The Trump Administration’s Apprenticeship Strategy Leads to a Dead End

The idea that apprenticeship programs, especially for industries that hire people with skills in science, technology, engineering, and math (STEM skills), is widely accepted and promoted, so the Trump proposal is not out of the mainstream of thinking about barriers to employment and wage growth.  However, expecting much of an impact on employment and wage growth from the Trump administration’s turn of attention to apprenticeship programs will only hand you disappointment.

Over the last several decades, American business and government support for workforce training has declined dramatically, as shown by declining funding levels.

At a time when employers are struggling to find the skilled workers they need to fill available jobs, funding to train workers has dropped dramatically. Since just 2010, federal education and training programs have been cut by more than $1 billion.

Federal funding webpage, National Skills Coalition.  Accessed June 15, 2017.

The incidence of training in the previous 12 months fell roughly 28 percent overall during the period between 2001 and 2009. The results show that the decline in employer-paid training was wide-spread, affecting most industries, occupations, and demographic groups.

Jeff Waddoups, Did Employers in the United States Back Away from Skills Training during the Early 2000s? Seminar Invitation, Center for Work, Organization, and Wellbeing, Griffith University.  Accessed June 15, 2017.

The Trump administration’s proposal does not restore former levels of funding, much less move America to a new level of support for apprenticeship programs.  The reason is in plain sight, but studiously “undiscovered” by political and business leaders: American businesses are no longer dependent on a skilled American workforce; dozens of high and middle affluence nations are training skilled workers who then seek work through globally organized recruiting institutions, and then either migrate across national boundaries to workplaces or work across national boundaries without physically moving.  In most cases, American businesses can offer these globally available skilled workers more of what they want than can businesses in most other nations, so American businesses generally get the workers they really need.

In addition to sourcing skilled workers from a rapidly growing global pool of skilled workers, American businesses are turning to a rapidly growing supply of robots that are becoming increasing skilled with each passing month and decreasingly costly to own.  Robots may not yet be able to take over all skill intensive activities of workers, but competent management teams can (and do) orchestrate teams of human workers and robots so as to hold human staffing steady or even reduce it while still increasing output.

These are the stubborn 21st century realities that no feasible set of U.S. policies can undo or overcome.  Despite the widely held belief to the contrary, we are actually living in a world economy weighed down by an oversupply of skilled labor.  Fortunately, this fact becomes more apparent with every passing day, but, unfortunately, for a very disturbing reason.  As skilled workers around the world are pushed out into the cold because of oversupply with no employment prospects that match the expectations they were told to have, more and more are turning their talents to cyber crime, to designing murderous weapons on an ad hoc basis, and to building terrorist organizations.

A Background Note

The use of apprenticeships and recognizing the value in them goes back thousands of years.  More relevantly, U.S. states have long recognized the value of apprenticeship programs and supported and promoted them through legislation; the federal government has done so since 1937.

Since time immemorial, people have been transferring skills from one generation to another in some form of apprenticeship. Four thousand years ago, the Babylonian Code of Hammurabi provided that artisans teach their crafts to youth.

History of Apprenticeship, Washington State Department of Industries.  Accessed June 15, 2017.

Since 1937, the Bureau of Apprenticeship and Training has worked closely with employer and labor groups, vocational schools, state apprenticeship agencies, and others concerned with apprenticeship programs in U.S. industry. It has field representatives in the 50 States.

History of Apprenticeship, Washington State Department of Industries.  Accessed June 15, 2017.

The point, of course, is that there is nothing new and noteworthy in the Trump administration’s apprenticeship proposal.  They are just trotting out old ideas that seem new because they have been pushed aside long enough for many American’s to think they are seeing something new and untried.

A Return to Full Employment With Mixed Signals: This Time is Different for the World of Employment

SOURCE ITEMS

Chart-Employed Full Time Trend

St. Louis Federal Reserve, Accessed December 13, 2015.

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The Netherlands seems to be undergoing a sort of industrial revolution in reverse, with jobs moving from factories to homes. The Dutch labor market has the highest concentration of part-time and freelance workers in Europe, with nearly 50% of all Dutch workers, and 62% of young workers, engaged in part-time employment – a luxury afforded to them by the country’s relatively high hourly wages.

Sami Mahroum and Elif Bascavusoglu-Moreau, Is Jobless Growth Inevitable? Project Syndicate, March 25, 2015. Accessed December 13, 2015.

