Monday, November 29, 2004

Bob Kuttner on the role the EU should play in the Iran conflict

Some interesting observations from Kuttner's latest op-ed in the Boston Globe:
Europe's initiative to prevent a military confrontation between the United States and Iran represents a new coming of age in world affairs for a Europe often described as an economic giant but a geo-political dwarf. Nowhere is this more true than in Germany.
The European initiative, led by Germany, France, and Britain, would give Iran major economic benefits in exchange for the Iranians giving up their aspirations to become a nuclear power. Specifically, Tehran would get membership in the World Trade Organization, trade deals, security guarantees, and nuclear fuel for peaceful uses such as nuclear power generation.

A preliminary agreement in mid-November produced an Iranian commitment to suspend work on uranium enrichment, but a follow-up agreement is still to be negotiated, and nobody here expects a final deal until after the Iranian presidential election next year, since none of the candidates can afford politically to appear weak.

Any deal would need US approval, and Washington's view of the European initiative thus far has ranged from skeptical to contemptuous. The Bush administration believes, with good reason, that the Iranians have been lying about their nuclear program. Officials consider the Europeans naive. The more hawkish officials in the administration want "regime change" or a "surgical strike" against Iranian nuclear facilities.

Both options, however, will be far more difficult than in Iraq, since Iranian nuclear facilities are both dispersed and hardened, and since President Bush has just about run out of US ground troops in the Iraq occupation.

Saturday, November 27, 2004

War Against Elites: Frnks considers "The America that will vote for Bush"

Here's an old article written back in February by Tom Frank in Le Monde Diplomtique that is well worth a read for the perspective it offers on the 2004 election. The article is entitled "The America that will Vote for Bush":

That’s the mystery of the United States, circa 2004. Thanks to the rightward political shift of the past 30 years, wealth is today concentrated in fewer hands than it has been since the 1920s; workers have less power over the conditions under which they toil than ever before in our lifetimes; and the corporation has become the most powerful actor in our world. Yet that rightward shift - still going strong to this day - sells itself as a war against elites, a righteous uprising of the little guy against an obnoxious upper class.

Book recommendation: Chomsky's "Profit Over People"

Noam Chomsky's recent book on neoliberalism is truly in the must-read category (I read it in about two weeks in e-book format).

Here's an excerpt:

Neoliberalism And Global Order
"I would like to discuss each of the topics mentioned in the title: neoliberalism and global order. The issues are of great human significance and not very well understood. To deal with them sensibly, we have to begin by separating doctrine from reality. We often discover a considerable gap.

The term "neoliberalism" suggests a system of principles that is both new and based on classical liberal ideas: Adam Smith is revered as the patron saint. The doctrinal system is also known as the "Washington consensus," which suggests something about global order. A closer look shows that the suggestion about global order is fairly accurate, but not the rest. The doctrines are not new, and the basic assumptions are far from those that have animated the liberal tradition since the Enlightenment.

The Washington Consensus

The neoliberal Washington consensus is an array of market oriented principles designed by the government of the United States and the international financial institutions that it largely dominates, and implemented by them in various ways -- for the more vulnerable societies, often as stringent structural adjustment programs. The basic rules, in brief, are: liberalize trade and finance, let markets set price ("get prices right"), end inflation ("macroeconomic stability"), privatize. The government should "get out of the way"--hence the population too, insofar as the government is democratic, though the conclusion remains implicit. The decisions of those who impose the "consensus" naturally have a major impact on global order. Some analysts take a much stronger position. The international business press has referred to these institutions as the core of a "de facto world government" of a "new imperial age."

Whether accurate or not, this description serves to remind us that the governing institutions are not independent agents but reflect the distribution of power in the larger society. That has been a truism at least since Adam Smith, who pointed out that the "principal architects" of policy in England were "merchants and manufacturers," who used state power to serve their own interests, however "grievous" the effect on others, including the people of England. Smith's concern was "the wealth of nations," but he understood that the "national interest" is largely a delusion: within the "nation" there are sharply conflicting interests, and to understand policy and its effects we have to ask where power lies and how it is exercised, what later came to be called class analysis.

The "principal architects" of the neoliberal "Washington consensus" are the masters of the private economy, mainly huge corporations that control much of the international economy and have the means to dominate policy formation as well as the structuring of thought and opinion. The United States has a special role in the system for obvious reasons. To borrow the words of diplomatic historian Gerald Haines, who is also senior historian of the CIA, "Following World War II the United States assumed, out of self-interest, responsibility for the welfare of the world capitalist system." Haines is concerned with what he calls "the Americanization of Brazil," but only as a special case. And his words are accurate enough.

The United States had been the world's major economy long before World War II, and during the war it prospered while its rivals were severely weakened. The state-coordinated wartime economy was at last able to overcome the Great Depression. By the war's end, the United States had half of the world's wealth and a position of power without historical precedent. Naturally, the principal architects of policy intended to use this power to design a global system in their interests.

High-level documents describe the primary threat to these interests, particularly in Latin America, as "radical" and "nationalistic regimes" that are responsive to popular pressures for "immediate improvement in the low living standards of the masses" and development for domestic needs. These tendencies conflict with the demand for "a political and economic climate conducive to private investment," with adequate repatriation of profits and "protection of our raw materials"--ours, even if located somewhere else. For such reasons, the influential planner George Kennan advised that we should "cease to talk about vague and unreal objectives such as human rights, the raising of the living standards, and democratization" and must "deal in straight power concepts," not "hampered by idealistic slogans" about "altruism and world-benefaction" -- though such slogans are fine, in fact obligatory, in public discourse.

I am quoting the secret record, available now in principle, though largely unknown to the general public or the intellectual community.

"Radical nationalism" is intolerable in itself, but it also poses a broader "threat to stability," another phrase with a special meaning. As Washington prepared to overthrow Guatemala's first democratic government in 1954, a State Department official warned that Guatemala had "become an increasing threat to the stability of Honduras and El Salvador. Its agrarian reform is a powerful propaganda weapon; its broad social program of aiding the workers and peasants in a victorious struggle against the upper classes and large foreign enterprises has a strong appeal to the populations of Central American neighbors where similar conditions prevail." "Stability" means security for "the upper classes and large foreign enterprises," whose welfare must be preserved.

Such threats to the "welfare of the world capitalist system" justify terror and subversion to restore "stability." One of the first tasks of the CIA was to take part in the large-scale effort to undermine democracy in Italy in 1948, when it was feared that elections might come out the wrong way; direct military intervention was planned if the subversion failed. These are described as efforts "to stabilize Italy." It is even possible to "destabilize" to achieve "stability." Thus the editor of the quasi-official journal Foreign Affairs explains that Washington had to "destabilize a freely elected Marxist government in Chile" because "we were determined to seek stability." With a proper education, one can overcome the apparent contradiction.

Nationalist regimes that threaten "stability" are sometimes called "rotten apples" that might "spoil the barrel," or "viruses" that might "infect" others. Italy in 1948 is one example. Twenty-five years later, Henry Kissinger described Chile as a "virus" that might send the wrong messages about possibilities for social change, infecting others as far as Italy, still not "stable" even after years of major CIA programs to subvert Italian democracy. Viruses have to be destroyed and others protected from infection: for both tasks, violence is often the most efficient means, leaving a gruesome trail of slaughter, terror, torture, and devastation.

In secret postwar planning, each part of the world was assigned its specific role. Thus the "major function" of Southeast Asia was to provide raw materials for the industrial powers. Africa was to be "exploited" by Europe for its own recovery. And so on, through the world.

In Latin America, Washington expected to be able to implement the Monroe Doctrine, but again in a special sense. President Wilson, famous for his idealism and high moral principles, agreed in secret that "in its advocacy of the Monroe Doctrine the United States considers its own interests." The interests of Latin Americans are merely "incidental," not our concern. He recognized that "this may seem based on selfishness alone," but held that the doctrine "had no higher or more generous motive." The United States sought to displace its traditional rivals, England and France, and establish a regional alliance under its control that was to stand apart from the world system, in which such arrangements were not to be permitted.

The "functions" of Latin America were clarified at a hemispheric conference in February 1945, where Washington proposed an "Economic Charter of the Americas" that would eliminate economic nationalism "in all its forms." Washington planners understood that it would not be easy to impose this principle. State Department documents warned that Latin Americans prefer "policies designed to bring about a broader distribution of wealth and to raise the standard of living of the masses," and are "convinced that the first beneficiaries of the development of a country's resources should be the people of that country." These ideas are unacceptable: the "first beneficiaries" of a country's resources are U.S. investors, while Latin America fulfills its service function without unreasonable concerns about general welfare or "excessive industrial development" that might infringe on U.S. interests.

The position of the United States prevailed, though not without problems in the years that followed, addressed by means I need not review.

As Europe and Japan recovered from wartime devastation, world order shifted to a tripolar pattern. The United States has retained its dominant role, though new challenges are arising, including European and East Asian competition in South America. The most important changes took place twenty-five years ago, when the Nixon Administration dismantled the postwar global economic system, within which the United States was, in effect, the world's banker, a role it could no longer sustain. This unilateral act (to be sure, with the cooperation of other powers) led to a huge explosion of unregulated capital flows. Still more striking is the shift in the composition of the flow of capital. In 1971, 90 percent of international financial transactions were related to the real economy -- trade or long-term investment -- and 10 percent were speculative. By 1990 the percentages were reversed, and by 1995 about 95 percent of the vastly greater sums were speculative, with daily flows regularly exceeding the combined foreign exchange reserves of the seven biggest industrial powers, over $1 trillion a day, and very short-term: about 80 percent with round trips of a week or less.

