Saturday, March 28, 2009
Tuesday, March 24, 2009
Saturday, March 21, 2009
China Environmental Practices Cast Pall on Climate Issue
Public Health, U.S. Jobs at Stake in China’s Industrial Spew;
New Report Focuses on Failures of China’s Environmental Regulation
WASHINGTON – With China now among the world’s leading polluters, climate change can not be achieved unless the Administration and Congress hold China accountable for its reckless environmental practices. A new report provides the most in-depth and detailed examination to date of the serious flaws in China’s pollution-control regime and the damage it is doing to human health and global efforts to address climate change.
Released on the eve of a Congressional hearing on climate issues, the report focuses on China’s rapidly growing steel industry, and documents China’s ineffective enforcement of weak pollution-control standards, its failure to use adequate pollution-prevention measures, and the resulting high levels of pollution.
The extensive research was conducted by the Alliance for American Manufacturing (AAM) with a team of environmental and legal experts, including investigators working in China. Last year, AAM released a report by Dr. Usha Haley, of the University of New Haven, that found China’s steel producers have received more than $27 billion in governmental energy subsidies since 2000.
“China’s steel industry is not only harming the health of its own people, but spreading pollution around the world and contributing to global warming,” said Scott Paul, executive director of AAM. “At the same time, China benefits economically from its failure to control pollution, giving it a significant advantage over its foreign competitors.”
“Ironically, China pays a heavy price for the serious harm it is inflicting on its citizens, resources, and environment,” he said. “And we suffer from the damage China is doing to the planet and unfair competition in the steel industry that’s vital to American jobs and our economic future.”
China’s production of steel has quadrupled this decade, making it by far the world’s largest source of steel. It now produces more than the United States, Russia, and Japan combined. And, while China produces one-third of the world’s steel, it is responsible for half of the world’s carbon dioxide from steelmaking, making it a leading contributor to global warming.
Propelled by its rapid industrial expansion and low environmental standards, China has also become one of the world’s biggest polluters. It now produces more sulfur dioxide than any other country, and has taken the lead in generating carbon dioxide as well.
The resulting pollution is taking a heavy toll within China. It causes as many as 750,000 premature deaths in China each year, according to the World Bank, and 99 percent of the 540 million Chinese who live in urban areas breathe unsafe air. But it also raises global threats. According to the Environmental Protection Agency (EPA), on some days, one-fourth of the particulate matter (dust and soot) in Los Angeles comes from China.
Low standards combined with heavy industry investments to expand capacity, as well as poor regulation and enforcement, result in far more pollution from steel plants in China than in the U.S. Although both the Chinese government and leading companies in the steel industry claim they want to address the industry’s environmental problems, the levels of pollution are still three to twenty times higher per ton of steel produced in China than in the U.S., depending on the specific pollutant and industrial process analyzed.
“American jobs are at stake and so is the health of the planet,” said Leo W. Gerard, International President, United Steelworkers (USW). “This report should be used as a guide for China and the U.S. to make Chinese pollution standards and enforcement efforts more consistent with programs in other steel producing countries.”
Gerard will testify on Tuesday, March 24, before Congress at a House Ways and Means hearing on climate issues. The USW represents more than 85,000 active workers in the basic steel industry, plus hundreds of thousands of retired steelworkers who are impacted by the inequities of environmental standards for China steel production.
Perhaps the most glaring example of the huge gap between environmental protection in China and the United States is the resources and personnel devoted to regulation and enforcement. China’s Ministry of Environmental Protection (MEP) has only about 300 employees, compared to the 18,000 who work for its U.S. counterpart, the Environmental Protection Agency (EPA). With few employees, most of whom are confined to Beijing, MEP relies on provincial and local governments to implement generally vague environmental laws. But these local entities often give higher priority to economic growth and employment.
Even if China’s environmental infrastructure was sound, its air and water pollution standards applicable to the steel industry are far less stringent than in the U.S. For existing equipment in integrated steel mills, emission-control standards for particulate matter, for example, are from two to six times more stringent in the U.S., depending on the steelmaking process. Chinese limits on sulfur dioxide are so low that most companies do not need additional pollution-control equipment to meet them.