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Inequality, exclusion, and duality became more marked in countries where skills were poorly distributed and many services approximated the textbook “ideal” of spot markets. The United States, where many workers are forced to hold multiple jobs in order to make an adequate living, remains the canonical example of this model.

Dani Rodrik, The Evolution of Work, Project Syndicate, December 9, 2015. Accessed December 13, 2015.

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Forced labor permeates supply chains that stretch across the globe, from remote farms in Africa and the seas off Southeast Asia to supermarkets in America and Europe. Almost 21 million people are enslaved for profit worldwide, the UN says, providing $150 billion in illicit revenue every year.

Erik Larson, These Lawyers Want Slave Labor Warnings on Your Cat Food, Bloomberg, December 10, 2015. Accessed December 13, 2015.

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Over all, the Labor Department data painted a picture of an economy that is growing steadily and creating jobs at a healthy pace, even as wage gains remain subdued and many Americans are still stuck on the sidelines of the recovery.

Nelson D. Schwartz, Robust Jobs Report All but Guarantees Fed Will Raise Rates, New York Times, December 4, 2015. Accessed December 13, 2015.

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In reality, the 35-hour workweek has become mostly symbolic, because a multitude of loopholes allow companies to work around the law. French employees work an average of 40.5 hours a week — more than the 40-hour average in the European Union — and have high productivity.

Liz Alderman, Smart Car Standoff Pits Social Progress Against Global Competition, New York Times, December 12, 2015. Accessed December 13, 2015.

COMMENTS

A question emerged after 2008 that unsettled the field of economics and is still unanswered: is this time different? Was the financial crisis of 2008 an economic crisis of a unique kind in the history of capitalism; or was it just a very severe version of a routine kind of economic crisis?

This phrase gained currency from the publication of the book, This Time is Different: Eight Centuries of Financial Folly, by Carmen Reinhart Kenneth Rogoff.[1] They argue that the financial crisis of 2008 is not different. But others disagree.

In a 2012 article, Lawrence King et al make the argument that this time is different because it is the result of a level of financial liberalization and a degree of free market economics that did not exist before the 1970s.[2]

A few of our world’s best and brightest economists expressed their uncertainty and sense that this time is different in this way:

“As a world economic crisis developed in 2008 and lasted longer than most economists predicted, it became increasingly clear that beliefs about macroeconomics and macroeconomic policy needed to be thoroughly examined. … we knew that we had entered a brave new world…”[3]

Different Seems More Likely Than the Same

After 2008 optimism about a return to robust economic growth has been the rule. But actual economic growth has not rewarded that optimism. A few economists have been trying to explain this poor record.

Robert J. Gordon, professor of economics at Northwestern University, recently asserted that “It is time to raise basic questions about the process of economic growth, especially the assumption – nearly universal since Solow’s seminal contributions of the 1950s (Solow 1956) – that economic growth is a continuous process that will persist forever.” He went on to propose that U.S. economic growth may grind to a halt because the kinds of technological innovations that drove rapid U.S. economic growth are not on the horizon.[4]

Professor Gordon was speaking only about the U.S., but the logic would apply to all of the world’s affluent nations.  Moreover, the World Bank and other global institutions have repeatedly warned of below par levels of global economic growth, in some cases for years to come.

Weighing anecdotal evidence, some discernible trends, and expert opinion, it seems reasonable to conclude that this time is different for economic growth.

That means this time is almost certainly different for the world of employment.

A Different World of Employment

In mainstream theories of economic development, the future of work is directly tied to the future of economic growth. Economic growth is the engine that pushes us toward the ever expanding prosperity goals that make for widespread affluence: high profits, high wages, and full employment. When economic growth slows down something has to give in the world of employment.  We are trapped in a long period of slow economic growth, so the employment trends of the past cannot continue.

We can be fairly certain that workers in the U.S. and other affluent nations will not experience the kind of return to full employment with high wage conditions we have known in the past. In the context of global competition and slow economic growth,  the world’s economic and political leaders are pressing hard to cap and reduce wage bills at all levels of employment. We have entered into an era of global degradation of employment.

In affluent nations they  are forcing working people to choose between fewer jobs and fewer hours at higher compensation levels or more jobs and more hours with lower wages and less valuable benefits.  In the rest of the world, where such a choice has seldom existed in any meaningful sense,  global competition and slow economic growth mean an end to the dream of jobs that will deliver better lives.  Everywhere, employment rights and workplace protections are falling away.

