Reports from the Economic Front

This long post examines the causes of and offers a response to the dangerous escalation of tensions on the Korean peninsula.

While the details of U.S.-North Korean relations are complex, the story is relatively simple.  In brief, the U.S. government continues to reject possibilities for normalizing relations with North Korea and promoting peace on the Korean peninsula in favor of a dangerous policy of regime change.  Unfortunately, but not surprisingly, the U.S. media supports this policy choice with a deliberately one sided presentation of events designed to make North Korea appear to be an unwilling and untrustworthy negotiating partner.

As a corrective, in what follows I offer a more complete history of U.S -North Korean relations, focusing on the major events that frame current tensions over North Korea’s nuclear program.  This history makes clear that these tensions are largely the result of repeated and deliberate U.S. provocations and that our best hope for peace on the Korean Peninsula is an educated U.S. population ready and able to challenge and change U.S. foreign policy.

Historical Context

Perhaps the best starting point for understanding the logic of U.S.-North Korean relations is the end of Korean War fighting in 1953.  At U.S. insistence, the fighting ended with an armistice rather than a peace treaty.  A Geneva conference held the following year failed to secure the peace or the reunification of Korea, and U.S. demands were the main reason for the failure.

The United States rejected North Korean calls for Korea-wide elections, supervised by a commission of neutral nation representatives, to establish a new unified Korean government, a proposal that even many U.S. allies found reasonable.  Instead, the U.S. insisted, along with South Korea, that elections for a new government be held only in the North and under the supervision of the U.S. dominated United Nations.  Needless to say, the conference ended without any final declaration, Korea divided, and the United States and North Korea in a continuing state of war.

Up until the late 1980s/early 1990s, an interrelated, contentious but relatively stable set of relationships—between the United States and the Soviet Union and between North Korea and South Korea—kept North Korean-U.S. hostilities in check.  The end of the Soviet Union and transformation of Russia and other Central European countries into capitalist countries changed everything.

The loss of its major economic partners threw North Korea’s economy into chaos; conditions only worsened the following years as a result of alternating periods of flood and drought.  The North Korean government, now in a relatively weak position, responded by seeking new trade and investment partners, which above all required normalization of relations with the United States.  The U.S. government had a different response to the changed circumstances; seeking to take advantage of the North’s economic problems and political isolation, it rejected negotiations and pursued regime change.

It is the interplay of U.S. and North Korean efforts to achieve their respective aims that is largely responsible for the following oft repeated pattern of interaction: the North tries to force the United States into direct talks by demonstrating its ability to boost its military capacities and threaten U.S. interests while simultaneously offering to negotiate away those capacities in exchange for normalized relations.  The United States, in turn, seizes on such demonstrations to justify ever harsher economic sanctions, which then leads North Korea to up the ante.

There are occasional interruptions to the pattern.  At times, the United States, concerned with North Korean military advances, will enter into negotiations.  Agreements are even signed.  But, the U.S. rarely follows through on its commitments.  Then the pattern resumes.  The critical point here is that it is the North that wants to conclude a peace treaty ending the Korean War and normalize relations with the United States.  It is the U.S. that is the unwilling partner, preferring to risk war in the hopes of toppling the North Korean regime.

The Framework Agreement, 1994-2002

The U.S. government began to raise public concerns about a possible North Korean nuclear threat almost immediately after the dissolution of the Soviet Union.  These concerns were driven by many factors, in particular the U.S. need for a new enemy to justify continued high levels of military spending.  Colin Powell, then head of the Joint Chiefs of Staff, explained in testimony to Congress that with the Soviet Union gone, the United States was running out of enemies.  All that was left, he said, was Fidel Castro and Kim Il Sung.

The North had shut down its one operating reactor in 1989 for repairs.  In 1992, the CIA claimed that the North used the shutdown to reprocess plutonium and was now in possession of one or two nuclear weapons, a claim disputed at the time by the State Department.  The North also denied the claim but offered to settle U.S. nuclear concerns if the United States would enter into normalization talks.

The Clinton Administration rejected the invitation and began planning for war.  War was averted only because of Jimmy Carter’s intervention.  He traveled to North Korea and brokered an agreement with Kim Il Sung that Clinton reluctantly accepted.  The resulting 1994 Framework Agreement required the North to freeze its graphite-moderated reactor and halt construction of two bigger reactors.  It also required the North to store the spent fuel from its operating reactor under International Atomic Energy Association (IAEA) supervision.

In exchange, the U.S agreed to coordinate the building of two new light water reactors (which are considered less militarily dangerous) that were to be finished by 2003.  Once the reactors were completed, but before they were fully operational, the North would have to allow full IAEA inspections of all its nuclear facilities.  During the period of construction, the U.S. agreed to provide the North with shipments of heavy oil for heating and electricity production.

Perhaps most importantly, the agreement also called for the United States to “move toward full normalization of political and economic relations” with the North and “provide formal assurances to the DPRK against the threat or use of nuclear weapons by the United States.”

Tragically, although rarely mentioned in the U.S. media, the U.S. government did little to meet its commitments.  It was repeatedly late in delivering the promised oil and didn’t begin lifting sanctions until June 2000.  Even more telling, the concrete for the first light water reactor wasn’t poured until August 2002.  Years later, U.S. government documents revealed that the United States made no attempt to complete the reactors because officials were convinced that the North Korean regime would collapse.

The Bush administration had no use for the Framework Agreement and was more than happy to see it terminated, which it unilaterally did in late 2002, after charging the North with violating its terms by pursuing nuclear weapons through a secret uranium enrichment program.  Prior to that, in January 2002, President Bush branded North Korea a member of the “axis of evil.”  In March, the terms of a new military doctrine were leaked, revealing that the United States reserved the right to take preemptive military strikes and covert actions against nations possessing nuclear, biological, and chemical weapons as well as use nuclear weapons as an option in any conflict; North Korea was listed as one of the targeted nations.  In July, President Bush rejected a North Korean request for a meeting of foreign ministers, calling Kim Jong Il a “pygmy” and a “spoiled child at the dinner table”

It is certainly possible that North Korea did begin a uranium enrichment program in the late 1990s, although the Bush Administration never provided proof of the program’s existence.  However, what is clear is that the North did halt its plutonium program, allowing its facilities to deteriorate, with little to show for it.  The failure of the United States to live up to its side of the agreement is highlighted by the fact that North Korea’s current demands are no different from what it was promised in 1994.

The North Korean government responded to the Bush administration’s unilateral termination of the Framework Agreement by ordering IAEA inspectors out of the country, restarting its plutonium program, and pledging to build a nuclear arsenal for its defense.

