Anatomy of a trade collapse: The UK, 1929-33

Anatomy of a trade collapse: The UK, 1929-33

Alan de Bromhead, Alan Fernihough, Markus Lampe, Kevin O'Rourke 22 May 2018

The literature has identified several stylised facts which characterise the nature and causes of the collapse in international trade during 2008 and 2009. This column uses detailed, commodity-specific information on UK imports between 1929 and 1933 to document several similarities between the trade collapses of the Great Depression and the Great Recession. The findings are in line with theories emphasising the composition of expenditure changes during major economic crises, or the relative sizes of firms operating closer to or further away from the margin between exporting or not.

The Great Trade Collapse of 2008-9 has given rise to an extensive literature analysing its nature and causes (a notable early contribution was Baldwin 2009). Several stylised facts about the collapse are now commonly accepted.

• First, there was no great increase in protection during the collapse, implying that protection must only have played a modest role in explaining it (Kee et al. 2011).
• Second, it was by far the most severe episode of post-war trade decline, and stands out as being unusually synchronised (Martins and Araújo 2009).
• Third, it was far more the result of a decline in the quantity of goods traded than of a fall in the prices of traded goods (Bricongne et al. 2012, Levchenko et al. 2010).
• Fourth, it was overwhelmingly due to changes along the intensive margin, rather than the extensive margin (e.g. Levchenko et al. 2010, Schott 2009).
• Fifth, it saw imports fall more rapidly in some sectors than in others. Trade in goods fell by much more than trade in services. Trade in automobiles and industrial supplies fell a lot, while trade in consumer goods and agricultural goods fell by a lot less (Bricongne et al. 2012, Levchenko et al. 2010), and durable goods trade fell by more than non-durable goods trade (Gopinath et al. 2012, Levchenko et al. 2010).
• Sixth, the relative contributions of price and quantity to the Great Trade Collapse varied across sectors. In the case of the US, import and export prices of differentiated goods barely declined, implying that the entire fall in the value of differentiated goods trade was due to a fall in quantity. Non-differentiated goods prices fell significantly, however, and thus contributed to the trade collapse in those products (Gopinath et al. 2012, see also Haddad et al. 2010).
• And finally seventh, Levchenko et al. (2010) find that in the case of the US, the collapse in trade was geographically quite well-balanced, in the sense that imports and exports fell by a lot for all major trading partners.

Do these stylised facts reflect the idiosyncratic features of the world economy in 2008, or are they are in some sense 'typical' of great trade collapses? 

In a recent paper (de Bromhead et al. 2018), we explore the extent to which the trade collapses of the Great Depression and the Great Recession resembled each other. Using detailed information from a variety of sources on UK trade between 1929 and 1933, we find that while several stylised facts are common to both episodes, others are not. We also compare thefree trade collapse of 1929-31 with the protectionist collapse of 1931-33 to see extent to which protection, and gradual recovery from the Great Depression, mattered for UK trade patterns.

Stylised facts

The first stylised fact about the Great Trade Collapse clearly does not apply to the interwar period. The UK trade collapse of 1929-33 took place under two very different trade policy regimes: a broadly liberal one from 1929-31, and a protectionist one from 1931-33. The latter saw not only a substantial increase in protection, but also active discrimination in favour of the British Empire and against the rest of the world.

Second, the Great Depression clearly stands out as the period that saw the greatest UK trade collapse over the past century and a half. In comparison, the UK trade collapse during the Great Recession was a much smaller and shorter-lived affair. 

The third stylised fact relating to the Great Trade Collapse is one that also cannot be applied to the Great Depression. Falling import prices accounted for no less than 83% of the decline in the value of UK imports between 1929 and 1933. In sharp contrast, the UK trade collapse during the Great Recession was entirely accounted for by fallingtradevolumes.

