Blog

Stan Sorscher
Labor Representative, Society for Professional Engineering Employees in Aerospace

In one view of economic development, the role of government is to “make business succeed.” In this view, government should get out of the way and let markets find the most efficient outcome.

An alternative view of economic development is that government policies should raise our standard of living. In this view, government plays an active role in devising trade and industrial policies that attract investment, build industrial capacity, and create good jobs that build the middle class. And make business succeed.

To be sure, markets are powerful and efficient, but markets fail. In particular, markets fail to serve non-economic interests — not just the environment, human rights, labor rights, and public health, but markets also under-invest in R&D, education, physical infrastructure and social safety nets.

Globalization has sharpened the difference in these two approaches, by de-coupling investor and business interests from the public interest. If investors are global in their outlook, then the interests of America dim from view.

In a global economy where national boundaries are blurred, we need to think about trade and industrial policies that work for America. A year ago, I mentioned 4 policies that would help reconnect the interests of investors with public interests and communities. Here are four more. (more…)

I opened up my Yahoo account when I got off work and was greeted by an article from the New York Times about how the State of California is outsourcing the San Francisco-Oakland Bay Bridge project to China.

Outsourcing has become an everyday occurrence. Big Businesses and governments like this tell our American citizens and workers exactly what they think about them every time a project like this is sent overseas. According to the article, the California government saved around 400 million dollars by sending our jobs overseas.

This type of action should be considered criminal.

The state of California contracted a Chinese company that pays their workers less than a dollar an hour, and works them for more than 100 hours per week to steal 3000 jobs from qualified and competent American Workers. Their safety concerns were so great that they had to ship 250 consultants, government employees, and contractors to Shanghai. (more…)

To learn more and take action, visit http://bit.ly/bbysLq.

In his State of the Union Speech last week, President Obama showed a new pro-business focus. Jobs no longer were  his number one priority. He didn’t directly mention the millions of unemployed once. But, isn’t business the biggest and best source of good jobs? To paraphrase an old saying: Isn’t what’s good for business good for America’s workers? Answer: It’s not necessarily so when it’s our multinational companies. They often put short-term profits ahead of domestic business and jobs by off-shoring  work that had been done here.

Since the dawning of globalization in the early 1970’s, a top group of America’s bankers and multinational companies has dominated U.S trade policy. They saw to it that the needs of some big domestic industries like textiles, steel, and consumer goods were frequently bypassed, supposedly to gain easier access to markets abroad for the multinationals. It turned out to be a destructive and wasteful over-reach that no other industrial nation adopted. Like them, the U.S. should have built on our own rich U.S. market, while also competing successfully overseas. (more…)

Stan Sorscher

By Stan Sorscher
Labor Representative, Society for Professional Engineering Employees in Aerospace (SPEEA)

Last spring, a congressional staffer introduced me to a new expression. She said, “Our job is to make business succeed.”

My message to her had been that careers in science and technology were threatened as our economy de-industrialized. As manufacturing work goes to low-wage countries, the engineering and R&D jobs will go, too. American engineers and technical workers will have fewer opportunities for career growth. Already, engineering and science graduates compete with hundreds of thousands of foreign temporary high-tech workers for entry-level high-tech jobs. About half of all engineering and science students find work outside of engineering and science, when they graduate from college. Our policies are undermining high-tech workers in America.

She was gently explaining how I had missed the point. Her job was to make business succeed. I was worried about workers. Her priorities and mine did not match up.

I assume she meant large businesses, with very large PACs, who have more influence with congressional committees than I do.

Shortly afterward, US Commerce Secretary Gary Locke said it more artfully in a radio interview, “Our job is to make businesses succeed… so they can create good new jobs.” (more…)

Kathy Newman

By Kathy M. Newman
Professor of Literary and Cultural Studies at Carnegie Mellon University

On a recent episode of NBC’s Outsourced, Todd, the clueless American who runs the call center for a US-based novelty company in Mumbai, is trying to understand what the Hindu celebration of Diwali is all about.  He asks one of his employees which magical element is featured during Diwali:  “Uh, laughing cow? Crouching tiger? Flying monkey?”  Manmeet replies:  “There does happen to be a flying monkey. But I feel like that guess came from a bad place.”

