I lifted these comments by rl love concerning a way to look at our current discussion about jobs from Linda Beale’s post on Tax Foundation analysis:
Rl love writes on the nature of trade for the US:
Stiglitz: ” … the export of T-bills is different from the export of cars or computers or almost anything else: it does not create jobs. That is why countries whose currency is being used as a reserve, and exporting T-bills rather than goods, often face an insufficiency of aggregate demand.”
Now, if this ‘insufficiency’ is combined with the increasing reliance in the US on financial services, and on gains via the trans-national corporations, it becomes much easier to understand the logic of the ‘trickle-down’ theory in the context of Globalization. I am not advocating ‘trickle down’ here, but it does make our mess easier to understand. Stiglitz again:”…note that the world’s economies hold more than 4.5 trillion of reserves,increasing at a rate of about 17% a year. In other words, every year some $750 billion dollars of purchasing power is removed from the global economy, money that is effectively buried in the ground.”
The point then is that efforts to create jobs, such as Bush’s tax cuts, or such as those that are part of the stimulus attempts, are not possible to analyze with traditional criteria. Tax cuts for example do nothing to increase global demand for US goods, and, the additional US debt decreases global demand by locking up global purchasing power. Essentially, it has become almost pointless to evaluate the US economy as if it might be understood without the global implications, but that is mostly what economists in the US do, and largely as a result of denial. The simple truth is that the presumption that developing nations ‘should’, share ‘their’ demographic dividend with the developed nations was folly from the start, and based on a faulty premise that ignores the negative externalities in the economies of scale computations, and, additional layers of presumption regarding energy and all labor costs. So, the question is, does anyone actually believe that tweaking the US economy might solve our problems?
More from Stiglitz:” the Uruguay Round made an unlevel playing field less level. Developed countries impose far higher—on average four times higher—tariffs against developing countries than against developed ones. A poor country like Angola pays as much in tariffs to the US as does rich Belgium; Guatemala pays as much as New Zealand. And this discrimination exists even after the developed countries have granted so-called preferences to developing countries. Rich countries have cost poor countries three times more in trade restrictions than they give in total development aid.”
And some economists in the US argue that tax cuts will solve our aggregate demand problems, as if the US role in the global economy has no consequences. Others claim that ending the alleged dependence on ‘foreign oil’ is the end all solution as if this has nothing to do with the global demand for US goods. As if Uncle Sam might just thumb his nose at the oil producing nations that we owe a couple of trillion to, as if. ~ray
It is too bad that this subject matter is not more popular. Corporate taxes could be raised for instance, in say the G8 or so, and this could provide the much needed revenues to address some of the global demand issues such as those regarding the exploitive trade practices etc. An ‘exploitation reparations fund’ could also improve two other problems as well. 1) A higher corporate tax could cause shareholders to apply pressure to Executives in order to bring down compensation levels at the management level. 2) An institutional wealth transfer aimed at raising global aggregate demand would bring balance to the very imbalances that have caused the economies of Japan and the US to be overwhelmed with investment capital.
The lack of ‘popularity’ though in these types of solutions is indicative of just how protective the citizens of the developed nations have become. At some point, “to conserve’, is the monkey with his hand stuck in the proverbial jar. And it is interesting how populations with roughly half of their voters who see themselves as ‘progressives’, when combined into a collective form, they ‘seem’ to transform in regards to global policies into power concentrations that are essentially fascist or ultra-conservative. Is it possible that the acceptance of selfish behaviors, over a long period of time, have caused a new form of collective mental illness, of a collective delusion? ~ray
(Making Globalization Work, 2007, pg.78)