What were the relative contributions of the intensive and extensive margins to the Great Depression trade collapse? In order to answer this question, we need detailed information on commodity-level trade, by country. In a companion paper (de Bromhead et al. 2017) we construct such a dataset, for a sample of 258 product categories imported from 42 countries. Using these data, we can decompose the decline in UK imports between 1929 and 1933 in the manner of Kehoe and Ruhl (2013: 380). We find that the intensive margin can account for the entire decline in trade. Despite the many differences between the two trade collapses, the fourth stylised fact about the Great Trade Collapse seems to apply to the interwar period as well. 

As can be seen in Figure 1, the composition of the 2008-9 US and 1929-31 UK trade collapses was strikingly similar, despite the fact that we are considering two different countries in very different eras. Automobiles and industrial supplies were the most affected in both cases, consumer goods and food the least. The correlation across categories between the extent of the import collapse is positive and strong. The lower panel of Figure 1 tells a different story, however. The cross-category correlation between the US Great Trade Collapse, and the UK trade collapse of 1931-33, was actually negative. 

Figure 1 Nominal changes in trade,1929-33 and 2008-9

Source: Authors' calculations, based on Statistical Office, H M Customs and Excise Department (1935) and Levchenko et al. (2010).

The sixth stylised fact regarding the Great Trade Collapse of 2008-9 has to do with the differing price changes for different types of goods. In particular, Gopinath et al. (2012) find that while US exports and imports of non-differentiated goods saw a 16% price decline on average, differentiated good prices fell on average by approximately only 1%. Categorising UK trade statistics in a similar manner reveals that non-differentiated export and import prices fell by roughly 15-17% between 1929 and 1931, rather similarly to the price changes experienced during 2008-9. However, the prices of differentiated goods also fell, though by much less (9-10%). Prices also fell more for non-differentiated than for differentiated imports between 1931 and 1933, and prices did not fall at all for differentiated, durable, imported manufactured goods.

The final stylised fact indicates that, for the US, the Great Trade Collapse was remarkably balanced across trading partners. Was the same true for the UK during 1929-33? Figure 2 plots imperial versus foreign percentage changes in export and import flows, in 1929-31 and 1931-33, for the same nine goods categories that we considered previously. As can be seen, during 1929-31 categories that saw their trade fall by more vis à vis the Empire also saw larger declines vis à visthe rest of the world. The same underlying forces were lowering trade with both groups of countries. The same remained true for exports after 1931, but the correlation becomes negative for imports, a finding consistent with the UK's switch to protection having had a major impact on trade flows (de Bromhead et al. 2017).

Figure 2 Nominal changes in trade, Empire versus foreign, 1929-33

Source: authors' calculations, based on Statistical Office, H M Customs and Excise Department (1935).

Lessons for today

The Great Trade Collapse of 2008-9 and the trade collapse of 1929-33 took place in very different economic environments. The Great Recession was violent indeed, but much shorter-lived than the Great Depression. The interwar gold standard implied worldwide deflation, of a sort not seen in the later crisis. Trade policies remained broadly liberal during 2008-9, in sharp contest with the dramatic switch to protection experienced after 1929 worldwide (and after 1931 in the UK).

Nonetheless, the similarities between the two trade collapses are supportive of theoretical accounts of the Great Trade Collapse emphasising the composition of expenditure changes during major economic crises, or the relative sizes of firms operating closer to or further away from the margin between exporting or not.

It should be emphasised, however, that we have only provided evidence for one major interwar economy, the UK, in much the same way as many writers on the Great Trade Collapse have focused on the US. It remains to be seen whether the stylised British facts that we have uncovered were common to other economies during the interwar period.

References

Baldwin, R (2009) (ed), The Great Trade Collapse: Causes, consequences and prospects, London: CEPR Press.

Bricongne, J-C, L Fontagné, G Gaulier, D Taglioni and V Vicard (2012), "Firms and the global crisis: French exports in the turmoil",  Journal of International Economics 87(1): 134-146.

de Bromhead, A, A Fernihough, M Lampe and K H O'Rourke (2017), "When Britain turned inward: Protection and the shift towards empire in interwar Britain", CEPR Discussion Paper 11835.

de Bromhead, A A Fernihough, M Lampe and K H O'Rourke (2018), "The anatomy of a trade collapse: The UK, 1929-33", CEPR Discussion Paper 12626.