Six Party Talks, 2003-7

Fearful of a new war on the Korean peninsula, the Chinese government organized talks aimed at deescalating tensions between the United States and North Korea.  The talks began in August 2003 and included six countries—the United States, North Korea, South Korea, Japan, China, and Russia.  Two years of talks failed to produce any progress in resolving U.S.-North Korea differences.  One reason: the U.S. representative was under orders not to speak directly to his North Korean counterpart except to demand that North Korea end its nuclear activities, scrap its missiles, reduce its conventional forces, and end human rights abuses.  The North, for its part, refused to discuss its nuclear program separate from its broader relations with the United States.

Finally, in mid-2005, the Chinese made it known that they were prepared to declare the talks a failure and would blame the United States for the outcome.  Not long after, the United States ended its opposition to an agreement.  In September 2005, the six countries issued a Joint Statement, which was largely a repackaged Framework Agreement.  While all the countries pledged to work towards the denuclearization of the Korean peninsula, most of the concrete steps were to be taken by the United States and North Korea “in a phased manner in line with the principle of ‘commitment for commitment, action for action’.”

Unfortunately, the day after the Joint Statement was issued, the United States sabotaged it.  The U.S. Treasury announced that it had “proof” that North Korea was counterfeiting $100 bills, so called super notes, an action it said amounted to war.  It singled out the Macao-based Banco Delta Asia, which was one of North Korea’s main financial connections to the west, for supporting the country’s illegal activities, froze its dollar accounts, and warned other banks not to conduct business with it or service any North Korean dollar transactions.  The aim was to isolate North Korea by denying it access to international credit markets.  The charge of counterfeiting was rejected by the North, most Western currency experts, and even China and Russia who were given a presentation of evidence by the U.S. Treasury.  However, fearful of possible U.S. retaliation, most banks complied with U.S. policy, greatly harming the North Korean economy.

The timing of the counterfeit charge was telling.  The U.S. Treasury had been concerned with counterfeit super notes since 1989 and had originally blamed Iran.  The sum total identified was only $50 million, and none of the notes had ever circulated in the United States.  This was clearly yet another effort to stop normalization and intensify economic pressure on North Korea.

The North announced that its participation in Six Party talks was contingent on the withdrawal of the counterfeit charge and the return of its Banco Delta Asia dollar deposits.  After months of inaction by the United States, the North took action.  On July 4, 2006, it test-fired six missiles over the Sea of Japan, including an intercontinental missile.  The U.S. and Japan condemned the missile firings and further tightened their sanctions against North Korea.  In response, on October 8, 2006, North Korea conducted its first nuclear test.  Finally, the U.S. agreed to reconsider its financial embargo and the North agreed that if its money was returned and it received energy supplies and economic assistance it was willing to once again shutdown its nuclear facilities, readmit international inspectors, and discuss nuclear disarmament in line with steps toward normalization of relations with the United States.

The Six Party talks began again in December 2006 but the process of securing implementation of the Joint Statement was anything but smooth.  The U.S. chief negotiator at the talks announced in February 2007 that all frozen North Korean deposits would be unfrozen and made available to the North within 30 days; the North was given 60 days to shut down its reactor.  However, the Treasury refused to withdraw its charges, and no bank was willing to handle the money for fear of being targeted as complicit with terrorism.  It took the State Department until June 25 to work out a back-door alternative arrangement, thereby finally allowing the Six Party agreement to go into effect.

The Six Party Agreement, 2007-9

As noted above, the Six Party agreement involved a phased process.  Phase 1, although behind schedule because of the U.S. delay in releasing North Korean funds, was completed with no problems.  In July 2007, North Korea shut down and sealed its Yongbyon nuclear complex which housed its reactor, reprocessing facility, and fuel rod fabrication plant.  It also shut down and sealed its two partially constructed nuclear reactors.  It also invited back IAEA inspectors who verified the North Korean actions.  In return, the U.S. provided a shipment of fuel oil.

Phase 2, which began in October, required the North to disable all its nuclear facilities by December 31, 2007 and “provide a complete and correct declaration of all its existing nuclear programs.”  In a separate agreement it also agreed to disclose the status of its uranium enrichment activities.  In exchange, the North was to receive, in stages, “economic, energy, and humanitarian assistance.” Once it fulfilled all Phase 2 requirements it would also be removed from the U.S. Trading with the Enemy Act and the State Sponsors of Terrorism list.

North Korean complaints over the slow delivery of fuel oil delayed the completion of this second phase.  However, in May 2008, North Korea completed the last stage of its required Phase 2 actions when it released extensive documentation of its plutonium program and in June a declaration of its nuclear inventory.  In response, the U.S. removed North Korea from its list of state sponsors of terrorism.

However, the U.S. government failed to release the remaining promised aid or end the remaining sanctions on North Korea.  It now demanded that North Korea accept a highly intrusive verification protocol, one that would open up all North Korean military installations to U.S. inspection, and made satisfaction of Phase 2 commitments dependent on its acceptance.  The U.S. was well aware that this demand was not part of the original agreement.  As Secretary of State Rice stated, “What we’ve done, in a sense, is move up issues that were to be taken up in phase three, like verification, like access to the reactors, into phase two.”

The North offered a compromise—a Six Party verification mechanism which would include visits to declared nuclear sites and interviews with technical personal.  It also offered to negotiate a further verification protocol in the final dismantlement phase.  The U.S. government rejected the compromise and ended all aid deliveries.

In February 2009, the North Korea began preparation to launch a satellite.  South Korea was preparing to launch a satellite of its own in July.  The North had signed the appropriate international protocols governing satellites and was now providing, as required, notification of its launch plan.  The Obama administration warned the North that doing so would violate sanctions placed on the country after its nuclear test.  In response, the North declared that it had every right to develop its satellite technology and if the U.S. responded with new sanctions it would withdraw from the Six Party talks, eject IAEA monitors, restart its reactors, and strengthen its nuclear deterrent.

The North launched its satellite in April.  In June, the U.S. won UN support for enhanced sanctions, and the North followed through on its threat.  In May the North conducted a second nuclear test, producing yet another round of sanctions.

Recent Events

In April and December 2012 the North again launched earth observation satellites.  Although before each of these launches the U.S. asserted that these were veiled attempts to test ballistic missiles designed to threaten the United States, after each launch almost all observers agreed that the characteristics of the launches—their flight pattern and the second stage low-thrust, long burntime–were what is required to put a satellite in space and not consistent with a missile test.