What we don’t know quite yet is how the ongoing degradation of the world of employment will play out in national and global politics. At the moment it appears that the world’s political and economic leaders have chosen to promote a free-for-all battle struggle among working people by defining rights to crumbs from the capitalist table using the old reactionary lines of difference – race, ethnicity, gender, religion, and nation. And, at the moment, too many workers in affluent nations are falling into this trap, as shown by the rise of Trumpism in the U.S., the growth of reactionary movements across Europe, and the destruction of governing institutions that embody common interests, and the rise of militaristic movements intent on redrawing national boundaries.

Intentionally engendering antagonisms can’t solve the fundamental problems for global economic growth, so the right wing policies can have only one ultimate outcome – a global catastrophe in multiple forms. Hopefully, this  will become clear to the world’s working people well before such a catastrophe becomes unavoidable.

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[1] Carmen M. Reinhart and Kenneth Rogoff, This Time is Different: Eight Centuries of Financial Folly, Princeton University Press, 2009.

[2] Lawrence King, Michael Kitson, Sue Konzelmann and Frank Wilkinson Making the same mistake again—or is this time different? Cambridge Journal of Economics 2012, 36, 1–15 doi:10.1093/cje/ber045.

[3] From the Preface: Olivier J. Blanchard, David Romer, A. Michael Spence and Joseph E. Stiglitz, In the Wake of the Crisis: Leading Economists Reassess Economic Policy, MIT Press, 2012.

[4] Robert J. Gordon, Is US economic growth over? Faltering innovation confronts the six headwinds, VOX, September 11, 2012. http://www.voxeu.org/article/us-economic-growth-over.

Rose Colored Job Growth Glasses Hide the Main Story

 

SOURCE ITEMS

For all of 2015, the nation added 2.65 million jobs, capping a two-year, back-to-back gain that was the best since the late 1990s, the government reported on Friday.

Patricia Cohen, Robust Hiring in December Caps Solid Year for U.S. Jobs, New York Times, January 8, 2016.

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Ratio of Working Age Population to Jobs Created

Best Two Years of 1990s (1997-98)

Years 2014-2015

Jobs Created in Two Year Period

6.5 million

5.8 million

Working Age Population (ages 18-64) 2000 and 2015 (estimated)

174.1 million

198.9 million

Ratio, Working Age Population to Jobs Created

26.8

34.3

Sources: U.S. Bureau of Labor Statistics and U.S. Census Bureau.

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After more than four decades of serving as the nation’s economic majority, the American middle class is now matched in number by those in the economic tiers above and below it. … a demographic shift that could signal a tipping point, according to a new Pew Research Center analysis of government data.

The American Middle Class Is Losing Ground, Pew Research Center, December 9, 2015.

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The decrease in labor force participation lowers incomes independently of wage trends. During an era when employment rates are trending downward, wages will grow faster than household incomes.

Salim Furth, Stagnant Wages: What the Data Show, Backgrounder #3074 on Labor, The Heritage Foundation, October 26, 2015.

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Stock Market Closing Prices

 

Dow Jones Industrial Average

Nasdaq Stock Market

S&P 500

December 31, 2014

17823.07

4736.05

2058.90

December 31, 2015

17425.03

5007.41

2043.94

Source: Dow Jones Close.

COMMENTS

But these rose colored glasses/That I’m looking through/Show only the beauty/’Cause they hide all the truth – Lyrics by John Conlee
 

To say that job creation in 2014-15 has been the best since the late 1990s is misleading and not only because making that statement implies that job growth is now the same as it was in the late 1990s.   It sidesteps an important and related issue: the loss of wealth in American households.

Fewer and fewer American families now have the wherewithal to live middle class lives and real wage growth, even if positive, is so modest that it will never restore the middle class prosperity Americans became used to in the post-WWII decades.

Yet, given the threats from global warming and the increasing flows of goods, information and people from place to place on this earth, we have to ask whether returning to the kind of prosperity that marked the 1960s in America is what we should expect or even want. Perhaps we should not expect it because the rest of the world now reaches into America enough to successfully demand a fairer (and therefore larger) share of the global pie. And, perhaps we should not want it because that way of affluence imposed an enormous cost in wealth and lives on most of the world’s peoples and, as we know so well now, is making the earth unfit for habitation.

Is there an alternative way of affluence? Yes, but we have to invent it.

Tom Friedman’s Jobs World is Interesting But a Bit Flat

SOURCE ITEMS

In today’s hyperconnected world without walls — when more Indians, Chinese, computers, robots and software can perform more average blue-collar and white-collar jobs — the only high-wage jobs are increasingly high-skill jobs

Our kids face three big adjustments. First, to be in the middle class, they will need to be constantly improving their skills over their lifetime. Second, to do that, they will need a lot more self-motivation. … And third, countries that thrive the most will be the H.I.E.’s — the high imagination-enabling countries — that attract and enable talent to be constantly spinning off new ideas and start-ups, the source of most new good jobs.