Prominent economists warned over 20 years ago that the process would lead to a low-growth, low-wage economy, and suggested fairly simple measures that might prevent these consequences. But the principal architects of the Washington consensus preferred the predictable effects, including very high profits. These effects were augmented by the (short-term) sharp rise in oil prices and the telecommunications revolution, both related to the huge state sector of the U.S. economy, to which I will return.

The so-called "Communist" states were outside this global system. By the 1970s China was being reintegrated into it. The Soviet economy began to stagnate in the 1960s, and the whole rotten edifice collapsed twenty years later. The region is largely returning to its earlier status. Sectors that were part of the West are rejoining it, while most of the region is returning to its traditional service role, largely under the rule of former Communist bureaucrats and other local associates of foreign enterprises, along with criminal syndicates. The pattern is familiar in the third world, as are the outcomes. In Russia alone, a UNICEF inquiry in 1993 estimated that a half-million extra deaths a year result from the neoliberal "reforms," which it generally supports. Russia's social policy chief recently estimated that 25 percent of the population has fallen below subsistence levels, while the new rulers have gained enormous wealth, again the familiar pattern of Western dependencies.

Also familiar are the effects of the large-scale violence undertaken to ensure the "welfare of the world capitalist system." A recent Jesuit conference in San Salvador pointed out that over time, the "culture of terror domesticates the expectations of the majority." People may no longer even think about "alternatives different from those of the powerful," who describe the outcome as a grand victory for freedom and democracy.

These are some of the contours of the global order within which the Washington consensus has been forged.

The Novelty of Neoliberalism

Let us look more closely at the novelty of neoliberalism. A good place to start is a recent publication of the Royal Institute of International Affairs in London, with survey articles on major issues and policies. One is devoted to the economics of development. The author, Paul Krugman, is a prominent figure in the field. He makes five central points, which bear directly on our question.

First, knowledge about economic development is very limited. For the United States, for example, two-thirds of the rise in per capita income is unexplained. Similarly, the Asian success stories have followed paths that surely do not conform to what "current orthodoxy says are the key to growth," Krugman points out. He recommends "humility" in policy formation, and caution about "sweeping generalizations."

His second point is that conclusions with little basis are constantly put forth and provide the doctrinal support for policy: the Washington consensus is a case in point.

His third point is that the "conventional wisdom" is unstable, regularly shifting to something else, perhaps the opposite of the latest phase -- though its proponents are again full of confidence as they impose the new orthodoxy.

His fourth point is that in retrospect, it is commonly agreed that the economic development policies did not "serve their expressed goal" and were based on "bad ideas."

Lastly, Krugman remarks, it is usually "argued that bad ideas flourish because they are in the interest of powerful groups. Without doubt that happens."

That it happens has been a commonplace at least since Adam Smith. And it happens with impressive consistency, even in the rich countries, though it is the third world that provides the cruelest record.

That is the heart of the matter. The "bad ideas" may not serve the "expressed goals," but they typically turn out to be very good ideas for their principal architects. There have been many experiments in economic development in the modern era, with regularities that are hard to ignore. One is that the designers tend to do quite well, though the subjects of the experiment often take a beating.

The first major experiment was carried out two hundred years ago, when the British rulers in India instituted the "Permanent Settlement," which was going to do wondrous things. The results were reviewed by an official commission forty years later, which concluded that "the settlement fashioned with great care and deliberation has unfortunately subjected the lower classes to most grievous oppression," leaving misery that "hardly finds a parallel in the history of commerce," as "the bones of the cotton-weavers are bleaching the plains of India."

But the experiment can hardly be written off as a failure. The British governor-general observed that "the 'Permanent Settlement,' though a failure in many other respects and in most important essentials, has this great advantage, at least, of having created a vast body of rich landed proprietors deeply interested in the continuance of the British Dominion and having complete command over the mass of the people." Another advantage was that British investors gained enormous wealth. India also financed 40 percent of Britain's trade deficit while providing a protected market for its manufacturing exports; contract laborers for British possessions, replacing earlier slave populations; and the opium that was the staple of Britain's exports to China. The opium trade was imposed on China by force, not the operations of the "free market," just as the sacred principles of the market were overlooked when opium was barred from England.

In brief, the first great experiment was a "bad idea" for the subjects, but not for the designers and local elites associated with them. This pattern continues until the present: placing profit over people. The consistency of the record is no less impressive than the rhetoric hailing the latest showcase for democracy and capitalism as an "economic miracle"--and what the rhetoric regularly conceals. Brazil, for example. In the highly praised history of the Americanization of Brazil that I mentioned, Gerald Haines writes that from 1945 the United States used Brazil as a "testing area for modern scientific methods of industrial development based solidly on capitalism." The experiment was carried out with "the best of intentions." Foreign investors benefited, but planners "sincerely believed" that the people of Brazil would benefit as well. I need not describe how they benefited as Brazil became "the Latin American darling of the international business community" under military rule, in the words of the business press, while the World Bank reported that two-thirds of the population did not have enough food for normal physical activity.

Writing in 1989, Haines describes "America's Brazilian policies" as "enormously successful," "a real American success story." 1989 was the "golden year" in the eyes of the business world, with profits tripling over 1988, while industrial wages, already among the lowest in the world, declined another 20 percent; the UN Report on Human Development ranked Brazil next to Albania. When the disaster began to hit the wealthy as well, the "modern scientific methods of development based solidly on capitalism" (Haines) suddenly became proofs of the evils of statism and socialism -- another quick transition that takes place when needed.

To appreciate the achievement, one must remember that Brazil has long been recognized to be one of the richest countries of the world, with enormous advantages, including half a century of dominance and tutelage by the United States with benign intent, which once again just happens to serve the profit of the few while leaving the majority of people in misery.

The most recent example is Mexico. It was highly praised as a prize student of the rules of the Washington consensus and offered as a model for others -- as wages collapsed, poverty increased almost as fast as the number of billionaires, foreign capital flowed in (mostly speculative, or for exploitation of cheap labor kept under control by the brutal "democracy"). Also familiar is the collapse of the house of cards in December 1994. Today half the population cannot obtain minimum food requirements, while the man who controls the corn market remains on the list of Mexico's billionaires, one category in which the country ranks high.

Changes in global order have also made it possible to apply a version of the Washington consensus at home. For most of the U.S. population, incomes have stagnated or declined for fifteen years along with working conditions and job security, continuing through economic recovery, an unprecedented phenomenon. Inequality has reached levels unknown for seventy years, far beyond other industrial countries. The United States has the highest level of child poverty of any industrial society, followed by the rest of the English-speaking world. So the record continues through the familiar list of third world maladies. Meanwhile the business press cannot find adjectives exuberant enough to describe the "dazzling" and "stupendous" profit growth, though admittedly the rich face problems too: a headline in Business Week announces "The Problem Now: What to Do with All That Cash," as "surging profits" are "overflowing the coffers of Corporate America," and dividends are booming.

Profits remain "spectacular" through the mid-1996 figures, with "remarkable" profit growth for the world's largest corporations, though there is "one area where global companies are not expanding much: payrolls," the leading business monthly adds quietly. That exception includes companies that "had a terrific year" with "booming profits" while they cut workforces, shifted to part-time workers with no benefits or security, and otherwise behaved exactly as one would expect with "capital's clear subjugation of labor for 15 years," to borrow another phrase from the business press."

Friday, November 26, 2004

Bush's Privatization plans for our school system: Vouchers in perspective

Here is a link to a great (long) article from the People for the American Way (PFAW)called "The Voucher Veneer". If you thought deregulating the energy markets were chaotic (think Enron and California), just think how dangerous the commodization of our children's right to education would be.

Sure, vouchers might make schools more "competitive" with one another, but what happens to the kids that have to go to the bad schools? Should we be taking even more moneyaway from poorly performing schools which are inadequately funded?

And who is pushing for privatization and why?

This is a great backgrounder.

Monday, November 22, 2004

The Vioxx scandal

The Vioxx scandal: damning Senate testimony reveals drug company, government complicity

By Joseph Kay at
22 November 2004

Several scientists testifying before the Senate Finance Committee on November 17 provided substantial evidence that the drug company Merck and the US Food and Drug Administration (FDA) knew of safety problems years before the drug Vioxx was withdrawn from the market.

Vioxx, which was used to treat arthritis and severe pain, was withdrawn by Merck on September 30 after conclusive evidence emerged that it greatly increased the risk of heart attacks and strokes. Some 80 million prescriptions of the drug have been filled around the world, most of them in the US, since it was approved in May 1999.

The principal testimony was given by Dr. David Graham, the associate director for science and medicine at the FDA’s own Office of Drug Safety. The ODS, responsible for monitoring the safety of drugs already on the market, is part of the Center for Drug Evaluation and Research (CDER), which also includes the Office of New Drugs (OND), responsible for approving new drugs for the market. Graham explained how he came into repeated conflict with the OND as he sought to raise concerns about the safety of Vioxx.

The OND is one of the branches of the FDA that is most closely tied to the giant drug companies it is nominally responsible for regulating. Since passage of the 1992 Prescription Drug User Fee Act, the office gets much of its funding directly from drug companies, in the form of new drug application fees of more than $500,000 per application. Most of this money goes toward speeding up the approval of new drugs.

Graham explained that the OND, which has a higher position in the FDA hierarchy than his ODS, is generally very reluctant to issue new regulations for drugs already on the market or order mandatory withdrawals of unsafe drugs that the office has approved. In the case of Vioxx, the drug was pulled from the market only after its producer, Merck, decided that the evidence of harmful consequences was overwhelming. It was not withdrawn as a result of any regulatory action by the FDA.

