1NC
A. Uniqueness:
Aviation industry growing now – this is contingent upon sustained air travel
demand
Zacks Equity Research 5/4/12. Leading investment research firm focusing on equities, earnings,
estimates, and stock analysis. “Airline Industry Stock Outlook - May 2012.”
http://www.zacks.com/stock/news/74514/airline-industry-stock-outlook-may-2012
The U.S. airline industry is expected to remain profitable over the next two decades given the improving worldwide trends in air
travel. However, growth may be held back until 2015 due to surging fuel costs and economic uncertainties in the U.S. and Europe.
Although U.S. airlines will see a small dip this year, the demand for air travel will double over
the next 20 years, as predicted by the U.S. Federal Aviation Administration (FAA). Passenger demand is expected to grow 2%
to 746 million in 2013 and about 3% in the future years, reaching $1 billion by 2024 and $1.2 billion by 2032. The FAA projects
air traffic, customarily measured in billions of revenue passenger miles -- implying a unit of one mile flown by one passenger -to grow by more than 90% over the same period. Revenue passenger miles would jump from 815
billion reported last year to 1.57 trillion by 2032 at an average annual rate of 3.2%. International traffic is
expected to grow 4.2% per year, in contrast to domestic travel that will growth at a more modest clip of 2.7% annually
through 2032. This projection assumes a steady economic recovery with no major calamities like a
large rise in oil price, swings in macroeconomic policy or financial meltdowns. Further, major North
American airlines would raise capacity (available seat miles) at an annual rate of 3.1%, reaching 1.89 trillion by 2032. The 20year airline growth is expected to stem from the implementation of NextGen, the satellite-based
navigation system that aims to make air travel more efficient. The carriers are taking numerous steps
to improve their profitability as described in the above sections. Moreover, the growing demand for air
travel and a relatively lesser number of planes will make future fare hikes possible over the
next two decades. Airline mergers and consolidation will bring down the number of flights and reduce the number of cities
served.
B. Links:
HSR trades off with demand for airplanes – Europe and China prove
Butterworth-Hayes ’12. Philip Butterworth-Hayes, Editorial Director at PMI Media, February
2012. Aerospace America. Industrial Beat. “High-speed rail will impact airliner markets.”
http://www.aerospaceamerica.org/Documents/Aerospace-America-PDFs-2012/February2012/International-Beat-FEB2012-2.pdf
The distance between Madrid (with a population of 5.7 million people) and Seville (population 750,000) is 335 mi. Before
the
HSR link was established between the two cities at the start of the 1990s, the mix of air/rail passengers was
67%/33% air to rail. After the HSR link, that changed to 16%/84% in favor of rail and will rise
to 13%/87% in favor of rail by 2020, according to Frost & Sullivan forecasts. The story is the same
throughout Europe: HSR links are being developed or expanded between key trading centers
at the expense of airline travel. As HSR services are established on key routes—London-Paris,
LondonBrussels, Barcelona-Madrid, ParisLyons—airlines have either pulled frequencies, reduced aircraft
sizes, or departed from the routes altogether. By 2020 a new high-speed line will be built between Paris and
Barcelona, cutting journey times on the 514-mi. route from 8 hr to 4.5 hr. This will be just the start of a new interconnected FranceSpain HSR jointly operated network, managed along the same lines as the U.K.-France Eurostar HSR system. By 2020 most of
Europe’s major trading centers will be interconnected via an HSR network. It
is not just in Europe that aviation is
losing out to rail. At the end of March 2011 all airline services between Nanjing and Wuhan in
China were canceled following the establishment of an HSR link between the two cities , offering
a cheaper and competitively fast link on the 284-mi. journey. The introduction in 2007 of the 209- mi. Taiwan High Speed Rail link
between Taipei and Kaohsiung has reportedly cut domestic airline services by 50% in the past three years. Some
believe that
competition between rail and air has only just begun. “The impact of the HSR industry and rail
in general on air networks has not been as great as it could have been because of the
commercial management of the rail system, which is still broadly government controlled,” says
Ian Lowden, principal with the U.K. aviation consultants LowdexxAviation Consulting. “Airlines, in general, have
developed far more flexible and advanced management systems. The rail industry lacks a
global distribution system as effective as the airlines’ Amadeus system—but that could come. As
air travel’s competitive advantages have been eroded through fuel price increases and taxes,
the airline industry needs to up its game to face a potentially more aggressive and competitive
rail system.” So what impact will these developments have on the market for civil aircraft worldwide, especially as HSR links
become available in the dynamic air traffic growth regions of China, India, and the Middle East?
C. Impacts:
Aviation industry key to economy – jobs and GDP
FAA ’11. Federal Aviation Administration, August 2011. “The Economic Impact of Civil Aviation
on the U.S. Economy.”
http://www.faa.gov/air_traffic/publications/media/FAA_Economic_Impact_Rpt_2011.pdf
The civil air transport industry provides economic benefits for the United States and the
world. In a world of decreasing barriers to trade, the U.S. civil aviation industry remains a
unique engine for innovation and technological progress, one that provides infrastructure that
keeps the nation competitive. This report found that, once all impacts are identified, civil aviation accounted
for 5.2 percent of the U.S. economy in 2009. Aviation contributes to economic growth and to
stronger ties to local and global markets for every region in the nation. The total output of
civil aviation-related goods and services amounted to $1.3 trillion in 2009 and generated more
than 10 million jobs, with earnings of almost $394.4 billion. Specific areas of civil aviation such as air cargo
have contributed to more effective networking and collaboration between companies far and
wide. Recovery in the wake of the recent recession presents many challenges and opportunities for aviation and the U.S. economy
as a whole. There is evidence that the capacity reductions made by airlines and airports as the result of
high fuel prices allowed the industry to better weather the storm, yet the prevailing economic
winds will lead the industry to continue to innovate and become leaner and more responsive
to volatile market conditions. The cost of fuel will likely remain a continuing concern for airlines and those affected by
air transportation. Many analysts believe that the price of oil will continue to transform the airline industry for years to come, just as
it will influence the prospects of other sectors of the economy. As it did in the past century, the role of air transportation will
continue to grow for the U.S. and global economies. The
economic impacts of civil aviation quantified in this
report summarize the benefits made possible by a vital and innovative industry. The industry
contributes positively to the U.S. trade balance, creates high-paying jobs, helps keep just-intime business models viable and connects us to friends, family and commercial opportunities.
As the role of air transportation evolves and becomes even more integral to our way of life, a
safe and efficient air transportation system will continue to be a vital, even essential,
component of a strong and healthy American economy in the 21st century.
