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The Wrongologist

Geopolitics, Power and Political Economy

Monday Wake Up Call – July 1, 2019

The Daily Escape:

East Inlet Pond, Pittsburgh NH – photo by Wes Lavin. The East Inlet area has one of the few remaining virgin stands of forest in the east.

How did Boeing, a company known for meticulous design and manufacturing, screw up the 737 Max so badly? Bloomberg is reporting that Boeing outsourced software development for some of the 737 Max’s software to Indian companies. There are concerns that decision may have contributed to Boeing’s two deadly crashes.

Bloomberg says that starting in 2010, Boeing began relying on Indian software engineers making as little as $9 an hour in their design program. The software engineers were supplied by the Indian software developer HCL Technologies, which now has annual sales of $8.6 billion. The coders from HCL designed to specifications set by Boeing but, according to Mark Rabin, a former Boeing software engineer:

“It was controversial because it was far less efficient than Boeing engineers just writing the code.”

It turns out that the HCL engineers were brought on at a point when Boeing was laying off its own experienced software developers. In posts on social media, an HCL engineer who helped develop and test the Max’s flight-display software, summarized his duties:

“Provided quick workaround to resolve production issue which resulted in not delaying flight test of 737-Max (delay in each flight test will cost very big amount for Boeing).”

This may be resume inflation. Boeing insists that HCL had nothing to do with the Max’s Maneuvering Characteristics Augmentation System (MCAS) software. HCL said that it:

“…has a strong and long-standing business relationship with The Boeing Company, and we take pride in the work we do for all our customers. However, HCL does not comment on specific work we do for our customers. HCL is not associated with any ongoing issues with 737 Max”.

It isn’t unusual for US companies to use outsourced talent. Prior to his dynamic blogging career, Wrongo was CEO of an outsourcing firm. Our clients were the US government, and several big tech and office product companies, including Dell, Microsoft, and Xerox.

But managing outsourcing is tricky, both for the company moving the work out-of-house, as well as for the outsourcer. Unless the parties develop detailed plans, procedures, and follow strict quality control, even top people can produce work that fails to meet design standards.

The typical jetliner has millions of lines of code. From Rick Ludtke, a former Boeing flight controls engineer:

“Boeing was doing all kinds of things, everything you can imagine, to reduce cost, including moving work from Puget Sound, because we’d become very expensive here….All that’s very understandable if you think of it from a business perspective.”

More profits over people.

In 2010, HCL and Boeing opened a “Center of Excellence” in Chennai, saying the companies would partner to create software used in flight testing. This is typical for big companies. Boeing also has a design center in Moscow. From Cynthia Cole a former Boeing engineer who headed the Engineer’s Union from 2006-2010: (emphasis by Wrongo)

“At a meeting with a chief 787 engineer in 2008, one staffer complained about sending drawings back to a team in Russia 18 times before they understood that the smoke detectors needed to be connected to the electrical system…”

A big reason for offshoring is price. Engineers in India make about $9 — $10/hour, compared with $35 to $40 for Indians in the US on an H1B visa, and higher for a US engineer. Anyone who understands offshoring knows that the cost of rework needs to be added to the apparent hourly cost, and in some cases, that can push the real price closer to $80/hour.

For the 787 Dreamliner, much of Boeing’s work was outsourced. It is well-known that the 787 entered service three years late, and billions of dollars over budget, in 2011. That was due in part to confusion caused by their outsourcing strategy.

Was another globalist lesson learned by Boeing with the 787? Not really, if the 737 Max troubles are any indication.

So this cheap labor story is another black eye for Boeing. It goes along with the Justice Department’s criminal probe, and the FAA’s continuing concern about the Max software. Boeing also has disclosed that the company didn’t inform regulators of the MCAS problems when they first learned about them, because engineers had determined it wasn’t a safety issue.

This is more of the crapification of America’s best companies as they chase lower costs. This time, people died.

Wake up Boeing! The high-value, high-risk elements in your product must be sourced at home.

If America had a real Justice Department, Boeing’s management would be in jail.

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Taxes Aren’t Theft

The Daily Escape:

Humpback Whale, Tonga – Photo by Rita Kluge

Joseph Stieglitz has an op-ed in the NYT about saving capitalism from itself. He wants to re-brand capitalism as “progressive capitalism”: (emphasis by Wrongo)

“There is an alternative: progressive capitalism. Progressive capitalism is not an oxymoron; we can indeed channel the power of the market to serve society….The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society. We need regulations that ensure strong competition without abusive exploitation, realigning the relationship between corporations and the workers they employ and the customers they are supposed to serve. We must be as resolute in combating market power as the corporate sector is in increasing it.”

America has been debating the role of capitalism in our society since our beginnings. In 1790, John Adams published the Discourses on Davila in which he said that entrenched economic inequality would create a political oligarchy in America similar to what had already occurred in Europe.

