Girls for Sale

January 17th, 2004

If there is even needed another case for globalization and development, Nicholas Christof writes a very moving article about slavery and prostitution in the east (click on continue reading link below for full article). For a while I have been making the argument that the American boycott of goods and hence closing of Asian sweatshops was not the smartest thing. Nike doesn’t use forced labor in its overseas factories, workers are willing to work there because its a better option than others they currently have. According to the Institute for International Economics foreign companies pay about double the local manufacturing wage in low-income countries. Another NYT columnist, Paul Krugman, made essentially the same point more elegantly than I could put it:

“In 1993, child workers in Bangledesh were found to be producing clothing for Wal-Mart and Sentor Tom Harkin proposed legislation banning imports from countries employing underage workers. The direct result was that Bangldeshi textile factories stopped employing children. But did the children go back to school? Did they return to happy homes? Not according to OXFAM, which found that the displaced child workers ended up in even worse job, or on the streets – and that a significant number were forced into prostitution.”(Hearts and Heads, NYT, 4/22/01)

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UPDATE:

Slavery vs. the Cell Phone: Epilogue to the previous piece.
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What’s it Worth?

January 17th, 2004

In a service based economy, higher education is not necessarily a smart thing.

Burgers or Beans

January 17th, 2004

The ever serious minds at the Economist have released the latest in the Big Mac Index. Of note is they are starting a Tall Latte Index; Starbucks is now serving in 32 countries round the globe (the mega chain opened its first shop in France on January 16th, 2004). Both indecies use purchasing power parity (PPP) as a way of comparing bundels of goods in seperate countries. The idea being that in the long run exchange rates will move to equalize the prices, a nifty way for telling which currencies are over or undervalued.

*********UPDATE**************
Jeremy Avnet knows an excellent reason for the problems caused by all those Big Macs eaten around the world.

Consumer Debt at 2 trillion

January 14th, 2004

John Irons of ArgMax thinks this is not good. I would have to agree…

Washington Post
U.S. Consumer Debt Grows at Alarming Rate
Debt Burden Will Intensify When Interest Rates Rise

By William Branigin
Washington Post Staff Writer
Monday, January 12, 2004; 12:46 PM

Feeling besieged by all those post-holiday credit card bills? Struggling to dig out from an avalanche of debt?

You are not alone.

According to the latest figures from the Federal Reserve, America’s consumer debt has topped $2 trillion for the first time, continuing what debt experts view as an alarming surge in recent years.
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Does the WTO Make Trade More Stable?

January 14th, 2004

A working paper out by Andrew Rose gives disconcerting evidence how membership in trade organizations does little to smooth a path towards interdependence. I resign myself to the notion that while trade is a crucial component, it is not sufficient condition for stability. Therefor the WTO is imperative, but not the answer-all it can be presented as.

“I examine the hypothesis that membership in the World Trade Organization (WTO) and its predecessor the General Agreement on Tariffs and Trade (GATT) has increased the stability and predictability of trade flows. I use a large data set covering annual bilateral trade flows between over 175 countries between 1950 and 1999, and estimate the effect of GATT/WTO membership on the coefficient of variation in trade computed over 25-year samples, controlling for a number of factors. I also use a comparable multilateral data set. There is little evidence that membership in the GATT/WTO has a significant dampening effect on trade volatility.”

25 months and counting

January 13th, 2004

Economists at Morgan Stanley give their thoughts on the U.S. recovery . Overall arching opinion is the economy is healing in an unsustainable manner.

On one hand the markets have had excellent performance for 2003. However they might not be accurately reflecting the risk of running low federal interest rates and an ever expanding fiscal deficit.

“The Great American Job Machine has long powered the US business cycle. It drives the income growth that fuels personal consumption. That internally generated fuel is all but absent in the current upturn. The US economy is mired in a jobless recovery the likes of which it has never seen. This has profound implications for the economic outlook, the political climate, trade policies, and the global business cycle.

Contrary to popular spin, the US labor market is not on the mend. In the final five months of 2003, a total of only 278,000 new jobs were added by nonfarm businesses — a gain that is easily matched in a single month of a typical hiring-led recovery. Moreover, literally all of the job growth that has occurred over this period has been concentrated in three industry segments — temporary staffing, education, and healthcare — which collectively added 286,000 positions in the final five months of last year. The “animal spirits” of a broad-based hiring-led revival by US businesses are all but absent. Jobs may be rising in America’s low-cost contingent workforce (temps) and in high-cost-areas that are shielded from international competition (health and education), but positions continue to be eliminated in manufacturing, retail trade, and financial and information services. ”
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IMF looks down upon U.S. Fiscal Policy

January 11th, 2004

The International Monetary Fund really wishes the Bush team would get the spending and deficit under control, for our growth and the stability of global economies.

“…Nonetheless, as the report underlines, the emergence of large fiscal deficits and signs that they will be sustained at substantial levels unless corrective action is taken, raises a number of longer term and multilateral concerns.