A study led by Graham that was concluded in the summer of 2004 found that Vioxx was responsible for an estimated 38,000 excess heart attacks and sudden cardiac deaths. In his testimony, Graham stated that this was a conservative estimate. He said that “a more realistic and likely range of estimates for the number of excess cases in the US” was between 88,000 and 139,000. “Of these,” he added, “30-40 percent probably died. For the survivors, their lives were changed forever.”

To dramatize the number of people affected, Graham noted that “this range of 88,000 to 138,000 would be the rough equivalent of 500 to 900 aircraft dropping from the sky. This translates to 2-4 aircraft every week, week in and week out, for the past five years.”

Graham testified that as his team concluded its study and prepared to present its results, it was attacked by the Office of New Drugs and other sections of the FDA. “I was pressured to change my conclusions and recommendations, and basically threatened that if I did not change them, I would not be permitted to present” the paper reporting his study’s conclusions. “An email from the director for the entire Office of New Drugs was revealing. He suggested that since FDA was ‘not contemplating’ a warning against the use of high-dose Vioxx, my conclusions should be changed.”

Up to a week before the drug was pulled from the market by Merck, FDA management, according to Graham, was attempting to undermine Graham’s conclusions.

Graham said, “[W]e are virtually defenseless” against another catastrophe on the scale of Vioxx. “The organization structure within CDER is entirely geared towards the review and approval of new drugs. When a CDER new drug reviewing division approves a new drug, it is also saying the drug is ‘safe and effective.’ When a serious safety issue arises post-marketing, their immediate reaction is almost always one of denial, rejection and heat.... At the same time, the Office of Drug Safety has no regulatory power and must first convince the new drug reviewing division that a problem exists before anything beneficial to the public can be done.”

The prevailing sentiment at the FDA, said Graham, is one that views “the pharmaceutical industry it is supposed to regulate as its client, over-values the benefits of the dugs it approves, and seriously under-values, disregards and disrespects drug safety.” When it comes to drug safety, he said, the operating principle is that the drug is safe unless it is proven to be unsafe beyond a shadow of a doubt. New drugs, including Vioxx, are pushed through the approval phase in a matter of months, before sufficient tests are done to ensure their safety. Independent clinical testing is rarely carried out by the FDA, and indications of safety problems are ignored or deliberately undermined.

Later, Graham pointed to five drugs currently on the market that he felt were potentially dangerous: Acutane, which is used to treat acne; Bextra, a painkiller; Crestor, used to lower cholesterol; Meridia, used to treat weight loss; and Serevent, used to treat asthma. All of these can cause dangerous side effects and have not been adequately tested for their safety, Graham asserted.

Others providing testimony included Gurkirpal Singh, from the Stanford University School of Medicine, and Bruce Psaty, co-director of the Cardiovascular Health Research Unit at the University of Washington. The two scientists reviewed some of the history of the testing of Vioxx and concluded that, even with the limited data available, the drug should have been pulled from the market well before it was eventually withdrawn.

Singh noted that there was evidence of serious heart problems associated with Vioxx before it was approved in 1999. “In 1998, Dr. Doug Watson, a Merck scientist, presented an analysis of serious heart problems with Vioxx compared to patients enrolled in studies of other Merck drugs. This analysis concluded that men taking Vioxx had a 28 percent greater risk (not statistically significant), but in women, the risk was more than double (216 percent, statistically significant) compared to people not taking any drug in other Merck studies. To the best of my knowledge, these data were never made public.”

Merck has continually asserted that at the time of Vioxx’s approval, no evidence existed indicating that the drug caused additional heart attacks. The main study carried out by Merck, known as VIGOR, showed a fivefold increase in serious heart conditions relative to another drug, naproxen (the generic form of Aleve). Merck explained these results as a consequence of naproxen’s beneficial effects, rather than Vioxx’s harmful ones. However, in 1999 a scientist at the FDA remarked that “thromboembolic events [such as heart attack and stroke] are more frequent in patients receiving Vioxx than placebo.” Singh noted, “This meant that not only did Vioxx not [have the benefits of naproxen], but for some reason, it was likely to promote heart attacks directly.”

The evidence was still limited, Singh said. “There were not adequate data to make a firm conclusion one way or another. In fact, the FDA reviewer went on to point out that ‘[w]ith the available data, it is impossible to answer with complete certainty whether the risk of cardiovascular and thromboembolic events is increased in patients on rofecoxib [Vioxx]. A large database will be needed to answer this and other safety comparison questions.’ ”

Instead of carrying out a larger study, the FDA quickly approved the drug for use. This was in spite of the fact that the drugserved no pressing necessity. There were already drugs on the market that performed the same function as Vioxx: to relieve inflammation without causing stomach problems. The FDA did not even require a caution on the drug’s label about the increased risk of hear attacks until April 2002.

Nor did Merck attempt a larger study. The New York Times reported on November 14 that such a study was contemplated in May 2000, but management rejected the idea. According to the Times, a slide prepared for an executives’ meeting stated, “At present, there is no compelling marketing need for such a study.... The implied message is not favorable.”

In their defense, Sandra Kweder, the deputy director of the Office of New Drugs, and Raymond Gilmartin, chairman and CEO of Merck, simply repeated the claim that everything was done to determine the safety of Vioxx as quickly as possible, and that the drug was immediately withdrawn as soon as safety problems became evident. The overwhelming evidence indicates the opposite: that tens of thousands of deaths likely caused by use of Vioxx were entirely preventable.

Sunday, November 21, 2004

The Impact of Trade Liberalization on World Poverty

   Poor Numbers: The Impact of Trade Liberalization on World Poverty

 By Mark Weisbrot, David Rosnick, and Dean Baker1

November 18, 2004

Executive Summary

Many economists and policy analysts have promoted trade liberalization in rich countries as the most effective way to reduce poverty in the developing world. Cline (2004), one of the leading references on this topic, projected that rich country trade liberalization would lift 540 million people out of poverty. This paper analyzes and corrects this projection. It notes that:

1) Most of the people lifted out poverty in these projections have their incomes raised from just below the international poverty level of $2 per day to just above this level. While this gain may correspond to a meaningful improvement in these people's lives, most are not being advanced very far from an impoverished living standard, if at all.

2) The Cline projections are overstated by approximately 20 percent due to an error in calculation. Once this error is corrected the projected reduction in poverty is just under 440 million.

3) The Cline projections rely on the use of the Gini coefficient as the basis for fitting the income distribution. This is an arbitrary method that produces very poor fits in many instances - a point acknowledged in the book itself. It would be equally legitimate to use the poverty rate to fit the distribution, a methodology that yields projections that are drastically lower - trade liberalization reduces poverty by less than 80 million people.

4) The impact of trade liberalization is even less if we take into account expected economic growth. The full effects of any agreement for trade liberalization will not be felt for a period of time. Trade barriers are typically phased out over time, and economies take time to adjust to the new relative prices that will exist in a world of liberalized trade. Many developing countries are projected to experience substantial growth between the period on which Cline based his projections and the point at which the full benefits of trade liberalization will be felt. If Cline's methodology is applied to the income distribution that is projected to be in place when the full effects of trade liberalization are realized than the impact on poverty reduction from trade liberalization will be less than 20 percent of the impact projected by Cline.

5) Finally, it is important to note that in Cline's analysis about half of the gains from trade that are estimated to reduce poverty come from the developing countries reducing their trade barriers; the other half are from rich countries' trade liberalization. The gains that developing countries can get from reducing their own trade barriers should be treated separately, rather than lumped together with gains from trade liberalization by rich countries, since developing countries can individually act to liberalize their own trade at any time, without negotiating or reaching agreements with the developed countries.

While any reduction in world poverty should be viewed as beneficial, trade liberalization is very likely to be accompanied by concessions from developing countries. Some of these concessions, such as paying patent- and copyright-protected prices for many goods, will impose substantial costs on developing countries. In addition, recent trade agreements have severely limited the ability of developing countries to pursue the same sorts of policies that the rich countries used in order to industrialize. For these reasons, it is important to have a clear idea of the size of the potential gains to developing countries from trade liberalization - in order to determine if they exceed the costs.


In recent years trade liberalization has been widely promoted as the best mechanism for eliminating poverty in the developing world. This argument has been adopted by the World Bank and other international financial institutions, many prominent non-governmental organizations, and numerous academic economists and development experts. It has also been actively promoted by the New York Times and Washington Post editorial boards, as well as dozens of other prominent commentators and writers.

While there are certainly theoretical reasons for believing that trade liberalization can reduce world poverty, the predicted benefits from liberalization are far smaller than the claims of proponents imply. Standard trade models do indicate that trade liberalization will reduce poverty in the developing world, but the predicted reductions in poverty are swamped by the impact of normal economic growth, and are at least an order of magnitude less than the impact of growth in countries that have successfully industrialized, such as China. Of course any reduction in poverty is desirable, but since poor countries are being forced to make concessions in exchange for trade liberalization in rich countries, it is important that they approach trade negotiations with a clear assessment of the size of the potential benefits.

This paper examines the nature of the predicted reductions in world poverty from trade liberalization. The first section describes the process through which trade liberalization is predicted to reduce poverty. It points out that the vast majority of poverty reduction is assumed to result from raising people who were living on an income that is just below the international poverty standard of $2 a day, to a standard of living that is just above $2 a day. The second section compares the extent of poverty reduction predicted from trade liberalization with the poverty reduction over the next decade that would be predicted based on World Bank growth projections. This discussion includes an examination and correction of the projections in Cline (2004), one of the most cited works on the topic.

