Craig Eisele on …..

February 26, 2012

Can Globalization Ever Be Used For Good??

Filed under: Uncategorized — Mr. Craig @ 11:12 pm

ADAM OZIMEK responds to David Pogue’s most recent post at the New York Times on working conditions at Foxconn’s iPhone factories, in which he notes several things. First, Apple has hired the Fair Labor Association to investigate Foxconn’s factories. Second, Foxconn has raised wages. Third, an ABC documentary team visited Foxconn’s factories and found mostly a lot of perfectly natural boredom, rather than dangerous working conditions per se. (Foxconn was aware of the visit in advance, and obviously would have ensured everything was scrubbed for the camera and that only compliant workers were around.) And finally, there’s tons of evidence that the Chinese workers are very happy to have Foxconn jobs. They’re better-paid than life in the village, they’re often viewed as starter jobs for young people who are planning to move on to something more substantial later on, and, as one letter writer notes, working at Foxconn was a lot better for his aunt than her prior job as a village prostitute.

Mr Ozimek concludes two things. The first is an argument about the primacy of rising productivity, rather than labour safety regulations, in improving working conditions. The second is that Westerners who argue that we should be sourcing our products in countries with better-enforced labour laws, like South Korea, Taiwan or Japan, rather than China, are making a huge mistake, trying to deprive Chinese of the income growth they need to better their lives and ultimately achieve safer and happier workplaces.

On this latter point, Mr Ozimek is absolutely right. But that’s not the important argument here. The argument isn’t “many factories in China have terrible labour conditions, therefore we shouldn’t buy Chinese products.” That would indeed be silly. It would also be completely doomed. Globalisation is a fact, not an option. We import huge amounts of stuff from China, and will continue to until Chinese wages rise much, much higher than they currently are. Rather, the argument is “many factories in China have terrible labour conditions, therefore we should demand that Western companies that source their products in China use their bargaining power to force Chinese factories to improve working conditions.”

A lot of people who are generally supportive of free trade seem to be making the same mistake Mr Ozimek is making in response to the Foxconn story: they’re refighting the “sweatshops, good or bad?” argument of the 1990s. That’s not what this is about. 

There are probably some people trying to argue that we should be demanding Apple make its iPhones in America to avoid infractions of its corporate code of conduct. Mr Ozimek cites Andrew Leonard’s article at Salon about a labour-union official who said in his search for an ethically manufactured mobile phone he considered buying Samsung because their phones are largely manufactured in South Korea, where safety regulations are better enforced. This is not a significant phenomenon. Vanishingly few people will ever go to the trouble this labour-union official has gone to in researching the sourcing of his phone, so any hypothetical harms from such decisions will fail to develop.

The media and public pressure being exerted on Apple is not focused on getting it to stop making phones in China. It’s focused on getting it to apply its own corporate code of conduct rigorously at the factories that make its phones in China. That corporate code of conduct is part of Apple’s brand ID. It is part of the reason why people desire to buy the phones that make those Chinese richer in the first place. If people think Apple is a sleazy company that employs workers under abusive conditions, they will not want to pay as much for its phones, and then those Chinese workers will be harmed. Getting manufacturing companies in China to allow more open scrutiny of the workplace and to cease any possible violations of their contracts guaranteeing adequate working conditions is good for Apple, good for consumers, good for the companies, and good for the workers. It’s just good. There’s nothing wrong with it. Nobody is trying to stop globalisation here, or take away Chinese workers’ jobs. As Mr Pogue’s article puts it:

[We] should be happy that in this corner of the Chinese landscape, things are getting better. On ABC’s show, a Fair Labor Association inspector, Ines Kaempfer, called the last month a “Nike moment” for Apple. In the 1990s, Nike’s sweatshops weren’t the worst in the business, but they’re the ones that got the negative publicity. In response, it cleaned up its act, and thereby lifted the bar for the entire industry.

Clearly, the recent spotlight on conditions at Foxconn has performed a similar service for the electronics industry. Better wages are good. More careful monitoring is good. Transparency—like letting TV cameras into your assembly lines—is good.

The Lack of Fear Is What We Need To Fear The Most

Filed under: Uncategorized — Mr. Craig @ 10:51 pm

WHAT to read into the following? At an event for CFOs and finance directors in London this week, I asked the audience whether Greece would end up leaving the euro zone. Every single hand went up. Asked whether more countries than Greece would leave, roughly two-thirds of the audience agreed they would.

