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The Wrongologist

Geopolitics, Power and Political Economy

Silicon Valley Will Escape the Revolution

The Daily Escape:

Waterfall Jumping Competition (from 69 feet up), Bosnia, August 5th – photo by Amel Emric

Antonio Garcia Martinez:

Every time I meet someone from outside Silicon Valley – a normy – I can think of 10 companies that are working madly to put that person out of a job…

Well, that makes most of us “normies”. In context, we are the people who do not work in Silicon Valley. We are the people who use technology, rather than invent technology, and many of us ought to see technology as a threat to our jobs and our place in society.

We are not in the beautiful peoples’ club. Our names are not on the list. We’re not software engineers who work just to pay the taxes on their company stock.

And who is this Martinez guy? From Mashable:

He’d sold his online ad company to Twitter for a small fortune, and was working as a senior exec at Facebook (an experience he wrote up in his best-selling book, Chaos Monkeys). But at some point in 2015, he looked into the not-too-distant future and saw a very bleak world, one that was nothing like the polished utopia of connectivity and total information promised by his colleagues.

Martinez pointed out that there are enough guns for every man, woman and child in this country, and they’re in the hands of people who would be hurt most by automation:

You don’t realize it but we’re in a race between technology and politics, and technologists are winning…

Martinez worries about how the combination of automation and artificial intelligence will develop faster than we expect, and that the consequences are lost jobs.

Martinez’s response was to become a tech prepper, another rich guy who buys an escape pod somewhere off the grid, where he thinks he will be safe from the revolution that he helped bring about. More from Mashable: (brackets by the Wrongologist)

So, just passing [after turning] 40, Antonio decided he needed some form of getaway, a place to escape if things turn sour. He now lives most of his life on a small Island called Orcas off the coast of Washington State, on five Walt Whitman acres that are only accessible by 4×4 via a bumpy dirt path that…cuts through densely packed trees.

He’s not alone. Reid Hoffman, co-founder of LinkedIn told The New Yorker earlier this year that around half of Silicon Valley billionaires have some degree of “apocalypse insurance.” Pay-Pal co-founder and venture capitalist Peter Thiel recently bought a 477-acre escape hatch in New Zealand, and became a Kiwi. Other techies are getting together on secret Facebook groups to discuss survivalist tactics.

We’ve got to expect that with AI and automation, our economy will change dramatically. We will see both economic and social disruption until we achieve some form of new equilibrium in 30 years or so.

It will be a world where either you work for the machines, or the machines work for you.

Robert Shiller, of the famous Case-Shiller Index, wrote in the NYT about the changing meaning of the “American Dream” from the 1930s where it meant:

…ideals rather than material goods, [where]…life should be better and richer and fuller for every man, with opportunity for each according to his ability or achievement…It is not a dream of motor cars and high wages merely, but a dream of a social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable…

That dream has left the building, replaced by this:

Forbes Magazine started what it calls the “American Dream Index.” It is based on seven statistical measures of material prosperity: bankruptcies, building permits, entrepreneurship, goods-producing employment, labor participation rate, layoffs and unemployment claims. This kind of characterization is commonplace today, and very different from the original spirit of the American dream.

How will the “Normies” survive in a society that doesn’t care if you have a job? That refuses to provide a safety net precisely when it celebrates the progress of technology that costs jobs?

The Silicon Valley survivalists understand that, when this happens, people will look for scapegoats. And we just might decide that the techies are it.

Today’s music is “Guest List” by the Eels from the 1996 album “Beautiful Freak”:

 Takeaway Lyric:

Are you one of the beautiful people
Is my name on the list
Wanna be one of the beautiful people
Wanna feel like I’m missed

Are you one of the beautiful people
Am I on the wrong track
Sometimes it feels like I’m made of eggshell
And it feels like I’m gonna crack

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

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IMF Reports US Standard of Living is Falling

The Daily Escape:

Haleakala Crater, Maui

Is it the best of times or the worst of times? This is no longer a partisan discussion. We have an economy in the midst of a long expansion, the third longest since 1850. The statistics say we are close to full employment. But, our mortality rate is moving in the wrong direction, and we have an opioid epidemic that is serious enough to cause jobs to go unfilled. The NYT reports that in Youngstown Ohio, middle class factory jobs go begging:

It’s not that local workers lack the skills for these positions, many of which do not even require a high school diploma but pay $15 to $25 an hour and offer full benefits. Rather, the problem is that too many applicants — nearly half, in some cases — fail a drug test.

