Thursday, August 4, 2016

Globalization and its Discontents Part 2/2

I can't imagine anything more futile and tedious than spending time agonizing over how to present what I have learned about some of the structural economic issues of this country. It goes without saying that i have no credibility in this area and that there is zero opportunity for my opinions to make the slightest difference.

On the other hand, I have read that a so-called democracy depends upon an informed electorate assuming, that is, that we do have a democracy, which I doubt. And some of the most important issues that we as a nation face are at the very least non-trivial and with a long and interesting history so it hasnt been entirely boring for me, but for you, thats not so clear.

If we are going to participate in the political process, then it is up to us to investigate what is going on, what the options are, correlate what we have been told with what actually happened in order to form judgments about future behavior and take what positive steps we can in a world out of our control. Furthermore, certain of the issues described below, although they are part of a very complicated economic system, do seem to have some straightforward partial solutions that would be helpful.

I will call these “naive solutions”. I mean, why not?

So with my undergraduate degree in Economics in hand, I boldly set out to understand what is going on with certain economic policies of our country. Probably no one term describes these structural issues but the one most often used is “globalization” and that will have to do for now. And the goal of my little adventure in civics and participatory democracy is to learn more about what is going on in our economy which seems to have substantially changed in the last 30 years.

Lets ask some fundamental questions.

1. Just how many unemployed people are there in this country?

I grew up at the RAND Corporation, the very home and heart of quantitative research in this country. All economic measures are imperfect but they are often useful. We need some way to judge the effect(s) of policy, and if we are using modeling and simulation, some way to evaluate the results of proposed changes in policy.

I assumed that the “unemployment rate” that we hear so much about was an imperfect measure of the percentage of Americans who are either completely unemployed or mostly unemployed. Imperfect is not the right way to describe this measure, a better way might be “deliberately deceptive”. According to the Bureau of Labor Statistics, the “unemployment rate” only measures the percentage of people in this country who had become unemployed in the last 18 months and are still unemployed. If you have been unemployed for more than 18 months, then you are no longer counted. But of the people I know who are unemployed, by far the ones who are most affected are those who have been unemployed for longer than 18 months. How many of those are there? No one seems to know.

Furthermore, there is no measure, as far as I can tell, of the number of people who did find work, but at a rate far lower than the one they had previously. So, if they previously worked as a Marketing professional at $80K/year but are now working slinging burgers at Jack in the Box, this is not measured. There is also no accounting for the people who have given up trying to work, but would be working if they could.

But our government does not measure or attempt to measure this. And when they talk about the unemployment rate they are deliberately lying. Well, I dont find that acceptable. What are they trying to hide. Thats an easy question to answer. They dont want to know how miserable people are in this country due to their policies and they dont want you to know either.

2. But, how much of this unemployment and underemployment is the result of “globalization”?

It would be easy to find out if they wanted to know, all they would have to do is to ask the companies that lay people off, or who no longer outsource to American companies, how many people they laid off or what is the value of the contract now sent overseas.

This would not tell the whole story.  If $500 million dollars worth of salaries is extracted from a community and sent overseas to save $50 million for the corporation, that $500 million is no longer being spent in the local community. How many people does that effect and how to do you measure it?  And then of course that money is itself recycled through the community many times, perhaps to a lesser degree.  Given enough time and a research library, I would probably find that economists have measured or modeled this effect in the economy.  For our purposes it is enough to know that we do not know how much the mere outsourcing of work to save a few dollars for the corporation hurts the rest of us.

But just like the unemployment rate, we would expect that our government would want to know these numbers and would make an effort to estimate them. But they do not. All that is reported, if anything is reported, is that the corporation saved $50 million dollars that year by outsourcing. That must be nice for that corporation, and their shareholders, but how about the rest of us?

3. Surely you do not advocate "Protectionism"? What about "market forces"? 

Yes, there are market forces at work, but there are also many government forces, subsidies, taxes and so forth at work as well.  And believe it or not, "market forces" do not absolve anyone from ethics, planning or thinking.

Protectionism is a naughty word in Washington.  The code word du jour is "free trade". As previously referred to in a test case, should we allow a corporation to save $50 million if it costs our citizens $500 million in salaries?  Our Washington elite says yes. They say that so-called "free trade" will help everyone. Does it? Prove it.  