A lot of the jokes on Outsourced come from a bad place.  TV critics over the last four months have argued that the show is racist, grounded in cheap gags like Americans eating Indian street food that gives them diarrhea. Others argue that Outsourced is too abject to be funny, given how many American jobs have been lost to outsourcing.  As one forum participant quipped, “What’s next?  A comedy about foreclosure?”  Finally, there are many who complain that the show is simply not funny—evidence, according to these critics, of how far NBC has fallen since the glory days of “Must See TV,” when Friends and Seinfeld dominated Thursday night in the battle for network supremacy.

The critics are mostly right:  Outsourced does play on a series of base and ethnically problematic gags, from having cows wander through set, to a pudgy character named Gupta who becomes addicted to a tobacco-like chew called “Paan,” to an employee who confounds her boss with her enigmatic head bob, to a beautiful Indian woman call center worker (played by the ravishing Rebecca Hazlewood from a steamy night time soap opera that ran on BBC, Bad Girls) who is torn between an arranged marriage and her Anglo American boss.  The Indians are frequently perplexed and/or offended by the American novelties they are selling—everything from fake vomit and Green Bay Packer Cheese Head Hats to red, white, and blue condoms and men’s belts with mistletoe attached to the buckle.  Likewise the Anglos are “fish out of water,” as they try to adapt to Indian holidays, Indian food, monsoons, power outages, Mumbai traffic, and Indian rules surrounding courtship and marriage.

What most of the critics have overlooked, however, is that Outsourced is more of a satire about the global workplace than it is a show about India.  The dialogue that pertains to economic issues is frequently biting and funny, and the overall message is two fold. Outsourced is critical of the economic situation that lured the call center from Kansas to Mumbai, but it also argues that the call center offers its Indian employees, and, especially, its women employees, genuine opportunities for social and economic advancement. (more…)

Peter Navarro and Leo Gerard

Leo W. Gerard: Your chapter in the new book, “Benchmarking the Advantages Foreign Nationals Provide their Manufacturers,” describes in devastating detail how China in particular, but also other major U.S. trading partners, violate international rules. The abuses you document make clear that it’s impossible for American manufactures to compete internationally. U.S. corporations responded by off-shoring manufacturing and millions of American jobs. Why does the U.S. put up with this unfair trade?

Peter Navarro: The Bush administration put up with unfair trade because it was distracted by the war on terrorism and because of its blind ideological commitment to free trade, regardless of the unfair trading practices adopted by our trading partners. The Obama administration is putting up with unfair trade with China because it is under the mistaken notion that it’s more important for China to keep financing our budget and trade deficits than for this country to crack down on unfair Chinese trade practices so that we can restore our manufacturing base. Consumers — oblivious to the destruction that the Chinese have done to our job base — have put up with this unfair trade because in the short run they get cheap Chinese goods. The National Association of Manufacturers puts up with this unfair trade because many of its members have offshored their production to China and now find it in their interests to oppose trade reform. What is critical in the politics of this whole situation is that the American people clearly understand how unfair trade practices translate into fewer jobs and lower wages and a bleak future. Only when the American people see the chessboard more clearly will our politicians act appropriately.

Gerard: The result of decades of losses is, as you put, the “hollowing out” of the U.S. economy. It depressed wages, lowered the standard of living, created recession conditions in the Midwest – even before the current great recession. Typically, in the mainstream media, the loss of industry routinely is blamed on unions seeking what we believe is decent wages and benefits. Your chapter provides a shockingly different story. Why don’t we hear that?

Navarro: Labor unions have become a common “whipping boy” for the recessionary ills that have afflicted the US economy off and on for several decades now. One problem is that much of the financial press has a strong, antiunion bias. A second problem is the far too parochial nature of American politics. Far too many Americans — and I include many members of the American press corps here as well — simply don’t understand some of the complexities of the global economic environment that have helped trigger the US recession. The case of Chinese currency manipulation is a perfect example. Very few politicians or pundits — much less the American people — understand how China pegs the yuan to the dollar and how an undervalued yuan acts as a subsidy to Chinese exports to the United States and a tax on US exports to China. Nor do these politicians and pundits understand how this currency manipulation affects the stock market or interest rates or the rate of off shoring. Because the effects of globalization are complex, labor unions make an easy target.

Gerard:  For those unfamiliar, because it isn’t covered much, would you explain how China can be both a mercantilist and a protectionist state, and the effect of that economic behavior on the U.S.?

