Category: Corporatism

Monday Wake Up Call – March 2, 2020

The Daily Escape:

St. Augustine, FL – photo by Wrongo

Hot takes:

First to politics: Joe Biden rolled to a big win in South Carolina, and billionaire Tom Steyer and former mayor Pete Buttigieg both folded their tents. Some in the media say that Biden is once again the front runner, but Sanders’s win in Nevada remains significant, and he remains on track to pick up a lot of delegates in California and Texas.

The real news from South Carolina is that Biden has become the Not-Sanders candidate. For Super Tuesday, Bloomberg essentially replaces Steyer as the billionaire in the race. Super Tuesday results are less than 48 hours away, and after that, we’ll have a real idea of who really remains a viable candidate.

Second, peace in Afghanistan: After 18 years of war, we signed an agreement with the Taliban. The deal does not end the civil war, but it has placed the outcome of the conflict in the hands of the Afghan people. Heather Cox Richardson quotes Laurel Miller, the former deputy and then acting Special Representative for Afghanistan and Pakistan from 2013 to 2017 for the State Department: (emphasis by Wrongo)

 “There’s nothing new in the Joint Declaration signed in Kabul today. It reaffirms existing commitments and it re-states some of US-Taliban agreement. Its purpose is evidently political symbolism.”

She explained: It includes the Afghan government and its opposition in future discussions. It draws down US troops to 8600 people—the number who were there when Trump took office, and promises “all” will be gone within 14 months. The 8600 drawdown has long been planned. In exchange, the Taliban will “not allow any of its members, other individuals or groups, including al-Qa’ida, to use the soil of Afghanistan to threaten the security of the United States and its allies.”

Miller’s conclusion:

“The Taliban got a lot. It got its main goal—a clear timeline for US withdrawal—and fast removal of sanctions and prisoner releases. The US got the power to decide whether “vaguely-stated conditions are met, so that in reality can withdraw when it chooses—will be political not military decision.” The Afghan government didn’t get much, but “this deal wasn’t really about the Afghan government.”

Trump, America’s Man of Peace. This looks a lot like what he did in North Korea, a PR moment that resembles a deal, but turns out not to be much of a deal.

Finally, the WaPo features a new report published by the Manhattan Institute, a conservative think tank, that clearly demonstrates the disconnect between the “great” economy described by economists, and the economy experienced by regular people. This chart shows the problem:

 

From the article (emphasis by Wrongo)

“In 1985, the typical male worker could cover a family of four’s major expenditures (housing, health care, transportation, education) on 30 weeks of salary….By 2018 it took 53 weeks. Which is a problem, there being 52 weeks in a year.”

Lead study author Oren Cass (formerly Mitt Romney’s domestic policy director) calls this calculation the Cost-of-Thriving Index. It measures the median male annual salary against four major household expenditures:

  • Housing: the annual rent for a three-bedroom house in the 40th percentile of the local housing market
  • Health care: the annual premium on a typical family health insurance policy
  • Transportation: the average cost of owning and operating a car driven 15,000 miles per year
  • Education: the average cost of tuition, fees, and room and board at a four-year public college

In 1985, the typical male breadwinner could cover those costs, and still have 22 weeks of pay left for other family needs, such as food, clothing, entertainment and savings. Today, the typical salary doesn’t even cover the four basics.

They also looked at female earners. The typical woman needed to work 45 weeks to cover the four big annual expenses in 1985. Today she needs 66 weeks. The most astonishing conclusion is that it was easier for a female breadwinner to provide for her family in 1985 than it is for a lone male earner today.

Remember that the study comes from a conservative-leaning institute. Here’s Cass:

“You can have a rising GDP….but if it’s in the context of collapsing families and people no longer getting married and declining fertility rates and so on and so forth, you haven’t necessarily enhanced well-being.”

Wake up America! The GOP has undone 50 years of economic gains that produced a robust middle class and vastly more economic and social justice than the country had ever known before, or since.

They have chosen candidates whose real agenda was to assist the corporatocracy in fleecing the very people who voted for them. Their candidates ran on issues like the Second Amendment, abortion, gay marriage and immigration. And then, the GOP shifted the tax burden onto the middle class. They deregulated industry and socialized corporate losses, eliminating any downside risk for banks.

