Sunday, April 27, 2008

Comments, comments everywhere and not a thought to think

This opinion from New York Times editorial board that trade is NOT the problem behind the war on the middle class asks for a "fact based" treatment from the candidates.

I think their analysis is helpful but incomplete.

In the US any job that can hurt the environment has become harder for employers to invest in both for health, remediation and prevention costs that the "cheap labor" countries ignore. Those countries then suffer environmental degradation and toxicity at rates that even a republican run EPA could not tolerate. The US [and Europe for the most part] are not wrong in bringing the environmental costs of industry onto the books. The evil lies in exploitation of both workers and ecologies far enough away from our Wal-Mart experience that we can ignore them and pocket the change. A better deal for all would be to condition "free" trade on the insistence that wherever we get our goods, they must be produced with the same worker benefits and environmental protections we have in the US. That is , we should export our standard of living rather than importing the third world's standard of living. Neither NAFTA nor US corporate regulation support that direction of wealth transfer because they do not properly define wealth.

There are really two sets of questions to be addressed when a nation's economy gets sick.
1. where is our wealth going
2. where does our wealth come from

The Times opinion rightly points out that a major part of the answer to the first question is that owners and executives and perhaps a few holders of college degrees who provide the vital brain power that generates new products and processes are taking an increasing share of the paycheck while people who do work that can be done without an education are getting a shrinking paycheck. That is true enough and aggravated by the reduction of high bracket taxation that might have made the Boards of Directors think twice before assuming their CEO was worth 1000 to 10000 times as much as their truck drivers and assembly line workers. It gets easier to make such a lopsided decision when [a] no tax penalty goes to the company for such inequity and [b] that CEO sits across the table from you while half of the assembly line workers are not even in the same country. Paying someone tens of millions per year to lead a company might make sense if there were any downside or risk to the position. Its a weak argument to say someone who has some magic "rain maker" genes that rescue companies from dumb strategies and insure a profit in most quarters could be worth his millions. But they are getting the millions whether the company does well or not. That fact puts the general executive paycheck in the category of money down a rat hole. And when executives make 10 million, a few spend it but more bank it. If instead, the company's gains went more to the workers who carry the company to the finish line on their backs, that money would go immediately and directly back into the economy. All many executives seem to have on their backs is a golden parachute in case they screw up. Don't get me wrong: Jealousy of the boss is as old as employment and many companies probably could not continue to plan product and market strategies that would get them through the next year if they did not have dedicated and talented management. But the pay scales have become divorced from the consequences. And worse yet, the only consequences for which management seems even slightly liable in the US is this quarters earnings. Long term health of the company, its workers or its environment are either fungible or forgotten. Who is being rewarded for investing cash this quarter that will see no tangible return for, say, ten years? The only people I can point to in that situation are private investors of the buy-and-hold sort who follow Peter Lynch or Motley Fool. Certainly not any executives of those companies whose stock is purchased. The investors are even more removed from the plight of workers and environmental resources used up in the profiting than are the executives. Socially responsible investing has been a growing segment of the investing world but is still insignificant. And like the carbon offset credits market, I wonder if there is really as much net benefit as there is hype. The investor can instantly punish and abandon the errant executive by clicking the SELL AT MARKET PRICE button on his trading screen. That bullet tends to miss the executive who can walk away with millions when let go by the Board. As our trade agreements and corporate tax laws are presently operated, the quickest fix to any industrial bottom line would be to reduce wages and to take environmental and social costs off the books. So this same executive who wins a little more if the company has a good quarter and a little less if not must see the opportunities to produce in hungry less developed countries as extremely tempting.

