What’s
Wrong Today:

Wrongologist
blog reader Shelley suggested a column about the “Texas Miracle” on the day
that the NYT had this
story about Texas water rights. Apparently, Texas allows corporations to
pretty much take water away from people who own it: (brackets and emphasis by
the Wrongologist)

And
the commission agreed, exempting 66 towns and electric utilities for health and
safety reasons, even
though hundreds of farmers and others who lost their water held more senior
rights. So a big
corporation got the water. The Texas miracle often favors big business over the
little guy.

Last fall,
economist Tyler Cowen tried to make the case that “Texas is our Future” in Time
Magazine. Cowen observed that more Americans are migrating to Texas than
to any other state. He said:

The idea that vast numbers of
Americans are “voting with their feet” for liberty and prosperity by abandoning
blue states and moving to Texas has become a conservative gospel, but the answer to the question of whether Texas is America’s
future depends on your political orientation as much as the facts on the
ground.

Phillip Longman in the Washington
Monthly deconstructed some of the migration data. He indicates that according to Census Bureau data,
441,682 native-born Americans moved to Texas from other states between 2010 and
2011. Sounds like a lot. But 358,048 Texans left their state behind during the
same period.

The net domestic migration of
native-born Americans to Texas came to just 83,634. It’s the demographic
equivalent of Germantown, Maryland (population 86,395) “voting with its feet”
and moving to Texas.

What
about job growth? Time reported on the
Texas boosterism of Richard W. Fisher, president of the Federal Reserve
Bank of Dallas:

To be
sure, Texas has more minimum-wage jobs than any other state, and only
Mississippi exceeds it with the most minimum-wage workers per capita.

According
to the Dallas Fed, only 28% percent of the jobs created in or relocated to
Texas since 2001 pay in the lowest quarter of the nation’s wage distribution.
By comparison, jobs paying in the top half account for about 45% percent of the
new jobs in Texas. The most obvious question about Texas
job growth is how much is driven by the
boom in Texas oil and gas production? Texas boosters say the Texas
economy is more diversified than in the 1970s. Yet, oil and gas account for a
rapidly rising share of the Texas economy.

Thanks to
fracking and historically high world oil prices, Texas oil production increased
by 126% between 2010 and 2013. Only a few years ago, Texas’s oil production had
dwindled to just 15% of US output; by May of last year it had jumped to 34.5%. Texas
accounts for 27% of US natural gas production, which is more than the
production of any nation except Russia. That creates jobs outside the oil
patch. A recent issue of Texas
Monthly reported that, in sleepy towns like Cotulla, the population
has more than tripled in the past two years, and no fewer than thirteen new
hotels have opened to accommodate the influx of oil rig workers.

Finally,
between 1998 and 2011, the percent of Texas GDP from oil and gas extraction
more than doubled, according to the US Dept. of Commerce. Meanwhile, despite
the hype about high tech jobs, the share of the Texas economy produced by the
information, communications, and technology sectors is 27% smaller than it was in 1998.

Texas has
a growing population, but inward migration has been quite modest. Texas
population has boomed due to two main factors: immigration from abroad, mostly
Mexico, and a birthrate that is the second highest in the nation after Utah.

From
Longman:

But
regardless of its source, population growth fuels economic growth. It swells
the supply and lowers the cost of labor, while at the same time adding to the
demand for new products and services. The population of Texas swelled by more
than 24% from 2000 to 2013, as did the demand for just about everything, from
houses to highways to strip malls. And this, combined with new flows of oil and
gas dollars, plus increased trade with Mexico, favored Texas with strong job
creation numbers.

Within
Texas, their (few) liberal legislators have updated a publication every year
since 2003 entitled “Texas
On the Brink” which provides rankings that point out the state’s deficiencies,
such as being last in the percentage of the adult population who graduated from
high school while being first among the states in carbon dioxide emissions and
in the share of the population lacking health insurance. Here are a few lowlights:

Education:

• Elementary and Secondary Public School
  Enrollment: 2nd (they have the 2nd largest population)

• Percentage of Population Graduated from High School: 50th

Health Care:

• Percent
  of Population Uninsured: 1st (highest # of uninsured)

• Percent
  of Non-Elderly Uninsured: 1st (highest # of uninsured)

• Percent
  of Low Income Population Covered by Medicaid: 48th

Environment:

• Amount
  of Carbon Dioxide Emissions: 1st (highest)

• Amount
  of Hazardous Waste Generated: 1st (highest)

Democracy:

• Percent of Voting-Age Population Registered to Vote: 47th

• Percent of
  Voting-Age Population that Votes: 51st

Migrate to
Texas! Just don’t be old, sick, poor, a woman, non-Christian, union, non-white,
a child, want to vote, or need an abortion.