4. But doesnt Globalization help everyone?

In a word, no.

If 90% of the wealth of this country is owned by 1 percent of the population, then if profits are increased for some major corporations, those profits go to the 1 percent. But its worse than that. Not only does this not take into account the lost income to the now-unemployed workers, it does not take into account how much of that income would go to local taxes and to local businesses as people live their lives. In other words, Globalization deliberately increases the profits of the rich at the expense of the working classes and the local communities.

Furthermore, it is completely obvious to anyone who reviews the history of this process that the people who are most hurt by these policies are the people who are least able to afford it.  The worker with tiny savings can not just simply be unemployed and go get retrained as a lawyer.  First, he has a family to support. Second he has no money for school.  Third he is an older worker and our society is ageist as can be, and furthermore is ageist with specific government support to be so.  (1)

5. Why do you say the government specifically did this to hurt most Americans?  Isnt that paranoid? 

Of course.  Or maybe being called paranoid is just an ad hominem attack by people who do not want to discuss the issues.

It is the responsibility of our law makers, our bureaucracies, and our justice system to create and then implement a body of complex laws, rules, precedent and so forth.  When someone who is an elected representative tries to get support for a law, or a treaty, or a judgment and tells people it will make them more prosperous when he or she knows full well that it will not, then what do you call that?

The issues associated with so-called "globalization" have been well known in economic circles since the 19 th century. Technology has made things somewhat different, there is more work that can be sent offshore, but this is hardly the first time this phenomenon has been seen. Our politicians and leaders of industry knew to a great extent what the result would be and they did it anyway and lied about how it would be good for us the whole time.  When they knew full well that the people who would benefit would be the rich, and that the people who would be hurt would be the middle classes and the poor.  And they did nothing whatsoever to mitigate that very predictable result.  

Nor have they tried to even measure the result as we have shown.  

6. Arent you oversimplifying this situation?

Yes, the situation is far worse and far more blatantly abusive than I have described.  Lets go a little deeper.

Our government has worked to encourage business to send work to countries where slave labor, indentured labor, and vast numbers of impoverished workers look for anything to do to make a living.  They knew full well that this infinite sink of cheap labor would impoverish a tremendous number of Americans, but they did absolutely nothing to mitigate it.  What could they possibly do, you say?  One, there could be laws against sending work to countries and companies that use slave and indentured labor. Second, these laws would have to include criminal sentences and mandatory jail time for all executives of a company, to the very top, or they would do it anyway, as business in America always breaks the law to make a fast buck.  Third, we can make provision for the displaced American worker to be able to support their family and pay for their graduate school.  Fourth, we can pay for the previous item because the company that displaced them will pay for this retraining out of the profits made from globalization.  Anything else would merely say to the company, make as much money as you want but do not for a second be concerned or responsible for the immense suffering and economic results of the greed of the corporation.

Instead the government and corporations pretend that outsourcing or offshoring does not have negative effects in this country.  But it does, and someone has to pay for it.  Why not have the corporation that benefited from such outsourcing pay for it?

7. Our government has failed to enforce treaties and trade agreements designed to create a level playing field.

The case study of the visual effects and motion picture industries is quite illuminating.  The commonwealth nations (UK, Canada, Australia, New Zealand) have created subsidies for foreign filmmakers to bring their films to these countries.  A producer who brings $10 million worth of production work to Canada will receive a check for $4 million up front.  No producer can resist that. This has affected all the filmmaking arts and crafts, but it has wiped out the American visual effects business (with a few exceptions).  Almost all visual effects has moved offshore and while some Americans have been able to leave the country and find work, or temporary work, many have not been able to do so and have been required to leave the industry and / or are otherwise impoverished.

There are laws about such things. There are treaties. There are remedies.  But in general it requires our State Department to act and they will not act if the elected representatives do not ask them to.  And our representatives will not ask the State Department to act unless the citizens demand it.  But labor is not organized in visual effects so they do not ask, or demand, their elected representatives to help them (or to invoke any of the other remedies that exist to deal with this kind of problem).