The problem isn’t inequality. We’ve survived a permanent underclass, but until recently, it has been a statistical minority. But, we won’t survive today’s continuing erosion of the middle class. Stieglitz says:

“We are now in a vicious cycle: Greater economic inequality is leading, in our money-driven political system, to more political inequality, with weaker rules and deregulation causing still more economic inequality.”

He calls for:

“…a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.”

Call it progressive capitalism, capitalism plus, democratic capitalism, or whatever you want. At the core of any reform of capitalism is less corporate control over the levers of power, and a redistribution of wealth. Along with the growth in economic inequality and political impotence, so grows the myth propagated by the ultra-rich that higher taxes are a public theft of their hard earned fortunes, and are a threat to their personal freedoms.

Let’s spend a minute on the difference between positive and negative rights.

In the simplest terms, negative rights (most of the Constitution’s Bill of Rights) protect us from the government. They tell us what the government can’t do. The Constitution was designed as primarily a negative rights document, to maximize our individual liberty, and to protect us from the government interfering in our lives. They are most helpful to people whose rights are already protected.

Positive rights are different. They include things like the right to an education, and in some countries, the right to healthcare. Most of us define freedom as: freedom from hunger, freedom from ignorance, freedom from exploitation, freedom from poverty, freedom from hopelessness and despair. Very few positive rights are enumerated in the Constitution, with the exception of the right to have the government protect private property.

Today, if there’s one enduring myth that drives US politics, it is the myth that the rich have earned their reward, through nothing but their own hard work and savvy. The rich want no income redistribution, which they call “socialism”, just as the fat cats said in this cartoon from 1912:

The Republicans in the 1930s called FDR a socialist. Now, as we are thinking about a New Deal 2.0, today’s Republicans want to again brand all Democrats as socialists.

Corporations and the 1% ignore how much they are helped by a system designed by them, and for them. They are contemptuous of government and public authority, which they say act as agents of the poor, attempting to extort the rich.

They forget that our government facilitates and protects their wealth. If not for the many Federal agencies that write regulations favorable to industry, the Federal Reserve, protectors of the banking industry along with others, there would be a lot less wealth for corporations and the 1% to aggregate.

Therefore, they should pay the most.

And remember, rural electrification was a federal project under FDR. The dams on the Columbia River made irrigation possible, opening up western lands to agriculture. The Tennessee Valley Authority (TVA) was the Green New Deal of its time, and was the basis for development of a modern Southeastern US. The railroads that opened up the West relied on government property provided to private companies (redistribution?) to develop.

Let’s decide to reform capitalism. First, by making it responsive to the positive rights that average Americans are longing for. Second, paying for that with much high taxes on corporations. If the loopholes created by savvy corporate tax lawyers remain on the books, let’s create a stiff Alternative Minimum Tax (AMT) for corporations.

Just like the AMT that Wrongo has had to pay for lo, these many years.

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Capitalism’s Bad Smell

The Daily Escape:

New Macallan Distillery – 2018 photo via ArchDaily. There are 952 different bottles to taste on site. Bring a designated driver.  

Capitalism in America has gotten bad enough to attract the attention of The Economist:

“Two things stand out about business in America today. One is how successful American firms are: they account for 57 of the world’s 100 most valuable listed firms. The other is the bad smell hanging over a number of powerful companies.”

No one says that The Economist has a liberal worldview. They are the news journal of globalism and neoliberalism. But, even they think that the time has come to revisit how we treat our largest companies.

They go through a litany of all-too-familiar corporate abuses.

  • Boeing selling 737 MAX planes with dangerous software that you had to pay extra to get.
  • Criminal charges have been filed against Goldman Sachs in Malaysia for its role in arranging $6.5 billion of debt for a fraudulently run state fund.
  • A jury in California has just found that Monsanto failed to warn a customer that its weed killer could cause cancer.
  • Wells Fargo admitted creating 3.5 million in unauthorized bank accounts.
  • Facebook’s data practices are under scrutiny in several countries.
  • Purdue Pharma is the subject of a lawsuit by New York’s attorney general, along with McKesson and Johnson & Johnson.

The Economist points out that America has been no stranger to corporate scandals. In the 19th century meat packers sold rotten meat. In the 1960s, Detroit made cars that were in the words of Ralph Nader, “unsafe at any speed”. In the 1990s, tobacco companies and asbestos manufacturers had to settle class action suits that cost them more than $150 billion.

In the early 2000s, WorldCom, Enron and Tyco committed accounting fraud. And nobody forgets the mortgage fraud by our large banks and insurance firms that caused the Great Recession in 2008.

Back to the Economist: (brackets by Wrongo)

“Today’s crises…have common elements. The firms tend to be established, with dominant market positions. Outrage infuses social media and Congress. And yet the financial cost [to these bad actors] has been limited.”