Escaping Poverty: What the Models Mean

The basic logic of the models linking trade liberalization in rich countries to poverty reduction in developing countries is that the world price of some of the items produced in developing countries would rise, in the absence of rich country trade barriers. In other words, if rich countries did not impose barriers that restricted imports of sugar, textiles, or other items produced in developing countries, then rich countries would demand more of these items, driving up their price. Higher prices for these products translate into higher incomes for producers in developing countries. Some of this gain goes to the factory or farm owners in developing countries, but much of this increase in income is passed on to the factory or farm workers, many of whom are among the world's poor. This income gain will typically mean higher wages for those who are already working and also increased employment, as more workers are needed to meet the increase in demand.

While the logic on how rich country trade liberalization can lead to poverty reduction in developing countries is straightforward, it is important to realize that in most cases the impact of liberalization will be limited. The rich countries already import a substantial volume of goods from the developing world, and in most cases the remaining trade barriers are relatively small. The average import-weighted tariff on goods from the developing world to major industrialized countries ranges from 3.93% in the United States and 8.89% in the EU to 9.96% in Canada and 13.48% in Japan2. For example, if the U.S. completely eliminates a tariff on imported clothes of 5 percent, then the impact on the price charged by exporters cannot possibly exceed 5 percent (U.S. consumers will not pay more for products after tariffs are eliminated) and will typically be substantially less. Usually consumers will be the main beneficiaries of a tariff reduction, with most of the gains from rich country tariff reductions taking the form of lower prices in rich countries. This can still lead to a somewhat higher price for exporters in developing countries, but the gains will not usually be very large3.

A second feature concerning rich country trade liberalization is that it will not benefit all developing countries equally. In some cases, developing countries benefit from existing trade restrictions in rich countries. This is due to the fact that these trade restrictions raise prices in the rich countries above the world market price. Insofar as developing countries are allowed to export into these markets, they are able to sell their products at higher prices than would be the case in the absence of trade barriers. This is the case with sugar exports to the United States, for example. The United States provides sugar quotas to countries in Central America and elsewhere that allow them to sell fixed amounts of sugar in the United States at prices that are far above the world market level. If the United States eliminates this quota system, these countries would be able to sell more sugar in the United States, but they would get a far lower price.

Similarly, the United States currently has a quota system for most textile and apparel imports (which is scheduled to be eliminated at the end of 2004). This allows quota holders to sell a fixed volume of textiles and apparel at a price that exceeds the world market price. With the elimination of these quotas, developing countries will be able to sell more textiles and apparel to the United States, but at a lower price. Countries that currently have relatively large export quotas are likely to lose in this scenario.

Another case of a loss from rich country trade liberalization stems from the removal of export subsidies. When rich countries subsidize products that compete with producers in the developing world, this is a loss for those producers. The subsidies lower the world market price and thereby reduce the income of producers in the developing world. However, insofar as developing countries are also consumers of the subsidized products, the elimination of rich country subsidies will be a loss. For example, if a developing country produces no cotton, then it is currently a beneficiary of rich country subsidies to cotton producers, since it is able to buy cotton and cotton products at a lower price than would be the case if the subsidies were eliminated. The same is true for subsidies to food crops. Many of the world's poorest countries are net importers of food, and therefore benefit from rich countries' subsidies that drive down the price of these food crops.

Therefore, the removal of rich country export subsidies will have a mixed effect on the developing world. Countries that export large volumes of products that are in direct competition with the subsidized items will gain from the elimination of subsidies. But countries that produce relatively small amounts of the subsidized goods will be hurt by the elimination of the rich country subsidies.

It is also important to note that in analyses such as Cline (2004) about half of the gains to developing countries from trade that are estimated to reduce poverty come from the developing countries reducing their own trade barriers; the other half are from rich countries' trade liberalization. In other studies the proportion that is due to developing countries reducing their own barriers is even higher4. The gains that developing countries can get from reducing their own trade barriers should be treated separately, rather than lumped together with gains from trade liberalization by rich countries, since developing countries can individually act to liberalize their own trade at any time, without negotiating or reaching agreements with the developed countries.

This backdrop is helpful for understanding how trade liberalization is projected to lift the poor in the developing world out of poverty. Essentially, it increases the price of their labor by an amount roughly proportional to the increase in the products they produce. Since the projected rise in the price of the products is relatively limited (generally less than 10 percent), then the projected increase in income for the poor is also relatively limited. However, since most of the world's poor are currently clustered close to the international poverty level of $2 a day, a relatively modest increase in income is sufficient to lift many of these people out of poverty. For example, a 4 percent increase in the income of a person living on $1.95 a day raises her income to 2.03 a day, three cents above the official poverty level. This is in fact the typical situation of a person projected to be lifted out of poverty due to trade liberalization.

Table 1 shows the current median and mean incomes, by country, of the people projected to be raised out of poverty by trade liberalization. It uses two methods for making this calculation. The first method fits the income distribution to the Gini coefficient, following the methodology used in Cline (2004). The second method fits the income distribution to the poverty rate. (For a full explanation of these methodologies and the construction of the table see the appendix.) It also shows their mean and median incomes after trade liberalization.


As can be seen, in most countries both the mean and median income of the people projected to be raised out of poverty as a result of trade liberalization was already above $1.90 a day. This is true regardless of whether the Gini coefficient or the poverty rate is used to calculate the income distribution. For example, both the mean and median income of the people in India projected to be raised out of poverty is $1.93 per day using the Gini coefficient, or $1.92 per day using the poverty rate. In Brazil, the mean and median income of those projected to be raised out of poverty is $1.95 per day, for both methods of calculating the distribution.

The projected mean and median post-liberalization income level in almost every case is less than $2.10 per day. The projected median and mean income after liberalization of the people in India projected to be lifted out of poverty is $2.08 per day. In Brazil, those incomes are projected to be $2.05 per day.

There are two important points that should be clear from the projections in Table 1. First, and most importantly, the projected gains from trade liberalization are not lifting impoverished people to living standards that anyone would view as very different from poverty. They are raising people that had previously been slightly below the official poverty level to a standard of living that is slightly above the official poverty level. This gain should not be minimized - in some cases it can mean the difference between malnourishment and an adequate diet that allows a child to grow to be a healthy adult - but there should be no illusions about the extent to which the typical person is projected to benefit in this process.

Second, the total amount of income being redistributed to people in poverty is relatively limited. This point is important to note for two reasons. First, in principle the sums required to accomplish this sort of poverty reduction are not large. The amount of income projected to be gained by the poor in developing countries due to trade liberalization is equal to between 0.1 and 0.4 percent of rich country GDP. While trade liberalization may be one way to bring about these gains to the poor, it is not necessarily the only way. In principle, effective foreign aid equal to 0.1-0.4 percent of rich country GDP could accomplish the same result. Table 2 shows the dollar amount of these gains from trade liberalization, when calculated (as in Cline) by fitting the income distribution to the Gini coefficient, and also the much smaller figure derived from using the poverty rate.

How Many People Benefit? - Getting the Numbers Right

There are several different issues that must be considered in projecting the number of people who are expected to escape poverty as a result of rich country trade liberalization. First, Cline (2004), the leading work on this topic, overstated the number of people who are projected to be raised above the poverty line due to trade liberalization, as a result of an error in calculation. The corrected projections reduce the original projections by approximately 17 percent.

Second, the choice of the Gini coefficient as the basis for approximating the income distribution is arbitrary. A plausible alternative, which in some cases produces a better fit, is the poverty rate. If the poverty rate is used to fit the income distribution, then the implied rates of poverty reduction would be drastically lower - less than a fifth of the calculations using the Gini coefficient.

The third issue is economic growth. The effects of trade liberalization are expected to be felt only over a substantial period of time. This is due to the fact that trade barriers are usually phased out over time, and also that countries require several years to adjust to the new trade regime before they can get all the benefits. The projections in Cline assume current income levels; but the full benefits of trade liberalization are not likely to be felt for approximately 15 fifteen years, even if agreements were reached immediately. It is therefore appropriate to examine the impact that trade liberalization will have on poverty rates, given the projected patterns of income distribution in fifteen years. Each of these issues is addressed in turn below.

The first point - correcting the mistake in the calculation - is straightforward. The projections in Cline (2004) depended on estimates of the standard deviation of the log of the incomes within each country derived from the known Gini coefficients. Unfortunately, Cline accidentally used the equation for the variance in place of the standard deviation5. Table 3 shows the number of people projected to be lifted out of poverty in each country in Cline (2004) and the number that would be projected using the correct derivation of the relationship between the number of people in poverty and the Gini coefficient.

The second issue is somewhat technical, but it demonstrates the degree of uncertainty around the projections (even the corrected projections) in Table 3. While it is reasonable to fit the income distribution using the Gini coefficient, in many cases this fit is very poor. This point is explicitly acknowledged by Cline6. As a result of the poor fit, in many cases the number of people projected to be raised out of poverty is capped at levels below what would be implied by the methodology, because the implied numbers are clearly implausible7. In some cases the uncorrected, uncapped projections exceed 100 percent of those currently below the poverty line and in Thailand, even the corrected projection is for more than 130 percent of the poor to be lifted out of poverty. Another way to fit the income distribution is to use the current poverty rate.

The number of people projected to be lifted out of poverty using this alternative methodology is shown in Table 4, along with the projections using Cline's corrected method. The result of using the poverty rate to fit the income distribution is that trade liberalization would have much less impact on world poverty than the projections in Cline (2004) imply, even after correcting for the calculation error. For example, while the Cline methodology implies that trade liberalization would raise 175.0 million people in India above the poverty line, if the income distribution is fit to the poverty rate, then trade liberalization would only lift 6.1 million people in India out of poverty. In Indonesia, the Cline methodology implies that trade liberalization will lift 18.1 million people out of poverty, while the methodology that uses the poverty rate implies that only 1.6 million people will be lifted out of poverty.

