Re: The Harsh Truth About Outsourcing

Dear Mr. Curtiss Priest, Bob, and Others,

I feel that I must comment on this article to say that there is so 
much more to this interesting story by Kuttner. I am a PhD student at 
University of Sussex in England and my research is in this very area 
and how it links to consumer debt.

First, I must say that England and Canada have experienced this same 
phenomenon of supposed low inflation and regular growth. It seems to 
me that in the early 1990s there was a tacit agreement among 
industrialized nations (G7 or OECD) to implement this non-inflationary 
growth policy-- the new economic mantra. The truth is when we talk 
about low inflation you should flag: "low wage growth". Price 
inflation in the whole economy can be divided into two: capital 
markets and real economy. Inflation in capital markets has never so 
vibrant, very good for investors and management of banks and 
corporations (something like the benefits people in the 1960s had when 
they had consistent wage increases every year), while wages have been 
stagnant throughout the great boom of the 1990s.

Also, important to note is how often CPI indices are "modified". I 
think it is interesting that countries that have hard and fast 
inflation targets seem to always be tweaking with the measures to get 
what they want. For example, in England they have weighted measures 
for transport costs and eliminated energy costs—humm, both after 
privatization.

Anyway, my only desire is to confirm Kuttner's argument and point to 
the large scale de-politicization of inflation. It is always portrayed 
as being nasty and to be avoided, yet a little inflation in the system 
right now would hurt profit projections for corporations but would 
also mean wage increases, which could possibly off set most interest 
rate increases on personal debt levels.

Some food for thought,

Ms. Johnna Montgomerie
PhD Candidate in International Relations
University of Sussex
Brighton, England


Quoting "W. Curtiss Priest" <bmslib@mit.edu>:

> Bob Bronson wrote:
> > 
> > Thanx, XXXXX.
> > 
> > We totally agree with Roberts, "The huge excess supplies
> > of labor in India and China mean that American wages will
> > fall a lot faster than Asian wages will rise for a long
> > time."
> 
> Dear Bob,
> 
> I fully agree with this statement.  In today's Boston
> Globe, we hear that India is being pushed by our
> administration to buy more from us.
> 
> But, what if their people don't want what we sell?
> 
> Meanwhile, on the CPI side of things, Kuttner has
> some very informative remarks:
> 
> ["fair use," "teachable moment," "archival," Section 107(a), 1976
> Copyright Act and 1998 Digital Millennium Act]
> 
> 
> ROBERT KUTTNER
> 
> Statistics lie on the true cost of living
> 
> 3/17/2004
> 
> HAT IS THE MATTER with the whiny American voters? They keep telling
> pollsters that they think America is on the "wrong path." But don't
> they read the statistics? Don't they know that unemployment is at a
> comfortable 5.6 percent, that inflation is almost nonexistent, that
> the economy is growing smartly at around 4 percent? 
> 
> These happy statistics, alas, don't accurately capture the economic
> reality of ordinary people. Take inflation. It's true that measured
> inflation is very low, but look at all that's left out.
> 
> In the case of health care, the government's consumer price index
> tracks the cost of medical services. But it is less precise about
> tracking who pays for them. If your employer's health plan is
> increasing your share of premiums and cutting the company's
> contribution or if the plan is increasing out-of-pocket charges or
> reducing what drugs it will cover, this shift is accounted for
> indirectly, after a lag of two years. But it hits your pocketbook
> immediately. And if rising medical costs deter you from seeing the
> doctor, that doesn't show up in the index at all.
> 
> Or consider housing. There are parts of the country where housing
> prices have been declining for a decade because few people want to
> move there. Statistically, these declines get averaged with
> astronomical housing costs in major metropolitan areas to show only
> modest average housing inflation. Around big cities, prices have
> plateaued at very high levels that are plainly outstripping incomes.
> Try telling a young person in Greater Boston or New York or LA that
> there's no serious housing inflation or that rents have not
> increased
> faster than earnings.
> 
> Another case of hidden inflation: A great many people in late middle
> age find themselves subsidizing their newly launched young. The
> causes
> of this trend are multiple: low starting salaries, skyrocketing
> rents,
> and the high cost of college tuitions and health insurance. Is this
> a
> dent in the cost of living for the middle aged? You bet. Does it
> show
> up in government statistics? Nope.
> 
> The inflation numbers also fail to capture pocketbook realities for
> retired Americans. A low official inflation rate plays a cruel trick
> on seniors. For starters, it means that cost-of-living adjustments
> in
> Security Security checks are mere pocket change. One new
> prescription
> can more than eat up this year's Social Security increase.
> 
> Further, a low rate of inflation translates into a low interest rate
> on savings accounts, Treasury securities, and other prudent
> investments for the elderly. Moreover, older people on fixed incomes
> who are not homeowners are also at the mercy of rising rents.
> 
> And the same deficiencies in the consumer price index that fail to
> capture cost shifting in health care particularly affect the
> elderly,
> who spend a disproportionate share of their income on doctor's
> bills,
> hospital costs, and drugs.
> 
> Or take energy costs. Gasoline is near an all-time high. That
> doesn't
> affect the overall index much because energy costs are a relatively
> small share of average total consumer spending. But if you need your
> car for your business, you certainly feel it.
> 
> Then we have the unemployment numbers. Nominally, unemployment is a
> nice, manageable 5.6 percent -- about where it was during much of
> the
> booming 1990s. But that statistic leaves out all the people who left
> the labor force because they gave up on ever finding a job. If you
> include those, the real unemployment number is more like 7.7
> percent.
> The proof of the soft job market is that earnings have not kept up
> with inflation. In 2003, the official inflation rate was 2.3
> percent.
> The median wage increase was just 2 percent. And the 2004 statistics
> are likely to be worse.
> 
> The "average" voter got a tax decrease that the administration likes
> to put at around $1,000. But that artful statistic averages Joe
> Sixpack with Bill Gates. The typical voter got a federal income tax
> cut of more like $300, and in many cases that small federal tax cut
> was overwhelmed by local property tax increases that were caused by
> declining federal aid to states and cities.
> 
> President Bush may have gotten away with telling the voters things
> about Iraq that just aren't true. But he'd better watch out when the
> evidence against his rosy statistics is right in voters'
> pocketbooks.
> 
> Ordinary people may not be professional statisticians, but they are
> not fools. America's voters know better than the experts whether
> their
> own personal economy is thriving. Bogus economic optimism only
> reinforces the growing sense that this president speaks with a
> forked
> tongue.
> 
> Robert Kuttner is co-editor of The American Prospect. His column
> appears regularly in the Globe.
> 
> c Copyright 2003 Globe Newspaper Company.
> 
> -- 
> 
> 
>          W. Curtiss Priest, Director, CITS
>    Research Affiliate, Comparative Media Studies, MIT
>       Center for Information, Technology & Society
>          466 Pleasant St., Melrose, MA  02176
>    781-662-4044  BMSLIB@MIT.EDU http://Cybertrails.org
>