Thomas Friedman, Can’t We Do Better?, New York Times, December 7, 2013.

 COMMENTS

Tom Friedman is almost always worth reading, but he has yet to acknowledge a societal development that is one of the most consequential for the world’s working families – the transformation of the role that work plays day in and day out in distributing the world economy’s newly created wealth.

Ironically, Friedman identifies the very forces that are undoing the role of work in distributing newly produced wealth, but fails to follow through. He takes us right to the door through which he could walk us to the real solutions to growing poverty and inequality.  He then turns away and offers up the same old failed conventional wisdom.

Friedman and so many others define the problem of low wage jobs and growing inequality as due to the inadequacies of workers (low skills, outdated skills, lack of drive).  They fail to seriously consider the possibility that the world of work is changing in such fundamental ways that no feasible amount of improvement in the skill levels of working people or change in their approaches to getting and keeping jobs can reverse the trend toward lower wages and greater poverty and  inequality.

As Friedman rightly notes, global integration and advancing productive technologies have great consequences for working families and societies, but not because they are creating demand for highly skilled workers and destroying demand for low skilled workers.  The core systemic change is that those forces are producing an enormous and growing surplus of labor, both skilled and unskilled.

The role of machine energy in the production of the world’s goods and services has advanced to such a large proportion of the combination of human energy and machine energy that the available human energy far exceeds the demand for human energy.  Even human thinking energy is being displaced by machine energy.

The trend shows up in the long term decline in the proportion of the world’s population that is employed.  Friedman and others apparently believe that this trend won’t eventually bring us to a point in time when more than half the world’s people are effectively outside the world of work.

How then will we distribute the world economy’s newly created wealth day after day?

The era in which employment could be the primary way in which a person could legitimately claim a fair share of the world economy’s income is nearly over.  Yet Friedman and other experts still have not asked the question in public of what will give a person a right to a fair share of income in this increasingly jobless world.

The world’s people desperately need a new kind of right to income, and until we invent that right, inequality will keep getting worse and more of the world’s people, including Americans, will be shoved into lives of destitution, begging, scavenging, and violence.

Liberals and Conservatives Share an Outmoded Belief that Underpins False Hopes for Job Growth

ITEMS FOR YOUR CONSIDERATION

With five cameras, a sonar sensor that detects motion 360 degrees around it, and enough intelligence to learn tasks within an hour, Baxter is designed to work safely alongside humans and do simple jobs such as picking items off a conveyor belt. It’s also cheap enough, at $22,000 a unit, so that the investment math works: If Baxter performs three years of eight-hour shifts, it’s the equivalent of labor at $4 an hour … To teach Baxter a job, a human simply grabs its arms, simulates the desired task, and presses a button to set the pattern.

Brad Stone,Smarter Robots, With No Wage Demands, Bloomberg BusinessWeek, September 18, 2012.

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Anyone who endured Macroeconomics 101 was taught that recessions and depressions occur because of insufficient demand or from overproduction and a general glut of things that no one can buy. This explains the still popular Washington economic cure, which involves artificially generating more economic demand via federal outlays.

The opposite perspective emerges from Say’s Law (named after Jean-Baptiste Say): the proposition that supply creates its own demand when economies are unshackled.

Wayne Crews, Stimulating Demand Misses the Point, Forbes Magazine, September 26, 2011.

COMMENTS

Now that we are so far away from the trauma of 2008, experts generally agree that policies haven’t worked as expected – but they continue to hope that GDP growth will produce massive job growth.  That hope is based on a shared belief that increases in GDP require equivalent increases in job growth.

The two sides offer competing formulas for stimulating GDP growth, but both rest on this belief.  Liberals call for increasing consumer demand (demand side economics), which in turn should generate more investment and more jobs.  Conservatives call for increasing investor funds (supply side economics), which in turn should increase hiring and then generate more consumer demand.  Both formulas end up in the same place: high GDP growth and a low unemployment rate.

The key connection for both formulas is the belief that the production of commodities that will be sold in markets is primarily dependent on human activity.  More production requires more human activity.

Well into the 20th century this belief had considerable validity.  It no longer does.  Machine activities have replaced large portions of human activity in the production of commodities for sale in markets, and more machines are being brought on line every day around the world.  Increasingly, machines are not only replacing physical production activities (like assembly line tasks), they are replacing information gathering and decision-making tasks.

