Category Archives: Economics

Autumn Update

Well it is finally autumn down here in New Orleans. Unfortunately, my pumpkin rotted and I had to trash it. As the front sweeps away down here, the drama in the air is palpable. On most every front, there is a lot of heady shit going down. For instance, it appears that Halliburton was indeed the culprit behind the Deepwater Horizon disaster. This is the same corporation that has been defrauding American taxpayers for years. Pause for a moment and consider the recent news that GlaxoSmithKlien had been ordered to pay a $750 M fine for selling tainted drugs. The settlement, negotiated with the DOJ, was for civil and criminal penalties. I begin to wonder whether this is just the “cost of doing business,” at least when you are out to poison people anyway. The fine is a landmark, though, and I’ll take it. My mini-course on the Foreign Corrupt Practices Act (FCPA) touched upon many of these themes. Were the DOJ to tackle Halliburton, the Federal Govt. could just possibly recover some of the assets sucked up by the Cheney network.

On top of this (already old) news, we’re also in an election season… yay! Luckily I don’t watch much network TV, so I’m spared most of the local ads. What I do see is that a crazed movement, two parts sheer ignorance and one part racism, is out to wreak great havoc. As a soon to be young lawyer, I’m hoping that things don’t go completely off the rails. Did you know that a question on the Massachusetts ballet would reduce revenue thereby necessitating major service cuts on the T? Whatever. The Taxes are Too Damn High! Last stop, Brighton Beach.

But there are also some signs of hope, particularly in California. Now, California has really become a dysfunctional mess of late; however, it’s importance to America necessitates an optimism about the Golden State. California may legalize the recreational use of marijuana. Given the violence and collateral damage of the “war on drugs,” isn’t it time we re-thought or national policies? Geez. Should this pass, I’d like to see what Justice does about it. Perhaps the deeper question here is whether/how we can transition from a military industrial complex to a R&D industrial complex. The U.S. is lagging way behind its peers on these expenditures. We do, however, get royally ripped off by our B.S. healthcare system and our lousy educational system (at least for the poor).

Federalism, a concept most “tea partiers” do not care to understand, allows the states to serve as laboratories of democracy. It also constructs, or concedes, certain functions to the federal government. I’m not so cynical to say that this system can no longer function, but I’m not so blind to see how it has been severely perverted. America has become somewhat perverted. We can’t even change unconscionable, legally deficient policies? Obama’s got to heat back up, because his bi-partisanship has really slowed things to a glacial crawl. Actually, I’ll take that back; the glaciers are probably chipping away at an increased rate these days… again, whatever. Kick in the crotch!

So, let us celebrate that we may (and really must) vote, get dressed up/down for halloween, and eat one too many tootsie rolls. Toast some apple cider, spiced or otherwise, to the possibility that this may be our last best chance.

~WD

Fools and Flags

Our media is so pervasive that sometimes I wonder what it would be like to go without it entirely. Even in remote Uzbekistan, I had shortwave radio and satellite TV. I am particularly interested in reading James Howard Kuntsler’s second book in the “World Made By Hand” series titled The Witch of Hebron.

I long for both the here and the distant, bats swooping across the gloriously moonlit hills. I worry that I am too entertained by TV, albeit of my own choosing at my time. I wonder what I could realistically grow to survive.

Don’t worry folks, not going off the deep end here, but certainly treading some intense waters. I think that we all are, but we haven’t yet admitted it collectively. My cause for optimism is that perhaps we’ll rebuild in a more equitable and sustainable manner. My only fear is that it will be so piecemeal, so segmented, individualized, customized, and misincentivized, that the “a-ha” moment will come far too late.

Modern day McCarthyism must not be tolerated in a free, open and democratic society, which we claim to be. I’m hardly throwing in the towel, but if we don’t get this seriously right, it’s gonna go way wrong.

A re-valuation of good will and enchanted spirit would go a long way.

In other news: Pepper is well. That is all.

ARPA-E

President Obama has selected Steve Chu to be Energy Secretary. Chu is a seriously brilliant scientist and economist. In 2007, he served on the “Committee on Prospering in the Global Economy of the 21st Century,” which was created in response to the following Congressional query:

What are the top 10 actions, in priority order, that federal policymakers could take to enhance the science and technology enterprise so that the United States can successfully compete, prosper, and be secure in the global community of the 21st century? What strategy, with several concrete steps, could be used to implement each of those actions?

