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Krugman: 85% of consumer spending in America is on American-produced goods and services

Not So Global


Barry Ritholtz sends us to a San Francisco Fed paper from last summer that makes a point on which many people seem confused: despite globalization and all that, the bulk of a consumer dollar spent in America falls on American-produced goods and services.

The reason this matters — or at least one reason it matters — is for discussion of austerity, stimulus, and all that. I often get comments along the lines of “Well, maybe stimulus worked back in the old days, but now it just means spending more on stuff from China”. In reality, that’s nowhere near true.

Why? For one thing, most consumer spending is on services, few of which are really tradable. For another, even if the thing you buy in WalMart says “Made in China”, the price includes a lot of US value-added in the form of transportation and retailing costs.

So we’re still a country where about 85 cents of your consumer dollar is spent at home, one way or another. And this means, among other things, that the rules of macroeconomics haven’t changed nearly as much as people imagine.

Canadians spend about 75% on domestic goods and services, Germans about 70%, Swedes less than 60%. Less than 2% of consumer spending here is on Chinese-produced goods.

Not surprisingly, many European countries are near the bottom in HO's "labor freedom" category.

Unfortunately the US is ranked #1 in "labor freedom" (weak/no unions) (after excluding Afghanistan, Iraq, Somalia and Sudan which had no rating). Ouch!

Europe also ranks at the bottom in "fiscal freedom" (low taxes) with Sweden, Denmark and Belgium the top 3. The same is true with "government spending" with Denmark, Belgium and Austria as the top 3. Europe does place 20 out of the top 25 in "trade freedom". (Canada is 7th and the US is 37th.)

The Heritage Foundation is about as conservative as you can get. Their "freest economy" rankings look like that they can be useful if you use them in reverse. The really progressive countries score very low in many of their categories, so that it what you have to look for.


The Great Migration is little known or taught in the US.

The Great Migration was the movement of 6 million blacks out of the Southern United States to the Northeast, Midwest, and West from 1910 to 1970. Some historians differentiate between a Great Migration (1910–30), numbering about 1.6 million migrants, and a Second Great Migration (1940 to 1970), in which 5 million or more people moved and to a wider variety of destinations. From 1965–70, 14 states of the South, especially Alabama, Louisiana, and Mississippi, contributed to a large net migration of blacks to the other three cultural (and census-designated) regions of the United States. By the end of the Second Great Migration, African Americans had become an urbanized population. More than 80 percent lived in cities. 53 percent remained in the South, while 40 percent lived in the North and 7 percent in the West.

When the Emancipation Proclamation was signed in 1863, less than eight percent of the African American population lived in the Northeastern or Midwestern United States, but this would begin to change over the next decade. The already recognized migration would be investigated by the U. S. Senate in 1880. By 1900 this figure would increase by about 25%, with about 90 percent of blacks still living in Southern states.

While the Great Migration helped educated African Americans obtain jobs, eventually enabling a measure of class mobility, the migrants encountered significant forms of discrimination. Because so many people migrated in a short period of time, the African-American migrants were often resented by the urban European-American working class (often themselves recent immigrants); fearing their ability to negotiate rates of pay or secure employment, they felt threatened by the influx of new labor competition.

Migrants often encountered residential discrimination
, in which white home owners and realtors prevented migrants from purchasing homes or renting apartments in white neighborhoods. In addition, when blacks moved into white neighborhoods, whites would often react violently toward their new neighbors, including mass riots in front of their new neighbors' homes, bombings, and even murder. ... By the late 1950s and 1960s, African Americans were hyper-urban, more densely concentrated in inner cities than other groups.


Chicago Race Riot of 1919

The sociopolitical atmosphere of Chicago was one of ethnic tension caused by competition among many new groups. With the Great Migration, thousands of African Americans from the South had settled next to neighborhoods of European immigrants on Chicago's South Side, near jobs in the stockyards and meatpacking plants. The ethnic Irish had been established first, and fiercely defended their territory and political power against all newcomers. Post World War I tensions caused frictions between the races, especially in the competitive labor and housing markets.