In addition to low standards, the new report found that “the Chinese steel industry operates in an environment in which enforcement of existing standards is weak, the permit system is ineffective, and facilities do not do an adequate job of monitoring their emissions and discharges. Financial penalties for violations are too low to have a substantial deterrent effect.”
For example, the maximum fine for non-compliance in China is $14,000 for most violations, and repeated violations don’t necessarily lead to additional penalties. By contrast, American companies may incur penalties of as much as $32,500 per day.
Due to China’s low standards and lax enforcement, U.S. steel companies in recent years spent 80% more than their Chinese counterparts per ton of steel –$8.83 vs. $4.85—on controlling air and water pollution alone. This meant a yearly savings for China’s steel sector of more than $1.7 billion at 2006 production levels. With respect to capital expenditures on pollution control equipment, estimates suggest that Chinese steelmakers would have to triple or quadruple their capital expenditures to reduce emissions to U.S. levels.
“This report shows that China does not enforce its own environmental regulations,” said Terrence D. Straub, Senior Vice President, Public Policy & Governmental Affairs, United States Steel Corporation. “Since Beijing has been unwilling to impose reasonable emissions regulations on provincial and local governments, there’s little anticipation that they will address carbon emissions and global climate change either.”
Other factors contributing to the Chinese steel industry’s pollution problems include higher use of energy (20 percent more energy per ton of steel than the international average), a heavy reliance on coal to produce that energy, a large number of smaller steel companies, and low use of recycled steel.
The report said it’s misleading to compare the Chinese steel industry’s practices to those in the U.S. decades ago, before regulations and pollution-control technologies existed. “Environmental technology that is in widespread use today has made the human and environmental impacts of industrial pollution both quantifiable and controllable,” the report noted.
China now has access to “the know-how needed to address effectively the industry’s environmental problems,” the report notes. And if China doesn’t take steps “to bring pollution levels closer to those in the rest of the world, China’s trading partners can justifiably complain that China’s failure to act confers on its domestic steelmaking industry an unfair competitive advantage.”
The Alliance for American Manufacturing is a unique non-partisan, non-profit partnership forged to strengthen manufacturing in the U.S. AAM brings together a select group of America’s leading manufacturers and the United Steelworkers to promote creative policy solutions on priorities such as international trade, energy security, health care, retirement security, currency manipulation, and other issues of mutual concern. For more information: www.americanmanufacturing.org.
How Unions Can Help Restore the Middle Class
The following testimony on the importance of unions to restoring a solid middle class was given to the Senate Committee on Health, Education, Labor and Pensions on Tuesday, March 10, by Dr. Paula B. Voos, a professor in the School of Management and Labor Relations at Rutgers, and an Economic Policy Institute [www.epi.org] research associate.
Thank you for the invitation to speak today. I am pleased to have the opportunity to consider the role unions can play in rebuilding the American middle class, a matter of utmost importance not only for ending the current economic downturn, but also for our nation in the longer term. As an economist, I have been studying the role unions play in our economy for some time and in 1993-94, I had the opportunity to serve on the Dunlop Commission in its consideration of how labor law should be modernized to serve the “Future of Worker Management Relations in the United States.”
There is now a substantial body of research evidence on the economic impact of U.S. unions. Unions typically:
- Raise the wages of the employees they represent;
- Increase the fringe benefits of those same employees, usually by a greater extent than they increase wages;
- Reduce income inequality within the represented firm, by reducing differentials between low-paid and high-paid employees, men and women, various racial/ethnic groups, younger and older employees, and so forth;
- Increase pay of nonunion workers in occupations and industries with substantial union presence as nonunion employers move closer to union standards;
- Reduce income inequality in the wider society by reducing inequality not only within and between represented firms, but also across entire industries as nonunion employers increase compensation to discourage unionization, all of which strengthens the middle class (Card, Lemieux, and Riddell, 2007).
- Reduce employee turnover by lessening the number of quits (voluntary separations); and
- Thus increase the retention of skilled employees, enhancing human capital and productivity in both the firm and the economy as a whole;
(See Freeman and Medoff, 1984; Bennett and Kaufman, 2007).