Our government had a responsibility to act and it did not do so, and as a result many, many people were impoverished and had to leave the country.  And why?  Because the movie studio wanted the subsidies, it helped them, not the worker.  But who cares about the worker, the non-shareholder? I presume that the field of visual effects is not unique, and that if our government is so completely in the pocket of the large corporation and against the worker in this industry, that the government also acts against the interests of the worker in other industries as well.

Isnt this really the fault of the worker for not organizing? Well, maybe, that is certainly part of the problem here. Maybe our system should require labor to organized to defend their basic rights? After all, the people who are hurt are not just those who did not organize (the craft of Visual Effects) but the local economies as well. But isnt this really just blaming the victim? Its all her fault because she did not scream loud enough when being raped? Maybe.

8. But what could our government do to change the situation?

The following would in no way solve all the problems.  Peoples lives have been destroyed to increase the profits of the rich and we can not turn back the clock.

First, measure unemployment. Second, pay for retraining (calculated at about 250K per person). Third, stop abusive visa programs such as the H2B program. Fourth, compel the corporations to pay their share of the retraining. Fifth, see to it the costs of shipping and communications reflects real costs and does not violate our laws. Sixth, enforce the trade laws regarding subsidies. Seventh, criminalize the corporate violations of the law that result in American unemployment. Eighth, stop oppressing the middle and lower classes with taxes, but increase the taxes on the rich. Backdate this five years. Ninth, use our intelligence community to shut down the transfer of wealth to off shore tax shelters and the work of companies to do the same. Tenth, make it illegal for our corporations to outsource or off shore work to companies that use indentured labor, slave labor, or suppress workers rights. As always with our corporations, these requirements must have criminal penalties attached.  Eleventh, the subsidy issue in the motion picture industry proves that labor must be organized to fight for its rights in our government, so not only must the "right to work" bullshit be eliminated, but unions of one type or another must become mandatory.  Twelfth, force our government to create a strategic economic plan for the economic well being of all our citizens. We have strategic plans for defense and energy, we should have one for our economy. Thirteenth, reduce the influence of big corporations on the political system.  Do this one first.

9. What conclusions should we draw?

I concluded from my little research project into the economic policies of this country the following:

1. That the policies that go under the term of "free trade" were guaranteed to impoverish and/or economically damage the American worker.

2. That the US Government knew this and lied to the American people about the likely economic results of their policies in order to increase the profits of the rich.

3. That the US Government does not measure nor does it want to measure the amount of economic distress that exists in this country.

4. That the US Government does not enforce the laws and treaties that might mitigate the distress their policies have caused.

5. That the US Government has not taken any of the steps or implemented the policies that would assist the American worker in this economy.

6. That in order for us, the 99 percent, to change this situation we will have to change our government, and force them to make the changes.  These changes include measuring the distress, stopping certain visa programs, implementing laws against outsourcing and offshoring to companies and countries using slave or indentured labor, or who deny worker rights, implementing new training and education programs for all Americans that put them on a even footing with the children of the rich, making it illegal to outsource or offshore unless it can be shown that the net benefit to society as a whole (and not just the profits of the corporation) are positive, criminalizing corporate malfeasance, making it illegal to outsource or outshore work to governments and companies known to be involved in immoral and unethical activities, creating real and non-insulting benefits for our unemployed and impoverished, force the State Department to implement the laws regarding subsidies, change the tax structure of this country to put the burden on the rich, and discover and punish off-shore and illegal tax accounts by our rich and our corporations.

Some of these are easier to do than others, but all of them are doable and should be done at once. Ha. Maybe you think that is unrealistic, and you are probably right. Our government has made it very clear what they think about the working classes of this country.

They could not care less.

[To follow: a post on the need to criminalize corporate crime and more specific remedies for the economic inequality our government has so conscientiously brought into being].


1. You are invited to spend a day reviewing the laws about ageism and ask yourself whether there is any chance for one second that these laws are intended, in any meaningful way, to prevent discrimination based on age.  My conclusion after spending a week on it, is that there is not the slightest chance in hell that these laws are expected to be taken seriously.  One more time our government pays lip service to some nice sounding social policy but does nothing to make it happen.  It would be a joke, if any of it was funny.

2. See the Congressional Research Service Report "The Economic Effects of Trade: Overview and Policy Challenges" at

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