Beginning in 1910, thousands of African Americans started moving from the South to Chicago as one destination in the Great Migration, fleeing lynchings, segregation and disfranchisement in the Deep South. The Ku Klux Klan committed 64 lynchings in 1918 and 83 in 1919 in southern states. With the pull of industrial jobs in the stockyards and meatpacking industry beckoning as European immigration was cut off by World War I, from 1916 to 1919 the African-American population in Chicago increased from 44,000 to 109,000, for a total of 148 percent during the decade.

The riot lasted for nearly a week, ending only after the government deployed nearly 6,000 National Guard troops. They stationed them around the Black Belt to prevent further white attacks. By the night of July 30, most violence had ended. Most of the rioting, murder, and arson was the result of ethnic whites attacking the African-American population in the city's Black Belt on the South Side. Most of the casualties and property damage were suffered by blacks.Newspaper accounts noted numerous attempts at arson; for instance, on July 31, more than 30 fires were started in the Black Belt before noon and were believed to be due to arson. Steel cables had been put across the streets to prevent fire trucks from entering the areas.

United States President Woodrow Wilson pronounced white participants the instigators of the prolonged riots in Chicago and Washington, D.C.....The riot shocked the nation and raised awareness of racial problems. It also demonstrated the new willingness of African Americans to fight for their civil rights despite injustice and oppression.


Good Wages, Unions and Government Regulation Are The Solutions, Not Causes, of our Economic Woes

Can we compete with China's wages? Does government interference and regulation hold us back? Are our unions keeping us from being competitive? Do we need to lower our standard of living in a race to the bottom? You might be surprised to learn that Germany pays higher wages, has strong unions, has much more government involvement and is doing better as a result. Conclusion: our wages, unions and government are not the problem, they are the solution.

Hourly manufacturing compensation (wages plus benefits) was $48 in Germany in 2008 - the most recent year surveyed by the Bureau of Labor Statistics - while it was $32 in the United States. Yet Germany is an export giant, while we are the colossus of imports.

In Germany, workers also get six weeks vacation - by law, federally mandated, a right. They get health care, university, child care and pensions and as a result they have higher productivity. In Germany, the government requires worker representatives to hold seats on the boards of directors of companies, depending on the number of workers. Government-funded research and vocational training, and policies to retain skilled workers bring another competitive advantage.

The result of all this government interference is that Germany's export-oriented manufacturing economy recovered from the recession and is doing OK, and their workers are paid well and have great benefits.


In 1936 many felt that FDR had not been "progressive enough" for the times.

The Campaign and Election of 1936

FDR entered the 1936 election with a strong, but not invincible, hand. The economy remained sluggish and eight million Americans still were without jobs. Critics from various points on the political spectrum—such as Father Coughlin and Dr. Francis Townsend—had spent much of the previous two years attacking the President. (They supported Representative William Lemke of the newly formed Union Party in the 1936 election.) Likewise, by 1936 FDR had lost most of the backing he once held in the business community because of his support for the Wagner Act and the Social Security Act.

Republicans, though, had few plausible candidates to challenge FDR in 1936. They settled on Alfred "Alf" Landon, a two-term governor of Kansas who was the only Republican governor to win reelection in 1934. Nominated on the first ballot at the Republican convention in Cleveland, Landon was a moderate conservative—and notoriously lackluster public speaker—who the party hoped could take votes from FDR in the rural Midwest. Unfortunately for Landon, his moderation was often drowned out during the campaign by the conservative clamor emanating from the Republican Party, as well as from his running mate, Chicago publisher Frank Knox.

