In this issue:

Release of Economic Data Delayed as Methods 'Redefined'

Machine-Tool Consumption Plunged Again in 2003

Globalization: The Return of Ricardo's 'Iron Law of Wages'

Economic Pressures Delay 'Transition to Adulthood'

Companies Drop Health Coverage for Future Retirees

Wal-Mart Audit Reveals Thousands of Labor-Law Violations

Stock Markets Bubbled Upward in 2003


From Volume 3, Issue Number 3 of Electronic Intelligence Weekly, Published Jan. 20, 2004

U.S. Economic/Financial News

Release of Economic Data Delayed as Methods 'Redefined'

The release of many Federal Reserve and Federal government economic statistics is being delayed, while a core Commerce Department agency "redefines" data and methods. The Commerce Department's Bureau of Economic Analysis (BEA) announced Jan. 11 that it is doing a "comprehensive revision" of the National Income and Product Accounts (NIPA) from 1929 through the second quarter of 2003, which involves both changes in definitions and classifications of accounts, and new statistical methodologies by which to revise data (NIPA is the overall balance sheet for the U.S. economy). The change has resulted in the delayed release of the Federal Reserve's main statistical compendium, the Flow of Funds, which would normally have been released in mid-December, but has not yet been published. EIR expects the revised numbers to be "recovery-friendly," in line with recent BEA reports of sharp GDP growth. The revised methodologies, which began with the third-quarter 2003 stats now being manufactured, preliminarily show a sharp jump in corporate profits over the previous methodologies, for example.

NIPA is periodically revised, giving the statisticians the opportunity to rewrite history and reduce the ability of researchers to show the decay of the U.S. economy.

Machine-Tool Consumption Plunged Again in 2003

During January-November 2003, machine-tool consumption by U.S. manufacturers dropped by 8.5% compared to the same 11-month period in 2002—when it had already plunged by 63% from the level in 1997. U.S. industry consumed $210.25 million worth of machine tools in November, up 34.8% from October's paltry level, according to a joint report by the American Machine Tool Distributors' Association and the Association of Manufacturing Technology, released Jan. 12.

In Michigan, demolition crews in December tore down the building that housed Western Machine Tool Works—a manufacturer that had been key to the development of the U.S. "arsenal of democracy" in World War II which shut down in 1989, after 87 years in business. Western was awarded the U.S. Army-Navy E Award for "high achievement in production of war materials" in June 1943, January 1944, and July 1944.

Globalization: The Return of Ricardo's 'Iron Law of Wages'

On Jan. 7, Sen. Charles Schumer (D-N.Y.) and conservative columnist Paul Craig Roberts published an op ed in the International Herald Tribune called "Exporting jobs is not free trade," in which they assert that although they have supported free trade in the past, today's easy outsourcing of jobs means that the old assumptions of free trade, as promoted by the 19th-century British economist David Ricardo, must be rethought.

On the contrary, William Pfaff writes in the same newspaper Jan. 10: Today's system of globalization is free trade as envisaged by Ricardo, "stripped of the economic, social and political constraints that for two centuries kept free trade from functioning the way that Ricardo expected."

Ricardo not only expounded his theory of "comparative advantage," but his second theory, the "iron law of wages," said that wages would tend to stabilize at or near the subsistence level. This seemed not to be true over the past two centuries, Pfaff says, but today, it's making a comeback. "Globalization is removing the constraints imposed in the past by societies possessing institutions, legislation, and the political will to protect workers. Free-trade doctrine is hostile to unions, social legislation, and legal restriction on industry's labor practices, all of which deprive poor countries of their comparative advantage, which is poverty."

Today, trade unions are weakened, and, Pfaff says, Ricardo seems to have been as right with his iron law of wages, as he was with his rule of comparative advantage: "In the case of wages, he was just ahead of his time."

Economic Pressures Delay 'Transition to Adulthood'

Many young Americans are postponing the "transition to adulthood"—career, marriage, and family—until after age 30, because the worsening job market has made it increasingly difficult to support a family, according to a study released Jan. 13 by the University of Pennsylvania.

"The ability to support and thus form a family has declined" since World War II, along with vanishing optimism about the future, said researchers Frank Furstenberg and Elizabeth Fussell.

Companies Drop Health Coverage for Future Retirees

Health benefits for future retirees have been eliminated by 10% of large companies over the past year alone, and another 20% said they plan to terminate coverage in the next three years—signs that the HMO system has accelerated its looting of health care for the lower 80% of income brackets, in the name of "shareholder value."

In addition, the survey by the Kaiser Family Foundation and Hewitt Associates, released Jan. 14, found that 71% of private firms with at least 1,000 employees, increased the amount retirees themselves had to pay for health-care benefits, in the past year. This happened largely because many companies have placed limits on their future payments for retiree health care, blaming rising health-care costs. A whopping 86% said they would raise retirees' contributions in the next three years.

The study, conducted between June-September 2003, shows that more and more companies have slashed retiree health benefits. Their survey in 2002 found that in a two-year period, 13% of large firms terminated health benefits for future retirees. "The bleeding hasn't stopped," Kaiser Foundation president Drew Altman cautioned.

Wal-Mart Audit Reveals Thousands of Labor-Law Violations

An in-house audit by Wal-Mart found tens of thousands of labor-law violations in just one week, including child-labor laws and state regulations requiring time for breaks and meals, the New York Times reported Jan. 13. Based on time-clock records for only 2% of its total workforce, over one week, the audit documented 1,371 instances in which minors apparently worked too late at night, worked during school hours, or worked too many hours in a day. Conducted in July 2000, the audit also found 60,767 apparent instances of workers not taking breaks, and 15,705 apparent instances of employees working through meal times.

More than 40 lawsuits are pending over Wal-Mart's forcing employees to work without pay through lunch and rest breaks. John Fraser, the former head of the U.S. Labor Department's wage-and-hour division during the 1990s, called the frequency of violations at the nation's largest employer, a "source of great concern."

Extended to Wal-Mart's 3,500 stores nationwide, the rate of violations would translate into tens of thousands of child-labor violations, each week, and more than 1 million violations of company and state regulations on meals and breaks.

Meanwhile, the National Labor Relations Board has ordered a hearing on Feb. 10 over charges that Wal-Mart illegally intimidated, harassed, and retaliated against workers organizing with the United Food and Commercial Workers Union in Las Vegas, Nevada.

Stock Markets Bubbled Upward in 2003

The 2,755 companies listed on the New York Stock Exchange saw their aggregate market capitalization grow 27% to $12.2 trillion last year, while the stocks on the Nasdaq grew 50%, to $3 trillion. The NYSE peaked at $12.9 trillion in August 2000, while the Nasdaq peaked at $6.2 trillion in March 2000. The Dow rose 25% and the Wilshire, the broadest U.S. index, rose 29%. Worldwide, stock markets rose in 2003, led by Venezuela with a 177% increase and Thailand with a 117% increase. The German DAX rose 37%, the Swiss SMI rose 19%, and the French CAC 40 rose 16%. Bubble, bubble.

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