DR-CAFTA & Ohio's 5th

Just want to remind you, as we think about the arguments in favor of free trade and against free trade, that we will have to keep our eye on the ball: Ohio's 5th district. Keep in mind that as we learn about DR-CAFTA, we should also remember what else we'll want to learn about... be resourceful, be resourceful, be resourceful...

DR-CAFTA subcommittee hearing, etc.

On Trey's DR-CAFTA post, I particularly recommend the subcommittee hearing to you all. Though I have not yet listened to the entire length of it (4 hours+), I encourage you to listen to the first 15 minutes or so. There is an introductory statement, with a bit of academic discussion of comparative advantage there (!)

Two opponents of CAFTA follow with "opening statements", then one proponent. In form (and in substance if you choose, and if appropriate to your position), you can think of these as models for what your opening statements might sound like tomorrow.

The other links on Trey's site are very helpful as well. Here also is the view of the Chamber of Commerce, here is the Agriculture Department's view on Ohio, and here is the AFL-CIO (the country's largest labor federation.

More to come.

Open thread on DR-CAFTA

Use the comments to make mention of issues related to DR-CAFTA.

America's Finest on the WTO

Straight outta Madison. Where else?

The Old Gray Lady demands tribute

So much for linking to NY Times Op-Ed columnists.

What would Ralph say...?

(Or better, yet, what would Homer say?
No good.... stupid... corporate ... non-free... media... Why you LITTLE...!)

Tom Brower, you won't have the New York Times to kick around anymore. At least not all of it.

"one atmosphere"

We closed out today with a discussion of Singer's ethical views that seemed to hint at some lingering tensions in his argument, and/or in your views of his argument. Since we never reached resolution, I just want to open up a forumhere where you can add comments if you want to think about this a bit more.

To raise again the key question that we did not resolve: are Singer's ethics correct? Another way of putting this is to ask whether his proposal (p. 43-49, but not the section beginning on p. 49 and after) is indeed fair. This would set aside for the moment any questions about the "practicality" of his proposal, both to simplify the issue and because he does the same in the way he structures the chapter.

Singer calls for everyone to have an "equal per capita share" of entitlement to use the atmospheric "sink". Straight up, let's ask ourselves: is it fair to give every individual on earth the same amount of "right to pollute"? Or should some people get more than others? We seem to get different answers to these two questions when we phrase the question differently.

Most seemed to agree that everyone should get the same allotment, or entitlement. (Of course we can disagree on how big or small that allotment is.) On the other hand, it seemed several people found something intrinsically unfair in the prospect of Americans, Canadians, Europeans, etc., being asked to either cut back on pollution disproportionately or prepare to pay out a bundle to non-polluters in poorer countries. These strike me not as two different issues, but as two sides of the same coin.

Let's examine the source of the unfairness. Is it unfair that a North American only gets the same "right to pollute" as someone from a country where there is little or no industry? (I have used Burkina Faso as the generic example here...). Or is it unfair to give a North American a different entitlement from an African? It seems we need to choose one of these options, but that we cannot have both.

It is certainly possible to disagree with Singer on his ethics -- and many seem to. Let's make sure, however, that we don't call his proposal fair on the one hand, and unfair on the other.

What is fair? WWYD?

As I may have misinterpreted people's reactions today, offer some comments here, if you will...

On the Environment

From the April 23rd edition of The Economist. A couple of articles on the cover story, which is about bringing the market to bear on an increasing number of environmental issues. The leader is here, while the longer cover story is here. These links will only work on campus, as the library has electronic access to The Economist via ProQuest.

Yuan to revalue, or not?

Others have picked up on this. Particularly interesting in this discussion of the valuation of the Chinese currency is the paragraph where one analyst says "Don't bite the hand that feeds you." Think about the logic there, and consider what the undervalued yuan has allowed the United States consumer to do for a very long time...

The Economist on Argentina: "Overdosed"

Here is an article from last week's Economist (mine tends to arrive in the mail a bit late...) on Argentina's current struggles with inflation. Since we contrasted the U.S. with Argentina briefly yesterday, this is worth a look. The article does a nice job, giving a quick overview of the links between inflation and monetary policy. Note in particular the following paragraph:

In a successful effort to resuscitate the economy after the collapse of 2002, the central bank pumped in money. It printed pesos to buy dollars, thus also boosting exports and import-competing local businesses by keeping the exchange rate undervalued. Conveniently, this allowed the government to impose export taxes to boost its revenues. These policies, together with non-payment of debt, engineered an impressive recovery: output is now almost back to its pre-collapse peak of 1998.

That may sound like a mouthful, but I suspect it is the kind of thing you can follow...

Also, they pick up on the fact that both monetary and fiscal policy are expansionary. See the following:

But the authorities carried on boosting demand for too long. In the three months to December, the monetary base rose from 47.5 billion pesos ($16 billion) to 52.5 billion pesos. The government joined in too: "discretionary" federal spending rose by 19% last year, while the government decreed wage increases for the private sector. [...] The inevitable result of more money chasing not many more goods has been price rises.

Don't cry for me...?

