Europe’s Migrant Crisis

October 28, 2015

Much has been made of the migration of asylum-seekers and economic refugees to Europe from conflicts and poverty in the Middle East and Africa.  The above link takes you to a site that maps the flow of people.  It’s pretty interesting and certainly looks alarming, especially to Europeans.  The media has virtually run out of superlatives to describe the scale of this crisis.  “Historic.”  “Unprecedented.”  “Staggering.”  This linked article says that “… it’s hard to grasp the magnitude …”  It’s a serious situation, to be sure, but I thought some perspective might be interesting.

Europe is a continent of approximately 585 million people, not counting Russia.  (After all, none of these people are seeking to migrate to Russia.)  It has a surface area of about 2.3 million square miles – about 2/3 the size of the U.S.  This gives it a population density of about 255 people per square mile, about three times as densely populated as the U.S.

As the article points out, approximately 680,000 people have arrived in Europe so far this year.  That’s an annualized rate of about 750,000.  So that rate would grow Europe’s population by about 0.13%.  Now, let’s compare that to the United States, which admits approximately one million legal immigrants per year and is also invaded by a roughly equal number of illegal immigrants, many of whom are deported, but roughly half remain and are eventually granted amnesty.  That’s an annual influx of approximately 1.5 million migrants each year, growing the U.S. population by 0.5% (more than three times the rate being experienced by Europe).

Put in that perspective, Europe’s migrant crisis pales in comparison to what the U.S. has been experiencing year-in and year-out for many decades.  The scenes of border crossings in Europe are no different than the situation at our own southern border.  Yet somehow it’s a crisis of historical proportions in Europe, worthy of constant global media attention, while America’s migrant crisis is completely shrugged off.  It’s become routine.  It’s become our duty to suck it up and take them all in.

Still, this is a serious situation, cause for major concern for Europeans and even for Americans.  Consider:

  • Europe is already very densely populated.  Take away Russia and the Scandinavian countries, and the rest of Europe is as densely populated as China.  Many European nations, especially Germany, are already heavily dependent on manufacturing for export to sustain their economies and avoid high unemployment.  The very last thing Europe needs is more population growth.
  • Americans should also be concerned by a surge in population growth in Europe.  It will exacerbate our large trade deficit with Europe as its market is further eroded by over-crowding and as its exporters become more desperate to increase foreign market share.
  • The days when the western world could serve as a relief valve for overpopulation are long since past.  Our ability to absorb immigrants without doing economic harm to our own people has been exhausted.  The inability of western economies to sustain economic growth or even maintain their present levels of consumption is becoming more evident every day.

The sad fact is that as long as the world’s population continues to grow exponentially, driven primarily by explosive growth among third world nations, we are rapidly reaching the point where all we can do is stand by helplessly and watch as more and more crises unfold.



The Volkswagen Debacle

October 17, 2015

The above-linked article appeared on CNBC a few days ago, and I can’t let it pass without comment.  In case you’ve been living under a rock and haven’t heard the news, the U.S. EPA (Environmental Protection Agency) discovered that VW diesel engine-equipped cars are also equipped with software that cheats on emissions tests, making them appear to meet emissions requirements when, in fact, they don’t.  VW is facing fines that potentially could reach tens of billions of dollars.  And sales of these models have been halted.  The city of Wolfsburg, home to VW, is bracing for the worst.

“… news of VW’s diesel emissions scandal has hit the city hard, sparking anger and dismay as well as worries of the financial and employment consequences for both the carmaker and Wolfsburg. Some are even invoking the decline of another motor city — Detroit in the US.

“I am worried. It’s not good for Wolfsburg. Detroit stands as a negative example for what can happen: the city has collapsed. The same here is also thinkable,” says Uwe Bendorf, who was born and raised in Wolfsburg and now works at a health insurer.”

The decline of Detroit is due entirely to trade policy that fails to recognize the role of population density in driving global trade imbalances.  A massive trade deficit in manufactured goods – autos in particular – is the inescapable consequence of attempting to trade freely with a nation like Germany, more than six times as densely populated as the U.S. – a nation that comes to the trading table with a bloated labor force, hungry for work making cars for export, and nothing to offer in return but a diminished market stunted by over-crowding.  Detroit’s misery is due in no small part to VW and the prosperity that Wolfsburg’s citizens have enjoyed at Detroit’s expense.

“VW’s sprawling factory employs about 72,000 in a city with just 120,000 inhabitants.”

Anyone who doubts the importance of manufacturing to our economy:  take note.  That’s a per capita employment rate of 60%, and doesn’t even include the additional employment in Wolfsburg by companies that provide products and services to VW and its workers.  Compare that to 46.3% per capita employment in the entire U.S. economy – a figure that the Obama administration would like you to believe represents low unemployment.

