The New York Times must have turned over a new leaf this holiday season. In just the past few days there have been four excellent Op-Ed contributions on the economy, calling into question some of the established Liberal orthodoxies on free trade, consumerism, and productivity, as well as one article on how Republicans hide the real unemployment figures.
First up, Paul Krugman, whose consistent brilliance in attacking conservative lies and distortion is matched only by his unwavering cheerleading for “Free Trade.” In this column, he actually makes some concessions to critics of corporate globalization. Even has he extolls the benefits of trade for lifting India, China and South Korea out of dire poverty, he adds some caveats:
That said, the critics of globalization do have some valid points.
First and foremost, the promise of export-led growth has failed in too many places. In particular, Latin America has signally failed to replicate Asia’s success: Latin nations have liberalized, privatized and deregulated, with results ranging from disappointing (Mexico) to catastrophic (Argentina). Open world markets, it seems, offer the possibility of economic development — but not an easy, universal recipe. Meanwhile, competition from newly industrializing economies does hurt some workers in advanced countries. I could tell you how sensible government policies could minimize this cost, but since we don’t have those policies and aren’t about to get them, free trade is, in reality, a morally ambiguous issue. And someone in my situation has to acknowledge being in a particularly weak moral position, since they aren’t yet having newspaper columns written in Bangalore.
Wow. Those are some pretty hard-core admissions from Krugman, even if he feels compelled to give his article a positive spin. (I’d like to see him talk about how unevenly distributed the benefits of trade have been for India and China, but I’m not holding my breath.)
Then, if that wasn’t enough, the Times also published an Op-Ed article by sociology professor Sharon Zukin on American consumerism and Wal-Mart. After a brief history of discount shopping in the U.S., she makes her key point in the final two paragraphs:
It is social equality — of a sort: instead of reducing differences between the classes, we are satisfied to see them shopping in the same discount store. Instead of supporting local businesses, we shop at giant chains. Instead of raising incomes, we lower prices. Americans have accepted bargain culture as our vision of democracy.
When the economy is uncertain, the appeal of bargain culture grows. But low prices are not really a bargain. They may allow us to shop more often, but they weaken our ability to pay the bill.
If you don’t live in N.Y. you may not realize just how radical this is. Bargain shopping is the closest thing N.Y. has to state-sponsored organized religion, and such heresy is libel to result in a public stoning.
In a more traditional vein of Republican-bashing, the Times also ran an Op-Ed on how the party which claims to defend America from anyone trying to get a “free-ride” is benefiting from the high numbers of people lining-up to sign up for Social Security Disability benefits because they are out-of-work. This effectively hides huge numbers of unemployed from the unemployment statistics reported by the government.
Take the revised numbers released by the Commerce Department on Tuesday. They showed that output in the third quarter grew at a rate of 8.2 percent, an extraordinary pace, and productivity grew even faster. Almost no one noted, though, that Social Security also announced the latest data on disability applications. Almost 200,000 people applied in October — up 20 percent from the previous month — tying the highest level ever. Despite the blistering growth of the economy, the invisible unemployment problem continues.
My understanding is that if you were to include all the people locked up in America’s prison industry, the unemployment figures would jump an additional two percent on top of whatever it would be if we added in all the people on disability …
Finally, Morgan Stanley’s “chief economist” Stephen S. Roach, has a fascinating Op-Ed on productivity. No matter what the reason, productivity is certainly up, and not only in the United States. As former Secretary of Labor, Robert B. Reich, recently argued, manufacturing jobs are disappearing not only in the U.S., but China as well.
All over the world, factories are becoming more efficient. They’ve installed new equipment and utilized new technology. And that often means fewer jobs. Market reforms have also played a role. In China, new modern factories are replacing large, inefficient state-run plants. The result is that even as China produces more goods than ever before, millions of factory workers have been laid off.
That this is driven primarily by “new technology” has been the orthodox view, put forth by Alan Greenspan and very rarely have I seen anyone challenge it — until now. Stephen Roach argues that the numbers are greatly deceiving, and that even if there are technological gains, they may not last. First up, he argues that “we are woefully underestimating the time actually spent on the job”:
For example, in financial services, the Labor Department tells us that the average workweek has been unchanged, at 35.5 hours, since 1988. That’s patently absurd. Courtesy of a profusion of portable information appliances (laptops, cell phones, personal digital assistants, etc.), along with near ubiquitous connectivity (hard-wired and now increasingly wireless), most information workers can toil around the clock. The official data don’t come close to capturing this cultural shift.
So greater productivity comes about because people are working longer hours — probably (although he doesn’t say this) because if they don’t there are lots of unemployed people ready to take their job! Other productivity gains, he argues, come from stripping companies of valuable employees (downsizing), or moving jobs overseas, neither of which he sees as “sustainable.” Even the technology boom may not last:
Once the migration from the old technology to the new starts to peak, this transitional productivity dividend can then be expected to wane.
Not good news all around: Globalization hasn’t lived up to expectations in many parts of the world, discount shopping won’t save the economy, unemployment is higher than we think, and productivity gains are much less miraculous than Greenspan (and Reich) would like us to believe. What needs to be done? The answer is simple: we need to invest in our future. Education, research & development, job training, infrastructure, etc. I hope the Democrats can find a way to sell this message to the country.
UPDATE: Nathan Newman has much more to say about these issues in a series of posts entitled “Is Growth Real?” Here is part one, part two, and part three. In addition to productivity, other government measures of economic vitality are equally questionable.