Tag: Economics

Restructuring the Weapons Industry

Steven Woolley2 Comments

Public anxiety over the economy has generated a variety of proposals for what to do: raise taxes, lower taxes, increase public spending, decrease public spending, raise trade barriers, negotiate more freed trade treaties, and on and on.  On top of that, the public is convinced that the size of the public debt and continued deficit spending are about to sink us into the swamp of Greece and Spain.  The issues are poorly understood but deeply held beliefs about them are unshakable.  
I want to suggest that something else is afoot, or at least I hope it is.  It is a dramatic restructuring of the American economy to position it as a major competitor in a global economy in which America is one player among others, but not the singular driving force that can command the fortunes of others.  That will require a coordinated public private partnership that rules out the romantic ideal of free enterprise unhindered by government regulation and interference.  
The problem is that any one change in public policy affecting the economy will have a multitude of effects, often effects that will stagger the way business is done.  Take, for instance, military spending.  We can no longer afford to pretend that global peace depends on American military might flexing its muscle in every corner of the world.  It is sad that there is warlike violence in so many countries, that human rights and simple justice are trampled in many places for so many reasons.  Nevertheless, America cannot, and does not have the moral right to, intervene to impose Pax Americana.  From a more selfish perspective, continuing to try will destroy our economy in the end.  Other nations must work out their own problems.  We may not like the way they do it, but it’s their life not ours.  It amazes me that so many conservative types who demand limited government for themselves are lightning quick to demand that America impose it’s will on others, by force if necessary.  
So what happens when we begin to resize our military establishment?  I think we can safely disregard the hysterical paranoia about weakening our national defense.  That’s a lot of nonsense.  However, backstage from troops and equipment is an enormous weapons industry that employs many hundreds of thousands of workers earning high wages.  Those industries will have to figure out some other product line for their highly skilled people to produce, or go out of business, and considering how slow, bureaucratic, and hide bound they are, it seems unlikely that they can easily adapt to a new more entrepreneurial way of doing things. 
Consider a small example: if you build tanks, then tanks are what you want to keep building.  A recent report (The Week, October 5, 2012) noted that the army has said that it needs no more tanks.  It has enough, in fact it has 3,000 sitting in reserve, but tank building is what they do in Ohio, so congress mandated construction of 42 new tanks not because they are needed but to keep jobs filled.  That is make work corporate welfare at its wasteful best. That one small example is replicated many times over on a much larger scale throughout the weapons industry, and is echoed in the public angst that comes with proposed base closures.  
Somehow all that talent must be reoriented to non-weaponry, but making it happen gets very complicated.  There is nothing easy about it.  The weapons industry is irrevocably embedded in the fabric of our national government, so whatever is done must be a function of public-private partnership.  It seems to me that a slow decade long transformation is the way to go.  It would give the greater economy time to adjust.  I wish it was as easy as just saying that, but we all know that industrial lobbying and congressional ineptitude will fight any change at all.  That’s too bad because history suggests that the possibilities are enormous.  No one can be certain what they are, but we know that products from micro-wave ovens to the innards of our communication devices were given birth in the weapons industry.  I have no doubt that there is more ahead like that if we can make the turn. 
If we fail to make the turn, we will simply become the weapons factory for the world with our economy dependent on a continued cycle of armed violence in a great many places.   How immoral would that be? 