Gopinath, G, O Itskhoki and B Neiman (2012), "Trade prices and the global trade collapse of 2008–09", IMF Economic Review 60(3): 303-328.

Haddad, M, A Harrison and C Hausman (2010), "Decomposing the great trade collapse: Products, prices, and quantities in the 2008-2009 crisis", NBER working paper 16253.

Kee, H L, C Neagu and A Nicita (2011), "Is protectionism on the rise? Assessing national trade policies during the crisis of 2008", Review of Economics and Statistics 95(1): 342-346.

Kehoe, T J and K J Ruhl (2013), "How important is the new goods margin in international trade?", Journal of Political Economy 121(2): 358-392.

Levchenko, A A, L T Lewis and L L Tesar (2010), "The collapse of international trade during the 2008-09 crisis: In search of the smoking gun", IMF Economic Review 58(2): 214-253.

Martins, J O and S Araújo (2009), "The Great Synchronisation: Tracking the trade collapse with high-frequency data", Baldwin, R (2009) (ed), The great trade collapse: Causes, consequences and prospects, London: CEPR Press. 

Schott, P K (2009), "US trade margins during the 2008 crisis", VoxEU.org, 27 November. 

Statistical Office, H M Customs and Excise Department (1935), "Annual statement of the trade of the United Kingdom with British countries and foreign countries for the year 1933", London: H M Stationery Office.

--

John Case
Harpers Ferry, WV

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Turmoil for Turkey’s Trump [feedly]

Turmoil for Turkey's Trump

Paul Krugman

https://www.nytimes.com/2018/05/24/opinion/turkey-trump-erdogan.html

WASHINGTON — By the time American negotiators wrapped up high-level talks with a visiting Chinese delegation last week, President Trump's ambitions for a multibillion-dollar trade agreement had, for the time being, shriveled into a blandly worded communiqué without any dollar figures. It was not clear that the talks set a path to success.

Ceaseless infighting and jockeying for influence on the White House's trade team helped deprive Mr. Trump of a quick victory on his most cherished policy agenda, several people involved in the talks said. The deep internal divisions carried over into how officials characterized the agreement and muddied the outlook for the next phase of the negotiations between Washington and Beijing.

Treasury Secretary Steven Mnuchin said Sunday that the United States would hold off on imposing tariffs on China, putting the trade war "on hold," but hours later, the United States trade representative, Robert Lighthizer, warned the Chinese that the Trump administration might yet impose tariffs.

On Friday, Mr. Trump's chief economic adviser, Larry Kudlow, told reporters that China had offered to reduce its trade surplus with the United States by $200 billion. Two days later, he said that the number was merely a "rough ballpark estimate," and that the two countries never expected to reach an agreement and merely planned to issue a statement laying out next steps.


It was a muddled end to a chaotic process — one that revealed an American team riven by conflicts over tactics and policy, working for a president eager for a victory but torn by his desire to have a smooth summit meeting next month with North Korea, over which China wields enormous influence.


Now the future of the negotiations falls to Wilbur Ross, the 80-year-old commerce secretary, who will travel to China in the coming days to try to nail down the commitments that proved so elusive in last week's negotiations.

Mr. Ross brings uncertain credentials to this task: Last summer, he attempted to strike a deal with China to reduce its steel production capacity. When Mr. Trump heard of the plan, he berated Mr. Ross and demanded that his advisers bring him a package of draconian sanctions.

On Monday, Mr. Trump put the best face on the talks, highlighting a Chinese pledge to buy more American agricultural exports. "Under our potential deal with China," he said on Twitter, "they will purchase from our Great American Farmers practically as much as our Farmers can produce."


It was far from the take-no-prisoners tone he struck before the Chinese arrived, when the president talked about a deal that would overhaul almost every element of the commercial relationship between the United States and its greatest economic competitor.