They say that of ten big American listed firms involved in scandalous episodes, their median share price only lagged the stock market by 11% after the event. And just two of the CEOs at scandal-ridden firms were fired. Worse, for the ten firms, the total pool of senior executive pay has risen over the four most recent years to almost $600 million.

Doesn’t corporate America just see these things as the cost of doing business?

We need to remember that this just doesn’t happen here. Volkswagen cheated on emissions tests, as did Audi and Nissan. Sweden’s Swedbank is facing a criminal investigation for money-laundering.

American capitalism needs reform. The Economist says that in the past, three forces constrained corporate conduct: regulation, litigation and competition. Since the 2008 financial crisis, each of these three forces have been weakened by both our elected officials, and by US regulators. This provides an incentive for firms to take an extended walk on the wild side.

First, America’s regulatory system features both capture and incompetence. The FDA has allowed opioids to be sold in huge numbers, clearly beyond what was medically necessary. The FAA delegated its inspection process to Boeing. The FTC can’t police Facebook. The Fed, the FDIC, and the Comptroller of the Currency, our bank regulators, fail to indict bank executives. They impose fines that are small, relative to value of the gains made by rules breaking.

Second, litigation is no longer a deterrent. The Economist says that:

“Criminal cases leading to jail terms for top executives are as rare as socialists at Goldman Sachs.”

The same is true for civil actions. Arbitration clauses cause both customers and employees to forfeit the right to pursue class actions. Firms are more likely to extend cases by appealing, which can take years.

Finally, we all expect the market will punish bad behavior by corporations, because customers have options. But we know that America’s corporations have gotten larger, primarily by acquisition. That makes it harder for angry customers to move to competitors. There’s just one alternative to Boeing; Airbus, but it doesn’t have spare capacity. Users aren’t leaving Facebook. If you need OxyContin, you have just one source. Try changing your cable provider.

Econ 101 shows that the trajectory of monopoly begins with economies of scale, and ends with economies of exploitation. And remember that six corporations own 90% of the media. We won’t hear much about wrongdoing at Amazon from the WaPo.

Voters need to push for more enforcement of regulations, which can only be done by the federal government.

We have to insist that the protection of citizens is more important than protecting corporations and the 1%.

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Saturday Soother – Final Four Edition

The Daily Escape:

Aiguille du Midi – 2019 photo by Berenicids. The Aiguille du Midi (12,605 ft.) is part of the Mont Blanc massif in the French Alps. It can be directly accessed by cable car from Chamonix. If you enlarge the picture, the cable car building is visible at the very top of the mountain.

The end of Wrongo’s favorite sport, the college basketball season, happens on Monday. Tonight is the Final Four, the Wrong family’s equivalent of the Super Bowl, with family gathering for food and drink around the TV.

But, that doesn’t start until the early evening, so we’ve got time to talk about another scary piece of news this week: There will be severe human impacts caused by the next wave of automation. The bottom line is that plenty of jobs will be lost and we’ll see societal disruption as machines and robots take over American jobs. Axios takes it from there:

In a new report, the Aspen Institute nudges policymakers away from any notion that the American economy will naturally adjust as robots are introduced at an accelerated pace over the coming two and three decades.”

Axios goes on to quote Aspen’s Alistair Fitzpayne who says that, workers displaced in prior technological cycles “have experienced profound downward mobility” in new jobs at much lower pay and benefits.

The report’s executive summary warns, “Artificial intelligence and other new technologies may lead to deeper, faster, broader, and more disruptive automation”, and retraining programs may be unable to mitigate the downward trend in earnings and social status. Aspen warns that fewer jobs may be created than are destroyed:

  • No one knows how many new jobs will be produced, where they will be created, or how much they will pay.
  • Most studies play down the real possibility that the automation age could go very wrong, for an extended period, for large swaths of workers and their communities.
  • Workers who lost their jobs in the wave of manufacturing layoffs in the early 1980s, for instance, were still earning 15%-20% less in their new work 20 years later, according to the Aspen report.

Axios reports that Aspen tries to pull the punch, saying that with the right policy choices, we can choose to create an economy that works for everybody. That we can encourage employers to adopt a more “human-centric approach” to delivering the bottom line. That we can support displaced workers through retraining, reemployment services, and unemployment insurance to help them transition to new jobs and careers.

Maybe, but it seems questionable that those things will spontaneously happen. Rep. Alexandria Ocasio-Cortez (D-NY) suggests all this new technology might be liberating, but she has reservations:

“The reason we’re not excited by it is because we live in a society where if you don’t have a job, you are left to die. And that is, at its core, our problem.”

The cultural stigma attached to job loss is profound, and that is unlikely to change by adding more retraining programs. Conservatives are not about to celebrate jobless people having more time to learn, to create art, or enjoy the world they live in, as long as they are unemployed.

