Author: WHES

Sorry, your job’s been outsourced! — a look at globalization and its effects in Wisconsin

(November 27, 2007) Thousands of manufacturing jobs have moved to countries that skimp on wages and regulations. Now the service sector is also at risk.

Greg Diederich, who worked at Rayovac’s Madison packing and distribution center for 17 years, vividly recalls a party hosted there in 2002. Workers were served cake and ice cream, and given flashlights to thank them for improving productivity.

Then, “a couple weeks later,” the company informed the 240 workers that the facility was closing, says Diederich, who served as president of United Auto Workers Local 1329 at Rayovac.

Rayovac, it seems, had secretly firmed up an agreement with Dixon, Ill., to relocate the packaging center there. Dixon offered a package of incentives, including adjoining rail and truck access to the new facility.

But Diederich identifies another reason for the shutdown: Rayovac’s increasing reliance on production from overseas sources in China, Indonesia and Mexico.

“The importation of carbon-zinc batteries from China and Mexico first resulted in the end of manufacturing in Madison and eventually the closing of the operation,” he says angrily. “They just look for the lowest wage and the largest profit.” In addition, these nations — notorious for their repression of worker rights — offer far fewer worker protections or environmental regulations.

Victoria Hofstad, a spokeswoman for Spectrum Brands, Rayovac’s parent company, denies it. “Rayovac did not close the Madison plant due to production in China,” she says. “The plant was closed because it produced old-technology batteries with a declining market.” She adds that while Spectrum does not disclose information on labor costs, it considers Rayovac’s remaining Wisconsin plants, in Fennimore and Portage, “cost-competitive for supplying the U.S. market.”

Diederich counters that even the U.S. government recognized that outsourcing was a factor: “The Rayovac workers were granted special Trade Readjustment Assistance because the government found the layoffs were the result of foreign competition. It made that determination.”

Since 2000, Wisconsin has witnessed the net loss of 100,000 factory jobs — one-sixth of its manufacturing base — with many jobs moving to Mexico, China and other low-wage, high-repression sites. Moreover, this epidemic of blue-collar jobs shifting overseas may be only the forerunner of a devastating “offshoring” plague affecting highly skilled white-collar jobs, heretofore largely immune.

Along with the job transfers overseas comes a profound break with the idea that corporations have a reciprocal obligation to the workers, communities and nation that nurtured their success.

Most dramatically, seemingly secure workers in Wisconsin suddenly find their lives in free fall when their employer announces a shutdown related to a shift to globalized production.

“It leaves you back at square one — no seniority, probably a non-union job with lower wages,” says Diederich. “The real kicker is that the executives continue to loot the corporation, jacking up the stock price and making millions on their stock options.”

Wisconsin’s loss

If golden-hued images from TV ads shape your reality, then you may tend to equate “globalization” with a joyous global village wired to link up Wall Street yuppies with grandmas in Italy and peasants in Tibet.

But if you look at what’s happening in Wisconsin’s factories — and, increasingly, its office parks — globalization often seems to mean global pillage and polarization, lower wages for workers and lighter taxes for corporations. And rather than bringing people together, it is driving an economic wedge between the super-rich and the rest of us.

In Wisconsin, countless firms have radically slashed employment while shifting work to low-wage nations.

Less than 15 years ago, Briggs & Stratton was the state’s largest private employer, with 11,000 production workers. Now, with plants in Mexico, China and the anti-union U.S. South, it has just 2,500 Milwaukee-area union members. Three other prominent blue-collar Milwaukee employers — Master Lock, Johnson Controls and Tower Automotive (the former AO Smith) — have long employed more workers in Mexico than Milwaukee. And Rockwell Automation (formerly Allen Bradley) has slashed its union workforce in Milwaukee from a peak of about 6,000 to 300, with plants in Mexico, the Dominican Republic, China and non-union sites in rural Wisconsin.

Other state companies have shut down entire operations. Consider these examples:

Johnson Controls in Milwaukee. On Oct. 4, 1996, the Fortune 500 company honored workers at its Brew City valve plant with a party to show appreciation for their years of dedication, with special gifts to workers with 15, 20, 25 and 30 years of service. On Oct. 9, the workers received another token of the corporation’s appreciation: the announcement that their plant was closing and the jobs were being moved to Mexico. Wages at the new Mexico plant: about 72 cents an hour.

Mirro Co. in Manitowoc. The Mirro cookware plant in this community north of Sheboygan employed about 1,000 workers and was a major community landmark. A sign on its factory building read: “Proud to be home in Manitowoc for over 100 years.” But in 2004, citing pressures from competitors and the demands of Wal-Mart, a major retailer for Mirro products, the firm decided to close its Manitowoc plant. It had already been importing products from China and Brazil, but chose to further lower labor costs by building a new factory in Mexico.

Racine Steel Castings. This massive foundry had been a port of entry for generations of immigrants from Eastern Europe, the South and Mexico, allowing them to escape poverty through hard work among the fiery furnaces. But the foundry, which employed 1,100 workers in 1980, was recently moved to Eastern Europe, where wages are a fraction of what they are in Racine. “We could not compete with companies where workers are paid $2,500 a year and our workers were paid $25,000 a year,” one of the plant’s new owners explained.

Across the street, the 125-year-old Rainfair clothing plant has been leveled after new owners, La Crosse Shoe, booted the jobs off to China. The plant has since been replaced by a juvenile correction facility.

Fiskars in Wausau. This Finnish-owned firm, whose U.S. headquarters for craft and garden products is in Madison, recently shut down production of its famous orange-handled scissors in Wausau, moving the jobs of about 300 workers to China and Taiwan. The Fiskars manufacturing jobs paid $11 to $14 an hour locally. “We were facing being the last man standing making scissors in the U.S.,” explained Bill Nee, vice president for human relations in the firm’s Madison office. “We had a very good plant and very good employees, but from a cost perspective, it wasn’t as competitive.”