We can begin undoing these things by electing Democratic majorities in the  House and Senate in November.

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The Future: Will It Be Just More of The Past?

The Daily Escape:

Wrongo said he wouldn’t look back, but has reconsidered. It’s time to declare war on those who refuse to use facts or science. Think about what these true believers in either faith or ideology have brought us:

Will we continue on this road, or will we make a turn for the better? Will 2020 usher in a better decade than the one we just closed? Doubtful, unless each of us stand up and do what we can to make a difference.

Those who think Trumpism is so new and novel should remember that Norman Lear made a hit TV show about it in the early 1970s. Since then, many American white people have taken a dark turn: They would rather have Trump’s government enforce a whites only voting policy than put in the work required to make our system benefit everyone equally, while decreasing the cut taken by the corporate class.

Building this better society requires hard cognitive work. So far, Americans aren’t up to thinking about solutions beyond “Build that wall!”

Another example: 50% of white people are actively against government bureaucrats making their health care decisions. They insist that something that important should only be decided by employer HR departments and multinational insurance companies.

They’re perfectly fine casting their fates with insurance bureaucrats. Even if those corporate bureaucrats deny their care most of the time. Worse, they’re told by the media that they shouldn’t pay any more damn TAXES for health care when they could be paying twice as much in premiums to insurance corporations.

Remember the song In the year 2525? “If man is still alive…”

That’s 505 years from now. What do you think the odds are that we’re still here?

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More Thoughts on Climate Change

The Daily Escape:

Frenchman Bay, viewed from Cadillac Mountain, Acadia NP, ME – 2019 photo by pmek99. Note the cruise ships lining up to visit Bar Harbor.

Following up on our post about climate change, many responded by attacking the premise that climate change is happening or, that it is due to human causes.

There have always been deniers. For example, a survey conducted by the YouGov-Cambridge Global Project in partnership with the Guardian, found that 13% of Americans believe that humans are not at all responsible for climate change. Another 5% of Americans don’t even believe the climate is changing. So, 18% think we shouldn’t worry about climate change.

Then again, 20% believe that extraterrestrials live amongst us.

Wrongo isn’t sure that we are focused correctly when we talk about climate change. It’s not the planet that’s in trouble, its humans. Humans thrive within a specific range of availability of water, air, and food, as do all animals. If one of the critical inputs is compromised, humans will fail to thrive, our habitable locations will shrink, and the human population will also shrink. The planet will survive.

For much of human history, humans have lived in hotter, dryer locations. They also survived in colder places, and in both, were able to live hard, but reasonably happy lives. Do we want to regress to that?

Peak human experience requires surpluses of food and livable space if the population is to grow. How can that happen on an overpopulated, resource-constrained planet?

Focus on this: Global population is projected to reach approximately 10.9 billion by 2100. If that is true, we will require 10X today’s electricity output by 2100. When you think about it, even if today, we had already reached the (unrealistic) level of 50% of power sourced from renewables, that would equal only 5% of the power we will need 100 years from now.

So, where will all that energy come from? Can Silicon Valley invent a different form of electric power generation? Will the world go fully into nuclear power?

The same is true for water. Where will the increased water resources come from? Desalination?

Suppose there is no climate change. We are still facing peak oil and peak other resources. We live on a finite Earth. Think about energy: We’re in a world of expanding energy demand. This will mean substantial shortages in the medium-term, which means immense and unavoidable energy price increases.

Politically, the higher prices should be used to defray the energy costs of the majority of the population that isn’t rich enough to pay them. Doing that will take a different economic system than we have today.

Can deniers also wish these problems away?

  • We live in a world where the big polluters, corporations, are dedicated to maximizing short term returns for a relatively few wealthy beneficiaries.
  • We still live in a Neoliberal world where government works for the few, where government largess continually transfers income to the wealthy, while our infrastructure is allowed to decay.
  • We still live in a world where economic growth cannot be sustained forever without collapse.

It will take a global mobilization that is massive, disruptive and smart to deal with the resources constraint, even if there wasn’t any climate change. What we really lack is the SOCIAL technology to mobilize corporations and politicians to bring about change.