While it is likely that the methodology that relies on the poverty rate to fit the income distribution understates the extent of poverty reduction from trade liberalization, it is also likely that using the Gini coefficient for this fit overstates the extent of poverty reduction. Depending on the country, either method could give the better fit. However, it should be clear that neither method is going to provide an accurate projection for all countries. Further research could determine the best fit for each country and therefore provide a better projection of the country-specific poverty reduction from trade liberalization, but it is likely that the projections in Cline (2004) are substantially overstated even after correcting for the calculation error.

The final point - the impact of growth on poverty reduction - is probably the most important. Since there is inevitably a long lag between the time when a trade agreement is negotiated and when its full benefits are realized, the basis for calculating the impact on poverty should not be the current income distribution, but rather the income distribution that is projected to be in place at the time that the agreement's effects are being felt. Past trade agreements have typically provided for phase-outs of tariffs and quotas over five- to ten-year periods. It is reasonable to expect that any future trade agreements will provide for a comparable phase out period. In addition, economies do not immediately adjust to the changes in prices that result from the elimination of trade barriers. This adjustment process can also add to the delay before the full benefits of a trade agreement are felt. In addition, Cline's original estimates were based on the income distribution that existed in 1999. This means that developing country economies have experienced five years of growth in the intervening period.

Table 5 shows the numbers of people who are projected to be removed from poverty over fifteen years as a result of the economic growth projected by World Bank. It also shows the number projected to be removed from poverty if this growth projection is combined with the effects of trade liberalization. The last column shows the additional poverty reduction that results from trade liberalization8.

The projections in Table 5 show that the projected impact of growth on poverty reduction is many times larger than the projected impact of trade liberalization. In other words, the baseline growth path for developing countries will lead to much larger reductions in their poverty rates than will trade liberalization. Furthermore, if countries actually follow their projected growth path, then the marginal impact of trade liberalization on the number of poor people will be less than 20 percent of that shown by the projections in Cline. Of course, there is no guarantee that developing countries will actually grow at the projected rate. For example, the International Monetary Fund has consistently overestimated the growth rate for countries in Latin America9.

The good news in this story is that if developing countries can sustain normal growth over the next fifteen years, then most of the world's poor will be raised above the poverty level - even though there will still be more than one billion people in poverty. However, this would mean that the marginal impact of rich country trade liberalization on poverty rates is far less than implied by a calculation based on the current distribution of income.


This paper has examined and explained projections of poverty reduction due to trade liberalization. It showed that the projections in Cline (2004) substantially overstate the likely benefits for three reasons. First, a calculation error led to an overstatement of approximately 17 percent in the number of people who would be lifted out of poverty using the book's methodology correctly. Second, the methodology used in the book - fitting the income distribution using the Gini coefficient - is arbitrary and often quite inaccurate. An equally plausible alternative methodology - fitting the income distribution using the poverty rate - yields projections that are less than a fifth as large. A more accurate methodology would likely produce projections that are between these two sets of projections. Third, it showed that the economic growth projected for a period in which any trade liberalization process is likely to be implemented will have a substantial effect in reducing poverty. If the effects of trade liberalization are calculated based on the income distribution that is projected after fifteen years of growth, the impact of trade liberalization on poverty reduction is approximately 20 percent as large as the corrected Cline projections based on the current distribution of income.

The paper also noted that the typical person raised above the poverty line in these projections is someone with an income just below the international poverty level of $2 per day. Trade liberalization is projected to raise their income just above this $2 per day poverty level. While this gain can mean a significant improvement in the life of the poor, most of the people pulled above the $2 per day poverty line through trade liberalization would still be seen as impoverished.

Of course, even if the projected reductions in poverty from trade liberalization are not as large as many have been led to believe, they still are not inconsequential. However, rich country trade liberalization is generally a quid pro quo for concessions from developing countries. Many of these concessions, such as the enforcement of rich country patent and copyrights, impose substantial costs on developing countries. In addition, trade agreements often limit the ability of developing countries to pursue the same sort of industrial policies that rich countries used in order to develop. It is entirely possible that the cost to developing countries from paying copyright- and patent-protected prices to rich countries will equal or exceed the gains from rich country trade liberalization, as suggested by preliminary research on this topic by the World Bank10. If trade agreements simultaneously foreclose successful development paths for poor countries, then the world's poor may end up being the big losers from commercial agreements that promise trade liberalization by rich countries.

The Impact of Changes in Work Schedules on Productivity Growth

Bad Times: The Impact of Changes in Work Schedules on Productivity Growth

By John Schmitt and Dean Baker1

November 2004

We are grateful to the Rockefeller Foundation for generous support of this project. We thank Paul Swaim for his helpful technical assistance with the hours data.


Executive Summary

Economists generally view productivity - output per hour of work - as the most important determinant of economic well-being. However, the standard measures of output are seriously flawed since they treat all hours as identical, regardless of when the hours are worked. Specifically, productivity measures do not distinguish between overtime hours, night and weekend hours, or erratic hours scheduled at the discretion of the employer, on the one hand, and regularly scheduled hours worked during the standard workweek, on the other.

The distinction between standard and nonstandard work hours is important for accurate productivity accounting, since the benefits from working these "bad hours" will appear on the output side of the equation. For example, an employer that can freely require overtime work, should be able to produce more output than an employer who must schedule hours well in advance. Similarly, items sold at 24-hour convenience stores sell for higher prices (which is reflected in GDP) than items sold in standard supermarkets.

Therefore, economists should want to distinguish between gains in output per hour that are attributable to more output from the same type of hours worked, and gains in output that are due to workers working less desirable hours. This paper is a preliminary effort at quantifying the amount of hours worked outside of the standard workweek. Using data from the May 2001 Work Schedule supplement to the Current Population Survey, we find:
* Seven percent of workers usually work at least six days per week. In addition, 17 percent usually work on Saturdays and nine percent usually work on Sundays.
* Almost 18 percent of workers work some kind of nonstandard shift. Evening shifts are the most common (6.9 percent), followed by irregular shifts (3.9 percent), night shifts (3.1 percent), and rotating shifts (2.4 percent). 
* A large share of the working population starts or finishes work outside of the standard 8am to 6pm work day. Just under 44 percent of workers start work before 8am, and almost 21 percent finish work after 6pm.
* In total, at least 15 percent of all hours worked fall outside the standard workweek.

The large quantity of nonstandard hours could have a substantial impact on how economists view the performance of the US economy, both through time and in comparison with other countries. While further research is needed to determine the appropriate size of adjustment for nonstandard hours (which would differ for different types of hours), simple calculations suggest that an adjustment could lower measured productivity in the United States by as much as 10 percent.

If the percentage of nonstandard hours has increased rapidly in recent years, then this would suggest a different view of the recent productivity upturn. Similarly, if non-standard hours prove to be far more common in the US economy than they are in other rich countries, the United States may rank lower in international productivity comparisons than current data indicate.

While the findings of this paper show the non-standard hours account for a substantial percentage of all hours worked, further research will be necessary to determine the growth path over time, and to have a reliable measures for international comparisons.

Economists generally view productivity as the single most important measure of economic well-being. Productivity is defined as the average value of goods and services (measured in dollars) produced in one hour of work. The need to control for changes in the quality of goods and services –the denominator in the productivity measure– has long complicated attempts to measure productivity, especially, the growth rate of productivity over time. A new-fangled coffee-maker, for example, may cost more than an old-fashioned stove-top percolator, but the new coffee-maker can make espresso and steam the milk.  Airline travel, on the other hand, may cost less today than it did twenty years ago, but seating is more cramped and flights no longer come with a meal. Economists have extensively debated the implications of such changes in the quality of output for the measurement of output and productivity, most recently, in connection with the possibility that the Consumer Price Index may overstate the true rate of inflation by not taking fully into account improvements in the quality of new goods and services.2

By contrast, economists have paid almost no attention to measuring the "quality" of the hours worked to produce the output -the numerator in the productivity measure. Few workers or economists would argue that hours worked at nonstandard times such as nights and weekends are qualitatively identical to hours worked between Monday and Friday from 9am to 5pm. Yet, our standard productivity measure treats all hours -including those worked at night and on weekends, or after eight hours in one day or forty hours in one week, or on the sixth and seventh day of a work week- as identical.

Failure to control for the type of hours worked could have an important impact on our interpretation of changes in productivity over time or differences in productivity levels across countries. For example, if output per rises in a country because workers are forced to work at less desirable times, such as weekends or evening shifts, then these output gains do not represent an increase in economic well-being.

Such changes in hours (or a loss of control over work schedules by workers) may, in fact, be an important factor explaining at least part of recent increases in measured output per hour. Employers (and economists) routinely argue that workplace flexibility - meaning less rigid work hours - is essential for maintaining profitability. At the most basic level, services provided at unusual times -for example, food sold at 24 hour convenience store- command a premium price. Our current measures of productivity pick up any increases in output that results from workers losing control over their work time or putting in less desirable hours.

However, our current procedures make no adjustment on the input side for less desirable hours. From a social perspective, productivity growth that simply reflects the use of a fixed amount of capital during longer shifts, nights, and weekends is less desirable than a rise in productivity produced by technological advances or better training. It is important to realize that this issue is simply one of accurate measurement, not an ethical question about the proper treatment of workers. The analysis is not affected in any way if workers receive premium pay for working extra hours or at inconvenient times. The point is to distinguish between a gain in output for the same type of hour - presumably due to more capital or better workplace organization - and a gain attributable to less desirable (and more valuable) hours.