As Nee’s comment suggests, the pressures of corporate globalization come down on management as well as workers. If a firm like Fiskars fails to keep pace with its competitors in shaving labor costs, it is likely to lose ground and maybe even find itself on the verge of extinction.

While critics attack corporations for their greed, they miss the underlying structural forces propelling the shift of work to low-wage sites like Mexico and China. When there is no global “floor” to enforce decent universal standards for wages, worker rights and environmental conditions, the systemic pressures promote a ruthless “race to the bottom” in which virtually all corporations feel they must participate.

The myth of retraining

Globalization supporters have claimed that education and retraining will allow displaced workers to adapt and find higher-value jobs elsewhere in the U.S. economy. But studies suggest that training programs — while helping individual workers increase their employability — cannot compensate for the loss of family-supporting jobs.

For example, a 2005 study by Marc Levine of the Center for Economic Development at UW-Milwaukee found that Milwaukee has 88,524 more unemployed people than available jobs, and that 44% of African American males were unemployed. A sufficient supply of jobs — at any level of pay or benefits — simply doesn’t exist.

Thus, when a displaced worker like Greg Diederich is able to land a new job — he now works in Madison at the unionized General Electrics Medical plant (formerly Datex-Ohmeda) — he realizes that he is one of the lucky ones. And still, he feels far from secure.

“I don’t see any bright spots in manufacturing,” Diederich says grimly. “GE Medical is building a new plant in China to supposedly build a lower-cost version of what we’re building, but I’m concerned about what they really intend.”

Moreover, even when displaced workers successfully complete retraining programs, they are generally unable to find jobs comparable in pay and benefits to the ones they lost. “Out of a hundred laid-off workers,” writes New York Times economics writer Louis Uchitelle in his book The Disposable American: Layoffs and Their Consequences, “27 are making their old salary again, or more, and 73 are making less, or not working at all.”

Finally, the latest news is that displaced workers may find even less help than before. Retraining programs in Wisconsin face a new round of cuts due to Bush administration budgetary priorities, according to memos now circulating in the state Department of Workforce Development. If so, it would be part of a trend: According to the Madison-based Center on Wisconsin Strategies, federal funding for key programs offered through the Department of Labor dropped 43% between 1985 and 2004.

Eroding support

Sen. Sherrod Brown (D-Ohio), in his book The Myths of Free Trade, has documented that U.S. investment is increasingly shifting toward authoritarian nations, where independent labor unions are crushed, critical journalists imprisoned or “disappeared,” and government policy is focused on attracting foreign investors through holding down wages and offering tax subsidies.

Conventional economists have trumpeted the merits of low-priced imports produced under brutal conditions in places like Mexico and China. But many U.S. citizens have reacted with alarm to the decline of living standards for U.S. workers — wages now make up the lowest share of national income since 1947 — and the highly visible decay of industrial communities.

Popular suspicions of global outsourcing were sharpened first by the debate over the North American Free Trade Agreement, which was opposed by 65% of U.S. citizens in 1993. That was just before President Bill Clinton, backed by all but three of the nation’s 1,300 daily newspapers, eked out a narrow victory for NAFTA with mostly Republican support.

NAFTA granted strong legal protections to corporate investors while offering only token protection of worker rights and the environment. Predictably, NAFTA produced a 50% increase in the number of factories along the Mexican border, where wages typically run 70 cents to $1 an hour.

Indeed, a Carnegie Endowment study found that wages along the Mexican border have actually fallen by about 25% since NAFTA. This is due to an oversupply of workers, combined with the crushing of union-organizing drives as Mexican government policy. NAFTA has fed corporate America’s hunger for low-wage labor without producing the promised uplift in the lives of Mexicans.

The U.S.-owned “maquiladoras” or factories have generally meant subsistence-level wages, pollution, congestion, squalid living conditions (cardboard shacks and open sewers), and runaway crime. As Gustavo Elizondo, the mayor of Ciudad Juárez, now crammed with U.S.-owned low-wage plants, has said: “Every year, we get poorer and poorer even though we create more and more wealth.”

That’s one reason that, contrary to promises made early on, NAFTA has utterly failed to stem the tide of illegal immigration. There were 2.5 million Mexican illegals in 1995; eight million more have crossed the border since then. In 2005 alone, some 400 desperate Mexicans died trying to enter the U.S. while crossing parched deserts.

NAFTA, by permitting heavily subsidized U.S. corn and other agribusiness products to compete with small Mexican farmers, has driven many thousands of Mexican farmers off the land. Some 1.5 million to 2 million Mexicans have been forced out of agriculture, and many of those that remain are living in desperate poverty. These people are among those who cross the border to feed their families.

Meanwhile, NAFTA’s service-sector rules have allowed firms like Wal-Mart to enter the Mexican market, selling low-priced goods made by ultra-cheap labor in China. An estimated 28,000 small and medium-size Mexican businesses have been eliminated.

The effects of NAFTA and subsequent trade agreements, such as the Permanent Normalization of Trade Relations with China and the Central American Trade Agreement, have fostered majority opposition to “free trade” even among affluent Americans. Overall, 77% of Americans oppose the offshoring of U.S. jobs, according to a 2006 Pew Research poll.

The case against ‘entitlements’

Standing resolutely against any consideration of “human capital” in trade agreements is an extremely influential group of American pundits, led by New York Times columnist Thomas Friedman, author of the best-selling book The World Is Flat. Friedman strongly opposes the notion that the workers of the world possess any economic “entitlements,” arguing that prosperity will be generated through governmental deregulation, higher levels of education, and the free flow of technological advances in the hands of unrestricted corporations.

Friedman reserves special venom for “The Coalition to Keep Poor People Poor.” This is the term he uses for labor and environmental activists who claim to seek higher wages and better conditions for Third World workers, but whose real agenda, he divulges, is actually protecting unionized jobs in the U.S. None of Friedman’s anger is directed at the corporations responsible for miserable wages and living conditions.