The merciless mantra of shareholder value above all, and our corporate masters’ acceptance of the inevitability of technological change means that low and moderate-skill workers are expendable. Efficiency for more bottom line is more important than the lives of human workers.

This coming automation disruption is hard to see now. But estimates are that it will impact as many as 40% of American workers.

The 21st Century American corporation isn’t our friend, as currently constituted and rewarded. It is the enemy of our society, because they are quietly working to eliminate our jobs. We constantly reduce their taxes, vainly hoping for them to create more jobs. We look the other way when they pollute our environment. We allow them to disproportionately finance our elections.

It’s time for a new Capitalism.

But you’ve had enough for this week, so on to the Saturday Soother. Start slowly, particularly if you plan to stay up until the last Final Four game ends at around midnight. Let’s brew up a cup of New Hampshire’s Flight Coffee’s single origin Tanzania Tarime AB, ($17/12oz.), with its floral fragrance and intensely sweet flavor. Now settle into your favorite chair and listen to “Spring Morning” by Frederick Delius, played by the Royal Scottish National Orchestra and conducted by David Lloyd Jones. “Spring Morning” is the third of ‘Three Small Tone Poems’ by Delius:

Those who read the Wrongologist in email can view the video here.

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Trump is Deregulating Pork Inspections

The Daily Escape

Zhongshuge Bookshop in Chongqing, China. There is a mirrored ceiling that enhances the visual effect of the stairs that might have been inspired by an MC Escher painting.

Under Trump, the executive branch has been policing its own damn self, and that’s working out splendidly! Think Mar-a-Lago’s security. And if Boeing inspecting themselves isn’t bad enough, the Trump administration is outsourcing much of the responsibility for food safety inspections in hog plants to the pork industry.

Trump will cut the number of federal inspectors by about 40%, and will replace them with plant employees. This could make trichinosis great again! From the WaPo (paywalled): (emphasis by Wrongo)

“Under the proposed new inspection system, the responsibility for identifying diseased and contaminated pork would be shared with plant employees, whose training would be at the discretion of plant owners. There would be no limits on slaughter-line speeds.”

This accelerates the Department of Agriculture’s plan to delegate on-site inspections to the livestock industry. It started under Obama, when poultry plant owners were given more power over safety inspections. One difference is that the Obama administration didn’t allow higher line speeds. The Trump administration starting last year, has allowed some poultry plants to increase line speeds.

WaPo says that The Trump administration is working to also shift inspection of beef to plant owners:

 ”Agriculture Department officials are scheduled next month to discuss the proposed changes with the meat industry. “

If you are a Trump fan, these moves are part of his administration’s plans to reduce regulations that large corporations want totally eliminated.

It’s standard-issue Republican Party pandering to their corporate base. And it’s ongoing, despite the administration coming under fire for delegating aircraft safety oversight responsibilities to Boeing, developer of the 737 Max jets that have crashed twice in the past six months. While FAA certification of the two aircraft involved in the crashes took place under President Trump, the major shift toward delegating key aspects of aviation oversight began under GW Bush.

Letting food producers regulate themselves: What could go wrong? That whole Listeria thing is way overblown, and the spinach growers are sure to guarantee that there’s no E Coli contamination in their produce.

Until there is.

Industry self-regulation is really no regulation at all. There’s only one case where private “regulation” has some teeth: FINRA, the not-for-profit that protects America’s investors by making sure the broker-dealer industry operates fairly and honestly. But, that’s the only example Wrongo can think of.

The real irony in this is that one of the key reasons food recalls have gotten so frequent is the cutbacks in inspections that have been going on for some time. It means that every time something IS discovered, they have to pull everything that went out since the last government inspection.

The longer the time between inspections, the more stuff that has to be pulled off the shelves.

You can be sure that if a pork plant contaminates their meat products and hundreds of people are poisoned, the free market will take care of the poor corporation. How? By letting the corporation declare bankruptcy to avoid paying victims and their next of kin. Then, the law allows them to quietly reorganize under a different business name, and sell more pork.

Of course, maybe a Boeing Max Jet will fall out of the sky, and land on one of these self-inspected pork producers.

Thomas Hobbes, in his “Leviathan”, in 1651, described what life would be without government:

“In such condition, there is no place for industry; because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; no instruments of moving, and removing, such things as require much force; no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short.”

Sounds like a Republican paradise!

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Don’t Call Warren a Wonk

The Daily Escape:

Bryce Canyon, Utah – 2019 photo by AccountexpiresSept10

(Wrongo has been a little distracted by the Barr Letter and the aftermath of Russiagate. He’s spent a ton of time checking out who is recanting their positions, and who is doubling down. That explains the lack of daily posting. Also, there will be no Saturday Soother this week as Wrongo and Ms. Right take advantage of Broadway and NYC’s nightlife. There will be cartoons on Sunday, though.)

