Showing all posts tagged: demographic arbitrage

It’s Morning in India - Thomas Friedman

Friedman wags his fingers at us, saying that we, Americans, are failing because we aren’t enthusiastic capitalists anymore. After creating a globalized world (that has destroyed the middle class and driven millions from ‘working class’ into poverty) we aren’t working like the Indians and Chinese are, we don’t seem to have their boundless optimism.

What is most striking to me being in India this week, though, is how many Indians, young and old, expressed their concerns that America also seems at times to be running away from the world it invented and that India is adopting.

With President Obama scheduled to come here next week, at a time when more than a few U.S. politicians are loudly denouncing immigration reforms, free trade expansion and outsourcing, more than a few Indian business leaders want to ask the president: “What’s up with that?” Didn’t America export to the world all the technologies and free market dogmas that created this increasingly flat, global economic playing field — and now you’re turning against them?

“It is the Silicon Valley revolution which enabled the massive rise in tradable services and the U.S.-built telecommunication networks that allowed creation of the virtual office,” Nayan Chanda, the editor of YaleGlobal Online, wrote in the Indian magazine Businessworld this week. “But the U.S. seems sadly unprepared to take advantage of the revolution it has spawned. The country’s worn-out infrastructure, failing education system and lack of political consensus have prevented it from riding a new wave to prosperity.” Ouch.

Saurabh Srivastava, co-founder of the National Association of Software and Service Companies in India, explained that for the first 40 years of Indian independence, entrepreneurs here were looked down upon. India had lost confidence in its ability to compete, so it opted for protectionism. But when the ’90s rolled around, and India’s government was almost bankrupt, India’s technology industry was able to get the government to open up the economy, in part by citing the example of America and Silicon Valley. India has flourished ever since.

“America,” said Srivastava, “was the one who said to us: ‘You have to go for meritocracy. You don’t have to produce everything yourselves. Go for free trade and open markets.’ This has been the American national anthem, and we pushed our government to tune in to it. And just when they’re beginning to learn how to hum it, you’re changing the anthem. … Our industry was the one pushing our government to open our markets for American imports, 100 percent foreign ownership of companies and tough copyright laws when it wasn’t fashionable.”

Mr Friedman, are those workers getting health benefits? What about the levels of pollution and exposure to poisonous chemicals those workers are exposed to? You never touch on the demographic arbitrage involved, when older US workers, who labored for decades under the presumption of ongoing employment, now are unemployed because corporations simply hire young cheap workers in India or China, with lax environmental and worker regulations, and pay them no benefits. This way both worlds are made poorer. Yes, the Indians are happy to take the work, but the ones benefiting the most are the owners of the companies.

No, Friedman continues as an apologist for a flat, globalized world. But he never mentions that its a policy choice for us to have such a world. We decide what to tax and to regulate. His attitude is that this world exists, inexorably, and now we have to accept its stark realities.

If this were the 19th century, Friedman would have been telling the smallholders of England that enclosing the commons was good for them, despite the fact that it made most destitute, and drove them to the factories of the Midlands, to work like slaves.

Thomas Friedman Tells Us To Work Harder

Thomas Friedman is blaming the victims, the American worker:

Thomas Friedman, The Election That Wasn’t

In the short run, we’ll probably need more stimulus to get the economy moving again so people have the confidence to buy and invest. Ultimately, though, good jobs at scale come only when we create more products and services that make people’s lives more healthy, more productive, more secure, more comfortable or more entertained — and then sell them to more people around the world. And in a global economy, we have to create those products and services with a work force that is so well trained and productive that it can leverage modern technology so that one American can do the work of 20 Chinese and, therefore, get paid the same as 20 Chinese. There is no other way.

Sure, more countries can now compete with us. But that’s good. It means they’re also spawning new jobs, customers, ideas and industries where well-trained Americans can also compete. Fifteen years ago, there were no industries around Google “search” or “iPhone applications.” Today, both are a source of good jobs. More will be invented next year. There is no fixed number of jobs. We just have to make sure there is no fixed number of Americans to fill them — aided by good U.S. infrastructure and smart government incentives to attract these new industries to our shores.

But not everyone can write iPhone apps. What about your nurse, barber or waiter? Here I think Lawrence Katz, the Harvard University labor economist, has it right. Everyone today, he says, needs to think of himself as an “artisan” — the term used before mass manufacturing to apply to people who made things or provided services with a distinctive touch in which they took personal pride. Everyone today has to be an artisan and bring something extra to their jobs.

Freidman’s trying to spin his way out of supporting business globalization with his World Is Flat mantra. He’s in a tough position at this point: a left-leaning liberal who supported late industrial age excess, where multinationals were encouraged by tax laws and international trade agreements into demographic arbitrage, stripmining our future.

You, Mr. Friedman, make the ‘integrated and automated global economy’ sound like natural law, like gravity or tooth decay. But it is the result of deliberate policy decisions, harming most to make a few wealthy.

So all the manufacturing jobs have moved to China, it seems, and Friedman was one of the many saying it was manifest destiny, rather than deliberate trade policies that benefited the oligarchs here and state capitalism there, but cut the US middle and working classes off at the knees. (Consider this editorial as an example, printed on the same day in the NY Times as Friedman’s op-ed piece. It discusses the Homeland Investment Act, that saved multinationals hundreds of billions in 2005, supposedly linked to creating jobs that never materialized, without penalties. And the multinationals are proposing to do it again. The GOP will support it, no doubt.)

Nowadays, Friedman tells us, we have to bring a little something extra to our jobs, if we want to have one. Each of us has to outwork 20 Chinese people, he says. The answer is to be an artisan, he says.