Roosevelt seemed to relish the attacks of Republicans, maintaining that he and his New Deal protected the average American against the predations of the rich and powerful, Referring to "business and financial monopoly, speculation, reckless banking," FDR crowed, "Never before have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred." Roosevelt's supporters believed their candidate understood and sympathized with them. As one worker put it in 1936, Roosevelt "is the first man in the White House to understand that my boss is a son of a (expletive.)" FDR won the election in a walk, amassing huge majorities in the popular vote and in the Electoral College.

What the 1936 election made most clear was that because of FDR and the New Deal, the Democratic Party was now the majority party in the nation. Roosevelt had put together what came to be called the "New Deal Coalition," an alliance of voters from different regions of the country and from racial, religious and ethnic groups. The coalition combined southern Protestants, northern Jews, Catholics and blacks from urban areas, labor union members, small farmers in the middle west and Plains states, and liberals and radicals. This diverse group, with some minor alterations, would power the Democrats for the next thirty years—and it was Roosevelt who put it together.


Fr. Charles Coughlin

"After the 1936 election, Coughlin increasingly expressed sympathy for the fascist policies of Hitler and Mussolini as an antidote to Bolshevism. His weekly broadcasts became suffused with antisemitic themes. He blamed the Depression on an "international conspiracy of Jewish bankers", and also claimed that Jewish bankers were behind the Russian Revolution."

But before the 1936 election "Early in his career Coughlin was a vocal supporter of Franklin D. Roosevelt and his early New Deal proposals, before later becoming a harsh critic of Roosevelt as too friendly to bankers. In 1934 he announced a new political organization called the National Union for Social Justice. He wrote a platform calling for monetary reforms, the nationalization of major industries and railroads, and protection of the rights of labor. The membership ran into the millions, resembling the Populist movement of the 1890s."


Dr. Francis Townsend

"Dr. Francis Everett Townsend (January 13, 1867–September 1, 1960) was an American physician who was best known for his revolving old-age pension proposal during the Great Depression. Known as the "Townsend Plan," this proposal influenced the establishment of the Roosevelt administration's Social Security system.

In 1935, partly in response to the continued growth of the Townsend Plan, President Franklin D. Roosevelt proposed his own old-age policy, which was less generous than Townsend and Clement's proposal. The president's policy included a program for poor older people with matching payments from the federal government, known as Old Age Assistance, and a national old-age annuity program that later was called by all Social Security. The president's programs were included in the Social Security Act, which passed in August 1935.

The Townsend Plan continued to agitate for higher benefits after the Social Security Act's passage and reached its peak of support in the months after it was enacted. The Townsend organization could plausibly claim that the benefits were far less than what the American public wanted. The average Old Age Assistance benefit was about $20 per month as late as 1939, and the program known as Social Security was not due to take effect until 1942, despite the fact that opinion polls indicated that the American public thought that $40 per month was fair for the elderly.

Although the Townsend Plan was hampered by Dr. Townsend's personal control over his organization and his vendetta against Roosevelt, by continued political pressure, augmented by other pension organizations, such as California's Ham and Eggs, the Townsend Plan helped to induce amendments to the Social Security Act in 1939. These amendments greatly upgraded old-age benefits for both programs."


Huey Long

Aware that Roosevelt had no intention to radically redistribute the country's wealth, Long became one of the few national politicians to oppose Roosevelt's New Deal policies from the left.
He considered them inadequate in the face of the escalating economic crisis. Long sometimes supported Roosevelt's programs in the Senate, saying that "[W]henever this administration has gone to the left I have voted with it, and whenever it has gone to the right I have voted against it." He opposed the National Recovery Act, calling it a sellout to big business. In 1933, he was a leader of a three-week Senate filibuster against the Glass banking bill for favoring the interests of national banks over state banks.

In terms of foreign policy, Long was a firm isolationist. He argued that America's involvement in the Spanish-American War and the First World War had been deadly mistakes conducted on behalf of Wall Street. He also opposed American entry into the World Court.

