contradiction to one another.

My theory is that what we are seeing here is globalization, which used to be a driver for increased oil usage and thus higher prices, now serving to actually blunt the price of oil and gasoline. Demand continues to rise in the world’s new factory economies like China and India, of course, but at a rate largely offset by the demand decline in consumer economies like the U.S.

I’ve posted countless stories on this blog in recent months containing news articles showing that, despite higher energy costs, the relentless offshoring of good paying American jobs to the lower wage factory economies is continuing at a rapid pace. Moreover, the wages and benefits for those jobs that do remain are being decimated more rapidly than they already were before the financial crash due to the amount of surplus labor we now have. The new normal in America is that the average person is poorer than they used to be, which means they have less money to be able to afford to buy cars and to drive them as often, especially at the current elevated gasoline price levels.

These effects of globalization on the prosperity of America’s working and middle classes will likely continue to place downward pressure on oil and gasoline prices even as the average barrel of oil itself gradually becomes more and more expensive to produce as the traditional supergiant oil fields deplete and “tight” oil sources (oil sands, oil shale, deepwater) struggle to replace the lost production. As long as we remain mired on the so-called “bumpy plateau” at or near the all time peak of world oil production first achieved in 2005, the globalized economic system will likely continue to limp along unless abruptly disrupted by a geopolitical crisis such as a Middle East war.

Eventually, of course, even without the advent of a major resource war, oil supplies will begin to decline and oil prices will rise to a level above that which can continue to sustain an economic model which dictates that products be made wherever in the world it is cheapest to make them and then shipped everywhere else. Globalization is doomed in the long run, and eventually we will all be returning to localized economies whether we wish to or not. This we know for certain. It just won’t happen as quickly as many in the peak oil community were expecting it to happen.

Saturday Night Music Video: "(Whatever Happened to) The Great American Bubble Factory?"

The outstanding Southern rock band Drivin'n'Cryin' had a brief boomlet of mass popularity when their muscular, guitar-driven 1990 antiwar song "Fly Me Courageous" became a hit among soldiers in the first Gulf War who completely misunderstood its message. Nearly 20 years later, lead singer Kevin Kinney and company recorded an album called, Great American Bubble Factory, which among other things laments what has become of small town America in the age of globalization. Here is the title track to that album, which, if we didn't have our heads shoved so far up our collective asses, would have been a bigger hit than any of that shit you hear on American Idol.

Enjoy!

What drives globalized manufacturing to emerging Asia?

Conventional wisdom would have it that the low labour cost in emerging Asia is the driving force behind outsourced manufacturing. The Times has an excellent article (see also this interactive video) that questions this belief with the example of iPhone. It argues that abundance of mid-level manufacturing skills and the advantages with the dynamics of production in massive scale are the reasons for the rapid growth of outsourced manufacturing to Asia.

Various academics and manufacturing analysts estimate that because labor is such a small part of technology manufacturing, paying American wages would add up to $65 to each iPhone’s expense. Since Apple’s profits are often hundreds of dollars per phone, building domestically, in theory, would still give the company a healthy reward.

But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans — it would require transforming the national and global economies. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility. Other companies that work with Apple, like Corning, also say they must go abroad.

Apple's iconic iPhone is the exemplar of modern day globalized production,

Though components differ between versions, all iPhones contain hundreds of parts, an estimated 90 percent of which are manufactured abroad. Advanced semiconductors have come from Germany and Taiwan, memory from Korea and Japan, display panels and circuitry from Korea and Taiwan, chipsets from Europe and rare metals from Africa and Asia. And all of it is put together in China.

Among the emerging economies, China has an unparalleled comparative advantage as the electronic products assemly line of the world. Its advantages as the assembler are numerous...

The entire supply chain is in China now... You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.

... and in leveraging its massive labour force with mid-level manufacturing skills...

China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States. In China, it took 15 days.

... finally, China has companies like Foxconn, which can mobilize massive numbers of diligent workers in quick time to deliver on any electronic assembling activity. It writes about the Foxconn City,

The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day... Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility’s central kitchen cooks an average of three tons of pork and 13 tons of rice a day.