Furthermore:
- Because they suffer less turnover, unionized employers have greater incentives for employee training and for high-skill, high commitment human resource policies, rather than low-skill, high-turnover or other “low road” approaches to human resources. Reduced turnover avoids costs to employers but also lessens society’s costs associated with unemployment, such as Food Stamps, uncompensated care and other social programs.
- Union-represented employees have been found to be more productive, on average. This is probably both due to the fact they have more work experience and due to greater employer investments in them and in physical capital (see Doucouliagos and Laroche 2003 for an overview of seventy-three statistically independent studies);
- The nature of the labor-management relationship is crucial in this regard: good union-management relationships are ones that foster high workforce productivity, but workplaces characterized by labor strife and worker resentment—whether union or non-union—do not (Belman, 1992).
- Union employees typically cannot be disciplined or discharged without a reason, termed “just cause.” This assurance of fair treatment is one reason union employees have greater “voice” than non-union employees and typically are more willing to make suggestions or speak up to improve business operations.
The most important reason to improve the ability of employees to organize into unions is that such membership is a fundamental right in democratic societies, related to freedom of association and the right of all human beings to band together to improve their lives. For that reason alone, I would urge you to pass legislation to make real in the U.S. once again the promise of the National Labor Relations Act. Section 1 of that Act puts federal law behind “the practice and procedure of collective bargaining and ... the exercise by workers of the full freedom of association, self-organization, and designation of representatives of their own choosing.” (NLRA Sec. 1).
Nonetheless, some may be concerned with the economic consequences of increased unionization at this moment in time. They should be assured that the economic consequences would be positive. There are two main reasons:
- First, greater union membership would help the United States recover from the current economic downturn and help prevent future economic crises.
- And second, greater union membership would help the United States make the transition to competing internationally on the basis of high productivity, high quality, and innovation, rather than on the basis of low wage labor or long hours - a race to the bottom that we can never win against nations like China.
http://www.epi.org/analysis_and_opinion/entry/how_unions_can_help_restore_the_middle_class/
Sunday, March 15, 2009
Dissent Magazine: Our Economy Fails Without Manufacturing
Dean Baker, co-director of the Center for Economic and Policy Research, argues that the United States cannot prosper with a substantial manufacturing sector.
Our Economy Fails Without Manufacturing
By Dean Baker
March 12, 2009, Dissent Magazine
I have often thought that economists should be required to have a better grasp of simple arithmetic. It would prevent them from repeating many silly comments that pass for conventional wisdom, such as that the United States will no longer be a manufacturing country in the future.
Those who know arithmetic can quickly detect the absurdity of this assertion. The implication of course is that the United States will import nearly all of its manufactured goods. The problem is that unless we can find some country that will give us manufactured goods for free forever, we have to find some mechanism to pay for our imports.
The end of manufacturing school argues that we will pay by exporting services. This is where arithmetic is so useful. The volume of U.S. trade in goods is approximately three and half times the volume of its trade in services. If the deficit in goods trade were to continue to expand, we would need an incredible growth rate in both the volume and surplus of service trade and our surplus on this trade in order to get to anything close to balanced trade.
For example, if we lose half of our manufacturing over the next twenty years, and imported services continue to rise at the same pace as the past decade, then we would have to see exports of services rise at an average annual rate of almost 15 percent over the next two decades if we are to have balanced trade in the year 2028.
A 15 percent annual growth rate in service exports is approximately twice the rate of growth in service exports that we have seen over the last decade. It would take a very creative story to explain how we can anticipate the doubling of the growth rate of service exports on a sustained basis.
The story becomes even more fantastic on a closer examination of the services that we export. The largest single item is travel, meaning the money that foreign tourists spend in the United States. This item alone accounts for almost 20 percent of our service exports.
There is nothing wrong with tourism as an industry. However, the idea that U.S. workers are somehow too educated to be doing manufacturing work, but instead will be making the beds, bussing the tables, and cleaning hotel toilets for foreign tourists is a bit laughable. Of course, with the right institutional structure (e.g. strong unions) these jobs can be well-paying jobs, but it is certainly not apparent that they require more skills than manufacturing.
