Trade Agreements: Even Mainstream Economists Starting to Admit that "Free Trade Agreements" Are Anything But ..- by Robert Reich

Trump and Sanders have whipped up a lot of popular support by opposing “free trade” agreements during the US Presidential debates.

But it’s not just politics and populism … mainstream experts are starting to reconsider their blind adherence to the dogma that more globalization and bigger free trade agreement are always good.

UC Berkeley Economics professor Robert Reich – Bill Clinton’s Secretary of Labor – wrote last month:

    "Suppose that by enacting a particular law we’d increase the U.S. Gross Domestic Product. But almost all that growth would go to the richest 1 percent.

    The rest of us could buy some products cheaper than before. But those gains would be offset by losses of jobs and wages.
   
This is pretty much what “free trade” has brought us over the last two decades.
   
    I used to believe in trade agreements. That was before the wages of most Americans stagnated and a relative few at the top captured just about all the economic gains.  Recent trade agreements have been wins for big corporations and Wall Street, along with their executives and major shareholders

    But those deals haven’t been wins for most Americans. The fact is, trade agreements are no longer really about trade.

Indeed, while it’s falsely called a “trade agreement”, only 5 out of 29 of the Trans Pacific Partnership’s chapters have anything to do with trade.  And conservatives point out that even the 5 chapters on trade do not promote free trade."

Reich continues: "Worldwide tariffs are already low. Big American corporations no longer make many products in the United States for export abroad.

    Google, Apple, Uber, Facebook, Walmart, McDonalds, Microsoft, and Pfizer, for example, are making huge profits all over the world. but those profits don’t depend on American labor – apart from a tiny group of managers, designers, and researchers in the U.S.

     To the extent big American-based corporations any longer make stuff for export, they make most of it abroad and then export it from there, for sale all over the world – including for sale back here in the United States.

    The Apple iPhone is assembled in China from components made in Japan, Singapore, and a half-dozen other locales. The only things coming from the U.S. are designs and instructions from a handful of engineers and managers in California.

     Apple even stows most of its profits outside the U.S. so it doesn’t have to pay American taxes on them.

     This is why big American companies are less interested than they once were in opening other countries to goods exported from the United States and made by American workers.

     They’re more interested in making sure other countries don’t run off with their patented designs and trademarks. Or restrict where they can put and shift their profits.

     In fact, today’s “trade agreements” should really be called “global corporate agreements” because they’re mostly about protecting the assets and profits of these global corporations rather than increasing American jobs and wages. The deals don’t even guard against currency manipulation by other nations.

     According to Economic Policy Institute, the North American Free Trade Act cost U.S. workers almost 700,000 jobs, thereby pushing down American wages.

     Since the passage of the Korea–U.S. Free Trade Agreement, America’s trade deficit with Korea has grown more than 80 percent, equivalent to a loss of more than 70,000 additional U.S. jobs.

     The U.S. goods trade deficit with China increased $23.9 billion last year, to $342.6 billion. Again, the ultimate result has been to keep U.S. wages down.

     The old-style trade agreements of the 1960s and 1970s increased worldwide demand for products made by American workers, and thereby helped push up American wages.

     The new-style global corporate agreements mainly enhance corporate and financial profits, and push down wages.

     Global deals like the Trans Pacific Partnership or the TTIP with Europe will boost the profits of Wall Street and big multi-national corporations, and make the richest 1 percent even richer."

Bottom- line - but they are not beneficial for the citizens of the countries which have signed these treaties. 

Read more: Even Mainstream Economists Starting to Admit that "Free Trade Agreements" Are Anything But ... | Zero Hedge

Greece Exposes The Flaws Of A Wrong Europe - by Mehmet Ugur and Ozlem Onaran

The Greek people, their newly-elected government and many Europeans and non-Europeans with a sense of justice, history and solidarity, have been shouting loud: the “Greek problem” is a consequence of neo-liberal economic and financial policies that have become increasingly dysfunctional and dangerous. The problem has been made worse by the ascendance of sheer inter-governmentalism in Europe.