Foxconn Technology has dozens of facilities in Asia and Eastern Europe, and in Mexico and Brazil, and it assembles an estimated 40 percent of the world’s consumer electronics for customers like Amazon, Dell, Hewlett-Packard, Motorola, Nintendo, Nokia, Samsung and Sony. They could hire 3,000 people overnight.

The article highlights the critical importance of a large base of mid-level manufacturing skills and the presence of a broad-range of manufacturing supply-chain in the success of any economy. They are essential ingredients to the development of a large manufacturing base. The United States which had these capabilities for many decades has seen them get eroded and has now ceded way to China.

Countries like India, which are waiting in line to emulate the Chinese growth miracle, would do well to appreciate the vital role played by these factors. India has nothing comparable to Foxconn and suffers from acute shortage of mid-level skilled technicians. Attempts to build up supply-chain capacities through growth clusters and special economic zones have borne limited success and that too only in a few sectors. Unless these deficiencies are bridged, India's growth potential will remain just that, potential.

Update 1 (26/1/2012)

NYT investigation reveals serious problems with working conditions in Chinese factories supplying components to consumer electronics firms like Apple. Here is the list of Apple's suppliers.

"Get Your Ass Down Here, Prime Minister Harper!"

Holy crap, what's this? The mayor of a city not taking lying down the gutting of a local factory's workers' pay and benefits after the foreign corporation which owns it was granted huge tax breaks? Not to mention that same mayor is also excoriating the nation's leader for favoring corporate interests over those of the workers? Fabulous! Too bad it is only happening north of the border, as reported Saturday by Digital Journal:

"Get your ass down here, Prime Minister Harper!" bellowed Joe Fontana, mayor of London. In 2008 Harper visited the city's EMD plant, announcing corporate tax cuts to increase job security for Canadians. Now, EMD workers are locked out by their U.S. owner.

So what exactly has the mayor all up in arms?

Since the start of the year, about 425 unionized Electro-Motive Diesel workers in London have been locked out by Progress Rail, a subsidiary of Caterpillar Inc. The highly profitable, global company shocked many by demanding London workers take a 50 percent drop in pay, accept deep cuts to their benefits, and stand by as their pension plans were gutted.

Yeah, that's pretty bad. I can see why people might be pissed off. And I found these quotes to be particularly delicious:

Stop, ask a pleasant looking older woman why she is there. You learn her son has worked at EMD for years and his reward is being locked out, put onto the street in January in the middle of the Canadian winter. "Tell Harper to get the money back . . . It's our money he gave to those bastards!" She spits out the words with venom.

Everyone hears the personal story of the Jones family when Brianna Jones and her father, Ian, take centre stage. Brianna made her contempt for the giant American company clear. Without unions she said, "We'd all be living in the slums. They don't care." She continued, "Our family's budget will be slashed in half." Brianna is attending university in Windsor and plans on going on to earn her doctorate. A crumbling family budget would hurt.

"It is morally wrong to call (my father's) life's work unskilled," she says talking about her dad. Brianna is proud of her father. "We should not have to inherit a society where greed trumps morality." The crowds loudly chants, "Greed. Greed. Greed."

Oh, and here you see the lingering effects of the Occupy movement:

But it was not only private and public-sector labour unions that were attracted to the rally; It also drew non-labour supporters as well. Sister Sue Walker of the Sisters of St. Joseph in London warned, "The social contract is breaking down." She said, "Wealth is trickling upwards" and this is "tearing at the fabric of society. Now is the time for the 99 percent to stand together."

The biggest question I have every time I read the latest story about a factory being shut down so that production can be moved to China, or workers being laid off by CEOs who are still paid tens of millions of dollars is: where is the outrage? Every time this kind of shit happens in America, the workers just meekly take it and don't ever protest. Why not yell and scream and make your voice heard? Ultimately, it might not save your job, but it might serve to finally wake people up to what is really going on in this country.


Bonus: Which side are you on?

NAFTA's Latest "Free" Trade Gift: Carrier Plant in Tyler, Texas, Moving Production to Mexico

Probably no other state in the U.S. has been as staunchly supportive as Texas of the politicians who have been firmly in the back pockets of big business and enacted the globalization policies which have wrought devastation upon working and middle class Americans. Nevertheless, as a staunch opponent of both big business and "free" trade (Once again, it's only free for the elites who profit from it and is paid for by those who lose their jobs) I still take no satisfaction from seeing the policies they have consistently voted for now devastate their livelihoods.