"The U.S. has very little to give," he tweeted last week, "because it has given so much over the years. China has much to give!"

In fact, the Chinese were well aware of the divisions in the administration's trade team — and set out to exploit them, according to people briefed on the deliberations. They recognized that Mr. Trump's advisers were split between implacable critics of China, like Mr. Lighthizer and Peter Navarro, the director of the White House national trade council; and free-traders who were more sympathetic, like Mr. Kudlow, Mr. Ross and Mr. Mnuchin, a former Goldman Sachs executive.

The divisions within the American team revolve around whether the United States should try to secure a short-term deal with China that would benefit some industries and avert a potential trade war, a path that Mr. Mnuchin prefers, or whether they should pressure China to make more fundamental changes to its economy, a path that Mr. Navarro and Mr. Lighthizer say is preferable.

Mr. Mnuchin led the Treasury Department in declining to label China a currency manipulator, defying one of Mr. Trump's campaign promises. He joined Gary D. Cohn, Mr. Trump's former chief economic adviser, in quietly arguing against trade measures — like withdrawing from the North American Free Trade Agreement — that could provoke retaliation and roil the American economy.



For months, the Chinese cultivated Mr. Mnuchin as part of a concerted effort to establish him as the primary American interlocutor. And to the dismay of some of his colleagues, he embraced that role — most visibly when Mr. Trump sent his own trade delegation to Beijing early this month.

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During that trip, Mr. Mnuchin agreed to a private meeting with China's top economic official, Liu He, without Mr. Navarro or any other members of the American delegation. He and Mr. Navarro stepped outside to engage in a profanity-laced shouting match, an unmistakable demonstration to the Chinese of their deep differences of opinions. Mr. Mnuchin sought to play down tensions between the American officials, saying on CNBC that Mr. Navarro was "an important part of the team."

Last week, the Chinese came to the United States prepared to deal, both by making numerical commitments to buy American goods and by promising structural changes to their economy. Over a period of years, that combination could equal $200 billion in additional trade — a figure echoing Mr. Trump's target of reducing the trade deficit by $200 billion.

But the Chinese were not willing to make an outright commitment to reduce the trade deficit by a specific dollar figure, believing that trade balances are the result of broader economic factors, such as currency valuations and economic growth, and such a commitment could set off more conflict with the United States down the road.

It is not clear that the Chinese ever saw the $200 billion figure as realistic or even relevant, people briefed on their plans said. But they realized its symbolic importance for Mr. Trump, and they were making an effort to give him some kind of victory.

In return for concessions, the Chinese were expecting the administration to offer relief to the Chinese telecommunications firm ZTE, which had been crippled by national security sanctions that prevented it from buying any American technology.

The Sunday before the Chinese arrived, Mr. Trump said on Twitter that he might rethink the company's punishment in return for trade concessions — and as a personal favor to Mr. Xi. But by the time Mr. Liu touched down last week in Washington, the president's statements had provoked a fierce backlash in Congress, and the politics around ZTE had shifted.


The Chinese also found new resistance to their requests to relax the export controls that prevent them from buying militarily sensitive products. Mr. Mnuchin's openness to this request set off fierce opposition within the administration, especially among Pentagon officials, who feared the sales could compromise American national security.  


On Tuesday, Mr. Mnuchin said at a Senate hearing that the United States would reject any trade deals that included weakening export restrictions on sensitive military technology.  


"Export control items are absolutely not on the table for discussions, we would in no way look to loosen that," Mr. Mnuchin said, explaining that Mr. Trump has asked him to aggressively review deals involving such industries. "I can assure you this president is very focused on, as I've said, protecting American technology."

As the talks with China began, Trump officials put out word — first in private, and then publicly — that the Chinese were prepared to meet the $200 billion target. Their motives differed:



Some may have blared the figure in an effort to lock the Chinese into their promises. Others may have leaked it as a warning that the administration was focused on reducing the trade deficit at the expense of other priorities, like overhauling the Chinese economy and ending its pattern of forcing American companies that do business in China to hand over intellectual property.