Global economic crisis causes war - great power transitions
Royal 10 – Jedediah Royal, Director of Cooperative Threat Reduction at the U.S. Department of
Defense, 2010, “Economic Integration, Economic Signaling and the Problem of Economic Crises,”
in Economics of War and Peace: Economic, Legal and Political Perspectives, ed. Goldsmith and
Brauer, p. 213-214
Less intuitive is how periods of economic decline may increase the likelihood of external conflict .
Political science literature has contributed a moderate degree of attention to the impact of economic decline and the security and
defence behaviour of interdependent states. Research in this vein has been considered at systemic, dyadic and national levels.
Several notable contributions follow. First, on the systemic level, Pollins (2008) advances Modelski and Thompson’s (1996) work on
leadership cycle theory, finding that rhythms
in the global economy are associated with the rise and fall
of pre-eminent power and the often bloody transition from one pre-eminent leader to the
next. As such, exogenous shocks such as economic crises could usher in a redistribution of
relative power (see also Gilpin, 10981) that leads to uncertainty about power balances, increasing the
risk of miscalculation (Fearon, 1995). Alternatively, even a relatively certain redistribution of power
could lead to a permissive environment for conflict as a rising power may seek to challenge a
declining power (Werner, 1999). Seperately, Polllins (1996) also shows that global economic cycles combined with parallel
leadership cycles impact the likelihood of conflict among major, medium, and small powers, although he suggests that the causes
and connections between global economic conditions and security conditions remain unknown. Second, on a dyadic level,
Copeland’s (1996,2000) theory of trade expectations suggests that ‘future expectation of trade’ is a significant variable in
understanding economic conditions and security behavior of states. He argues that interdependent
states are likely to
gain pacific benefits from trade so long as they have an optimistic view of future trade
relations. However, if the expectation of future trade decline, particularly for difficult to replace items such as
energy resources, the likelihood for conflict increases , as states will be inclined to use force to gain
access to those resources. Crises could potentially be the trigger for decreased trade
expectations either on its own or because it triggers protectionist moves by interdependent states. Third, others have
considered the link between economic decline and external armed conflict at a national level. Blomberg and Hess (2002)
find a strong correlation between internal conflict and external conflict, particularly during
periods of economic downturn. They write, The linkages between internal and external conflict and prosperity are
strong and mutually reinforcing. Economic conflict tends to spawn internal conflict, which in turn returns the favour. Moreover, the
presence of a recession tends to amplify the extent to which international and external
conflicts self-reinforce each other. (Blomberg & Hess, 2002, p.89). Economic decline has also been linked with an
increase in the likelihood of terrorism (Blomberg, Hess, & Weerapana, 2004), which has the capacity to spill across borders and lead
to external tensions. Furthermore, crises generally reduce the popularity of a sitting government. ‘Diversionary
theory’
suggests that, when facing unpopularity arising from economic decline, sitting governments
have increased incentives to create a ‘rally round the flag’ effect. Wang (1996), DeRouen (1995), and
Blomberg, Hess and Thacker (2006) find supporting evidence showing that economic decline and use of force are at least indirectly
correlated. Gelpi (1997) Miller (1999) and Kisanganie and Pickering (2009) suggest that the tendency towards diversionary tactics are
greater for democratic states than autocratic states, due to the fact that democratic leaders are generally more susceptible to being
removed from office due to lack of domestic support. DeRouen (2000) has provided evidence showing that periods
of weak
economic performance in the United States, and thus weak presidential popularity, are statistically linked to an
increase in the use of force..
Uniqueness
US air industry strong
Zacks Equity Research 5/4/12. Leading investment research firm focusing on equities, earnings,
estimates, and stock analysis. “Airline Industry Stock Outlook - May 2012.”
http://www.zacks.com/stock/news/74514/airline-industry-stock-outlook-may-2012
Though the airlines have not yet released their global 2011 actual profit numbers, the
IATA projects that the industry
should earn profits of $7.9 billion. This is up from the previous projection of $6.9 billion,
primarily attributable to better performance of the Chinese carriers. However, U.S. airlines announced a
profit of $390 million overall in 2011, which is much lower than $2 billion projected by the IATA. The 2011 profit also plunged 86%
from $2.7 billion earned in 2010. This
nevertheless marked the second consecutive year of profits after
incurring cumulative losses of more than $50 billion in the past decade. Fuel price volatility, the worst
threat to the airline industry, represents about 35% of total expenses, up from 30% in 2010. North American airlines yielded 0.3% of
the net margin, down from 2.2% in 2010. Revenue
climbed 12.6% year over year with total expenses rising
15.5%, primarily due to a 36.1% rise in fuel costs. Further, the U.S. air carriers are providing excellent services
to their passengers. They are performing at record levels when it comes to arriving on-time,
baggage handling, fewer customer complaints, lower cancellations and lower overbooked
flights.
Aviation industry strong – fuel conservation efforts solve costs
FAA ’11. Federal Aviation Administration, August 2011. “The Economic Impact of Civil Aviation
on the U.S. Economy.”
http://www.faa.gov/air_traffic/publications/media/FAA_Economic_Impact_Rpt_2011.pdf
Even during tough times, the efficiency of our air transport network serves commerce and
supports jobs that maintain and revitalize the strength of the U.S. economy. Today, despite the
lingering effects of the recent recession, there is cautious optimism in the air transport sector
of the U.S. economy. 2 The industry continues to be flexible, developing new, innovative ways
to lower costs and increase revenues. • For example, as the price of jet fuel climbs, air carriers are
finding innovative ways to conserve fuel and lower costs by: replacing old, heavy drink carts with new lighter
versions, removing seat back telephones, installing lighter seats and TV monitors, applying new coating on airframes to improve
airflow, and purchasing more tugs to reduce engine fuel use. 3 • Investment
in air transportation infrastructure
leads to smart growth and job creation. The American Recovery and Reinvestment Act of 2009 provided funding to
invest $200 million in FAA facilities and equipment and $1.1 billion in grants-in-aid for airports. • The 2011 FAA Aerospace
Forecast expects a 4.9 percent increase in RPM between fiscal years 2010 and 2011, and
projects average annual growth rates of 3.8 percent per year through 2031 for U.S. airlines.
Aerospace high now – record high sales
Deloitte ’12. Deloitte LLP, audit, consulting, financial advisory, risk management and tax firm.
“The Aerospace and Defense Industry in the U.S. A financial and economic impact study.”
http://www.aia-aerospace.org/assets/deloitte_study_2012.pdf
For commercial aerospace, 2010 marked
the beginnings of what appears to be an upcycle in sales and
production, both in the large commercial aircraft segment. Indeed, in 2011, commercial aircraft
production reached a record high of 1,011, and sales orders recorded were the second highest
ever. With production rate increases being announced by the large aircraft manufacturers,
and the introduction of next generation fuel efficient aircraft, the supply base may expect to
experience a prolonged growth pattern, if past is prologue. On the other hand, this increase in production activity
poses a potential capacity challenge, as suppliers gear up to meet the rate increases.