Concern about the twin problems of finite resources and climate change hasn’t brought about any particular political, social or spiritual commitment on the part of the power elites in finance, corporations or politics.

For all of our superiority at the apex of the animal kingdom, we seem unwilling to solve what surely lies ahead. That’s why we see Greta Thunberg, a 16 year old scolding world leaders, with 4 million kids standing behind her. To adapt, we will require a Manhattan Project-level of effort, but we’ll have to do all that work in the face of depleted resources, an unstable climate, and a contracting economy.

We have choices. We can continue as we are, or we can stop now, take a moment to reassess, and then put ourselves on an alternative path, as the younger generation says we must.

Thunberg challenges us to stop being selfish, to care about the future, to care about living things and recognize that we are all part of the natural world, and that our commitment to continuing economic growth is killing the planet.

We should listen, organize, and act.

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Saturday Soother – Dorian Edition, September 7, 2019

The Daily Escape:

Garden of the Gods, Colorado Springs, CO – 2019 photo by ForkMan. Cheyenne Mountain is in background.

(There will be no Sunday Cartoons this week.)

Trump’s decision to change our posture toward China from free trade to trade war is one of the most significant policy shifts in recent American history. And despite the hand-wringing by corporations and politicians, there’s a grain of value in what Trump is attempting to do.

For sure, it’s unclear if he really knows what he’s doing, but it highlights whether we have a strategy for our trade relations with China. American policy makers must look at and answer a few questions:

  • Why is our industrial supply chain located within our economic adversary?
  • Doesn’t our military readiness therefore depend on that adversary?
  • Why are American companies allowed to transfer critical technologies to China in exchange for short-term market access?
  • Why is Tesla building self-driving cars in Shanghai?
  • Why should Google be running an Artificial Intelligence (AI) lab in Beijing after canceling an AI contract with the Pentagon?

Our corporate overlords’ answer? Because the market wills it.

But markets choose one global power over another only for narrow financial reasons. The market will happily move its business to a surveillance state if it means bigger CEO bonuses and higher profits. In this competition, Corporate America’s ideological commitment to free trade is as big a handicap to us as the Soviet Union’s commitment to central planning was during the Cold War.

Republicans and their corporate partners reject the idea of America having an industrial-policy to support key strategic economic sectors. China has an industrial policy. It’s focused largely on AI, integrated circuits, telecom, and steel. We no longer have high end manufacturing, and we’re losing other strategic industries.

This means that Beijing is likely to pick our “winners” for us. Corporations use the old Ricardian comparative advantage to organize their supply chains. This means that we will watch helplessly as American innovations are transformed into economic engines in China, while our corporations will reap efficiency gains by locating their engineering and management operations next to their Chinese manufacturing.

Inevitably, the innovation in which we pride ourselves will depart as well.

A recent survey of 369 manufacturers found that American firms are moving their R&D operations to China not just to take advantage of lower costs, but to be in close proximity to their supply chains. About 50% of foreign R&D centers in China are now run by American companies. This has helped China achieve first place in market share for manufacturing R&D.

If we remain neutral regarding where our supply chains are located, “we innovate, they build” will become “they innovate, they build.”

So, an unintended consequence of Trump’s tariff war is that maybe American politicians will wake up to the strategic battle underway with China, and realize how our American corporations are lining up on the side of our competitor and economic adversary.

Enough of the outside world, time for a rainy Saturday Soother if you are on the east coast of the US. Wrongo is sitting on Cape Cod, and the weather service here has announced tropical storm warnings for Saturday. So, settle back and watch the Weather Channel!

Now brew up a mug of Panama Finca San Sebastian ($12/12 oz.) with its deep chocolate notes supported by subtle but persistent sweet floral tones. It comes from the brewers at Thermopolis, Wisconsin’s Jack Rabbit Java.

Now, as you watch Dorian news over and over until your mind is numb, listen to the great 1980’s hit from the Eurythmics, “Here Comes the Rain Again”:

Those who read the Wrongologist in email can view Annie Lennox here.