Among other things Tyler, Texas, was once home to a Kelly Springfield tire factory that was a sister plant to the one in my hometown where my father served his whole career as a middle manager. That plant closed in 2008, and now, according to a local television station, it is being joined by another factory from the Carrier corporation, which is shutting down to move production across the border to Mexico:

More than 400 employees at Tyler's Carrier plant were told this morning that the Carrier plant in Tyler could be closing. The company has proposed the closure but it is subject to a collective bargaining agreement with the union.

If they choose to close, the company will continue operations through the end of 2013.

Carrier tells CBS 19 they are proposing the closure after a review of business and market conditions.

"I thought it was a shame that again we're losing jobs to a foreign country," Carrier worker Darren Hawks said about the possible closure.

He's worked at Tyler's plant for close to 20 years.

"I don't know what I'm going to do because I'm right in the middle of an age where I don't want to be looking for a job. There are a lot of unemployed people out there who are a lot younger than me so I'm just curious what job I'm going to find," he said.

At least one worker knows what the real story is:

Carrier spokesperson Michelle Caldwell says The shutdown is pending a collective bargaining agreement with the sheet metal workers union.

"We go under negotiations starting next week for severance packages and whatever we can get for employees who lose their jobs,"Local Sheet Metal Workers Union manager, Blain Strickland, said.

Strickland says the jobs are headed to Mexico.

"They're wages are like $4 an hour. American companies can't compete with that," he said.

Well, not since NAFTA anyway. But you have to ask yourself this: in a few years when nearly all of America's good paying blue collar jobs have been destroyed by globalization and the economic effects of peak oil, who is going to be left to buy Carrier's products? Because the low paid Mexican workers sure won't be able to afford them.

The idea that poorer Mexicans, many of whom used to live on subsistence farms and have been driven off their land by plunging grain prices that were a direct result of NAFTA and the subsequent flood of American agriculture products into the country, are somehow better off working long hours for crappy wages in the shitty factories that have been built to replace the ones in the U.S. is laughable. Does anyone really think that the surge in illegal Mexican immigrants to the U.S. looking for work after NAFTA was passed was just a coincidence?

Mr. Strickland also took his soon-be-ex-employers task for their excuses:

Carrier said there decision came down to the numbers. They said since 2005 housing starts are down 71 percent and non residential construction is down 59 percent. Carrier said it was those numbers that affected their market decision."

Strickland disagrees with that explanation.

"Since 1992 carrier has closed 6 manufacturing plants in the United States," he said. "There is no other reason than cheap labor."

In the last decade, Tyler's Carrier plant has slowly shrunk its workforce from 1250 to just over 400. A blow to the economy.

No doubt the housing crash was a big factor in the declining profit margins for Carrier, but that still doesn't explain the previous rounds of layoffs and closings during the boom years.

Ultimately, however, despite the unrelenting bad news, hope somehow still springs eternal:

"Next two years you never know what will happen things might go skyrocket high," Stewart said.

Or things might crater to as yet unseen depths. And quite frankly, the latter scenario seems far more likely than the former given that there is no driver for the creation of good paying jobs in America these days.


Bonus: Linda and Emmylou sing a melancholy Bruce Springsteen tune about crossing the border

"Thank You, Sir. May I Have Another?"

image: "For the Better" - unless you happen to have been employed there.

At first glance, this story from the Hartford Courant looked like just another routine tale of American manufacturing jobs being shipped overseas:

PerkinElmer, a global manufacturer with more than 500 employees in Shelton, is eliminating close to 75 jobs as it moves four product lines to England and Singapore.

The company, headquartered in Waltham, Massachusetts, lauded the Shelton location for its safety and environmental stewardship in its last corporate social responsibility report.

Gov. Dannel P. Malloy and other state officials visited the Shelton plant in July as part of the governor's jobs tour, but no one from PerkinElmer talked to the state before choosing to transfer jobs overseas. The company told its employees Wednesday about the layoffs.