After the December launch, the only successful one, the U.S. again convinced the Security Council to apply a new round of sanctions.  And in response, the North carried out its third nuclear test in February 2013.  The North Korean Ministry of Foreign Affairs pointed out that there have been “more than 2,000 nuclear tests and 9,000 satellite launches” in the world, “but the UN Security Council has never passed a resolution prohibiting nuclear tests or satellite launches.”  The Security Council responded to the North’s nuclear test by approving stricter sanctions.

In addition to sanctions, the U.S. has also intensified its military provocations against the North in hopes of destabilizing the new North Korean regime led by Kim Jung Un.  For example, in 2012, U.S.-South Korean military analysts conducted the world’s largest computerized war simulation exercise, practicing the deployment of more than 100,000 South Korean troops into North Korea to “stabilize the country in case of regime collapse.”  As part of their yearly war games, U.S. and South Korean forces also carried out their largest amphibious landing operations in 20 years; 13 naval vessels, 52 amphibious armored vehicles, 40 fighter jets and helicopters, and 9,000 U.S. troops were involved.

As part of its March 2013 war games, the U.S. flew nuclear-capable B-2 Stealth bombers over South Korea; these are also the only planes capable of dropping the 30,000-pound Massive Ordnance Penetrator bomb, which was developed to destroy North Korean underground facilities.  Nuclear-capable B-52 bombers also flew over South Korea, dropping dummy munitions.  The United States also sent the nuclear-powered submarine USS Cheyenne, equipped with Tomahawk missiles, into Korea waters.

The North Korean government responded to these threats in three ways.  First, the content of their declarations changed.  In particular, they began to focus their own threats on the U.S. as well as South Korea.  For example, the government stated, “If the US imperialists brandish nuclear weapons, we — in complete contrast to former times — will by means of diversified, precision nuclear strike in our own style turn not just Seoul, but even Washington, into a sea of fire.”  It also asserted, for the first time, that its nuclear weapons were no longer negotiable.  At least, not “as long as the United States’ nuclear threats and hostile policy exist.”

Second, the government put North Korean forces on full alert, including all artillery, rockets, and missiles.  Kim Jong Un announced that the country would “answer the US imperialists’ nuclear blackmail with a merciless nuclear attack.”  Finally, it announced, in April, that it would restart its uranium enrichment program and its Yongbyon reactor.

What Lies Ahead

The Obama administration has adopted what it has called the doctrine of “strategic patience” in dealing with North Korea.  But as made clear from above, in reality the U.S. has continued to pursue an aggressive policy towards North Korea, motivated by the hope that the regime will collapse and Korean reunification will be achieved by the South’s absorption of the North, much like the German experience.

The consequence of this policy is ever worsening economic conditions in the North; continuing military buildup in the United States, Japan, China, and both North and South Korea; a strengthening of right-wing forces in South Korea and Japan; and the growing threat of a new war on the Korean peninsula.  There are powerful interests in Japan, South Korea, and the United States that are eager to further militarize their respective domestic and foreign policies, even at the risk of war.  Tragically, their pursuit of this goal comes at great cost to majorities in all the countries concerned, even if war is averted.

The North has made clear its willingness to enter direct talks with the United States.  It is only popular pressure in the United States that will cause the U.S. government to change its policy and accept the North Korean offer.  It is time for the U.S. government to sign a peace treaty finally ending the Korean War and take sincere steps towards normalization of relations with North Korea.

So, what government believes that it has the right to kill anyone, regardless of where they are, if the head of state believes that the person is a threat to the country’s national security?  No, the answer is not the government of North Korea.  It is the government of the United States.

And how does the government of the United States justify its policy of targeted assassinations?  According to a recent New York Times article:

On Page 4 of the unclassified 16-page “white paper,” Justice Department lawyers tried to refute the argument that international law does not support extending armed conflict outside a battlefield. They cited as historical authority a speech given May 28, 1970, by John R. Stevenson, then the top lawyer for the State Department, following the United States’ invasion of Cambodia.

Since 1965, “the territory of Cambodia has been used by North Vietnam as a base of military operations,” he told the New York City Bar Association. “It long ago reached a level that would have justified us in taking appropriate measures of self-defense on the territory of Cambodia. However, except for scattered instances of returning fire across the border, we refrained until April from taking such action in Cambodia.”

In fact, Nixon had begun his secret bombing of Cambodia more than a year earlier. (It is not clear whether Mr. Stevenson knew this.) So the Obama administration’s lawyers have cited a statement that was patently false.

To be sure, the administration may have additional arguments in support of its use of drones in Yemen, Pakistan, Somalia and other countries. To secure the confirmation of John O. Brennan as the C.I.A. director, it recently showed members of the Congressional intelligence committees some of the highly classified legal memos that were the basis for the white paper. But Mr. Obama has asked us to trust him, and Cambodia offers us no reason to do so.

The following link illustrates the escalation of drone warfare under President Obama by highlighting every known drone attack in Pakistan since 2004 and the estimated casualties: http://drones.pitchinteractive.com/

After watching the graphic take a few moments to explore the site, especially the victims and news links.

The Asia Times Online calls it “‘Occupy’ with Chinese Characteristics.” Whether Chinese activists identify with the Occupy Movement is unclear.  What is clear is the growing activism of:

a confrontational vanguard of young people – high school students and twenty-somethings (collectively known as “after 80s” and “after 90s” for their birth years) who appear quite happy to mix it up violently with the cops and cadres.

The most recent confrontation took place on July 28^thin Qidong.   Qidong, as the Austalian Socialist Alternative explains,

is located on an estuary of the Yangtze River; across the way stands China’s biggest city, Shanghai. The Yangtze River Delta is one of China’s richest regions, but high speed economic development has come at the cost of severe environmental destruction. For example, more than half of coastal areas in Jiangsu province (where Qidong is located) are categorised as “seriously polluted zones” by the Ocean and Fishery Bureau. The main source of pollution is the industrial wastewater illegally discharged by corporations.

The Chinese government wants to build a new pipeline that would take wastewater from a special economic zone near Shanghai to a major Qidong fishing port on the Yellow Sea.  The pipeline would serve a paper mill and nearly completed pulp plant, both of which are owned by a large Japanese multinational, Oji Paper Company of Japan.  The people of Qidong don’t believe Chinese government claims that the wastewater will be safe and have voiced opposition to the pipeline since 2009 when the government first proposed its construction.  

THE RESISTANCE MOVEMENT IN ACTION

Here is a report from a Japanese newspaper about what happened in Qidong:

About 5,000 people filled the streets in central Qidong before 6 a.m., when the rally began. The protesters began chanting, “Protect the environment” against the dangers posed by a plan for a drainage pipeline into local waters.

But less than 10 minutes later, the crowd broke through a row of police officers blocking the main street and started marching toward the city government building 1 kilometer away. The demonstrators became louder after they reached the building.