The real
Texas miracle is that its current leaders get away with bragging so much about it.

 “I can hire one half of the working class to kill the other half” – Jay Gould

A cynic might say that the trumped up “vote” in Crimea and voting in the US are not that far apart. No, we don’t have mob violence or killings as a part of our process, just voter suppression and Citizens United. We laugh at those immature democracies abroad that just do the bidding of oligarchs.

Bottom line is, we’re on our way to joining that club. America has sold its soul to the corporations’ bottom line, and we got a good price. “We” got a good price, depending on how you define we. We, in this case, means ‘not you.’

How was the payout distributed? Among the makers and takers. The makers made the deal and took the profits, while the takers took it on the chin. When we look back on the period 1980-2020, the headline will be the corrosive impact of wealth disparity. Now, we are surprised at what happened. We also seem surprised that an airliner can disappear, when an entire middle class has gone missing without explanation. We say, “But, you can’t fight City Hall with a ham sandwich”.

We used to be a nation of shared prosperity. We are now an oligarchy. And power follows money, and back again, through an unbreakable feedback loop. Use the quote above by Jay Gould, one of our original oligarchs, to write this Sunday’s homily.

Crimea’s Referendum:

Putin takes a bite of Ukraine, likes the taste:

NSA acts like an oligarch @ home:

Obama: Oligarch or not?

Oligarchs press advantage against the poor:

Enjoy St. Patrick’s Day. Just don’t drink and drive:

What’s
Wrong Today:

As
John Kerry ends his
meeting today with Russia’s Foreign Minister Lavrov with no progress, it is
time to review a thread that has emerged from the last 10 days of posturing in
the US about Russia’s energy threat to West.

The US
Department of Energy (DoE) said that it would sell
5 million barrels of crude oil from the Strategic Petroleum Reserve; a move it
said was to test the capabilities of the nation’s emergency stockpile in a
rapidly changing oil market, (meaning Ukraine and Russia’s threat to cut flows
of gas to Europe).

It would
be the first sale from the reserve since 1990.

Oil
Price.com reports that after Russia’s occupation of Crimea, many in the
West wondered if it were possible to unleash
America’s natural gas abundance to reduce Europe’s dependence on Russia
for over 30% of its natural gas supply. Moscow has used this leverage in the
past to extract political concessions, and Gazprom, Russia’s gas
behemoth, has threatened to cut
exports to Ukraine should it fail to pay its gas debt.

To many,
the answer to the specter of Russian natural gas dominance is clear: unleash
America’s natural gas.

This
sentiment was crystallized in a John Boehner Op-Ed in the Wall Street Journal last week, which
called on President Obama and the DoE to accelerate approvals for
new LNG export terminals and to open up America’s natural gas supplies to
export. Boehner claimed that not only can the United States match Russia in the
European energy marketplace; it has an
obligation to do so.

The DoE has
approved
six applications for terminals
to export liquefied gas; five are in Texas and Louisiana, and one in Maryland.
A further 24 applications are pending.

Boehner
and other top Republicans are calling on the administration to expedite their
approval. Hard talk from the Boehner:

From last
Friday’s Guardian:

No
surprise that the oil industry and Republicans smell opportunity. But, would
American natural gas exports help shift the European balance of power?

In
short: no. From Oil Price:

Mr. Boehner
ignores two important facts: First, most of those contracts are in Asia, where
natural gas prices are higher than in Europe. Second, the US does not sell
natural gas, corporations do. Why would these
companies voluntarily lose money in order to advance American interests? They
wouldn’t.

Those
businesses are most likely to sell the gas where they will get the greatest
return. Landed (includes costs of delivery by tanker) LNG prices in Europe
range between $10 and $11 per MMBtu (one million BTUs), while the price in
Asia is $15 or higher.

Mr.
Boehner should have also considered that the gas liquefaction process adds
between $4 and $6 to the price of natural gas, and that the benchmark price for
American natural gas spiked to over $7 per MMBtu in the beginning of March due
to our abnormally cold winter.

At these
prices, it would be hard for American producers to compete with European prices
even if they wanted to.
Mr. Boehner’s call (and that of other Republicans) for “helping” Ukraine and Western
Europe offers nothing to solve the current problems with Russia.