Instead of Friedman’s “flat world,” we are witnessing Himalayan levels of inequality. Internationally, the gap between the world’s richest and poorest one-fifths has increased from 30-1 in 1960 to 78-1. The world’s three richest individuals possess more wealth than the combined Gross Domestic Product of the poorest 48 nations.

In the U.S., inequality is reaching levels not seen since the 1920s. To cite just one striking measure: the richest 1% — about 300,000 people — earn 16.2% of all income, more than the 150 million who make up the bottom 40%, according to various news reports. Those fortunate few earning over $4.5 million — the richest 1/10 of 1% — earn 6.9% of annual income.

Further, the threat of relocating production has helped leverage vast reductions in corporate taxes at both the state and federal levels. A list of Wisconsin firms earning more than $100 million in 2003 that paid no state income tax includes such well-known names as McDonald’s, Merck, Microsoft, PepsiCo, Kimberly-Clark, Johnson Controls (the largest Wisconsin-based firm), Kohl’s, Snap-on Tools, and the S.C. Johnson family of companies. [See Isthmus, “Are Wisconsin Taxes Too High?” 4/6/07.] Wal-Mart is currently fighting a state effort to boost its minimal taxes.

The shift in Wisconsin’s tax structure exemplifies the phenomenon described by author David Korten in When Corporations Ruled the World: “Communities and workers competing against each other to absorb even more of the costs of the world’s most powerful and profitable corporations.”

Much more to come?

Perhaps the most chilling aspect of the impact of globalization — a.k.a. outsourcing — on the U.S. economy is the prospect that what we’ve seen so far is only the beginning.

Princeton economist Alan Blinder, a self-described “free trader down to his toes,” has estimated that up to 42 million highly technical U.S. jobs — ranging from computer programmers to accountants to economists — are “highly off-shorable” (Wall Street Journal, 3/28/07).

Blinder bases his projections on a detailed analysis of 817 job classifications. He predicts this next wave of job shifts will go far beyond relatively low-skill jobs like those in “call centers” used by insurance and credit-card companies, and reach even people with Ph.Ds.

Favored sites will likely be low-wage nations with large numbers of well-educated people, like China, India and countries in Eastern Europe. U.S.-based corporations that relocate professional jobs overseas will thus be able to rely on the public expenditures for higher education made by other nations, even as they fight to lower their taxes in the U.S. and thus undermine higher education here. Blinder calls this offshoring of professional jobs “the big issue for the next generation of Americans.” In remarks to members of Congress, he warned that “tens of millions of additional American workers will start to experience an element of job insecurity that has heretofore been reserved for manufacturing workers.”

The immunity enjoyed until now by college-educated professionals could change drastically. “The cheap and easy flow of information around the globe,” writes Blinder, “will require vast and unsettling adjustments in the way Americans and residents of other developed countries work, live, and educate their children.”

Blinder’s warning must be taken seriously, especially in communities like Madison, whose employment base includes huge numbers of workers in insurance, information technology and finance who are potentially vulnerable to being offshored. For example, Promega, regarded as Madison’s premier biotech firm with 850 workers worldwide, has opened operations in China.

Meanwhile, CUNA Mutual, the insurance firm, has been shifting jobs out of its unionized Madison office to non-union sites in Waverly, Iowa, and Fort Worth, Texas. But advances in technology may make transplanting jobs to, say, India or Ireland more feasible.

Leveling the field

Doug Drake, the Milwaukee-based organizing coordinator for United Steel Workers, argues for another possible model of globalization, focused on human needs rather than investor rights.

“The fundamental flaw with the current regime of world trade is that the only interests considered are those of investors and private capital,” he says. “Workers, community, health and safety and the environment don’t matter. So these trade deals like NAFTA are one-sided structures where investors and banks are the only ones protected….

“No one is saying we should return to a one-nation economy,” Drake stresses. “We need a much more comprehensive approach that does more than take into account global stockholders.”

One approach along these lines has been used by the European Union to integrate poorer nations. The EU’s “social charter” calls for democracy, decent wages, health care and extensive retraining in all nations. Before then-impoverished nations like Spain, Greece, Ireland and Portugal were admitted, they received massive EU investments in roads, health care, clean water and education. The implementation of democracy, including worker rights, was an equally vital precondition for entry into the EU.

Efforts to improve conditions — schools, hospitals, roads, water supply, etc. — in poorer nations would be a central part of human-centered globalization. So too would be the enforcement of universal standards on labor rights and press freedoms, so workers could organize unions and expose unsafe or unsanitary conditions. The elimination of corporate “incentives” to relocate would be another key step.

Such an approach would level the playing field between transnational corporations and lift up conditions across the globe, rather than ratchet them down by pitting nations against each other.

Roger Bybee has written on globalization issues for a variety of national publications and websites including The Progressive, Z magazine, Progressive Populist, Extra!, Commondreams.org, dailykos.com and others. He is starting work on a book on US media’s flawed coverage of globalization issues, called The Giant Sucking Sound.

Ending hunger isn’t what it used to be–neither is fear

(October 23, 2007) The issue of hunger means many things to many people. Most Americans think about starving babies and many even donate to help feed the hungry. This year’s “World Food Day” passed with barely a media mention, yet the world wide deaths attributed to malnutrition remain unimaginable, contributing to millions of child deaths a year and the permanent mental and physical disability of hundreds of millions more. With such an anemic public view of and retarded response to hunger, the biblical reference that ‘hunger will always be with us,” is certainly believable.

But the fact remains that we have everything necessary to end hunger now. Food production and distribution capacity is abundant. There is no shortage of money. For a fraction of what US tax payers spend on the War in Iraq each year, all the world’s children could receive adequate nutrition, clean water, sanitation, immunizations and an education to boot for a decade. The only missing ingredient–the same one documented decades ago by a presidential commission, a National Academy of Sciences study and a prestigious international commission–remains the same today. What’s missing is the “political will.”

