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Barack Obama got a bad job evaluation last Tuesday. A large part of the Democratic defeat at the polls resulted from the frustration of chronic high unemployment. So, the Democratic president who was unable to convince the American public that he was the champion of working men and women, boarded his private jumbo jet and took off for India.
His approach on this trip looks like he is attempting to sell himself to the people of India. He appears to be having more success at that than he has at selling himself to the people of America. On foreign policy issues got got raves in the Indian parliament and press by endorsing India’s bid for a permanent seat on the UN Security Council and by sharply criticizing Pakistan in its dealings with India. This is the same Pakistan that he needs to support his war in Afghanistan. I doubt this will play well there.
However, it was Obama’s positions on economics and trade that will likely have much greater reverberations in domestic American politics.
<a href=”http://articles.latimes.com/2010/nov/07/world/la-fg-obama-india-trade-20101107″>In India Obama Unveils Nearly $10 Billion In Export Deals</a>
President Obama on Saturday announced a loosening of U.S. restrictions in trade with India and unveiled almost $10 billion in export deals he said could lead to 50,000 American jobs, as he moved quickly to show a laser-like focus on the economy after a bruising midterm election.
Although many of the agreements, including the sale of Boeing aircraft and General Electric turbines, have been in discussion for some time, Obama held up the deals as examples of the great potential for expanding trade and commercial links between the world’s two largest democracies.
There are of course many people in the US who have seen their jobs in IT and customer support outsourced to India or have been replaced by an Indian H1B worker. There are similar issues among American manufacturing workers. Obama has made rather halfhearted efforts to sound sympathetic to those concerns. Since that didn’t play well in the US he has now come up with a new line that is playing considerably better in India.
“I want to be honest,” Obama said at a business summit here with U.S. and Indian executives. “There are many Americans whose only experience with trade and globalization has been a shuttered factory or a job that was shipped overseas.”
As for India, he added, the perception in the U.S. is it’s “a land of call centers and back offices.”
Obama called this an “old stereotype,” noting that it ignores billions of dollars invested by Indian companies in the United States and the partnerships between U.S. firms and Indian entrepreneurs that are developing India’s countryside.
“It is a dynamic two-way relationship that is creating jobs, growth and higher living standards in both countries,” he said.
The US still enjoys some competitive advantage in the field of ultra tech manufacturing such as aircraft. Obama is correct that some of these trade deals will keep some Americans employed. However, the US and India have been running an unbalanced trade account with the balance being in India’s favor for many years. The US faces rising competition in the markets that Obama is peddling. It is going to take a lot more than this to restore balance to US international trade. It seems likely that the leading US export will continue to be American jobs.
The biggest problem with this is Obama’s schizophrenic messaging. Wherever he goes, he seems desperate to have the people at hand love and adore him. He seems to be seriously addicted to cheering crowds. The problem with that is that in this globalized world the people you are dumping on to get the cheers of others have a virtual front row seat for your speech. Perhaps Obama is giving thought to prospects for new employment prospects in January 2013.
18 Comments
“Wherever he goes, he seems desperate to have the people at hand love and adore him. He seems to be seriously addicted to cheering crowds.”
Nice article!
I would posit that Obama’s is not addicted personally to such stuff. It’s simply his stock in trade. Neolib technocratic propaganda from the manchurian candidate.
Like so.
http://market-ticker.org/akcs-www?post=171242
India is very poor, obviously.
http://www.maryellenmark.com/frames/falkland.html
Except for a few elites in a high caste.
http://www.thenational.ae/news/worldwide/asia-pacific/high-caste-indians-find-low-caste-cooks-hard-to-swallow
This is Obama’s ‘vision’ for America, inasmuch as he can be said to have one.
“Perhaps Obama is giving thought to prospects for new employment prospects in January 2013.”
Dear God, I hope so because just the thought of two more years of Obama is too nightmarish to consider.
“It is going to take a lot more than this to restore balance to US international trade.”
Do people even understand that trade imbalances for the US are built into the global dollar reserve system?
Until we fix the global monetary system, we are going to have continual trade deficits.
The US is able to get by with its trade deficits because of the status that the dollar enjoys as the prime reserve currency. If that were shifted to some sort of basket of currencies or an international accounting unit it would a major and permanent come down for the US economy.
I firmly believe The Party will have Obama step down for ’12 and anoint HRC & A General . . . more war party hawks to take our minds of the upcoming econ collapse that will dwarf the one we’re still in . . . I’d be willing to bet we invade Pakistan, as Iran is just not doable.
USA just MIGHT get away with invading Pakistan because they got ‘nukes’ that threaten India.
Course, if we DO take on Pakistan in open or undeclared war it opens the door for India to retake it . . . then maybe, oh, Bangldesh?
And if ANY of this happens, look for China to go to defcon red as it poses a DISTINCT threat to Nepali control.
Never a dull moment in foreign affairs, is there . . .
Nice diary and thans/rcc’d.
RE: global prime reserve currency status . . .
If the commercial real estate bubble (it’s as much house of cards as the housing bubble was/is) collapses in ’11 . . . would that be enough to threaten our global prime reserve currency status?
I don’t think that is unlikely to be determined by domestic American economic events. China’s $2.6T in reserves is a major piece of the action. All of the major economies are stuck to each other like tar babies. If the US got the renmenbi decoupled from the dollar then China would no longer be compelled to keep most of its reserves in dollar assets. That could undermine the reserve status.