Boehner
might have been on solid ground if the argument was to export crude
oil  or possibly, coal
to Europe. That might work quickly to dampen Moscow’s regional clout, but natural
gas exports cannot tip the geopolitical energy scales anytime soon. It might
happen in 5-10 years.

It
is amazing to see the extent to which the foreign policy of our nation can be
subverted to serve corporate interests. Why are we yammering on and on about
Ukraine? Have we done anything about China interfering in Tibet? Or about China
and its clash with Japan over the Diaoyu (or Senkaku, depending on your side in
the dispute) islands?

We
are hip deep in Ukraine because of the neoconservatives who have
specialized in modern imperialism for profit. The class that now manages Washington
have been unceasing in their efforts to achieve their geopolitical goals. Those
include Russia’s encirclement, and direct military intervention, as we have
done in Grenada, Panama, Serbia, Iraq, Afghanistan and Libya.

For
those readers who think this little rant is over the top, here are 3 words to
consider: “Operation Iraqi Freedom”.

That’s
what in Orwellian doublethink, America’s government called 12 years of interference
in Iraqi to keep a supply of oil from falling into, or staying in, the wrong
hands. Interference, with thousands killed on our side and millions displaced
on the side of the Iraqis.  

Ukraine dominated the week. There was lots of news, but little enlightenment. But let’s
start this Sunday with a much-repeated story about Rep. Paul Ryan (R-WI). Paul
Krugman was pitch-perfect:

Ryan’s story was lifted from a book
written by an advocate of nutritional assistance. The story is true,
but who cares? Paul Ryan attributed the story to Eloise Anderson,
who serves as the Secretary of the Wisconsin Department of Children and
Families. Ms. Anderson had
testified before Ryan’s committee that she had met with the child. In fact, the real event happened 25 years ago,
when Mr. Ryan was 19. The child is now in his late 30’s.

The whole point of
the book is that children shouldn’t go hungry. But, Ryan twisted it into an argument for letting kids starve.
This led to a twitter shame-fest at
Ryan’s expense. Here are a few:

Mr. Ryan gives evidence for today’s homily. Use the following quote to shame him some more:“DC is a place where the facts are negotiable.”

Senate rejects DOJ Nominee with the same “negotiable facts” that were acceptable for Chief Justice Roberts:

The real story on Crimea:

The real story of Crimea, Part II:

John Kerry’s guardian angel tries to warn him:

GOP poutrage then and now:

Its a vicious circle when the people try to replace Autocrats:

What’s Wrong Today:

This morning we read that Russia sunk an old warship in the mouth of a harbor where the Ukranian Navy had some of its ships at anchor, effectively preventing their access to the Black Sea. From the Daily Mail:

Congrats Vladimir Putin, you win Crimea! Nice Crimea you got there Vlad, it would be a shame if something happened to it. But, the devil is always in the details. From the Monkey Cage:

 

 

Wow, Crimea for the win! Putin will have to provide Crimea access to these resources from Russia, at what will be a huge cost.  Putin might have to spend an amount similar to what he spent to build the Sochi Olympics infrastructure, or, slightly less than the value the Russian stock market lost on Monday. More from the Monkey Cage:

 

 

Building or creating these capacities in Crimea could put a huge strain on the Russian budget. 

Maybe Putin expects to cut a deal with Ukraine to keep supplying water and electricity in return for which, he will shelve (temporarily) any demands for more Ukranian territory

 

Part of Putin’s big win will be the job of pacifying the Tatars. 12% percent of Crimea’s population is ethnically Tatar. The Tatars have called for Turkish mediation and are refusing to recognize the seizure of power in Crimea as legitimate. Russia’s annexation of Crimea might lead to the guerrilla war we discussed yesterday.

 

Annexing Crimea will also cause a deterioration in Russia’s relations with its post-Soviet neighbors. The former Soviet states must be having serious security concerns as they watch Putin’s actions in Ukraine. Specifically, the annexation may be perceived as extremely threatening by neighboring and somewhat friendly states, such as Belarus and Kazakhstan, where large Russian-speaking populations reside.

 

As we said yesterday, annexing Crimea could put an end to Moscow’s reintegration projects such as the Custom Union. Ukraine could be pushed to protect its security by seeking NATO membership.