Several minutes later, they pulled down the steel gate and swarmed over the premises.

About 2,000 occupied the inner courtyard, several thousand on the street in front of the city government building and many others in nearby structures overlooking the building, bringing the total of protesters to more than 10,000.

Here are some pictures that help to give a feeling for the day’s events:

This was, as Socialist Action describes, a well planned action:  

In order to stop this disastrous project, small-scale protests had been occurring since June, but were suppressed by the local government with various means. When China’s summer school holiday began in July, many students in Qidong decided to help build a bigger protest movement. They used social media to spread the information, but also produced many leaflets “To the people of Qidong” and distributed them in shopping centres and other public spaces. . . .

Big banners of petition with countless signatures were carried in the middle of the column, saying “Resolutely Resist Oji Paper Discharging Wastewater at Qidong”. Organisers equipped with megaphones led the chanting: “Opposing Oji Paper, defending our home!” A teenage woman, holding an anti-pollution t-shirt with her mother, marched proudly in the front of the contingent. More people arrived. The demonstration was growing like a rolling snowball.

People were taking photos from the roadsides and posting them online. Within hours, the news of Qidong had spread like a wild fire nationally. . . . Some shops offered free bottled water and bread to the protesters as support.  A 70-year-old woman reproached the cops: “These kids are doing the right thing, don’t disrupt them.” Most of the police personnel who arrived in the morning were local residents, whose families would be affected by the pollution as much as the protesters, so they generally sympathised with the cause. Moreover, they were heavily outnumbered so could not stop the protesters anyway!

Outside the municipal building, the protesters demanded that the government stop Oji Paper from building industrial wastewater pipes. The officials rejected the demand with the excuse that the government would have to pay a great amount of compensation to the company if they cancelled the project. The response enraged the crowd and thousands of protesters stormed the building. They surrounded the party secretary (the highest government official in a city) and asked him to wear an anti-pollution T-shirt. On his refusal the protesters stripped him naked and chased him around.

Large quantities of poker cards, condoms, expensive cigarettes and imported wine were found in those officials’ offices. These things were displayed on the roadside as evidence of government corruption.

The outcome, as reported by Asia Times Online, was a victory for the demonstrators:

The announcement posted on the Qidong municipal website on July 28, the same day as the demonstrations, stated:

After careful considerations, the Nantong City Government has decided to halt the implementation of the Nantong Large-Scale Project for Expelling Standards-Meeting Water into the Sea in Qidong.

An electronic billboard in Qidong displayed a less nuanced, more crowd-pleasing message on the same day, even as demonstrators were gathered in the city center:

After careful consideration, the Nantong City Government has decided to cancel this project for ever. 

MOVEMENT BUILDING

The Qidong protest was no isolated event.  For example, it followed the three day June struggle in Shifang (in Sichuan province, Southwest China) to halt the construction of a copper smelter.  According to Asia Times Online,

In Shifang, activists among a crowd of several thousand attempted to bumrush the municipal government building, but were repelled in a police action that turned into something of a police riot. The result was dozens of serious injuries inflicted on agitators, demonstrators, and hapless bystanders alike, and a marked swing in national popular sympathy toward the demonstrators.

Despite the repression, the activists did succeed in forcing the government to cancel the project.  Socialist Action notes that the Shifang action was itself inspired by:

a 100,000-strong demonstration in Dalian (in Liaoning province, Northeast China) last year, which compelled the local government to promise to move a chemical plant. . . . 

From Dalian to Shifang, then to Qidong, young people dominated. They used social media to organise their actions, their enthusiasm to agitate the masses and their bodies to fight the cops. Many of them were born after 1989, but they have inherited the spirit of Tiananmen Square. Such a generation of youth are not only active in environmental struggles, but also in the strikes taking place in the factories of Pearl River Delta, in the land rights uprisings occurring in the villages of Guangdong, in the battles against police brutality that occur in every city on a daily basis.

There is a lot going on in China that is not reported in this country.  While there is indeed labor repression there is also resistance fueled by the desire of many Chinese to change the direction of their country. Rather than seeing ourselves locked in some kind of zero sum economic competition with China, we should be looking to connect with Chinese activists, sharing experiences and strategies.  After all, we also are in desperate need of a change in direction.

The Obama administration continues to push new free trade agreements, arguing that they are needed to boost job creation.  The latest attempt is the Trans-Pacific Partnership (TPP).    So far nine countries are engaged in negotiating this free trade agreement: Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the United States.  The United States in particular is thinking big; it insisted that the agreement also have a “docking clause,” which means that it is structured to make it easy for other Pacific Rim countries to join.  Canada, Japan and Mexico have already expressed interest.

Following standard procedures, the U.S. trade representative is negotiating the terms of the agreement with other trade representatives with the support and active involvement of some 600 multinational corporations.  Unfortunately, they are the only ones who know what is being negotiated.  As the Eyes on Trade Blog writes:  

Not only is the text secret during the negotiations, but all TPP countries signed a secret agreement to classify the negotiating texts for at least four years after the TPP goes into effect. After taking heat for this secret agreement that keeps everything secret, New Zealand was forced to release the text of the secrecy pact. Though neither the public nor members of Congress are permitted to view the negotiating texts, over 600 representatives from corporations have access to the texts, allowing them to steer the negotiations in their favor.

In brief—this is another terrible free trade agreement.  Beyond reducing tariffs what little we do know of the treaty suggests it will also include 26 chapters designed to enhance the freedom and profits of multinational corporations at majority expense.  There is nothing about this agreement that will promote jobs or a higher quality of life for workers in any of the participating countries.

One way to appreciate just how damaging capitalist structured globalization has been to the health of the U.S. economy is to read Michael Spence and Sandile Hlatshwayo’s study of trends in U.S. employment and value added in both tradeable and nontradeble sectors over the period 1990 to 2008.    

Starting with employment, the authors found that almost all job growth from 1990 to 2008 occurred in the nontradeable sector.  Specifically, there was a 27.3 million increase in jobs between 1990 and 2008, from a starting a base of 121.9 million.  Approximately 98 percent of that increase, 26.7 million jobs, was generated in the nontradeable sector.  Job creation in the tradeable sector was basically nonexistent in the aggregate. 

In 2008, the nontradeable sector had 114.9 million jobs and the tradeable sector 34.3 million jobs. Government at all levels was the largest employer in the nontradable sector, accounting for 22.5 million jobs in 2008.  Health care was second, with a total of 16.3 million.  In terms of job growth over the period, health care generated the most new jobs, followed by government, with a growth of 6.3 million and 4.1 million respectively.  These two sectors together combined for approximately 40 percent of total net employment gains.  The other large job creating sectors were retail, accommodation and food service and construction.  In 2008, these five accounted for 73.5 million jobs or approximately 50 percent of total employment.