Navarro:  In thinking about the issue of trade reform, it is important to distinguish between mercantilism and protectionism. A mercantilist state uses tools like illegal export subsidies and currency manipulation to increase its level of exports to other nations at the expense of jobs and income in those nations. In contrast, a protectionist state uses unfair trade practices like quotas, forced technology transfer, and regulatory barriers to prevent foreign competitors from entering its markets. As a practical matter, any state that engages in protectionism likely also is a mercantilist as well. In the world arena today, China is the reigning Emperor of both mercantilist and protectionist practices. The scope of what this “beggar thy neighbor” country does in direct violation of the World Trade Organization rules is breathtaking, and it is precisely these mercantilist and protectionist practices that I outline in my chapter in the book.

Gerard:  Can we talk for a minute about currency manipulation because this is something you hear a lot, but, again, it’s rarely explained. You provide great descriptions in the chapter of why China’s undervaluing the yuan “makes exports cheap and imports dear,” as you put it. Can you give us a primer here?

Navarro:  As a practical matter, any given country can choose between a fixed or a floating exchange rate system for its currency. In a floating exchange rate system, the value of the country’s currency is determined by supply and demand conditions in the international market. Currencies that float and trade freely everyday include the dollar, the euro, the yen, and the Swiss franc.

In fact, floating exchange rates represent a crucial element of any free trade regime that benefits all nations. The reason is that floating exchange rates act as a natural market mechanism to prevent any trade imbalances between countries. If one country like the United States runs a trade deficit with another country like China, the value of its currency should fall relative to the other currency. A falling currency will boost that country’s exports because its exports will be cheaper to sell while it will reduce its imports, because imports will become more expensive. In this way, the trade will come back into balance in a floating exchange rate system.

The problem is that some countries like China embrace the alternative of a fixed exchange rate system. In China’s case, it tightly pegs the value of the yuan to the US dollar. This means that no matter how big the US-Chinese trade imbalance, the dollar can’t fall relative to the yuan and bring trade back into balance. 

China pegs the yuan to the dollar in a very complex process, but in a simplified example you can think of it this way. American consumers go into Wal-Mart and buy a bunch of cheap Chinese goods with American dollars, and these dollars are exported over to China. Ordinarily, the surplus dollars would put downward pressure on the value of the dollar relative to the yuan. However, to reduce these pressures the Chinese government sweeps up these dollars in a “sterilization” process which involves selling bonds to Chinese citizens at interest rates of a little more than 4%. China then turns around and uses these sterilized dollars to buy US government bonds at interest rates of less than 2% — thereby losing a considerable amount of money on the deal. The Chinese government is willing to incur these losses, however, because by buying US government bonds, it bids the value of the dollar back up so that China can maintain its dollar-yuan peg. At the same time, China’s purchase of US government securities also helps lower US interest and mortgage rates — a kind of financial heroin that makes America feel good even as China steals its jobs and destroys its manufacturing base using this currency manipulation as a weapon.

Gerard:  I think that after the Olympics were held in China, a lot of people became aware of the high level of pollution there. So while American companies must pay decent wages and control pollution, Chinese companies don’t. But you detail much more insidious internationally illegal competitive advantages China has over the U.S. One of those is forced technology transfer. Can you describe that?

Navarro:  While currency manipulation and China’s high levels of illegal export subsidies rank as two of its most important mercantilist practices, China’s forced technology transfer represents one of its most insidious protectionist practices. The idea of forced technology transfer is that if a company like General Motors and General Electric or Intel wants to set up production facilities in China and sail into the Chinese market, it must surrender some of its technology to the Chinese in order to do this. This practice is, of course, one of the most blatant violations of the World Trade Organization. However, American corporate executives rarely challenge this practice because they are all too eager to play in the Chinese market. Over time, however, the practice of forced technology transfer in China is a one-way ticket to the destruction of the American technology base. If in the short run, American corporations surrender their technologies to China, eventually, over the longer run, China won’t need these American corporations, and they will be quite ironically run out of China by their own evolved technologies.

Gerard:  You describe virtually all of these practices as being illegal under international treaties or World Trade Organization rules. People who are so hot for free trade must know that China is violating these rules. Is it correct to say that the U.S. simply is not demanding enforcement of the regulations to its own detriment?

