In case you didn't know it, "The superrich are doing you a favor"

Continuing a growing trend to idolize the rich as truly special folks who make life itself possible for the rest of us unrich clowns, Jon Markman at MSN offers up a piece titled The superrich are doing you a favor.

I can't quite decide if the title and piece are tongue-in-cheek or if Markman feels at least a bit of genuine awe and idolatry when viewing the megarich. Witness this:

In fact, the superrich spend so much more of their mountains of money, according to a new line of thinking among academics, that they may provide a public service by smoothing out the little dents and valleys in the global economy. As scads of Russians, Chinese, Indians and South Americans have joined the billionaires club due to the rise of emerging markets' industrial might, worldwide recessions have become much fewer in number and far slighter in severity than in past decades.

This makes sense, even if it doesn't make you feel better. For just when many average people in the United States or Europe are slowing down their consumption of goods and services due to the loss of a job or pending home foreclosure, there are an increasing number of superrich worldwide to fill in the spending gap. It's sort of a perverse fulfillment of the trickle-down theory.

In any case, the piece offers up a bowl full of interesting facts on the super rich, including:

• The wealthiest 1 million people in the world account for as much spending as 60 million other households


• Russian natural resources has helped create at least two dozen Russian billionaires and thousands more multimillionaires


• China is now home to 500,000 millionaires


• BusinessWeek reports 83,000 millionaires in India

Man, just reading about all this wealth, all this vibrant and humming economic activity in so many places around the globe just makes me want to....

Jordan's drug prices soar--can you say "free trade?"

A report by Oxfam indicates that another nation has begun to feel those masochistic benefits of "free trade."

Strong intellectual property protections in U.S. free trade deals have hurt developing countries, pushing up drug prices in Jordan by 20 percent, an aid advocacy group said in a report released on Tuesday.

Beefed-up property rights for drug makers, which have been built into U.S. free trade deals like the one with Jordan, "will make it harder and harder to sustain public health systems," said Rohit Malpani, a trade analyst with the advocacy group Oxfam in Washington.

U.S. trade officials disputed the report's findings, saying the trade agreements fairly balanced intellectual property protections and health care needs.

The Oxfam report found that drug prices in Jordan have increased by 20 percent since 2001, when the bilateral deal with the United States was implemented, and are up to six times higher than comparable drug prices in Egypt.

Oxfam said a big driver of higher drug prices is a rule that guards, for a time, against sharing of clinical trial information that can be used to make generic drugs.

"In developing countries ... public health systems are very fragile and only a small percentage of the population has health insurance," so higher drug prices can have serious health consequences, Malpani said.

Strong stuff. But is the U.S. worried that our free trade mania is having adverse consequences? I'm sure you knew this before I told you---Nope.

But a U.S. trade official, who requested anonymity, said: "We strongly disagree with Oxfam's contention that intellectual property protection is at odds with an effective response to global health crises.

"We believe that our (trade agreements) represent an appropriate means of advancing high standards of IP protection, while safeguarding the ability of trading partners to respond to legitimate public health needs," the official added.

The big test is how strongly the Democrats in congress feel about the issue, and that remains to be seen, although the battle lines are being tested:

Malpani believes support is gathering among some Democratic lawmakers for loosening those rules for developing countries.

Democrats on the House of Representatives Ways and Means Committee, which oversees trade, recently released their own vision for trade including a goal to "reestablish a fair balance" in setting IP rules for medicine with developing countries.

Last month, a group of lawmakers sent a letter to U.S. Trade Representative Susan Schwab saying that trade deals "appear to undermine" a pledge from all World Trade Organization members to give poorer countries flexibility in protecting public health.

Some Democrats are also calling for stronger protection for workers and the environment to be woven into pending deals.

India knows gloablization...and someone has figured out why not to like it

Here's a pretty succinct, eloquent lament from India on what globalization will ultimately mean for that country (not to mention all the rest of us):

Globalization - Plunder Fueled by Greed?
by Aarcee

March 30, 2007




Globalization is touted by some as a win-win arrangement for every country that participates in it and opens it markets. A sweet poison tastes sweet first and kills you later. So, the first taste of Globalization that India had was incredibly sweet. When everyone was so inebriated by the sudden glut of consumer items that had been forbidden in a closed economy, any hint that this glut was going to be harbinger of economic shackles was unwelcome. However, reality has now begun to sink in. I was very delighted to read an article by a reader lamenting the erosion of India’s manufacturing capability by under-priced Chinese imports. I see him as an individual who is among the first few to open his eyes and realize that this sweet potion of Globalization actually does considerable harm!