The answer, Mr Friedman, won’t be Americans working like drones. It will be the rise of trade protectionism as a political movement, and the end to the hogs-at-the-trough global economics that you have explicitly supported, sadly.

This trade protectionism will be the defining issue of the  next presidential elections, although it hasn’t really been picked up much by either party as yet: they are still in thrall to the moneyed interests that are still making hundreds of billions from trade imbalances, even in this global downturn.

They don’t care about the manufacturing workers that are flipping burgers, or the small businesses that have closed, or the real estate agents that are broke and homeless.

And it sounds like you are siding with them, and wagging your finger at the dispossessed and downtrodden. You, Mr. Friedman, make the ‘integrated and automated global economy’ sound like natural law, like gravity or tooth decay. But it is the result of deliberate policy decisions, harming most to make a few wealthy.

Don’t patronize us. You are better than that.

Why would the organizations whose agenda is outsourcing put in $75 million into the campaign?

James Carville

The message that Obama is searching for: who benefits from open markets and demographic arbitrage? Big multinational corporations, who aren’t hiring in America.

‘Americans need not apply’ would be good, based on the history of discrimination slowly overturned in America: Irish need not apply, Colored people need not apply, Jews need not apply, ..,. and now, Americans need not apply.

Economic populism is coming, but Obama may be too slow to jump aboard, and too closely self-identified with the elites that paint those signs.

(Source: The New York Times)

Why Free Trade And Global Markets Are Unsustainable And Unethical

Offshoring work — manufacturing, services, agriculture — from more advanced countries with older and aging populations to emerging countries with younger populations has led to a dramatic destabilization of the world’s economy, and threatens to bankrupt the most advanced.

Consider China and the US. Many companies here have shifted manufacturing jobs from the US to China, because workers cost less in China. This wage differential is partly the gap between direct payment for work done, but a large part is the gap is the non-existent social services of China, and the cost benefit of dropping older workers in the US who not only are paid more, but who have higher health and pension benefits.

Of course, China is itself playing along. It is generally the younger citizens there that are lured from the countryside to manufacturing jobs in the cities, here they have low pay and zero benefits. This keeps costs down, attracting lots of cash flow, but basically none of it put aside for these youngsters’ old age.

By moving the work, the companies benefit in both ways, and both countries are left holding the bag for the future health and pensions for their citizens. Here in the US, our day of reckoning is approaching quickly; and in China, it is farther down the road, but at some point the Chinese will demand a social net, and China will not have paid for that.

In effect, both US and Chinese citizens are being screwed by the companies who profit from the labor and demographic arbitrage. It is only the business elite that benefit.

Ted Fishman, As Nations Age, a Chance for Younger Nations

The problem for China is that it is rapidly approaching the point after which it will no longer be the relatively young country we see today. In 2015, China’s working population below the age of 65 will begin to shrink. Meanwhile, the number of people over 65 will be rising to 300 million by 2050, a threefold increase. Richard Jackson, the director of the Global Aging Initiative at the Center for Strategic and International Studies, notes that China will be older than the United States within a generation, making it the first big national population to age before it joins the ranks of developed countries. One of China’s biggest fears, expressed repeatedly in public pronouncements, is that it will grow old before it grows rich.

To avoid this fate, China is doing all it can to lure the world’s production and capital while its work force is young. In large part, it does this by denying meaningful pensions and health care to its people today. Not only do the vast majority of elderly Chinese have little more than their meager savings, but today’s workers have pensions so measly as to be irrelevant. To keep the cost of manufacturing in China low for the rest of the world, the young Chinese work force is, for now, rarely provided more than token pensions, health care or disability insurance. In aging, developed countries, older workers with long tenure are usually at their peak in terms of pay and the cost of their benefits. Here in the United States, for example, health care costs for workers who are between 50 and 65 are, on average, almost two times what they are for their peers in their 30s and 40s. When the median age of workers climbs in the United States, so does the cost of insurance their employers must buy for them. China’s leadership clearly believes its young workers would lose their allure if the future costs of old age were added to their costs today. When state-owned companies trimmed their ranks of tens of millions of workers following the country’s transition to a market economy, older workers — many only in middle age — were often let go with small pensions and replaced by younger workers. So what China offers now is workers with short tenure and negligible benefits (as well as something of a free social safety net in the form of all the relatively young, physically fit grandparents who move in with their children to care for their grandchildren).

The GOP likes to talk about health care and other social benefits in an extremely narrow way. To them, it’s a morality play starring the individual and the state. We are each supposed to make out own way, and take responsibility for our retirement, our health, and that of our dependents. Government is supposed to stand aside, with social services privatized, and unchecked corporations are incented to take advantage of open global markets, moving jobs wherever. The mystical association of free markets and human destiny seems to be behind most GOP dogma.

But the GOP is ignoring the larger context, or actively lying about it. We live in a world where the primary context for our personal lives is not in our own hands. We are victims of the chicanery of titantic business sectors that buy off politicians and slough hundreds of thousands of workers in one country while hiring hundreds of thousands elsewhere, and stealing from both. We are in the shadows, under the feet of giant businesses that act in concert to arbitrage demographics, and bankrupt the societies that allow them to exist.

The Democrats have allowed the GOP to frame this debate as one based on how much money is being spent by the government on these social services, and whether individuals have a claim to funds — for health care and pensions — that the state can accrue through taxation. Instead, the debate should be — and will be soon — about letting corporations and their owners rape us demographically, just as they have historically raped us ecologically and financially, and not paying back to the societies that allow them to thrive.

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