Navarro: That is absolutely correct — the US government has failed abysmally at using the tools at its disposal to crack down on Chinese mercantilism and protectionism. The Bush administration failed to do so because of its preoccupation with the war on terror and its misguided ideology. The Obama administration is even more culpable because it fully understands the damage that China is doing to the American economy. However, the President, the Treasury Secretary, and the United States Secretary of State have all decided that it’s more important that China continue to finance our budget and trade deficits than it is to challenge China on trade reform. The problem with this strategy is that it guarantees the long run secular decline of the American economy, which will come as an inevitable result of a further erosion of America’s already weakened manufacturing base.

 ***

Peter Navarro is a best-selling author and CNBC contributor. His most recent book is “Always a Winner: Finding Your Competitive Advantage in and Up and Down Economy.” Mr. Navarro is also the author of the worldwide bestseller, “The Coming China Wars,” and the bestselling investment book, “If It Rains in Brazil, Buy Starbucks.” He also wrote the management book, “The Well-Timed Strategy.” With a Ph.D in economics from Harvard, Mr. Navarro is a business professor at the Merage School of Business at the University of California, Irvine. He is an expert in macroeconomic analysis of the business environment and financial markets. He has been featured on “60 Minutes,” and his articles have appeared in publications such as “Business Week,” “The New York Times,” and “The Wall Street Journal.”

Robert Borosage

By Robert L. Borosage
Co-Director Campaign for America’s Future

Is the Obama Administration saving General Motors or is it saving auto industry jobs in the US? Is it saving GM as an American brand or GM as an American manufacturer?

These aren’t academic questions. General Motors, which has been buttressed by $15.2 billion in loans from taxpayers with more to come, has been circulating a plan for its recovery which envisions it doubling the number of cars that it builds in China, Korea and Mexico and sells in the US. According to the UAW analysis, GM projects opening the equivalent of four plants abroad to build cars for the US market, while closing more than that here at home.

Labor costs in those countries are far lower. While paying a U.S. autoworker with benefits cost about $54 an hour (before the massive concessions), a South Korean worker earns about $22 an hour, a Mexican worker earns less than $10 an hour and some Chinese workers can earn as little as $3 an hour. This may make sense for GM’s bottom line, but it makes no sense for American taxpayers.

Although GM is an American brand, it is a global manufacturer. What’s good for GM is no longer necessarily good for America.

This isn’t the first time the administration’s efforts to rescue the US economy have run into the reality of globalization. The furor over the bonuses paid to AIG executives distracted from the real scandal: that $93 billion in taxpayer money was funneled not simply to Goldman Sachs, which is bad enough, but to a parade of Europe’s leading banks — Germany’s Deutsche Bank, France’s Societe Generale, UK’s Barclays. No explanation was made on why US taxpayers had to pick up the entire tab.

Knowing that the US can’t afford to lift the entire global economy, Obama went to the G-20 meetings intent on getting Europeans to adopt bold deficit-financed recovery plans like that of the US. But, led by the Germans, the Europeans pretty much stiffed the president they so admire. That left the US to do the lifting, and rack up the debts, dangerously weakening the recovery effort.

Saving good jobs in America can’t be done simply by rescuing GM or Chrysler. The Europeans get this. The Italians provided $1.7 billion in aid to Fiat, on the condition that the plants stay open in Italy. France loaned $8.5 billion to its big three automakers, but again with pledges to retain jobs in France.

The US, however, is the champion and the protector of the global market. Americans have served as the consumers of last resort for the world. We’ve largely spurned industrial policy — other than that associated with the military industrial complex, agribusiness and finance. We’ve followed — from Reagan to Rubin — a high dollar policy that made imported goods a bargain and US exports expensive. We’ve allowed our global corporations and banks to define our trade policy, while borrowing $2 billion a day to cover record trade deficits. As William Greider summarizes, we’ve assumed that aiding multinationals in the global economy served the national interest. “That is how America became a debtor nation with its steadily weakening industrial base and stagnant wages. That condition became the predicate that led to financial crisis.”

Now those days are over. Our trading partners must be put on notice that the old order isn’t coming back. The US can no longer afford to borrow unsustainable amounts to buy stuff made abroad with the jobs our companies have moved there. We need to lower the dollar and balance our trade. We need to build things in America once more.