Coming a week after an agreement on a second international bail-out for Greece, such certainty that the country would have to exit the euro was striking. It may be that an audience in London, albeit a cosmopolitan one, is prone to misjudge the willingness of the euro-zone creditors to keep lending money to Greece even if the country’s programme goes off-track again. But I still think their judgment is right, for three reasons.

First, the demands being made of Greece will be almost impossible to meet: they will eventually need more money or some kind of forbearance. Wolfgang Schäuble, Germany’s finance minister, and Jean-Claude Juncker, Luxembourg’s prime minister, have both suggested in recent days that a third bail-out may well be needed.

Second, there is a finite amount of times that creditor nations can justify bail-outs to their taxpayers, and the poisonous manner in which the latest package was agreed suggests this point may already have been reached. There is a good chance that approving extra money is becoming politically impossible. The Greeks themselves may well give up on the whole process, too.

To be clear, a Greek default is not the worry. It is already happening, after all: a 70%-plus fall in the net present value of private-sector bonds counts as a pretty severe pasting for investors. The worry is the unpredictable impact of a euro-zone exit, not just for Greece but for the rest of the euro zone. The Economist has argued for a Greek default for a year, but always on the presumption that default need not mean exit. But it is ever harder to envisage a situation in which official creditors take a loss on their Greek bond holdings, which is needed to put Greek debt on a sustainable footing, but also agree to keep funding the country until it starts running a primary surplus. Default and exit are becoming inseparable.

Which brings us to the third reason why exit is likely. The prospect of euro-zone departures (even multiple ones) doesn’t scare people as much as it should. The overall mood of the delegates at the conference was relatively sanguine about the effects of an exit. Contingency plans were in place at their firms to deal with it; this wouldn’t be another 2008.

Yet 2008 is what the current situation ominously resembles. Sticking plasters have been applied (for Greek bail-outs, read the rescues of Bear Stearns, Fannie Mae and Freddie Mac) but more rescues are needed. Politicians are reaching the point where they believe that injecting more public money into failing entities is untenable. And there is an assumption that people have had enough time to prepare for the consequences of a shock that it would be absorbable. That strongly echoes the mood when policymakers let Lehman fail. Sometimes it’s good to be afraid.

Barack Obama’s job – and yours

Filed under: Uncategorized — Mr. Craig @ 10:50 pm

Can Barack Obama win re-election with the current employment rate?

San Pedro, CA – “No president since World War II has been re-elected with an unemployment rate over 7.2 per cent.” That’s a snippet of conventional wisdom that’s been floating around almost since the day that Barack Obama was inaugurated in January 2009, a month that ultimately closed out with an ominous unemployment rate of 7.8 per cent – although it was only reported at 7.6 per cent at the time.  

That too-rosy, though still dismal employment statistic was just one factor feeding into a too-rosy economic projection that ended up getting the Obama Administration into a good deal of trouble. Although economic adviser Christine Romer originally pushed for a $1.8tn stimulus in a December 2008 memo, that was considered politically impossible, and Obama officially asked for less than half that amount – and still was greeted with intense GOP opposition, even though around 40 per cent of his stimulus package was tax cuts. The projections released on January 10, 10 days before his inauguration, anticipated peak unemployment of 8 per cent with the scaled-down stimulus, and 9 per cent without it. In reality, the 8 per cent figure was passed the next month, which ended with at 8.3 per cent unemployment. The stimulus plan was signed into law on February 18. 

On the surface, Republicans were able to argue the stimulus was a failure, since unemployment peaked at 10 per cent in October 2009. But Romer’s original calculations had been generally vindicated: the recession was far more severe than originally anticipated, and a much larger stimulus had been called for. The unemployment rate could have easily been over 11 per cent or more without the stimulus. That’s scant solace, of course. But those stubbornly high unemployment rates may not be as politically deadly as they once seemed. 

For one thing, they are finally coming back down to earth – though still nowhere near what they should be. Yet, at 8.3 per cent – down 0.7 per cent in four months – the unemployment rate now matches that of February 2009. It’s still a far cry from 7.2 per cent, but that level nine months from now is far from impossible.  

More importantly, though, that 7.2 per cent figure extremely misleading, as Nate Silver explained at the New YorkTimes “
“538” blog last June. For one thing, Ronald Reagan was re-elected with a 7.2 per cent unemployment rate – by a whole 18 points – strongly suggesting he could have been re-elected with a much higher rate than that. (What’s more, before World War II FDR was re-elected by even bigger landslides in 1936 and 1940, with unemployment still in double digits!)