The category “other transportation” accounts for another 10 percent of exported services. These are the fees for freight and port services that importers pay when they bring items into the United States. This service rises when our imports rise. It is effectively money taken out of our consumers’ pockets because it is included in the price of imported goods.
Royalty and licensing fees account for another 17 percent of our service exports. These are the fees that we get countries to tack onto the price of their products due to copyright and patent protection. It might become increasingly difficult to extract these fees as the spread of the Internet increasingly allows more movies, software, and recorded music to be instantly copied and exchanged at zero cost. It’s not clear that the rest of the world is prepared to use police-state tactics to collect revenue for Microsoft and Disney. The drug patent side of this equation is even more dubious. Developing countries are not eager to see their people die so that Pfizer and Merck can get high profits from their drug patents. This component of service exports is likely to come under considerable pressure in future years.
Another major category of service exports is financial services. This category accounted for approximately 10 percent of service exports in recent years. It is questionable whether this share can be maintained in the years ahead. Wall Street had been known as the gold standard of the world financial industry, with the best services and the highest professional standards. As a result of the scandals that have been exposed in the last year, Wall Street no longer has this standing in the world. After all, investors don’t have to come to New York and give their money to Bernie Madoff or Robert Rubin to be ripped off; they can be ripped off almost anywhere in the world. Perhaps the Obama administration will be able to implement reforms in the financial sector that will restore its integrity in the eye of world investors, but that will require serious work at this point.
Finally, there is the category of business and professional services, which accounts for roughly 20 percent of service exports. This is the area of real high-tech and high-end services. It includes computing and managerial consulting.
Rapid growth in this sector would mean more high-end jobs in the United States, but the notion that it could possibly expand enough to support a country without manufacturing is absurd on its face. First, even though it is a large share of service exports, it is only equal to about 0.8 percent of GDP. Even if it quadrupled over the next two decades, it wouldn’t come close to covering the current trade deficit, to say nothing of the increase due to the loss of more manufacturing output.
More important, it is implausible to believe that the United States will be able to dominate this area in the decades ahead. The United States certainly has a head start in sophisticated computer technologies and in some management practices, but it is questionable how long this advantage can be maintained. There are already many world-class computer service companies in India and elsewhere in the developing world, and this number is increasing rapidly.
The computer and software engineers in these countries are every bit as qualified as their U.S. counterparts and are often prepared to work for less than one-tenth of U.S. wages. Furthermore, unlike cars and steel, which are very expensive to transport over long distances, it is costless to ship software anywhere in the world. Given the basic economics, it seems a safe bet that the United States will lose its share in this sector of the world economy. In twenty years it is quite likely that the United States will be a net importer of this category of service, unless of course wages in the United States adjust to world levels.
In short, the idea that the United States can survive without manufacturing is implausible: it implies an absurdly rapid rate of growth of service exports for which there is no historical precedent. Many economists and economic pundits asserted that house prices could keep rising forever in spite of the blatant absurdity of this position. The claim that the U.S. economy can be sustained without a sizable manufacturing sector is an equally absurd proposition.
http://dissentmagazine.org/online.php?id=214
http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/our-economy-fails-without-manufacturing/
Saturday, March 07, 2009
Michael Lind: Obama needs to follow FDR, Eisenhower
Michael Lind explains that no matter what the radical free market types say, public provision of public goods isn't socialism. And Republicans like Dwight D. Eisenhower would agree.
Obama's Timid Liberalism
By Michael Lind, New America Foundation www.newamerica.net
Salon www.salon.com, March 6, 2009
Barack Obama's bold, ambitious budget plan proves that he is the true heir of Franklin Roosevelt and the New Deal. Consider Obama's Rooseveltian energy plan. In 1939, President Roosevelt decided to mobilize Americans to create a new source of energy: atomic power. Although he was urged to focus on government-funded R&D, FDR chose a different route. He wisely encouraged private capital to invest in atomic energy research by a variety of tax incentives. To make atomic power investment more palatable to private capital, FDR boldly chose to make all other forms of energy in the U.S. uneconomical, by slapping high taxes on kerosene and coal. With the money from the new federal Kerosene Cap and Trade system, President Roosevelt and Congress funded a small-scale federal research program, in the hope of attracting much greater private investment ...
