Tuesday, November 15, 2011

Debunking the Myth That Only Private Industry Can Bring Economic Recovery

Conservatives don't want the government to stimulate the economy because they claim that only private enterprise can create a recovery. When progressives point to the New Deal as a successful way of ending the Great Depression, conservatives claim it didn't really work: it was World War II that ended the depression.

The massive unemployment plight did indeed end when men were drafted into the military. As so many of the men were away fighting a war, women who had never worked outside of the home helped keep American factories going. Worries about keeping or getting a job simply vanished after the attack on Pearl Harbor.

So was it private industry that put the country back on its feet economically? No, it was the government that created jobs by asking private companies to produce whatever was necessary to win the war. Yes, private companies manufactured guns, planes and tanks, but the decisions of what resources to apply when and where were made by the Roosevelt administration.

Were corporations allowed to make profits? Yes, but only within reason. Getting rich from the war was generally condemned as "war profiteering." In 1941, then Senator Harry Truman began to travel from coast to uncover corruption on the part of companies involved in war production. President Roosevelt made sure that the government had the money needed by imposing tax rates of 92 percent on incomes over 100,000 dollars (which would be about 1.2 million in today's monetary value.)

The leadership that guided America through World War II, the country's greatest challenge in history, was not the management of a corporation but a government headed by Roosevelt and then Truman. It was under a democratically elected presidency that victory was achieved. The person holding the country's highest office was not a private individual running a corporation, but an elected official accountable to every citizen of the nation.

In the minds of some it may be acceptable for corporations to rule the U.S. if not the whole world. The recent decision by the U.S. Supreme Court that corporations are "persons" may even make it possible for them to wield such power legally. But these persons, having neither body nor soul, will never have the wisdom demanded of human beings qualified to lead the people of a democracy.

Once the war was over, the American economy, no longer fueled by war production, had to be kept from relapsing into pre-war depression. It was the Truman administration's resolute implementation of the Marshall plan that made it possible for the U.S. to have a prospering post-war economy while helping Europe and Japan rebuild what was destroyed in the war. America with its vast industrial base was able to supply the goods and services Europe and Japan needed to rebuild. With a steady demand for U.S. products, America's economy prospered for decades to come.

Friday, November 11, 2011

Austerity is Wrong: Austerity Is Toxic for the Health of the Economy

(This is the body of a letter sent to our Congressman, Xavier Becerra. Xavier Becerra is one of the twelve members of the Supercommittee on Deficit Reduction.)

Austerity moves in the United States and other parts of the world are counterproductive to economic recovery. Austerity takes away money from the middle and working classes, as well as from the poor. If you want to stimulate the economy, you don't take money from people who produce, create and consume. When money is taken away from the middle and working classes and from the poor, money is taken away from the productive segment of the public; the economy rather than being stimulated is ground to a halt. A severe depression will result.

Whereas money in the hands of the wealthy for the most part rests in idle holdings and does little, if anything, for the benefit of anyone.

Representatives sincere about the well-being of the American people should realize that the only motive for the implementation of austerity measures on the part of conservatives is to create economic failure, so that the current administration can be blamed and so that they, the conservatives, can assume power during the next election.

Friday, October 21, 2011

Myth is like Math

Q. How do you define a myth?

A. Basically a myth is a belief system that explains any given process or phenomenon.

Q. What comes to mind are the stories of Greek mythology where phenomena in nature are personified.

A. Yes, God is personified as the ultimate father figure, Zeus, and the Earth is personified as the mother figure, Juno. And there are many others like Aphrodite who embodies sexuality, or Mars who stands for war.

Q. So myth is the means for humans to understand the world. Could one say that myth is an essential element of religion?

A. Yes, it is. But it is not limited to religion. In the Judeo-Christian context, a central belief that can be classified as myth is "Obey the ten commandments and you will be rewarded." In the domain of commerce there are myths like "you cannot go wrong buying real estate", or "in the long run you are always best off investing in the stock market rather than staying in cash."