We could get lucky and escape a self-inflicted wound. America tried to pull a fast one by energizing a Ukrainian “democracy movement” that was a well-organized mob. That mob included a significant number of nationalist thugs. When things with the mob went south, Mr. Obama did not employ a defensive diplomatic position where he might have agreed with Russia’s concerns about the mob and the coup.

We could have agreed that the new Ukranian government had little legitimacy, that it should have been more inclusive, that the parties should work together to avoid the appearance of a coup, provided ousted president Yanukovych was not brought back.

All of that would have been relatively easy to say via back channels.

But Mr. Obama, and the “haircut in search of a brain”, (h/t Jim Kunstler), Sec. of State John Kerry, made increasingly strident statements including vague threats. Now, we have sanctions, a reasonably predictable next step.

Mr. Obama seems to be forcing a showdown with Russia, and Mr. Putin personally. Let’s assume that Mr. Obama is trying to blunt Republican attacks on his ability to manage our foreign policy, so grandstanding is required for home consumption, particularly with Congress in play in the 2014 elections.

But, ceding Crimea is likely to be a win for Ukraine, America and the EU.

Why can’t we let Putin weaken his economy further by propping up Crimea?

What’s
Wrong Today:

Today,
let’s visit Russian history. There are two threads to discuss, Vladimir Putin’s view of the
world, and whether he is a successor to the legacy of Peter the Great. Second,
we look at a few troublesome facts from history that limit our actions in Ukraine today.

I.  Putin’s
Worldview

The
NYT’s David Brooks had an interesting perspective
on Mr. Putin:

Putin
was personally involved in getting Ilyin’s remains re-buried back in Russian
soil. In 2009, Putin went to consecrate the grave himself. The event sent him
into a nationalistic fervor. On that day, Brooks reports Putin as saying:

Brooks
cites Ilyin’s 1948 essay, “What
Dismemberment of Russia Entails for the World,” in which Ilyin describes
the Russian people as the “core of everything European-Asian and, therefore, of
universal equilibrium.” Yet the West is
driven by “a plan of hatred and lust for power.”

Brooks
concludes:

But
as history shows, Russia’s (and Putin’s) relationship with Crimea isn’t simple.
The Greeks held it, as did the Romans, the Byzantines, the Mongols, the Tatars,
the Ottomans, and in 1753, the Russians annexed it. In 1853, the French,
British, and Ottomans began a war in Crimea against Russia that was devastating
and ended with Russia defeated, but still in control of Crimea.

II.  Peter
the Great

Peter founded the modern Russian state. As Robert K. Massie’s
book, Peter the
Great, His Life and World shows, when Peter was born, Russia was still very deep in the Middle
Ages. Peter understood that a landlocked Russia could never be a great power,
or be able to even control its own geography from outside invaders. Much of his
career was dedicated to developing access to the Baltic Sea to the north and to
the Black Sea to the south. He built a modern army and navy.

Sweden’s monarch, Charles XII, was
Peter’s adversary in both the Baltic and the Black seas, and Peter’s lifelong
duel with Charles XII shaped Russia’s borders and its role in the world. As a
result of these wars, Russia extended its European frontiers southward to the Black Sea, southwestward to the Prut River, and south of the
Caucasus Mountains. Present day Ukraine was a major battlefield in many of these
wars.

Peter
founded the city of St Petersburg in 1703, allowing Russia to secure its
presence on the Baltic. He reformed the calendar and simplified the alphabet. He founded schools of Medicine,
Engineering, Science and Navigation and Mathematics. By the end of his reign, Russia
was a major power in Europe.

So, is Putin
the second coming of Peter the Great? No.

Expansion of its
domain from the interior to the seacoasts was the glory of Peter, while holding
sway over all the Slavic-speaking peoples was the triumph of the Soviet Union. Putin’s
plans by contrast, may echo the Tsarist dream of a powerful and expansive
Russia, but he is simply trying to recreate the trade bloc of the former Soviet
Union.

In fact, what David
Brooks really shows is how similar Mr.
Putin’s logic and rationale resembles that of some political zealots here in
the US. Think about it: To advance their cause, they need a worldview
that one side is pure and the other evil; that modern day changes are ruining
the nobility of the American spirit (in Russia’s case, this is the threat of the
gays), and that anything done in the name of God and country is preordained,
and thus good.

He’s a Great Putin, not
Peter the Great.