Whatever the motivation, the leaks ignited a backlash from the Chinese. On Thursday, the Chinese Foreign Ministry denied that it had offered to reduce its trade surplus by $200 billion. On Friday, the state-run People's Daily labeled the reports "a misunderstanding."

Also on Friday, Mr. Kudlow told reporters that "the number's a good number." But on Sunday, he said, "Maybe I got ahead of the curve."

Mr. Trump, Mr. Kudlow said, liked the number, "but it's too soon to lock that in."

After expecting to wrap up talks on Friday, the two sides argued into the night about the wording of their joint statement, and the talks extended into the next day.


The final product was vaguely worded and lacked numerical commitments or any firm details.

In multiple TV appearances after the announcement, Mr. Mnuchin, Mr. Kudlow and Mr. Ross presented the deal positively in an effort, some trade analysts say, to paper over divisions with the Chinese until after the summit meeting next month with the North Koreans.

Not everyone was so pleased. On Sunday, Mr. Lighthizer released a statement on the talks that many in Washington saw as a not-so-veiled critique of Mr. Mnuchin's choice to prioritize the trade deficit.

"Real work still needs to be done to achieve changes in a Chinese system that facilitates forced technology transfers in order to do business in China and the theft of our companies' intellectual property and business know how," it said.

"Getting China to open its market to more U.S. exports is significant," Mr. Lighthizer continued, "but the far more important issues revolve around forced technology transfers, cybertheft and the protection of our innovation."


Critics said Mr Trump
 
was at risk


 of jeopardizing a trade

 policy that had put China on the

defensive for the first time in decades.

"It's absolutely stunning how we snatched defeat from the jaws of victory," said Stephen K. Bannon, the president's former chief strategist and a prominent representative of the nationalist wing.

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"China is still in a trade war with us," he said. "It's just that we're unilaterally calling a truce."

But after the talks in Washington, the Chinese, too, seemed bewildered by the divisions, saying that even if they were able to secure concessions from Mr. Mnuchin, they were not sure those promises would ultimately hold, according to people briefed on the discussions.

For the moment, it is Mr. Ross, not Mr. Mnuchin, who will be sitting across the table as the two sides continue to work toward a deal.

 -- via my feedly newsfeed

Social generativity and complexity [feedly]

Social generativity and complexity
http://understandingsociety.blogspot.com/2018/05/social-generativity-and-complexity.html

The idea of generativity in the realm of the social world expresses the notion that social phenomena are generated by the actions and thoughts of the individuals who constitute them, and nothing else (link, link). More specifically, the principle of generativity postulates that the properties and dynamic characteristics of social entities like structures, ideologies, knowledge systems, institutions, and economic systems are produced by the actions, thoughts, and dispositions of the set of individuals who make them up. There is no other kind of influence that contributes to the causal and dynamic properties of social entities. Begin with a population of individuals with such-and-so mental and behavioral characteristics; allow them to interact with each other over time; and the structures we observe emerge as a determinate consequence of these interactions.

This view of the social world lends great ontological support to the methods associated with agent-based models (link). Here is how Joshua Epstein puts the idea in Generative Social Science: Studies in Agent-Based Computational Modeling):

Agent-based models provide computational demonstrations that a given microspecification is in fact sufficient to generate a macrostructure of interest.... Rather, the generativist wants an account of the configuration's attainment by a decentralized system of heterogeneous autonomous agents. Thus, the motto of generative social science, if you will, is: If you didn't grow it, you didn't explain its emergence. (42)

Consider an analogy with cooking. The properties of the cake are generated by the properties of the ingredients, their chemical properties, and the sequence of steps that are applied to the assemblage of the mixture from the mixing bowl to the oven to the cooling board. The final characteristics of the cake are simply the consequence of the chemistry of the ingredients and the series of physical influences that were applied in a given sequence.