Airbus investing in the US – creates thousands of jobs
Aviation Today 7/2/12. “Airbus to establish assembly line in United States.”
http://www.aviationtoday.com/press_releases/201207021100PR_NEWS_USPR_____DC33900.h
tml
In a major strategic announcement today, Airbus
said it will establish a manufacturing facility in the
United States to assemble and deliver A320 Family aircraft. Located at the Brookley Aeroplex in Mobile,
Alabama, it will be the company's first U.S.-based production facility. Airbus stressed that the assembly
line, which will create jobs and strengthen the aerospace industry, is part of its strategy to
enhance Airbus' global competitiveness by meeting the growing needs of its customers in the
United States and elsewhere. The facility in Alabama will assemble the industry-leading family of A319, A320 and A321
aircraft. The company said construction of the assembly line will begin in summer 2013. Aircraft assembly is planned to start in 2015,
with first deliveries from the Mobile facility beginning in 2016. Airbus anticipates the facility will produce between 40 and 50 aircraft
per year by 2018. "The time is right for Airbus to expand in America," said Fabrice Bregier, Airbus President & CEO at the
announcement today in Mobile. "The U.S. is the largest single-aisle aircraft market in the world – with a projected need for 4,600
aircraft over the next 20 years - and this assembly line brings us closer to our customers. Mobile is now becoming part of Airbus'
global production network, joining our successful and growing assembly lines in Hamburg, Toulouse and Tianjin."
Links
HSR kills aviation competitiveness – China proves
CAPA ’11. CAPA Center for Aviation, April 15, 2011. “China's aviation industry to suffer billions in
losses from high-speed rail.” http://centreforaviation.com/analysis/chinas-aviation-industry-tosuffer-billions-in-losses-from-high-speed-rail-50007
High-speed rail is rapidly becoming a pillar of China's transportation network and an
increasing threat to local airlines that have prospered from years of strong demand growth
and a lack of efficient ground transport alternatives. China's burgeoning high-speed rail network is already the
world's most extensive at 8358 km as at the end of 2010. But that is just the start. A 50% increase in the network is planned in 2011
alone. China’s
aviation industry is bracing for a reduction in revenues and profitability arising
from rising competition from high-speed rail. International expansion is an increasingly
necessary option for China's airlines. Some estimates put the loss in revenue for China’s
aviation industry (from reduced traffic and price pressure) at up to CNY10 billion (USD1.5 billion) in 2012, or 34% of the total. CAAC Director Li Jiaxiang stated some 50% of flights less than 500 km in length could
become unprofitable as a result of competition from high-speed trains and around 20% of
flights of between 800 and 1000 km could also run at a loss for the same reason. But sectors above
1500 km are not likely to be threatened, he added.
Politicians reduce airline investment regardless
Butterworth-Hayes ’12. Philip Butterworth-Hayes, Editorial Director at PMI Media, February
2012. Aerospace America. Industrial Beat. “High-speed rail will impact airliner markets.”
http://www.aerospaceamerica.org/Documents/Aerospace-America-PDFs-2012/February2012/International-Beat-FEB2012-2.pdf
But there is a downside to this. Some European politicians now see HSR as an alternative to
airline services, rather than a parallel, if connected, transport system. In the U.K., for example,
the government has declared it will not build any more runways in the southeast but will
promote new HSR lines, potentially depressing the number of aircraft required by U.K.
airlines.
HSR hurts aviation industry – China proves
OSCCC Ocean Shipping Communication Center China [News source on China’s transportation]
10/14/11 “High speed rail cuts into airline success”
http://coscc.ebizchina.net/2011/index.php/news/railway-news/high-speed-rail-cuts-intoairlines-success
This is the first air route halted at Wuhan’s airport as the city emerges as a hub of China’s
expanding high-speed railway network, which had a total length of 8,358 kilometers at the
end of last year. Previously, two daily flights linked Nanjing and Wuhan, about 520 km from each other, and a full price oneway ticket cost 730 yuan ($111). The intercity bullet trains, which began service in 2009, running at up to 250 km per hour, offer
second-class tickets for 180 yuan.
The high-speed trains have an occupancy rate of about 90 percent,
outperforming the flights, which had an occupancy rate of less than 50 percent on workdays.
With additional bullet train services coming in the third quarter of this year, the rail system,
which has drawn international attention, is expected to consolidate its advantage. “Our flights
were seriously affected after the high-speed rail lines opened,” Meng Qian, deputy director of the
marketing department of Lucky Air, said on Friday. The Yunnan-based budget airline was making
a scheduled round trip passenger flight daily between Wuhan and Nanjing. Meng said the flight, which had
been in service for five years, had been suffering big losses since 2009. Even after Lucky Air
offered up to 80 percent discounts on tickets, the flights were less than half full on nonholidays, according to a previous report. China Southern Airlines had the same experience
with flights it offered.
IL
Civil aviation key to jobs and GDP
FAA ’11. Federal Aviation Administration, August 2011. “The Economic Impact of Civil Aviation
on the U.S. Economy.”
http://www.faa.gov/air_traffic/publications/media/FAA_Economic_Impact_Rpt_2011.pdf
Table 2 summarizes the total impact of U.S. civil aviation on output, earnings and jobs. Economic
activity attributed to
civil aviation-related goods and services totaled $1.3 trillion in 2009, generating 10.2 million
jobs with $394.4 billion in earnings. Aviation accounted for 5.2 percent of GDP, the valueadded measure of economic activity.
General aviation key to economy
FAA ’11. Federal Aviation Administration, August 2011. “The Economic Impact of Civil Aviation
on the U.S. Economy.”
http://www.faa.gov/air_traffic/publications/media/FAA_Economic_Impact_Rpt_2011.pdf
GA [General Aviation] also made a remarkable impact. While smaller than the impact from
commercial aviation, the GA contribution still reflects the industry’s unique role in the
nation’s transportation system. GA operations contributed $38.8 billion to total output.
Factoring in manufacturing and visitor expenditures, GA accounted for a significant
contribution of $76.5 billion. In the U.S., GA has access to more than 5,178 public-use airports and a significant number of
private airports, making it one of the largest airport users. 36
Aviation and aircraft manufacturing key to economy
FAA ’11. Federal Aviation Administration, August 2011. “The Economic Impact of Civil Aviation
on the U.S. Economy.”
http://www.faa.gov/air_traffic/publications/media/FAA_Economic_Impact_Rpt_2011.pdf
Table 5 shows the total output, earnings and job estimates by civil aviation activity for 2009. The
two largest activities
contributing to output, earnings and jobs are airline operations and visitor expenditures.