Q. Don't you think it might be a bit offensive to many religious people to refer to the Ten Commandments as myth?

A. Yes, but only if you use the term myth to imply something is untrue or worthless. No myth is in and of itself true or untrue. Like formulas in math, myths designate abstract elements and their relationships to one another. The truth contained in math may indeed be something untouchable. It is possible to prove the correctness of an algebraic equation within the domain of mathematical relationships. But the question of a formula's validity comes up when applied to situations in the physical world.

Q. I don't quite get it?

A. Take the example of two engaged in a conflict. One has a team of twenty-five lawyers and his opponent has only himself and his partner. According to arithmetic, the one with a team of two has no chance against a team of twenty-five. But while the truth of math that 25 is "more" than 2 is unimpeachable, when the formula is applied to a given reality, the result of the interaction may appear to invalidate the underlying mathematical principle.

Q. But it does not really!

A. You are right. The mathematical statement assumes that any one of the numbers is exactly the same as any other, but when applied to reality each individual unit is in some way different from any other unit.

Q. Okay, that's math. What about myth?

A. Let's stay away from religion for the moment.

Q. Why?

A. Because with religion it is impossible for most people to think analytically. Let's take an example from money and markets. Let's take the myth "you can't go wrong buying real estate in the long run." The myth may be true as long as the reality it is applied to is in an economically stable world, but even here a follower of the myth may fail terribly. An easy example might be that of someone buying an office complex in a tsunami-prone area or within the range of the lava of an exploding volcano.

Q. Okay, what about "the Last Judgment?" Isn't that a myth?

A. Absolutely not if you are a fundamentalist Christian for whom the Bible has one and only one meaning. But you cannot deny that whatever is told as a story is a story, and stories are myth. And when stories are told, people add and subtract whatever they imagine.

Q. You mean like on judgment day when all sinners are being cast into hell where they will burn forever?

A. This is not the time to argue about details, but you have to admit if you ask individuals, each one will see a somewhat different picture. While the myth will have a basic structure, there are as many realities as there are persons. So anyone or no one will know what judgment day will really be like.

Q. But you are not going to deny that there will be a judgment day?

A. Well, if you are a fundamentalist Christian, judgment day is an indisputable truth because this truth comes from God. The myth is not just a myth; it is gospel truth.

Q. Not to be argumentative, isn't it possible for what has been announced as gospel truth not to become reality?

A. It is only impossible if someone's god cannot change his mind. But as the God of the Judeo-Christian-Islamic tradition is a living deity and an all-powerful that deity one, He has the capacity to change His mind at any time.

Q. So there might not be a judgment day?

A. There might be or there might not...

Wednesday, April 20, 2011

Animals, Dervishes and Souls

From the point of view of empirical science it is as yet impossible to prove or disprove that there is such a thing as a "soul." Assuming that souls do in fact exist, it would be interesting to ask if not just humans but also animals have them. A couple of weeks ago I saw the documentary, "The Cove." One of the main points of the film is that dolphins have the intelligence and sense of ethics equivalent to that of humans, and they deserve the same basic respect as humankind. Is it fair to be dismissive of animals just because they see and act in ways that don't make sense to us humans?

Whether observing animals or humans, one should be careful about rejecting as bizarre any behavior that seems to make no sense. Today I saw a youtube video of whirling dervishes, men who spin around in a circle in order to attain spiritual enlightenment. Isn't it unfair to be dismissive of strange behavior simply because we initially perceive it to be pointless or silly?

I believe it is proper to extend the courtesy of not just panning another's misunderstood ways even if that other is an animal. If, for example, we see a dog chasing its tail, can one be ever so sure that in the universe of that dog his spinning in a circle is not some kind of a spiritual quest? According to principles of karma, someone laughing at a dog chasing its tail may find himself being reborn in another life as a whirling dog...

Friday, March 4, 2011

How Oligarchs Grab What is Yours

You may use points from this dialog to explain how oligarchs operate and how they become very comfortable enriching themselves at the expense of the poor and middle class.

Q. Times are getting tougher. European Central Bank economists have called for austerity measures around the world. Why?

A. The story goes, because governments around the world are in the red they cannot do what is expected of them: Things like rescues from natural disasters, law enforcement, keeping up the infrastructure, and last but not least, making sure that the poorest of the poor, even though they may not be entitled to shelter, have enough food to survive.

Q. So it would mean that governments, if they want to remain in existence, need to cut services. A sudden stoppage of all the services would be too much of a shock for any given country. If for example, roads would no longer be repaired, laws no longer enforced, fire fighting no longer available etc., even some of the very wealthiest would be unhappy because if a fire went out of control in a middle class area, the fire might spread to the more upscale neighborhood. So, where can governments cut?

A. As perhaps a majority of the wealthy would not want any cuts on any service that might affect them personally--an example might be the elimination of air traffic control because it would effect the flying safety of private jets--the areas that could be cut are the so-called entitlements...

Q. Like what?

A. Anything that would benefit people of middle and lower income. Food stamps and shelters for the very poor, aid to schools and universities, health care, subsidies to Amtrak, infrastructure grants to small and large communities etc.

Q. Are you trying to say that "entitlements" are services that the wealthy think those with less money are not entitled to?

A. Exactly.

Q. Why? What's the philosophy behind that?

A. It is a philosophy that says the wealthy deserve what they get and that they merit their fortune by being "chosen." As evidence that this is so they assume that people with low net worth are simply not worth as much as human beings and therefore are not entitled to "entitlements."

Q. They don't actually say that?

A. No, but they act it. Even though many of the wealthy have never ever produced anything of value, they assume that they have earned all they own.

Q. You are not being clear.

A. Take, for example, executives in the banking sector. They may have made good decisions in their lending or investments benefiting their institution, or they may have made decisions that ran their bank into bankruptcy. At the end of a year they still collect millions in salary and bonuses, simply because they have made arrangements that as corporate officers they will get paid, not for performance, but for the position they have assumed in the corporation.

Q. Who makes the decisions about how much money executives get and how do the decision makers justify giving high compensations to non-performers?

A. It is the board of directors who decides. Board members also get paid without having to perform. As to giving huge bonuses to non-performing executives, they claim it is necessary to pay such high compensations so that they can compete for top level talent with other corporations.

Q. Doesn't sound too logical to me. Why would they want executives with ever higher compensations to run companies into the ground?

A. Because in today's financial world there is money to be made whether the value of a company goes up or down.

Q. This does not make any sense at all.

A. It makes sense when you begin to understand how derivatives work. Derivatives work like insurance policies. If you take out an insurance policy on a house and that house burns down, you break even when the policy pays off. But if you buy several insurance policies on the same house and it burns to the ground, you win by however many policies you have bought. So where your property value was that of one house, you now have a property value of five houses if you bought five policies.

Q. So holders of the right derivatives make out when sectors of the economy collapse?

A. Yup, and they get away with it because people don't know how derivatives work...

Wednesday, January 26, 2011

How Corporate Cost-Cutting Makes People Invisible

A Dialog Between Quincy and Arthur

Q. It is January 2011. There is talk about the economy improving because the largest companies in the United States are going to report greater profits. Does that mean that those without jobs will soon be getting back to work?

A. That would be good news, but it is simply not so.

Q. Why not?

A. Because greater profits more often than not mean the company has saved on costs. And what are costs? Perhaps the greatest cost factor generally is the cost of labor. When companies save on the "cost of labor," it simply means they spend less money on salaries and wages. And that means fewer people, both blue and white collar, earning less money.

Q. Yes, it is hard to see how the economy is improving when people have fewer jobs and get paid less. It just does not make sense that when corporations are earning more, people are not better off. Where does the money go that is earned?

A. While some of the earnings translate into dividends for investors, a greater part goes to the top of the company and to its cost-saving base. It is no secret that every year company executives, whether in sectors like banking, insurance or manufacturing give themselves huge sums in salaries and bonuses.

Q. What about that money going to the bottom? Doesn't the staff at the middle and at the bottom also benefit?

A. Well, it depends how you define "staff at the middle and bottom." In a traditional American corporation it meant skilled and unskilled blue collar workers and white collar staff from middle management on down. The salary schedule would be somewhat standardized as the pay at one company would be roughly the same for the same tasks as that of other companies. For a company to remain reasonably profitable, management would strive for reasonable compensation at all levels.

Q. That sounds like everybody would be kept happy, so where is the problem?

A. The problem lies with top management. Ideally, the mission of a business is to serve society through whatever its product or services are while making a profit doing so. In this process small companies are like families, larger companies are like communities ranging from small towns to large cities and so on. Whatever the nature of the community there is a greater or lesser connection between those on top with those at the middle and the bottom. Ideally there is a measure of respect for a person at one level for anyone at any other level.

Q. Looks like you are painting an idyllic picture. So what can go wrong?

A. Communities fail when their members become confused about their priorities. With a business operation two main priorities are contributing to society with products or services on the one hand and earning enough money to keep the business viable. Where decades ago the two elements were somewhat balanced, it is no secret that today making money far outweighs any other priority. So one of the quickest ways for management to increase earnings is to cut as much of the funds going to the middle and lower strata of its workforce.

Q. So how do corporations manage? Wouldn't operations simply break down if most of the workforce were eliminated?

A. Yes, companies cannot survive without a workforce. But at this point in history, an American company can do without an American workforce. At this point you might have guessed how top management keeps operations going without paying the kind of salaries middle and working class Americans are used to.

Q. Well, it's obvious. They simply send the high-paying jobs overseas to China or India, right?

A. That's it--exactly. If you want get your work done cheaper, you outsource. There is nothing easier.

Q. But isn't there an obstacle to laying off practically an entire workforce, how can top management simply get rid of people who have worked loyally for years and years?

A. It is difficult if there is a sense of community within a firm, but there is none. If there is a sense of community, those who have the power to hire and fire hesitate to visit economic disaster upon people they know and feel close to. But with most of today's corporations upper management functions within a gated community, and those who are outside the gates are considered nothing more than a cost factor.

Q. Strange--what does this lead to? What happens when human beings are nothing more than cost factors?

A. There is a major psychological shift. As long as a person is seen as a human being, he or she benefits from a cultural value system: Thou shalt not steal, nor lie , nor above all not kill. But as long as someone is nothing but a cost factor, he can be annihilated quite easily because costs are there to be cut.

Q. So any idea of how many formerly employed humans who were eliminated as "cost factors" there in the U.S.?

A. The official figure is around thirteen million, but it is probably a lot higher because long-term unemployed are no longer part of the statistics.

Q. So what happens to all these people?

A. Some try their very best to get back to work in their area of expertise--if there is nothing where they can apply their skills, they become willing to accept any job whatsoever. If they can't get any kind of job at all, their new economic reality pushes them into becoming invisible.

Q. Hmmm, why invisible?

A. A job or any valid source of income provides dignity. Having neither job nor income brings with it a sense of shame for being seen as someone who cannot function in life. The jobless/incomeless person tends to keep his lack of wherewithal under wraps to avoid embarrassment. More often than not the need to become invisible is met through a life of seclusion.

Q. So what does that mean?

A. Someone whose identity has been annihilated because he was no more than a cost factor that has been cut will have to find a new path in life.

Q. How do you do that? Is there a formula?

A. There is no formula and there is no easy answer. One may look for a clue in two words adopted from the collapse of the Soviet Union: glasnost and perestroika...