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The Ethics of Responsibility

The Daily Escape:

John Muir Wilderness, CA -August 2019 photo by petey-pablo

Nobody in America should be rooting for a recession, and no political party should root for one either. Shame on those who are.

US economic policy is often driven by ideology, and those operating policies can change whenever the party in power changes. That seems to be more likely to occur in 2020 than it has at any time since Reagan. Like it or not, Bush I, Clinton, Bush II, and Obama all followed similar economic policies.

Trump has disrupted much of them, returning to a vigorous trickle-down policy, aggressive deregulation and the imposition of unilateral tariffs.

Max Weber, in his 1919 essay on “Politics as a Vocation”, made a distinction between politicians who live by the “ethics of responsibility” and those who follow the “ethics of conviction”. The ethic of responsibility is all about pragmatism; doing the right thing in order to keep the show on the road. But the ethic of conviction is all about moral (ideological) purity, about following the playbook despite the impacts.

An example is the Kansas Experiment, where Sam Brownback, following right-wing convictions, cut taxes to produce a “shot of adrenaline into the heart of the Kansas economy.” Economic growth was below average, state revenues crashed, and debt blew up. But, still a believer, Brownback vetoed the effort to repeal of his laws.

You don’t need more from Wrongo to paint the picture. We’re in a time of the ethics of conviction.

Let’s take a look at two recent articles about the economy. First, from the Economist, which is telegraphing the possibility of a US recession:

“Residential investment has been shrinking since the beginning of 2018. Employment in the housing sector has fallen since March….The Fed reduced its main interest rate in July and could cut again in September. If buyers respond quickly it could give builders and the economy a lift.”

But housing is not the only warning sign. The Economist points to this chart, showing the change in payrolls in the 2nd Quarter of 2019:

It’s clear that much of America is doing quite well. It is also clear that most of the 2020 battle ground states are not. Indiana lost over 100,000 manufacturing jobs in the last downturn, almost 4% of statewide employment. It is among a growing number of states experiencing falling employment: a list which also includes Ohio, Pennsylvania and Michigan.

In 2016, those last three states all delivered their electoral-college votes to Trump, and were decisive in his electoral victory. Trump’s trade war may still play well in these states, but if the decline in payrolls continues, it suggests a real opening for Democrats, assuming they are willing to hammer on pocketbook issues.

Second, the Wall Street Journal had an article about winners and losers in the 10 years since the Great Recession. It isn’t a secret that those left behind are in the bottom half of the economic strata, and there is little being done to help them:

“The bottom half of all U.S. households, as measured by wealth, have only recently regained the wealth lost in the 2007-2009 recession and still have 32% less wealth, adjusted for inflation, than in 2003, according to recent Federal Reserve figures. The top 1% of households have more than twice as much as they did in 2003.”

We also call wealth “net worth”. It is the value of assets such as houses, savings and stocks minus debt like mortgages and credit-card balances. In the US, wealth inequality has grown faster than income inequality in the past decade, making the current wealth gap the widest in the postwar period. Here is a devastating chart from the WSJ showing the net worth of the bottom 50% of Americans:

There’s a big difference between the 1% and the bottom 50%: More than 85% of the assets of the wealthiest 1% are in financial assets such as stocks and bonds. By contrast, more than half of all assets owned by the bottom 50% comes from real estate, such as the family home.

Economic and regulatory trends over the past decade have not only favored stock investments over housing, but they have also made it harder for the less affluent to even buy a home. The share of families in the bottom 50% who own a home has fallen to 37% in 2016, (the latest year for which data are available), from 43% in 2007. OTOH, homeownership among the overall American population is higher since 2016.

Weber’s ethics of conviction have driven our politics since well before the 2008 recession. We know what it caused: inequality, demonstrated by lower wages for the 90%, and a devastating decline in net worth for the bottom 50%.

Can we turn the car around? Can we elect politicians who will follow Weber’s ethics of responsibility at the local, state, federal and presidential levels in 2020?

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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. Ultimately, there is no denying that testing software plays a huge role in ascertaining safety standards. You can find further information and resources related to software testing and a guide to IEC 61508 Compliance by checking out the Parasoft website. Generally speaking, this type of testing 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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