But now, the global war on terror might be aiding in the war to end hunger. And it’s not because of any increase in humanitarian passions. It’s directly attributed to our fear of terrorists and our desire to take cost effective measures to prevent terrorism, instead of launching more costly and provocative military missions to pre-empt them.

Soldiers in Iraq are increasingly involved in building schools and health clinics or digging wells to win hearts and minds and gain more reliable assistance in locating improvised explosive devices (IEDs).

The expansion of US military missions in Africa is more like a Peace Corps project than a Marine Corps incursion. And now the Navy’s role in combating global terrorism is about to expand by bringing more medical help and construction teams to regions considered possible flash points for anti-Americanism. According to Admiral Patrick M. Walsh, who recently completed maritime strategy plan for the Navy, Marine Corps and Coast Guard we will see a “renewed commitment to humanitarian missions.” Walsh’s comments matched those by Adm. Gary Roughead, chief of naval operations, in a speech Wednesday October 17, 2007 to an international gathering at the Naval War College in Newport, R.I. Roughead was backed by Marine Commandant Gen. James T. Conway and Adm. Thad Allen, commandant of the Coast Guard. “Preventing wars is as important as winning wars,” Conway said. “We can talk about what you destroy in war, but what is equally important is what you build in peace,” Walsh said. Formerly the Navy tended to cobble together responses to humanitarian disasters — such as the Indian Ocean tsunami in 2004 — on an emergency basis. But naval planners now argue that in “the battle of ideas,” humanitarian missions are a good method of counteracting suspicion of the U.S.. Walsh said, “If we wait until a crisis to form relationships, we will be late to the game,”. “Trust cannot be surged.” Future military ‘humanitarian’ missions will undoubtedly involve host governments and nongovernmental relief agencies. Clearly, hunger does not cause terrorism or create terrorists. But clearly, terrorists thrive in the lawless, lethal conditions where hunger also thrives.

Pakistan’s former Prime Minister Benazir Bhutto summarizes “for democracy to really succeed and to put an end to extremism, we need to attack its root cause. The solution lies in focusing on the elemental needs that matter most to ordinary people: food, clothing, shelter, jobs and education. Fostering a better level of trust and understanding among the people in the boarder areas and delivering on their key needs, is the key to improving our security situation.”

There are far more compelling national security reasons for ending hunger. Preventing the spread of infectious diseases, reducing the flow of illegal immigrants or the lessening the catastrophic consequences of global warming will require ending the lethal, debilitating and highly motivating aspects of human hunger.

But none of this is really new.

In the end notes of 1980 Presidential Commission on World Hunger it was suggested that efforts to end hunger wouldn’t likely succeed without our recognition that doing so would be vital to ensuring our own peace and prosperity.

It’s unfortunate that most liberal institutions committed to ending hunger have been to fearful of using fear to motivate our political leaders. Some progress has been made in reducing hunger but how different the world would be today if all means were mobilized by those committed to ending hunger.

At this point it would be safe to wager that even the less than inspiring hunger reduction goals for 2015 won’t be met if left to the work of humanitarians. Perhaps there is more to fear than fear itself.

Burma–growing darker daily

(September 11, 2007) On August 15th the Burmese government raised the price of fuel 500%. This sparked a series of peaceful demonstrations all over the country, beginning with demonstrations in Rangoon, now called Yangon, the former capital of the country. They have since spread to Pakokku and Mandalay in Northern Burma. In Pakokku, Budhhist monks took some army officers hostage for a few hours, and in Mandalay, where traditionally monks have been highly politicized and aware, it is reported that the army has units surrounding the city in readiness for an inevitable clampdown.

Dr. Alfred Oehlers, now a security analyst based in Hawaii, points out that Burma is a diesel-dependent country that lacks refining capacity. He says that fuel is heavily subsidized, and the government has probably signed away natural gas and raw petroleum exports in barter agreements for refined fuel that don’t bring in cash. It has to import fuel at high spot prices, Oehlers says.

So it is in a bind — finding new gas reserves, some reportedly huge, but still unable to import fuel from earnings from the energy sector. The fuel price hike will put the Burmese people under even greater strain. They have spent decades adjusting to whatever policies the junta decrees off the top of its head. When things come to the unbearable crisis level people have taken to the streets, most notably in 1988, and as they already have this time. In response to this exorbitant price hike, smugglers immediately attempted to smuggle in diesel from Malaysia, but the Malaysian authorities intercepted a reported $147,000 worth of diesel oil, hidden in a Burmese ship.

In 1988, the general consensus among Burmese citizens and Burma watchers alike was that the military government came within a hair’s breadth of losing power. But it managed to regain its control by the use of massive force and by an increasingly ratcheted up control, which remains in force to this day.

The difference between 1988 and now is that now, due to the internet and citizen journalism, it is much more difficult for the junta to hide its human rights abuses. The outside world is much more aware of the Burmese situation, the National League for Democracy is still an important force for change in Burma, exile groups are much more galvanized, and the gap between the power holders and everyone else is much wider than it ever was before.

News reports generally ignore or gloss over structurally-ingrained problems in the Burmese political economy. The truth of the matter is that Burma has been a command economy and a military dictatorship since General Ne Win’s coup in 1962. In 1974 it had its first sham constitution. The economy is still largely state-controlled, despite a much touted “opening up” after the government clamped down on the mass pro-democracy demonstrations of 1988.

To placate the population, the junta privatized somewhat, without giving up its major monopolies.

The main effect of this so-called opening up was to raise the stakes higher in governmental and military corruption. What can be called pariah capitalists or oligarchs have appeared in the Burmese economy, such as the businessman Tay Za, whom Oehlers suggests might be one the chief beneficiaries of the privatization of the fuel sector. A few years ago there was a run on the banks, which were mainly money laundering facilities for the drug lords, or Ponzi schemes in which many honest people lost their life savings.