First, sustained fiscal deficits lower national savings in the United States and will eventually raise real interest rates both in the United States and abroad, thus crowding out private investment. The eventual cost will be lower global productivity and income growth. These effects are discussed in Section 2 of the report.

Second, higher U.S. fiscal deficits means that federal debt will not be brought down as had previously been envisaged, making the impact of an aging population on Social Security and health care programs even more difficult to deal with…”
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Where to Cast the Net? article 1

January 11th, 2004

Jacon S. Hacker begs the question is risk being rolled from government and business onto employees. (NYT 1/11/03)

Call It the Family Risk Factor
By JACOB S. HACKER

newhackop.jpg

NEW HAVEN, Conn.–On the heels of Friday’s glum Labor Department report, Americans have a right to be confused. Soaring growth, stocks and consumer confidence have heartened investors. And yet, the country remains mired in a jobless recovery. The reality is that the economy has become more uncertain and anxiety-producing for most of us — not just over the past three years, but over the past 30. But by fixating on the day-to-day ups and downs, analysts have largely missed the more telling trend: an increasing shift of economic risk from government and corporations onto workers and their families.

Signs of this transformation are everywhere: in the laid-off programmer whose stock options are suddenly worthless, in the former welfare mom who can get a job but not health care or day care, in the family forced into bankruptcy by the sickness of a child. But these episodes, while viewed with sympathy, are usually seen in isolation, rather than as parts of a larger problem. This blinkered view stands in the way of both diagnoses of the causes of the new economic insecurity and prescriptions for its cure.

Consider the accompanying chart. The line traces the year-to-year instability of family income from 1972 to 1998, based on the University of Michigan Panel Study of Income Dynamics. It measures the extent to which a family’s income from both government and the private sector fluctuates from year to year, controlling for the size of the family and the general rise of income among all Americans (so as not to confuse upward mobility with instability).

The formula captures both changes in the income of families and changes in families themselves, like divorce and separation, that alter their standard of living. What it shows is that family finances have grown much more insecure. Although insecurity dropped in the booms of the late 1980′s and late 1990′s, the long-term trend is sharply upward. In fact, the instability of family incomes was roughly five times greater at its peak in the 1990′s than in 1972.

Optimists point out that Americans are much richer than they were in the 1970′s. But while they are as a whole, incomes have grown little for the middle class and working poor — even as wages have become more unstable, the financial effects of losing a job have worsened, and the cost of things families need, from housing to education, has ballooned. Yet government and the private sector aren’t just ignoring these problems, they are making them worse. Many programs for the poor, for example, have been substantially cut. And middle-class programs like Social Security have steadily eroded.

The truly staggering changes, however, are taking place in the private sector. The number of Americans without employment-based health benefits has been rising for decades. Employers are also restructuring workplace benefits to impose more risk on workers. Once, for instance, workers lucky enough to have a pension enjoyed a guaranteed benefit. Now, with so-called defined-contribution plans like 401(k)’s, workers have to put away their own wages and the returns of the plan depend entirely on their own investments.

What might be done to help families cope with the new economic insecurity? The essential first step is to shore up existing policies to ensure broad-based and secure unemployment, pension and health benefits.

Yet simply upgrading present efforts is not enough. I believe we need a new, flexible universal insurance program to protect families against catastrophic expenses and drops in income, before families fall into poverty. Universal insurance would, in turn, be coupled with tax-subsidized savings accounts that would help middle and lower-income families manage these expenses before they reached catastrophic levels.

Our economy is in the throes of a great transformation — from an all-in-the-same-boat world of shared risk toward a go-it-alone world of personal responsibility. Protecting families from the greatest “hazards and vicissitudes of life” — in Franklin Delano Roosevelt’s still relevant words — is necessary and possible, and it offers perhaps the best hope for reviving a constructive role for government, on bold new terms, in this new century.

Broken Promises…

January 7th, 2004

Joesph Stiglitz looks at NAFTA for the New York Times. I don’t agree with all of it, but his insight is thoughtful. (yes yes, a tautology)

The Broken Promise of Nafta
By JOSEPH E. STIGLITZ

Published: January 6, 2004

The celebrations of Nafta’s 10th anniversary are far more muted than those involved in its creation might have hoped. In the United States, the North American Free Trade Agreement has failed to fulfill the most dire warnings of its opponents and the most fervent expectations of its supporters. In Mexico, however, the treaty remains controversial and even harmful — as do America’s efforts to liberalize trade throughout the hemisphere.
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the stars are aginst us

January 7th, 2004

Well, it was finally bound to happen. After four and a half years I had drive failure in my Machintosh G3. Truth be told it wasn’t really Apple’s fault, it was IBM’s (a deskstar drive). SInce this happens on the nexus of me installing OS X ver3, Mac World Expo across the bay, and thinking (albeit stupidly) that after two years of running a RAID setup and never using it, I’d kind of like to get some drive space back, it seemed relevant. In case any of you are wondering-the life for IBM’s drives bought in 1999 is about up.