But the real problem Silver highlighted was an overall lack of correlation. “Historically, the correlation between the unemployment rate and a president’s electoral performance has been essentially zero.” And, of course, he had the charts to prove it. He also said that looking at the change in the unemployment rate over a president’s term was little better. “This does produce some positive correlation, but it’s quite weak and almost entirely driven by a couple of outlying data points surrounding the Great Depression.” Again, he had the charts to prove it.  

There’s just one catch: the four-year time-frame wasn’t a good predictor, but a two-year time-frame could work wonders, as an AP story from last month pointed out. “Going back to 1956 no incumbent president has lost when unemployment fell over the two years leading up to the election. And none has won when it rose.” True enough, but still misleading, George Washington University political scientist John Sides told me.

Sides has published on the subject of economically modeling elections, as well as writing about it on the blog Monkey Cage, which he co-curates. First off, “the year before is what matters more”, rather than the two-year period, he said. Second, “It’s not necessarily useful to pick any one indicator or one particular threshold that candidates need to meet. It’s the general trend that matters.”

There are, in fact, a number of strong indicators to choose from, if you look at election year changes. “We shouldn’t get too concerned with which exact indicator we choose. When the economy is growing, most indicators will move in a positive direction: GDP, real disposable income and unemployment. That’s the important point.”

In a paper Sides coauthored, he noted that “at a meeting of political scientists held over Labor Day weekend in 2008 –  even before the start of the Republican National convention – a panel of political scientists each presented a forecast of the outcome. Almost all of them predicted the exact outcome within a couple of percentage points. The average of their predictions was 53 per cent, and that’s what Obama got.” So much for all the hoopla over Sarah Palin – at least for that election. And indeed, the nine-month period from January through September seems quite enough for predictive purposes. By the time the traditional campaign season is halfway done, the economic cake is already baked.

Although Silver missed these nuances initially, he caught up rather thoroughly, writing another post last November, in which he looked at 43 economic variables over the nine-month period for the 16 presidential elections held since World War II. The strongest indicators all account for a third of the winning margin or more. These were real GDP, real personal income, change in non farm payrolls, change in unemployment rate, change in employment-to-population ratio and the ISM manufacturing index, a multi-factor index regarded as a leading indicator for the economy at large. Not too surprisingly, this leading indicator proved the strongest election predictor, accounting for 46 per cent of winning margin. Altogether, Silver found 21 economic indicators that accounted for at least one-fifth of the winning margin.

Summing up, what all the above tells us is:

  • The unemployment rate is electorally unimportant. From a human standpoint, as well as an economic one, it’s very bad indeed that the unemployment rate still stands at 8.3 per cent, with many millions more who are working part-time involuntarily, or else have left the job market entirely. But from a political standpoint, this is irrelevant.
  • The change in unemployment rate from January to September this year is very important,but so are a handful of other economic indicators. As the economy continues to improve, the unemployment rate may go up again temporarily, as previously discouraged workers rejoin the potential workforce pool. But as long as the overall trend is positive, and other indicators continue moving in the same direction, Obama could be in very good shape, even if the unemployment rate remains higher than 7.2 per cent. What matters, in short, is whether or not people feel the economy is improving fast enough to promise a better tomorrow, and make them reluctant to take chances on switching direction.
  • Most political commentators are woefully ignorant about how the economy impacts elections. Conventional wisdom – even when it’s good enough to be technically true – can be dangerously shallow and misleading. An example comes from a Monkey Cage post by Sides from June 2010, “Do Americans Really Want to Cut the Deficit?” As Sides shows, reducing the debt has a much smaller effect on the incumbent party’s presidential candidate’s share of the vote than does increasing Americans’ disposable income. (Both measures are for the single year before the election.) The lesson about conventional commentators’ ignorance applies in other ways as well, such as evaluating the candidates’ job proposals, to which we now turn. It’s not that everyone is stupid – they’re not. But crucial big-picture facts may be missing from the pictures they paint. And with all the Republican candidates in particular offering “jobs” plans that actually encompass every aspect of economic policy and then some, it’s increasingly necessary to compare overall visions of how the economy works and how it can be made to function better.

Obama’s jobs plan

In September 2011, Obama announced a four-part, $447bn jobs plan (with a fifth part dedicated to making sure it would be deficit-neutral), which Republicans in Congress blocked. But it remains a good guide to the kinds of things he would like to do in a second term. Parts of it are about to be passed, as shifting political fortunes have made Republicans more willing to work with him.

The first part of his plan, “cuts to help America’s small businesses hire and grow”, had as its centerpiece cutting the payroll tax in half for 98 per cent of businesses. It also included a complete payroll tax holiday for added workers or increased wages. 