Yes, now apples from New Zealand, America, Australia and China are available in India. Everyone has a Korean cell phone now. That is the visible carrot. Let’s see where the looming invisible stick is. With the Corporations invading India, the small entrepreneurs is becoming history. Small retailers can not compete with Wal Marts and Reliance Marts. You will see them going out of business one by one. They are screaming, but their cries are being drowned by the cheers of those who are still gloating on the carrots of globalization. Now the fruit seller and vegetable seller goes door to door selling his ware. The huge Marts will in near future buy the produce straight from the farms. So now, the hundreds of small business owners will be replaced by one obscenely wealthy individual who will employ the small farmers as farm workers and pay them ridiculously low wages.

Globalization brings in its wake a perverted kind of capitalism. Capitalism is good when it encourages small entrepreneurs to set up shop and earn a buck. In this 21st century perverted kind of Capitalism, the wealth gets siphoned off to a few ridiculously rich individuals who use privileged accounts in market trading, IPO grabbing and, at worst, Enroning the savings of the middle class.

Fourth quarter corporate profits headed south, like the mortgage market

Although you probably didn't hear this unless you really pay close attention to the financial news, the Commerce Department deported that corporate profits in the fourth quarter of 2006 kind of went south. Except for Wall Street. And domestic corporation operations abroad. Doesn't that sound optimistic?

Well, Paul Kasriel of the Northern Trust Company offers up both the bad news and probably as optimistic a view as you could find from this info:

The fourth-quarter contraction in corporate profits would have been worse had it not been for Wall Street's profits and profits of U.S. corporations earned abroad. Profits of domestic nonfinancial corporations declined 6.63% in the fourth quarter while profits of domestic financial corporations and profits earned from abroad increased 4.32% and 15.90%, respectively. The creation of mortgage-related financial instruments has been a money machine for Wall Street in this expansion. Now that mortgage credit growth is in a steep decline, Wall Street will have to find another money machine. I have complete confidence it will.

Pay particular attention to that "profits earned from abroad increased...15.90%. What do you think happens when the profit center of a corporation moves from the U.S. to its overseas operations? And why do you think such a thing would happen?

And do you share Kasriel's confidence that Wall Street will find another "money machine?" Especially when you realize that much of the previous money machine--mortgage-related financial instruments--is now credited with creating the mortgage default crisis that we now "enjoy?"

We seem to be approaching the end of stage one of globalization. Bet you can't wait to see how good stage two is.

Wish someone in America would say this out loud (in public)

The statement:

People in the middle class have long been said to be a robust pillar supporting the socio-economic stability of a country. So, the bigger the middle class, the better our society is. However, the number of those in the middle class here was learned to have declined substantially while those in the upper and lower classes has increased in the last 10 years, according to a report released recently...It makes one wonder whether or not a chronic social state making the rich richer and the poor poorer is being revived. The crumbling of the middle class means nothing other than those in a state of economic hopelessness are increasing. Those driven out of the middle class are set to be deprived of their courage and hope that they would be better off if they work harder.

Who said it?
No, it wasn't a Democratic legislator, or an academic with a conscience, or even an American labor leader.  It's an unbylined editorial in the Korea Times newspaper from South Korea.
Other excerpts:

According to the report, the middle class, which accounted for 55 percent of the total population in 1996, fell to 43 percent last year while those in upper and lower classes that stood at 20 percent and 11 percent, respectively, increased to 25 percent and 20 percent in the same period.
...

Particularly worrisome is the fact that those in the lower class have doubled in the last 10 years. Those driven out of their jobs or the selfemployed suffering from a long business recession are deemed to have fallen out of the middle class. The statistics testify to the worsening income polarization of our society, a phenomenon the current regime has vowed but failed to correct.
...