Wrongo is beginning to place Pete Buttigieg near the head of the 2020 class of presidential candidates. He’s smart, an intellectual, and most important, someone who thinks and speaks with nuance about our politics. Wrongo also likes Elizabeth Warren. She’s turning out ideas at a higher rate than any of her competitors. This, from Charlie Pierce: (brackets by Wrongo)

“The Senator Professor Warren Policy Shop and Idea Factory continues to operate at full capacity. First, a little something-something from the Des Moines Register: Warren has not shied away from confronting those affected by her policies, delivering them directly to those industries’ doorsteps. Just as she announced her plan to break apart the nation’s largest tech companies before heading to one of the [agricultural] industry’s largest gatherings…”

Warren announced her plan to take on corporate agriculture just before traveling to Iowa to speak at a rural issues forum. The companies she names in her plan — Tyson, Dow-DuPont and Bayer-Monsanto — are all key players in Iowa’s economy. More:

“Warren argues small farmers are unable to get ahead ‘because bad decisions in Washington have consistently favored the interests of multinational corporations and big business lobbyists’ over their own. Warren said during a recent interview with the Register ‘The number of purchasers of soybeans or hogs has shrunk dramatically….The number of seed providers has shrunk dramatically, and the diversity of the seeds (offered) has shrunk. Concentration in those industries has put a real squeeze on small- and medium-sized farms in Iowa.”

But Warren is being concern-trolled as an unlikeable, wonkish professor, while Buttigieg gets praise for learning Norwegian in order to read a favorite author. More from Pierce:

“The temptation will be great for people to hang the deadly Wonk label on her, an especially painful tag for a woman. But to do so is to ignore the fundamental theme that all of these proposals have in common: a multi-front attack on…monopoly power as an enemy of the poor and middle class….”

Bias remains in all of us, even as we try to ignore it. Wrongo wonders if non-MAGA males will view a smart female candidate like Warren differently than a male competitor.

Buttigieg is impressive. He may be young, but he’s serious, intelligent, and well-versed in the issues.

Warren, a college professor and US Senator, is every bit the intellectual equal of Buttigieg and, like Mayor Pete, is light-years smarter than Donald Trump.

Here’s the problem: When men listen to Buttigieg, they hear intelligence, humility, and a willingness to learn. When they listen to Warren, do they hear something different, and maybe, less likeable?

That was true in 2016. Hillary Clinton was held to a higher standard than Donald Trump. Her negatives were far higher than would have been true for a male candidate with similar strengths. Despite more than three decades of public service, Clinton lost to the most unqualified and unfit Presidential candidate in our nation’s history.

Can Democrats nominate another woman so soon? If so, should Warren be the one?

Warren is an intellectual force who wants capitalism reform. She articulates real policies, and attacks the class war waged by the rich. Like Mayor Pete, she has the ability to present complex ideas in ways that are both accessible, and actionable.

Maybe, “wonk” won’t stick to her as it did to Hillary. “Wonk” implies focusing on technicalities that ordinary people find boring, or beyond their understanding. The wonk tries to describe a small world, while the rest of us mostly try to focus on the big picture.

Warren seems the opposite of a wonk. She is more like Teddy Roosevelt than Paul Krugman. No one would call Theodore Roosevelt, a demonstrated reformer with anti-plutocrat chops, a wonk. It should be difficult to portray Warren that way.

Warren has found a way to merge an economic agenda and Democratic voters’ deep concern about our political system. She says, “rebuild democracy.” Accountability, reform, oversight, anti-corruption brings it all together.

But there are those in the media who think Warren is wonky. There also are men who, in 2019, still have trouble listening to a smart woman.

Clearly, as a society, we haven’t made nearly the progress we like to give ourselves credit for.

Warren needs to avoid the media painting her into a corner. Her message is resonating.

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The Long Battle to Reform Capitalism

The Daily Escape:

Poppies in bloom, Southern California – March 2019 photo by Leslie Simis. This annual explosion of color is enhanced this year by extraordinary rainfall

You can call the period in US history from FDR to Nixon “America’s social democratic era”.  A collection of politicians had hammered out the policies and regulations that became FDR’s New Deal in America. It became a period of post-war prosperity during which inequality narrowed, economic growth boomed, and optimism reigned.

The characteristics these policies shared were reciprocity and generosity. For the citizen, there was some form of social support that grew from Social Security in 1935 through the 1960’s with Medicare and Medicaid. In 1970, Nixon implemented the Environmental Protection Agency. There was also a willingness to care for the disadvantaged. Our Marshall Plan and our commitment to foreign aid are both great examples. The success of social democracy in the postwar era weakened the market’s power to act independently within our society.

But then things changed. Our government’s role became a helpmate for corporations, financial institutions, and their lobbyists. The result has been growing inequality between suppliers of capital and the suppliers of labor, even of highly educated labor, like teachers and professors. Economic growth slowed, and we have developed a permanent underclass that seems impervious to repair.