The Fed’s regular Beige Book surveys of economic activity across the country in April, May and July all noted the inability of employers to find workers able to pass drug screenings.

So the best of times? Probably not. Bloomberg reports that the International Monetary Fund (IMF) looked at the US economy. This is what they see:

For some time now there has been a general sense that household incomes are stagnating for a large share of the population, job opportunities are deteriorating, prospects for upward mobility are waning, and economic gains are increasingly accruing to those that are already wealthy. This sense is generally borne out by economic data and when comparing the US with other advanced economies.

The IMF then goes on to compare the US with 23 other advanced economies in the Organization for Economic Cooperation and Development (OECD) in this chart:

The chart is a bit of an eye test unless it’s viewed on a big monitor, but its overall point is that the US has been losing ground relative to its past OECD reports by several measures of living standards. 35 countries make up the OECD. The members include all of Western Europe, Russia, Japan, Australia, and several developing nations like Korea and Panama.

This from Bloomberg:

And in the areas where the US hasn’t lost ground (poverty rates, high school graduation rates), it was at or near the bottom of the heap to begin with. The clear message is that the US — the richest nation on Earth, as is frequently proclaimed, although it’s actually not the richest per capita — is increasingly becoming the developed world’s poor relation as far as the actual living standards of most of its population go.

This analysis is contained in the staff report of the IMF’s annual “consultation” with the U.S., which was published last week. The IMF economists haven’t turned up anything shocking or new, it’s just that as outsiders, they have a different perspective than what we hear from our politicians and economists.

For example:

Income polarization is suppressing consumption…weighing on labor supply and reducing the ability of households to adapt to shocks. High levels of poverty are creating disparities in the education system, hampering human capital formation and eating into future productivity.

What is to be done? Well, the IMF report concludes:

Reforms should include building a more efficient tax system; establishing a more effective regulatory system; raising infrastructure spending; improving education and developing skills; strengthening healthcare coverage while containing costs; offering family-friendly benefits; maintaining a free, fair, and mutually beneficial trade and investment regime; and reforming the immigration and welfare systems.

In other words, they suggest substantial reform. It’s doubtful that America can take care of these things anytime soon.

The subtext to most of their suggestions is that other affluent countries have found ways to improve in these areas, while the US has not. We don’t have to look too far into the past to see when those countries were modeling their economies on ours. But today, on all sorts of issues, like taxation, labor markets, health care, and education, the opposite is now true.

One major difference between the US and the rest of the developed world is ideological: Voters and politicians in the US are less willing to raise taxes to finance a better life for our citizens.

Other wealthy countries have figured out how to raise revenue, provide quality education, help the the unemployed, reduce poverty, and keep their citizens healthier than America has.

We must catch up, or admit our time as the world’s indispensable economy is over.

Today’s music (dis)honors the turmoil in the White House. See ‘ya Mooch! Remember that in just six months, Trump has gone through two National Security Advisers, two Chiefs of Staff, two Communications Directors, two Press Secretaries, and two Directors of the FBI.

Here is “Disorder in the House” by the late Warren Zevon and Bruce Springsteen:

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

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“We Don’t Need No Education”

The Daily Escape:

Antarctic Relic, 2017 – photo by Daniel Kordan

Pink Floyd’s big mainstream hit has new relevance today, since Pew Research produced these interesting findings on US attitudes towards higher education: (emphasis by the Wrongologist)

While a majority of the public (55%) continues to say that colleges and universities have a positive effect on the way things are going in the country these days, Republicans express increasingly negative views.

A majority of Republicans and Republican-leaning independents (58%) now say that colleges and universities have a negative effect on the country, up from 45% last year. By contrast, most Democrats and Democratic leaners (72%) say colleges and universities have a positive effect, which is little changed from recent years.

The Pew study, conducted from June 8 to 18 among more than 2,000 respondents, found that Democrats and Republicans are growing substantially more divided in their opinions on public institutions, including higher education.

According to the survey that Pew released on Monday, this is the first time that a majority of Republicans have thought that higher education is bad for the country. As recently as 2015, 54% of Republicans said colleges and universities had a positive impact on the way things were going in the country, but by 2016, those results split to 43% positive and 45% negative. On the other side of the aisle, 72% of Democrats continue to think colleges and universities have a positive effect on the country, holding steady with past years’ results. Here is a chart with the study’s top findings:

And if we get granular about the viewpoints, we see the positive view by Republicans has declined dramatically in just three years:

Only 1/3 of Republicans who have graduated from college now believe that college is a positive contributor to the way things are in America today. In fact, Republicans over age 50 support college and universities the least (28%). Even a majority of GOP Millennials do not see higher education as a positive force in our society.