One more "fill in the blank"

See? This stuff's a can o'corn now... weak dollar, BMW complains. We'll talk about MNCs next week. (In the meantime, enjoy perspectives on globalization and the IMF from Mr. Nader and Professor Smitka.)

Combine BMW's lamentations with the news yesterday that the Fed raised interest rates, and you'll realize there's lots to think about out in that thar news. BMW might be glad to hear about the Fed's monetary policy, as this might strengthen demand for the dollar, right? This would make the dollar stronger, and BMW would be happy because... why again?

Unsolicited plug for The Economist

Several of you noted an article in The Economist on China, the U.S., and protectionism. I wanted to point out that in the same issue, there is a three-page spread on the hub of India's IT boom: the city of Bangalore (and the state of Karnataka).

The article nicely mixes the appeal of outsourcing and the constraints built into the process. You will probably all find something to agree with in the article -- those of you who find outsourcing a frightening prospect and those of you who are assuaged by its limitations alike.

As a general rule of thumb, flipping through a copy of The Economist (hard copy available in the reading room in Leyburn) is highly educational. The last few pages, for instance, have detailed data each month on economic variables such as exchange rates, interest rates, and trade deficits. Dry reading, perhaps, looking at the charts, but it does put many of our conversations in perspective. They are good about noting current rates vs. rates a year ago, and so on, so you can see how things have changed recently as well. For example, the $US on April 20th was worth only about 5/6 of what it was worth in 2000...

Just food for thought.

Lou Dobbs Tonight

You may recall I mentioned the CNN show Lou Dobbs Tonight in class the other day. The most prominent theme of the show is outsourcing, with a nightly segment called "Exporting America". You can see the site here.

There is even a quiz on how much you know about outsourcing! Go get 'em...

Incidentally, I have no comment about how I did on the quiz.

Brain Gain

Before we move on from the topic of outsourcing to discuss the international monetary order, here's one last view on outsourcing to India. Have a look at this article on the BBC.

Enjoy -- and decide for yourself whether this is (a) not too big a deal, or (b) something that should make Americans very afraid.

Differing views on Boeing...

Interesting to note that today Trey and David have quite different reads on Boeing's situation. Go have a look. David notes a recent decline in profits and a potential conflict with the Pentagon (its most important customer), while Trey notes several important orders coming in for commercial aircraft. All big news for America's biggest exporter.

Little did we know when we started spring term how fascinating the fortunes of a single company could be...

Differing views on pharmaceutical costs

We discussed in class today the relative costs of research & development vs. marketing in pharmaceutical companies. Happily, views ranged dramatically -- from asserting the importance of protecting pharmaceutical patents as a long term industry necessity to the urgency of epidemics facing millions in thedeveloping world today.

With regard to the specific issue of costs, I had heard reports that marketing comprised a substantially higher portion of costs, but the evidence is mixed. One scholar puts R& D costs at roughly the equal of marketing costs, while the industry claims R&D is much greater and critics say marketing is much greater. Undoubtedly, I heard information (through major media) taken from the "critics", and you may have reasons to discount this information accordingly. See this PBS Frontline report on the industry for more.

The most relevant section follows (though you might also look to the surrounding information on profitability and comparisons of international prices, if you are interested):

What percentage of industry revenue is spent on R&D? How much is spent on marketing and advertising?

Uwe Reinhardt, an economist who studies the U.S. health system, says that R&D accounts for about 13 percent of pharmaceutical companies' revenue. Twenty-eight percent, he says, is spent on manufacturing, packaging and quality control, and 13 to 15 percent on administration and marketing.

Since companies are not compelled to make public a breakdown of their marketing and advertising costs (almost all companies combine administration and marketing costs), it's hard to pinpoint a figure for marketing expenditures. Industry spokesperson Marjorie Powell estimates that drug companies spent twice as much on R&D as on ads and marketing -- roughly $15 billion in 2002 on advertising and marketing, and about $30 billion on R&D.

However, industry critic Marcia Angell reverses that ratio, estimating that the industry spends about twice as much on marketing as they do on research. She tells FRONTLINE, "by their own figures, over a third of their employees are in marketing. Not marketing administration, but marketing. So I think it's safe to conclude that somewhere on the order of 30 percent -- over twice the R&D costs -- are marketing."

The widely divergent views of the costs in R&D vs. marketing almost certainly depend on how costs are defined and parsed out. For what it's worth, I will show my own bias and say that I am inclined to take the study by Uwe Reinhart as the most even-handed assessment. (Not least because we all liked the guy in graduate school.)

"American" companies and Singer

Several of you have taken to the issue of outsourcing. Excellent -- I am glad some of the themes seem to have struck a chord, and I look forward to hearing more of your thoughts. I will try to bring in another piece or two, perhaps on Friday, that we might look at.

In terms of foreign and domestic production, I have been thinking about an issue that has not yet come up in our discussions, but may in the future when we talk about MNCs in week 4. The issue is, what is an "American company"? Does an MNC have a "home country"? Toyota and Honda have factories in the U.S., employ American workers, and have American shareholders owning a piece of the company. Similarly, Ford and GM have factories, employees, and shareholders in Brazil, Canada, Europe, and elsewhere. This makes it interesting to think about what is an "American" car -- or more generally, American product -- in the age of globalism. Should it be measured just by where the corporate headquarters is? The majority of the shareholders (i.e., where its profits go)? Where most of its employees are (i.e., where its wages go)?