Yesterday, we talked about Economic Dignity, and how focusing on it might help solve inequality. Today’s market economics is partly based on the ideas of Jeremy Bentham and John Stuart Mill, economists who viewed human beings as supreme over the state. As individuals who would make rational decisions to maximize utility. It turned out to be incomplete, since it left out key dimensions of human psychology, like the individual’s need for social esteem or respect. In other words, they ignored economic dignity.

Couple that with Milton Friedman’s idea, that the mission of the firm is to solely maximize profits, that any responsibilities to its employees, consumers, or society should be ignored. Profit maximization at all costs has done great damage to American society. And conservatives and free marketers have married the ideas of these three economists, making the removal of government from markets their primary mission.

But what they call “the market” is really a bundle of regulatory (and non-regulatory) rules by which market activities operate. The mix of free and regulated market activities can be changed, even though capitalists say we shouldn’t change the rules, because it adds uncertainty to markets.

Just because in baseball, three strikes and the batter is out, or with four balls, there is a free pass to first base, doesn’t mean it has to be that way. It could be five strikes and you’re out, or three balls is a walk.

As an example, we tend to fight unemployment with “trickle-down” solutions. That means we bribe the rich and corporations to hire more. But, the bribe is always bigger than the payrolls that are generated.

We could fight unemployment with fiscal policy, such as infrastructure spending by the government. It would employ many, possibly hundreds of thousands, and there would be no need to pay any entity more than was warranted by the tasks at hand.

America needs a return to what economist Paul Collier calls the “cornerstones of belonging”— family, workplace, and nation, all of which are threatened by today’s market driven capitalism. That means capitalism has to return to the ethics of the New Deal. Joseph Stiglitz, Nobel laureate in economics, says: (parenthesis and emphasis by Wrongo)

Over the past half-century, Chicago School economists, (including Milton Friedman) acting on the assumption that markets are generally competitive, narrowed the focus of competition policy solely to economic efficiency, rather than broader concerns about power and inequality. The irony is that this assumption became dominant in policymaking circles just when economists were beginning to reveal its flaws.

Stiglitz says we need the same resolve fighting for an increase in corporate competition that the corporations have demonstrated in their fight against it. We’ll need new policies to manage capitalism.

It means higher taxes on profits.

It means paying workers more.

It means rebuilding public assets like roads.

It means teaching students to be both technically capable, and grounded in their values.

Speaking of needing to teach our students, if you think we’re not in a rigged game, think about one “USC student” who is part of the admissions fraud scandal, Olivia Jade Giannulli. She was on the yacht of the Chairman of USC’s Board of Trustees when she heard about it.

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Trump Says Dems Are Socialists

The Daily Escape:

Sulfur Skyline Trail, Jasper NP Alberta, CN – August 2018 photo by MetalTele79

Trump wants to run against socialism in 2020, so he’s trying to paint the Democrats as socialists. At the Conservative Political Action Conference, Trump brought up “socialism” four separate times:

“Just this week, more than 100 Democrats in Congress signed up for a socialist takeover of American health care.”

“America will never be a socialist country — ever.”

“If these socialist progressives had their way, they would put our Constitution through the paper shredder in a heartbeat.”

“We believe in the American Dream, not in the socialist nightmare.”

Steve Benen notes that Senate Majority Leader Mitch McConnell (R-KY), indicated that the Voting Rights Bill passed by the House as HR-1 was a “radical, half-baked socialist proposal”. Benen goes on to say:

“There’s nothing “socialist” about automatic voter registration. Or curtailing partisan gerrymandering. Or requiring officials to use “durable, voter-verified” paper ballots in federal elections.”

Or making Election Day a national holiday.

Perhaps the GOP is redefining socialism as: Any legislation or policy that would diminish the power of the far right, or diminish the wealth differential enjoyed by their business elites.

An NBC News/Wall Street Journal poll showed that just 18% of Americans had a positive view of socialism, 50% had a negative view, and 26% had a neutral view. Most of the skepticism about socialism comes from older American generations. People who are nearly Trump’s age grew up fearing nuclear war. They saw the Soviet Union as an existential threat to the US.

OTOH, Axios reports that 73% of Millennials and Gen Z think the government should provide universal health care. They will make up 37% of the electorate in 2020. And Gallup found that Americans aged 18 to 29 are as positive about socialism (51%) as they are about capitalism (45%).

Vilifying socialism might be a winner for the GOP, unless the Democrats hammer home a series of ideas. First, that Social Security and Medicare aren’t socialism or socialized medicine. Second, that we socialize corporate losses all the time. The taxpayers bailed out banks, capitalists and speculators 10 years ago. We also bailed out GM and Chrysler.

We bail out corporations that do not pay for “externalities”. Externalities are the indirect costs incurred because of actions taken by someone else. Think about pollution. When a manufacturer can make its decisions based on their bottom line, it makes sense for them to dump waste into our rivers or air, pushing the costs of cleanup onto society as a whole.