Now consider the concept of a complex system. A complex system is one in which there is a multiplicity of causal factors contributing to the dynamics of the system, in which there are causal interactions among the underlying causal factors, and in which causal interactions are often non-linear. Non-linearity is important here, because it implies that a small change in one or more factors may lead to very large changes in the outcome. We like to think of causal systems as consisting of causal factors whose effects are independent of each other and whose influence is linear and additive.

A gardener is justified in thinking of growing tomatoes in this way: a little more fertilizer, a little more water, and a little more sunlight each lead to a little more tomato growth. But imagine a garden in which the effect of fertilizer on tomato growth is dependent on the recent gradient of water provision, and the effects of both positive influencers depend substantially on the recent amount of sunlight available. Under these circumstances it is difficult to predict the aggregate size of the tomato given information about the quantities of the inputs.

One of the key insights of complexity science is that generativity is fully compatible with a wicked level of complexity. The tomato's size is generated by its history of growth, determined by the sequence of inputs over time. But for the reason just mentioned, the complexity of interactions between water, sunlight, and fertilizer in their effects on growth mean that the overall dynamics of tomato growth are difficult to reconstruct.

Now consider the idea of strong emergence -- the idea that some aggregates possess properties that cannot in principle be explained by reference to the causal properties of the constituents of the aggregate. This means that the properties of the aggregate are not generated by the workings of the constituents; otherwise we would be able in principle to explain the properties of the aggregate by demonstrating how they derive from the (complex) pathways leading from the constituents to the aggregate. This version of the absolute autonomy of some higher-level properties is inherently mysterious. It implies that the aggregate does not supervene upon the properties of the constituents; there could be different aggregate properties with identical constituent properties. And this seems ontological untenable.

The idea of ontological individualism captures this intuition in the setting of social phenomena: social entities are ultimately composed of and constituted by the properties of the individuals who make them up, and nothing else. This does not imply methodological individualism; for reasons of complexity or computational limitations it may be practically impossible to reconstruct the pathways through which the social entity is generated out of the properties of individuals. But ontological individualism places an ontological constraint on the way that we conceptualize the social world. And it gives a concrete meaning to the idea of the microfoundations for a social entity. The microfoundations of a social entity are the pathways and mechanisms, known or unknown, through which the social entity is generated by the actions and intentionality of the individuals who constitute it.

 -- via my feedly newsfeed

Did the Supreme Court Just Gut the New Deal? [feedly]

Did the Supreme Court Just Gut the New Deal?
http://prospect.org/article/did-supreme-court-just-gut-new-deal

AP Photo/J. Scott Applewhite

The Supreme Court in Washington is seen at sunset

Yesterday, the Supreme Court's five-justice conservative bloc empowered employers to require employees, as a condition of employment, to forego any joint legal remedy for unlawful abuse. It did so despite the core guarantee of two landmark New Deal statutes, that workers have a federal right to engage in "concerted activity" for their "mutual aid or protection."

During the oral argument in the case, as I noted in the Prospect on January 4, some members of the conservative bloc seemed to be considering tempering or qualifying a result so blatantly at odds with the 1932 Norris-LaGuardia Act (NLGA) and the 1935 National Labor Relations Act (NLRA), and with 75 years of subsequent court decisions interpreting those laws.  But Monday's decision—in the opinion written by Justice Neil Gorsuch—reflects no such caution.

In their briefs and in oral arguments, the U.S. Chamber of Commerce and its allies, including the Trump Justice Department, spun their side of the case as simply a modest extension of the conservative majority's well-established, if notoriously business-friendly precedents interpreting the Federal Arbitration Act. Most media coverage of the decision has accepted that frame. But in fact, as two scholars warned while the case percolated through the lower federal courts, a complete business victory would not primarily affect arbitration law, but "would effectively end the labor laws." At least for the millions of non-union workers lacking any meaningful safeguard against employer illegality other than joint court or administrative relief, this prospect cannot be dismissed as hyperbole—or, as Justice Gorsuch dismissed Justice Ruth Ginsburg's dissenting opinion, as "apocalyptic."