Thoughts on the European Economy

Steven Woolley3 Comments
The austerity program in Europe doesn’t seem to be working all that well.  Restructure your debt, and live within your means by immediately and drastically cutting government expenditures, sounded like good common sense advice, and certainly something had to be done.  Bureaucracies in the so called PIIGS nations (Portugal, Italy, Ireland, Greece, Spain) were bloated and inefficient.  Guaranteed social benefits were overly generous and unfunded.  Deficit spending and national debt had climbed to unsustainable levels.  Banks were under capitalized.  What a mess!
What appeared to be the common sense solution just is not working.  As it turns out, Keynes was right, you cannot financially starve a country into prosperity.  All it produces is a deepening recession accompanied by very unhappy citizens verging on riot and revolution.  Add some strong arm tactics to put down civil unrest and it’s a path toward authoritarian rule. 
So what might work?  How about focussing on reforms of a more prosaic nature?  Some of these countries, Greece and Italy especially, are well known for massive tax evasion by just about everyone.  The very rich report only a fraction of their income.  Lower classes don’t report at all.  Shops collect the VAT on every sale, but forward only a portion, or none, to the state.  It’s hard to run even a slimmed down government under circumstances like that.  Honest enforcement of the tax laws might produce enormous revenues for the state without jeopardizing anyone’s well being.
What about reducing bureaucracies through attrition while enforcing simple rules promoting efficiency and punishing bribery?  It would require a change in organizational culture, but, I suspect, a welcome one.
What about phased in changes to working hours, retirement ages, and paid leave benefits in ways that would enable ordinary families to prepare and adjust without feeling like they have had it shoved down their throats?
Instead of shutting down public expenditures altogether, what about a carefully designed plan of additional investment in appropriate infrastructure, both physical and social?
It would still require a massive restructuring of debt, and, perhaps, Greece at least would still find its way out of the Euro and back to the Drachma.  It would not be a quick fix, but it might stave off a European wide depression while setting the groundwork for long term economic recovery.  
To me, that’s common sense.

Plutocrats and the People Who Love Them

Steven Woolley1 Comment
Paul Krugman wrote an interesting column today in which he noted the correlation between extremes in income inequality with poor economic performance, and the dismal track record of far right wing economic practice delivering the goods it promises.  When income inequality becomes too great, and what too great is is debatable, governments tend toward plutocracy where the very rich are able to “purchase” policies that protect their accumulated wealth while opening up small windows to increased wealth through which only they, and a few others, can pass. 
Looking at the current American scene from a distance, as Krugman is able to do, it looks like a pretty good description of what is going on.  But looking at the same scene from the inside, down at the middle and lower levels, it looks different.  The so called Tea Party movement, aided and abetted by more ordinary conservatives, are not only enthusiastic supporters of policies favorable to the plutocracy, they often want to go farther.  Curiously, none of them are members of the plutocratic class, nor are they ever likely to be.  Moreover, many are in that indebted middle class group that is always teetering on the verge of personal economic disaster.  Yet they are enthusiastic about policies destined to work against their own best interests.  Why is that?
I suspect that fear has something to do with it.  Fear that the nation might be in as bad a shape as they are.  They know how close to edge they live day to day, and believe that the nation is nothing more than a typical domestic household writ large, very large.  They believe, without examination, that we have to go begging hat in hand for loans from the Chinese.  They believe that petroleum products produced domestically are consumed domestically, and that, if we really tried, we could produce all that we need.  They are certain that certain other nations want to conquer us, making us subjects of an alien empire.  They are, to be truthful, suspicious of a president who is not a white male.  In my part of the country, they are Republicans because they are Republicans, and whatever the party is selling must be good, as opposed to tax and spend big government Democrats.
I don’t think the plutocrats get together to giggle at their good fortune, finding their best allies among those whom they are grinding underfoot.  They don’t do that because they don’t think about it at all.  Nor do they give much thought to the destructiveness of their favorite policies that, in the end, will erode their own domestic wealth producing opportunities.  That’s because they are both short sighted and not economic citizens of this country anyway.  They are global citizens quite certain that if a market dries up in one place, there will be another lucrative, amenable one not far off.  The well being of the commonwealth is unimportant because they have little regard for the idea of commonwealth at all.  What is important is the viability of markets in which they can make a killing over the short term. 
It will be interesting to see how all of this works out.  

What is Ownership?