Today’s GOP is pushing quickly to gut regulations in order to protect the industries of their big donors from paying the cost of these externalities.

Third, reforming capitalism isn’t socialism.  Reform is necessary for the economic future of the country. The current neoliberal form of capitalism dominates both our economy and our thinking about economic success. And in the past 40 years, we’ve changed the rules of the game for corporations. We’ve moved the fifty yard line much closer to the capitalists’ goalpost than it was during FDR’s time.

And corporations and capitalists have been running up the score in the economic game ever since.

Neoliberal capitalism has made selfishness an economic and moral good. One result was that improving our economic security, or our social safety net, can no longer be discussed in our society.

The Green New Deal document directs the government to provide all Americans with:

(i) high-quality health care,
(ii) affordable, safe, and adequate housing,
(iii) economic security; and
(iv) access to clean water, clean air, healthy and affordable food, and nature.

These goals are within America’s capabilities, but they come with costs, costs that will not be willingly paid for by corporations, or by “public-private partnerships”. They will only come about with direct government intervention, primarily by implementing policies that encourage them, and by a new tax policy that finances them.

Nothing in the above requires state ownership of corporations, so we don’t have to talk about socialism.

Our market economy should remain, but capitalism needs to be different, because its current track cannot be sustained if we want to contain and correct income inequality, or deal with climate change. Today’s capitalism is creating concentrations in most industries, driving out the little firms. Price gouging is an issue, particularly with big Pharma.

Everyone should agree that companies above a certain size must pay for the externalities they create. That they should also pay a larger share of their profits as taxes. And that they should pay a fee for domestic jobs lost to overseas locations.

2020 should be about those who want to reform capitalism, and how to do it. It shouldn’t be about Trump’s trying to paint Democrats as Soviet-era socialists.

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Reform of Capitalism Isn’t Socialism

The Daily Escape:

Graffiti in Greece by Lotek

The NYT reported that Rep. Tom Emmer (R-MN), chairman of the National Republican Congressional Committee, said: (brackets by Wrongo)

“Socialism is the greatest vulnerability by far that the House Democrats have…He added that he had also instructed his team to spotlight “all the [Dems] extreme wild ideas on a daily basis, on an hourly basis if it’s available.”

As we said yesterday, most Democrats are not socialists. They are for reform of capitalism. The problem is that our economic system is broken; it does not meet the needs of the vast majority of our people.

Capitalism has metastasized into a financialized cancer. Its growth-at-any-cost, profit-over-purpose ideology has wreaked havoc with the lives of millions of people. From Forbes:

“One example: For more than 400 years, 12.5 million Africans were kidnapped, enslaved and sold to build wealth and power largely for white men in the US, Europe and South America. The first enslaved Africans were shipped directly to the Americas in 1518, one year after Martin Luther nailed his 95 Theses to the door of Castle Church. The centrality and largely unconstrained profit motive in capitalism has been with us since the beginning.”

Today, corporations track our every movement. Algorithms manipulate us to buy things, or to vote certain ways. We’ve put outsized power into the hands of corporations. We have to ask: What do we need from capitalism in the 21st Century? Is it more of the same, or something different?

Capitalist Reform is about re-imagining the purpose of business and redefining its success. The doctrine of shareholder primacy must be the first to go. It needs to be recognized as a form of oppression of human nature since it doesn’t value our humanity.

According to a 2019 Politico/Morning Consult survey, 76% of registered voters want the wealthiest Americans to pay more. Politico also notes that a recent poll from Fox News shows that 70% of Americans supporting increased taxes for those earning more than $10 million, and 54% of Republicans also supported it. People are contemplating not just piecemeal tax increases, but a wholesale reversal of the Reagan-era shift in tax policy. The Economist reported that in 2016, more than half of young Americans no longer support capitalism.

There is an urgent need to push back against the widening economic inequality in the US. Taxing the rich is an easy answer, because so few of us are rich.

But, step one should be increasing corporate income taxes. Corporations’ share of total taxes paid has decreased to about 9% of total US tax revenue in 2017, from about 33% in 1952. How many stories like Amazon’s failure to pay anything in taxes on $11 billion in profits should it take to begin the task of closing corporate tax loopholes and increasing corporate income taxes?

Step two is to break up corporate concentrations. Wrongo addressed this here. The primary issue with corporate concentration is that it drives up prices. The fewer sellers, the fewer choices consumers have for goods and services, and thus, there is little pressure for big competitors to hold prices down.

Step three is to help workers. The share of profits that goes to workers must increase. This shouldn’t punish capitalists. Higher wages for workers means more business for American companies.