The pervasiveness of official corruption — as we say in Burmese, the house leaks starting from the roof — became apparent in late 2004, when Lt. Col. Khin Nyunt was deposed and placed under house arrest, allegedly for deals with the Wa drug cartels in Northern Burma. This is not to say that those who won in the internal power struggle or purge are not corrupt. They may be more so, since they are still in power.

On May 30th 2003, Aung San Suu Kyi’s entourage was attacked by government-sponsored thugs near Depayin and she has been under house arrest since, following the previous periods of house arrest which, cumulatively, amounts to thirteen years of official captivity. Khin Nyunt was supposed to be “the moderate” according to some pundits, but since he himself is under arrest too, there is no real likelihood that the on-going stalemate will be resolved through dialogue.

It’s very sad that the brave amazing people of Burma have to take their lives in their hands to go out on the streets to protest peacefully. Among the arrested now are the famous 1988 leader, Min Ko Naing (Conquerer of Kings). Other notable leaders who are in hiding include Su Su Nway, who has reportedly run out of medication for the heart ailment from which she suffers, and a husband and wife team who had been free only for one year before they re-started their activism. Their infant daughter is now being looked after by her grandmother.

For the last 14 years the junta has been dotting the i’s and crossing the t’s on a document it calls a constitution, in a process it calls the “National Convention.” Now it has ratified its statement and there are no surprises for anyone. The ugly new flag shows one big star, clearly symbolizing the military’s intention to remain dominant.

A boot crushing everyone underneath it would be a more apt symbol.

Sham effort to place blame for the price hike on concerned citizens

In a disturbing new development, a report supposedly written by an advisory group of Rangoon-based economists and scientists recommended the price hike to cover higher budget expenditures by the military government. It was leaked to exile groups and the Burmese media outside the country. However, Dr. Maung Myint, a prominent Burmese economist and a member of the group, denied the authenticity of the report in a letter to The Irrawaddy, a Thailand based dissident magazine.

I believe the report was a fake and an attempt to make scapegoats of the academics. It betrayed a poor and mechanistic “understanding” of “bringing prices in line with the world market.” It did some rudimentary arithmetic and said the budget deficit, caused by the government’s raising salaries of civil servants, could be covered by raising fuel prices. It did not go into the inflationary affects of this increase in money supply at all. The Burmese government has been continuously printing money to cover its expenditures since 1962.

It was a sort of watered down version of the IMF/World Bank 4 step program of privatization, market based pricing, free trade and capital market liberalization that has been criticized by Nobel Laureate Joseph Stiglitz, formerly chief economist at the World Bank. Allowing prices to float to market levels as per IMF/World Bank recommendations also caused demonstrations in Indonesia in 1998.

Prospects for outside pressure on the regime

A recent Washington Post editorial criticized Secretary General Ban Ki- moon and the U.N. for lack of action; U.N. Special Envoy Mr. Gambari wrote a rather unconvincing reply. At the White House, Mrs. Laura Bush condemned the Burmese junta for its latest abuses. At the APEC Summit in Sydney, President Bush urged leaders of other nations to join him in pressuring China and India to press the Burmese junta for political and economic reform.

The Chinese foreign ministry spokesman said China did not interfere in the affairs of other nations. The Indian representative did not comment.

On the whole, the current Bush administration, including Secretary of State Condoleeza Rice, has paid scant attention to Asia. But now it is clear that the United States and China are linked together inextricably by enormously large trade ties. China’s huge trade surplus is invested in U.S. treasury bills, and it could crash the U.S. government if it were to withdraw its investment. Moreover, its balance of payments surplus in its trade account is growing daily.

The United States is a consumer economy, and the U.S. consumer drives China’s exports to the USA. There is concern in Asia that the downturn in the U.S. economy will affect Asia. Since 1988, overland trade between Burma and China has been booming. Not all of it appears in the official trade figures. Burma is a virtual economic colony of China, and also of Thailand. Overland trade with India is also substantial. A major highway connecting Burma with India is under construction. At the same time, India has toned down its rhetoric with regard to Burma and is on friendlier terms with China.

It could not be a better time for all these countries to step up the pressure on the Burmese junta. .

They could take their lead from the Canadian Friends of Burma, which last month sponsored a conference in Ottawa on how to exert influence on China. Several groups have started to demonstrate in front of Chinese embassies.

The Burmese case is a no-brainer. If things are to change meaningfully, these and other forms of pressure will need to mount.

Kyi May Kaung is a University of Pennsylvania-trained Burma specialist who taught at the Institute for Economics in Rangoon for 20 years. She is an analyst for Foreign Policy In Focus. This article was first published in FPIF and may be viewed at http://www.fpif.org/fpiftxt/4532 .

Trade can play a role in agricultural development

Gawain Kripke is senior policy adviser on international trade issues with Oxfam America. Kripke has authored numerous opinion pieces and briefing papers on trade and development issues, has testified before Congress, and appears frequently on radio and television programs, including Marketplace, CNN, National Public Radio, and BBC World News. This article first appeared in Foreign Policy In Focus and may be viewed at http://www.fpif.org/fpiftxt/4023.

(February 23, 2007) This year may prove critical for the intertwined puzzles of trade rules, agriculture policy, development, and hunger. A few facts to consider:

* The Doha Round of global trade negotiations is sputtering to an unsuccessful end. Disputes around agriculture trade are the central obstacle.

The U.S. Farm Bill expires in September 2007, and the new Democratic Congress is expected to revise American farm programs in coming months.

At stake is close to $100 billion annually in government spending on farm subsidies, food stamps, environmental programs, and related programs

Agriculture is the most important livelihood for the poorest people. Of the 1.3 billion people who live on less than $1 per day—a common measure of absolute poverty—more than 70% rely on farming for their livelihood.

Global hunger is on the rise. According to the latest UN figures, historic progress reducing the number of hungry people has reversed in the most recent tallies. Eight hundred fifty-four million people, mostly in Africa, are undernourished.

For better or worse, all these issues are connected. And it would be very nearsighted, perhaps destructive, to address any of these in isolation from the others.