Significantly, employment in both government and health care depends heavily on public spending.  Current austerity trends threaten to limit future employment gains in these sectors, foreshadowing future difficulties for U.S. workers.  Retail, accommodation and food service, and construction employment growth was largely supported by debt-financed consumption.  The end of the housing bubble will likely limit future employment growth in those sectors as well. 

As noted above, trends in employment creation in the tradeable sector have been dismal, strongly suggesting that workers have good reason to fear the ongoing restructuring of the U.S. economy in line with capitalist globalization plans.  Growing numbers of workers will be forced to compete for jobs in the nontradeable sector at a time when employment opportunities in that sector will also be limited. 

Of course, the lack of aggregate job growth in the tradeable sector masks the existence of divergent trends within the sector.  In particular, globalization did produce employment increases in industries that service transnational corporations and their international operations.  As Spence and Hlatshwayo noted:

The tradable sector experienced job growth in high-end services including management and consulting services, computer systems design, finance, and insurance. These increases were roughly matched by declines in employment in most areas of manufacturing.

The loss of employment in the manufacturing sector was caused by the out-migration of functions in global supply chains associated with lower valued added per job. But as the emerging markets grow, they will compete for more sophisticated functions. This does not mean that the United States will lose all the sectors in which it has developed a comparative advantage—just that more potential competition is on the horizon.

Despite past growth, largely made possible by the rapid run-up in consumer debt, private sector employment gains in the nontradeable sector were not large enough to compensate for the lack of job creation in the tradeable sector.  Michael Mandel summed up the situation as follows:

Between May 1999 and May 2009, employment in the private sector only rose by 1.1 percent, by far the lowest 10-year increase in the post-depression period. It’s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years.

Over the past 10 years, the private sector has generated roughly 1.1 million additional jobs, or about 100K per year. The public sector created about 2.4 million jobs.

But even that gives the private sector too much credit. Remember that the private sector includes health care, social assistance, and education, all areas which receive a lot of government support.

Without a decade of growing government support from rising health and education spending and soaring budget deficits, the labor market would have been flat on its back.

Total private sector wage growth, critical to any sustainable consumption driven expansion, has also stagnated.  As Jed Graham noted:

The increase in total real private-sector wages over the period 2001-11 was smaller than in any other 10 year period since World War II.  In fact its 4 percent growth rate was even lower than the 5 percent increase from 1929 to 1939.  To put that in perspective, since the Great Depression, 10-year gains in real private wages had always exceeded 25 percent with one exception: the period ending in 1982-83, when the jobless rate spiked above 10 percent and wage gains briefly decelerated to 16 percent.

Spence and Hlatshwayo also examined trends in value added in both nontradeable and tradeable sectors.  Significantly, the lack of net job creation in the tradeable sector, especially in manufacturing, did not translate into a decline in value added.  According to the authors, “Valued added in the tradable and nontradable parts of the economy grew at similar rates [over the years 1990 to 2008]. In fact, the tradable sector, though smaller than the nontradable, grew slightly faster and hence marginally increased its share of total value added, in marked contrast to the employment trends.”

Ironically, the cause of both the loss in employment and rise in value added in tradeable sectors like manufacturing was the same: the internationalization of production.  For example, the decline in manufacturing production was encouraged by multinational corporations shifting production to other lower labor cost locations. The rise in manufacturing value added was due in large part to the fact that, by cheapening the cost of production, such activity not only expanded the market for many manufactures (such as consumer electronics), it also widened the gap between final sales price and production cost, thereby raising both profit and value added.  Not surprisingly, then, according to Spence and Hlatshwayo, tradeable value added over the period 1990 to 2008 rose by 363 percent in electronics.

This outcome makes clear why U.S. multinational corporations, especially those involved in the tradeable sector, have embraced the internationalization of production and the free trade agreements that encourage it.  Of course transnational retailers have also benefited.  In fact, retailers like Walmart have aggressively pushed manufacturers to move their production offshore in order to lower production costs.  Finally, the new international division of labor has also created profitable opportunities for business and financial service companies.

In short, it is perfectly understandable why most major corporations happily support U.S. government efforts to enhance corporate mobility through new international agreements.  And given the negative consequences of these agreements for most working people, it is also perfectly understandable why they want the terms of negotiation kept secret.  At issue is whether we will find a way to deny them what they want.    

A January 22, 2012 New York Times story, The iEconomy: How U.S. Lost Out on iPhone Work, has been getting a lot of coverage.   The article makes clear that Apple and other major multinational corporations have moved production to China not only to take advantage of low wages but also to exploit a labor environment that gives them maximum flexibility. The following quote gives a flavor for what attracts Apple to China: 

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

The article highlights these conditions to make the point that manufacturing is not coming back to the United States because these conditions cannot be replicated in the United States. 

One aspect not stressed in the article is that many of the labor policies described are actually against the law in China and contrary to Apple’s own claims about its labor standards.  See William K. Black’s analysis here.

If you are interested in a more detailed picture of just what goes into making Apple products so profitable you should listen to or read the transcript of a This American Life radio segment which aired in January.  The segment is based on a Mike Daisey performance in front of a small audience.  Mike is a self proclaimed technology geek who just adores Apple products.  At least that was before he visited the Foxconn (Taiwanese multinational corporation owned) factory located in China in which many Apple products are assembled.  The program discusses the labor conditions at Foxconn and other similar multinational corporations operating in China.

These multinational corporations have helped make China the world’s top exporter of manufacturers, both overall and of high technology goods more specifically.  China’s share of world exports of information and communication technology products (such as computers and office machines; and telecom, audio and video equipment) has grown from 3 percent in 1992 to 24 percent 2006, and its share of electrical goods (such as semiconductors) from 4 percent to 21 percent over the same period.  Of course, while these exports are officially recorded as Chinese exports, approximately 60 percent of all Chinese exports and 85 percent of all Chinese high technology exports are produced by foreign companies operating in China.

The issue here isn’t one of China stealing manufacturing jobs from the United States or other developed countries.  According to the U.S. Bureau of Labor Statistics, total manufacturing employment in China actually fell by over 9 million over the period 1994-2006, from 120.8 million to 111.61 million.  Total urban manufacturing employment, which would include most foreign operations, declined sharply from 54.92 million to 33.52 million. 