While Pew doesn’t speculate on the reasons for the shift in thinking, it is clear that the last few years have not been kind to higher education. Elite colleges have made headlines for a series of controversies and protests around racism, free speech, and civil rights. We hear constant debate about “trigger warnings”, and “safe zones” for students who can’t be exposed to uncomfortable ideas or situations.

In 2015, the football team at the University of Missouri went on strike to protest the handling of racist incidents on campus, and Yale was rocked by controversy about the proper way to address insensitive Halloween costumes.

More recently, students have protested and sometimes disrupted appearances from controversial figures. But only 28% of college-educated GOP’ers support higher education? From Booman:

It’s really not compatible with being a country club Republican to have a negative view of a college education. A college degree confers respectability and signals status.

Booman makes the point that more and more of them home school their kids to protect them from the opinions of educated people who might have different views, and fewer of them want their children to go to a college where those religious and political views may be undermined.

Perhaps it also says that college is NOW no longer a good thing, either due to economic factors, or all the strict social/cultural paths people want their kids to follow. But, in America today, the unemployment rate for college grads is 2.4%, while it is 4.6% for those without a degree.

Why would Republicans want to deny their children the opportunity to earn a living?

And there is our PISA ranking. PISA rankings are produced by the OECD based on tests taken by 15-year-olds in more than 70 countries every three years. Comparing the US ranking in both 2012 (the last time the test was administered) and 2015, the US fell to 38th from 28th in math out of 71 countries. We ranked 24th in science. For whatever reasons, we just don’t do a good job educating our kids.

But to the larger point, perceptions of college’s value/non-value is symptomatic of a much deeper and very dangerous schism, the devaluation of facts and scientific evidence. The GOP discredits facts and reality. They emphasize school choice (although it is the only thing that they are pro-choice about).

Resentment and fantasy based on ideology drives our discussion of education. So education has become a low priority for the young and old alike.

Today’s tune is appropriately, “The Wall” by Pink Floyd. It was their 11th studio album, released as a double album in November 1979:

Takeaway Lyric:

We don’t need no education

We don’t need no thought control

No dark sarcasm in the classroom

Teachers leave them kids alone

Hey! Teacher!

Leave them kids alone!

All in all, it’s just another brick in the wall

All in all, you’re just another brick in the wall

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

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Saturday Soother – June 3, 2017

The Daily Escape:

Trolltunga (Troll’s Tongue) Norway – photo by B. Krustev

What is left to say about Trump pulling out of the Paris Climate Agreement? The world is looking at a post-agreement future as if we were standing on the edge of Troll’s Tongue. The Paris deal wasn’t a binding agreement, it was aspirational, with voluntary targets and no mechanism for enforcement. But, this quote from Abu Ivanka tells all:

At what point does America get demeaned? At what point do they start laughing at us as a country? We want fair treatment. We don’t want other countries and other leaders to laugh at us anymore.

This is the core problem with Trump’s view of the world: He and the members of his Party see the world agenda as a zero-sum game, in which only one nation can win. Therefore, we gotta win, or else we lose, and God forbid, we can’t lose. At anything.

Zero-sum thinking is what causes voluntary agreements to fail; they require non-zero sum thinking to succeed.

But, in a zero-sum world, there will always be someone in some country who thinks, rightly or wrongly, that they’re being screwed over, that other countries are using the climate issue to pursue an economic advantage.

In this case, Trump gets into power. He then abandons the agreement, or attempts to renegotiate it.

The new terms on offer will be unacceptable, possibly even designed to fail. So it will be with Trump, who is looking to force both China and India into binding targets in order to continue with the agreement. That’s what Republicans consider “fair treatment”.

In other climate news, the Tampa Bay Times points out that the hurricane season started with nobody in charge at FEMA or NOAA.

What could go wrong?

And farther south, a massive crack in the Antarctica ice shelf grew 11 miles in only 6 days.

But America’s coal miners gotta work. Trump is in thrall with an industry that is among those dying out in America. In March, the WaPo reported that:

The coal industry employed 76,572 people in 2014, the latest year for which data is available. That number includes not just miners but also office workers, sales staff and all of the other individuals who work at coal-mining companies.

That’s fewer people employed than at other shrinking industries, like travel agencies (99,888), used-car dealerships (138,000), or carwash employment (150,000).

Maybe Trump will gin up a reason why climate change is killing jobs in those industries as well.