The recent spiraling of apartment and other real estate prices makes it extremely hard for middle or low-income people to secure their own housing. That has made a growing number of people who can't afford to buy homes regard themselves as economic "losers."
It is simply intolerable for the government to simply let the gap between haves and have-nots continue to grow---even psychologically---because it signifies social injustice in itself and threatens to destabilize society. The only plausible means to redress the situation is to vitalize business activities. A policy putting more emphasis on economic growth than on distribution should be pursued.

The government should realize that supporting the waning middle class is their foremost task because the decline of the middle class is not merely a sign of economic difficulty, but an indication that society's existence might be in danger.

Still waiting for an American paper or other media source to be that direct and honest about the situation.
And, by the way, do you still think that "globalization" is innocuous, that it's effects on America are isolated, that it's anything but a looming threat to what the developed world has long considered to be a healthy society?

Another heart warming story of jobs going to India

The official line from the US government and the vast majority of American Business leaders is "outsourcing is good for America." The number of games played to provide evidentiary support for such a notion is truly mind boggling (a subject for another post), but reality keeps raising its ugly little head and whispering "psst, buddy, there go some more jobs."

What's really fascinating is how the business press does back flips to spin a story of jobs going to India rather than the US into a classic feelgood story. Kafka and Orwell could not do a better job of absurdity reported via new speak.

Take this little gem from the Chicago Tribune on how using Indian labor to start a new Information Technology (IT) venture just made the whole startup even more special, spiced up with a few other heartwarming anecdotes about how other white collar jobs, including legal research and basic legal services, are now drifting India-ward (emphasis added):

For starters, firms turn to India
Companies find edge by using full-time outsourced workers

By Ann Meyer
Special to the Tribune
Published March 5, 2007


Entrepreneur Bill Lederer is no stranger to dot-coms, but his latest venture has taken him to a new place--India.

Lederer, the founder of Art.com a decade ago and an investor in several other early dot-coms, is rolling out CompleteLandlord.com and RentSlicer.com, two niche sites that aim to deliver comprehensive listings, legal forms and other information for landlords, property investors and renters. Both are part of Lederer's Socrates Media, financed by Lederer and other local investors.

But this time Lederer is relying on a wholly owned subsidiary in India to keep costs low and service high. The strategy will help make the company profitable sooner, he said.

"If we had gone to do this in only Chicago, it would have cost us considerably more," Lederer said. "We are able to do it faster, cheaper, better."
...
The company's subsidiary in Hyderabad is doing more than IT work. It's involved in accounting, marketing support, editorial, creative services and a customer call center, Lederer said.

"Everything we do in Chicago, they do in India," he said, though strategic decisions and new-product development are concentrated in Chicago.

Lederer started Socrates after acquiring a paper-legal-forms company, Made E-Z, in 2003. He brought it online in 2005 in a brick-to-click model, where landlords' in-store purchases of legal forms were supplemented with services from Socrates.

In December, CompleteLandlord.com launched as a separate Web site. And Lederer is taking a similar approach with RentSlicer.com, which will offer comprehensive listings and information for renters when it is launched next month.
...
Socrates employs 50 workers in India and 15 in Chicago. It started setting up its India team by hiring managers with experience working with American companies, said Bruce Masterson, Socrates' chief operating officer, who formerly ran Reuters North America.
...
CVM Solutions, an Oakbrook Terrace-based provider of supplier diversity data and technology, first outsourced its IT work to a provider in India but later formed a wholly owned subsidiary as its needs grew, said Rajesh Voddiraju, president, technology solutions. Now the company employs 36 people in India, while 46 work in Oakbrook Terrace, he said.

"Having a low-cost arm has helped us grow," he said, noting that the company saves about 70 percent in costs from the India operation.

Legal-services firm Mindcrest, with a headquarters of four in Chicago, wouldn't be in business without a wholly owned subsidiary operating in Mumbai and Pune, India, which employs about 150 Indian workers, most of them lawyers with knowledge of American law, said Ganesh Natarajan, the Chicago attorney who founded the company six years ago with three partners.

Natarajan, who is from Mumbai, saw legal services in India as a natural fit because India is a common-law country and its lawyers are used to researching case law, he said.
...
Mindcrest does not give legal advice but provides basic legal services, such as reviewing documents, drafting contracts and doing research, at savings of 50 percent to 90 percent from U.S. rates, Natarajan said. Most of the firm's clients are law firms, consulting firms and corporations with their own in-house counsel who use Mindcrest to save time and money, he said.