“A worker at Autostadt, a kind of theme park to VW that was built at great cost at the start of the century, says: “Who is polluting the air in the world? It’s not just cars, it’s airlines, big trucks, container ships. There is lots of pollution in the US and they don’t seem to care about that.” “

You’ve got to be kidding me!  The U.S. EPA raised this issue because the US does care about pollution – pollution caused by German engineers who obviously don’t give a crap about it!

“Referring to General Motors‘ ignition switch scandal last year that was responsible for more than a dozen deaths, he adds pointedly: “At least we didn’t kill anybody.” “

Not directly in this case, at least.  But he seems to forget some of the junk that’s been foisted on the American public by VW, like “The Thing” and the VW Fox – a car famous for starting up and driving off by itself with no one inside.

The German auto brands owe much of their success to a perception among the American auto-buying public that “German engineering” is somehow superior.  That notion continues to thrive in spite of the poor quality rankings of Mercedes Benz and chronic electronic problems with BMWs.  This cheating scandal is just another crack in that myth.  One can only hope that it will lead to the deserved demise of VW and a boost to domestic manufacturers in the U.S.  If it does, then just suck it up, crybabies in Wolfsburg, and enjoy a taste of your own medicine.





Obama’s Trade Failure Grows Worse

October 9, 2015

A week ago, the Bureau of Labor Statistics released the jobs report for September – a report that was the worst in four years.  The same thing could be said for the trade report released earlier this week.  Manufactured exports, which the president had vowed to double – a cornerstone of his economic policy, fell to a level that was actually less than July, 2011.  The trade deficit in manufactured goods worsened to $60.6 billion, the second worst reading ever.  (The record was $63.7 billion, set only five months ago.)  Here’s the chart:  Manf’d Goods Balance of Trade.

In 2012, the president hailed a new trade deal with South Korea as a “big win for American workers.”  The trade deficit with South Korea, which was $13.2 billion in 2011, nearly doubled to $25.0 billion in 2014 and is on track to reach nearly $30 billion this year.

Our trade deficit with China was $268 billion in 2008, the year the president was elected.  This year our deficit with China is on track to easily surpass $350 billion.

The president’s mistake on trade policy is the same mistake made for decades by the presidents who preceded him – putting blind faith in “free” trade, taking no account of the role of population density in driving trade imbalances.  He fails to understand that, when dealing with nations far more densely populated than our own, “free” trade is a worse policy than no trade at all.  That’s not to say that we shouldn’t trade with nations like China, Japan, Germany, South Korea and others who are totally dependent on manufacturing for export to sustain their bloated labor forces.  It simply means that some mechanism for assuring a balance of trade – tariffs, quotas or whatever – is essential to prevent a crippling of our own economy.

The Trans Pacific Partnership trade deal that Obama has recently concluded again blindly applies “free” trade policy to each nation regardless of their population density.  Based on the long track record we have with that approach, it’s easy to predict the results if Congress is foolish enough to enact it.



September Jobs Report Worst in Over Four Years

October 6, 2015

The September jobs report (link provided above), released on Friday by the Bureau of Labor Statistics (BLS), was just about as bad as it could be for an economy not officially in recession.  The headline numbers – 142,000 jobs created and an unemployment rate that held steady at 5.1% – weren’t great.  Expectations had been for an increase of 203,000 jobs.  But those headline numbers mask just how horrible this report was.

For beginners, the tally for July and August was also cut by 59,000 jobs.  Also, the average work week declined and average hourly earnings actually fell by one cent.  But here’s where it gets really bad:  the employment level – the number of Americans working – the numerator in the calculation of the unemployment rate – actually fell by 236,000.  That’s, the biggest decline since June, 2011, when the economy was struggling to claw its way out of recession.

So if the employment level actually fell by 236,000 in September, then how did unemployment remain unchanged?  You guessed it – the same old trick the Obama administration has used throughout – the magically disappearing work force.  According to the BLS, the civilian labor force actually declined yet again by 350,000.  That’s the second consecutive monthly decline and the sixth in the last twelve months.  Year-to-date, according to the BLS, the civilian labor force has actually declined by 465,000 in spite of the fact that the U.S. population has grown by over a million people.

Truth be told, unemployment actually rose slightly in September to 8.8%.  Per capita employment remains stuck at 46.3% (more than two percentage points below its pre-recession level), where it has been all year.  Here’ the chart:  Per Capita Employment.  And the number of unemployed Americans rose by 62,000 to 14,395,000.  Here’s the chart:  Unemployed Americans.

Finally, thanks to the BLS chicanery with the labor force statistics, the Detachment from Reality Index – the difference between the official unemployment rate and real unemployment rate – rose to a record level of 3.77 points in September.

This jobs report paints a picture of an economy that’s slipping back into recession, something that we won’t know for sure until GDP data for the 3rd quarter is released later this month.