Wait. What's that you say? FDR didn't do that? He poured federal money into the all-public Manhattan Project and created the first atomic bomb in a couple of years? He didn't tax kerosene to make it uneconomical and to encourage private investment in atomic power?
Oh. OK. Never mind.
But what about Social Security? In 1935, FDR signed the historic Social Security Act. It created a complex "retirement mandate" system, forcing all elderly Americans to buy expensive annuities from private insurance companies, without, however, imposing price controls on the insurance companies ...
What? FDR didn't force the elderly to subsidize private annuity brokers? He imposed a single, simple, efficient tax to pay for a single, simple, efficient public system of retirement benefits?
All right, then, forget FDR. He was a socialist, anyway. Let Dwight Eisenhower serve as a model for the Obama administration. President Eisenhower authorized the biggest infrastructure program in American history, when he signed the National Interstate and Defense Highways Act of 1956. The interstate highway act created an elaborate system of private tax incentives and public-private partnerships (PPPs) to encourage private corporations to build national highways. To begin with, all U.S. highways were leased to domestic and foreign corporations for a period of decades. Second, all U.S. highways were set up with toll booths, so that American drivers would be forced to repay the corporate owners of the national highways every few dozen miles. Finally, a system of high-speed lanes with higher tolls was created, so that the rich could whiz down the road while middle-class and poor Americans were stuck in traffic jams ...
All right, what now, wise guy? So that's wrong, too? Eisenhower's national highway system wasn't based on tolls, leases to foreign companies, income-based pricing, and tax credits for private corporations? It used gasoline taxes to fund free public highways?
Free highways without toll booths, owned by the public, paid for out of taxes? My God. So the John Birch Society was right after all. Dwight Eisenhower was as much of a socialist as Franklin Delano Roosevelt!
The point of this imaginary monologue is simple. Once upon a time in the United States, public goods -- from retirement security and energy research to public roads -- were provided by the government and paid for by taxes. As late as the Nixon administration, the provision of public goods by government was considered perfectly compatible with a robust market economy by so-called Modern Republicans like Eisenhower and Nixon as well as New Deal Democrats like Roosevelt, Truman, Kennedy and Johnson. In the intervening 40 years, however, free-market fundamentalists of the Chicago School have managed to change the debate, redefining "socialism" to mean not only public ownership of the means of production, but also public provision of public goods.
Rather than fight back, most Democrats in the last generation adapted to this hostile conservative political climate by jettisoning New Deal "big government" liberalism for "market-friendly" neoliberalism. Neoliberals shared the right's enthusiasm for deregulating industries that New Deal Democrats had regulated in the public interest. Jimmy Carter and Ted Kennedy supported the deregulation of trucking and airlines, while Bill Clinton presided over the dismantling of the New Deal era's banking regulations and declared: "The era of big government is over." Neoliberals and conservatives agreed that public goods should be provided by private, for-profit or nonprofit entities, rather than government agencies. If private corporations or universities had no motivation to provide public goods, well, then, they would be bribed with tax credits or other government subsidies.
Neoliberals are liberals in one sense -- they fret about unequal outcomes. But rather than help middle- and low-income Americans by regulating the prices of privately provided public goods, as the crude and direct New Dealers would have done, neoliberal Democrats have argued for allowing the "market" (translation: the publicly subsidized entities) to set prices and then promised to provide tax subsidies or grants to help middle- and low-income Americans pay for the expensive, privately provided public goods.
You might have thought that the Crash of 2008 would have led Democrats to reconsider this neoliberal approach to providing public goods by private means. But to judge from President Obama's budget, the White House is still living back in the neoliberal era, when the diminutive Milton Friedman cast a giant shadow.
Consider Obama's education proposals. The problem with higher education is that it costs way too much. Tuition costs at private universities and some state universities have been growing far more rapidly than inflation. A crude, old-fashioned, old-thinking New Deal liberal would see the problem as one of excessive prices demanded by universities, not insufficient funds on the part of the students whom the universities gouge. The hypothetical New Deal liberal would threaten to deny universities their privileged tax-exempt status unless they spend more of their endowments on tuition and keep their prices affordable.