Civilian aircraft manufacturing, engine and parts manufacturing, and other aircraft parts and equipment contribute
a total of $177.4 billion and nearly one million jobs to the U.S. economy. Increased global
demand for U.S. aircraft and parts makes this an important part of the manufacturing sector.
Visitor expenditures contributed the largest single portion of the total impact by far, with
some $597 billion in output and over 5.3 million jobs. Air couriers, airport operations and travel arrangements
round out the rest of commercial aviation, contributing $163.7 billion in total output and supporting just over 1.4 million jobs in the
U.S economy. Civil aviation supports job creation and the jobs are highly compensated. Civilian aircraft
manufacturing’s average salary of $51,303 was the highest among the industry followed by the engine and other aircraft parts
manufacturers (Table 6). Average salaries for jobs supported by airport operations was nearly $45,000, while jobs supported by air
courier and travel arrangements hovered around $34,000. At the lowest part of the spectrum, the average salary for jobs supported
by visitor expenditures was $33,550. The jobs induced by visitor expenditures are concentrated in the retail and the service sectors.
Impacts
Economic growth solves poverty
Winters, 2k. L. A. Winters, Professor of Economics at the University of Sussex and former Chief
Economist at the Department for International Development. “Trade and Poverty – is there an
Connection?” WTO. http://wto.org/english/news_e/pres00_e/pov3_e.pdf
Economic growth is the key to permanent poverty alleviation. It is also strongly related to
contemporaneous reductions in poverty—see, for example, Bruno, Ravallion and Squire (1996) or Roemer and
Gugerty (1997). Unless growth seriously worsens income distribution the proportion of the population living in
absolute poverty will fall as average incomes increase. The balance of the evidence seems to be that
although growth can be associated with growing inequality (or economic decline with narrowing inequality),
the effects on poverty tend to be dominated by the advantageous direct effects of growth—see,
for example, Demery and Squire (1996) on Africa. This effect also appears to generalize to the very poor
(below $1 per day)—Ravallion and Chen (1996) or Bruno, Ravallion and Squire (1996), although, at such very low levels of income,
small shocks loom large, and Demery and Squire (1996) find hints of contrary evidence in Africa. In recent work, Dollar
and
Kraay (2000) have found that the incomes of the poorest fifth of the population grew one-for-one
with GDP per head in a sample of 80 countries over four decades. This was as true of growth
induced by openness to trade as of that due to other stimuli. Possibly lying behind these results, but
possibly independent of them, is that it is generally easier for the government to raise the resources for
poverty alleviating policies if incomes are higher and/or growing.
Aerospace Addons
Aviation industry key to aerospace industry
Conway and Pedersen, ‘6. Richard S. Conway, Jr., Douglas H. Pedersen, January 2006. Puget
Sound Economic Forecaster. “THE WASHINGTON AEROSPACE INDUSTRY.” http://afawa.com/Aerospace_Industry.pdf
Air transportation is a vital function of a modern economy. It entails a variety of activities:
aerospace manufacturing, air passenger and freight service, airport operations, air traffic control, air transportation
arrangement, and other air support services. Today, including the suppliers of these activities, air transportation employs
more than 100,000 people in Washington. This study focuses on the aerospace industry, which
accounts for more than one-half of the employment in air transportation: The Washington
aerospace industry primarily manufactures aircraft and parts.
Airlines contribute significantly to the aerospace industry
SelectUSA ’10. “The Aerospace Industry in the United States.”
http://selectusa.commerce.gov/industry-snapshots/aerospace-industry-united-states. Accessed
7/15/12.
The U.S. aerospace industry is the largest in the world and the industry continued to show
reasonable strength in 2010 despite the lingering effects of the global economic downturn. In
2010 the U.S. aerospace industry contributed $85 billion in export sales to the U.S. economy. The industry’s positive
trade balance of $44.1 billion is the largest trade surplus of any manufacturing industry and
came from exporting 42 percent of all aerospace production and 72 percent of civil aircraft
and component production.
Econ
Aerospace industry key to economy – jobs, GDP, and new tech
Deloitte ’12. Deloitte LLP, audit, consulting, financial advisory, risk management and tax firm.
“The Aerospace and Defense Industry in the U.S. A financial and economic impact study.”
http://www.aia-aerospace.org/assets/deloitte_study_2012.pdf
We estimate that the
U.S. aerospace and defense industry directly employed 1.05 million workers
in 2010. These workers received $84.2 billion in wages and paid $15.4 billion in U.S. Federal individual income taxes, and $1.9
billion in state individual income taxes. Although not directly in the scope of this study, in addition we found that the Federal
government employs an estimated 845,198 aerospace and defense skilled workers at armed forces maintenance and repair depots,
National Aeronautics and Space Administration (NASA), Federal Aviation Administration (FAA), other defense agencies including
Defense Advanced Research Projects Agency (DARPA) and civilians working at the Department of Defense. We
found the
industry has an estimated indirect and induced employment of 2.36 jobs for every 1 directly
employed. This employment multiplier is a “direct effect” multiplier, which accounts for primary and
secondary effect employment associated with the aerospace and defense industry. It does not contemplate “final demand,” or
employment associated with tertiary effect employment well beyond the direct effect of this industry’s employment base. Thus, we
believe that
indirect and induced employment totals 2.48 million workers, in addition to those
cited above who are directly employed. Together with these indirect employees, we estimate the grand total
direct, indirect and induced employment associated with the U.S. aerospace and defense
industry is 3.53 million jobs, not including industry skilled workers employed by the Federal government or airlines. We
estimate that these U.S. aerospace and defense companies generated $324.0 billion in sales
revenue in 2010, with $15.6 billion in net income after tax at an average pre-tax reported operating profit margin
of 10.5%. This margin percent metric was below average, when compared to other industries in America. These companies paid
$5.5 billion in corporate income taxes on their earnings, as well as $1.7 billion in state income and similar business taxes. Thus
together with individual direct employee taxes,
the total industry generated an estimated $37.8 billion in
wage and income based taxes to state and Federal government treasuries, not including the taxes paid
by indirect and induced industry employment.4 The industry is the largest net exporter, and one of the
largest contributors to our nation’s gross exports at $89.6 billion, with a larger portion made up of
commercial aircraft bound for foreign carriers. The industry’s contribution to the nation’s GDP is 2.23%, and
as described below, we conclude the industry “punches above its weight,” when considering other beneficial and
qualitative impacts to our economy beyond these metrics. Indeed the industry contributes in ways not directly
included in GDP, employment, and taxes paid. Although it has only been 108 years since the Wright Brothers’ first
flight, the industry has contributed fundamentally to the way we live, work, travel and
communicate with the technology created and continued innovations in jet aircraft,
communications satellites, the internet and Global Positioning Systems (GPS), for example. Also, the
industry is primarily responsible for the reduction of casualties in armed conflict due to the
technology innovations that keep our warfighters out of harm’s way with unmanned aircraft,
sophisticated surveillance sensors and over the horizon strike capability.