You need to relax, you need to think about something other than Trump, Ivanka and Jared, or Putin and Megyn Kelly. In other words, you need to turn off your devices, sit quietly and take a long look out the window at the natural world. It helps if you can have a strong cuppa something while you kick back.

Wrongo recommends brewing some Sumatran Mandheling coffee (only $11.44 for 16 oz.) and some beautiful music. This morning, we are listening to a Russian and a Latvian singing beautifully together. Here are Anna Netrebko & Elina Garanca performing the Flower Duet by Léo Delibes at the Baden-Baden Opera Gala in 2007:

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

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Retail Stores Are Closing Fast

The Daily Escape:

Cougar with Radio Collar – Griffith Park, Los Angeles, via Nature Photography

Retailers are closing thousands of stores and going bankrupt at a rate not seen since the Great Recession, and tens of thousands of people are losing their jobs as a result. Retailers blame Amazon and other online vendors, and e-commerce sales are booming. While some brick-and-mortar retailers are doing well, many are losing money. The Atlantic reports that:

Overall retail employment has fallen every month this year. Department stores, including Macy’s and JC Penney, have shed nearly 100,000 jobs since October—more than the total number of coal miners or steel workers currently employed in the US.

Wolf Richter has the following chart showing the nature of the problem for retail stores:

But the e-commerce industry won’t rescue out-of-work retail employees. Most warehouses are regional, and located far from residential areas, which means they might not be within a reasonable commuting distance for displaced workers. By contrast, retail stores are typically located near residential centers. E-commerce warehouses also employ fewer people than retail stores, since the warehouses are increasingly automated.

Yves Smith offers this idea: (parenthesis by the Wrongologist)

One of the reason so many real world retailers are hitting the wall so hard is that private equity leverage and asset stripping made them particularly vulnerable. While the losses to online retailers would have forced some downsizing regardless, the fact that so many are making desperate moves in parallel is in large measure due to the fact that…their private equity (PE) overlords have made them fragile.

That’s a new angle for evaluating Amazon’s performance: it’s not that retailers are closing because Amazon is expanding, but Amazon is expanding because retailers are closing. Jeff Bezos should be thanking the PE firms for looting the retail industry.

The Federal Reserve’s low interest rates also made it easier for Private Equity funds to load these retailers up with debt. Management could borrow more money than necessary, pay themselves cash bonuses, and claim “interest rates are low; making payments will be easy“.

They would even show you the math. Of course, that math assumed that store sales would continue climbing in the future. If sales fell, high debt payments could quickly become an outsized burden.

The Private Equity all-stars often follow a particular deal model. After purchasing the retail company, the PE firm sells the real estate owned by the retail company to another entity (owned by the PE fund). Then the retail company makes lease payments to its new landlord. This splitting of the assets into an operating company and a property company allows the PE fund manager to make a cash distribution to its investors early on, producing a quick return on the deal. Later, the property company will be sold.

The problem with this approach is that businesses that choose to own their real estate are typically seasonal businesses, as all retailers are. Or they are low margin businesses particularly vulnerable to the business cycle, like restaurants. Owning their property reduced their fixed costs, making them better able to ride out bad times.

To make this picture worse, the PE firms often “sell” the real estate to itself at an inflated price, which justifies saddling the operating business with high lease payments, making the financial risk in the operating company even higher. Of course, those high rents make the property company look more valuable to prospective investors, who may fail to look close enough at the retailer who is paying the rents.

Companies with little debt generally can survive lower sales. They can engage in cost-cutting, maybe encourage some employees to retire early, etc. It’s easier to survive if they own their own property. But when you’ve got a lot of debt, and servicing that debt requires that sales continue to rise quarter after quarter without fail, then things become a LOT more fragile.

Trump claims he’s created 500,000 new jobs in his first 100 days. Notice that he doesn’t say what these jobs are, or where they were created. Certainly they weren’t in Retail. Or Coal. Or Steel. Those jobs aren’t coming back.

Here is Jonathan Richman with his 1990 song “Corner Store” which laments what towns have lost to the malls:

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

Takeaway Lyric:

Well, I walked past just yesterday
And I couldn’t bear that new mall no more
I can’t expect you all to see it my way
But you may not know what was there before
And I want them to put back my old corner store.

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Democrats Have Failed

The Daily Escape:

Lavender in Provence – 2017 Photo by Fabio Antenore

This week, Wrongo wrote that 50% of US births are paid for by Medicaid, and how worry about hunger and homelessness has never been higher among Americans. Both of these issues are symptoms of how our economy fails low-income and lower middle class Americans, and neither political party is truly interested in addressing the problems.