Both neo-liberalism and inter-governmentalism are the results of collusion between economic, financial and political elites in Europe, aided by economists, political scientists, lawyers, analysts and journalists with a conservative outlook. The symbiotic relationship between these two has been feeding on the spoils of increasingly unequal wealth accumulation. Their narrative about “Greeks living beyond their means” is nothing but an unashamed distortion of facts about both the present and the past.

The distortion of current facts takes the form of preaching to the Greek people on how they should show penance despite the facts on the ground. The origin of Greek debt, like subprime lending in the US and, given the general dysfunctionality of the financial system as laid bare by the Great Recession, is a result of reckless lending by private banks. Accommodating economic policies and perverse financial regulations have facilitated this – just as much as the symbiotic relations between the European arms industry and corrupt politicians in Greece, and tax evaders in Greece and tax havens in Luxembourg and elsewhere in Europe.

This distortion takes the form of misleading public opinion despite evidence that the ruling elite has secreted away. The conservative European elites and their henchmen have been pushing Greece towards destruction despite IMF documents showing that austerity is unlikely to make Greek debt either repayable or sustainable in the medium- to long-term.

The conservative rhetoric distorts the history of Europe too. Europe prospered and avoided repeated crises and wars only when it found collaborative solutions to collective problems. The leading proponent of austerity, Germany, was by far the biggest beneficiary of debt forgiveness. After World War I Keynes argued in the Economic Consequences of the Peace that the Versailles Treaty was a “Carthaginian peace” that would ruin Europe rather than set the conditions for economic recovery. This is very important not only because the demand for solidarity with the German people came from a scholar at the winning side, but also because the demand was made despite the fact reparations were meant to compensate for the human and material costs of more sinister German military actions in the form of war.

Note EU-Digest: Excellent report on the flaws of the European monetary and political structures which can be traced back to European Conservative Political forces copying and linking themselves to the "ruthless and corrupt" US financial system and the general dysfunctionality of that system, as laid bare by the 2007-2009 recession. This in addition to the reckless lending by private banks and accommodating economic policies and perverse financial regulations. When will Europe understand that the future of Europe must depend on our own needs and objectives and not be influenced by "surrogate" decisions on the other side of the Atlantic, as it unfortunately is today.

Read more: Greece Exposes The Flaws Of A Wrong Europe » Social Europe

Ukraine: Obama and Putin Playing Chess With New Cold War At Stake - by RM

It's amazing to hear US Senator McCaine calling for force to solve the Ukraine crises while President Obama and President Putin are playing a complicated game of chess in trying  to solve the problem without militarily involvement.

How can President Obama and his European allies counter Putin's opening gambit of this chess game? And how can the United States and the EU roll back what Putin has pulled off so far?

The US Obama Administration and the EU can-not and must-not confront Russia militarily -- it would be suicide in today's nuclear age.

At this point it looks like actions from the West against Russia, over the long term, will come in a form where it will hurt Russia and President Putin's popularity at home the most - economics.

But not everyone agrees that this scenario is the best course of action - certainly not the Republicans in the US, or for that matter, the conservative right-wingers in Britain.

US Republican Sen. John McCain - presently one of the the least popular senators in the US of those surveyed by the Public Policy Polling, with low marks from members of his own party, independents and Democrats, is among the Republican's loudest critics of the Obama Administration foreign policy.

He directly blamed President Obama's "incompetent" foreign policy for inviting the crisis in Ukraine and  recently told a pro-Israel group that the president has repeatedly failed to demonstrate American strength in the face of adversaries.

McCain was not the only Republican to criticize the Administration's handling of the crisis.Many other GOP critics just about tripped over each others feet to attack Obama.

On Sunday March 2, Sen. Lindsey Graham, R-S.C., even went as far as to tell CNN in an interview, "we have a weak and indecisive president whom invites aggression.".