The report (of which I’ve only read the Executive Summary,) outlines major investments to be made by the Federal Government into math and science research in this country. Some hilights of the proposal include:

  1. Establish a national launching program for scientists by fully funding a launching program with a teaching requirement… ($20K/yr for 4 years in exchange for five years in public K-12 schools.)
  2. Increase federal investment in research with an emphasis on physical sciences, engineering, mathamatics, information sciences and DOD.
  3. Create in the DOE an agency modeled off of DARPA called ARPA-E… (Advanced Research Projects Agency-Energy.)
  4. Reform patent system… make things more inclusive/logical.

In support of these recommendations, the report presents some interesting statistics from a variety of disciplines. Some that caught my eye:

  1. General Motors spends more on healthcare than on steel.
  2. Chemical companies closed 70 facilities in the United States in 2004 and tagged 40 more for shutdown. Of 120 chemical plants being built around the world with price tags of $1 billion or more, one is in the United States and 50 are in China. No new refineries have been built in the United
    States since 1976.
  3. A company can hire nine factory workers in Mexico for the cost of one in America. A company can hire eight young professional engineers in India for the cost of one in America.
  4. The United States ranks only 12th among OECD countries in the number of broadband connections per 100 inhabitants.
  5. American youth spend more time watching television than in school.
  6. In 2001, US industry spend more on tort litigation than on research.
  7. “We go where the smart people are. Now our business operations are two-thirds in the U.S. and one-third overseas. But that ratio will flip over the next ten years.” —Intel Corporation spokesman Howard High

All in all not not a rosy picture. However the report is hopeful and coherent, and I strongly support it. I am particularly interested in the ARPA-E aspect of the project. That led me over to http://science.house.gov where I found out that the project had been signed into law on August 9th, 2007. Selections from the bill:

  1. This section establishes the Advanced Research Projects Agency – Energy (ARPA-E) within the Department of Energy. Similar to the Department of Defense’s Advanced Research Projects Agency (DARPA), this new organizational structure will support revolutionary and transformational energy research where risk and pay offs are high.
  2. ARPA-E shall be headed by a Director, appointed by the Secretary.
  3. Funds may be used for activities in any stage of the innovation spectrum from early-stage basic research to late-stage demonstration. A special emphasis should be placed on activities that serve to bridge between these stages and, ultimately, across the “valley of death” to commercial applications of the technologies.
  4. As with DARPA, the Director of ARPA-E will have special authority to hire program managers and other technical, managerial, and financial staff for limited terms, and at a salary commensurate with what such staff would expect to make in the private sector.

This is all part of the America COMPETES Act, the fruition of the work of Chu and the other members of the committee. Now that Chu is Energy Secretary, he will be able to appoint the Director of ARPA-E. What will be interesting to watch is how the development of this program unfolds. Since DARPA brought us the internet, one can only hope that ARPA-E will be able to deliver as revolutionary a result. This is a great step forward (likely cemented by Al Gore,) that shows a real commitment to create a 21st Century energy infrastructure that will be the envy of the world and the engine of our economy.

Obama inspires a little theorizing.

Tomorrow I take my first law school exam. Yay. In other news, I am very pleased with what Obama had to say about the automobile industry. He was tough on ‘government oversight,’ and clear about protecting the people (we’re largely less well off these days if you haven’t noticed.)

I like the way he speaks (except for the clearly affected dropped g’s (who’d of thunk?) For instance, he used the term ‘fleet’ while discussing the American automobile industry. Fleet is a technical, if somewhat militaristic term. Talk to any transportation buff and you’ll soon end up in a discussion about the fleet. Fleet is rolling stock, ‘rolling’ of course in a very Ike & Tina style. The kicker is that America is far behind at this level.

Example: While I was in the Peace Corps in Romania, CFR (the Romanian national railroad,) greatly expanded its offerings of IC level trains. IC is a European train standard for longer distance express trains (both domestic and international,) which mandates certain levels of service. Many Western countries have express interstate systems (more or less,) through their high speed rail-lines. Romania was not yet there but it was getting massive new tracking, electrical infrastructure and trainsets.