Trump won because he led people who used to vote for Democrats to believe that they had nothing to lose if they voted for him. Below-median income voters had long ago lost faith that Democrats, and Hillary in particular, would ever do anything to change their plight.

Trump said he would look out for them. Whether he does or not, remains an open question, but even before Trump, Democrats had already lost a big swath of America. From the American Prospect:

In the race for the White House, the Democratic presidential candidate has won…fewer US counties with average incomes under the national median and with populations that are more than 85% white in every general election since 1996. Concentrated in the Midwest, Appalachia, and the upper Rocky Mountains, there are 660 such counties today. Hillary Clinton won two of them.

Think about that: The Democratic Party’s influence in mostly white, lower-income America has eroded to nearly nothing since Bill Clinton was president. This chart documenting their fall is stunning:

 

 

 

 

 

 

 

 

 

 

 

 

The Parties basically split below-median income counties that were 85% white in 1996. Over a 20-year period, the erosion of the Democrats’ control was steady, and complete. This isn’t just the result of a poor 2016 presidential candidate, it is an indictment of the Democratic Party, its leadership, and its strategy.

The American Prospect article is about Montana’s Democratic Governor, Steve Bullock, who won his state by 4 points while Trump was beating Clinton by 20. Bullock is a rural populist in a party of technocrats. Obama lost Montana by 2 points in 2008. Bill Clinton won Montana in 1992.

But, the electoral failure of Democrats is worse than its showing in these below-median income white counties. The following graphically illustrates the abject failure of Democrats to be competitive in political contests at all levels:

Nothing that Barack Obama did by holding on to the White House for that entire period compensates for these terrible losses.

Democrats remain divided about their Party strategy, many clinging to the thought that if Hillary could have turned about 80k voters in Michigan, Pennsylvania, and Wisconsin, where white working-class people are abundant, she would be president.

But she would not control either legislative branch, and she would have had to propose Supreme Court Justices similar to Neil Gorsuch to get one confirmed by the Senate.

The question is where will the DNC be taking the Party in 2018? In a 2018 mid-term election where the president has a historically poor approval rating with independents and Democrats, like Trump has now, victory is possible.

If Democrats want to win back Congress, and the White House in 2020, they need to field candidates who believe in jobs and economic growth first. The candidates need to be authentic people, who listen more than they talk. And when they do speak, they should use PIE as a metaphor for America’s economy, as in: (H/T Seth Godin)

  • How big is the pie?
  • Is the pie growing?
  • What will my share of the pie be tomorrow?
  • Who allocates the slices of pie? Can they be trusted?

When voters think the economy isn’t growing, things begin to feel zero-sum. People begin to think that they may permanently lose their place in our society.

If the Democrats want to win back Congress, they need to describe concretely what they plan to do when they say they support their working-class constituents, regardless of color.

They need to get to be better than Trump on jobs, economic growth and finding a peace dividend.

All of that, and Medicare for all. In Wrongo’s Thursday column, Gallup found that health care concerns ranked highest across all income cohorts.

Shouldn’t these principles be credible with working-class people—including whites?

A song about pie: Here is D’Angelo with “Devil’s Pie” from 1998. It’s a dystopian vision of capitalism, where everybody’s fighting for more of the tasty, materialistic dish. All is fair in pursuit of a bigger paycheck:

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

Takeaway Lyric:

Fuck the slice we want the pie
Why ask why till we fry
Watch us all stand in line
For a slice of the devil’s pie

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Is Taxing Robots a Solution to Fewer Jobs?

The Daily Escape:

(Slot canyon with dust devil – photo by Angiolo Manetti)

Yesterday, the Dutch voted in an election pitting mainstream parties against Geert Wilders, a hard-right, anti-Islam nationalist whose popularity is seen as a threat to politics-as-usual across Europe, and possibly, as an existential threat to the EU.

Wilders, who wants to “de-Islamicize” the Netherlands and pull out of the EU, has little chance of governing, as all of the mainstream parties have already said they won’t work with him. Given Holland’s complicated form of proportional representation, up to 15 parties could win seats in parliament, and none are expected to win even 20% of the vote. OTOH, polls show that four in 10 of the Netherlands’ 13 million eligible voters were undecided a day before voting, and there is just 5 percentage points separating the top four parties, so Wilders could surprise everyone.