In March 1933, Long offered a series of bills collectively known as "the Long plan" for the redistribution of wealth. The first bill proposed a new progressive tax code designed to cap personal fortunes at $100 million. Fortunes above $1 million would be taxed at 1 percent; fortunes above $2 million would be taxed at 2 percent, and so forth, up to a 100 percent tax on fortunes greater than $100 million. The second bill limited annual income to $1 million, and the third bill capped individual inheritances at $5 million.

With the Senate unwilling to support his proposals, in February 1934 Long formed a national political organization, the Share Our Wealth Society. A network of local clubs led by national organizer Reverend Gerald L. K. Smith, the Share Our Wealth Society was intended to operate outside of and in opposition to the Democratic Party and the Roosevelt administration. By 1935, the society had over 7.5 million members in 27,000 clubs across the country. Long's Senate office received an average of 60,000 letters a week. Some historians believe that pressure from Long and his organization contributed to Roosevelt's "turn to the left" in 1935. He enacted the Second New Deal, including the Social Security Act, the Works Progress Administration, the National Labor Relations Board, Aid to Dependent Children, the National Youth Administration, and the Wealth Tax Act of 1935. In private, Roosevelt candidly admitted to trying to "steal Long's thunder."


During his first term many on the left thought that FDR was "Obama" rather than the FDR that we remember today.

You understand that our trade with "free trade" countries is much more equal than with

the rest of the world?

We have "free trade" with 17 countries. In 2010 our total trade with the those 17 countries was $1.115 trillion. We had a deficit of $71.1 billion (6.5% of the total). Exports were 47% of the total and imports were 53%.

In 2010 our total trade with the rest of the world was $2.108 trillion. We had a deficit of $574.8 billion (27.2% of the total). Exports were 37% and imports were 63%.

Every developed country has seen manufacturing decline. Several have it worse than the US.

"One interesting tidbit: While Americans sometimes complain that the country doesn’t “make” anything anymore — a sentiment related to manufacturing’s long-term slide in this country — they should know that declines in manufacturing jobs are common in the rest of the developed world, too:

In the United States (the red line), manufacturing as a share of total employment has fallen 15.5 percentage points in recent decades, from 26.4 percent of jobs in 1970 to 10.9 percent in 2008. In some other countries the decline has been even steeper. In Britain, for example, the share of employment held by manufacturing has fallen 21.9 percentage points in the last few decades, from 33.9 percent in 1971 to 12 percent in 2008.

There are several generally accepted explanations for these trends. They include productivity growth and new technologies; the rise of the service-sector economy; and the shift of manufacturing jobs to areas of the world where labor is cheaper."


Juan Cole: Top Ten Myths about the Arab Spring of 2011


1. The upheavals of 2011 were provoked by the Bush administration’s overthrow of Saddam Hussein in Iraq. None of the young people who made this year’s revolutions ever pointed to Iraq as an inspiration. The only time Iraq was even brought up in their tweets was as a negative example (“let’s not let ourselves be divided by sectarianism, since that is what the Americans did in Iraq.”)

3. Muslim radicalism benefited from the revolutions in the Arab world. So far, at least, the beneficiaries of the upheavals have been both secular, left-leaning dissidents and Muslim religious parties. Neither is violent.

7. The Arab Spring is a Western plot. This allegation was made by the Qaddafis in Libya and is currently asserted by many in Syria’s Baath Party. Nothing could be farther from the truth. It is quite clear that the upheavals in the Arab world came as a surprise to the G8 nations, and were mostly at least initially unwelcome.

9. The Arab dictatorships now overthrown or tottering were better for women than their likely Islamist successors. The postcolonial Arab states often pursued what my friend Deniz Kandiyoti of the School of Oriental and African Studies has called “state feminist” projects of female uplift. ... That is, “state feminism” often backfired because it was felt as intrusive and heavy-handed. Women’s progress was tainted, moreover, by association with hated dictatorships.

"Germany ... an economic model with more bottom-up worker control than that of any other country..."