Generally, is there any truly "American", "Japanese", or "German" car?

This seems to be one more area to which we can extend Singer's logic. Let's assume for the moment that Toyota and Honda are as intricately intertwined with the welfare of the world economy as GM. Is there a reason to favor one of these companies over the other?

Outsourcing radiology

Hmmm...

Extending Trey's logic on Freeman

Trey has posted something interesting on Freeman's logic and the U.S. Auto industry, saying that employees of GM & Ford will need to consider accepting lower wages or will wind up having their jobs outsourced. He asks whether current high incomes are reasonable or sustainable.

It strikes me that part of the reason we have heard so much more about "outsourcing" of jobs to Asia in recent years is that this phenomenon has begun to affect white collar workers more. It used to be that blue collar workers, such as people working on assembly lines, were the ones threatened by globalization and having their jobs getting "shipped overseas". All of a sudden, as Queen Deviant notes, the low cost of shipping information (with broadband cables around the world, e.g.) means that outsourcing is now affecting people working in (God forbid!?) law firms, software companies, and maybe even investment banking firms.

Let's consider Trey's thoughts in an international perspective. Many people in India and China might say something like the following: not only should American auto workers not be paid so much, but there is also no reason for American professionals to get paid so much. What will happen when Wall Street finds they can hire very proficient investment analysts in Calcutta for $40,000 a year instead of three times that for someone living in Manhattan?

So, to extend the logic, here is the question I would ask: if we look at things globally, are American white collar workers overpaid too? Will our professionals find themselves trapped by the same logic Trey has outlined for GM and Ford workers? If not, why not?

Finally, as probable future professionals yourselves, do you feel the U.S. should protect America's highly educated, highly skilled workers? Would you feel differently if you were born in Calcutta? (Singer would suggest you shouldn't...)

-- jtd

Thomas Friedman on Geo-Greening & Outsourcing

Postings on Res Severa Verum Gaudia and Queen Deviant both reminded me of Thomas Friedman, currently a columnist for the NY Times and author of several books, including The Lexus and the Olive Tree (which made the short list for inclusion on our syllabus, but which I left out in favor of Bhagwati because of the latter's focus on the effects of various economic aspects of globalization). Friedman recently visited VMI, as part of a tour promoting his new book The World is Flat.

If you use the Lexis-Nexis access through Leyburn, you can do a search for Friedman's recent articles on his "Geo-Green" strategy. As I note in a comment on Res Severa, Friedman deems oil conservation essential to national security. If you do the L-N search, have a look at "No Mullah Left Behind", or any of his other articles on the Geo-Green phenomenon. In "No Mullah", he says the following:

[T]he Bush energy policy is: ''No Mullah Left Behind.''

By adamantly refusing to do anything to improve energy conservation in America, or to phase in a $1-a-gallon gasoline tax on American drivers, or to demand increased mileage from Detroit's automakers, or to develop a crash program for renewable sources of energy, the Bush team is -- as others have noted -- financing both sides of the war on terrorism. We are financing the U.S. armed forces with our tax dollars, and, through our profligate use of energy, we are generating huge windfall profits for Saudi Arabia, Iran and Sudan, where the cash is used to insulate the regimes from any pressure to open up their economies, liberate their women or modernize their schools, and where it ends up instead financing madrassas, mosques and militants fundamentally opposed to the progressive, pluralistic agenda America is trying to promote. Now how smart is that?

Friedman also has a great deal to say about outsourcing and foreign direct investment. One of his articles previews his new book; it talks about how suddenly American white collar workers are competing with computer programmers in Bangalore, India, for instance. Queen Deviant has touched on this issue.

Provocative stuff... thoughts?

On Debt Relief

Thanks to all of you on the IPE blogroll for developing your sites. Here is an item out of the news today that discusses the wealthy G7 countries and the prospects for debt relief for poor nations.

Whether or not you think debt relief is a good idea -- and it is something we can talk about this term, if you wish -- it strikes me that politically it is easier to support something like debt relief in principle (at least for those deemed "deserving" of it) than it is to follow through on it.

One also wonders what the best criteria are for providing debt relief to poor countries. Should it be based on economic principles, such as openness to free markets and fiscal austerity (which we will talk about later)? Should it be based on political decisions and, say, something like "support in the war on terror"? Should it be based the number of people living in poverty in a given country? To put it in terms of another form of financial aid: should it be need-based, or merit-based?

Maybe only he knows...

(I can't believe the news today
I can't close my eyes and make it go away...)

-- jtd

International Political Economy (Spring 2005)

This weblog will serve as a point of departure for our course. You will see links to various news sources and to your weblogs on the right-hand side of the page. Please feel free to link to this page in your own weblogs.

While I am not a technology expert, I am happy to help you with the basics of setting up your page. The Blogger help page may be of use to you as well.

Enjoy. I look forward to reading your commentaries.

-- JTD