As Wrongo writes this, the Dutch election results are not known, but PBS NewsHour coverage on Tuesday surfaced a thought about taxing robots. PBS correspondent Malcolm Brabant was interviewing workers in Rotterdam:

Niek Stam claims to be the country’s most militant labor union organizer. He says the working class feel insecure about their prospects because of relentless automation and a constant drive to be competitive. The union is campaigning for robots to be taxed.

Brabant then interviewed a worker:

Robots do not buy cars. Neither do they shop for groceries, which leads to a fundamental question: Who’s going to buy all these products when up to 40% of present jobs vanish?

This isn’t an entirely new idea. Silvia Merler, blogging at Bruegel, says:

In a recent interview, Bill Gates discussed the option of a tax on robots. He argued that if today human workers’ income is taxed, and then a robot comes in to do the same thing, it seems logical to think that we would tax the robot at a similar level. While the form of such taxation is not entirely clear, Gates suggested that some of it could come from the profits that are generated by the labor-saving efficiency…and some could come directly in some type of a robot tax.

The main argument against taxing robots is made by corporations and some economists (Larry Summers), who argue that it impedes innovation. Stagnating productivity in rich countries, combined with falling business investment, suggests that adoption of new technology is currently too slow rather than too fast, and taxing new technology could exacerbate the slowdown.

It can be argued that robots are property, and property is already taxed by local governments via the property tax. It might be possible to create an additional value-added tax for robots, since an income tax wouldn’t work, as most robots are not capable of producing income by themselves.

Noah Smith at Bloomberg argues that the problem with Gates’ basic proposal is that it is very hard to tell the difference between new technology that complements human work, and new technology that replaces them. Shorter Noah Smith: Taxation is so hard!

Why are Western economies stagnant? Why has wage growth lagged GDP growth? Automation is certainly a key factor, but rather than point the finger at the corporations who continually benefit from government tax policies, let’s just assign blame to an object, a strawbot, if you will. That way, we won’t look too carefully at the real problem: The continuing concentration of economic and political power in the hands of fewer and fewer corporations.

Automation isn’t the issue, tax laws that allow economic treason by corporations in their home countries are the issue.

Why is nationalism on the march across the globe? Because fed-up workers see it as possibly the only answer to the neoliberal order that is destroying the middle class in Western democracies.

Let’s find a way to tax robots. Something has to offset Trump’s tax breaks for the rich.

Now, a musical moment. Did you know that “pre-St. Patrick’s Day” was a thing? Apparently, some dedicated celebrators prepare for the day itself by raising hell for up to a week beforehand. With that in mind, here is some pre-St. Pat’s Irish music, with Ed Sheeran singing “Nancy Mulligan” a love song about his grandparent’s marriage during WWII, against the wishes of her parents, and despite their Catholic/Protestant differences:

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

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February 22, 2017

The Daily Escape:

(Student dormitories surround the largest Buddhist Monastery in Tibet) 

Trump spoke at Boeing’s factory in South Carolina last Friday to help unveil the latest version of the company’s 787 Dreamliner. During his visit, he praised Boeing and its employees for the new jet and vowed to protect US manufacturing jobs:

We want products made by our workers, in our factories, stamped with those four magnificent words: Made in the USA…

Boeing, however, buys many parts for the plane globally. It assembles the plane in the US. In fact, foreign parts account for almost a third of the cost of the entire plane. So much for “Made in the USA“:

  • An Italian firm makes the center fuselage and horizontal stabilizers.
  • A French firm makes the aircraft’s landing gears and doors.
  • The Germans supply the main cabin lighting.
  • The Swedes make the cargo access doors.
  • A Japanese company makes parts for the lavatories, flight deck interiors and galleys.
  • Another Japanese firm supplies the system’s lithium-ion batteries.
  • The French make its electrical power conversion system.
  • The British company Rolls Royce makes the engines.

None of those countries are low wage/low tax places. Robert Reich has a good observation about Boeing’s partners: (brackets by the Wrongologist)

Notably, these companies don’t pay their workers low wages. In fact, when you add in the value of health and pension benefits – either directly from these companies to their workers, or in the form of public benefits to which the companies contribute – most of these foreign workers get a better deal than do Boeing’s workers. (The average wage for Boeing production and maintenance workers in South Carolina is $20.59 per hour, or $42,827 a year.) They [foreign workers] also get more paid vacation days.

These nations also provide most young people with excellent educations and technical training. They continuously upgrade the skills of their workers. And they offer universally-available health care.

To pay for all this, these countries also impose higher tax rates on their corporations and wealthy individuals than does the US. And their health, safety, environmental, and labor regulations are stricter.