As Americans, perhaps the most proximal issue for us is the Farm Bill, which will be considered by Congress this year. The Farm Bill was initiated as “a temporary solution to deal with an emergency” in 1933, as part of the New Deal program to help rural America recover from the Great Depression and the Dust Bowl. Although the farm supports have been reformulated over the years, the programs still reflect the legacy of that era.

The current Farm Bill was enacted in 2002. It immediately became controversial—especially among our trading partners who viewed it as a major expansion of unfair subsidies promoting farm exports. Although the United States has very few “export subsidies” as defined by the WTO, the reality is that the Farm Bill helps to maintain the massive surpluses that are exported. About one-quarter of U.S. farm production is exported, so farm subsidies that encourage increased production are, effectively, export subsidies.

Competing agricultural exporters, like Brazil and South Africa, are unhappy with U.S. farm subsidies, which they view as unfair competition. Agricultural importers are unhappy as well, since U.S. farm exports lower prices for their farmers and undermine rural livelihoods in countries like Guatemala and Mexico.

In this way, U.S. farm policy is, effectively, trade policy. And since trade—especially agricultural trade—has a lot to do with poverty-reduction and development, U.S. farm policy is a form of anti-development policy.

All of this would be troubling, but perhaps understandable, if the Farm Bill was an effective program to help American farmers. But, it’s not. Most U.S. farmers don’t get any support from the Farm Bill. The vast majority of funds are allocated among farmers who grow a limited number of crops: wheat, corn, cotton, rice, soy beans, sugar, and a few others. Only about one-quarter of U.S. farmers qualify.

Even among those who do receive support, the vast majority receive very limited payments. 72% of the subsidy payments go to the biggest 10% of farmers. The remaining 28% of the subsidy pie is divided among 90%.

There is in American agriculture an unrelenting trend toward higher productivity, consolidation, and increased farm size. The vast majority of “farm households” don’t really make a living by farming. Off-farm income makes up 91% of the household income, with farming providing a supplement in good years for the large majority. Of course, it’s a different story for a relatively small number of commercially competitive farms—usually very large and mechanized—where farm income is the livelihood.

At the aggregate level, American farmers aren’t poor. On average, farm households have higher incomes and greater wealth than the population at large.

So what does all of this mean for the Farm Bill?

For one thing, it means that the current program is not achieving any meaningful objective. That’s not to say that there’s no role for farm programs to support American agriculture. There’s room for reform that targets support to vulnerable or disadvantaged farmers, directs support for better environmental practices or land stewardship, prioritizes healthy food and promotes more diverse rural development. All of this could be achieved within existing budgets by reducing the production-oriented subsidies that largely benefit big farm operations and hurt farmers in other countries.

Cutting production-oriented subsidies could reduce the massive surpluses that U.S. agriculture produces and dumps onto global markets. This reform would likely raise prices and create market opportunities for developing country farmers to sell their agricultural production.

However, reforming the Farm Bill will not solve all the problems in agriculture trade. Even major reforms to the bill are unlikely to have a measurable impact on development and poverty reduction unless complementary measures are undertaken by developing countries and development donors.

Farmers in developing countries, more than 2.5 billion of them, will continue to face risks in the volatility and long-term decline of farm commodity markets. Many of these farmers are very poor, with little cushion to absorb shocks in the market. A collapse in coffee or cotton prices, for example, can mean destitution for millions of farmers in Africa and Latin America. A surge in maize imports can ruin the livelihood of millions of farmers in Mexico or Malawi.

Developing country governments need to retain the ability to moderate these market shocks through safeguard mechanisms and protections. And they should pursue policies that ensure food security for their populations—which includes maintaining domestic production capacity. Many of the poorest countries are growing increasingly dependent on a limited number of basic commodities to achieve economic growth. At the same time, these countries are also becoming more reliant on food imports to satisfy their national demand. This dependency creates major risks and creates a vulnerability to market shocks or climatic conditions. A drought or a collapse in prices for their exports can create an economic crisis, draining foreign exchange reserves and impeding the ability to pay for imports, including food.

As such, developing countries—particularly poor countries—should maintain and expand domestic agriculture, both as a valuable economic strategy and as a hedge against the food insecurity caused by the vicissitudes of trade. This is not an argument against trade, nor for food autarky; just a recognition that globalization offers risks that must be managed, as well as an opportunity to be exploited.

Some trade agreements work against this objective. Trade agreements negotiated by the United States—such as the North American Free Trade Agreement (NAFTA) and the Central American Free Trade Agreement (CAFTA)—could seriously impede developing country food security and development strategies by requiring countries to open their markets completely, with few safeguards or other moderation. These agreements treat negotiating countries as equals and essentially require symmetrical and reciprocal obligations from both rich and poor. Missing from these agreements is a recognition of the special vulnerabilities of poor countries, particularly among their poor rural populations.

At the same time, a multilateral trade agreement could offer the potential to benefit both rich and poor countries, while permitting the “policy space” for developing countries to pursue food security and development. In addition, the multilateral venue is the only place where reducing rich-country subsidies is on the negotiating table. The Doha Round negotiations, while incomplete, offered some promise of a result that takes into account the differences between rich and poor, and the need to permit developing countries tools to pursue pro-poor strategies in agriculture.

Embedded in the negotiations was the principal of non-reciprocity, i.e. that developed countries must take on higher obligations than developing countries. In addition, several new measures have been proposed to give developing countries special mechanisms and safeguards for food security and development. Admittedly, when the negotiations stalled in July 2006, the state of play was far from adequate. But, the failure of the negotiations, in some way, was a measure of the growing assertiveness of developing countries in pursuing their interests and in negotiating an equitable agreement.

Some have argued that agriculture should be removed from purview of the WTO and the Doha Round. But doing so could also limit the opportunities that greater trade and investment in agriculture can offer to developing countries. By restricting trade-distorting subsidies—like those in the Farm Bill—the WTO helps to limit the damage that rich countries can do to developing country farmers. And there are significant economic benefits at stake in reducing the high tariffs that block access to rich-country markets for commodities important to poor countries.

