U.S. multinational corporations were actually hiring in 2011 as they were in 2010. Unfortunately as in 2010, they are hiring abroad. In an updated BEA summary on sales, investment and employment by Multinational Corporations for 2011, we have a 0.1% increase in hiring for jobs in the United States while MNCs increased their hiring abroad by 4.4%.
The excellent blog, My Budget 360, has a very interesting and important article today entitled 10 States with Underemployment Rates of 20+ Percent. Manufacturing Sector Employs Same Number of Workers that we did in 1940. It is a hard hitting piece that amplifies concerns raised here on many occasions regarding the ill-effects of globalization. And they have some nice, powerful graphs in support of their arguments.
For instance, on the underemployment issue, consider this data:
One thing that is clear is the employment situation is in a major funk. 10 states now have underemployment rates of over 20 percent. We are talking about Great Depression statistics here:
Business groups are worried by the potential effects of provisions banning the import of all goods made with convict labor, forced labor, or forced or indentured child labor that were included in a customs bill sponsored by Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA)...
These groups are examining the ramifications of the bill's provisions, especially in light of the bill's requirements that a newly created office in the Department of Homeland Security (DHS) annually report to Congress on the volume and value of goods made with child labor, forced labor or convict labor that have been stopped at the border.
In past global slowdowns, the United States invariably led the way out, followed by Europe and the rest of the world. But for the first time, the catalyst is coming from China and the rest of Asia, where resurgent economies are helping the still-shaky West recover from the deepest recession since World War II.
While Roubini warns on oil price increases breaking any potential recovery, we note China's robust growth is causing oil prices to rise.
Pope Benedict XVI on Tuesday called for a radical rethinking of the global economy, criticizing a growing divide between rich and poor and urging the establishment of a “world political authority” to oversee the economy and work for the “common good.”
He criticized the current economic system, “where the pernicious effects of sin are evident,” and urged financiers in particular to “rediscover the genuinely ethical foundation of their activity.”
While this "Great Recession" highlights need for new social safety net, this need existed when U.S. accepted and promoted globalization. It is just that the "Great Recession" is making a bad situation worse.
Globalization has promised great things for everyone - lower cost products, more efficient international labor markets and economic growth. The problem is that with globalization there are winners and losers especially in U.S. The losers have been workers - particularly working class Americans. Globalization creates downward pressure on wages and salaries. Economists say that they have not been able to draw a connection because lower wages and increased globalization.
I've been catching up to my reading and came across an incredible story in FT which makes a prima facie case for the very strict regulation of credit default swaps. Here's the gist of it:
As the financial crisis virus has swept around the globe in recent months, Kazakhstan’s banking sector has been engulfed in turmoil. This is not just creating a headache for the Kazakh government and Western creditors, but also highlighting issues about the credit derivatives market that extend well beyond those far-flung steppes.
Take the case of Morgan Stanley’s dealings with BTA, Kazakhstan’s largest bank. A few years ago, BTA – like many of its Eastern brethren – was an up-and-coming darling of the capital markets world, with investment bankers furiously competing to float its bonds, provide loans, and much else.
In the continuing saga of "What are they up to now?", comes this story from Huffpo about the Fed pumping foreign currency into the US money supply. In this way, US banks can pay their foreign obligations in foreign currency.
This is a new wrinkle in the regular currency swaps the Fed performs with foreign banks. Until now the Fed has held the foreign currencies on its balance sheet while the foreign banks pass the swapped US dollars to their financial institutions. According to the minutes of the March FOMC meeting, this is just a precautionary move and not indicative of other countries having any trouble meeting their foreign currency obligations.
The minutes also show that the Fed will be increasing their currency swap limits with the Bank of England, European Central Bank, Bank of Japan and Swiss National Bank. Here's what Jamie Galbraith had to say:
I believe it is time to question the benefits of globalization. We were told that globalization would benefit all nations. Sure, maybe in the short term but in long term and sustainability globalization may not be the answer.
I am not advocating "protectionism". Frankly, I am not sure what am advocating right now. But I know this: globalization has not been the "win-win" that "free trade" proponents have argued.
Globalization is not sustainable because it supports a downward pressure on wages and encourages and requires insatiable consumption of resources and cheap consumer goods. But the financing of the consumption, particularly by consumers, is not by higher incomes but by higher amounts of debt. Globalization may only lead to more "boom/bust" cycles in the future.
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