In this brief analysis, we assess the potential quantitative impact of factoring the "quality" of work hours into standard measures of productivity. First, we use data from the May 2001 Work Schedule supplement to the Current Population Survey to calculate a simple and almost certainly conservative estimate of the volume of total nonstandard hours as a share of total hours worked. We then use plausible estimates of the "premium" that workers need in order to compensate for working nonstandard hours to produce a rough but reasonable estimate of the impact on measured productivity. We conclude with a discussion of the implications of our analysis for the measurement of productivity growth over time and for international comparisons of productivity levels.

Estimating hours of nonstandard work

The May 2001 Current Population Survey (CPS), a large, nationally representative survey conducted by the Census Bureau, included a special supplement that asked workers detailed questions about their usual work schedule. These data from the CPS Work Schedule supplement allow us to distinguish between hours worked during the course of the regular work week, defined here as between 8am and 6pm, Monday through Friday, and hours worked at other times, specifically, evenings, nights, and weekends. We can use the resulting estimates of standard and nonstandard work hours to produce an estimate of the share of all hours worked outside of regular work hours.

A few examples will illustrate the general procedure we used to estimate the share of nonstandard hours of work.


If a worker usually starts work at 9am and usually finishes work at 5pm and usually works only Monday through Friday, we calculate the total number of hours worked per week as 40 hours: eight hours per day times five days per week.3 Since all of these hours fall between 8am and 6pm, Monday through Friday, in this case, the total number of nonstandard work hours would be zero.  

If a worker usually starts at 6am and works until noon, Monday through Thursday, we would calculate total hours worked per week as 24: six hours per day times four days per week. Since two hours each day are before 8am, we would calculate usual nonstandard work hours as eight: two hours per day times four days per week. The resulting share of nonstandard work hours would be 33 percent (8 nonstandard hours / 24 total hours). 

If a worker usually works from 8am to 6pm, Friday through Monday, his or her total hours per week would be 40: ten hours per day times four days per week. Since all of the hours on fall between 8am and 6pm, none of these hours on Friday and Monday would count as nonstandard. However, since we count all hours worked on Saturday and Sunday as nonstandard, the total number of nonstandard hours would be 20: ten hours per day on Saturday and Sunday. The final share of nonstandard hours would be 50 percent (20 nonstandard hours / 40 total hours).

If a worker usually works midnight to 8am, Monday through Friday, total hours per week would be 40: eight hours per day times five days per week. Total nonstandard hours would also be 40, since all hours worked fall outside the 8am to 6pm period on Monday to Friday. In this final example, the share of nonstandard hours would be 100 percent (40 nonstandard hours / 40 total hours).4

This procedure provides the best estimate of nonstandard work hours possible, given the format of the CPS Work Schedule supplement. The procedure, however, most probably underestimates the share of nonstandard work hours, making our calculations below conservative estimates of the effect of adjustments on measured productivity. Our estimates of nonstandard work hours are low for three principal reasons. First, we have excluded any overtime hours worked during the standard Monday through Friday, 8am to 6pm period. If a worker works Monday through Friday from 8am to 6pm, he or she is on the job 50 hours per week, ten of which are in excess of the standard 40-hour week. Ten of the 50 hours, therefore, could conceivably count as nonstandard hours by a reasonable definition. 

Second, the 2001 CPS Work Schedule supplement asked workers only about their usual schedule. To the extent that workers regularly or even occasionally deviate from their usual schedule and these deviations involve working outside the standard work hours, the total number of nonstandard hours worked in a year would be higher than our estimate here.5  Finally, our analysis measures only the standard and nonstandard hours at the respondent's main job. We have therefore excluded both standard and nonstandard hours at second (and additional) jobs. To the extent that second jobs are more likely to involve working at nonstandard times such as evenings and weekends, excluding second jobs from our analysis probably further reduces our estimated share of nonstandard hours. All three of these factors mean that our estimates below of the effect of nonstandard-work-hour adjustments on productivity are likely to understate the true effect.

Table 1 summarizes the available data from the May 2001 CPS Work Schedule supplement. According to the CPS data, a substantial portion of workers have schedules that include at least some nonstandard hours or shifts. About 7 percent of workers usually work six days per week, with almost 2 percent usually working seven days per week. About 17 percent of workers usually work Saturdays, and almost 9 percent usually work Sundays. Almost 18 percent of workers work some kind of nonstandard shift. Evening shifts are the most common (6.9 percent), followed by irregular shifts (3.9 percent), night shifts (3.1 percent), and rotating shifts (2.4 percent). A large share of the working population starts or finishes work outside of the standard 8am to 6pm work day. Just under 44 percent of workers start work before 8am, and almost 21 percent finish work after 6pm.

Taken together, the numbers in the table demonstrate that a substantial portion of the workforce, somewhere around half, have schedules that regularly involve working at least some nonstandard hours. However, since our principal interest is in productivity, we are not as interested in the share of workers with nonstandard hours as we are in the share of all hours worked that are nonstandard. The last line of Table 1 presents our estimate of the share of all hours worked that were nonstandard, following the procedure described earlier. According to our rough calculations, about 15 percent of all hours worked in 2001 fell outside the standard period from 8am to 6pm on Monday to Friday.

Adjusting productivity for nonstandard work

 Table 2 presents some simple estimates of the impact of adjusting national productivity levels for nonstandard hours. The rows of the table correspond to different shares of nonstandard hours in total hours worked. The middle row assumes a 15 percent share of nonstandard hours, which is the estimate from Table 1 based on the CPS Work Schedule data. The first row assumes none of the hours worked are nonstandard, which is effectively what the current procedure for calculating productivity assumes. The last row assumes that 20 percent of all hours are nonstandard, a plausible estimate of what nonstandard hours might include if we had included daily and weekly overtime during otherwise standard work hours, nonstandard work hours that are not part of workers usual schedule, and nonstandard hours worked in second jobs.

Notes: Authors' analysis. See text for complete explanation.

The most difficult aspect of adjusting productivity for nonstandard work hours is determining how to discount the nonstandard work hours to reflect the extra personal and social burden associated with the nonstandard work hours. One natural way to weight nonstandard hours would be to ask how much of a pay premium over workers' standard rate of pay is required to compensate them for the inconvenience of working at nonstandard times.6 The columns of Table 2 assume different adjustment factors calculated along these lines. In the column marked ten percent, for example, we are assuming that a worker in a nonstandard job would need to receive a ten percent pay premium to compensate for the personal costs of a nonstandard hour of work. The adjustment factors in the table range from zero percent (effectively, the procedure followed by the current productivity definition) through 50 percent (equivalent to assuming a "time and a half" premium), through 100 percent (equivalent to "double time" for nonstandard work).

 Once we've established the appropriate "premium" necessary for nonstandard hours, we can use the premium to adjust measured productivity for the inconvenience of working nonstandard hours. Imagine that an economy currently produces $1,000 of output in 100 hours worked over the course of a year. The productivity level would be $10 per hour. Now imagine that all of the hours were worked at nonstandard times and that workers required a ten percent premium to compensate them for nonstandard hours. The economy would still produce $1,000 per year, but rather than measuring hours as 100, we would measure them as 110 hours, reflecting the 10% premium workers' need to leave them just as well off working nonstandard hours as standard hours. The nonstandard-hours-adjusted level of productivity would fall from $1,000/100 hours or $10 per hour to $1,000/110 hours or $9.09 per hour. This simple procedure effectively penalizes the use of nonstandard hours when calculating productivity. The size of the penalty depends on how much workers dislike working nonstandard hours.

Each of the entries in Table 2 shows the effect on measured productivity of an analogous calculation under different sets of assumptions about the total number of nonstandard hours and the associated "penalty." The entry in the first row –zero percent nonstandard hours– and first column –no penalty for nonstandard hours–  yields a productivity level set equal, for purposes of this example, to 100.0. The assumptions of zero nonstandard hours and zero penalty for nonstandard hours is, in effect, the procedure followed by current methods for calculating productivity. In the second row of the table –assuming 15 percent nonstandard hours (the estimate from Table 1)– and the second column –assuming a 10 percent discount for nonstandard hours– measured productivity would fall from 100.0 to 98.5. If workers need a 50 percent premium for nonstandard hours ("time and a half"), relative to the standard measure, adjusted productivity would fall 7.5 percent to 92.5. 

Assuming a slightly higher share of nonstandard hours of 20 percent , and a nonstandard penalty of 30 percent, measured productivity would fall 10.5 percent to 89.5. With larger assumed penalties (up to 100 percent) measured productivity would drop even more.

The exercise in Table 2 suggests that adjusting measured productivity rates for plausible estimates of the volume of nonstandard hours and the associated welfare costs could significantly alter our productivity accounting. Assuming that nonstandard hours of work account for 15 to 20 percent of all hours worked and attaching a 10 to 30 percent penalty to those hours, would lower measured productivity by 1.5 to 10.5 percent.

Policy implications

The calculations summarized in Table 2 have important implications for two important public debates: the measurement of productivity growth over time and comparisons of productivity levels between the United States and other advanced, capitalist economies.

Economic booms tend to be periods when the average hours of work rise and  productivity growth accelerates. To the extent that some portion of the expansion in hours over the business cycle reflects a rise in nonstandard hours, failure to properly discount the new, nonstandard hours would lead standard measures of productivity to overstate productivity growth during booms. Similarly, when the economy contracts, and nonstandard hours fall, the standard productivity measure may overstate any deceleration in productivity, relative to a measure that properly discounted nonstandard hours.

Moreover, to the extent that the US economy has over the last several decades moved toward greater use of more "flexible" (for employers) hours of work arrangements, our conventional measures of productivity may yield an overestimate of actual productivity growth, relative to a measure that controlled for the rise in less desirable hours.