Removing agriculture from multilateral governance and negotiations risks ghettoizing the economic sector of greatest importance to poor people. It would be unwise to isolate agriculture and hope that developing country markets are not pried open by pressure from aid donors, bilateral trade agreements, and private sector lobby. A better strategy is to push for a good agreement with strong pro-poor development orientation.

In many of the poorest countries, agriculture has long faced neglect by governments and the private sector. It has often been viewed as an unproductive and inefficient economic backwater. As a result, there has been little investment in infrastructure, stagnant or declining productivity, and entrenched poverty.

But there is strong evidence that investments in agriculture offer the best prospects for development, with comparatively big impacts on poverty reduction. With new interest among aid donors and many developing country governments, with the Farm Bill under consideration in Congress, and with Doha wounded but not yet dead, the time could be right for a new package of policies and investments to make agriculture an engine for development and poverty reduction in poor countries.

What should a billionaire give to save human lives–and what should you?

What is a human life worth? You may not want to put a price tag on a it. But if we really had to, most of us would agree that the value of a human life would be in the millions. Consistent with the foundations of our democracy and our frequently professed belief in the inherent dignity of human beings, we would also agree that all humans are created equal, at least to the extent of denying that differences of sex, ethnicity, nationality and place of residence change the value of a human life.

Reflections on Pinochet’s death

By now the world has had enough time to reflect on the irony of Gen. Augusto Pinochet’s death Sunday, December 10, International Human Rights Day. Now the dictator responsible for the death, torture and disappearance of thousands will never face justice.

It’s been over 33 years since Pinochet rose to power in Chile through what is generally recognized as one of the bloodiest coups of the 20th century. On September 11, 1973, Gen. Pinochet led the bombing of the Chilean presidential palace, La Moneda, overthrowing the democratically elected government of Socialist, Salvador Allende. To those mourning his death, Pinochet was a hero and patriot who saved Chile and its waning economy from the clutches of Marxism and Soviet influence. But to me and countless others he’s the reason I grew up with one less family member.

montec1Cristián Montecino

In 1973, in the weeks following Pinochet’s coup, my uncle, Cristián Montecino, was abducted from his apartment by the military police and executed in a military barrack for no reason other than taking pictures. Throughout the 17-year dictatorship, Pinochet’s secret police, the DINA, murdered and kidnapped approximately 3,000 people, ranging from leftist dissidents to clergymen, university professors and journalists. Even today, many of the victim’s family members still deal with the pain and uncertainty of not knowing if their disappeared loved-ones were killed or not.

When I was still a child an Argentine woman came over to my house to ask my father to help her find her long-lost lover, disappeared since 1973. My father wasn’t home at the time and so I helped her search through his archive of pictures of political prisoners in Santiago’s national stadium. Still clutching a half-faded picture of her lost lover, the woman patiently watched my father’s computer screen as I zoomed in and out of the faces of those who most likely never made it out of the stadium alive. But the hundreds of pictures yielded no clues and the woman had no choice but to live on with her solemn conviction that one day, if not reunited with her missing lover, at least she’d know his fate for sure.

When I was teenager growing up in post-Pinochet Chile, I struggled to convey my feelings about the dictatorship to my friends and classmates, many of them who were pro-Pinochet. Some of them, no doubt instructed by their wealthy parents, said things like: “Pinochet is a hero” or “it’s too bad so many had to die but it was in our country’s best interest.” Now I am continually shocked at how often I hear the same defenses from educated adults, people who cowardly refuse to see the thousands dead as more than mere faceless numbers or collateral damage.

Was my childhood babysitter and close family friend, Rodrigo Rojas, who was burned alive and left to rot in a roadside ditch, merely collateral damage? Can economic growth offset the impunity enjoyed by the perpetrators of such crimes against humanity or the pain suffered by Rodrigo’s family?

The good thing is most people don’t think so anymore and the overwhelming public reaction in Chile to Pinochet’s death was celebration as news reached the U.S. that Chilean liquor stores have sold out of Champagne. But even though Pinochet’s corruption and crimes are now almost universally condemned and Chile has even elected a former torture victim, Michelle Bachelet, as its President, I for one am not celebrating.

His death is far too convenient for him and his supporters because now he will never be convicted for his crimes. Those on the Right callous enough to still stand by their “General” can now forever live in fantasy. Fortunately, Bachelet’s government spokesmen have announced that Pinochet will receive no special funeral from the state. Now the cult of Pinochet is finally in decline and this year’s International Human Rights Day can go down in history as a truly appropriate one indeed.

Perhaps Pinochet’s death marks the true end of the Cold War in Latin America.

Juan Antonio Montecino is a student at the University of British Columbia and a contributor to Foreign Policy In Focus. This article first appeared in Foreign Policy In Focus.

Inter-American Development Bank debt cancellation for Haiti–just another promise?

(December 7, 2006) Members of the international community got a tongue lashing at a recent donors conference on Haiti, attended by more than 90 delegations of countries and international organizations.

After numerous press announcements and pledges of assistance, totaling nearly $1.8 billion over the past two years, promises “have not been kept,” according to Dominican Republic foreign minister Carlos Morales Troncoso. Morales further criticized participants from the U.S. and other rich country governments for blaming Haiti for this failure, rather than their own practices.

The Inter-American Development Bank (IDB), with a newly announced, but ill-defined plan to cancel Haiti’s debt may well become one of those donors who fail to deliver.

IDB President Luis Alberto Moreno trumpeted the new debt initiative, which also includes Honduras, Nicaragua, Bolivia, and Guyana, saying: “This is great news for the more than 30 million people in these five countries.” Yet, since the November 17 announcement, campaigners have been scrambling to determine just what this “news” will mean for impoverished peoples in the five countries.