But then, someone had the bright idea to go interview the local Chamber of Commerce flack to get his opinion:

Bill Purcell, president of the Valley Chamber of Commerce, which invited the governor and Economic and Community Development Commissioner Catherine Smith to visit, said: "It's not an accident that we invited the governor there because they do represent — and they still do represent — all the best Connecticut has to offer; innovation, progress, globalization, exporters, and good global citizens."

Yeah, fat lot of good that did, Mr. Purcell. You sound like an abused spouse telling the policeman she doesn't want to press charges. You got any more inane blather for us?

Purcell said the layoffs will begin in the second half of 2012, and continue into the early part of 2013.

"Obviously it's disappointing to hear, we're grateful for what will remain, and know they'll continue to be big players here, not only in our state and in our region but on the global stage."

Thank you, sir. May I have another?

"Their tagline is 'For the Better,' and they are making the world a better place as a result of the important work they do," Purcell said. The instruments the company designs and manufacturers are used in medical and environmental testing.

Bend me, shape me, any way you want me.

Purcell said PerkinElmer "made a very, very substantial investment in that property. They've been just a terrific company, a great employer, great innovator, a great exporter, a wonderful and gracious corporate citizen."

Holy crap, what a pathetic, craven, simpering little worm. If this guy is what passes for a "business leader" in America these days, no wonder we are headed right down the shitter.

Endgame: Close the Prison, Kill the Town

Yesterday I posted a story about the latest factory closing in my hometown of Freeport, Illinois, and the devastating effect it is going to have on the local community. Like many rust belt towns, Freeport was chosen as the site of a state prison back in the 1990s, which was built there in part to try to make up for some of the factory jobs that were leaving thanks to rampant globalization. One could question the effects on the self-esteem of former factory workers who are used to building useful things being relegated to warehousing the worst elements of hour society for half or even less of their former salary, but that's a discussion for another day.

Instead, I'm more concerned with what happens to those factory workers-turned prison guards once the state decides it can no longer afford to maintain such a large prison population. That is happening to one Florida town in particular, as reported this week by Tallahassee.com:

Jefferson County officials told a House budget panel Tuesday closing their state prison will be an economic death sentence for the small, struggling rural community.

But the head of Florida’s prison system said there can’t be any reprieves for the seven prisons and four work camps he announced last week will be closing before June 30. Department of Corrections Secretary Ken Tucker said a detailed business analysis was used to evaluate each institution and that his agency will do all it can to transfer some employees and help find jobs in other state or local agencies for others.

“We are a community on life support and this decision will equate to pulling the plug on us,” Kirk Reams, the clerk of court and chief financial officer for the county, told the House Justice Appropriations Subcommittee.

Jefferson Correctional Institution, with 177 state jobs, was on the list Tucker announced last week. It is the county’s largest employer, with an $8.2 million payroll.

Julie Conley, executive director of the county’s Economic Development Council, said that figure multiplies by four as the money is spent in the Monticello area. She said the county’s budget is about $20 million.

County Commissioner Stephen Fulford said hundreds of Jefferson County residents work at state jobs in Tallahassee. He said many of them are fearful of losing their jobs in Gov. Rick Scott’s new budget proposal, which is projected to result in about 600 layoffs statewide next June 30 — apart from the prison closings.

How sad is it that a community has become so destitute that its last life line depends upon the state continuing to pay to keep people locked up? Sadly, this is the entirely predictable end result of 30 years of unfettered globalization now combining with the effects of peak oil to create a perfect economic shit storm.

Still, some will yell and scream that it isn't fair:

“If you don’t consider the economic impact on people who live in an area, I think that’s a serious flaw,” said Rep. Leonard Bembry, D-Greenville, a committee member who represents Jefferson County. He said JCI accounts for 5.5 percent of all employment in Jefferson County and that, while Hillsborough or Broward County might be able to absorb layoffs in big urban areas, Jefferson cannot.

“That would be like Orlando shutting down Disney,” said Bembry.

But frankly, my Dear Mr. Bembry, reality doesn't give a damn:

Tucker said the department considered personnel impact, along with other dollars-and-cents realities of its decision. The closings are projected to save $14 million in this fiscal year and $75 million in the year starting July 1.