We were founded on republicanism as a public virtue: The Constitution implies that a citizen is duty-bound to abandon self-interest when it conflicted with the General Welfare. Capitalism has usurped republicanism by insisting that abrogation of self-interest violates the doctrine of “survival of the fittest,” and it’s also an attack on individual liberty.

We need to revive the understanding of public virtue. So, some form of “mixed economy” is in our future. It’s obvious to all except right wing ideologues that socialized medical insurance is in our future. But it is doubtful that a majority want to socialize production and distribution of America’s products and companies.

The task for Congress and the next president is to figure out what activities and/or economic sectors are best guided by tax and economic policy, and which are best left to “market forces”.

We’re a country where vast wealth is rewarded with tax cuts, loopholes, and endless ways to ensure that corporate dollars earn even more dollars. While average people are bankrupted because of a health crisis, and we value semi-skilled labor at $7.25 an hour.

Today’s capitalism is anti-democratic. General welfare and public virtue derive from a desire to improve the human condition. That needs to be the goal of political action to reform capitalism, and it needs to be hammered home again and again.

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Monday Wake Up Call – Green New Deal Edition

The Daily Escape:

Double Rainbow, Kauai, Hawaii – 2018 photo by Charlene Renslow

There has been plenty of talk about the introduction of a Green New Deal (GND) as an answer for what ails America. Here is the text of HR 109. Everyone should take a few minutes and read it.

The power of the GND is that it addresses the power imbalance between established political and business interests in the US and the rest of us. The GND injects compassion into our democracy. Justice for workers is compassion. Care of the environment for future generations is compassion. A more equitable distribution of wealth is compassion.

From Ed Walker:

“The Green New Deal is an overarching statement of political goals for the Democratic Party, something the party has not had for decades. It lays out a vision of a future inspired by the best the party has to offer, Franklin Roosevelt’s Four Freedoms, which he laid out in January 1941 as the US stared at the unfolding crisis in Europe…..It is a combination of Roosevelt’s unfinished goals and the massive work done by liberals to expand the reach of the Constitution to previously disfavored groups. It offers hope and possibility as we confront the crisis of environmental disaster.”

Most people think the GND is about fixing the environment. That’s true, but there is a larger theme running through it, the reform of capitalism.

Capitalism is at the core of our country’s growth and place in the world. It has created wealth for all. In accordance with its tenets, a few of us are fabulously rich, while the majority of us are not. It also imposes economic costs on the 99% while sucking up most benefits for those at the very top. As Ed Walker says:

“You don’t see the rich living next door to petroleum processing plants or airports or gravel pits or trash dumps. You don’t see their kids suffering from asthma caused by factory pollution or heavy truck traffic or worse. You don’t see them unable to pay medical bills or take their kids for needed medical attention. That’s for the little people.”

The GND’s most important virtue is that it doesn’t assume that the entire burden of the disruption caused by economic growth (if the GND becomes law), should be borne only by the 99%. It insures corporations will not grab vast profits, or control adaptation to the new economy for their sole benefit.

For example, when the price of natural gas dropped, capitalists stopped using coal, and coal miners lost their jobs, their insurance, their homes and their futures. Under the GND, when natural gas is phased out in favor of alternative sources, displaced workers will have a job and health care, because the GND offers a job guarantee and universal access to health care.

The knee-jerk reaction from Republicans (and many Democrats) is that the GND is socialism, and it’s impossible to implement in a free society. It is true that HR 109 is designed to rebalance the power about who decides the future of the nation. It explicitly favors the interests of the vast majority. It explicitly limits the power of corporations to dictate what response will be made to the threat of climate change.

This isn’t socialism, it’s an overdue reform of capitalism. Our companies, in particular the large global firms, can no longer be trusted to do the right thing when it comes to the welfare of Americans. For the past 70 years, people accepted that they would do well if American companies did well.

Globalism has made a lie of that ideology. Corporations must pay taxes. Corporations must be responsible for bearing the economic costs for all of us that come from their decisions.

Capitalism reform is a serious challenge not just to corporations and the rich. It is a serious challenge to our current political parties. Democrats claim to be the party of the people. The GND will force them to prove it.

The GOP represents the interests of corporations and the rich against the interests of working people. The GND makes this clear. It offers voters a contrast with the Republican/MAGA vision for this nation.

Both parties claim to want the best for the country’s future. Thinking about the GND forces them to come up with positive programs, or to do nothing in the face of mounting inequality, and a zero-sum political economy. Some have compared a GND transition to the abolition of slavery. Slavery was immensely profitable, and the benefits went to relatively few. And those few held all the political power in the South. It led to war.

Meanwhile, the media focuses on the horse race of ideas, and the cost. Can the Green New Deal pass? How could we ever pay for it?

Democrats and Republicans opposed to the GND must explain why even more neoliberal capitalism will accomplish what voters say they want. Republicans will continue to argue that the GND will turn us into Venezuela or worse.

But the rest of us now have a vision for a better future.

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