The second part, “Putting workers back on the job while rebuilding and modernising America”, included a “Returning Heroes” hiring tax credit for veterans, proving anywhere from $5,600 to $9,600; support for state and local governments to prevent up to 280,000 teacher layoffs, while keeping cops and firefighters on the job; school modernisation for at least 35,000 public schools, supporting new science labs, internet-ready classrooms and other renovations; immediate investments in infrastructure and a National Infrastructure Bank to modernise roads, rail, airports and waterways and put hundreds of thousands of workers back to work; a new “Project Rebuild”, which will put people to work rehabilitating homes, businesses and communities, via various different public-private collaborations.

The third part, “Pathways back to work for Americans looking for jobs”, included extension of unemployment insurance for five million Americans with three “innovative reforms” supporting state-level programs, one to support work-sharing alternatives to layoffs; another for displaced workers to take temporary, voluntary work or pursue on-the-job training and a third to provide wage insurance to help reemploy older workers or help them start their own businesses. It also included a $4,000 employer tax credit for hiring the long-term unemployed, and a prohibition on discriminating against unemployed workers. 

The fourth part, “Tax relief for every American worker and family”, included cutting payroll taxes in half for 160 million workers in 2012, providing a $1,500 tax cut to the typical American family; and allowing more Americans to refinance their mortgages at then-current interest rates, around 4 per cent.

This proposal represented a true “jobs plan” in a traditional sense. It had a detailed focus on specific aspects of the problem and specific policies to address those aspects. The relationship between problem and solution was transparent and straighforward, which also means that problems with the ideas proposed, as well as possible alternatives, could also be articulated with a good deal of specificity. This is inevitably less true with broader economic plans, which have multiple explicit short- and long-term goals, as well as cultural, social and political agendas as well. This could be seen if one were to consider Obama’s recently-released budget, for example, or even the more narrowly job-focused recent proposals of Obama’s jobs council of top US business leaders.

But it’s much more pronounced with the economic proposals of the remaining top two GOP candidates, Mitt Romney and Rick Santorum.

Obama’s Campaign Opens Fire–on the Kochs

Filed under: Uncategorized — Mr. Craig @ 9:37 pm

I just received a new mailer from  Even before the primaries are finished, Obama is apparently kicking off the campaign against his now-inevitable opponent: the Koch brothers.

Obama - Biden
Friend —

In just about 24 hours, Mitt Romney is headed to a hotel ballroom to give a speech sponsored by Americans for Prosperity, a front group founded and funded by the Koch brothers.

Those are the same Koch brothers whose business model is to make millions by jacking up prices at the pump, and who have bankrolled Tea Party extremism and committed $200 million to try to destroy President Obama before Election Day.

Obviously, the campaign is not yet fully fleshed out. How will Obama distinguish himself from the Kochs on important issues like the Iranian missile program, gay marriage, and national education standards?  How will he counter the favorability boost that the Kochs are expected to get from the fact that their name sounds like a popular soft drink (and will people get confused when pollsters ask them if they prefer “Coke, or Obama”)?  Will he be courting the paleolibertarians whose hatred of the Kochs is second only to that of the Center for American Progress?  How will he counter if the Kochs promise to lower gas prices in exchange for the presidency?

I know it’s customary to whine about the permanent election, but I confess, I’m excited to see this one unfold.  Sure, it was historic to have our first black president–not to mention the first president who was a professor at my alma mater–and I don’t mean to take anything away from that.  But it would also be a pretty big landmark to have our first joint presidency.
Not that that will influence my vote, mind you.  I vote the issues.  Which is why I’m not proffering an endorsement until I know how the Kochs feel about soda taxes and those videos of animals being killed. 

Wisconsin Recall Rival Slams Governor Walker

Filed under: Uncategorized — Mr. Craig @ 9:00 pm

In a preview of the Wisconsin recall election, top Democratic challenger Kathleen Falk has come out guns blazing against Gov. Scott Walker, saying he ruined the state, has no scruples in labeling any opponent as a union pawn, and is under a cloud from the ongoing “John Doe” criminal investigation into some of his former aides.

“I have worked around the state with citizens who have just reacted to the extreme far right agenda of Scott Walker in a way I’ve never seen before,” Falk told POLITICO in an interview. “In Wisconsin, we don’t skew far left or skew far right. We just want good education, some health care, clean air and water and a decent job — very common sense values. The Governor Walker agenda has just torn the state apart.”