US aerospace industry key to global economy – jobs, exports
ITA ’11. International Trade Administration, June 21, 2011. “AEROSPACE INDUSTRY IS CRITICAL
CONTRIBUTOR TO U.S. ECONOMY ACCORDING TO OBAMA TRADE OFFICIAL AT PARIS AIR
SHOW.” http://trade.gov/press/press-releases/2011/aerospace-industry-critical-contributor-tous-economy-062111.asp
“The
U.S. aerospace industry is a strategic contributor to the economy, national security, and
technological innovation of the United States,” Sánchez said. “The industry is key to achieving the
President’s goals of doubling exports by the end of 2014 and contributed $78 billion in export
sales to the U.S. economy in 2010.” During the U.S. Pavilion opening remarks, Sánchez noted that the aerospace
sector in the United States supports more jobs through exports than any other industry. Sánchez
witnessed a signing ceremony between Boeing and Aeroflot, Russia’s state-owned airline. Aeroflot has ordered eight 777s valued at
$2.1 billion, and the sales will support approximately 14,000 jobs. “The
218 American companies represented in
the U.S. International Pavilion demonstrate the innovation and hard work that make us
leaders in this sector,” said Sánchez. “I am particularly pleased to see the incredible accomplishments of U.S. companies
participating in the Alternative Aviation Fuels Showcase, which demonstrates our leadership in this important sector and shows that
we are on the right path to achieving the clean energy future envisioned by President Obama.” The 2011 Paris Air Show is the
world’s largest aerospace trade exhibition, and features 2,000 exhibitors, 340,000 visitors, and 200 international delegations.
The
U.S. aerospace industry ranks among the most competitive in the world, boasting a positive
trade balance of $44.1 billion – the largest trade surplus of any U.S. manufacturing industry. It
directly sustains about 430,000 jobs, and indirectly supports more than 700,000 additional
jobs. Ninety-one percent of U.S. exporters of aerospace products are small and medium-sized
firms.
Aerospace k2 GDP
Deloitte ’12. Deloitte LLP, audit, consulting, financial advisory, risk management and tax firm.
“The Aerospace and Defense Industry in the U.S. A financial and economic impact study.”
http://www.aia-aerospace.org/assets/deloitte_study_2012.pdf
We found that the
aerospace and defense industry has a significant impact on the U.S. economy, with
direct industry sales contributing 2.23% to national GDP in 2010. This figure differs from other industry
citations, such as an FAA citation that the U.S. civil aviation industry contributed 5.2% to U.S. GDP
in 2009. As mentioned earlier, the FAA’s study had a different scope than ours. For comparison purposes, we analyzed the direct
sales to GDP ratios for different industries based on their NAICS codes. As can be seen from Figure 13, the aerospace and
defense industry has a nominal GDP contribution higher than the primary metal
manufacturing industry. It has a similar level of contribution to the automobile and machinery manufacturing industries.
Finally, it has a significantly lower nominal GDP contribution than the health care and chemicals industries. We believe the
industry has contributions of significance that are not counted in the GDP numbers and that
are worth noting, as described in the following section, entitled, ‘Qualitative and nonquantified contributions.
Aerospace key to US economy
Deloitte ’12. Deloitte LLP, audit, consulting, financial advisory, risk management and tax firm.
“The Aerospace and Defense Industry in the U.S. A financial and economic impact study.”
http://www.aia-aerospace.org/assets/deloitte_study_2012.pdf
The U.S. aerospace and defense industry has been a leader in its contribution to product
innovation, bringing people all over the world into contact with each other with safer and lower cost air travel and
communications. It has created the technology that successfully addresses national security and
helps defend the U.S. It continues to create marvels of science and technology such as
airplanes that turn into helicopters, high definition pictures from space, and remote
controlled armed conflict. It continues to create the technology innovations that power the
economy with our just-in-time, internet-based commerce. The industry also has a large
contribution to the U.S. economy, responsible for fully 2.23% of GDP and 7.0% of exports in
2010, and is the largest net exporting industry in America. 39 With direct, indirect and induced
employment of 3.53 million jobs spread over the entire U.S., as well as contributing an
estimated $37.8 billion in tax collections benefiting local communities, state treasury coffers and the federal
government, this industry is part of the very fabric of our country’s well-being. Indeed we conclude the
industry punches above its weight, when considering qualitative contributions cited.
Trade
Aerospace key to trade
Deloitte ’12. Deloitte LLP, audit, consulting, financial advisory, risk management and tax firm.
“The Aerospace and Defense Industry in the U.S. A financial and economic impact study.”
http://www.aia-aerospace.org/assets/deloitte_study_2012.pdf
The industry exported $89.6 billion and imported $47.5 billion in goods in 2010. According to the
Defense Security Cooperation Agency (DCSA), of the $89.6 billion in goods exported in 2010, $31.6 billion were foreign military sales.
14 Figure 11 highlights the contribution of the aerospace and defense industry to the U.S.’ trade balance in 2010, in comparison with
other industries with exports that were greater than $50 billion. Although
the aerospace and defense industry in
2010 was the third highest gross exporter, it had the highest net trade balance, followed by
agricultural products.
Trade k2 economy
McTeer, ‘8. Bob McTeer, former president of the Federal Reserve Bank of Dallas. December 10,
2008. New York Times. “The Impact of Foreign Trade on the Economy.”
http://economix.blogs.nytimes.com/2008/12/10/the-impact-of-foreign-trade-on-the-economy/
Foreign trade has become more important to our economy in recent years. Exports and
imports of goods and services have grown rapidly. A growing trade volume benefits our
standard of living in several ways, but, as the recession deepens, my focus here will be limited to the impact of the
trade balance on America’s gross domestic product and, by implication, its job market. G.D.P and employment
generally move in the same directions; so what I say about the impact on G.D.P generally applies to employment as
well. G.D.P., as I’ve discussed here before, is the way economists calculate how much an economy is producing in total goods and
services. It is usually calculated by adding together several categories of spending, including consumer spending, investment and
government spending. Exports of goods and services generate income at home, and so they are also a
component of G.D.P. Imports, on the other hand, generate income abroad, so they are subtracted from the other categories of
spending to get a more complete picture of how much an economy is actually producing. Higher
exports and lower
imports add to G.D.P., while reduced exports and higher imports contract G.D.P.