In his latest book, "Were You Born on the Wrong Continent? How the European Model Can Help You Get a Life" (The New Press, 336 pages, $25.95) Geoghegan asks his readers if they really believe the propaganda that the U.S. is the greatest place to live on earth, balancing job security, health care, life expectancy and time off for good behavior to have some fun.

His conclusion, based on five trips where he tries to understand so-called European socialism firsthand, is that we're not the best place for middle-class people. First he tries France (which has become a rhetorical stand-in for the continent as a whole in many Americans' minds), but he eventually ventures into Germany to see what some call the "boring" Europe. He says the French model is flawed because workers don't have the advantages of Germans, with a say in the company's future, and are constantly striking. Germans, with their powerful unions, rarely go on strikes because they have a real voice in their employment.

In Germany, Geoghegan finds the true "other"—an economic model with more bottom-up worker control than that of any other country in the world
— and argues that, while we have to take Germany’s problems seriously, we also have to look seriously at how much it has achieved. Social democracy may let us live nicer lives; it also may be the only way to be globally competitive. His anecdotal book helps us understand why the European model, contrary to popular neoliberal wisdom, may thrive well into the twenty-first century without compromising its citizens' ease of living — and be the best example for the United States to follow.

OK, some facts about Germany, the largest economy by far in the European Union and the fourth largest in the world, measured by gross domestic product per person (GDP), with a thriving export-oriented manufacturing sector -- like the kind we used to have when we manufactured goods that were desired around the world.

Germany, with 83 million people and few natural resources, is the world's second largest exporter, with $1.170 trillion exported in 2009. You know who is the largest exporter and it ain't us. Hint: It begins with C and ends in A. and has more than 1.3 billion residents. Germany's service sector contributes about 70 percent of the total GDP of Germany, with industry another 29.1 percent and agriculture less than 1 percent. Most of the country's exports are in engineering, automobiles, machinery, metals and chemicals. Germany is the world's leading producer of wind turbines and solar power technology.

Geoghegan tells us that the average number of paid vacation days in the U.S. is 13, compared with Germany’s 35. New mothers in the U.S. get three months of unpaid job-protected leave and only if they work for a company of 50 or more employees, while Germany mandates four months’ paid leave and will pay parents 67% of their salary to stay home for up to 14 months to care for a newborn. U.S. life expectancy is 50th in the world, compared to Germany’s 32nd.

What kind of nationalism makes people happy?

The term nationalism can encompass many strands of ideology; from believing your country is superior to all other countries, to 'civic' nationalism, to protecting a state from another state's imposed power.

'Ethnic' nationalism, often expressed in racial or religious terms, sees ancestry as the key social boundary defining the collective national 'us'. 'Civic' nationalism on the other hand is more about creating an inclusive society, requiring only respect for a country's institutions and laws for belonging. Whilst ethnic nationalism often employs a closed and antagonistic approach to minorities or immigrants, civic nationalism, in principle anyway, is more open to building bridges between different communities and opening up borders to immigrants.

Like the previous studies they found that people who exhibited more national pride had greater well-being. But Reeskens and Wright's findings also show that it was the civic nationalists who were on the whole happier, with even the proudest ethnic nationalists' well-being barely surpassing that of people with the lowest level of civic pride.

By looking at how people define their pride we can make predictions as to how they might react as situations change.

With extreme nationalist parties once again on the rise in Europe, studies like these are essential for getting to grips with complex political ideologies and for defining exactly what kind of nationalism is a desirable one. Wright believes that the findings give clues to what popular responses we might expect to trends such as millions of people crossing borders from poorer to wealthier countries looking for work or seeking refuge from war or political repression. 'It's unclear what the political implications of the happiness measure are - though unhappy citizens could demand many politically dangerous, xenophobic responses. Ethnic nationalists, proud or not, appear relatively less happy to begin with and more likely to lead the charge as their nation diversifies around them.'

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