Finally, to the extent that international perceptions of US workers as working longer and more flexible hours are true, comparisons of international productivity levels that don't take differences in nonstandard hours into account will systematically overstate the productivity of US workers relative to their counterparts in economies where nonstandard work hours are less common. Given that differences in conventionally measured productivity levels are small, adjusting international productivity measures for nonstandard hours could significantly alter our rankings of international productivity levels. In 2002, for example, productivity levels were already higher in Belgium (111), western Germany (101), France (103), Ireland (103), Italy (105), the Netherlands (106), and Norway (131) than they were in the United States (set equal to 100), and productivity levels in Austria (96) and Denmark (95) were not far behind.7 Controlling for nonstandard hours would shift these numbers in favor of countries working fewer nonstandard hours.


More than 15 percent of all hours worked in the United States are worked during evenings, nights, weekends, and other nonstandard times An accurate measure of productivity should adjust for the type of hours worked, since increases in output per hour since output gains that stem from a loss of employee flexibility and other personal and social costs do not imply an increase in economic well-being.

Such adjustments are essential both for measuring economic progress through time and for accurately comparing economic well-being across countries. The simple set of calculations we present here suggests that accounting for the type of hours worked may substantially alter our understanding of economic progress over time and the relative productivity rankings of national economies. 

Saturday, November 20, 2004

Oil and Military Planning

US military on the scent of oil
By Colonel Daniel Smith, Foreign Policy in Focus, Nov 20, 2004

History was made on April 2, 2004, as the three ex-Soviet republics of Estonia, Latvia and Lithuania formally joined the North Atlantic Treaty Organization (NATO). Almost immediately, much to Moscow's consternation, four Belgian fighter aircraft were positioned in Lithuania, from where they will patrol the airspace of the new members.

NATO officials insisted the deployment did not foreshadow new bases or a permanent troop presence on Russia's frontier. But Kremlin concerns were not eased when Ukraine, which lies between other NATO countries and Russia's Black Sea coast, agreed to allow NATO forces to transit its territory. Left unsaid was "to where?" Given the geography, the obvious answer is "to countries in the lower Caucasus and Central Asia" - Russia's frontier.

A few days before and half a world away, on March 31, the US Navy made more history as it officially ended a 60-year presence at Puerto Rico's Roosevelt Roads Naval Station. Envisaged in World War II as the linchpin in the Caribbean Basin defense system, in its last years the station supported naval exercises on nearby Vieques Island, which ended in May 2003.

These are but two of the latest changes in a worldwide reassessment by the Pentagon of where the United States wants air and naval bases and ground-force posts, access or basing rights, and transit agreements. Such reviews and realignments are not new; since 1988, the Pentagon has conducted four major rounds of base closings or restructurings of its domestic installations and will implement a fifth round in 2005. Foreign bases have undergone only one large restructuring round - after the 1991 Gulf War - but smaller adjustments have been made in response to both political-military circumstances (continually rotating a ground-force brigade into Kuwait in the 1990s to deter Saddam Hussein) and demands of host governments (consolidating marine bases on Okinawa and leaving navy facilities at Subic Bay in the Philippines).

The Pentagon hopes that its plan, the Global Posture Review, when fully implemented, will allow for rapid, tailored responses to contingencies that could arise from any one of a number of "vital national-security interests". However, two of these circumstances are paramount: countering any new outbreaks (and containing existing ones) in the "global war on terror" - with Afghanistan, Iraq and the hunt for Osama bin Laden as subsets - and reliable access to energy resources.

The 2003 Defense Department's "Base Structure Report" lists 702 foreign bases owned or leased by the Pentagon, with about 6,000 more installations in the US and its possessions. As vast as this network seems, the report inexplicably fails to include any locations in Afghanistan, Uzbekistan, Kyrgyzstan, Kuwait, Qatar and Kosovo. And to these must now be added at least 14 garrisons in Iraq.

Then there is "under-reporting". In Asia, the 10 US Marine Corps facilities on Okinawa, including the sprawling 485-hectare USMC Futenma Air Station, have only one entry. The array of intelligence gathering and other military installations in Britain are nowhere to be found in the report, possibly because they all are technically Royal Air Force facilities. Moreover, while a surface-based "boost-phase" missile defense system to counter North Korean missiles can be deployed on ships in the international waters of the Sea of Japan, effective coverage by a surface-based system to counter Iranian missiles would require launch sites in at least Afghanistan and Iraq (and possibly Turkmenistan), according to a Congressional Budget Office study completed in July.

A bit of history
"Manifest destiny" is common shorthand for the series of wars, purchases and broken agreements that fueled continental expansion westward by European settlers in the New World and their 19th-century descendents. It also covers myriad motives that led to the annexation of Hawaii (July 7, 1898), declared by a congressional joint resolution, and to the Spanish-American War (March-August 1898), from which the US acquired Puerto Rico, Guam, a "permanent" lease of Cuba's Guantanamo Bay, and direct political control of Cuba until 1902 and of the Philippines until 1946.

As the 20th century began, US industrial prowess merged with the country's traditional reliance on freedom of the seas for unhindered trade to present an alternative power center to those in a Europe heading toward the collapse of the post-Napoleonic "Concert of Europe". But if war, with its embargoes and exclusion zones, was bad for US commercial interests, so too would be a Europe under a single power that could regulate access to continental trade to the detriment of the United States.

This latter consideration drove two interrelated US policies that, with modifications, remain relevant today. The first is tactical: the acquisition of strategically located bases or basing and port visiting rights for US warships (and now land-based aircraft and ground forces) - "coaling stations" in the vernacular of the day. Although US aircraft carrier battle groups include highly efficient re-supply vessels, being able to count on immediate access to a port for emergencies, shore leave or swapping crews is prudent diplomacy.

The second, a strategic policy, opposes any attempted hegemony of the Eurasian continent. By coincidence, at the time the US first acquired overseas possessions, Sir Halford Mackinder proposed (December 1904) what became known as the "Heartland Theory":
* Who rules Eastern Europe commands the heartland.
* Who rules the heartland commands the world island (Eurasia and Africa).
* Who rules the world island commands the world.

While Mackinder's formulation most likely did no more than lend an air of gravitas to an already determined policy imperative (if even that), the question of continued access to European markets helped tip the US to oppose imperial Germany. The same logic can be detected in president Franklin Roosevelt's support for Britain (eg, lend-lease) in the period between the Nazi invasion of Poland (September 1, 1939) and Pearl Harbor (December 7, 1941). In a sense, World War II then "morphed" into the Cold War, with the communist Soviet Union and the People's Republic of China replacing fascist Germany - at least until the Sino-Soviet split in 1959.

While the collapse of the Soviet empire in 1989 and of the USSR itself in 1991 ended the 45-year ideologically based East-West competition for Europe, Europe itself had steadily been creating its own collective identity - the European Union. Ironically, through the World Trade Organization, the US is encountering resistance to some of its trade, price and tax policies that, while not doing so physically, psychologically and economically threatens to close access to the heartland for US business and trade.

Emerging energy dependence
As World War II ended, US opposition to a hegemonic Europe was expanded to a new region. In February 1945, president Franklin D Roosevelt met with the ruler of the modern Kingdom of Saudi Arabia. Foreseeing that oil would become increasingly vital to the US across virtually all sectors, Roosevelt struck a bargain: a guarantee of access to Saudi oil in return for a guarantee of US protection. In 1991, after being briefed by US intelligence on Saddam Hussein's seizure of Kuwait and the dispositions of Iraqi troops along the border areas, the Saudis called on the US to honor Roosevelt's 1945 promise.

The 1991 war was not the first time that "black gold" was the catalyst of war. Adolf Hitler's need for petroleum for Germany's military machine and industry lay behind his assault on the Soviet Union, and Roosevelt's actions to cut Japan's access to oil contributed to Tokyo's decision to attack the US. Now, under the "Bush Doctrine", oil has become the catalyst for preventive war.

Why this is so obvious is from the vast quantities of petroleum the US economy consumes - 26% of global consumption by 5% of the globe's population. Fourteen of the top 15 foreign sources of crude oil in the first two months of 2004 were countries with direct access to the US (Canada and Mexico) or access to the world's oceans for direct transport. (The 15th, landlocked Chad, whose oil sector first came on line in late 2003, exports its oil through Cameroon.) Maintaining this immediate access keeps prices low without seriously impeding the profligate "easy rider" mentality of a significant portion of the public.

The changing US military base blueprint
Before going further, it might be useful to explain the Pentagon's latest terminology pertaining to overseas bases and describe current basing-related actions.

In an August 16 joint Defense and State Department background briefing on the Global Posture Review, briefing officers noted that 202 of the 230 major US bases worldwide are in the US or its possessions. But they also pointed out the US military is present in 5,458 "distinct and discreet military installations around the world". These are broken down into three main categories:
* Main operating bases (MOBs) with permanently stationed forces and families. Current US bases in Germany fit this category. But when the new Stryker-equipped medium brigade replaces the four heavy brigades now in Germany, it will probably be stationed at the vast Grafenwoehr/Vilseck/Hohenfels training complex - a "forward operating location" (see below). Conversely, Ramstein Air Force Base and Spangdahlem (which houses two US F-16 squadrons) will remain MOBs. Italy will be the home of other MOBs such as the 173rd Airborne Brigade in Vicenza, US Navy Europe headquarters in Naples, and two F-16 squadrons at Aviano.
* Forward operating locations (FOLs) with "warm" facilities having pre-positioned equipment and a small military support group but no families.
* Cooperative security locations (CSLs) with austere facilities occupied only for training, exercises and other military "interactions". Locales in Thailand for joint "Cobra Gold" exercises with Thai and other regional partners are examples.