Trade solves poverty
Winters, 2k. L. A. Winters, Professor of Economics at the University of Sussex and former Chief
Economist at the Department for International Development. “Trade and Poverty – is there an
Connection?” WTO. http://wto.org/english/news_e/pres00_e/pov3_e.pdf
In the broadest possible terms, the essay concludes that trade
liberalization is generally a strongly positive
contributor to poverty alleviation—it allows people to exploit their productive potential,
assists economic growth, curtails arbitrary policy interventions and helps to insulate against
shocks. The essay recognizes, however, that most reforms will create some losers (some even in the long run) and that some
reforms could exacerbate poverty temporarily. It argues, however, that in these circumstances
policy should seek to alleviate the hardships caused rather than abandon reform altogether.
Tech
Aerospace k2 tech
Deloitte ’12. Deloitte LLP, audit, consulting, financial advisory, risk management and tax firm.
“The Aerospace and Defense Industry in the U.S. A financial and economic impact study.”
http://www.aia-aerospace.org/assets/deloitte_study_2012.pdf
Technology innovations, many of which emanated from the U.S. aerospace and defense
industry, have played a major part in the economic advancements made in the U.S. in the last
century. Often cited are economic developments created out of necessity related to the industrialization of the defense industry
during World Wars I & II, the Korean Conflict, the Vietnam War and the more recent Middle East conflicts in Afghanistan and Iraq.
Game changing technology innovations were created or improved, such as the jet engine,
supersonic flight, space flight, radar, communications, direct-to-home television broadcast
and GPS navigation satellites, and development of the internet, for example.
Technology key to solve climate change
Hoffert, et al, ‘2. Martin I. Hoffert, Ken Caldeira, Gregory Benford, David R. Criswell, Christopher
Green, Howard Herzog, Atul K. Jain, Haroon S. Kheshgi, Klaus S. Lackner, John S. Lewis, H.
Douglas Lightfoot, Wallace Manheimer, John C. Mankins, Michael E. Mauel, L. John Perkins,
Michael E. Schlesinger, Tyler Volk, Tom M. L. Wigley. Science Magazine. November 1, 2002.
“Advanced Technology Paths to Global Climate Stability: Energy for a Greenhouse Planet.”
http://www.sciencemag.org/content/298/5595/981.short
Stabilizing the carbon dioxide–induced component of climate change is an energy problem.
Establishment of a course toward such stabilization will require the development within the
coming decades of primary energy sources that do not emit carbon dioxide to the
atmosphere, in addition to efforts to reduce end-use energy demand. Mid-century primary power
requirements that are free of carbon dioxide emissions could be several times what we now derive from fossil fuels (∼1013 watts),
even with improvements in energy efficiency. Here we survey possible future energy sources, evaluated for their capability to supply
massive amounts of carbon emission–free energy and for their potential for large-scale commercialization. Possible candidates for
primary energy sources include terrestrial solar and wind energy, solar power satellites, biomass, nuclear fission, nuclear fusion,
fission-fusion hybrids, and fossil fuels from which carbon has been sequestered. Non–primary
power technologies
that could contribute to climate stabilization include efficiency improvements, hydrogen
production, storage and transport, superconducting global electric grids, and geoengineering .
All of these approaches currently have severe deficiencies that limit their ability to stabilize global climate. We conclude that a
broad range of intensive research and development is urgently needed to produce
technological options that can allow both climate stabilization and economic development.
Security
Aerospace k2 nat’l security
Deloitte ’12. Deloitte LLP, audit, consulting, financial advisory, risk management and tax firm.
“The Aerospace and Defense Industry in the U.S. A financial and economic impact study.”
http://www.aia-aerospace.org/assets/deloitte_study_2012.pdf
The world continues to demonstrate how dangerous it is and how our civilization and way of
life can be put in jeopardy quickly. The surprise attacks on Pearl Harbor and the tragic events surrounding the terrorist
attacks of 9/11 have shown our nation how vulnerable it can be. Technology innovations and products
developed in the aerospace and defense industry have made our nation safer, from sophisticated
sensors that can “see” nefarious activities of our adversaries, to the bomb and metal
detectors that have become ubiquitous at airports around the world, the industry continues
to innovate to produce the necessary defenses used to increase our national security. Recent
advances to counter the next generation national security threats include for example, sophisticated software to trace bank
transactions of terrorists, advanced listening sensors to eavesdrop on communications of known terrorists, and sophisticated
sensors to help discover threats at our airports, borders, and seaports. Of course, the unmanned aerial vehicle (UAV) has been
extraordinarily successful in helping to see, then attack if necessary, our adversaries. Lastly, the
specter of a potential
cyber-attack on our nation’s water, power, transportation or communications infrastructure is
cause for alarm, and the industry continues to develop the next generation technologies to
address these and future threats.
Tourism
Airlines key to tourism, which is key to the economy
OEF, ‘6. Oxford Economic Forecasting, October 2006. “The Economic Contribution of the
Aviation Industry in the UK.” http://www.oef.com/Free/pdfs/Aviation2006Final.pdf
The tourist
industry makes a large and growing contribution to the UK economy, directly contributing nearly 4%
of GDP. • Nearly three-quarters of international visitors to the UK arrive by air. Spending by
visitors who arrive by air is equivalent to 1.1% of GDP and generates around 170,000 jobs in the
UK. • Air services also allow UK tourists to enjoy a much wider range of overseas holidays than
would otherwise be accessible. • Increased air services capacity is likely to be needed if the government
is to achieve its objective for the tourism industry to grow by a third by 2010. Tourism makes a
major contribution to the UK economy. In 2005 the sector directly generated an estimated £46.8
billion of output, equivalent to 3.9% of GDP, according to OEF/World Travel & Tourism Council (WTTC) estimates.
And this activity was responsible for 1.08 million jobs – 3.5% of total employment 13 . However, this is just the
direct impact of travel and tourism in the UK. These 1 million+ workers – which covers those working at airports, in hotels and
restaurants etc – do not reflect the full contribution of travel and tourism to the UK economy.
The firms directly involved
in providing travel and tourism goods and services spend money in their own supply chains
that support more jobs in other industries. This spending filters through the economy into the
sectors that provide the travel and tourism industry with the food provided in restaurants, the fuel
required to move people around, and a range of business services. Allowing for the spending of the travel and tourism industry
on bought-in goods and services, the total number of jobs directly and indirectly supported amounts to 2.9 million (9.3% of total
employment).
AFF Answers
Non-Unique
Airlines down now – fuel costs and slowing demand
Caplinger, 12. Dan Caplinger, 03/27/12. “Has Delta Air Lines Become the Perfect Stock?”
Dailyfinance.com. http://www.dailyfinance.com/2012/03/27/has-delta-air-lines-become-theperfect-stock/
Since we looked at Delta Air Lines last year, the company's score has fallen by two points. With
shareholder equity
having gone negative, the airline still faces balance-sheet woes that pose a long-term threat to
the company. Delta actually had a good year in 2011. With a combination of baggage fee revenue and high fares, Delta earned
more than $850 million in profit for the year. Yet AMR's recent bankruptcy shows just how quickly fortunes can change among
airlines. Indeed, fuel
costs and lagging traffic have started to catch up with the industry. Southwest
Airlines (NYS: LUV) recently said that high fuel prices could prevent it from earning a profit this
quarter, while both Southwest and US Airways (NYS: LCC) have had trouble getting passengers in
airplane seats. Bad conditions have led United Continental (NYS: UAL) to cut back on its capacity
in the hopes of supporting higher fares and cutting costs.
Airlines down – diminishing profits
Kaur 2012. Navjot Kaur, 03/23/12. “Turbulence Ahead for Airlines?” Dailyfinance.com.
http://www.dailyfinance.com/2012/03/23/turbulence-ahead-forairlines/?source=edddlftxt0860001
If you're betting on airline companies, you could be in store for a rough few months. Low-cost
carrier Southwest Airlines (NYS: LUV) recently announced that it may not post a profit in the first
quarter. And this dismal scenario is not just limited to low-cost airlines that function on thin
margins. Other carriers such as Delta Air Lines (NYS: DAL) are also cutting their profitability
forecast for the near future.
Airlines down – oil prices
Kaur 2012. Navjot Kaur, 03/23/12. “Turbulence Ahead for Airlines?” Dailyfinance.com.
http://www.dailyfinance.com/2012/03/23/turbulence-ahead-forairlines/?source=edddlftxt0860001
Although the first quarter is traditionally one of the weakest performing periods during the year for the airline industry, it is
important to find out whether these
companies' expectation of low profitability has more to it than just
oil prices seem to be the main culprit. The costly liquid Oil prices are
continuously spiking up, denting the delicate economic recovery that, in turn, determines the
fortunes of the airline industry. What does not help either is the fact that jet fuel prices are the biggest
part of airline operating expenses. From January 2011 to January 2012, the price of jet fuel increased by as much as
seasonality. Burgeoning
18%, leaving airline companies with few options.
Airline industry down – low passenger traffic
Kaur 2012. Navjot Kaur, 03/23/12. “Turbulence Ahead for Airlines?” Dailyfinance.com.
http://www.dailyfinance.com/2012/03/23/turbulence-ahead-forairlines/?source=edddlftxt0860001
To add to their woes, most
airlines are witnessing lower capacity utilization. Southwest complained
of relatively low passenger traffic in February. This reflected in its passenger revenue per
available seat mile (a significant metric), which grew by a disappointing 4% as compared to 7% in January.
This was also the case with US Airways (NYS: LCC) , which experienced low bookings during the beginning of
February.
Airlines down – profits
Zacks Equity Research 5/4/12. Leading investment research firm focusing on equities, earnings,
estimates, and stock analysis. “Airline Industry Stock Outlook - May 2012.”
http://www.zacks.com/stock/news/74514/airline-industry-stock-outlook-may-2012
The global airline industry continues to face challenges in 2012, from rising costs -- fuel, in
particular -- and economic uncertainties. The condition looks bleaker ahead with a weak outlook for Europe, given
its financial problems. The International Air Transport Association (IATA) projects overall airline profits of $3.0
billion for 2012. This is down from the $3.5 billion projected last December and $4.9 billion projected in
September. Moreover, the 2012 profit outlook is also below the estimated $7.9 billion in 2011
and $16 billion earned in 2010. This steep decline in the industry's profitability is a function of
the overall unfavorable macro backdrop with which the industry must operate this year.
No link
HSR impacts on aerospace only short-term
Butterworth-Hayes ’12. Philip Butterworth-Hayes, Editorial Director at PMI Media, February
2012. Aerospace America. Industrial Beat. “High-speed rail will impact airliner markets.”
http://www.aerospaceamerica.org/Documents/Aerospace-America-PDFs-2012/February2012/International-Beat-FEB2012-2.pdf
Some estimates are suggesting the impact could be more short term. According to a study by the Centre
for Asia Pacific Aviation on the implications of HSR growth in aviation in China: “Some estimates put the loss in
revenue for China’s aviation industry from reduced traffic and price pressure at up to CNY10
billion ($1.5 billion) in 2012, or 3-4% of the total. Li Jiaxiang, director of the Civil Aviation Administration
of China, stated some 50% of flights less than 500 km in length could become unprofitable as a result of competition from
high-speed trains, and around 20% of flights of between 800 and 1,000 km could also run at a loss for the same reason. But
sectors above 1,500 km are not likely to be threatened, he added....Guotai Junan Securities recently predicted
that high-speed rail could capture between 1.3% and 5.3% of domestic airline passengers [per annum] by 2014.
HSR has minimal impact on aerospace – airlines can just focus more on
interregional transport
Butterworth-Hayes ’12. Philip Butterworth-Hayes, Editorial Director at PMI Media, February
2012. Aerospace America. Industrial Beat. “High-speed rail will impact airliner markets.”
http://www.aerospaceamerica.org/Documents/Aerospace-America-PDFs-2012/February2012/International-Beat-FEB2012-2.pdf
However,
the impact of new HSR services on the demand for singleaisle aircraft may be less than
many in the aviation industry fear. The plans are ambitious, but economic and other issues
have slowed down HSR plans in many countries. The recent European economic issues have
delayed HSR plans in Poland by up to 20 years, according to recent reports. The crash in July 2011 of
two high-speed trains in Wenzhou, Zhejiang Province, China, with the loss of 40 lives, prompted the
government to postpone many of the major HSR developments it had planned. China’s
railway has also been under increasing financial pressure. At the same time, the country plans
to build 70 airports between now and 2020, suggesting that it is building its aviation services in parallel with,
rather than instead of, its fast train system. Second, airlines have successfully reacted to HSR
competition by increasing frequencies and introducing new regional services where HSR rail
simply cannot compete. “Low cost carriers might respond to the emergence of a high speed
rail alternative by increasing the frequency of service,” according to a 2009 study, Competitive Interaction
between Airports, Airlines and High-Speed Rail, by the Organisation for Economic Cooperation and Development and the
International Transport Forum. “A
similar improvement on the rail side would be very expensive given
the cost of trains, and this would reduce rail’s market share and profitability. “In addition, low
cost carriers can provide services between regions instead of cities (so avoiding the need to acquire
expensive slots at centrally located airports). This is effectively what happened after the high speed rail service between Paris and
London opened. The potential strategic responses from low-cost carriers reinforce the view that high
speed rail may be
justified where densely populated origin destination pairs exist, but is not a general model for
interurban and interregional transport.” The effect of HSR competition on northern European routes between
London, Paris, Amsterdam, Brussels, and Frankfurt has been to open up slots at heavily congested airports, a
phenomenon most airlines have welcomed as they have been able to replace short-haul
services with more profitable long-haul routes. In this scenario, integrated air-rail HSR networks
allow fast trains to become ‘feeder services’ to an airport hub, encouraging network carriers
to develop their global services using larger aircraft.
Impacts
Airlines depend on the economy, not the other way around
FAA ’11. Federal Aviation Administration, August 2011. “The Economic Impact of Civil Aviation
on the U.S. Economy.”
http://www.faa.gov/air_traffic/publications/media/FAA_Economic_Impact_Rpt_2011.pdf
Economic recovery in the air transportation industry depends heavily on the economic
recovery of the rest of the economy, the willingness and financial ability of individuals and businesses to undertake
travel, and the need for air-freight services. As the overall economy improves and as more individuals and
businesses are willing and able to travel, more arrangements are made for trips to be
completed at a future date. Therefore, economic movements in the air transportation industry
generally lag movements in the rest of the economy. The recent growth in the economy is leading to increases
in airline operating revenues and RPM, 21 but not industry employment. Airline industry employment is in decline
and could continue to fall even as the industry recovers. Airline employment has fallen since
reaching a peak in 2000, before the onset of the U.S. recession in 2001 and the ensuing
terrorist attacks on September 11.
Aviation industry causes GHG emissions
Center for Climate and Energy Solutions, 09. “Aviation.” Accessed 7/15/12
http://www.c2es.org/technology/factsheet/Aviation
Aviation has reshaped the world we live in—allowing for affordable and rapid travel to almost any point on the
globe. In recent years, economic growth and rapid globalization have made air travel affordable to an even larger part of the global
population. In this context, demand for aviation, in terms of passenger-miles flown, has grown at a rapid pace. In China, for example,
domestic air transport grew at 15.5 percent annually from 2000 to 2006.[1] Globally, the rate of air travel increased at 3.8 percent
per year over the same time period.[2] This growing
demand for air travel has resulted in increasing levels
of greenhouse gas (GHG) emissions from the aviation sector, despite efficiency improvements .
Currently, the aviation sector—including both domestic and international travel—accounts for approximately
1.5 percent of global anthropogenic GHG emissions per year.[3] The U.S. accounts for nearly
40 percent of the global GHG emissions from aviation. Barring policy intervention, GHG
emissions from aviation are projected to quadruple by 2050.[4]
No risk of or impact of economic decline
Drezner ‘11 Daniel W. Drezner, professor of international politics at the Fletcher School of Law
and Diplomacy at Tufts University, “Please come down off the ledge, dear readers,” Foreign
Policy, 8/12/11,
http://drezner.foreignpolicy.com/posts/2011/08/12/please_come_down_off_the_ledge_dear_r
eaders
So, when we last left off this debate, things were looking grim. My concern in the last post was that the persistence of hard times
would cause governments to take actions that would lead to a collapse of the open global economy, a spike in general riots and
disturbances, and eerie echoes of the Great Depression. Let's
assume that the global economy persists in
sputtering for a while, because that's what happens after major financial shocks. Why won't these other bad things
happen? Why isn't it 1931? Let's start with the obvious -- it's not gonna be 1931 because there's some passing
familiarity with how 1931 played out. The Chairman of the Federal Reserve has devoted much
of his academic career to studying the Great Depression. I'm gonna go out on a limb therefore and assert that
if the world plunges into a another severe downturn, it's not gonna be because central bank heads replay the same set of mistakes.
The legacy of the Great Depression has also affected public attitudes and institutions that
provide much stronger cement for the current system. In terms of [public] attitudes, compare the results of
this mid-2007 poll with this mid-2010 poll about which economic system is best. I'll just reproduce the key charts below: The
headline of the 2010 results is that there's eroding U.S. support for the global economy, but a few other things stand out. U.S.
support has declined, but it's declined from a very high level. In contrast, support for free
markets has increased in other major powers, such as Germany and China. On the whole, despite the
worst global economic crisis since the Great Depression, public attitudes have not changed all that much.
While there might be populist demands to "do something," that something is not a return to
autarky or anything so [drastic]. Another big difference is that multilateral economic institutions are
much more robust now than they were in 1931. On trade matters, even if the Doha round is dead, the
rest of the World Trade Organization's corpus of trade-liberalizing measures are still working
quite well. Even beyond the WTO, the complaint about trade is not the deficit of free-trade agreements but the surfeit of them.
The IMF's resources have been strengthened as a result of the 2008 financial crisis. The Basle
Committee on Banking Supervision has already promulgated a plan to strengthen capital
requirements for banks. True, it's a slow, weak-assed plan, but it would be an improvement over the status quo. As for the
G-20, I've been pretty skeptical about that group's abilities to collectively address serious macroeconomic problems. That is setting
the bar rather high, however. One
could argue that the G-20's most useful function is reassurance.
Even if there are disagreements, communication can prevent them from growing into
anything worse. Finally, a note about the possibility of riots and other general social unrest. The working paper cited in my
previous post noted the links between austerity measures and increases in disturbances. However, that paper contains the following
important paragraph on page 19: [I]n
countries with better institutions, the responsiveness of unrest to
budget cuts is generally lower. Where constraints on the executive are minimal, the coefficient on expenditure changes
is strongly negative -- more spending buys a lot of social peace. In countries with Polity-2 scores above zero, the coefficient is about
half in size, and less significant. As we limit the sample to ever more democratic countries, the size of the coefficient declines. For
full democracies with a complete range of civil rights, the coefficient is still negative, but no
longer significant. This is good news!! The world has a hell of a lot more democratic governments
now than it did in 1931. What happened in London, in other words, might prove to be the exception more than the rule.
So yes, the recent economic news might seem grim. Unless political institutions and public attitudes buckle,
however, we're unlikely to repeat the mistakes of the 1930's. And, based on the data we've
got, that's not going to happen.
World War 2 counterexample is wrong
Ferguson ‘6 Niall Ferguson, Laurence A. Tisch Professor of History at Harvard University and
senior fellow at the Hoover Institution at Stanford University, Foreign Affairs, Vol. 85, Issue 5,
September/October 2006
Nor can economic crises explain the bloodshed. What may be the most familiar causal chain in modern historiography links the
Great Depression to the rise of fascism and the outbreak of World War II. But that simple story leaves too much out. Nazi
Germany started the war in Europe only after its economy had recovered. Not all the
countries affected by the Great Depression were taken over by fascist regimes, nor did all such
regimes start wars of aggression. In fact, no general relationship between economics and
conflict is discernible for the century as a whole. Some wars came after periods of growth, others were the
causes rather than the consequences of economic catastrophe, and some severe economic crises were not followed by wars.