In fact, China’s growth has generated few decent employment opportunities for urban workers, regardless of their employment sector.  The International Labor Organization did an extensive study of urban employment over the period 1990 to 2002.  Although total urban employment increased slightly, almost all the growth was in irregular employment, meaning casual-wage or self-employment—typically in construction, cleaning and maintenance of premises, retail trade, street vending, repair services, or domestic services.  More specifically, while total urban employment over this thirteen-year period grew by 81.7 million, 80 million of that growth was in irregular employment.  As a result, irregular workers in China now comprise the largest single urban employment category. 

The issue here isn’t even one of China versus the United States.  It also isn’t one of dictatorship versus democracy.  Rather it is one of capitalism’s logic.  Said simply, large multinational corporations and their allies in both the United States and China have successfully created a global system of production and consumption that gives them maximum freedom of operation.  It is this logic that keeps pushing more free trade agreements, attempts to create more flexible labor markets, and more attractive conditions for business investment, both here and in China.   And it is this logic that needs to be challenged on both sides of the Pacific. 

Here is a short (less than 4 minute) video that illustrates the fact that 53% of our tax dollars, conservatively estimated, go to finance our military.   

[youtube] http://www.youtube.com/watch?v=kFeduoDWKj4 [/youtube]

And here is a link to a recent study by Robert Pollin and Heidi Garrett-Peltier on the employment effects of military spending versus alternative domestic spending priorities, in particular investments in clean energy, health care, and education.

The authors first examine the employment effects of spending $1 billion on the military versus spending the same amount on clean energy, health care, education or tax cuts.  The chart below shows their results. 

Moreover, even though jobs in the military provide the highest levels of compensation, the authors still find that “investments in clean energy, health care and education create a much larger number of jobs across all pay ranges, including mid-range jobs (paying between $32,000 and $64,000) and high paying jobs (paying over $64,000).”

Let’s see if these facts come up in the next Congressional budget debate.

The deficit commission failed to produce a plan to cut deficit spending by $1.2 trillion over the next ten years.  According to the ground rules of the agreement that created the commission, its failure is supposed to trigger approximately $1 trillion in “automatic” spending cuts that will go into effect beginning January 2013. 

The agreement included the following stipulations for guiding the automatic cuts:

• Approximately 50% of the required reduction is to come from the so-called security budget (national security operations and military costs).  
  

•  Approximately 32% is to come from non-defense discretionary programs (health, education, drug enforcement, national parks and other agencies and programs).  

• About 12% is come from Medicare (reduced payments to Medicare providers and plans).   

• The rest is to come mostly from agricultural programs.  

To be clear, these are reductions to be made in projected budget lines.  In other words, the cuts to the security budget will not produce an actual decline in security spending, only a slowdown in the projected increase previously agreed to by Congress. 

As previously discussed the failure of the commission is a good thing.  The commission was actively considering structural changes to a number of key social programs.  One was to change the formula for calculating social security payments so as to reduce them.  Another was to raise the age at which people could access Medicare. The automatic cuts, if enacted, will reduce spending on important programs, but at least they do not include steps towards their dismantling.  In fact, Social Security and Medicaid are exempt.

The next stage of the budget battle has been joined.  Political forces are maneuvering to change the formula for the automatic cuts mandated by the budget agreement.  In fact, this maneuvering began weeks before the commission formally announced its failure to agree on a deficit cutting plan.  According to a November 5, 2011 New York Times report:  

Several members of Congress, especially Republicans on the House and Senate Armed Services Committees, are readying legislation that would undo the automatic across-the-board cuts totaling nearly $500 billion for military programs, or exchange them for cuts in other areas of the federal budget.

We need to enter this budget battle with our own plan.  That plan must include blocking further cuts to non-defense discretionary programs and Medicare.  It is worth recalling that the agreement that established the deficit commission already included approximately $1 trillion in cuts to non-defense discretionary programs.

It is the security budget that we need to focus on.  And we need to be clear that our aim in demanding cuts to that budget, as well as tax increases on the wealthy and corporations, is to help generate funds to support an aggressive federal program of economic restructuring not deficit reduction.

The table below makes clear just how important it is to target the security budget.  It shows the pattern of  federal spending on discretionary programs, defense and non-defense, over the years 2001 to 2010.  The big winner was the Department of Defense, which captured 64.6% of the total increase in discretionary spending over those years.  It was still the big winner, at 36.9%, even if one subtracts out war costs.   

While the defense gains are staggering, they do not include spending increases enjoyed by other key budget areas dedicated to the military.  For example, many costs associated with our nuclear weapons program are contained in the Energy Department budget.  Many military activities are financed out of the NASA budget.  And then there is Homeland Security, Veteran Affairs, and International Assistance Programs.  It would not be a stretch to conclude that more than 75% of the increase in spending on discretionary programs over the period 2001 to 2010 went to support militarism and repression.  No wonder our social programs and public infrastructure has been starved for funds.

There is no way we can hope to reshape our economy without taking on our government’s militaristic foreign and domestic policy aims and the budget priorities that underpin them.  

The U.S. economy is in trouble and that means trouble for the world economy.

According to the United Nations Conference on Trade and Development’s Trade and Development Report, 2010, “Buoyant consumer demand in the United States was the main driver of global economic growth for many years in the run-up to the current global economic crisis.”

Before the crisis, U.S. household consumption accounted for approximately 16 percent of total global output, with imports comprising a significant share and playing a critical role in supporting growth in other countries.  In fact, “as a result of global production sharing, United States consumer spending increas[ed] global economic activities in many indirect ways as well (e.g. business investments in countries such as Germany and Japan to produce machinery for export to China and its use there for the manufacture of exports to the United States).”

In short, a significant decline in U.S. spending can be expected to have a major impact on world growth, with serious blow-back for the United States.

There are those who argue that things are not so dire, that other countries are capable of stepping up their spending to compensate for any decline in U.S. consumption. However, the evidence suggests otherwise.  As the chart below (from the Trade and Development Report) reveals, consumption spending in the U.S. is far greater than in any other country; it is even greater than Chinese, German, and Japanese consumption combined. 

Moreover, there is little reason to believe that the Chinese, German, or Japanese governments are interested in boosting consumer spending in their respective countries.  All three governments continue to pursue export-led growth strategies that are underpinned by policies designed to suppress wage growth.  Such policies restrict rather than encourage national consumption. 

On May 6, 2011, I spoke at the First Unitarian Church in Portland along with Chuck Collins (from the Institute for Policy Studies) as part of a program sponsored by the church’s Real Wealth of Portland group.  We both addressed the following theme: “Economic Insecurity Continues…and Communities Respond.”   

Chuck talked about a very important initiative: Common Security Clubs.  The First Unitarian Church has sponsored similar clubs for approximately one year.  