Steven Woolley3 Comments
What does it mean to own something?  I guess I’ve owned a few things, things that were in my possession for my exclusive use until they had no more life in them, although I have to admit they were few.  For instance, right now I’m looking at a clock that I bought at a roadside stand on Kauai twenty or thirty years ago.  I think it cost less than $5.  I doesn’t run anymore. The clock face has no covering so the hands are bent out of shape.  It just sits there telling me it’s 10:17 a.m. or p.m., take your pick.  One could probably say that I own it because no other person would have use for it, and there is no word other than ownership that fits.  
That seems a very limited definition of ownership, but I can’t think of anything broader that makes sense.  
Do you own a house?  The other night we were talking about our house.  I’ve written about the problematic question of home ownership before, but it bears repeating.  I don’t think anyone ever owns a house.  We are only stewards of a piece of property for a time.  It’s a temporary thing.  For instance, we now live in the fifth or sixth house we have owned.  We received those other houses from other people, lived in and cared for them for a while, and passed them on to the care of others who will do the same.  I like to think that we now live in the last house we will ever own, and have just finished a remodeling project the cost of which would not be recovered if we were to sell.  But that’s not the point.  We have greatly improved the delight we take in living in here.  Someday another family will own this house, and we hope that our improvements bring them joy also.  We are owners of this property only in the sense that our names are on the deeds.  Of course we paid, and are paying, a substantial amount of money to live here, and we like to think of that money as an asset, but the greatest portion can only be understood as rent paid for the duration of our occupancy.  Ownership is a very transient thing.  Our estate will eventually be valued at whatever is left after we have frittered away most of it.  So even our treasured money is a transient thing passing through our fingers as food through our stomachs.  We are merely stewards of it for a very short time. 
I thought about that again this morning when I caught a bit of a television show about the sale of certain classic cars at auction.  I don’t know why the owners felt a need to sell, but it was clear from the interviews that they identified themselves as owners in almost narcissistic terms.  I didn’t watch enough of it to get a feel for what the new owners thought.  As for me, I think all they did was transfer stewardship from one to another.  Whatever cash was exchanged was little more than water being poured from sieve to sieve.  There are other ways of understanding ownership, and since I’m on the subject of cars, not so many years ago I had a friend, now deceased, who owned quite a few antique cars.  What made him different was the sheer child like delight he took in them, including his incurable desire to share that delight with anyone who showed even the slightest interest.  He seemed to know that he didn’t really own these things, he was the steward of them for a time, and that time would pass.  
We don’t own any million dollar classic cars, but we are avid art collectors who have slowly built up a collection of works that might have some modest value if sold at auction.  Do we own them?  That’s hard to say.  We certainly have the legal right to their exclusive use.  Is that ownership?  They bring joy into our lives each day.  If they were destroyed or stolen money would not replace them.  Their value is not in dollars but in their existence as expressions of artists’ gifts that have spoken through our eyes into our minds and hearts.  We hope that others also can see and hear, each in their own way.  (A number of our friends are singularly unimpressed by them, and that’s OK too.)  Someday they will hang on walls in other places.  In the meantime, we are their keepers.  It all adds up to the fact that we really don’t own them, we’ve just rented them for a season, and we have a responsibility to care for them until they are handed into the care of the next steward.  
About now I can almost hear the harrumph of someone who says that they worked hard for their money, they earned it, and I’m demeaning the value of hard work and its rewards.  Not at all.  Hard work, performed with diligence and appropriately rewarded is worthy, commended by scripture and valued in every culture. There is a difference between that and the egotistical, fear driven, defensiveness that seems to be the aura surrounding so much of what we call ownership.  
As Christians we are called more to stewardship than ownership.  In our society we have the right to the exclusive use of property that we have acquired legally, but as Christians that civil right is mediated by a higher law calling us to stewardship with the understanding that, whatever our exclusive rights might be, they are temporary at best.

Free Enterprise, Private Enterprise and Government

Steven Woolley2 Comments
The campaign is on and the devotees of an unfettered free market system are intent on getting government out of the way.  
Wherever did the idea come from that we have, or ever have had, a free market system, fettered or unfettered?  What we have is a private market system that exists within the political context of a democratic republic.  It’s a good system, but it’s an amoral system and cannot be trusted for the commonweal on it’s own.    
I was struck by an editorial article by Rodney Clapp in the January 11 edition of Christian Century in which he discussed the limitations of private enterprise as a supplier of goods and services.  It led me to write down these thoughts that have been rumbling about in my head for some time.  