Indeed, the single most telling feature of what Justice Ginsburg labeled an "egregiously wrong" decision, is not what it adds to Court precedents interpreting the 1925 Federal Arbitration Act to force employment, consumer, and other disputes against corporations into individual arbitration proceedings, often secretive and otherwise stacked against individual complainants. On the contrary, what stands out is that Gorsuch went out of his way to trivialize—evidently seeking to gut—the provisions of federal labor law that Justice Stephen Breyer had called, during the oral argument, "the entire heart of the New Deal." Gorsuch's opinion suggests that the NLGA-NLRA guarantee of collective action is limited to collective bargaining efforts—that is, union activity. He thus purports to read protection for concerted legal activity out of federal labor law, in the teeth of the pertinent NLRA provision that specifies protection for "concerted activities for the purpose of collective bargaining or other mutual aid or protection." Gorsuch dismisses this language which I have italicized, as a "catch-all phrase," and then asserts that it should be read to "only serve to protect things employees 'just do' for themselves in the course of exercising their right to free association in the workplace."  

Just why—contrary to the text, manifest purpose, and precedents that apply these labor law safeguards—protection for joint activity should apply only to what he calls "things employees just do," and what those opaquely labeled "things" might include or exclude, appear to be questions Justice Gorsuch is content to leave to future cases brought by the Chamber and its allies to further narrow workers' rights.

 -- via my feedly newsfeed

Bosses win, workers lose in High Court arbitration ruling [feedly]

Bosses win, workers lose in High Court arbitration ruling
http://www.peoplesworld.org/article/bosses-win-workers-lose-in-high-court-arbitration-ruling/

WASHINGTON—Bosses won and workers – especially non-union workers – lost when the 5-man GOP-named majority on the U.S. Supreme Court ruled mandatory arbitration trumps workers' rights.

The case, decided on a 5-4 vote, also barred workers covered by mandatory arbitration clauses in their individual employment contracts from banding together as a class to sue to bosses when they find the bosses broke the pacts. Instead, the workers must confront the corporations one by one.

Three cases rolled into one, collectively named the Epic Systems case, mean that workers who sign pacts with such mandatory arbitration clauses "waive their rights to file for collective action" when the boss breaks the pacts, AFL-CIO Co-General Counsel Craig Becker said in a telephone interview.

Justice Neil Gorsuch wrote in the May 21 decision that although the Federal Arbitration Act generally requires courts to enforce arbitration agreements, one so-called "savings clause" in it was an exception: if the arbitration agreement breaks some other federal law.

GOP President Donald Trump named Gorsuch to the Supreme Court. Gorsuch is a proponent of originalism, the idea that the Constitution should be interpreted as perceived at the time of enactment, and of textualism, the idea that statutes should be interpreted literally, without considering the legislative history and underlying purpose of the law.

The workers involved cited that "savings clause" exception. They sued as classes, saying their firms either didn't pay the minimum wage or overtime. Both non-payments break the Fair Labor Standards Act (FLSA). The bosses invoked their individual arbitration clauses, and the workers in class actions told lower courts that forced arbitration breaks their labor law rights under the National Labor Relations Act.

The National Labor Relations Act (NLRA) protects class actions, the workers said. Gorsuch and the court majority said "no."

"Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the savings clause nor the National Labor Relations Act suggests otherwise," Gorsuch declared.

The case is important, especially for non-union workers, because it opens the door for employers to order forced arbitration virtually any time they want – and the workers are stuck. Numerous studies show bosses win 90 percent or more of all arbitration cases.

"No one who's represented employers cannot say this will cripple enforcement of any labor laws, especially the FLSA," Becker said.

With this ruling, "employers will know the court will protect them. Without class action suits, you'll have much less effective enforcement of labor laws."