The neoliberal alternative is to avoid impolite and divisive inquiries into the reasons for skyrocketing tuition costs. That would entail the government concluding that prices in a particular industry (in this case, a nonprofit industry) are too high, something that government should not do. Instead, the taxpayer will be forced to cough up money to help students meet the exorbitant fees. Thus Obama's first budget calls for maintaining the $2,500 New American Opportunity Tax Credit for middle-class students, while converting Pell Grants up to $5,550 into a permanent government entitlement. If I were a university, I'd raise my tuition by ... oh ... let's say $5,550 a year. Government subsidies without government price controls would encourage cost inflation, one might think, but this possibility appears not to bother the brilliant economists on Obama's team.
Then there's energy. The problem with alternative energy sources like solar power and wind power is that they are still too expensive, compared to coal, natural gas and nuclear energy. The answer, according to a minority of enviromentalists like Ted Nordhaus and Michael Shellenberger, should be massive, Manhattan-style public sector R&D to discover ways to bring alternative energy prices down -- in absolute, not just relative, terms, to maintain cheap electricity for American industry and American households. That would be the Roosevelt approach. But the Obama approach is to use a cap-and-trade system to artificially raise the prices of conventional energy, in the hope that private capital (with modest help from public capital) will pay for efforts to invent a cheaper solar cell or wind turbine. The fact that most of the left embraces cap-and-trade should not blind us to the fact that cap-and-trade is a classic example of an indirect, overly complicated, "market-friendly" neoliberal approach, touted originally by conservatives and neoliberals as an alternative to the allegedly discredited "top-down, command-and-control" approach that gave us, among other things, the TVA, the Manhattan Project and the Internet.
And healthcare? The Obama administration deserves credit for trying to reduce prescription drug costs and to promote electronic medical records. Obama's budget director Peter Orszag in particular deserves praise for pointing out that escalating economy-wide healthcare costs, not the Social Security and Medicare costs associated with the aging of the boomer generation as such, represent the real long-term threat to the U.S. economy. Even so, it seems likely that whatever ultimately emerges as the consensus Democratic healthcare plan will be yet another Rube Goldberg scheme for massively subsidizing employers, private health insurers, or both.
I'm sympathetic to the argument that the public, after nearly half a century of conservative anti-government propaganda, will oppose the direct provision of public goods paid for out of straightforward taxation -- the "socialistic" old Eisenhower-Roosevelt approach. It was the conviction that a single-payer healthcare system was politically impossible that led me to endorse the individual mandate system as the next best alternative, in "The Radical Center," a book I co-authored with Ted Halstead in 2001.
But a lot has changed since Wall Street imploded last fall. The great investment banks are gone, the U.S. has nationalized much of the financial system, and appears to be on the way to effectively nationalizing the automobile and housing sectors as well. In this environment, we need to consider some heresies, like the idea that the best way to provide a public good is not necessarily to pour subsidies on middlemen, and then bail them out with more subsidies when they fail at their public function.
The fundamental barrier today is the way that the issues are framed, by Democrats and Republicans alike. Thus the problem is defined not as making credit available for individuals and businesses, but as saving the banks and the shadow banking system. The goal is not to provide healthcare to all citizens, but to enable all citizens to purchase private health insurance. The objective is not to ensure universal access to higher education; it is to insure universal access to colleges and universities. In these and other cases, the means is confused with the end. The ultimate goal -- providing credit, healthcare or education -- is identified with the interests of non-governmental for-profit or nonprofit providers of that service. If these private institutions fail to provide the public service in a low-cost, effective and equitable way, then they must be subsidized even more. The idea of achieving the same public goals through simpler, more direct and efficient means that would cut out the middleman appears to be heresy to the Obama administration.
It's not necessary to nudge the Obama administration leftward until it arrives at socialism. When it comes to the public provision of public goods, Eisenhower Republicanism would be just fine.
http://www.newamerica.net/publications/articles/2009/obamas_timid_liberalism_11559
http://www.salon.com/opinion/feature/2009/03/06/neoliberalism/index.html
Friday, March 06, 2009
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