A positive experience using a similar legal services firm, QuisLex, based in New York but with 100 employees in India, gave Socrates the confidence to pursue Indian labor for other aspects of the start-up, Masterson said.

I think we have seen the future, and it doesn't work if you live in America.

And ask yourself, would the trusty old US government bother tracking down these jobs which originated in India, but clearly would have been in the US in decades past, and include them in its very suspect analysis of jobs lost to outsourcing?

I think not. I really, really think not.

Ignoring our way into third world status

If you were ever tempted to believe the globalization propagandists that globalization (1) creates more jobs than it takes away from the U.S., and/or (2) doesn't really affect that many jobs, check out this, from PAUL CRAIG ROBERTS:

American employees have been abandoned by American corporations and by their representatives in Congress. America remains a land of opportunity ? but for foreigners ? not for the native born. A country whose work force is concentrated in domestic nontradable services has no need for scientists and engineers and no need for universities. Even the projected jobs in nursing and school teaching can be filled by foreigners on H-1B visas.

...
The myth has been firmly established here that the jobs the U.S. is outsourcing offshore are being replaced with better jobs. There is no sign of these jobs in the payroll jobs data or in the occupational employment statistics. When a country loses entry-level jobs, it has no one to promote to senior level jobs. When manufacturing leaves, so does engineering, design, research and development, and innovation itself.

Matthew J. Slaughter, a Dartmouth economics professor rewarded for his service to offshoring with appointment to President Bush's Council of Economic Advisers, suffered no harm to his reputation when he wrote, "For every one job that U.S. multinationals created abroad in their foreign affiliates, they created nearly two U.S. jobs in their parent operations." In other words, Slaughter claims that offshoring is creating more American jobs than foreign ones.

How did Slaughter arrive at this conclusion? Not by consulting the BLS payroll jobs data or the BLS Occupational Employment Statistics. Instead, Slaughter measured the growth of U.S. multinational employment and failed to take into account the two reasons for the increase in multinational employment: (1) Multinationals acquired many existing smaller firms, thus raising multinational employment but not overall employment, and (2) many U.S. firms established foreign operations for the first time and thereby became multinationals, thus adding their existing employment to Slaughter's number for multinational employment.

ABC News' John Stossel, a libertarian hero, recently made a similar error. In debunking Lou Dobbs' concern with U.S. jobs lost to offshore outsourcing, Stossel invoked the California-based company, Collabnet. He quotes the CEO's claim that outsourcing saves his company money and lets him hire more Americans. Turning to Collabnet's webpage, it is very instructive to see the employment opportunities that the company posts for the United States and for India.

In India, Collabnet has openings (at time of writing) for eight engineers, a sales engineer, a technical writer, and a telemarketing representative. In the U.S. Collabnet has openings for one engineer, a receptionist/office assistant, and positions in marketing, sales, services and operations. Collabnet is a perfect example of what Lou Dobbs and I report: the engineering and design jobs move abroad, and Americans are employed to sell and market the foreign-made products.

Other forms of deception are widely practiced. For example, Matthew Spiegleman, a Conference Board economist, claims that manufacturing jobs are only slightly higher paid than domestic service jobs, so there is no meaningful loss in income to Americans from offshoring. He reaches this conclusion by comparing only hourly pay and leaving out the longer manufacturing workweek and the associated benefits, such as health care and pensions.

Occasionally, however, real information escapes the spin machine. In February 2006 the National Association of Manufacturers, one of offshoring's greatest boosters, released a report, "U.S. Manufacturing Innovation at Risk," by economists Joel Popkin and Kathryn Kobe.16 The economists find that U.S. industry's investment in research and development is not languishing after all. It just appears to be languishing, because it is rapidly being shifted overseas: "Funds provided for foreign-performed R&D have grown by almost 73 per cent between 1999 and 2003, with a 36 per cent increase in the number of firms funding foreign R&D."

U.S. industry is still investing in R&D after all; it is just not hiring Americans to do the research and development. U.S. manufacturers still make things, only less and less in America with American labor. U.S. manufacturers still hire engineers, only they are foreign ones, not American ones.

The "Blame the Unions" con

I've now had at least ten members of the public tell me that the reason that blue collar jobs got shipped overseas is that the unions created outrageous wage and benefit structures. "If only the unions hadn't gotten greedy," these gullible folks insist, "the jobs would still be here."