We’re not talking about China or Bangladesh. Boeing’s partners are in high-wage/high-tax locations. Why? Because the parts made by workers in these countries are more reliable than parts made anywhere else. Boeing isn’t concerned about costs of personnel or parts (within reason), they are concerned with reliability and total cost of ownership of the plane for their clients.

There’s a lesson here: Trump’s idea of putting a wall around America and charging more for imports won’t make us more competitive with the rest of the world. Investing more, and investing smarter in the education and skills of working-age Americans is what has to happen. Subsidized and formal on-the-job training will also help make US workers more competitive.

Trump isn’t interested in the kind of education reform which would re-energize our middle class and improve our global competitiveness. He’s simply rehashing his campaign speeches. Trade is global, and has been for thousands of years. Capital is global; there is no way to restrict its movement. Trying to implement a protectionist system will fail.

The best weapon a country has in the global competitive environment is an educated people.

 

Here is the British rock group Ten Years After doing “I’d Love to Change the World”. This is the lead single from their 1971 album “A Space in Time”. It was their only Top 40 hit. The Vietnam War ended three years after this song was released, so the lyric, “them and us, stop the war” had relevance then, and still has relevance now. The lyric “tax the rich, feed the poor/ ’til there are no rich no more,” has more relevance today than it did in the early 1970s when it was written.

Here is “I’d Love to Change the World”:

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

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January 20, 2017 – Trump Inaugural Edition

Today is the Trump Inaugural. So many preparations, and so much detail for the transition team to worry about. From the no stone left unturned department, comes this from the WSJ:

 Workers preparing for the Trump Inaugural have taped over the name of the company — “Don’s Johns” — that has long supplied portable restrooms for major outdoor events in the nation’s capital…Virginia-based Don’s Johns calls itself the Washington area’s top provider of portable toilet rentals. But the name apparently strikes too close to home for inaugural organizers.

Too close to Donald John for Donald John Trump? Of course. Somebody placed blue tape over the company name on dozens of portable restrooms installed near the Capitol for the inauguration. The company says they didn’t do it. But, the company’s name is clearly blocked from the TV cameras:

Once Donald J. Trump becomes the 45th president of the US, he will certainly push the agenda that got him elected. We all will need a way to sort the signal from the noise that we will hear from both his partisans and his opposition (which includes the Wrongologist). When you hear people raising reasoned questions and objections to Trump’s proposed policies, odds are that you’re listening to the kind of dissent that’s essential to our democracy, and you ought to take it seriously. For the kinds of arm-waving, emotional, knee-jerk support (or criticism) that you will hear every day, feel free to ignore that. You will know the knee-jerk stuff, since it will be sung in harmony by all the other partisans. And the media will repeat it often for your consideration.

Wrongo has serious problems with Trump, but is hopeful that his administration will:

  • Live up to his populist domestic promises, and
  • Simplify our country’s confusing foreign policy

If he normalizes relations with Russia, extracts us from the messes in Iraq and Syria and if he encourages domestic jobs growth, Wrongo will likely sign up for all of that. If he pushes through a big infrastructure bill that isn’t a wealth transfer to corporations, Wrongo will probably go along with that as well.

Wrongo does not trust Trump or the GOP on health care insurance. He worries that Republicans will throw a number of Americans under the bus, causing a great deal of unnecessary pain.

You can be sure that Trump is going to try to do some terrible things over the next four years, such as appointing ideologues to the Supreme Court. But, Congressional Republicans will clearly attempt far worse things than will The Overlord.

So the terrible fact is, we have to count on Trump to rein in the worst of the GOP’s ideas and instincts.

Needing to trust Donald Trump is enough to frighten anyone.

Trump tweets continually to rally his supporters while simultaneously manipulating the media. It’s unnerving. Saying that Trump is terrifying, while correct, is useless. The most obsessive of his opponents focus on worst-case scenarios that are designed to rally (and raise money from) the anti-Trump troops among us. Sadly, that strategy largely guarantees that the opposition will look disorganized and fragile. It also causes the American center-left to be fragmented issue by issue, and therefore, unable to broadly challenge the GOP, at least in the short run.

The Dems need to coalesce around only the potentially win-able issues. Otherwise, they should “just say no” to any Trump legislation intended to weaken or break our social contract. Sen. Schumer is correct when he says that the GOP needs to own 100% of the pain they cause the average person, whenever they break the contract. Any Democrat that breaks ranks to support issues like cuts to Medicare or privatization of Social Security must be challenged from the left in the next primary.