III.   Random,
Ukraine-related history

• The Budapest Memorandum: The US and UK signed the Budapest
  Memorandum in 1994 with Ukraine and Russia, to govern the removal of nuclear
  weapons from Ukraine to Russia, who was to dispose of them. Part of that memorandum was that Ukraine’s sovereignty was
  guaranteed. Due to their signatures, the US and the UK are both on the hook to resist incursions
  into Ukrainian territory. So, even if a majority of the population in Crimea
  now favors either independence or becoming part of Russia, we may have a duty
  to support the Ukraine’s objections.

Maybe
Obama and Cameron will forget about this document. Putin sure has.

• The
  unraveling of the USSR and its Soviet bloc (the Warsaw Pact) dismantled the largest
  empire in modern history. The NATO alliance was the outside threat that had
  held the Soviet Union together, so Russia had real concerns that could only be
  met by assurances that NATO would not
  move into the Warsaw Pact states. George H. W. Bush assured Gorbachev
  that if the Soviets dissolved the Warsaw Pact, NATO would not fill that vacuum.
  But as Steven Kinzer in the Boston
  Globe noted:  

This
may explain some of Putin’s belligerence after we and EU attempted to engineer
the Ukraine’s ascension into NATO and the EU trade bloc.

• In the event there is a
  need to escalate in Ukraine or Crimea, US
  and NATO access to the Black Sea may blocked by Turkey.

After the hostilities in
Georgia in August 2008, Turkey prevented the US and NATO from sending large
naval ships into the Black Sea. Turkey did so under the 1936
Montreux Convention which makes Turkey
the gatekeeper to the Black Sea and lays down the rules to be applied
by Turkey in allowing the entry of warships from the Mediterranean.

The US is not a party to the Convention. The
Convention contains a provision for
the parties to the Convention to amend it, but it gives Turkey a veto over any amendment
voted on by the conference.

In
Conclusion:

We
messed with Russia after the fall of the Soviet Union by not living by Bush 41’s
handshake about NATO. Our tangle of alliances, including Turkey through NATO, limits
our ability to move military assets into the Black Sea.

Our
European allies are dependent on Russian gas. Al-Monitor reports
that around 80% of EU gas imports from Russia pass through Ukraine. Turkey
uses Russian gas to produce 32% of its electricity. These countries have
experience with Russia cutting off their supply. In 2006 and 2009, Russia used
its gas monopoly as a political weapon in its dispute with Ukraine,
cutting gas flows to the EU via Ukraine.

We have no good options
for military engagement in Crimea or Ukraine, but we are looking at a win if we proceed on a hands-off basis.

Really?
 

The chances are that the Ukraine
(minus Crimea) will become a pro-Western, pro-EU government. That is the strategic
prize that Putin’s bellicose action has dropped in the lap of the West. If Russia accepts
the legitimacy of Ukraine’s new government in return for a partition that takes
Crimea back to Russia, we have a win, albeit with a price tag of $25 billion in aid. 

If the Ukrainians and their military
are determined to resist any further Russian incursions with force, then Putin’s easy territorial win comes to a
screeching halt and he faces the prospect of a guerrilla war, one that
is not likely to remain just in Ukraine.

That would be a huge loss for Putin.

The more that NATO, the EU and the
US intrude loudly in this process (that means you, John McCain), the less room
Putin has to back down, and the more likely Ukrainian military officials will have
to move to defend their own country.

Do we want a win, or are we just itching
for a fight?

You may have missed the news last week that bankers at Credit Suisse used cloak and dagger tactics to help wealthy American clients stash $ billions in assets out of sight of the IRS, according to a Senate report.Credit Suisse is under investigation by the US Justice Department for allegedly aiding tax evasion by its rich American clients. The bank opened a special Zurich airport branch identified with only a code name (SIOA5) so customers could fly in, meet their private bankers and quickly hit the slopes, or quickly fly back to the US.

In the US, VIPs would use a secret elevator without buttons and operated by remote control to be whisked to Credit Suisse private banking suites. The Senate report says that bankers hid bank statements in the pages of Sports Illustrated rather than sending account statements and leaving paper trails.

According to CNN, there were some really fun ways that Credit Suisse customers moved their money:

Surely, that was legitimate money being transported for legitimate purposes by a person who was very concerned about being illegally separated from her dough.

According to the Senate report, Credit Suisse held more than 22,000 accounts for US customers, with assets valued at between $10 billion and $12 billion. Up to 95% of the accounts weren’t reported for tax purposes to the IRS. Sen. Carl Levin, (D-MI) who heads the Senate committee that produced the 175-page report, criticized the US Department of Justice, the bank and Swiss authorities, saying at the hearing: (brackets by the Wrongologist)

That’s 1% of the total, for those of you keeping score at home.

