Protectionism at its worst?

My current workplace released an interesting study about the presence of foreign students here in the U.S and the results seem quite dire. An excerpt-

According to the study’s findings, very few foreign students would like to stay in the United States permanently—only 6 percent of Indian, 10 percent of Chinese and 15 percent of Europeans. And fewer foreign students than the historical norm expressed interest in staying in the United States after they graduate. Only 58 percent of Indian, 54 percent of Chinese and 40 percent of European students wish to stay for several years after graduation.

Around the same time that the paper was released, I stumbled upon this story from the NYT that detailed the protectionist effects of Obama’s stimulus package. More specifically, a provision of the bill limits the hiring of foreign workers by any firm receiving financial assistance from the government. One company, Bank of America even had to rescind job offers to foreign MBA students as a result of the bill. Obviously, this is a problem. Business schools generally tend to be more supportive of international students and this inability to find jobs will hamper greatly international recruitment among American institutions. We also don’t want to turn away knowledge and skills, no matter the nationality and citizenship. At the same time, there is something to be said for ensuring that tax payer money primarily benefits American workers. It does seem rather strange to use American funds to pay the wages for foreign workers, while American workers continue losing jobs at alarming rates. Is this just protectionism at its worst or does it make good business sense? Thoughts?

-Indira

Hating on Ayn Rand

I’m too exhausted to post anything substantial today and I’d really like to do a recap of Jessica Valenti’s lecture, atleast for Anna’s sake, but I’m going to wait until I’ve caught up on some sleep. I do have a new column up on the IDS website in which I mock the latest fad among the ever-crazed and delusional libertarians/Randites- “going galt,” a reference to one of the worst books ever written, Atlas Shrugged. An explanation below [and no, this is NOT made up]-

Some conservatives and libertarians are threatening to curtail economic production in homage to the book. The loose movement, termed “going galt,” is a reference to an uprising led by John Galt, the novel’s antagonist, where the “productive” class of society goes on strike to protest governmental actions. Miraculously, this strike bleeds the government dry, capitalism is saved and the world is whole again!

If indeed people are planning on “going galt” to escape Obama’s taxes for the rich, I say good for them. People who actually like Ayn Rand and glean life lessons from her works are probably brain-dead anyway, so it isn’t like they’re contributing much to society.

God, I hate these people. Read the rest of the piece here.

-Indira

The trouble with Davos

My latest IDS column about the World Economic Forum at Davos is up. An excerpt-

For the uninitiated, Davos, a tiny ski resort in Switzerland, plays host to the annual Forum, a gathering of business leaders, politicians, non-governmental agencies and the occasional celebrity. Historically, the five-day conference provides an opportunity for the rich, elite and overwhelmingly white audience to bask in its own greatness, all while lauding the benefits of globalization and the power of free markets.

This year was to be no different – until the gloom and turmoil besetting the global economy cast a pall over the celebrations. It became apparent that praising unfettered capitalism as the key to solving global poverty, or whatever it is that you’re taught in economics classes these days, would surely have been in poor taste.

You can read the whole piece here.

-Indira

Three cheers for sweatshops!

Nick Kristof, at the NYT, has been doing a phenomenal job outlining the problem of violence against women, particularly in Asia. The stories are gut wrenching and his work even received a mention at Hillary Clinton’s confirmation hearings. But, his most recent column about sweatshop labor is a serious departure from this excellence. Kristof maintains, and this is a view shared by many economists, that sweatshop labor is the only real alternative available to people in developing countries, short of being unemployed.

Mr. Obama and the Democrats who favor labor standards in trade agreements mean well, for they intend to fight back at oppressive sweatshops abroad. But while it shocks Americans to hear it, the central challenge in the poorest countries is not that sweatshops exploit too many people, but that they don’t exploit enough.

Really? Working for mere cents, unhealthy/unsanitary working conditions,  verbal abuse, forced overtime and sexual harassment aren’t exploitative enough? I’m not even sure where to begin. First off, it may be true that increasing labor standards could increase production costs, which would in turn lead to the shutting down of factories in developing factories. But, the solution here isn’t to promote some sort of race to the bottom. If we can demand various regulations for workers here in the U.S. including banning of child labor, why shouldn’t we expect the same from these corporations abroad? Kristof, like many economists, is unfortunately endorsing the view that trade is a zero-sum proposition wherein you can’t have both sensible regulations and economic development and that is dead wrong.

There is also the moral argument here. It’s pretty disgusting that we’ve reached a point in humanity where we can force people from developing countries i.e. non-whites to work for next to nothing, all in the name of economic development and free trade. This mad desire for profits without any consideration of people’s dignity is precisely what’s causing our breakdown in our value system. What makes this even sadder is that otherwise conscientious people like Kristof actually believe in this sort of madness.

-Indira

The first shot against organized labor?

Why am I not surprised that the Republicans would capitalize on the bailout of the Big 3 as an attack on labor unions? A secret Republican memo says as much-

This is the democrats first opportunity to payoff organized labor after the election. This is a precursor to card check and other items. Republicans should stand firm and take their first shot against organized labor, instead of taking their first blow from it.

At issue here is the breakdown of negotiations between Republicans and the United Auto Workers (UAW) over wage reductions as part of the bailout package. Conservatives bandied about the supposed wages of UAW members- $70 an hour- as evidence of the industry’s failure. In comparison, Toyota employees make about $45 an hour in wages and benefits. The problem here is that the number is grossly inaccurate.

This [$70] number includes pension and health care liabilities of all current and retired workers, divided by the number of current workers. It makes no sense to say a UAW member, on average, “earns” $70 an hour when only a fraction of this sum actually goes to that worker. The average hourly wage of a UAW worker in 2007 was actually estimated to be closer to $28 an hour, which is roughly equivalent to that of a Honda, Nissan, or Toyota employee.

The other thing to note here is the inequity that American autoworkers have to contend with. While it’s unthinkable that Ford or GM could just set up shop in Japan and operate without any union regulations, the same is not true of foreign automakers. Additionally, Japanese automakers deliberately set up factories in places where wages are low, making their employee benefits seem generous by comparison. Why is this ok? At the end of the day, we can all argue about crappy American cars and their low environmental standards but this latest narrative of attacking the workers is just unethical.

-Indira

The old gang’s back!

Yesterday, President-elect Obama revealed his core economic team and mercifully, Larry Summers will not be our Treasury Secretary. That’s the only silver lining, though. Instead of Summers, Obama has chosen Tim Geithner to head the Treasury and this selection is rather bewildering not least of because Geithner was a major architect of financial deregulation, the source of our economic worries. Same with Summers. Even more disturbing about Obama’s economic team is that it demonstrates the influence that Robert Rubin, former Citigroup chairman and Clinton Treasury Secretary, has on Obama. Both Summers and Geithner are protégés of Rubin and are just a handful of economic appointees with deep connections to Rubin. Such validation and recognition of Rubin comes at a time when Citigroup faces serious financial woes, largely his doing.

When he was Treasury secretary during the Clinton administration, Mr. Rubin helped loosen Depression-era banking regulations that made the creation of Citigroup possible by allowing banks to expand far beyond their traditional role as lenders and permitting them to profit from a variety of financial activities. During the same period he helped beat back tighter oversight of exotic financial products, a development he had previously said he was helpless to prevent.

That being said, Obama’s centrism is not a major surprise. To those following his campaign closely, it was apparent that Obama and McCain weren’t all that different on economic issues. So, it is pretty funny that some liberal bloggers are in a tizzy over the disconnect between Obama’s supposed progressive rhetoric and his actions. Heh. Clearly, they haven’t been paying attention.

-Indira