Democrats did not believe they would be in this political mess. They are trying to find their footing, but establishment Democrats want to simply tweak the message, and stay the course.

However, the battle against Trump and the GOP majority must move from “Republican Lite” to a fight to put social justice and progressivism back on the table as viable options for all Americans.

Otherwise, it will be a precipitous fall from political relevancy for Democrats.

Establishment Democrats who profit from the status quo, have no incentive to come up with an agenda that appeals to people who are suffering because of that status quo. The great weakness of Hillary Clinton’s campaign was that she aimed her appeals at the minority of voters who would benefit from the established neoliberal order, while largely ignoring those who suffered under it.

That decision could cost the Dems for a generation.

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Saturday Soother, January 7, 2017

Happy Birthday today Kelly!! Other than that happy fact, little went right in America this week. Our Overlord, Donald I, rode to a presidential win by saying he would bring jobs back to America that have been lost to automation and offshoring by US companies.

But economists have said for years that creating jobs for low skilled Americans will be difficult. Here is further evidence that bringing back jobs may be tougher than Trump thinks. Salon reports that for men ages 25 to 54, the work statistics are poor:

For this group, labor force participation has sunk to 88.5% from a 1954 peak of 97.9%. Most of that loss has occurred among men who have a high school degree or less, according to a report this year by the Obama administration.

And there are interesting facts to consider where unemployed men are concerned. The NYT’s Upshot reports that the jobs that have been disappearing, like machine operator, are predominantly those that men do, while the occupations that are growing, employ mostly women. More from Upshot:

Of the fastest-growing jobs, many are various types of health aides, which are about 90% female. When men take these so-called pink-collar jobs, they have more job security and wage growth than in blue-collar work, according to recent research. But they are paid less and feel stigmatized.

Upshot quotes David Autor, an economist at M.I.T.:

The jobs being created are very different than the jobs being eliminated…I’m not worried about whether there will be jobs. I’m very worried about whether there will be jobs for low-educated adults, especially the males, who seem very reluctant to take the new jobs.

The issue is America’s culture of masculinity. Andrew Cherlin, a sociologist and public policy professor at Johns Hopkins says:

Traditional masculinity is standing in the way of working-class men’s employment…We have a cultural lag where our views of masculinity have not caught up to the change in the job market.

Why is it that men can get away with saying that they deserve better than women? Perhaps that is a rhetorical question. After all, we elected Donald Trump, who can get away with anything.

The Salon article had this snippet: (emphasis by the Wrongologist)

Health problems and the opioid epidemic may also be a major barrier to work, according to research by Alan Krueger, a Princeton economist and former Obama adviser. Nearly half of men ages 25 through 54 who are neither working nor looking for work, take pain medication daily.

Some of these men may have been injured on the job and were subsequently laid off. But some may also represent part of the huge increase in opioid use in America. They may be part of the increase in disability cases since the Great Recession: More than 10 million Americans received Social Security disability benefits in 2014 (most recent statistics). Benefits paid to disabled workers totaled $11.4 billion per month nationwide, a substantial increase from the $6.1 billion paid monthly in 2004. The top three states receiving disability benefits are West Virginia, Alabama and Arkansas.

We became this society honestly. Our politicians hold our corporations in high esteem. The corporations repay us by automating most jobs and shipping other jobs overseas. They do this with little or no responsibility to help displaced workers retrain, or find new work. They do this while asking for bigger tax breaks to remain domiciled in the US. They do this while blaming our education system for not providing trained, ready-to-work job entrants at no cost to them.

We just cannot count on them to be good corporate citizens.

Those on pain killers may or may not have disabilities that prevent them from working. But in any case, society does not owe unemployed working age men permanent, high paying manufacturing or mining jobs, despite whatever efforts Trump may make.

It is time for them to adapt.

We need a soother. Here is Grex Vocalis a Norwegian chorus formed in 1971. Grex Vocalis has reached the finals of the BBC contest “Let the Peoples Sing” three times. In this video they are performing “An Irish Blessing” (May the road rise to meet you) written by an American, James E. Moore in 1987, live at the Amadeo Roldán Theatre in Havana Cuba:

A Norwegian chorus performing an Irish tune, written by an American, in Cuba. That’s gotta be soothing.

For those who read the Wrongologist in email, you can view the video here.

Sample Lyrics:

May the sun make your days bright

May the stars illuminate your nights

May the flowers bloom along your path

Your house stand firm against the storm.

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