Falk, a former Dane County executive who also ran for governor in 2002, has already promised to reverse one of Walker’s most provocative measures — stripping away collective bargaining rights from public employees — if she wins the likely recall election later this year. And after jumping into the race just one day following the announcement that one million signatures had been gathered to prompt a recall election against the first-term Republican governor, Falk said she is ready for the campaign to take down Walker and his “extreme far-right agenda.”

Falk has already started raking in major endorsements — the Wisconsin chapter of the American Federation of State, County and Municipal Employees union, with more than 60,000 public employees, SEIU Healthcare Wisconsin, the state’s largest healthcare workers union, and Emily’s List have all thrown their support behind the 60-year-old Milwaukee born and raised contender.

Falk said she’s proud to have the union support, but also cited her work as county executive negotiating with public employees to cut their salaries as proof she is not the union stooge some may paint her as.

“I’m not a soft touch, I’m just fair,” she said. “And that process of negotiating through collective bargaining accomplished a ten million dollar saving for taxpayers, and I am proud of it. I am proud of those unions for doing their share of the sacrifice. Wisconsin is the home to public sector collective bargaining and Walker refused to negotiate, he refused to talk, so his extreme position is one of those reasons he will be recalled.”

Walker has made labor unions a cornerstone of his attacks against any potential Democratic opponent. He recently told POLITICO in an interview that if he keeps his seat in the recall contest, it would send a crushing blow to the “national big government union bosses.”

“[The unions] want to send a clear message to any politician, be it Republican or even a handful of the Democrats that might even consider this, that if you try anything courageous, if you try to tackle tough issues, you’re going to get burned,” he said.

After AFSCME endorsed Falk on Monday, Walker’s campaign slammed home the union connection. “It comes as no surprise that Kathy Falk is emerging as the handpicked choice of the big government union bosses who will fund her campaign,” the Walker campaign said.

 For Falk, it’s also no surprise that Walker will tie any Democratic contender, herself included, to unions.

“I think he is going to label whoever his opponent is with those kinds of what he believes are derogatory labels,” she said. “One of the reasons he is in deep political trouble is because he labels those he disagrees with and marginalizes them instead of working with them. He doesn’t talk to people, he doesn’t negotiate with people, he doesn’t work with people he doesn’t agree with. And you can’t be a leader that way.”

It’s not the only aspect of Walker’s leadership qualities that Falk cites as troubling. Falk, who noted her path would sometimes cross with Walker when the two were county executives, said the ongoing John Doe investigation looking into whether some of the governor’s former staffers engaged in political activity on taxpayer time when he served as Milwaukee County executive casts a cloud over his current campaign and term in office.

On Jan. 5 the district attorney said it found that Tim Russell, who had been with Walker as a campaign and county aide since 2002 but did not get a job in the governor’s administration, and Kevin Kavanaugh, Walker’s appointee to the Milwaukee County Veterans Service Commission, stole funds intended for wounded vets and families of U.S. soldiers who died in Iraq and Afghanistan. And on Jan. 26, Kelly Rindfleisch and Darlene Wink, two former aides, were charged with engaging in campaign fundraising during work hours.

Walker, who said he does not believe the probe is targeting him, has announced he will voluntarily meet with prosecutors about the investigation.

Falk slammed Walker for not publicly addressing the investigation and questioned how a manager could possibly be unaware of what his closest aides were up to during work hours.

“People are reserving final judgment as they ought to, but they are very dismayed,” she told POLITICO. “They are very troubled by this cloud surrounding Gov. Walker. It is very hard to understand because he has not publicly explained how he could have been in his office as county executive literally feet from his chosen staff, his high level ranking staff, who are accused of running a political campaign to foster his political future literally within a stone’s throw from his office without him knowing about it.”

“Or, if he didn’t know about it, what kind of manager does that make him?” she added. “No matter what angle you look at it from, people are very concerned and he has not been forthcoming about what he knew or when he knew about it. I am, like most people, disappointed and concerned about this cloud that hangs over him and will be looking to what the district attorney finds next or whom the district attorney charges next.”

Falk has already hit the ground running on her month-old campaign, traveling across the state and securing endorsements from major unions and organizations. If the recall goes ahead as expected, the election should come in late May or early June — and with such a short time frame, Falk says she’s laser-focused on locking up the Democratic nomination and then moving into the governor’s mansion.

“I’m running strong and hard. It’s why I announced I was running literally the day after the million signatures were announced,” she said. “I’m running a statewide campaign. I’m on the road a lot and have an A+ team running my campaign and advising me. This will be a very short election.”

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