Saving GM won’t work without broader changes. Export-led countries like Germany and China must be challenged to generate internal demand (the Chinese have done far more of this than our European allies) to help reverse the global downturn and as a first step to a new and sustainable growth model. Taxpayer dollars should be conditioned on the maintenance of good jobs here — rather than subsidize their export abroad. We should be leading, as Obama has done, global efforts to help developing nations recover and lift their own standards in the process.

Demanding that taxpayer dollars go to save jobs here will be denounced as protectionist. But it is squandering billions in public moneys on companies that then move jobs abroad that will fuel a protectionist fury.

Save General Motors or save an auto industry and jobs in America? The president and the Congress have to decide. It ain’t necessarily the same thing.

Sherry Linkon

By Sherry Linkon
Co-Director, Center for Working-Class Studies, Youngstown State University

As the economic crisis deals another blow to American manufacturing, I’ve been wondering about something my brother-in-law asked me last fall:  the good working-class jobs seem to be disappearing, so what will become of the working class?

It’s a good question, and the answer is pretty discouraging.   Between the mid-1940s and the early 1970s, strong contracts negotiated by industrial unions, national policies such as the GI Bill and National Highway Act, and several decades of growth by American industries created what many thought would be the permanent reality: working-class jobs that could fund middle-class lives.  Three decades later, some still equate the “working class” with blue-collar industrial workers, and we still believe that working people deserve a chance to achieve the American dream.  Even as unions have accepted reduced wages and benefits and retirees have struggled to survive when the promises of earlier contracts are abandoned, we still see manufacturing jobs as good jobs.  Globalization and technology have allowed manufacturers to make more – products and money – with fewer workers, or at least with fewer workers here.  But even as reality shifts, we can’t let go of the ideal of the good manufacturing job.

All of that is coming to an end, leaving the working class with two options.  The one we hear about most is education.  That college is the path out of the working class has become received wisdom.  And yes, many of the occupations that are projected to grow over the next two decades require college degrees.   While attending college can mean piling up debt and offers no guarantees, education will help some working-class people find their way to new middle-class jobs.

But college isn’t an option for everyone, and about two-thirds of jobs do not require a college degree.  Indeed, some of the fastest-growing occupations require little training.  Manicurists, skin care specialists, fitness instructors, and preschool teachers need only a certificate or license.  Other growing fields require even less.  On-the-job training is all that’s necessary for security personnel at casinos, janitors, or home health and personal aides.

At first glance, then, it would seem that today’s displaced workers have reason to be hopeful for the future.  23 of the 30 jobs projected to produce the largest job growth over the next decade don’t require a college degree, and many don’t even require special training.  Who needs factories?  Beauty salons, medical offices, and casinos will provide the working-class jobs of the future.

But there’s a catch.  The pay is lousy.  The average annual salary for a beginning steelworker (assuming that such a position exists) is $35,590.  After five years, that steelworker would bring in over $50,000.  The starting salary for a manicurist is $21,280, and it tops out at about $32,000.  For home health and personal aides, the #2 and #3 fastest growing jobs, the salary hovers around $20,000 a year.

It’s not news that the American economy is shifting away from manufacturing and towards service.  Nor would anyone be surprised to hear that while service jobs are sometimes safer, cleaner, and less physically-taxing than working in a steel mill, they don’t pay as well.  But let’s think about what this means for the future of the working class and the future of America.

If nothing else, this will clear up all that confusion about who is working class.   As the majority of working-class jobs become low-wage jobs, we won’t have to worry about how to determine the social class of a high-school graduate working on an assembly line but earning over $50,000 a year.  Income, education, and social position will line up neatly, as they did before the 1940s.

But it also means saying goodbye to the American dream.  Home ownership and saving for a child’s college education are beyond reach if your salary hovers around the Federal poverty rate of about $22,000 for a family of four.  True, some families have multiple wage earners, and many working-class families will be able to earn about $45,000 annually – a good $15,000 below the suggested national livable wage.  And many households struggle to survive on one low income.  As the working-class moves into these low-income jobs, the ranks of the working poor will grow, and the proportion of the working class who are comfortable and financially secure will shrink.