Gorsuch wrote "the employees" in Epic Systems, at Murphy Oil and at the Ernst & Young accounting firm "ask the court to infer class and collective (legal) are 'protected concerted activities'" under labor law's key section 7. "But section 7 focuses on the right to organize unions and bargain collectively. It does not mention class or collective action procedures or even hint at a clear and manifest wish to displace the Arbitration Act. It is unlikely Congress wished to grant a right" to class actions "since those were hardly known when the NLRA was adopted in 1935."

Gorsuch also noted section 7 sets up detailed regulations for "protected concerted activities" by workers which it lists in the NLRA – but none for class action suits. And the arbitration law's "savings clause" covers only "obvious cases, such as fraud, duress and unconscionability."

The dissenting opinion

Justice Ruth Bader Ginsburg, writing for the four dissenters, said the court majority is going back to the days before 1908 when the justices "regularly overrode legislative policy judgements." Many of those destroyed policies were in workers' favor.

"Congressional correction of the elevation of the Federal Arbitration Act over workers' rights is urgently in order," Ginsburg wrote. Otherwise, she warned, employers could even try to bring back the "yellow-dog contracts" that existed before 1935.

Those pacts banned workers from forming their own unions and banned other "protected concerted activities." The NLRA outlawed them.

But Becker said union workers will by and large escape the damage from this High Court ruling, for now. "The one group still protected, and who can't waive their rights to class actions, are those who are protected by unions," he explained.

But that doesn't minimize the anti-worker impact of the High Court's ruling, he warned. That's because this ruling could be magnified if the justices rule, by the end of July, that every single state and local government worker in the country could be a potential "free rider."

The Janus case danger

Unions and workers widely expect the same 5-man GOP-named majority to rule against them in the Janus v AFSCME District Council 31 case, brought by the anti-worker anti-union National Right to Work Committee and its legal defense arm.

The RTW crowd and its recruited and paid-for worker, anti-union Illinois state employee Mark Janus, argue that anything unions do – even bargaining and enforcing contracts – is "political" and violates the anti-union workers' free speech rights.

By turning every state and local government into a virtual "right to work" site, the court would deprive unions of tens of thousands of members – one analysis puts minimum losses at 726,000 nationwide – and tens of millions of dollars in "agency fees" they use to defend all workers.

"This is an ominous precursor of Janus," Becker said. "Together, they're the judicial equivalent of 1947 in Congress." Back then, the GOP-run Congress passed the Taft-Hartley Act, over strong and outspoken union opposition and President Harry S. Truman's veto. That law ushered in "right-to-work" laws and imposed draconian restrictions on workers' rights thus seriously weakening the NLRA.

 -- via my feedly newsfeed

We All Do Better with an Immigration System that Works for All Working People [feedly]

We All Do Better with an Immigration System that Works for All Working People
https://aflcio.org/2018/5/22/we-all-do-better-immigration-system-works-all-working-people

AFL-CIO

Yesterday, the AFL-CIO hosted the "We All Do Better" conference, which focused on an important discussion on advancing an immigration agenda for all working people. Attacks against working people come in many forms, but we must stand against the idea that some of us are more worthy of freedom and worker protections than others.

At the opening of the conference, AFL-CIO President Richard Trumka (UMWA) said:

We need workers to understand America's broken immigration system puts downward pressure on pay and benefits for all of us. Our answer is to stand united, as a politically independent movement of working people, for an immigration agenda that lifts us up. That starts with a path to citizenship for the millions and millions of people who live and work here and are American in every way but on paper.

But it doesn't stop there. It's time to reform captive work visa programs so they are based on actual industry needs and include full labor rights and fair wages for every single worker. We must end the enforcement overreach and provide explicit protections to workers who want to organize a union or have the courage to speak up about unsafe conditions. We must keep families together, offer safe harbor to refugees and open our doors to working people from all over the world who want nothing more than a better life, just like my family did.

If we do it right, immigration reform will make jobs better for everyone, improve the health of our democracy and empower us to organize millions of workers into unions.

 -- via my feedly newsfeed