About a month after the joint departmental briefing (September 23), Secretary of Defense Donald Rumsfeld described for the Senate Armed Services Committee the general strategy behind the Global Posture Review:

In Asia, our ideas build upon our current ground, air, and naval access to overcome vast distances, while bringing additional naval and air capabilities forward into the region. We envision consolidating facilities and headquarters in Japan and Korea, establishing nodes for special operations forces, and creating multiple access avenues for contingency operations. In Europe, we seek lighter and more deployable ground capabilities and strengthened special operations forces - both positioned to deploy more rapidly to other regions as necessary - and advanced training facilities. In the broader Middle East, we propose to maintain what we call "warm" facilities for rotational forces and contingency purposes, building on cooperation and access provided by host nations during Operations Enduring Freedom and Iraqi Freedom. In Africa and the Western Hemisphere, we envision a diverse array of smaller cooperative security locations for contingency access.
Currently, a congressionally mandated Overseas Basing Commission is gathering evidence on which it will make recommendations for streamlining the Pentagon's "footprint" abroad. The commission's final report is now due next August 15. Its work will complement that of the Base Realignment and Closure panel that will begin meeting in 2005 to review domestic military installations and recommend closures, realignments and consolidations. 

Energy security and US military presence
At first glance, an overlay of US military base locations or allied nations and the top 15 countries from which the US derives its oil shows significant divergence.

Excluding NATO allies Canada, Norway and the United Kingdom, only three of the remaining 12 current main suppliers have basing agreements with the US - Saudi Arabia, Kuwait and Ecuador - while one, Iraq, is currently occupied by US military units.

As part of the war to oust the Taliban from power in Afghanistan, the US secured FOLs in Uzbekistan (Khanabad Airfield) and Kyrgyzstan (Manas Airfield near Bishkek) for about 1,000-1,200 personnel. These two bases are still active FOLs. In Afghanistan itself, the US seems sure to retain control of Bagram airfield outside Kabul as well as a FOL outside Kandahar. Moreover, an airbase at Shindand, which lies only 16 kilometers from the Iranian border, is home to some 100 US Special Forces personnel with helicopter support. The Iranians reportedly suspect that Shindand might be converted into an eavesdropping base or a forward operating base for a future US attack.

That said, the picture changes when non-NATO countries that (1) are the main sources or potential sources of oil for the US market, (2) have the largest petroleum deposits, and (3) have transit facilities vital for moving the oil are compared with countries that have military agreements with the US, host a US military presence, or have been identified as a possible host.

Other important bridgeheads in the Persian Gulf include Bahrain and Qatar, both of which host key US facilities; the United Arab Emirates; and Oman. In Eastern Europe, after the end of major hostilities in Iraq, 150 US marines remained at an FOL at the Black Sea port of Constanta, Romania. Conversely, US presence at the airbase at Incirlik, Turkey, has been sharply reduced from 3,000 to 500.

The challenge of maintaining dominance
Dominant military powers have always had to deal with countries not part of their "empire" - whether the empire is formal or informal. This rule still applies in the 21st century despite the US claim to overwhelming "global" power and reach. And a corollary also still applies: the "natural" tendency of those outside the empire is to work together to split off parts of the imperium or even undermine the entire edifice of empire.

As the 21st century began, the two main outsiders were Russia and China. They had a love-hate relationship during the 20th century, one that, after 1959, included a series of military encounters along their very long and still militarized border. In the 1970s, Richard Nixon played "the China card" against the Soviets by establishing diplomatic relations with China and opening trade.

But the 21st century brought another challenge to US dominance: the rise of sub-national groups intent on terrorizing whole populations. The initial reaction of the administration of President George W Bush after the attacks by al-Qaeda on September 11, 2001, seemed oriented to rally the world against terror. Yet within 18 months, the combination of the president's ultimatum to other nations to be "with us or against us" and the US invasion of Iraq allowed unilateralism to triumph. The US, mired in Iraq, was arguably much less secure as a result.

Those who reveled in the US "victory" over the Soviet empire, and who came to power in 2001, were oddly blinded to the Cold War lessons of the power of cooperative relationships. They seemed to think that the US was so dominant that it could achieve unilateral security - completely ignoring the basic principle that every action intended to move closer to this goal generates one or more counteractions. The post-major-combat phase of the Iraqi adventure finally compelled the administration to reverse its tactics and invite United Nations help - only to lose it and the vital assistance of non-governmental agencies because of the continuing chaos in many parts of Iraq.

There have been other negative consequences of US unilateralism in the struggle to contain and reduce the number of terrorist acts. Washington has attempted to gain support by adding to its list of suspect individuals and groups whoever is named by "allies" in the "war on terror". For example, on April 1, Ambassador J Coffer Black, the State Department's counter-terrorism coordinator, appeared before the subcommittee on international terrorism of the House International Relations Committee to testify about al-Qaeda and the "global war on terror".

On al-Qaeda, he asserted that the organization still poses a significant threat despite the loss of its training base in Afghanistan and the arrest or death of 70% of its seasoned leaders and more than 3,400 "operatives or associates". On the "war on terror", he singled out six terror organizations or locations for particular mention: Ansar al-Islam and the Abu Musab al-Zarqawi network, both in Iraq; the Salafist group for Call and Combat and the Salafiya Jihadia, both in North Africa; Jemaah Islamiya in East and Southeast Asia; and the Islamic Movement of Uzbekistan. He also referred to "thousands of jihadists around the world who have fought in conflicts in Kosovo, Kashmir, Chechnya and elsewhere".

Some observers believe the mention of the Islamic Movement of Uzbekistan was a quid pro quo for basing access in that country. Yet the Central Asia-western China "terror" scene is confused, to say the least. For years, China had played down the frequent incidents of violence in the Xinjiang Uighur Autonomous Region (XUAR). But after October 7, 2001, when the first US bombs hit Afghanistan, Beijing started playing them up, attributing them to East Turkestan Islamic "terrorists" who formed part of the international terrorism network and hence should be a legitimate target of the US-led coalition.

At first, Washington resisted Beijing's ploy. After a December 6, 2001, meeting with Chinese vice foreign ministers Li Zhaoxing and Wang Yi, Francis Taylor, the State Department's counterterrorism coordinator, said: "The legitimate economic and social issues that confront the people in western China are not necessarily terrorist issues and should be resolved politically rather than using counter-terrorism methods." Eventually, however, opposition turned to ambivalence until finally the East Turkestan group was added to the list.

Another group, Hizb-e Tehrir (HT) or Party of Liberation, claims it has substantial membership across Uzbekistan, Tajikistan and Kyrgyzstan. Its agenda includes a caliphate that would unite east and west Turkestan (China's XUAR and the Central Asian Republics, respectively). Russian media link them to the Islamic Movement of Uzbekistan, which reportedly has adopted HT's vision.(1)

Looking ahead
Where does this leave the future? Clouded, to say the least, until the Overseas Basing Commission finishes its work. But others are examining some options based on criteria laid down by the Pentagon. In May, the Congressional Budget Office (CBO) released a study examining overseas bases and options for realignment ranging from maintaining the status quo through minor consolidation to complete withdrawal of most permanently based forces.

One of the main criteria the CBO considered was the "time needed to deploy a heavy army brigade combat team [BCT] by sea" to potential conflict zones - one of the administration's rationales for change. (Rumsfeld's "transformation" program envisions meeting a 10-30-30 timeline: 10 days to move forces to any place on the globe, 30 days to defeat an enemy, and 30 days to reconstitute for another war.) CBO looked specifically at Nigeria, Azerbaijan (potentially important future sources of oil), Uganda and Djibouti (potential staging bases for conducting operations in Africa and the Arabian Peninsula to counter instability and terrorism).

CBO compared times to move a BCT from hypothetical FOBs in Bulgaria, Poland and Romania with current bases in the Indian Ocean at Diego Garcia (equipment on ships) and in Germany. Azerbaijan is the only destination which could be reached more quickly (six days) from FOBs - and then only from Bulgaria and Romania. In all cases, departures from Poland take as long (or one day longer) as from Germany, while departures from Bulgaria and Romania take one, three and six days longer than from Diego Garcia to reach Nigeria, Djibouti and Uganda, respectively.

(Changing the BCT from tank-heavy to the new Stryker configuration would save even more time compared to current times, but this difference rests more on the fact that the Stryker-equipped BCT can be moved by air more efficiently.)

CBO also looked at times required to move combat service and combat service support units that sustain the BCTs. Elapsed time from Germany was equal or quicker than from the US in all cases, but from Qatar, which hosts an entire division's equipment, Uganda and Djibouti could be reached nine and seven days quicker, respectively, than from Germany.

The CBO study suggests two conclusions. First, relocating bases in Europe does not improve operational response time except to the Caspian region. Nonetheless, the Pentagon seems determined to continue to draw down the biggest troop MOBs outside the US while increasing the number of FOLs and CSLs to enhance its "freedom of action". The latter two types of bases undoubtedly will multiply in sub-Sahara Africa, Eastern Europe and Southwest Asia.
Second, notwithstanding current consolidations under way in Germany (13 facilities closing) and in South Korea (18 facilities closing), what remains unchallenged in the CBO report is the contention by outside observers that future US base locations in Europe, the Middle East, Southwest and Central Asia will be tied to oil sources and oil transport considerations.

Even with additional closings and consolidations to the 702 overseas "installations" (army 381, navy 44, Marine two, air force 275) identified by the CBO, the US will continue to maintain the most extensive foreign basing structure of any country. For the Pentagon, it seems, not only is "location everything", it's "everywhere".