Some will suggest that the working class deserves its economic difficulties.  Want a decent life?  Go to college.  Too “lazy” or can’t afford to go to college?  Tough.  So much for the idea of valuing hard work, much less our moral and social obligation to ensure that anyone working full-time deserves a living wage.

Yet having a large proportion of the population living on the economic edge increases demand for governmental and charitable support, creates a cycle of poverty that’s difficult to escape, and undermines the broader social fabric of American society.

I don’t have a solution beyond the obvious: raise wages.  The only way to get there is to recognize the emerging reality: even if many more people attend college, we will still have a large and growing, hard-working, low-paid working class.  All the discussion about education as the key to stabilizing the economy ignores the real future of the working class.

This article was first printed on the Center for Working-Class Studies blog.

Robert Borosage

Robert L. Borosage

Co-Director Campaign for America’s Future

We are headed into the most ambitious era of progressive economic reform since the New Deal. The crisis leaves little alternative, as job losses mount across the country and the world. The Obama administration has hit the ground running, pushing to pass an $800 billion plus recovery plan, scrambling to put together a new plan for banks still on life support, and cobbling together an initiative to help millions of families on the verge of losing their homes.

But recovery, however daunting, is not enough. Even as the administration struggles to fend off a full-scale depression, it faces the task of constructing the foundations of the new economy out of the ashes of the old.

Republicans, still grousing about more tax cuts and less spending, are clueless. But even many Democrats seem to assume that if we just get the economy going, bail out the banks, add a dash of regulation, we can go back to business as usual.

But that is neither possible nor desirable. That old economy was founded on stagnant incomes and unsustainable debt. Families struggled to keep their heads above water by taking money out of their homes and assuming ever higher levels of student, car, credit card and consumer loans. The country served as the consumer of last resort for the world by borrowing staggering sums — $2 billion a day over the last years – from creditors abroad, largely Japanese and Chinese central bankers. That economy was floated on asset bubbles like that in housing which has now exploded in our faces. We can’t resuscitate the old economy – and should not want to.

The next economy must seek to provide a sustainable and a widely shared prosperity, one where the American dream remains in reach for working people. That will require new thinking and bold reforms. A group of progressive organizations have joined together to kick off this discussion. (For the first conference on “thinking big, thinking forward — already oversubscribed — go here.)

But many of the changes needed are clear — and the initial struggles over signature reforms are already teed up.

What is needed to insure to every person a job with a decent wage, a world class public education, affordable health care, and retirement with dignity? This is the pledge Franklin Roosevelt made when he laid out his Economic Bill of Rights in the midst of World War II. It was echoed in Obama’s inaugural address. Surely that new economy must include:

1. A new public social compact — affordable health care, pensions above Social Security — to replace the promises that the corporations have shredded. The signature fight over health care reform will begin this year. 

2. Sustained public investment in areas vital to a maintaining a high wage path in a global economy — world class schools, affordable college, 21st century infrastructure, cutting edge science, research and development. The first volleys of the signature battle — over whether we will sustain expanded public investment after the economy regains its footing or short-change it –are already being exchanged. 

3. A new global economic strategy — featuring a new industrial policy — that enables the US to balance its trade, while creating global rules that protect workers, consumers and the environment, rather than threaten them. The initial struggle over making the transition to renewable energy the centerpiece of economic reform is beginning. 

4. Restructuring and regulation of the financial sector, making banking a boring occupation again, devoted to making loans to the real economy, not hawking exotic instruments in operatic speculative ventures. The signature reform — taking over and breaking up the major banks that are on life support — is likely to be fought out in the next months. 

5. An aggressive wage policy that empowers workers to organize and bargain collectively, raises the minimum wage, and mandates basic benefits and safety standards. The donnybrook will begin this Spring over the Employee Free Choice Act. 

These are fundamental choices threatening entrenched interests. Health care reform requires taking on the drug and insurance companies. Sustaining public investment requires defeating the military lobby and the wealthy whose taxes will rise. A new global strategy challenges the multinationals that profit from the old order. Getting Wall Street under control threatens the largest political donors. The business lobby promises Armageddon if the Employee Free Choice Act moves forward.

President Obama has already signaled his intention to go forward with the core reforms in this agenda. So forget about a new era of bipartisan consensus and get ready to rumble. We’re headed into pitched battles that will succeed only with massive popular mobilization. We won’t have this opportunity again, and we dare not blow it.