The private market system, operating within reasonable constraints that assure public health, safety and honesty in the market place, works very well when there are many suppliers, many buyers and the ability of each to make informed decisions.  It doesn’t work so well when the numbers don’t add up to many, or when many is counterproductive.  
The private market system also lacks internal incentives to consider the public, or external, costs of doing business.  The costs to society of pollution, unsafe products and practices, withholding of essential services to the poor, etc., are not natural calculations for private enterprises.  They need to be imposed, in appropriate measure, by the society itself.
Then there is the knee jerk assumption that anything government does can be done better and cheaper by private industry.   Contracting out public services is not the same thing as allowing the advantages of private sector competition to do the job better.  One might, for instance, contract out police services to a private enterprise, but a community would not open up the town to a multitude of competing police services selling themselves to individuals or groups.  Well, I take it back.  A town could do that.  Chicago did, in a sense, during prohibition, and ended up with gang wars as each competed for territory in which they sold “protection.”  
The point is this: what I hear being argued in the GOP debates, and among my conservative friends, is that private enterprise is a moral system of moral agents, and is best equipped to do all things for all people.  That’s naive at best.  The private enterprise system is a very efficient system for the production and sales of goods and services.  Given the right competitive environment, it cannot be beat for the generation of new ideas growing into new and improved goods and services.  But it is an amoral system.  Whatever morality it has is injected into it from the society it serves acting through its governments.

Flying First Class

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The New York Times recently featured an article on the transformation of first class air travel, especially on overseas flights, from roomier, more comfortable seats and better food, to the luxury of flat beds, privacy screens and an over abundance of service.  I have no problem with that, and have enjoyed several flights up front with grateful thanksgiving for the ability to do so.  
What does trouble me is the other end of the plane, especially on domestic flights, where every effort has been made to stuff as many passengers as possible into the smallest tolerable space while removing any sign of hospitality.  I see no reason to treat people like animals, stripping them of almost all dignity.  I’ve heard the arguments about maximizing seat mile revenues while pleading corporate poverty and find them wanting.  One airline marketing VP was cited as saying that coach travelers were only interested in the lowest fare, and creature comforts are costs that can be shaved to keep fares low.  There may be some truth to that, but for many travelers that cheap fare is dear.  Money for it has been saved up for a long time, or it’s been financed by credit card debt that will be paid off over many months at high interest.    Dehumanizing one’s customers with utter contempt for their well being may be a plan for profit but it is immoral, and I cannot help but believe that there is a better way.  
A few airlines have made modest accommodations for their coach passengers.  Hawaiian serves a well prepared complementary hot meal between the mainland and Hawaii.  Alaska offers meals for sale that appear to be nutritious, as opposed to the fat, carb and salt mix of processed junk food sold on some other airlines. We flew coach on EVA to Taipei a few months ago.  The seats were comfortable.  There was enough room between rows to recline a bit without slamming into the person behind.  Food and drinks were more than adequate.  The same cannot be said for many American airlines on international routes, and domestic flying in coach is simply a painful experience to be endured with as much tolerance as possible.  
I’m always struck by the quarterly news reports on airline performance and customer satisfaction.  The criteria are limited to on time takeoffs and landings and how much luggage is lost.  I’ve been on the receiving end of those questionnaires.  Not a single sign of interest in whether my seat was comfortable, was there enough room between me and the guy in front of me, was food or drink of reasonable quality offered at a reasonable price, was I treated like a valued customer or a cow on the way to slaughter.
I don’t imagine that much can be done about it.  Airlines have proved, at least to themselves, that they can be successful without paying much attention to customer comfort, except in first class.  They deal with declining passenger numbers by reducing fleet size and making remaining planes as spartan as possible for the majority of their occupants.  I’m not sure how that can contribute to long term growth in passenger numbers.  As for me, I remain grateful for the ability to fly up front whenever I want to but resent the corporate thinking that makes it so hard for everyone else.   

Occupy Wall Street? Who Cares?