Credit Suisse is the just the latest Swiss bank to come under scrutiny. The government cracked down on the Swiss bank UBS in 2009, which paid $780 million to settle similar allegations.

Hiding this information is the reason that the US Congress passed the FATCA legislation in 2010. The purpose of the law is to make foreign financial institutions identify accounts held by US taxpayers and report them to the IRS. FATCA also requires US citizens, including individuals who live outside the US, to report their financial accounts held outside of the US.

The United States and Switzerland signed a FATCA agreement in February. But the information exchange pact cannot go into force without Senate ratification of the US-Swiss tax treaty originally executed in 2009.

If you think that everyone in the Senate must be in favor of eliminating tax evasion
and this will be easily ratified in the Senate, you would be wrong. In fact, good ol’ boy Sen. Rand Paul (R-KY) has been the sole blocker of a vote to ratify the treaty with the Swiss.

Rand may be trying to run out the clock. The Treaty was written in 2009, and the statute of limitations is (generally) five years. So maybe we can expect Paul to change his mind and vote for ratification in 2014? Isn’t the past 5 years sufficient time for anyone wanting to cover their tracks to move their untaxed assets from Swiss banks to another jurisdiction that has yet to sign a treaty with the US?

Kentucky’s Tea Party darling says the treaty infringes on privacy rights. From Sen. Paul:

Nice. Sen. Paul believes that you need proof of a crime for which it is impossible to develop the facts to make the case that a crime was committed, without the treaty he is holding up.

Naturally, Credit Suisse is hiding behind Sen. Paul’s blockage of the Treaty. At the hearing in Washington last week, Credit Suisse’s American operation’s CEO, Brady Dougan said: (emphasis by the Wrongologist)

Paul’s protest of the Treaty is also linked to his desire to repeal FATCA, because the “privacy rights” of criminals hiding billions of US taxpayer dollars is more important than the government’s right to collect taxes.

The Wrongologist wrote in February that the Republican National Committee (RNC) approved a resolution that added the repeal of FATCA to its 2014 platform.

That means any effort by Harry Reid (D-NV) to bring the Treaty ratification to the whole Senate in order to override Sen. Paul’s blocking, would require some Republicans to join with Democrats in the override effort. Plus, ratification of treaties requires the vote of 67 senators. That isn’t likely, now that their 2014 platform opposes the underlying law that enabled the Treaty.

Despite Sen. Paul’s privacy concerns, no one is asking the rich to pay unfairly − they already get all kinds of tax breaks − but to encourage tax evasion seems to be far beyond the Republican’s usual pale.

How about having the rich simply pay their fair share and watch the federal deficit which they are so concerned about, fall, without requiring Americans to give up food stamp subsidies or funding for long term unemployment benefits?

It is always so curious. Republicans talk about cutting the deficit, but their 2014 platform underwrites tax evasion instead of tax compliance for their wealthy overlords.

Those of us who pay our taxes, work all our lives, and watch our children’s opportunities for a good life vanish due to the horrific economic disparity that is now America, require more of Congress.

We’re running out of cake ….

 

What’s
Wrong Today:

It
has been the practice among key players in the tech industry not to poach
employees from competitors, particularly employees with technical knowledge
like software (SW) engineers. Tech firms see the move of a key engineer to a
competitor as a potential risk, since product innovation that uses even a small
piece of knowledge brought by an engineer to a competitor can quickly move the new
company to a better competitive position. The employment market in Silicon
Valley is among the most competitive in the country, and job hopping of SW engineers
and other employees is common.

In
early 2005, as demand in Silicon Valley for SW engineers boomed, Apple’s Steve
Jobs entered into a pact with Google’s Eric Schmidt and a few other firms to agree
not to recruit each other’s employees. Apple in particular threatened to punish
companies that violated the arrangement.

The
NYT reported last week about a class-action
lawsuit
in San Jose Federal Court that will head to trial in the spring. It involves
64,000 programmers and seeks $ Billions in damages. The suit names Adobe,
Apple, Google, Intel, Intuit, Lucasfilm and Pixar as defendants. From the NYT:

Santa
Clara County, in the heart of Silicon Valley, has the highest average wage in
the country, but even though Silicon Valley’s SW engineers make really good
money, the court filings call the SW engineers “victims of a conspiracy” who
were cheated by their bosses. According
to Joseph Saveri, a lawyer for the plaintiffs:  

The
actions described in the lawsuit were first uncovered in an investigation by
the Justice Department, which concluded with an antitrust complaint against a
half-dozen companies. In September, 2010, the companies settled
with the Justice Department. The terms of the settlement are confidential, but
the companies agreed to drop the no-poaching practice.