There are of course other places our money goes without stopping along the way to do us any good. The current administration and the three Republican administrations before it have multiplied the national debt about 6-fold. Last year Congress let Bush have his way by borrowing another $1500 for each man woman and child in the nation. You may be having trouble paying your mortgage. Certainly you know some people are having awful trouble with personal debt. Banks are being bailed out with public money to deal with those unpayable debts. As of today roughly $30000 dollars is owed by the US government, much of it to foreign investors, and the interest on that is being paid how? Out of your taxes. Michael Hodges puts up a very informative website on the whole national debt situation. He is not a liberal by any means and would be happy to bring balance by cutting services rather than cutting out the war or raising taxes...but he is fiscally responsible and wishes his country were. So do I. His numbers are honest and just a lot handier than the treasury department's obfuscating information. My point in all this is just to support the contention that there are many reasons beside our trade, outsourcing and globalization to account for the dim prospects of American job seekers. The Times mentions that government expenditures for infrastructure would aid our competitiveness as an exporter and this is true. My own guess of about 5% interest on the debt , and ignoring payments against principle [are there any? the debt GROWS!] agree closely with Mr. Hodges about how much money the government takes in which it must turn over to creditors rather than help with university tuition, run job retraining programs or build ports, roads and canals: about 450 billion per year [it varies with the Fed's setting of the prime interest rate]. On the eve of George Bush the first taking office that number had grown to about $220billion and has doubled despite a drop during Clinton's term. That is way more than the GNP of most nations, it would pay for a lot of college tuition. It would retrain a lot of workers. That money is just gone.

All of those considerations affect where the money goes and they seem largely out of whack to me.

As for where wealth comes from. Inventiveness is just a seed and money the fertilizer. But day in and day out labor and ultimately something ripped from the earth are constant ingredients of what we finally put in our shopping carts. And with out the raw ingredients, we have nothing, not even the opportunity to perform the transformative labor. Management is primarily the art of seeing businesses as a whole and tweaking all the little human parts and arts that make the whole perform, knowing well what each part is worth and what it is contributing. Management then is responsible for keeping the engine humming but is itself neither the engine nor the fuel. The increase in value of finished goods over raw materials is often viewed as a kind of golden egg of capitalism's goose ...the fount of wealth. Raw materials themselves provide income to those who wrest them out of the earth but seldom does the ultimate source ever get paid or compensated in a way that would support restoration of what was taken. Sustainable agriculture, more a theory at this time than a practice, comes closest. Mineral wealth and the poorly quantized economic value of a benign climate are treated like god's endless gift, burnt as if they were a candle of infinite length. Have you checked the price of paraffin lately? Its made from oil and the Chinese are in the market for candles too This citation of physical resources as the ultimate source of wealth may seem to some as relevant as saying that someday the sun will burn out. From here on out, "someday" is right now. The price spikes we have begun to experience are the harbingers of wide and spreading dearth. Our globalized industries make the nations work rather like cars in a freight train: so coupled that one hitting an obstacle makes all shudder to a halt. Trade, as the Times points out is not that obstacle, it is only the coupling.

Update 28 April:
Mr Yarrow at HuffPo has picked up on the presence of the republican elephant taking a dump in the middle of our living room. I find it odd that no candidate will address this issue.

thongish metablogging

I have been struggling for time and for the will to hit the publish button lately but not for words to say. The whole "bitterness" thing and the petty playing on what self appointed media opinion shapers and campaign strategists consider the dominant fears of undecided voters is beginning to sicken me. Jude puts it well. My notion that a blog devoted to complete examination of comment threads in more or less neutral media might be a way to discover [though perhaps to my horror] just where the heads of the electorate are at ... well that is a tougher assignment in some ways than I had imagined. It obviously will take time and less obviously a way to assess divergent views without my usual "liberal bias", not by the impossibility of becoming neutral but by the possibility of making my interpretation a sidebar or otherwise separable input. One last problem is which places to look for representative threads. NY Times accepts comments without editorial assessment on its blogs. For some OP-ED and editorial pieces it takes comments and rates them. Those are fun and I recommend reading the comments but they disallow certain comments I consider fair and they are managed haphazardly. For example Frank Rich pieces can have comments [sometimes 400] that are subsequently withdrawn from the server. I need permalinks to do real blogging and I don't know what is stable. The editorial I am commenting on here is not accepting reader feedback. That is a shame as I am sure there would be a ton of it.

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