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Will occupy Wall Street make a difference?  To who about what?  Most people seem to be more aware of the pathological disparity of wealth and income.  Some appear to be aware that it is not a matter of some people doing well in the old fashioned American way while others are just not trying hard enough, or, perhaps, not lucky enough.  Something has happened that has tipped the table, rigged the game, so to speak, so that some have the opportunity for enormous profits while most do not.
So is that it, awareness?
If the intent is to force a change on Wall Street it will fail.  Wall Street doesn’t even have to wait them out.  Wall Street just goes on about its business as it always has knowing that the large pension and investment funds, major corporations and world wide bond traders are the ones who count, and no one else.  The occupiers are little more than an annoyance, and not all that inconvenient at that.
It would help if Americans would get over the idea that major corporations headquartered in America are somehow American.   As one corporate representative said on NPR recently, if we don’t get the government subsidies we want we will move our production overseas.  Corporations began as creatures of the state, authorized to do business deemed in the public interest.  Now, with the ability to incorporate anywhere, produce anywhere, sell anywhere and buy anywhere, they are creatures unto themselves with no national loyalty.  Their only loyalty is to the bottom line and Wall Street analysts, both of which they are perfectly willing to manipulate.  The question is, who are “they.”  They are not the investors, of which I am one.  They are not the board of directors, at least not often.  They are not even the overpaid, marginally competent executives.  They are some undefinable combination of all of them that the Supreme Court has the audacity to proclaim is a person.  It’s like something out of a bad science fiction movie.
The only pressure points that might result in useful change are located in D.C. and the several state capitals.  It is public policy and only public policy that establishes the conditions under which wealth and income are generated.  The makers of public policy alone are able to shine the uncomfortable light of public scrutiny on corporate practices that may be harmful to the well being of the community.  The Occupy movements across the nation may be able to make that happen.  It all depends on the 2012 elections.  Two things must happen.  The adherents of Tea Party ideology have to recognize that what they truly desire cannot be found in right wing policies, or they have to be outnumbered at the polls.  If candidates championing the far right can be defeated, if representatives who are willing and able to take a more pragmatic view can be elected, if classic American liberality can prevail, things might change for the better.  We shall see. 

A New Farm Insurance Program

Steven Woolley1 Comment
Law makers have been threatening to eliminate farm subsidies for years on the grounds that most of it goes to large, corporate style farms that make plenty of money without government help.  According to AP reports, existing farm support programs cost taxpayers between $7 and $8 billion annually. The new plan is to replace direct payment subsidies with a form of free insurance against losses due to price fluctuations which would supposedly shave $23 billion off costs over ten years.  There is not a lot of agreement on how solid that estimate is.  Savings are always calculated as coming mostly in the out years when a new congress, administration and world conditions will have made current projections meaningless.
American industry receives many kinds of tax breaks and production incentives from federal, state and local governments while its executive leaders and board members scream for smaller and less regulatory government: a few of them, such as the infamous Koch brothers, underwriting extreme right wing movements in favor of almost no government at all.  However, no segment of American industry is coddled as much as agriculture where subsidies of one kind or another have become an essential part of farming’s revenue stream.  Talk about welfare addicts, agriculture wins the crown with no second place in sight. 
Perhaps this new idea is a good one in some way.  Maybe it’s needed to preserve and protect American agriculture.  I live in the rural west. We depend on a profitable agricultural economy to drive everything else.  I want our ag. industry to prosper.  So I’m open to hearing the case for it.  What distresses me is the predominant far right wing political culture of our region that despises government and delights in the most goofy of the right wing candidates and their policies.  There seems to be no recognition that the only reason agriculture flourishes is the support it receives from government through direct payments, crop insurance, cut rate electricity, diverted water, and marketing assistance.  A little recognition of that, and some gratitude toward the American taxpayer for making it possible, would be appreciated.
The petulant side of me thinks maybe we should start downsizing government by eliminating all farm support programs in their entirety.  In the meantime, I find the politics of the region’s agricultural interests to be naive, terribly disingenuous, and frankly disrespectful of the value of government in general.

Let Them Eat Cake

Steven Woolley2 Comments
Over the last decade or so major corporations in every industry improved productivity and the bottom line by eliminating jobs and forcing down rates of pay for employees other than those at the top.  At the same time, the American economy was driven partly by unthinking consumer spending spurred on by sophisticated marketing techniques.  And I don’t think we can overlook that it was also driven by spending required to sustain two inane but unfunded wars.  The combination of consumer and national deficit spending was a bubble bound to burst, and it did.  
Oddly enough the current, and no doubt brief, joy over modest improvements in GDP growth rates is the result of increased consumer spending while consumer income and levels of unemployment have remained stagnant.  We need to get something straight.  A nation cannot simultaneously force middle and lower incomes to remain stagnant (or decline) while encouraging greater savings, paying down on consumer debt and building a revitalized economy on consumer spending.  
An unnamed wire service reporter wrote today that, “Economist believe that growth in consumer spending, which accounts for about 70 percent of economic activity, will be restrained until incomes start growing at healthier levels.  That is unlikely until hiring picks up.”  At the same time, Census Bureau data show that between 1979 and 2007 the top 1 percent of households saw their incomes rise 273 percent while middle income households saw theirs go up 40 percent and low income households 18 percent.  It looks like a systemic problem, and maybe it is in one way or another.  The greater reality is that it is an ethical problem that lies squarely in the laps of boards of directors and senior management in major corporations and investment funds.
For the economy to truly recover we must adopt a new ethic, one in which low and middle income wage earners are enabled to see their incomes rise while top earners see theirs level off.  The likelihood of that happening is not great.  The government has little power to change things except through tax policy, which is not a very effective tool for things such as this.  Where the problem lies is from where the solution must come, but human greed is such a strong and seductive force that I don’t think it will.
The more likely result will be for income inequality to continue to grow.  The economy will enter a years long period of tepid growth fueled more by selling whatever we can over seas than anything else.  And most Americans will see their standard of living slowly deteriorate.  It may not be all bad.  Average Americans will learn that there is a limit to how many flat screen televisions, boats, pickups and ATVs they really need.  They will discover the benefits of community colleges and inexpensive entertainments.  Incomes will slowly catch up to declining home prices for some, and others will find the life of a renter not all that bad.  The rich will still be rich of course, and behave more and more like oligarchs, but as I have written before, oligarchies are inherently unstable.  Who knows, maybe we will become something like the French of the early 19th century with the lower classes periodically rising up to depose the wealthy for a season.  I hope not.  Perhaps the raggedy moral force of the Occupy Wall Street demonstrations will make a difference.  We shall see.

Redistribution of Wealth

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Multiple letters to our local editorial page have raised the alarm over liberals trying to redistribute income by taxing it away from the rich and giving it to the (undeserving?) poor.  An Oklahoma acquaintance posted this cartoon on her Face Book page, all in fun she said, but it’s what she believes.  There is a certain condescending self righteousness in these thoughts that makes it difficult to enter into conversation with them.  The underlying attitude appears to be that the poor and unemployed are just lazy and don’t deserve any help.  Help, by the way, seems to be understood only in terms of a handout with little thought given to the “help” they received and continue to receive that allows them to be not poor nor unemployed.
Federal tax and regulatory policies are powerful tools that establish the rules through which the economy is guided this way or that.  Complex to the point that few can fully understand them, they have created an environment in which wealth has been systematically funneled into the hands of a relative few while limiting or eliminating the possibility of it going elsewhere.  Societies where income disparities of grotesque dimensions are systemic are unhealthy societies that tend toward corruption and dissolution.  Oligarchies simply do not have much staying power.  They enrich some at the expense of whole nations.  Societies where the possibility of acquiring wealth is equitably distributed throughout the population tend toward strong middle classes with upward mobility as a hope broadly shared and deeply believed.  
It seems to me that many ultra conservatives are like the apocryphal frogs in a pot that do not realize that the rising heat will soon boil them to death.  In defense of the American dream of a strong middle class and universal hope that the next generation can do even better, they seem oblivious to the reality of policies that have rigged the economy against them in the midst of public spending debates that are resolved in favor of conditions that will likely make it even harder for most to make it while protecting the position of those who have at the expense of those who have not.
It’s not about redistributing wealth by taking it from one and giving it to another, it’s about creating an environment in which the opportunity to build wealth is more widely distributed.  It’s also about redistributing the definition of wealth to include physical and emotional well being, opportunity for jobs providing middle class wages and opportunity for career growth, education and skills needed for those jobs, and the physical infrastructure needed to support community life.  It means less military spending, especially military spending protecting us against enemies of the last century.  It means not mindless deregulation, but eliminating those that are unneeded while simplifying others and making their administration more efficient.  It also means rolling back the Bush tax cuts for the wealthy with the expectation that a revitalized middle class will begin to pay higher taxes not through rate increases but through higher earnings.  
Rugged libertarians would disagree.  What they want is as little government as possible and let the chips fall where they may.  The one thing I admire about a man like Ron Paul is that he is honest about that.  Most others who rant and rave about dismantling government, and doing away with regulations, while opposing any tax increases whatsoever see that as affecting others, not themselves.  They still want good roads, safe air travel, fine schools (for their kids), mortgage deductions, well populated prisons, and neighborhoods zoned to their liking.  They just don’t want to pay for any of that.