Manufacturing Slows as Trade Wars Quicken

Popular Economics Weekly

Trade wars are not really winnable anymore—at least the way some world leaders conduct them—or any wars for that matter. This is because we no longer live in a win-lose world where the strong are able to so easily prey on or even conquer the weak and vulnerable.

The world has become too populous, and thanks to modern technologies too interlinked for modern economic bullies—like a Trump, or Russia’s Putin, or even China’s Xi Jinping—to succeed for long in their win-lose negotiating tactics based on perceived grievances.

And that is the reason Trump’s trade wars are failing. NAFTA is still NAFTA, because the U.S. depends so heavily on trade with Canada and Mexico. And now there are predictions that his China trade war will fail as well, because his policies are causing so many losses among his Midwest electorate, and now the US manufacturing sector.

Why are we even having trade wars with our allies, as well as adversaries?

We can thank UC Irvine economic professor Peter Navarro, a protectionist, anti-free trade advocate, for convincing President Trump that multi-lateral trade agreements that link us more tightly to our allies are bad for the U.S., including the 12-nation TPP, Trans-Pacific Trade Partnership, that was designed to curb China’s economic expansionism.

So Trump cancelled the TPP and began his trade wars with our allies in Europe, as well as Canada and Mexico, where the U.S. does most of its trade. The result has been slower growth everywhere, as has been cited in many studies.

“Trade growth, a key artery in the global economy, has also slowed markedly, to around 4 percent in 2018 from 5¼ per cent in 2017, said a recent OECD economic outlook report, “with trade restrictions having adverse effects on confidence and investment plans around the world. In Europe, trade growth has stalled, reflecting a slowdown in both external and internal demand. Leading indicators suggest that near-term trade prospects are weak. Survey indicators of new export orders remain low in China and continue to decline in Europe and many Asian economies.”

Econoday

The U.S. has the Chicago ISM Business Barometer of business activity to measure such activity, a survey of more than 80 economic indicators that show a general national trend. It is giving similar results to the OECD outlook; slowing US growth as well.

The MNI Chicago Business Barometer decreased by 4.5 points to 49.7 in June from 54.2 in May, marking the first sub-50 reading since January 2017, said their press release. Business confidence dipped significantly in Q2, with the Barometer averaging 52.2, down 13 percent on the previous quarter and almost 16 percent lower than Q2 2018.

This month’s special question asked firms about the impact of government-imposed tariffs on their business. 80 percent of firms said that they were negatively impacted, with tariffs raising prices of their goods leading to a pullback in orders.

The June ISM manufacturing Index also fell to 51.7, the slowest pace in more than two years, hurt by trade tensions with China and Mexico. “Backlog orders continue to contract, inventories are coming down, delivery times are improving, import buying is flat -- all signs of weakness. Another disappointment is a 0.5 point decline in new export orders which are barely growing at 50.5,” said the report.

The LA Times has reported on other damage caused by the trade wars; the sharp decline in Chinese direct investments in US manufacturing that had been growing until last year’s start of the Chinese trade war. Investments shrank to $5 billion in 2018, after $29 billion in plant and equipment in 2017 and $46 billion in 2016, which had been responsible for thousands of new, higher-paying American jobs.

Such win-lose trade tactics are designed to fail, as skilled negotiators have been saying since the end of WWII, when allies and alliances have been necessary to keep the world peace (e.g., the Marshall Plan).

“…win-win negotiation involves working to get the best deal possible for yourself while also working to ensure that your counterpart is satisfied (see also, Win-Win Negotiations: How to Manage Your Counterpart’s Satisfaction), says an article in the Harvard Law School blog. “It means making offers that are good for them and great for you, according to Massachusetts Institute of Technology professor Lawrence Susskind. And it means thinking creatively about how you can get more of what you want by helping the other side get what she wants.”

An Eye-for-an-Eye Makes the Whole World Blind was Mahatma Gandhi's famous insight, patron saint of non-violence.

Most of the western world has progressed beyond that stage, at least, in this world of super abundance. We no longer suffer from starvation or famine in the developed world.  Only by helping those underdeveloped countries still suffering from overpopulation and droughts to enter the modern world will we be able to replace the belief in cut-throat competition of the win-lose crowd that sees conflict as the only solution, with the win-win world of cooperation, and a lasting world peace.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Who Is Killing Our Children?

Popular Economics Weekly

The fact that the NRA contributed $30 million to Donald Trump’s campaign is all we need to know about who is responsible for deaths of 14 high school children and 3 adults in Florida, or the 58 killed and 851 wounded in Las Vegas.

What made the NRA the killing machine it has become, from the sporting association it once was? The NRA contributed a total of $55 million to 2016 presidential campaigns.

We can thank the Second Amendment of our Constitution that enshrined gun ownership as an unalienable right, and to Supreme Court Justice Antonin Scalia, who wrote the 2008 opinion in District of Columbia v. Heller that interpreted its original wording: “A well-regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.” to mean every individual has the right to bear arms. But he added, that does not prevent the state from banning “dangerous and unusual weapons.”

We can also thank the gun manufacturers themselves that fund the lobbyists that keep Republican congressmen opposing all forms of gun control. We really should be talking about gun safety, rather than gun control, since gun owners aren’t required to have a license or training to own a gun, as is required for operators of other dangerous machines, like car owners.

We also know the carnage that guns can wreak. In 2016 alone there were more than 38,000 gun-related deaths, according to the Center for Disease Control. Just-released autopsy reports from the Las Vegas carnage show the damage done by military-style assault rifles at the Route 91 Harvest country music festival.

A military-style assault rifle bullet travels 3,000 feet per second—more than 3 times the speed of a pistol bullet because it is meant to kill instantaneously. It has such power that many bodies of the Las Vegas victims were literally torn apart by bullets that were probably tumbling by the time they reached the victims more than 500 yards away from Stephen Paddock, the Mandalay Bay Hotel’s 32^nd story shooter.

Graph: Mother Jones

Military-style assault rifles have been banned before; during the Tommy gun era of 1930’s gangster wars, and in 1994 after a series of similar mass shootings with semi-automatic weapons. But it had a ten-year sunset clause that was never renewed when Republicans again dominated Congress.

There have been 1600 mass shootings since the 2012 Sandy Hook massacre of elementary school children, according to Maureen Dowd.

When will American children again feel protected? When a Congress is elected that admits military-style, semi-automatic guns of all shapes and sizes are “dangerous and unusual weapons” needed only by those trained to use them—the police and members of our military.

Harlan Green © 2018

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Please Protect US, Mr. President!

Popular Economics Weekly

What has happened to our gun laws—especially the assault rifle ban that expired in 2004? Australians had the courage to pass tougher gun regulations—Australia’s Prime Minister in particular, at the time. It takes political courage, in other words, something U.S. politicians seem to lack.

Conservative Australian Prime Minister John Howard, a close ally of George W. Bush, faced political and public resistance to the laws. After just three months as the country's leader, Howard wore a bulletproof vest as he addressed a hostile 3,000-strong crowd opposed to the reforms.

How did he do it? The current Australian gun laws were passed after 35 were killed and 23 wounded in a 1996 mass shooting in Port Arthur, Tasmania.  The shooter was able to buy his assault rifle, even though later he was later determined by authorities to have an IQ of 11. There hasn’t been a mass shooting in Australia since then.

Twelve days after the Port Arthur massacre, the Australian prime minister, John Howard, announced a sweeping package of gun reforms in a country where firearms had long been considered an essential prop in the national mythology of life in the bush.

“At that stage the gun lobby was the ruling lobby in Australia,” says Philip Alpers, associate professor at the University of Sydney. “What happened at Port Arthur is that they were outpaced, outflanked and outwitted by a man who had the power to move in 12 remarkable days.”

Tim Fischer was leader of the National party and Howard’s deputy prime minister in the Coalition government, charged with persuading skeptical country voters to support, or at least accept, reforms. “Port Arthur was our Sandy Hook,” he says. “Port Arthur we acted on. The USA is not prepared to act on their tragedies.”

It was called the National Firearms Agreement — legislation that outlawed automatic and semi-automatic rifles, as well as pump-action shotguns. At the heart of the new law was a massive buyback of about one-fifth—640,000—of all firearms in circulation in Australia. The country’s new gun laws prohibited private sales, required that all weapons be individually registered to their owners, and required that gun buyers present a “genuine reason” for needing each weapon at the time of the purchase, as well as a 28-day waiting period while backgrounds were checked. (Self-defense could not be a reason.) In the wake of the tragedy, polls showed public support for these measures at upwards of 90 percent.

"The laws had widespread public support but faced fierce opposition from some rural supporters … because they believed they were unfairly paying a price for the misdeeds of others," Howard told NBC News in a statement. "This resentment assisted the rise of a new political party which damaged the government at the following election."

Howard persisted with introducing the laws, and went on to win that election and lead the nation for more than a decade. He considers the reforms as a key part of his legacy. An article published online in July by the NRA claimed there was "growing consensus" that the laws hadn't made Australians safer.

Howard acknowledges that "major cultural and historical differences" make it difficult to draw comparisons between the gun cultures in the U.S. and Australia. "Although I had not anticipated the need to act on this matter so early in my term of government, I had always believed there was a clear link between the ready availability of guns and gun-related death," Howard said.

"The national gun control laws enacted after the Port Arthur massacre remain one of the major social reforms ... of [my] government," he added. "All the credible research both in Australia and elsewhere shows that the gun control laws have markedly reduced gun-related deaths."

Graph: The Guardian

Total intentional gun deaths fell by half in the decade after the 1996 restrictions were put in place, even as Australia’s population grew nearly 14 percent. The rate of gun suicides per 100,000 people dropped 65 percent from 1995 to 2006, and the rate of gun homicides fell 59 percent, according to a 2010 study by Andrew Leigh of Australian National University and Christine Neill of Wilfrid Laurier University.

“Australia is not like the U.S.” said commentator Michael Pascoe in the  Sydney Morning Herald in response to President Obama’s remarks on last year’s Umpqua Community College killings by a deranged killer, whose mother kept at least 7 guns at home, in addition to the  8 guns plus ammunition carried by the shooter in the slaughter of college students and a teacher.

"We know that other countries in response to one mass shooting have managed to craft laws that almost eliminate mass shootings," said President Obama. "Friends of ours, allies of ours, Great Britain, Australia, countries like ours.”

In fact, the US now has a gun homicide rate 370 times that of Australia's. “Unlike the US,” said Pascoe, “we collectively decided to have a decent social safety net, the concept of a living wage and make good education freely available. Most of us are wary of those with extreme views of any kind.”
Our gun problem of course extends beyond mass violence, says the LA Times. In 2014 alone, for example, the Centers for Disease Control and Prevention recorded 11,208 people shot to death, 33,636 injured by gunfire and 21,175 who killed themselves with a gun. That's a total of 66,019 people who were killed or injured by a gun, which comes out to 1,269 per week, 180 a day or 7.5 per hour.

“The US is too immature a society to be allowed to play with guns,” said the Sydney Morning Herald’s Pasco. “It has never shed its Wild West mythology. Americans still use their courts to kill people, which sends a message in its own way.”

We do not at present have a leader or leaders with enough courage to stand up to the gun lobby, as Australia’s John Howard was able to do. Their most important job should be to protect our citizens, regardless of creed or color.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen