Jomo Kwame Sundaram — Lost Jobs, Lower Incomes, Rising Inequality

Optimistic claims about the TPP’s economic impacts are largely based on economic modeling projections published by the Washington-based Peterson Institute for International Economics.2 Its researchers used a computable general equilibrium (CGE) model to project net GDP gains for all countries involved. These figures have been widely cited in many countries to justify TPP approval and ratification. Updated estimates, released in early 2016 and incorporated into the World Bank’s latest report on the global economy,3 now stress income gains for the United States of $131 billion, or 0.5 percent of GDP, and a 9.1 percent increase in exports by 2030.4

The methodology of the Peterson study is flawed; consequently, growth and income gains are overstated, and the costs to working people, consumers and governments are understated, ignored or even presented as benefits. Job losses and declining or stagnant labor incomes are excluded from consideration, even though they lower economic growth by reducing aggregate demand.

The projections methodology assumes away critical economic problems and boosts economic growth estimates with unfounded assumptions.…

Some economists have pointed out6 additional misleading findings in the most recent Peterson Institute update….

In sum, the TPP will increase pressures on labor incomes, weakening domestic demand in all participating countries, in turn leading to lower employment and higher inequality. Even though countries with lower labor costs may gain greater market shares and small GDP increases, employment is still likely to fall and inequality to increase.…

Triple Crisis
Lost Jobs, Lower Incomes, Rising Inequality
Jomo Kwame Sundaram

Jomo Kwame Sundaram was an Assistant Secretary General working on Economic Development in the United Nations system during 2005-15, and was awarded the 2007 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.