Fast forward two years to a trip from New York to New Orleans by rail. The only upgrade from cattle car coach is overnight accommodation. Unless you get a full size bedroom (which runs in the hundreds,) you get a ‘roomette.’ … Pause… time out… since when was it fashionable to brand anything with the suffix ‘ette’ ? That’s right, maybe the early to mid 1970’s, right when most of passenger rail was jettisoned by the freight carriers into an agency run by an inherently hostile governmental regime. The result was, now with apparent parallel in Detroit, lack of innovation; grudging governmental management sold with a side of diminishing returns. The American fleet is out of date. Remember how the Enterprise would sometimes come upon far more primitive species and its ships?

Since Obama is wise, he articulates that our national concept of our fleet must range beyond our military apparatus. While military driven hardware is an important segment of our fleet that generates great (and frightening) technologies, it can not be nurtured at the cost of the rest of the fleet.

3 Basic Components:

Rail – Huge re-conceptualization of the role of modern rail networks in our urban and inter-urban infrastructure. Major city pairs need new tracks, for both freight and passenger. Don’t forget: the freight railroads dumped passenger service, it was not profitable! They are separate businesses and with some major outlays they can be separately tracked. A dedicated passenger network, perhaps funded by freight taxes, would be tremendously beneficial. First, massive heavy labor public works. Creating major electrified railroads is an extremely labor intensive endeavor. The system will be a stimulus to alternative energy, perhaps through a mandate to meet X% of the system’s energy needs through region-appropriate renewables. Second, it would encourage widespread use of transportation systems that are much kinder to their surroundings. Major ancillary and wide reaching businesses implications.

Road – The Eisenhower Interstate System was a bold and not entirely unsuccessful project. I highly admire some of our major pre-interstate highways (such as Moses’ feeder Parkways in New York and Connecticut.) They were bold and radical by betting on our adoption of the automobile. Some interstates are also very important, especially for large states and regions with scattered urban and rural population centers. However, all this connectivity has its downsides; sprawl has ruined much of the interstate experience. Interstates are not kind to local enterprise, especially in urban cores. While highways were sold as great connectors, they instead became great dividers… observe the relationship between highways and public housing projects. They decreased the quality of the urban experience thereby fostering the increasing ghettoization of American urban cores.

The suburb was triumphal piece of propaganda that spoke to a real need. The problem was that it just kept going; there was no master plan, so things just sprawled. We now face an interesting demographic shift. Urban, somewhat more collective an efficient living will command a premium. Some cities will shape a nice mix: Seattle, San Francisco, Denver, Boston. Others, such as New Orleans and Las Vegas, may end up as a kind of Terry Gilliam / Mike Davis hybrid city of the future. My observation, (which I stated earlier in response to a Newsweek column dedicated to the indulgences of the nouveau-billionaire class,) is that extreme bifurcation is detrimental to any system. Though I have never been to Vegas and I have only lived in New Orleans for six months, I imagine that they might be somewhat similar in terms of fate if not character. In both, tourism is a primary engine of the economy; tourism, however, is a notoriously poor contributor to civic vitality. These cities often have grand urban cores, or at least some stately areas. These areas are often developed as privately run high security havens for the super-rich. This militarization of public space eschews a human scale and thus discourages civic interaction (just take a look at ‘brutalist’ style concrete plazas and terraces from buildings of the 1960s.) This bifurcation between indulgent fantasy and grinding poverty is an illness, and particularly un-American.

Wow, that was tangential, got to remind myself not to do that tomorrow! The point I was getting at is that road and rail are both integral to our infrastructure but must re-negotiate some precious spaces.

Fleet – So let’s have at it! Develop an electric automobile fleet with battery changing stations and strive to improve that battery technology exponentially. Lay new track and develop new rail systems which help lessen our over-dependence on the car and cheap air. And, yes, let’s still build the best damn commercial airliners. We must and can be competitive on all three fronts, but it’s going to take some pretty radical restructuring, especially for all you former Reagan Democrats. If done well, this basic stimulus will do much to improve both our operating efficiency and quality of life.

Money, Politics and You – Part I

Okay, so most of the people I know are not too happy that W has got himself another 4 years at the helm of this country. If you read my last post, I noted that at the time I was feeling disappointed, and that the anger would come later. Well it has. But, this time around, I am going to attempt to do something productive with that anger.

As such, this will be the first in hopefully many entries about what we, that is progressives/democrats/non-Jesus freaks, can do to stem the tide of the right wing neocon movement in this country. Although my ideas may come across as mere drops in the bucket, I feel that collective action around a unified cause will have results… I mean, look how we got into this mess in the first place.

This week, I’ve moseyed on over to a website called Open Secrets, an outfit that concerns itself with campaign finance disclosure. I pulled up the top twenty donors to both the Bush and the Kerry campaign. First the overviews:

1) Of the top twenty donors on each side, George W Bush’s top ten each donated over $300,000.00 Only John Kerry’s top two donors broke this mark.

2) 16 of Bush’s top twenty donors were large financial companies. (The other two included a business law firm and a large electricity generation conglomerate serving the southeastern US.)

3) Of the previously noted 16 financial institutions giving to the Bush campaign, six of them also gave to the Kerry campaign. In each instance, though, the Bush campaign received significantly more from the same institution.

4) Five of the top donors to the Kerry campaign were universities (three private, two public.)

5) Like the financial institutions, one popular company which makes, among other things, operating systems, played both sides. However, unlike the financial companies, this one donated more to Kerry than Bush

6) Four of Kerry’s top twenty donors were large, predominantly corporate, law firms.

Naming Names:

Bush’s top 10 (all over $300,00.00) :

Morgan Stanley
Merrill Lynch
Pricewaterhouse Coopers
UBS Americas
Goldman Sachs
MBNA
Credit Suisse First Boston
Lehman Brothers
Citigroup
Bear Sterns

Kerry’s Top 10:

University of California
Harvard University
Time Warner
Goldman Sachs
Microsoft
Citigroup
Law Firm
UBS Americas
JP Morgan Chase
Stanford University

Putting it all together:

Working only within the top twenty donors to both campaigns, I have removed those companies that have given to both. On the right, I am left with nothing but financial companies and the electricity generation company. On the left, there are: universities, law firms, two major media outlets, and a large international computer maker. What does this all prove? Well beyond the obvious, that academia is filled with lefty communist pinkos and that there really is a liberal media, not much. The trends shown by this little investigation are not at all earth shattering.

For instance, those who control large sums of money tend to favor the Republicans. Why? Generally Republicans are associated with a culture that is pro-business and anti-social spending. This ideal of rugged individualism, as applied to economics, makes the Republicans understandably more favorable to those who already control capital.

On the other hand, the large involvement of academia within the Democratic party sends a different message. The universities in Kerry’s top 20 were: UCal, Harvard, Stanford, Columbia, and the University of Michigan. This list itself is interesting, in that both elite private schools and public schools are on it. Whereas a place such as Harvard or Stanford could be written off as just as institution where the wealthy send their children, the presence of UCal and U Michigan sends a different message, emphasizing the power of strong, rigorously run state education systems. Although any college graduate will have an appropriate level of cynicism when viewing the entire notion of higher education, it is hard to deny that the experience often serves as a springboard for socially progressive ideas and actions. Both state systems and private institutions, while having to admit some students just to foot the bill, do offer enormous opportunities for those who have the talent but not the cash.

Recommendation:

Since financial institutions tend to favor Republicans, why not check up on the institution you do your banking and trading with? For instance, if you have an account in one of the “mega banks,” ask yourself, “is that giant network of ATM’s really worth it if the money they get from me is going to neocons like Bush?” If you think not, then find a socially progressive bank and do your business with them. For instance, check out this funky local bank chain serving the Boston metropolitan area: Wainwright Bank. Though their website is a bit hokey, their commitment to progressive social activism and corporate responsibility is commendable.

What’s most disturbing about the fact that the Republican party is so rich is that its biggest supporters are constantly funded by the likes of you and me. Sure we aren’t writing a check to the GOP, but when we patronize institutions that are heavily right weighted, we are doing ourselves a grave disservice.

Coming up next:

Although today’s “lesson” focused on the biggest corporate donors, next time, we’ll take a look at some other (non top 20) corporations and where their money goes. We’ll break down the relationship between the parent company and the item on the shelf at your local supermarket, and start to think about how we can consume for our future.