The Challenges Ahead

Third, meaningful solutions will require building a movement that challenges our current reliance on profit driven market outcomes.  This movement has to be built by organizing strong social and community institutions, ones that give people the chance to develop in common a correct understanding of the causes of our problems and the organizational weight and confidence to promote the needed transformation of our economy.

Structural Crisis

The National Bureau of Economic Research, the official designator of recessions and expansions, declared that our economy went into recession in December 2007 and that this recession ended and an expansion began in June 2009.  In other words we have been in an expansion for almost two years.  Normally, the deeper the recession, the stronger the recovery.  However, as I am sure you are aware, the recession was very deep and to this point the recovery has been extremely weak.

The federal government has poured trillions of dollars into the economy to end the recession and boost the recovery.  The government’s great accomplishment has been a strong recovery of profits.  In fact, total domestic corporate profits are now about as high as they were in 2006 before the start of the crisis, and financial profits as a share of total profits are pushing 35%, which is close to the pre-crisis high of 40%.

But beyond this restoration of corporate profitability, and the recovery of finance as our leading economic sector, little has happened to generate sustained and beneficial growth for the great majority of us.  For example, total bank excess reserves averaged around $10 billion a year in the decades prior to the crisis.  Now they are pushing $1.4 trillion.  The banks are just holding this money.  One reason is that since October 2008 the Federal Reserve Board is paying them interest on those reserves.  Similarly non-financial corporations now have the highest ratio of cash to assets in post-war history; they are not using that money to invest in new plant and equipment.

What this means is that our leading financial and non-financial corporations have plenty of money, but see no privately profitable productive investment opportunities.  At the same time, they are in no hurry to pursue policy changes because despite the slow recovery they are doing quite well.  Thus, as things stand, there is little reason to believe that this government supported expansion will be long lasting or beneficial for working people. 

I cannot emphasize enough the fact that we are in an expansion; these are the good times—the period of recovery, when our income is supposed to go up, when unemployment is supposed to significantly decline, when we have money to rebuild our infrastructure, fund our health care and other social programs, and build a solid collective nest egg to cover the hard times which will of course come.  The fact that this is not happening—that we continue to struggle during this period of economic expansion—is indicative of the fact that our economic system as presently structured is not one we can count on; in other words it is a flawed system. 

With this perspective, you can see why the small increases in employment and production that are cheered by policy makers mean little—of course we are going to see some increases.  But for how long and with what effect?  Given the lack of corporate interest in investment or lending I think that there is little reason to be optimistic.  And now, there is even an increasingly strong movement to slash government spending.  Those who support that policy claim that we just have to put the collapse of the bubble economy behind us, tighten our fiscal belts, and let market forces return our economy to normal—but what is normal?

Let us consider the previous economic expansion.  That expansion lasted from 2001 to 2007.  If we compare it to the nine other post-war expansions, it ranks dead last in terms of the growth in GDP, investment, employment, wage and salary income, and compensation.  It ranks highly in only one category—and that was the growth in profits.  In fact, median household income actually fell over this period of economic expansion.  And it is important to recall that this expansion was long lasting only because it was supported by a debt-driven housing bubble.  We no longer have that bubble to support growth.  Therefore, the new normal appears to be ever weaker growth and deteriorating living and working conditions for the great majority of us.  I don’t find that to be acceptable. 

Class Struggle

Significantly, more and more people are arguing that our current problems are caused by government deficits that are too big, taxes that are too high, and unions that are too strong,.  They are therefore pushing for a major reduction and privatization of government social programs, tax cuts for the wealthy and corporations, and a weakening of unions, especially those in the public sector. 

This would be a recipe for disaster.  Where these policies have been implemented, in places like Ireland, Greece, and the UK, the result has been only more problems: lower growth, greater deficits, and of course worsening social conditions.  That is not a surprising outcome.  If you have an economy where there is weak domestic demand because banks will not lend and corporations will not invest, workers are deep in debt, unemployment is high, and exports are limited, and then you cut government spending—it should not surprise anyone that things go from bad to worse.

And, it is not like we haven’t tried similar policies here in the United States.  We have been cutting taxes, government programs, and union strength for more than two decades, and we can see the effects—ever weaker growth, greater inequality, and worsening living and working conditions for the great majority.

The fact is that government spending is one of the main reasons that we still have an economic expansion.  Debt fears are being hyped to scare us. 

So, why are there powerful social forces arguing for these policies?  I think there are two main reasons.  The first is to ensure that our anger is not directed at the corporate sector.  When this crisis broke in 2008 people were angry, and they were angry at our corporations.  There were demands for nationalization of the banks and auto industry and calls for greater government intervention in the economy to save homes, employ people, in short, chart a new economic course for the country. 

What happened was quite different.  The president immediately made clear that he was not going to interfere with market processes—in finance, in auto production, in the housing market, in health care, or in job creation.  Rather he did all he could to bail out those corporations that were in trouble because of their own reckless pursuit of profit.  And his efforts succeeded.  Profits are back up and finance continues to dominate.  Unfortunately for us, those efforts did little to address our needs. 

I think that the corporate sector is getting nervous.  They are fearful that their large profits in the face of our deteriorating social conditions might lead to a renewal of demands for social change.  And lets be clear—any significant social change is going to require a significant change in government policy.  For example, strengthening our economy will require an end to free trade agreements; rebuilding our infrastructure; a new green industrial policy directed at retrofitting our buildings, developing solar and wind power and mass transit; and a shrinking and redirection of finance.  Rebuilding our communities will require new labor laws to support unionization and higher minimum wages; support for education, health care, and transportation rather than military activity; and an increase in taxes on corporations and the wealthy to help pay for many of the needed initiatives. 

This is not what the corporate sector wants.  Therefore, they are trying to steer us in a different direction—to encourage us to believe that the reason our economy is not doing better is that our government deficits are too great and workers have too much power.  It is ironic.  We have government deficits not because of runaway social programs but because the government had to bail out the private sector.  It was this spending that kept us out of depression and enriched our corporations.  And now the leading lights of the private sector are trying to convince us that the main cause of our slow growth is this very same deficit spending.  So, the first reason for this anti-government offensive is to keep us from focusing on corporate behavior and the contradictions of market processes by encouraging us to blame the government and unions for our problems. 

The second reason is that the push for marginalizing government programs will likely open up new private profit making opportunities for our large corporations.  For example, the privatization of our military, our education system, our health care system, our retirement and social insurance systems all mean public dollars flowing into private coffers.  And as a bonus corporations would likely get new tax breaks.

