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Monthly Archives: July 2011

Two stories today serve as good examples of the negative externalities that may come with development based on trade–external based development.

One is about clothing manufacturers releasing dangerous chemicals into local water supplies. Addidas, Nike, and Li Ning are accused of releasing harmful chemicals into the Yangtze and Pearl rivers.

Another is about Conoco-Phillips and leaking oil in Bohai Bay. They have been ordered to shut-down the pumps.

The 840-square-kilometre (336-square-mile) slick emanating from the oil field in Bohai Bay — which ConocoPhillips operates with China’s state-run oil giant CNOOC — has caused huge anger amid allegations of a cover-up.

On Wednesday, the State Oceanic Administration (SOA) said operations would not be allowed to resume before the source of the spill was fully plugged and “risks eliminated”, as fears over the long-term impact on the environment grow.

“There has been oil seeping continuously into the sea for days from platforms B and C in the Penglai 19-3 oil field and there is still a slick in the surrounding marine areas,” the SOA said in a statement.

An especially interesting story for me because my wife and daughter visited a beach on Bohai Bay just a few days ago. No reports at home about oil slicks, but I guess it might happen.

The interesting observation to make here is how countries are encouraged to sacrifice domestic environment–and maybe public health–in the interest of development.

Greenpeace said eight samples of wastewater discharge from two factories in the Yangtze and Pearl River deltas, identified as suppliers for the brands, contained “a cocktail of hazardous chemicals”.

The Yangtze — China’s longest river — and the Pearl River Delta serve as a source of drinking water for about 67 million people, including those in Hong Kong, according to Greenpeace.

“Our tests of the wastewater found toxic chemicals that have no place in our natural environment,” Greenpeace campaigner Vivien Yau told a news conference in Hong Kong.

It is likely that these companies were facing restrictions that were not not very well enforced. Typically, China is enforcing rules now that some development has occurred.

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Today, American business pages are full of reports about the shrinking jobs market in the US. Just when many economists were expecting positive news about employment, unemployment rates have grown back to 9.2%, and that is not including underemployment and the large numbers of people who have dropped out of the workforce.

While you might think the concern should be for the unemployed, the focus of most articles is the negative effect on growth, and the problems it presents for Obama’s re-election.

Economists were stunned. They had been expecting job growth to strengthen in June as oil prices eased and supply disruptions caused by the Japanese tsunami and earthquake receded. Instead, the government’s monthly snapshot of the labor market showed that several industries, including construction, finance and temporary services, shrank. At the same time, leading indicators like wages and the length of the average workweek, which tend to grow before employers begin adding more jobs, actually contracted.

Most analysts are not yet forecasting an outright slide back into recession, but at a time when President Obama and Congress are focused on spending cuts, Europe is in financial crisis and even China’s growth is slowing, there is little expectation of anything other than a prolonged slog for the United States economy.

Recent debates in the US Congress have focused on the huge public debt and how to address it, raise taxes, cut spending, or both. If you are concerned about employment, it does not look like a good time for worrying about debts, but recent political battles have focused on the debt limit and whether to increase it.

Budget strains were evident in the public sector as the federal government slashed 14,000 jobs, and state and local governments cut an additional 25,000. Nearly three-quarters of the job losses at the local level came in education.

Clearly, further cuts in government spending need to balanced by expansion in the private sector. That takes time, and the priorties may be different, but some are still optimistic.

For hopeful signs, some economists pointed to more recent data showing a pickup in retail sales at chain stores and a rise in an index of business hiring. In manufacturing, analysts expect an increase in auto production in the fall, partly because disruptions in supply will have diminished and partly because of built-up consumer demand.

Daniel J. Meckstroth, chief economist of the Manufacturers Alliance, a trade group, said consumers who had been delaying purchases of cars, washing machines, refrigerators and other big equipment that breaks down over time would eventually start buying again as they paid down debts.

“Spending was severely cut during the recession,” Mr. Meckstroth said. “Now, the longer you wait, the more pressure there is to make purchases. You can’t postpone some things indefinitely.”

Others believe this thinking is overly optimistic.