However,
the settlement did not preclude affected SW engineers from pursuing their own
case against the companies. The class-action lawsuit quotes emails and other
communications from some of Silicon Valley’s biggest names:

• On
  February 27, 2005, Bill Campbell, a member of Apple’s board of directors
  emailed Jobs to confirm that Eric Schmidt “got directly involved and
  firmly stopped all efforts to recruit anyone from Apple”

• When
  Google’s co-founder, Sergey Brin, tried to hire from Apple’s browser team, Jobs
  warned: “If you hire a single one of these people that means war”

• In
  2007, when a Google recruiter slipped up and contacted an Apple engineer, Mr. Jobs
  immediately complained. Google fired the recruiter within an hour

• Eric
  Schmidt said he preferred that the company’s Do Not Call list be shared orally,
  “since I don’t want to create a paper trail over which we can be sued later”

• An
  Intel recruiter asked Paul S. Otellini, then CEO, about a hands-off deal with
  Google. Mr. Otellini responded in an email: “We have nothing signed,”…We have
  a handshake ‘no recruit’ between Eric and myself. I would not like this broadly
  known”

The Times reports that these
“no poaching” deals might have been more widespread. The Justice Department is
currently pursuing a case against eBay, accusing it of having an illegal
no-poaching deal with Intuit. The Times
reports that eBay is in settlement talks with the government.

At
issue in the class-action suit is an offense under antitrust laws called an
“unlawful group boycott,” which is an agreement by two or more direct
competitors not to do business with specified targets.

In
this case, the “targets” were the SW engineers employed by the alleged co-conspirators,
so the case presents a twist on an ordinary group boycott. Usually, the aim of a
group boycott is to hurt a competitor by depriving it of supplies or access to
customers that it needs. Here, the aim of the boycott was to deprive the SW engineers
of a competitive marketplace for their services by the firms that
would be primarily interested in using those services.

“No
poaching” is very different from “no hiring”. The companies agreed to stop
calling employees working at a competing firms and offering them jobs. If an
employee wanted to apply for a job at a competing firm, they might or might not
be turned away, and whether a turn-down was really a part of the side deal
would be extremely difficult to prove.

Another
point: These are the same firms who lament the shortage of American
workers with the technical skills they need. They decry the sorry state of the
American education system that fails them by not producing the kind of workers
they want to hire. Then they hire thousands of H-1B visa indentured servants to
fill positions for which there just
weren’t any qualified American applicants. This serves just one purpose:
to maintain downward pressure on the wages of IT workers.

Never
underestimate the ability of the one-percent to invent ways that strangle the
middle class.

Yes,
these no poaching deals had something to do with protecting the firm’s
intellectual property, but it was primarily about wage suppression. Engineers
work hard to acquire and maintain expert knowledge with important economic value
to prospective employers. The salaries of the top people could only be
suppressed through artificial deals and questionable immigration policies.

Robber Barons
was a term used in the late 1800’s to describe industrialists who used exploitative
practices to amass their wealth. Their practices included exerting control over
natural resources, buying political influence, and paying extremely low wages.

In
the 2000’s, the Tech robber barons tried to corner the market on human capital instead
of the market for natural resources. Like the robber barons of old, the Tech barons
still try to develop all the political influence that they can.

Any
settlement that emerges from these lawsuits will amount to nothing compared to the stock price increases
and the profits made by the companies that colluded in “no poaching”.

Corporate
welfare, collusion, buying off the government − still the face of gangster
capitalism in America.

What’s
Wrong Today:

Steven
Cohen on CNN
this weekend made a point that has not
been covered clearly about Ukraine’s proposed deal with the EU: (brackets
and parentheses by the Wrongologist)

Cohen
is professor emeritus at New York University and Princeton University. His
books include “Soviet Fates and Lost Alternatives: From Stalinism to
the New Cold War.”

So,
the West’s plan was to bring NATO through Ukraine right onto the Russian border.
Unsurprisingly, the Russians are not prepared to accept that. Specifically, they’re
not prepared to accept NATO forces in Ukraine, or the possibility that subsequently,
NATO could gain a base near that of the Soviet Black Sea Fleet based in Crimea.

