Ford Repays Union Concessions with Closing of Foundry Plant

This is the opening paragraph in the Cleveland Plain Dealer's story on the closing of the Ford foundry plant in Brook Park, Ohio:

"Barely a year after workers agreed to concessions to guarantee new work at Ford Motor Co.'s foundry in Brook Park, the automaker announced Monday it will close that factory in 2009."

And where are the jobs going? "Joe Hinrichs, Ford's vice president for North American manufacturing, said the company is getting out of the foundry business altogether, sending that work to a series of suppliers in Canada, Europe and South America."

This part of the story explains what happened:

"A year ago, the Brook Park plants were among the first to agree to new work rules that make it easier for Ford to outsource work and move workers between different jobs. In return, the casting plant was supposed to get the engine block for a 6.2-liter V-8 engine to be used in upcoming pickups and SUVs.

"Ford Motor Co. told us if we passed the competitive operating agreement and put ourselves in a more-competitive position, we'd get new work," said UAW Local 1250 President Tim Levandusky.

He said he knew Ford would have trouble keeping that promise a few months after the company made it. Instead of using cast iron, the automaker wanted to make the engine block with a newer graphite technology that would have meant expensive upgrades at the plant."

Oh, one other thing, while Ford and GM are outsourcing casting operations, guess who isn't? "Ford's biggest foreign-owned competitors, Honda Motor Co. and Toyota Motor Co., avoid outsourcing engine components because of the need to guarantee quality on those vital parts". By the way, Toyota is kicking Ford's butt on sales of vehicles.

Don't worry, though. Some writer like Thomas Friedman of the New York Times, who married an heiress from a billionaire's family, will tell us why globalization is good for us and why we should be happy that Ohio has lost hundred of thousands of manufacturing jobs. Of course, he doesn't have to worry about losing his job, or does he? After all, couldn't the NYT find pompous windbags in India who would do his job for a fraction of the cost?

Click on the link in this entry's title to read the whole PD article.

Report Says 3.2 Million U.S. Manufacturing Jobs Lost

The AP put out a story yesterday, April 20, 2007, about the loss of manufacturing jobs in America. The story points out that 84 percent of Americans in the labor force are employed in service jobs, up from 81 percent in 2000. This loss of manufacturing jobs has put "16 percent of the nation's 379 metropolitan areas are in recession, reflecting primarily the troubles in manufacturing. There have been heavy job losses in a variety of industries from textiles and apparel to paper and furniture."

Most of these manufacturing job losses can be explained by two words: China and Mexico. That is where the jobs are going. These job losses are caused by cheaper labor rates and by the Chinese government keeping its currency artificially low compared to the currency of the United States.

Currently the job losses are being seen in manufacturing, but according to one expert quoted in the article, job losses will soon spread to service jobs. This is from the article: "Princeton economist Alan Blinder, who was vice chairman of the Federal Reserve during the Clinton administration, says the number of jobs at risk of being shipped out of the country could reach 40 million over the next 10 to 20 years. That would be one out of every three service sector jobs that could be at risk."

When you start looking at Democratic candidates for our party's 2008 nomination ask yourself which ones will fight for American workers and which ones won't.

Washington Post Editorial Board: Out of Economic Touch with Working Americans

The Washington Post ran an editorial on 4.4.2007 criticizing Democrats in Congress for opposing free trade deals. The editorial contained this concluding sentence: If the Democrats do not wish to be known for standing against the prosperity brought by globalization, they should pocket the concessions the administration has offered and make some compromises of their own. The question isn't whether globalization has brought prosperity, but how and for whom has it brought prosperity?

In 2003 the Economic Policy Institute did a study on how many jobs had been lost since the adoption of NAFTA. The EPI concluded that NAFTA had displaced production that had the net effect of costing 879,280 American jobs. The study put it this way: Between 1993 and 2002, NAFTA resulted in an increase in exports that created 794,194 jobs, but it displaced production that would have supported 1,673,454 jobs (see figure). Thus, the combined effect of changes in imports and exports as a result of NAFTA was a loss of 879,280 U.S. jobs.

What was true in 2003 is still true today: the rewards from globalization aren't spread throughout the economy equally. There are winners and losers in globalization. Whether you support trade agreements depends on how you see yourself and others like you faring under globalization.

Here's another fact from EPI released this week: Newly released data on income inequality reveal that all of the gains in 2005, the most recent year for data of this type, went to households in the top 10%. Moreover, those even higher up the income scale—say, the top 1% and above—saw the largest gains of all.

Our guess is that the economic elites who support globalization are people who live in the top 10% and most likely the top 1% of American households. People like the owners of the Washington Post. That's why those people support globalization. The Democratic Party, however, represents a lot of people who don't fall into the top 10% of American households. That's why a lot of Democrats oppose globalization.

A Blog About Economics That Makes Sense

If you click on the link in this entry's title, you can read an article about economics that is very interesting. The author postulates the theory that over the last 25 years politicians of both parties in the U.S. have pushed policies that allowed both capital and goods to flow freely around the globe. During that time over two billion workers in China, India, the former USSR, and Eastern Europe have entered the global workforce because of the fall of communism in Russia, China, and Eastern Europe and the modernization of the Indian economy. Because of the entry of these workers into a global economy that allows for more free movement of capital and goods, America has become the financier of the global market while China and other areas have become the labor force. Result? Millions of high-paying jobs lost to foreign countries.

He points out that there is an economic theorem that says if a country with capital trades with a country that has cheaper labor, the result will be increased profits and a lowering of wages in the country with capital. We are seeing this in America as the divide between the rich and the rest of us increases. It is a very fascinating article and one that is worth the time it takes to read it.