In this context, the old formulas for job growth don’t work.  A large amount of investment in buildings and machines produces only a tiny amount of job growth.

In the 21st century, jobs must be created intentionally, not as a byproduct of investment growth or demand growth.  Competing companies can’t do that kind of intentional job creation without putting themselves out of business.

Only governments can intentionally create jobs.

Hard Working? Creative? Strong Language and Computer Skills? Earn Up to $4 Per Hour in the New Global Labor Force

ITEMS FOR YOUR CONSIDERATION

The job didn’t pay much: four bucks an hour if you really hustled. But for Catherine Fraser, a recent community college graduate from Mountain View looking to pick up a little extra spending cash, the work was a hoot.

… said analyst Martin Schneider with 451 Research. “Like manufacturing has done forever, crowd-labor lets us break down a job into tiny components, where one bit of fact-checking or writing a few sentences is now the equivalent of gluing that chip onto a computer board.”

… The larger question — and one with huge global implications as crowd-sourcing redefines and in some cases kills traditional jobs and long-established labor-management models — is whether the crowd-labor pool could essentially become one big worldwide digital sweatshop. While industry studies show average hourly earnings across all categories range from about $7 in India to $16 in Western Europe, the fast-growing segment of micro-taskers earn half that on average, and some make only $1.50 an hour.

Patrick May, ‘Crowd labor’ helps spur social networking revolution, San Jose Mercury News, Updated: 05/01/2012.

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Series Index May

Series Index Apr

Rate of Change

Employment Index

50.8

54.2

Slower

Business Activity/Production

55.6

54.6

Faster

New Orders

55.5

53.5

Faster
Source: May 2012 Non-Manufacturing ISM Report On Business, Institute for Supply Management, June 5, 2012

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For Great Wall, a private sector Chinese car maker that employs 50,000 workers, the Swiss robots and other machinery that line its bright factory floor produce more than cost savings. The company hopes they will help it build cars good enough to compete with the global auto makers.

According to Nomura, 28 percent of factory machines in China use numerical controls – one measure of automation. That may be far lower than Japan’s 83 percent, but China is growing far faster than Japan did at a comparable stage of development, says Ge Wenjie, a machinery analyst with Nomura.

In other words, China may soon be known less for cheap Christmas toys and more for high-end medical equipment, luxury cars and jet engines.

By Don Durfee, Analysis: Robots lift China’s factories to new heights, Reuters, June 3, 2012.

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Unit labor costs fell in 23 of 47 service-providing industries, the most since 2003 …

Output per hour increased in 32 of the 47 [service-providing industries] industries studied.  In most of these industries, productivity rose as output growth was accompanied by declines or more modest increases in hours.  Several  industries posted double-digit productivity gains as a result: local as well as long-distance general freight trucking; refrigerated warehousing and storage; radio and television broadcasting; wireless telecommunications carriers; and travel agencies.

In a few industries, productivity rose despite falling output.  In industries such as postal service; couriers and messengers; video tape and disc rental; photofinishing; and newspaper, book, and directory publishers, rising labor productivity reflected declines in both labor hours and output, with hours falling more rapidly than output.

Productivity and Costs by Industry: Selected Service-Providing and Mining Industries, 2010, Economic News Release, U.S. Bureau of Labor Statistics, May 31, 2012.

COMMENTS

During the 20th century each new generation of U.S. workers faced declining employment opportunities in agriculture, mining, and manufacturing.  But those lost employment opportunities were offset by growing employment opportunities in government and private service sector industries.

This is no longer the case.  Job growth in government and service sector industries has slowed considerably.  Moreover, some government agencies and service sector industries are embracing new production technologies and becoming job shedders themselves.

The hallmark of the first half of the 21st century may well be a decades long global employment crisis.  National governments are still trying to apply economic remedies carried over from the 20th century in a world that is vastly different.  National economic sovereignty is gone.  Rich and poor nations alike are now joined at the economic hip in a single world economy.

Sticking with the “each nation goes it alone” strategy for addressing the global employment crisis isn’t working.  Rather than getting increasing prosperity, U.S. working families and local business owners are getting a larger share of the world’s very high level of poverty.

The practical alternative for the U.S. is to join with the world’s other nations to build institutions that coordinate national economic policies and set minimum global standards for corporate behavior, working conditions, wages and benefits.

Globalization cannot be undone, so there is no other choice.

Accumulating Evidence Shows That the World’s Nation-Centered Economic Policy Making Paradigm is Obsolete

ITEMS FOR YOUR CONSIDERATION

Chart-Global GDP Growth 2007-13, IMF

World Economic Outlook Update: Global Recovery Stalls, Downside Risks Intensify, International Monetary Fund, January 2012.

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Chart-World Trade Volume 2000 - 2011

Trade and Development Report, 2011: Post-crisis Policy Challenges in the World Economy, United Nations Conference on Trade and Development (UNCTAD).

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“Last year alone the daily volume of currencies traded was 220 per cent higher than that in 2001, and 65 per cent of the transactions were cross-border ― up from 54 per cent in 1998. Since 1990 foreign direct investment increased more than six fold.”

Moisés Naím, The Dangerous Cocktail of Global Money and Local Politics, Financial Times, November 18, 2011, (published on Carnegie Endowment for International Peace website).

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“Assuming a cyclic dynamics of national economies and the interaction of different countries according to the import-export balances, we are able to investigate … the synchronization phenomenon of crises at the worldwide scale. … The results support the theory of a globalization process emerging in the decade 1970–1980, the synchronization phenomena after this period accelerates and the effect of a mesoscopic [intermediate in size] structure of communities of countries is almost dissolved in the global behavior.”

Pau Erola, Albert Diaz-Guilera, Sergio Gomez, Alex Arenas, Modeling international crisis synchronization in the World Trade Web, arXiv.org, January 10, 2012.

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“In today’s financial architecture, as with other supply chains, interdependent networks tend to concentrate in powerful hubs. For example, just two financial centers, London and New York, dominate international finance, and only 22 players conduct 90% of all global foreign-exchange trading.”

Andrew Sheng, Global Finance’s Supply-Chain Revolution, Project Syndicate, January 5, 2012.

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“So the degree of synchronisation has evolved fitfully. It is only in the most recent 1973-2006 period that we can speak meaningfully of anything resembling an international business cycle.”

Paul Ormerod, Random matrix theory and the evolution of business cycle synchronisation 1886-2006, arXiv, July 11, 2008. 

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“Globalization has made frontiers more porous. We see how one country’s policies, whether pertaining to work, the environment, public health, taxation, or myriad other issues, can have a direct impact on others. And we see such interdependence even more clearly in their economic performance: China’s annual GDP growth rate, for example, will slow by two percentage points this year, owing to sluggishness in the United States and the EU.”

Javier Solana, Whose Sovereignty?, Project Syndicate, March 12, 2012.

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“At the news conference Monday, Mr. Zhou said China was especially worried about Europe and its chronic sovereign-debt crisis … The world economy is highly globalized with a very active flow of capital worldwide,” he said. “All of these factors will have an impact on our monetary policy.’”

Ian Johnson, China Talks of More Lending but Less Currency Growth, New York Times, March 12, 2012.

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“Undoubtedly politicians should do a much better job of explaining to their constituents’ that what happens beyond the borders of their country-or city has implications for what happens inside their homes.”

Moisés Naím, The Dangerous Cocktail of Global Money and Local Politics, Financial Times, November 18, 2011 ( published on Carnegie Endowment for International Peace website).

COMMENTS

It is becoming increasingly clear that merging the world’s 20th century national economies into our 21st century world economy has raced ahead of merging national economic policy making institutions into a global economic policy making system.  The consequences of this lag in the development of global policy making institutions for the people of the U.S. and other nations are enormous.

National employment and income growth efforts are often ineffectual or only effective for a short time because of the ongoing policy push and shove of nations competing for advantage in the world economy.  What one nation does to improve its position in the world economy and grow jobs and incomes, other nations work quickly to undo.

For the world economy as a whole, this push and shove of nation-centered economic policy making produces a high level of economic instability and a high level of policy incoherence.

One glaring and maddening consequence of this combination of reduced national policy effectiveness and global policy incoherence is that the recovery from the financial crisis of 2008-2009 has proceeded in fits and starts and seems too frequently to be on the verge of collapsing back into crisis.  Global job and income growth is being held back and governments are being denied the tax revenues they need to protect economically vulnerable people from the ravages of poverty.

Most U.S. economists and policy makers continue to hold out hope for a much more robust economic recovery than we have had.  But, one has to wonder whether a more robust recovery is possible while the world’s economic house is so geopolitically divided.

See my related comments in:  The World Economy’s Demolition Derby of Competing and Overlapping Economic Policy Making Entities, January 22, 2012