This is always followed by some variation on this line of thought: "Why should the companies pay union members $17 an hour, when they can get the same work done for less overseas?"

I guess that makes superficial sense if you don't know any details about the wages being paid in the countries to which these jobs were shipped. But if you actually think, rather than parroting what Rush Limppaw, or Shill O'Reilly, or Sean Vannity say...

The illogic of this theory can be demonstrated by asking a simply and very obvious question: If union wages caused jobs to be shipped overseas to cheaper labor, how low would wages have to be in the U.S. to convince employers to keep the jobs here?

The people who spout this theory to me seem to assume that if only the unions would have accepted a "more reasonable" wage like $10 an hour, the jobs would still be here. Which is, of course, nonsense.

If the overseas labor cost is $.50 an hour, it wouldn't take a genius employer long to realize that this is only 1/20 of a $10 per hour rate here. Even if you lowered wages to $5 per hour here, that would still be ten times higher than they would have to pay overseas.

The whole theory is crap. If employers can get their labor overseas for $.50 an hour, American workers would have to accept something very close to that...say $.75 per hour...to prevent the jobs from fleeing overseas.

And I wonder how many of my misinformed friends have tried living in the U.S. on $.75 per hour. Let's see, $.75 per hour, times 40 hours, equals $30 per week. Yeah, that could work if you walked everywhere, went naked, lived in a cardboard box on public land, never, ever got sick.....

Why the growing income/wage gap? It's you, you uneducated fool!

Concerned about the growing divide between the rich and poor, between the well-paid and poorly-paid? Well, Fed chief Ben Bernanke has the solution: go get yourself a better education, you fool!

Speaking to the Omaha, Nebraska Chamber of Commerce, Bernanke said, according to Market Watch(emphasis added):

Education, not protectionism, is the best weapon in the fight against rising income-inequality...If we do not place some limits on the downside risks to individuals affected by economic change, the public at large might become less willing to accept the dynamism that is so essential to economic progress...The gap rose particularly rapidly through most of the 1980s, although it has continued to trend higher...I read the available evidence as favoring the view that the influence of globalization on inequality has been moderate and almost surely less important than the effects of skill-based technological change...As a result, erecting trade barriers to trade and investment would not be helpful, he said.

Bernanke made no conclusion on the issue of soaring CEO compensation, beyond noting that some economists tie it to the increased complexity of corporations, while others see it as a result of CEOs being in charge of their own pay.

Now isn't that really cute? The gap rose "particulalry rapidly" through the 1980s. So I guess we can spell the origin of "the gap" R E A G A N. Like so many other despicable traits of 21st century America.

But don't worry, that's the message Big Ben is trying to send here. It isn't that big bad globalization you've been hearing about from those nasty, pessimistic sources (like this one); it's just a little asymmetry between education and skills that are in demand. We'll solve it. Go back to sleep. A deep sleep. Count backward with me, from 100: 100...99...98...97...Reagan is a hero...96...95...gloablaization is good...94...93...your eyes are getting....blind.

David Brooks Strikes Again

The NY Times's David Brooks strikes again in his column for today: Who's Afraid of the New Economy. Touting a new report by Third Way, Brooks tries to convince readers (& himself?) that the economic future is rosy. And rosiest of all for the U.S.

First thing he doesn't tell you is that Third Way is an organ of the Democratic Leadership Council, which is firmly pro-globalization. Then he tries once again to pooh-pooh the bad economic signs for America:

1. We don't need to worry about high consumer debt because "household assets have risen faster than debts." That's only true, of course, if you look at the aggregate for all Americans. For individuals at the bottom or lower middle--not true at all. Why do you think there have been so many people filing bankruptcy, and so many mortgage loan defaults that they're starting to affect stock prices of mortgage lenders?

2. The "vast majority of job losses are caused by technological change, not outsourcing."

But: (a) he has no way of knowing that, and (b) he seems to once again be playing the semantic game of talking about jobs that are "lost," defined as jobs that once existed here and have now been shipped overseas, leaving out the many "new" jobs that were created overseas that would have been created here absent globalization.


David Brooks: my nominee for dishonest globalization cheerleader of the decade.