“It’s hard to make the case that we need to maintain personnel and beds for inmates that we’re not going to have,” said Tucker. “We’re holding empty dorms at this prison and that prison, all across the state.

Bonus: Todd Snider with the best prison song this side of Johnny Cash

Another Globalization Blow to My Home Town

image: The Lincoln Mall in Freeport, Illinois. Built the year I was born, the mall was anchored by Sears and JC Penney when I was growing up and along with the downtown business district was the city's prime shopping destination. Like Freeport's downtown, it is now virtually abandoned.

Back on August 12th of last year in my post, "Friday Rant: A Half-Century at the Local Tire Factory in a Globalizing World", I wrote about the history of the factory in my hometown where my father spent his entire career as a middle manager. The factory in question is currently operating at about one-fourth the capacity it was when my father retired, and just recently ownership locked out the workers to win more wage concessions from the union.

Well, the hits just keep on coming for my hometown of Freeport, Illinois, as reported this week by the Freeport Journal Standard:

As the plan to phase out roughly 170 jobs at the Sensata Technologies/Honeywell plant in Freeport continues to move ahead, local workforce officials are meeting with affected staff in an effort to keep them employed in this region.

“We want to make the transition for them as quick and pain-free as possible,” said Stephenson County Board Chairman John Blum, who is a member of the Local Workforce Investment Board (LWIB). “It’s definitely upsetting a lot of lives.”

In early 2011, Sensata announced it would be closing its local plant at the end of 2012, and relocating the jobs there to a plant in China. Normal operations will continue at the Freeport plant until then, but roughly 170 jobs are being phased out gradually.

About 25 employees at the plant are expected to be laid off over the next six weeks. However, many of these employees have chosen to extend their employment at the local plant by moving to another production line there. Still, all the plant employees will be let go by late 2012, at which time the facility will be decommissioned.

I really have one question for the American management officials who make decisions like this. How the fuck do you sleep at night? Seriously, I really want to know. Has corporate America been completely taken over by psychopaths at this point?

Freeport is a small city of around 25,000 mostly blue collar souls who were already struggling from the loss of much of the town's manufacturing base. This action is going to be a real kick in the nuts for the city.

Sadly, this was all predicted back in 1994 by the late James Goldsmith, who ironically was the financier whose attempted buyout of the Goodyear corporation in 1986 caused my father to be laid off for about six months. His subsequent appearance on the Charlie Rose show a few months after NAFTA was passed in 1994 is a rare example of must-see teevee. Goldsmith very presciently warned that globalization was going to destroy the lives of working people in the United States, even as Rose pooh-poohs the idea.

I've posted this video before, but it deserves to be spread as far and widely as possible:

Stylized Facts on Indian Economy

Arvind Subramanian and Utsav Kumar have certain stylized facts about recent economic growth trends in the Indian economy.

1. Putting to rest the debates and concerns about economic growth in an open and liberalized economy, economic growth was faster in the 2000s than the 1990s in most states. Rajasthan, West Bengal, and Himachal Pradesh were the only laggards. The growth rates in many of other states more than doubled in the 2000s.



Conversely, this also meant that these state economies were more exposed to the global economic factors. Therefore when the world economic slowdown struck, the faster growing and more globalized states were more adversely affected.

2. One of the common features of economic growth is that as economies liberalize and growth picks up, a trend towards covergence takes hold. The poorer states, by virtue of growing faster than the richer states, start catching up with the latter’s level of income. This convergence is also critical towards promoting a consensus on liberalization and reforms and also sustaining the high growth rates.

Unfortunately, a regression of the average annual growth rates across all states and initial percapita income of 2001 reveals little convergence. In fact, it shows that richer states on average grew faster so that the inequality across states is actually increasing. This relationship holds for different time periods and different state sample sizes. It should sound a note of caution for policy makers that the robust growth in the traditional laggard states in the last decade is not enough to promote the much-needed convergence.



3. The biggest concern is the possibility that one of India's greatest strength, its young workforce (demographic dividend), could also turn out to be its biggest problem. In the last decade of 20th century, this beneficial impact of this favorable demographics was favorable in the economic growth trends as seen from the graphic below.



However, the picture appears to have reversed in the first decade of the new millennium. Economic growth has been found inversely correlated with the working age population growth rates among the various Indian states.