The IDB “Plan”

The IDB announced that its Board of Governors had agreed to a “framework for debt relief,” and that the Governors will meet again in January to hammer out details in Amsterdam, hopefully announcing a final decision at the IDB’s March annual meeting in Guatemala. The IDB hasn’t yet disclosed details of the framework under consideration.

However, several news reports circulating the next day indicated a more substantial decision. Apparently quoting from a draft agreement, Heartbeat News from Jamaica reported “The principles of the framework stipulate that 100 percent debt relief be granted, with effect from January 1, 2007, to the five countries, which will continue to have access to concessional loans and technical cooperation grants from the IDB.”

The persistence of poverty in Latin America and the Caribbean has been an important campaign issue in numerous presidential elections this year, especially in Haiti and Nicaragua. The debt burdens in these five eligible countries combined with harmful economic policies imposed on them through loan and debt relief programs by rich country creditors, severely limit resources available to governments to invest in basic services such as health care and education.

Thus the IDB announcement was welcome news. In Haiti, impoverished people cannot afford to continue to service this debt burden. In 2005, the Haitian government spent more than $70 million on debt payments, a significant portion of its budget. Yet less than half of the population has access to basic rights such as healthcare, education, and potable water. The World Bank estimates that three-quarters of Haiti’s 8 million people live in poverty; half the population lives on less than $1 per day.

Officials close to the debt negotiations have not confirmed the January implementation date, and this will be under discussion in Amsterdam. The stipulation of 100% debt cancellation is technically accurate, but highly misleading.

What will be cancelled is 100% of debts accrued prior to a yet to be established date, possibly debts accrued before the end of 2004. For months, IDB board members and officials have discussed this “cut-off date” with an eye towards canceling a total of $3.5 billion in debt for all five eligible countries. However, a leaked November IDB staff paper suggested reducing the proposed amount of debt cancellation by almost $2 billion from $3.5 billion to $1.6. Such a steep reduction in the benefits from this debt deal to these impoverished countries is unacceptable.

Odious Debt

Many of these IDB debts were initially contracted during the 1960s and 1970s. The high interest rates that prevailed in the 1980s resulted in ever-increasing debts. Much of this debt is also “odious” under international legal precedent, meaning creditors knowingly lent to undemocratic or illegitimate regimes, and the funds did not benefit the population in these impoverished countries. This provides a compelling argument for immediate and broad cancellation.

In Haiti, more than half the country’s debt was contracted by the Duvalier family dictatorship (1957-1986). Harvard economist Michael Kremer reports that Jean-Claude Duvalier stole $900 million from the Haitian people. According to a 2006 UN sponsored census, half of Haiti’s population was born after the Duvalier era and forced to carry this debt burden from birth. The Haitian people were not consulted about these loans, and received little benefit from them. But now they are forced to repay them. It is unjust that Haiti is being asked to comply with economic policies such as privatization of basic services or increased trade liberalization before obtaining full debt cancellation.

Guyana, Honduras, Bolivia, and Nicaragua each have a history of odious and illegitimate debt as well. Though specifics vary, the general pattern of international financial institutions, including the IDB, issuing loans to dictatorial regimes holds true. In Nicaragua under Somoza, loans were readily given including a last minute loan from the International Monetary Fund for $65 million nine weeks before the collapse of the regime in 1979. Somoza left an international debt of $1.6 billion–the highest ratio of debt to GDP in Latin America at the time. In Bolivia support for military governments during the period 1965-1978 was constant, including General Hugo Banzer (1971-1978) who waged a campaign of murder against priests of liberation theology. By the end of that period Bolivia’s international debt was $3 billion. Guyana under Forbes Burnham’s government (1964-1985) was increasingly the site of numerous human rights violations, including the assassinations of scholar and political leader Walter Rodney in 1980 and the Jesuit Priest Bernard Drake in 1979. Yet the country was still able to receive loans for most of this period.

Haiti’s Special Case

Because ultimately it is the people, not the government, that pays these debt burdens, justice requires immediate cancellation for all of these countries. However, in Haiti’s case, justice will likely be delayed even further. Indeed, whatever is ultimately decided on both the date of implementation and the “cut-off”, Haiti will face a delay of at least two years before obtaining 100% cancellation. Unlike the other four countries in the IDB plan, Haiti has yet to complete the International Monetary Fund (IMF) and World Bank’s debt relief program, which is required for Haiti to see its debt cancelled to any international financial institution including the IDB.

The IMF and World Bank’s debt relief program requires countries to first implement a series of harmful economic reforms such as privatization of basic services before obtaining debt cancellation. Haiti was admitted into the IMF and World Bank’s program (or HIPC, Heavily Indebted Poor Countries, Initiative) in April. The government is now committed to undergo a minimum of two years of structural reform before reaching “completion point” in the program and being granted debt relief.

Providing for immediate debt cancellation, without forcing Haiti to go through the IMF and World Bank’s HIPC program, is quite manageable. The government has already submitted an interim poverty reduction strategy that could easily be extended, and thus provide the basis for accountability into the future. Haiti is facing an institutional crisis more extreme than any other country in the region.

Haiti has one of the lowest public employment rates in the world; the impact of this is seen in the lack of public schools and public health services. Savings from debt cancellation would have an immediate impact on the capacity of the state to enhance desperately needed services. It would also save lives.

On December 5 Jubilee South called for an International Day of Solidarity with Haiti, with the principle demand being immediate cancellation of debts. We would encourage the IDB to listen. A debt relief program that extends into two or three years risks missing an opportunity to have an impact on the current crisis. Indeed, delays coupled with intrusive policy conditions could make things worse.

The international community has made many promises to Haiti over the last two years and has mostly failed to deliver. We hope the IDB chooses a different road.

Debayani Kar is Communications and Advocacy Coordinator at Jubilee USA Network and Tom Ricker is Co-Director of Haiti Reborn/Quixote Center. This article first appeared in Foreign Policy In Focus.