To state the obvious: corporations are defending policies that help them make profits at majority expense.  I think the best way to grasp this reality is to focus on General Electric.  GE is not only one of our nation’s largest corporation, its head, Jeffrey Immelt, was picked by President Obama to head his President’s Council on Jobs and Competitiveness.  President Obama said he picked him because “He understands what it takes for America to compete in the global economy.”

That may be true, but what is GE’s competitiveness strategy? 

First, it is to avoid taxes. GE reported worldwide profits of $14.2 billion in 2010, including $5.1 billion from its operations in the United States.  Yet, it paid no US taxes; in fact it claimed a tax benefit of $3.2 billion.

It accomplished this through a very aggressive working of our tax policy. Here is what the New York Times said:

G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

Second, it is to shift operations from production to finance.  According to the New York Times:

General Electric has been a household name for generations, with light bulbs, electric fans, refrigerators and other appliances in millions of American homes. But today the consumer appliance division accounts for less than 6 percent of revenue, while lending accounts for more than 30 percent. . . . Because its lending division, GE Capital, has provided more than half of the company’s profit in some recent years, many Wall Street analysts view G.E. not as a manufacturer but as an unregulated lender that also makes dishwashers and M.R.I. machines.

Third, it is to move its operations and profits outside the US.  Since 2002, the company has eliminated a fifth of its work force in the United States while increasing overseas employment.  Over that same period G.E.’s accumulated offshore profits have risen from $15 billion to $92 billion.

GE is far from unique in employing this strategy.  For example, the Wall Street Journal reports that U.S. MNCs cut their work forces in the United States by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.

So, we are in a battle over the nature and direction of our economy.  Successive governments, in response to corporate demands, have worked to promote more mobility for corporations, lower taxes for corporations, and the growing power of finance—all at our expense.  And despite our current economic problems, our government continues to push for more of the same.  In sum, while we might be experiencing a crisis caused by capitalism it is not a crisis for capitalism.

Movement Building 

So, what shall we do?  In fact, we are not short of ideas.  We have all sorts of progressive policy suggestions.  The problem is that those with power are not interested in our suggestions.  This means that we need to organize if we are to succeed in making a real change.  Here are a few of my suggestions about next steps.

First, we need to make sure that people understand the structural nature of the problems we face.  We have to make sure that unions, neighborhood associations, and places of worship become venues where people can talk, learn, develop their understandings and most importantly connections. 

Second, we need to build alliances around critical demands—changes in government priorities, for example, such as cutting military spending in favor of social programs, raising taxes on the wealthy and corporations, and defending Medicare and Social Security.  These alliances shouldn’t be hard to build.

Third, we need to be creative in who and how we organize.  We need organizations where people can produce themselves more fully as actors.  In the 1930s, for example, we had councils of the unemployed.  They fought for greater government spending, unemployment insurance, and in support of unionization for workers with jobs.  Now, we have large numbers of homeless and hungry.  We need to do more that take food to food banks—we need to help the hungry and homeless organize themselves into powerful social movements. 

We also need to help students, for example, see that their likely future of job insecurity, low wages, and lack of health care can be changed if they join with others, including unions, and health care advocates, and perhaps their parents, to demand a change in the direction of the economy.  And we need our unions to recognize that many of our young workers will be moving from job to job, and company to company, in temporary positions, which means that unions will have to develop new forms of organization.   

Fourth, we need to focus our attention on the public sector.  I think that one of our key challenges is to develop new coalitions between public sector unions and those who use public services.  While I believe that we need to fight against spending cuts for important programs I also know that our existing programs are far from perfect.  Moreover, just maintaining the same level of spending is not the same as transforming our economy.  We need more accountable and responsive public programs and I think the key to that, to the democratizing of the state, is a community-public sector worker alliance.

For example, imagine if those that cared about the environment; worker rights; an end to militarization; and gay, lesbian, transgender rights could engage public school teachers who were responsive to these views and collectively develop curriculum that advanced those views, thereby producing young people able and eager to contribute to making a better society.  And also imagine that in return, those in the community committed to working to ensure good funding for schools and political protection and decent salaries for our teachers.  We would not only help to improve the school system but also develop a new and positive understanding of the benefits of public services.  The same process can be encouraged around transportation by finding ways to bring bus riders and bus drivers together.  The same for social workers and their clients.  You get the idea.  Public sector workers could become our defenders—blowing the whistle if our money is not being property spent and helping us find ways to play a meaningful role in determining the actual nature and delivery of the services we want and pay for. 

We really have little choice but to help build resistance to current political tendencies and shape more positive visions.  There are very few of us that can avoid the consequences of failure.

The conventional wisdom may well celebrate the private sector for its job creating abilities, but economic trends don’t provide support for this celebration.  In fact, private sector job creation has been on the decline for many years now–even during periods of economic expansion. 

This development is well illustrated by the chart below taken from Businessweek.  Each data point shows the percentage change in private sector job creation over the preceding decade. 

The declining trend from the mid-1980s, and especially after 2001, means that, year-by-year, fewer private sector jobs were being created.  Michael Mandel sums up the situation as follows:

Between May 1999 and May 2009, employment in the private sector only rose by 1.1%, by far the lowest 10-year increase in the post-depression period. It’s impossible to overstate how bad this is. Basically speaking, the private sector job machine has almost completely stalled over the past ten years.

One likely explanation for the especially poor private sector job creation performance over the last decade: the global profit strategy of U.S. multinationals.  As the Wall Street Journal explains:

U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization’s effect on the U.S. economy.

The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show. That’s a big switch from the 1990s, when they added jobs everywhere: 4.4 million in the U.S. and 2.7 million abroad. . . .

The data also underscore the vulnerability of the U.S. economy, particularly at a time when unemployment is high and wages aren’t rising. Jobs at multinationals tend to pay above-average wages and, for decades, sustained the American middle class.

This employment trend is illustrated below:

General Electric is one of the companies that has led the way in charting this globalization strategy and its corporate leaders are not shy about defending it.   Significantly, President Obama recently appointed Jeffery Immelt, GE’s current chief executive, to be head of the President’s Council on Jobs and Competitiveness.

In this light it is well worth watching the 3 minute video interview with the author of the above cited Wall Street Journal article.  At the end of the video we learn that Immelt’s advice to the U.S. government for reversing the loss of U.S. jobs is more tax cuts for corporations and better efforts to improve the nation’s education and infrastructure.  One can only wonder how he proposes to pay for the latter–there was no mention of slashing the military budget, for example.  It is hard to take this kind of advice seriously.  

So, what does all of this mean?  In broad brush: while continued reliance on profit driven market activity may well boost corporate earnings, it won’t do much for working people.   If job creation is important to us, we are going to have to transform our economic system.