The biggest concern states in this regard are Rajasthan, Bihar, UP, Assam, and Madhya Pradesh where the demographic dividend is in serious danger of turning sour. In many respects, this reversal of trend over the last decade is one of the biggest challenges facing India. Unfortunately, the policy paralysis of recent years means that it is in serious danger of being overlooked.

Globalization and American economy

The impact of globalization has been one of the most controversial topics of debate in macroeconomic policy making for nearly two decades now. However, for most part, the debate has been partisan and driven by ideological considerations (free-marketers Vs protectionists). In this acrimony, important issues about how the dynamics of globalization affects economic output, employment, trade and inequality have not got the deserved attention, atleast among policy makers.

In this context, Michael Spence and Sandile Hlatshwayo have an excellent working paper on the impact of globalization on employment, economic value-added, and value-added per employee across various sectors of the US economy. The deeply empirical paper has several interesting findings.

They divided the economy into two buckets - tradeables and non-tradeables - and examined what happened in them during the high-noon of globalization, the 1990-2008 period. Tradeable sectors' output is traded across national borders and include manufacturing, agriculture, mining, technical services, financial services etc. Non-tradeables include government services, health care, retailing, transportation, construction, restaurants, legal services etc.

Their main findings, based on examination of historical time series data from US BLS and BEA, drawing on aggregate and particular industry level data for employment and value-added, include

"Value added grew across the economy, but almost all of the incremental employment increase of 27.3 million jobs was on the non-tradable side. On the non-tradable side, government and health care are the largest employers and provided the largest increments (an additional 10.4 million jobs) over the past two decades... without fast job creation in the non-tradable sector, the United States would already have faced a major employment challenge."

And about the underlying forces driving these trends and future prospects, they write,

"The trends in value added per employee are consistent with the adverse movements in the distribution of US income over the past twenty years, particularly the subdued income growth in the middle of the income range. The tradable side of the economy is shifting up the value-added chain with lower and middle components of these chains moving abroad, especially to the rapidly growing emerging markets. The latter themselves are moving rapidly up the value-added chains, and higher paying jobs may therefore leave the United States, following the migration pattern of lower-paying ones."

And about the implications of this trend, they point to long-term structural challenges with respect to the quantity and quality of employment opportunities for Americans, especially with respect to income distribution

"... almost all incremental employment has occurred in the non-tradable sector, which has experienced much slower growth in value added per employee. Because that number is highly correlated with income, it goes a long way to explain the stagnation of wages across large segments of the workforce."

More critically, they point to the impact of this trend on the US labor market, which assumes greater significance in view of the prevailing unemployment gloom,

"The expanding labor force was absorbed in the non-tradable sector (roughly 26.7 out of a total of 27.3 million net new jobs), government and health care leading the growth (10.4 million incremental jobs between them). In our view, it is unlikely that this pattern will continue. Chances are good that the pace of employment generation on the nontradable side will slow. Fiscal conditions, the costs of the health-care sector, a resetting of real estate values, and the elimination of excess consumption all point to the potential for a longer-term structural employment problem. Expanding employment in the tradable sector almost certainly has to be part of the solution. Otherwise, the United States will have a longer-term employment problem."

In other words, the authors make the point that while globalization has made goods and services less expensive for Americans (and kept a lid on inflation), it has also diminished employment opportunities for Americans at the lower and middle parts of the value chain, besides leaving open the danger that the higher-paying jobs at the top end of the value chain too may follow lower paying jobs in leaving American shores.

They also claim that the two contrasting trends across the tradeable and non-tradeable sectors - the former growing in terms of income (higher wages and profits) but not jobs and the latter growing in terms of jobs but not income (stagnant wages and benefits) - is a recipe for increasing inequality and social and political polarization.

Their prescription for the American economy is simple - boost the tradeable sector. Without dramatic increases in the size and scope of the tradable sector, the US economy will face an extended period of slow job growth and rising inequality. Arguing against protectionism, they advocate policies that incentivize businesses to invest in the physical and human capital necessary to make American workers more productive, rather than simply outsourcing work overseas.

See also this from Michael Spence and this from Uwe Reinhardt.