Not if, but when, according to World Bank top honcho Robert Zoellick:
World Bank Chief Calls For A New Global Gold Standard:
http://stage.businessinsider.com/robert-zoellick-gold-standard-2010-11
Gold Standard??????????
WTF?
That’ll never happen.
It’s not just that the US can get by with trade deficits… it’s that trade deficits are built into the entire dollar reserve model.
Under the current model, the US running a long term trade balance would result in the world economy crashing. Why? Because you’d basically be starving the rest of the world of the dollars they need to facilitate trade.
Granted, the world economy is in danger of collapse atm for an entirely different reason. I don’t know how much longer it’ll keep together but so long as it does…. there’s no use in making “balanced trade” a goal. It’s the same as making “balanced federal budgets” a goal… absolute nonsense.
People can mean a couple different things when they say “gold standard”.
They could literally mean gold coins…. which I agree would be crazy.
Or they could mean that annual trade imbalances are settled in gold. A government to government transfer. That’d be more along the lines of Bretton Woods I. If they did that then they’d outlaw private ownership of gold. That’s basically what happened between the 1930′s and 1940′s.
Thanks for the replies folks . . . international econ is NOT my fortitude by any means . . . political and military affairs, yes. Money matters, no.
The other option being bantered around is Special Drawing Rights:
2 sources:
• WEBSTER TARPLEY :
http://www.youtube.com/watch?v=ZwnfiE521DY
• WSJ
http://online.wsj.com/article/BT-CO-20101025-700112.html
The origional Breton Woods arrangement depended on the commitment of the US to operate on a modified gold standard. The inflation resulting from the Vietnam war made that increasingly burdensome for the US and Nixon unilaterally pulled the plug, Since then there has been no really consistent and coherent system of international currency exchange management. However, the US has continued to enjoy the privileges of reserve status without the responsibility.
One reason that things have been allowed to clunk along for 40 years is that the US has provided the consumer engine to maintain global demand. It is beginning to look questionable as to whether that can continue.
Although no one should discount the hardship and uncertainty faced by an individual who has lost his or her job, nothing is that black and white. The popular misconception is that outsourcing always means job loss and a windfall profit for the company doing the outsourcing. A more accurate perspective is that for companies, it is often a matter of staying afloat or struggling to grow, not getting windfalls, and with regard to jobs – when economies are not stifled by protectionism – job losses and gains tend to balance out. Please see more at my blog post at Law Without Borders.
Furthermore, those American companies with manufacturing and service set-ups abroad haven’t made these arrangements to take advantage of the tax deferral. They have done it because of lower operational costs, or because of the proximity to target markets, or for other reasons that may have nothing to do with tax breaks or outsourcing of jobs. Changing the tax code to remove the deferral will only create a barrier that will reduce the ability of U.S. companies to compete in today’s global marketplace. If the U.S. government offers incentives and tax credits to companies that create more jobs for the American workforce, that might help a bit.
Vidya Devaiah
SDD Global Solutions
No, the Keynesians of the world would never let gold currency, or even a gold standard. It would prevent them from their stupid, recession producing and extending games.
I disagree. Having all currencies trade against each other, and against commodities is quite rational and coherent. It is much better than the phony baloney “gold backed” standard we had in the USA for a while, especially when you throw in that the dollar was defined in terms of an amount of gold and an amount of silver, with the relative values of those dancing all of the time as new mines were opened or played out.
There’s domestic out-sourcing, and there’s near-sourcing (to Mexico and Canada), and there’s off-shore out-sourcing. All three are almost always bad as practiced over the last 30 years.
First, even with strictly domestic out-sourcing, it’s been used as a scam to cut compensation and life-time earnings. In a real job, before the 1983 explosion of bodyshopping, most US employers expected to have to help new and retained employees relocate; they extected to invest in 2-12 weeks of new-hire training, and a couple weeks of on-going training or education of every employee every year. With bodyshopping (in the guise of domestic out-sourcing) they cut those forms of compensation, but did not openly admit it. They tried to act as though they were offering bodies shopped more, by simply mentioning “hourly rates”, the possibility of some training during down-times, but not mentioning that many bodies shopped are simply dumped in down-times, and remain unemplyed for extended periods (hence the current average US duration of unemployment of over 30 weeks).
Cross-border bodyshopping is all about labor/wage arbitrage. As Phiroz Vandrevala of Tata admitted several years ago, the key to their business model is that they pay their people $20K to $30K less than US workers. This merely confirms the results of many investigations into the pay of guest-workers and off-shore labor. The totalization agreement in the works could add another $8K to $14K to that. They down-play the fact, that in even biased surveys by a former cross-border bodyshopper, US STEM workers are rated the best, that we’re more flexible, creative, dynamic, and can hit the ground running faster than their Chinese and Indian counterparts (2 weeks vs. 6 months).
If the US worker — now unemployed or underemployed — and the guest-worker, and the off-shore worker are not getting the premium, that leaves the bodyshop/off-shoring executive and the immigration and trade lawyers.
It’s interesting that the governments in India and Red China have insisted on trade deals heavily biased in their favor, and US government officials and business executives have consistently caved in. One reason the business executives have been giving since the 1970s was that, with those huge populations, there must be a lot of money to be made in those markets. Unfortunately, we have yet to see any evidence of profits being made by firms and spead to their US employees as a result of these mythical big profits. Please, get back in touch when this happens, but we won’t hold our breath, and we won’t silently go along with more stupid concessions.