Tuesday, August 05, 2008

Florida Economics Update

More news that will drive anti-outsourcing progressives batshit.

A recent study by the Economic Policy Institute found that Florida lost 100,900 jobs from 2000 to 2007. It is not just manufacturing jobs. The technology sector is feeling the pinch.


Increased imports of computers and electronics account for nearly half of the $178 billion trade deficit between 2001 and 2007.

More than a quarter of last year's $68 billion trade deficit came from advanced technology products. In comparison, the U.S. has a $15 billion trade surplus with the rest of the world in advanced technology products.

More than half of the jobs displaced by trade to China were in the top half of the country's wage earners.


A Center of American Progress study shows Florida having 0 percent growth in manufacturing jobs. Although, I do question where the study finds a 1.3 percent growth in non-manufacturing jobs. (Perhaps from population growth.) I wrote a recent post about increased unemployment in Florida.

My views on outsourcing are more tempered. One of these days, I will finally get around to writing a post on outsourcing.

In other news: the Florida budget is going to take more cuts. The state deficit is increasing. Governor Charlie Crist's solution is to tap into the state coffers.


Recognizing that possibility, legislators earlier this year gave Crist authority to use half of the $700 million in the state's budget-stabilization fund to patch holes in the 2008-09 spending plan.

Once that money is depleted, Crist could then tap as much as $1 billion from the Lawton Chiles Endowment Fund, usually used to finance health-care programs, to bring the budget back into balance.


Florida's economic woes are being felt at the county level. Alachua County has a $14 billion deficit. There is no daylight in the near future. Crist and the legislature lack the political courage to clean up the tax loopholes. Crist and the legislature have forced counties to increase property taxes and then tell voters they will relieve their property taxes. The Florida tax system is a shell game. The latest is the Amendment 5 proposal that would cut property taxes. Sales taxes would make up the difference. Crist lacks the courage to firmly say if he supports the amendment.


"I'm evaluating it," he said. "I think the closer we get to November the better idea we'll have about our level of involvement."


True leadership at it's finest.

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3 Comments:

At August 06, 2008 12:06 PM , Blogger tas said...

My views on outsourcing are more tempered. One of these days, I will finally get around to writing a post on outsourcing.

Why write it yourself? I'm sure you could hire somebody out of country to do it for cheap.

One economic question I'd like to have answered is what happens to a country that basically loses its manufacturing? I know America is setting itself up as an advanced service economy -- we handle the management jobs that nobody else can, and we can do such with minimal competition because we've got the best system of higher education, etc... But what happens when the rest of the world catches up to us in higher education? Given how underfunded public colleges have become, this shouldn't take too long. Is it prudent to stick all the economic eggs in one basket and scorn manufacturing for service jobs? The damage we've seen from outsourcing right now is relatively sizable (for example, forcing workers like me out of the computer industry and into restaurants -- can I take your stinkin' order please?*), but that's nothing compared to the broader swath of economic damage that outsourcing could cause by causing us to be less diversified.

* - But I desperately wanted to get out of the computer industry anyways. Not having a house or family makes the drastic pay cut easier to manage.

 
At August 06, 2008 3:13 PM , Blogger Michael Hussey said...

China and India are catching up on the high tech jobs. The Clinton administration wanted to have job training for the high tech sector in their first budget. That got killed with deficit reduction. Obama and McCain have paid lip service to job training. It's not the major focus of their campaigns.

 
At August 07, 2008 10:09 AM , Blogger Pete Murphy said...

Our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the weathiest nation on earth - its preeminent industrial power - into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It's a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, is now approaching $9 trillion. What will happen when those assets are depleted? Today's recession may be just a preview of what's to come.

Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit continues to grow. Our median wages and net worth have declined for decades. Our debt has soared.

Clearly, there is something amiss with "free trade." The concept of free trade is rooted in Ricardo's principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn't consider?

At this point, I should introduce myself. I am author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." My theory is that, as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.

This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It's because these effects of an excessive population density - rising unemployment and poverty - are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.

One need look no further than the U.S.'s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!

Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable - nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. In fact, our largest per capita trade deficit in manufactured goods is with Ireland, a nation twice as densely populated as the U.S. Our per capita deficit with Ireland is twenty-five times worse than China's. My point is not that our deficit with China isn't a problem, but rather that it's exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one sixth of the world's population.

Ricardo's principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.

If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at OpenWindowPublishingCo.com where you can read the preface for free, join in the blog discussion and, of course, buy the book if you like. (It's also available at Amazon.com.)

Please forgive me for the somewhat spammish nature of the previous paragraph, but I don't know how else to inject this new theory into the debate about trade without drawing attention to the book that explains the theory.

Pete Murphy
Author, "Five Short Blasts"

 

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