The
grandstanding politicians (Sen. Lindsey Graham) and the pundits who say we need
to be more muscular in our response to Russia in Ukraine are morons.

Sen.
McCain (R-AZ) said this weekend that all Putin sees around the world is America’s
weakness and withdrawal from conflict and that emboldened him to move against
Ukraine. It was actually our “muscular” approach to snag Ukraine for NATO that emboldened
Mr. Putin (after Russia’s competing deal to the EU deal) with Putin’s puppet, Yanukovych, died when Yanukovych
fled Ukraine.

Putin’s move is no
threat to us, and we have no responsibility to come up with a counter-move in
Ukraine. Putin
wins this round, he out-thought the US and gets Crimea for his efforts.

Let’s
remember that Russia is no longer the USSR. It is not a threat to Europe, and
it is certainly not a threat to the US.  It is a corrupt, resource-rich
state with a big army and nukes. It controls a lot of
territory, but the idea that it would win a full-on war with America is moronic.

We
also should remember that Ukraine is poor, and mostly corrupt, run by wealthy
oligarchs who have skimmed off the top for years. Subsidized diesel fuel is a
huge part of Ukraine’s economic problems. Ukrainians pay about half the price for
diesel that people do in Europe. In fact, a liter of diesel in Ukraine is the
cheapest in the world. At the same time, Ukraine uses a lot of it, behind only
to Germany and Russia. One of the IMF’s and the EU’s early requirements for
loans was that diesel prices be raised. Next winter might have been very harsh
for the average person in the Ukraine if their government had agreed to that
IMF requirement.

Finally,
Ukraine has an industrial base, but their factories are Soviet era, and supply
nothing we want. They have agriculture, but they produce primarily for the
Russians. Our subsidized agricultural production would make buying from Ukraine
uncompetitive, so we are not an economic alternative for them.

Ignoring
any humanitarian issues, there is little reason for the US to get involved just
because Russia is involved. This kind of cold warrior, knee-jerk reaction has
caused us more financial problems since the 1950’s than any other US foreign
policy response, except for our Al-Qaeda global response for the past 12 years.

We
were out-strategized by Mr. Putin. Is Mr. Obama completely bereft of advisers who know
something about Russia? It should have
been a Rumsfeldian “known-known” that Mr. Putin would react to any
move that would possibly put NATO in his shorts.

Today, the “known unknown” question is how Ukraine will be
partitioned. The Western part of the country will reach towards Western Europe.
Crimea will default to Russia. The Eastern parts of Ukraine, where its industry
is located, could go either way.

In the all of our bouts of bluster with Russia over the past 50 years, the Cuban Missile Crisis was the scariest. Everything since then has been either theater
or a prelude to a proxy war the US wants, and gets.

Ukraine isn’t one of them.

Last
week, we learned that an Arizona Tea Party group believes that the 1st
Amendment is
only for Christians:

Hmmm. We also learned that
there is plenty of global unrest.
Here is a partial list of countries to be worried about:

Afghanistan

Burma
Central
African Republic
Libya
Iraq
Somalia
Syria
Thailand
Turkey
Ukraine
Venezuela

With so much
uncertainty in the world today, please use the chorus from Bob Dylan’s “Ballad of a Thin Man” as the inspiration
for your homily:

“But something is happening here
And you don’t know what it is
Do you, Mister Jones?”

Ukraine is a losing position
for Obama:

The BBC reports today
that Russia’s upper house of Parliament has approved President Putin’s request
for Russian forces to be used in Ukraine. This is essentially a Russian version
of our Authorization for the Use of Military Force (AUMF) that was requested by
George W. for Afghanistan and Iraq. Let’s spell out a few things:

• The
  US, the EU and NATO will, if push comes to shove, acquiesce in the partitioning
  of Ukraine

• The
  US, the EU and NATO will not offer Ukraine a serious bailout. The EU offered Ukraine
  $700 million. In contrast, the Russians offered $15 billion

So, Mr. Putin has
called Mr. Obama’s bluff. What will Mr. Obama do? Maybe cancel his appearance
at Sochi G-8. In the end, nothing. Let the bloviating begin!

In a related story,
Sec. of Defense Hagel announces cuts in Pentagon budget:

Facebook makes billionaire of welfare recipient founder of Whatsapp:

Arizona gets reprieve from corporate boycott:

Enjoy the Oscars tonight. Democrats want to run from their award: