Climate Change, Minimum Income and the Disappearing Middle Class

Naomi Klein 20aug16Reich Saving Capitalism 20aug16

Canadian journalist Naomi Klein charges capitalism with blocking efforts to save humanity from climate change disaster in her book “This Changes Everything”. But she plays fast and loose with facts. Economist Robert Reich argues for capitalism in his book “Saving Capitalism”. He provides plenty of supporting facts but he ignores the rest of the story.

Ms Klein begins “This Changes Everything” with the woeful tale of US Airways Flight 3593 unable to take off as scheduled because “the wheels of the US Airways jet had sunk into the black pavement as if it were wet cement.” This happened “…Because DC is so damn hot…” as “someone” posted on one of the social media sites. None of the real news outlets bothered to cover the story.

This is her smoking gun. Climate Armageddon is upon us. But so many facts are missing that it looks like another urban legend. The airport is not identified. The date of the incident is not mentioned.  The person who supposedly posted about the incident is not named. There is no evidence that Ms Klein made any effort to verify the report.

Ms Klein complains that world leaders can agree on far reaching trade agreements but are unable to do anything to limit climate change. Apparently she doesn’t appreciate the difference between pushing something profitable versus pushing something costly. I want climate change addressed and soon. My grandchildren will be senior citizens with responsible jobs and their children will be coming into their peak years in 2050 when the global climate situation is expected to get really bad. If they are going to enjoy a life at least as good as mine, they need advocates who understand how difficult making the necessary changes is going to be.

For example, coal fired power plants cannot be tolerated. The ones now in operation will have to be shut down. When those plants are shut down, the coal mining operations will also be shut down. But everyone must understand that these developments are going to be a disaster for many people. Men who earn their livelihood by coal mining as did my grandfathers are going to find themselves out of work just like the steelworkers and the auto workers. Reaching an actionable agreement on what needs to be done is going to be painful.

Ms Klein wants electric utilities turned over to the control of local governments. She argues that when power utilities are locally controlled as they are in Germany, they will move quickly from coal to solar and wind.

But the United States already has a substantial number of municipally controlled power utilities. A study in 1998, found that 15 per cent of the electricity sold in the United States was provided by governmentally controlled utilities.  According to Ms. Klein’s logic about 15 per cent of the electricity generated in the United States should be powered by green energy sources.  But a Duke University study in 2009, found that less than three per cent was derived from wind or solar technologies. The municipally owned power utilities in the United States have not made a massive switch to green technologies over the first decade of the twenty first century.

Fortunately, capitalists have been developing mechanisms for a smooth transition to renewable energy sources. Non-utility energy providers can use the existing power grid to offer energy alternatives to customers because of laws like PURPA (1978) and the EPAact (1992). Many areas in the United State already allow competition. Even though the competition is limited, it is producing substantial benefits. Some power companies are even offering their customers the option of choosing to have their power generated by eco-friendly sources.  (See “The Concise Encyclopedia of Economics: Electricity and Its Regulation” by Robert J. Michaels)

Even more encouraging is the emergence of programs that allow customers to install rooftop solar panels and sell excess power to their local power company. This arrangement lowers the customer’s bill and helps the power company avoid building additional capacity.

One of Ms Klein’s favorite bad guys is the World Trade Organization or WTO. She mentions it eight times in “This Changes Everything.” She cites three green energy programs that were “challenged” by the WTO. One example that she cites is a green energy project in Ontario, Canada. But the WTO did not actually challenge the green energy project. China challenged a job growth scheme that went along with that green energy project. If Ontario had been serious about converting to green energy, it could have used products from China. The resulting energy would have been just as green.

Canada, China and practically all other countries are tied together in a global village. Our world functions as a global market place that allows us to buy and sell goods anywhere in the world. That global market place requires a governing body to make and enforce rules for all of the participants.

The WTO is a critical entity charged with keeping our society functioning. It is not perfect. Many if not all of the players are looking for ways to use the rules to their advantage. Some players are more successful than others. The WTO can either be tool to be manipulated or it can be a work in progress. Either way, we cannot realistically get along without it.

Economist Dr. Robert Reich believes that the more successful players are establishing rules in the marketplace that will ensure their positions of wealth and privilege. In essence, we have passed through the golden age of the common man and returned to a period of royalty and paupers. The rich are too rich and getting richer by the day while the poor are getting poorer and the middle class is going extinct.

In “Saving Capitalism”, Dr. Reich writes, “Put simply, globalization and technological change have made most of us less competitive. The tasks that we used to do can now be done more cheaply by lower-paid workers abroad or by computer-driven machines. My solution … [is] an activist government that raises taxes on the wealthy, invests the proceeds in excellent schools and other means people need to get ahead, and redistributes to the needy.” In other words, we need a little bit of socialism to save capitalism.

He calls up a vision of an American Golden Age in which factory workers could earn as much as engineers, designers, accountants and even managers without bothering to complete high school.

That fabled Utopia lasted three decades from 1945 through 1975. It was only possible because of a special set of economic circumstances.  When WWII ended, our economy flipped from enforced scarcity to unfettered abundance. Consumer demand rose rapidly. Production capacity was converted from meeting war demands to meeting the growing consumer demands. The technological advances of WWII were adapted to creating new products for consumers. It was the ultimate Win-Win situation.

In the early years of that era, some unions were highly effective at gaining wage concessions for their members. The unions were most effective in the Industrial Northeast where they had been successful in securing a monopoly on labor. For example, the United Auto Workers (UAW) supplied all of the blue collar labor for the big three automakers – Chrysler, Ford and General Motors. The automobile manufacturing giants were forced to come to terms with the unions in order to keep their factories running. The resulting wages were very generous for the times. The workers represented by the UAW were making much more than non-unionized workers doing equivalent work. In some cases they were making more than their managers.

The Big Three Auto Makers were among the most profitable and the most influential companies in the world in spite of the incredibly high wages they paid their factory workers. They accomplished this economic miracle by charging premium prices for their products. “Sticker Shock” was coined to describe the reaction Americans had when they found out how much a new car would cost.

The Ford, Chrysler and GM could get away with price gouging because Americans were moving out to the suburbs and needed cars for transportation. But the high prices created an opening for competition. Volkswagon, Datsun (Nissan), Toyota and Honda entered the market with less expensive, well-made economical cars. American automakers began losing market share and their profits declined.

The American automakers had to reduce the size of their workforce in order to stay profitable while meeting the auto workers wage demands. The UAW pushed for higher wages, the manufacturers pushed for automation. It was a losing the battle for both sides.

By 2008, Chrysler and GM had to be rescued from bankruptcy along with Wall Street and the Big Banks. Ford was on the verge of bankruptcy but engineered its own turnaround rather than accept help from the Federal Government. Detroit, the home of the American car, and its citizens were the biggest losers. The city that had once boasted one of the highest paid worker populations in the world was stuck with one of the highest rates of unemployment in the country.

It is unrealistic to expect that the successes of that golden age in America will be reproduced. But many observers, including Dr. Reich, are appalled by the extent to which we seem to have fallen back into an age of royal families and peasantry. Their solution is a cost of living adjustment to the minimum wage. Some would also like to see a cap on CEO earnings. These steps may be helpful but successful business enterprises are essential because they provide the jobs that people need in order to get ahead.

It seems to me that the focus on CEO salary is based on a misunderstanding of the CEO’s role. According to Dr. Reich, “The net worth to society of many CEOs … may be less than they command in the market. …Much of what they do entails taking money out of one set of pockets and putting into another, in escalating zero-sum activity.”

The CEO is actually the head of the management team which is responsible for pulling everything together in a successful business. Managers are responsible for supplying the factories, the production tools, the components that are used assemble products, and the workforce. Management is also responsible for shipping products to sales outlets.

Everything has to be paid for before the first unit is sold. Management has to risk investing in the production of cars before any income can be realized from the sale of products such as cars. If the products do not sell the upfront investment will be lost.

The buck stops at the CEO’s desk. Some CEO signed off on the decision to design the Edsel. When the design was complete, the CEO authorized production and sale of Edsels. When the Edsel didn’t sell, the CEO took the heat for the failure. The company, Ford, lost money on the project but everyone who worked on it, including the autoworkers got paid for doing their job.

Brian Roberts the CEO of Comcast Corporation is singled out as an example of the overcompensated executive. Roberts makes $26.5 million per year in total compensation which puts him somewhere between NFL Quarterback Aaron Rodgers who is paid $22 million per year and Tennis star Serena William who earns $30 million per year.

Comcast is an example of a successful business that makes it possible for people to get ahead. It provides jobs for 153 thousand workers who generate $74.5 billion in revenue by providing service to over 20 million customers. CEO Brian Roberts has a unique role in making Comcast a successful business. In the quarter century since he was named president of Comcast, the company’s revenue has grown by over 1000 per cent. In all fairness, a successful CEO should be as well compensated as entertainers who are making very little contribution to the well-being of our country.

Clyde Prestowitz, offers an alternative approach to dealing with our current economic situation. His years as a senior trade negotiator for the United States have convinced him that we are doing a terrible job of competing in the global market. In “The Betrayal of American Prosperity”, he writes “This brings us to the irony of America’s role as the world’s sole super power. Beyond our blind adherence to simplistic free-trade orthodoxy and market fundamentalism… We have evolved from a country that wanted no foreign entanglements and saw the business of American governments as business, into a country in which the business of government has become trading America’s productive and technological base for geopolitical and military advantage.”

Mr. Prestowitz wants us to look at what is working for countries that America competes with in the global market place. He wants our government to develop a focused economic policy that targets markets and products for development in order to generate living wage jobs. Then he wants us to support that policy with seed money to develop successful commercial enterprises.

That is a change I can support.

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Guns are our Friends. We need them.

A friend of mine recently posted a story about a simple experiment to prove conclusively that guns do not kill people. A common sense gun owner and hunter placed his hunting rifle with six rounds of live ammo out on his porch. He left the gun unattended all day. People walked by the house. The mailman delivered the mail. None of them were threatened. The gun did not even load itself. There was the indisputable proof that guns do not kill.

It was a stroke of genius. It got me thinking. Guns don’t kill people. They can’t kill people. Guns do not even load themselves. The guns that fired stray bullets that killed people watching television in their living rooms did not load themselves. The guns that children used to kill their playmates did not load themselves.

It’s true that there are an ungodly number of dead bodies. But we cannot blame the guns. They are not responsible for what their owners did. The guns are certainly not responsible for what their owner’s children did.

Sometimes loaded guns do strange things like former VP Dick Cheney’s shotgun and Plaxico Burress’ pistol. But the guns did not load themselves. It is not clear what caused Plaxico Burress’ pocket protector to fire the bullet that wounded him and got him sent to prison. But clearly somebody pulled the trigger when Dick Cheney’s shotgun fired a blast that nearly killed a hunting companion. That shotgun did not load itself and it did not discharge on its own.

Gun ownership is very safe. Take the case of Nancy Lanza, for example. She was a long-time gun enthusiast who owned dozens of guns and thousands of rounds of ammunition. She and her son would regularly go out to the shooting range together. It was a great hobby. It gave her time with her son who otherwise stayed holed up in the basement with his video games. She did not have a single problem from the time she started collecting guns until the day of her death. Not one of her guns loaded itself let alone killed or even threatened another human being.

When her son Adam shot her four times in the head, he had to load the .22 caliber rifle himself. He had to aim it and he had to pull the trigger each time the gun fired. The gun did not aid the young man in any way. Unfortunately, it did not protect Nancy from a violent attack either.

Adam Lanza did nothing wrong when he left home with his mother’s Bushmaster that morning. The Second Amendment of our constitution guaranteed him the right to bear arms. He was legally entitled to carry a long gun in Connecticut. The gun may even have belonged to him as his mother’s heir. As for the shooting of his mother, that was probably an act of temporary insanity. So he really had done nothing wrong as he headed out with enough ammunition to wipe out the population of an elementary school that morning.

Of course, the Bushmaster had not done a thing. It was kidnapped and pressed into service. It did not even have a microchip let alone the artificial intelligence to say, “Hell no! I won’t go!”

Don’t blame the gun.

It is not clear where the blame for the Sandy Hook Elementary School Massacre lies. The Bushmaster fired the bullets that did the killing. But it was under the control of Adam Lanza who was out of control. You can’t really blame Adam Lanza, he probably had no idea what he was doing. For all we know, he was playing “Call of Duty: Black Ops XXX: Live Fire”.

Blaming Nancy Lanza would be like blaming Adam and Eve for the behavior of their adult son Cain. Out of control children are nothing new. Leopold and Loeb were raised in good families by good parents and yet they killed their cousin just to see if they could commit the perfect murder. Bonnie Parker’s letters to her mother about her relationship to Clyde Barrow make an interesting read.

But Nancy Lanza could have made more of an effort. She could have kept her Glock under her pillow a la James Bond and Oscar Pistorius, just in case. True, she did not feel threatened by her son. She believed that he was harmless. But how could she be sure he wouldn’t snap one day?

If Nancy Lanza had been prepared, if she had been up to it, she could have prevented the Sandy Hook Massacre before it even got started. All she had to do was shoot her own son before he shot her. But she seems to have been quite still when she was shot. She was probably sleeping. Even a Glock under her pillow would have been useless because guns do not shoot by themselves. But she could have at least made the effort.

There were other opportunities. Principal Dawn Hochsprung, school psychologist Mary Sherlach and Natalie Hammond came out of a faculty meeting when they heard Lanza shooting through a glass panel so he could bypass the locked entrance door. When the three women confronted Lanza in the hallway, they yelled “Shooter”.

If they had been properly prepared, they would have pulled their Glocks to the ready and cut Adam Lanza down on the spot. But they had been lulled into a false sense of security. There had not been a shooting incident in Sandy Hook for over a decade. The front door of their school was locked. There was no need to go into a faculty meeting fully armed like soldiers in a war zone. On the other hand, you never know when some American Hero is going to become tired of playing Call of Duty: Black Ops III on his Xbox and decide to go out for a live fire exercise.

If first grade substitute teacher, Lauren Rousseau, had known where to put her hands on a couple of Sigs, she and temp behavioral therapist, Rachel D’Avino, could have put up a fight instead of just mounting an unarmed stand against Lanza and his Bushmaster. But it seems that we as a society are just not ready to face the new normal. There are a lot of guns out there and we need to be ready to take decisive action always and everywhere. There can be no peace on earth until the blood thirst has run its course.

It is not clear what happened in Victoria Leigh Soto’s classroom. She might have survived if she had been able to back up her raw courage with a Glock or Sig.

We need to make sure that our teachers are properly equipped to protect themselves and their students. We are living in a war zone. It is no longer enough for our teachers to be skilled educators and mentors. They have to set an example by being soldiers. Their sidearms should be visible throughout the day.

There are, of course, some risks to this approach. Current protocol requires a teacher to call in an armed police officer to get a surly teenage girl physically ejected from her classroom. But an armed teacher would have a lot more negotiating power. There might be some temptation for an overworked teacher to use her gun to help her deal with an obnoxious, oversized, varsity athlete. That is a risk we must be prepared to live with.

We know that there are some bad eggs among the nation’s teachers. There are a few perps who will install hidden cameras in bathrooms and locker rooms. There are some who will play with naked youngsters in the showers. There are some who don’t know how to control themselves around a crowd of ripe, hormone driven adolescents. There is no way to predict how such teachers would behave if they were walking around armed. That is a risk we must be willing to live with.

The important thing is to remember that guns are necessary for protection. It is true that our guns will probably not protect us in the event of an ambush, or a crazy pilot who decides to commit suicide by crashing our plane into the side of a mountain, or a tsunami, or an encounter with a drunk/distracted driver, or other things too numerous to list. But they can provide a measure of protection is some situations. So we should all carry and be prepared to defend ourselves everywhere and all times. This is important. This could also be the answer to overpopulation. If enough of us make a habit of going around armed, eventually, the human population will be reduced to a comfortable level.

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President’s Day 2016

Mt._Rushmore wikimedia commons

The theme of the current presidential campaign might be “Let’s Make America Great Again”.

The citizens who are going to elect the next leader of the United States should consider three questions:

  1. When was America Great?
  2. What made America Great during these golden years?
  3. Which candidate is most capable of making us Great again?

America was certainly not great at the start.  It is probably safe to say that America was not great until some time in the twentieth century.  America emerged from World War I as a dominant power.  But was she great?

It seems fair to say that our country got very wealthy by staying on the sidelines and supplying goods to the actual combatants.  The Roaring Twenties which followed WWI were a high point in our history.  The Great Depression followed.  This is generally considered a low point but it was also a period of testing that showed out mettle.

World War II gave us the Greatest Generation and another shot at wealth and high living.  We faced our greatest enemy in the Soviet Union and lived through a fearful period of nuclear armament and mutually assured destruction.  In spite of those pressures, America continued to grow in stature.  Our industries dominated the world.  We had cars and the freedom to go anywhere and do anything.  We launched satellites and a mission to the moon.

America was unquestionably great in the middle of the twentieth century.  The zenith was reached sometime in the sixties.  Then an ill advised foray into Vietnam exposed our weaknesses.  The country did not collapse but things started going wrong.  American society oozed wealth but greatness was slipping away.  Our great industries were in decline.  Venerable industrial giants closed up shop in the face of competition from overseas.  Japanese automakers were climbing past America’s big three.  The aerospace industry was consolidating.  A sign at the exit from Seattle requested that the last person to leave, “Please shut out the lights.”

A careful review of Twentieth Century American History will show that we had fallen a long way by the time George W. Bush took office in January of 2001.  Even at that point, making America great again would have been a daunting challenge.

America had been great because of the people who lived there.  It was a country of immigrants who were willing to sacrifice and work hard to achieve a better life.  It was also a country that followed George Washington’s advice and avoided foreign entanglements.  Dwight Eisenhower’s  Military-Industrial Complex had not yet come to dominate the lives of its citizens.

If America is going to be great again, it is going to have to return to its roots.  The American People are going to have become a group of hard working producers who are willing to sacrifice for something worthwhile.  We have to set our sights on producing something more substantial than the next killer app.

Richard Nixon, Gerald Ford and Jimmy Carter had us  on that path.  Then along came Ronald Reagan with his message of debauchery.  When Reagan took office in 1981, America was the leading lender in the world.  By the time he took office for his second term in 1985, America was the world’s leading debtor nation.  Remember the day the Japanese bought Rockefeller Center?

The tipping point for the price of a gallon of gasoline in the United States is four dollars.  When gas gets that expensive, Americans start looking for ways to conserve.  The last time I was in Ireland, I paid five dollars a gallon. If the Irish, the British, the French and the Germans can live with those prices, why can’t Americans?

We are going to pay taxes.  We may pay more taxes under President Sanders.  President Rubio’s national sales tax is still a tax.  The real question is whether we are getting our money’s worth.  The Republican candidates are complaining about the decline in our military.  We have the largest, best equipped military in the world.  In business terms, it is a cost center.  It produces no revenue.  We need to do what any sensible business person would do – cut costs wherever possible.

One cost area and security concern that needs to be addressed by the next administration is the national debt.  When are the candidates in this year’s race for the White House going to  put forward a plausible plan for reducing our national debt?

Pick your candidate and ask, “Is this person really going to make America great again?”

If your candidate is not going to demand sacrifices from the American people, you can confidently answer, “No!”

If you candidate is unwilling to cut back on the foreign entanglements and bring our troops home, you can confidently answer, “No!”