As an independent congressman remarked afterwards, "this kind of rhetoric by the Republicans can basically be qualified as that of five year old's playing with marbles and one suddenly throwing a tantrum."

To put some perspective as to the causes of what is happening in Ukraine, and why Obama and Putin are now having to negotiate and play a game of chess,  requires us to turn back the clock to when the Soviet Union (USSR) formally ceased to exist on 26 December 1991. 

From that date onward,  the United States has relentlessly pursued a strategy of encircling Russia, just as it has with other perceived enemies like China and Iran.

At the same time, the US also increased its military capability in Europe after it brought an additional 12 countries from central Europe, all of them formerly allied with Moscow, into the already existing NATO alliance. This in fact has now brought US military power and might directly on Russia’s borders.

Apart from facing the issue of encirclement President Putin probably also had a few other sleepless nights after he compared US military spending, which is 40% of the worlds total military spending,  to that of his own country, which is only 5.5% of the total global military spending.

Let's face it and be realistic, Russia is now basically between "a rock and a hard place" and  that is not a good place for them or anyone else to be in.

Obviously there are no angels on either side -  but for this issue is to be resolved everyone has to take a step back, look at the bigger picture, calm down and reach a negotiated diplomatic solution.

EU-Digest

Economics: How Mainstream Economics Failed To Grasp The Importance Of Inequality - by Jon Wisman

The magnitude of exploding inequality since the mid-1970s is captured by the following: Between 1979 and 2007, inflation-adjusted income, including capital gains, increased $4.8 trillion — about $16,000 per person.

\Of this, 36 percent was captured by the richest 1 percent of income earners, representing a 232 percent increase in their per capita income. The richest 10 percent captured 64 percent, almost twice the amount collected by the 90 percent below. Between 1983 and 2007, total inflation-adjusted wealth in the U.S. increased by $27 trillion. 

 If divided equally, every man woman and child would be almost $90,000 richer. But of course it wasn’t divided equally. Almost half of the $27 trillion (49 percent) was claimed by the richest one percent — $11.7 million more for each of their households. The top 10 percent grabbed almost $29 trillion, or 106 percent, more than the total because the bottom 90 percent suffered an average decline of just over $16,000 per household as their indebtedness increased.

This soaring inequality generated three dynamics that set the conditions for a financial crisis. The first resulted from limited investment potential in the real economy due to weak consumer demand as those who consume most or all their incomes received proportionately much less. Not being capable of spending all their increased income and wealth, the elite sought profitable investments increasingly in financial markets, fueling first a stock market boom, and then after the high tech bubble burst in 2001, a real estate boom.

As financial markets were flooded with credit, the profits and size of the financial sector exploded, helping keep interest rates low and encouraging the creation of new high-risk credit instruments. This enabled more of the elite’s increased income and wealth to be recycled as loans to workers. Financial institutions were so flush with funds that they undertook ever more risky loans, the most infamous being the predatory subprime mortgages that often were racially targeted. As the elite became ever richer, those below became ever more indebted to them. When this debt burden became unsustainable, the financial system collapsed and was bailed out by taxpayers.

Economists might have stood a better chance of foreseeing the developing financial crisis had they thrown their nets far wider to catch the insights that have been harvested by a wide range of so-called heterodox economists. From the underconsumptionist tradition of Keynes, Kalecki, and Minsky they could have developed an understanding of how inequality affects aggregate demand, investment, and financial stability.

From the institutionalist tradition of Thorstein Veblen they could have learned how consumption preferences are socially formed by humans who are as concerned with social status and respectability as with material well-being. And from the Marxist tradition they could have seen how economic power translates into political power. 

Economists have failed to grasp the wisdom of one of the foremost students of crises: “the economist who resorts to only one model is stunted. Economics is a toolbox from which the economist should select the appropriate tool or model for a particular problem.”

Read more: How Mainstream Economics Failed To Grasp The Importance Of Inequality