Sunday, September 15, 2019

Week-end Wrap – Political Economy – September 14, 2019

Week-end Wrap – Political Economy – September 14, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

The Oligarch Threat
Tamsin Shaw, August 27, 2019 [New York Review of Books]
The bigger picture... was the way in which the Cambridge Analytica story opened a window onto a new constellation of international billionaires, corrupt politicians, and war profiteers who were apparently amassing enormous power. That story isn’t only about technology, data, and psychographic profiling; it’s also, at root, a story about the consequences of entrenched economic inequality, the privatization of essential public assets and government functions, including even national security, and the challenge to conventional foreign policy posed by the bargains being struck between international kleptocrats…. 
In both Britain and America, there exists a class of billionaires who seek to become oligarchs and a corresponding class of government officials who want to become billionaires. Since 2008, when the financial markets’ development of complex and ill-regulated derivatives led to a credit crisis and crash that erased huge sums from the fortunes of the global ultra-rich—with Western tycoons like Rupert Murdoch and Sheldon Adelson, and Russian oligarchs like Oleg Deripaska among the biggest losers—the world’s billionaires have been moving away from a commitment to free markets. Learning from the banking bailouts and the socialization of moral hazard, they have instead embraced an ambition to build lasting monopolies that enjoy both official and unofficial forms of state support.
….
The United States has its own versions of the oligarchs, albeit ones who made their money legally rather than through the criminal enterprises for which many Russians have been indicted by American prosecutors or sanctioned by the federal government. As I’ve previously written, the oligarchs of Silicon Valley managed to establish their extraordinary monopolies—viewed by the state as a form of soft power as well as an essential national security asset in a world of cyber-conflict—only because that entire sector received huge injections of venture-capital funding from the military and intelligence agencies. In this case, too, the astronomical profits are largely untaxed and held off-shore.... 
This international billionaire class is also establishing and using private intelligence and influence agencies like Cambridge Analytica to help them manipulate national and international politics. It’s well known that the Koch brothers have their own such agency (called i360), but other billionaires have firms whose names we don’t even know. That’s not to say there’s a grand conspiracy of global elites or coordinated centralization of power for mutual advantage. But what these messy conflicting interests do have in common is that they are all working against liberal-democratic institutions. The free-market dream of being liberated from government authority, once an article of faith for the billionaire class, has turned into the oligarchs’ dream of coopting, or even usurping, government authority in pursuit of profit. 
....one of the most ambitious of America’s would-be oligarchs, Erik Prince. He is a private military contractor, formerly of Blackwater; his present company, the Frontier Services Group, has backing from the Chinese government and a Hong Kong billionaire named Johnson Ko, the company’s executive director. Prince’s meetings on behalf of the Trump team were arranged by a former Blackwater colleague who is now an adviser to Crown Prince Mohammed bin Zayed al-Nahyan of the United Arab Emirates, George Nader. Nader, who is currently in federal custody in Virginia as an accused child sex trafficker, claims that Prince was sent as an emissary for Trump’s chief strategist, Steve Bannon, to the notorious Seychelles meeting with Dmitriev and Bin Zayed.  
  .... Mueller’s main finding, a “sweeping and systematic” campaign of interference by Russia in the 2016 election, has simply reinforced the idea that the United States and Russia are combatants in a fairly traditional form of political warfare. Mueller’s report and testimony had no impact in exposing the multilateral business deals—here involving American, Russian, Saudi, Israeli, Qatari, and Emirati actors—that bypass national interests, official foreign policy, international regulations, electoral laws, and even ordinary market pressures.
[Daily Maverick, via Naked Capitalism 9-12-19]
The UK security services targeted The Guardian after the newspaper started publishing the contents of secret US government documents leaked by National Security Agency contractor Edward Snowden in June 2013.
Snowden’s bombshell revelations continued for months and were the largest-ever leak of classified material covering the NSA and its UK equivalent, the Government Communications Headquarters. They revealed programmes of mass surveillanceoperated by both agencies. 
According to minutes of meetings of the UK’s Defence and Security Media Advisory Committee, the revelations caused alarm in the British security services and Ministry of Defence.

Spontaneous Resistance

“We tested a messaging app used by Hong Kong protesters that works without an internet connection” 
[Abacus, via Naked Capitalism 9-11-19]
“Telegram has proven the most popular communication app in the “be like water” toolkit of the leaderless protest movement, helping with spontaneous road blockades and adapting to quickly-changing conditions on the ground. But Hongkongers are also looking into other options, and one of them is messaging app Bridgefy. The app received a sudden surge of downloads over the past two months in Hong Kong, according to Apptopia. The most attractive feature of Bridgefy is that it works without the internet, instead relying on Bluetooth to create a mesh network. Bridgefy’s co-founder and CEO, Jorge Rios, told Forbes last week that the app is usually downloaded for mass events when there’s a chance that the internet will be spotty. This could mean a large sports game or a big concert… or a mass pro-democracy movement.”

The Failure of Establishment Neoliberal Economics

Study Shows Income Gap Between Rich and Poor Keeps Growing, With Deadly Effects
[New York Times via Naked Capitalism 9-12-19]

Economics Can’t Explain Why Inequality Decreases 
Peter Turchin [Evonomics, via Naked Capitalism 9-12-19]

The Future of Capitalism 
[Bloomberg, via Naked Capitalism 9-12-19]
Chris Hedges [Truthdig, via Naked Capitalism 9-10-19]
Great to see Hedges' take on last month's statement by the Business Roundtable supposedly calling for something to replace the neoliberal and conservative economic doctrine of "shareholder value."
It is not accidental that the United States now has the worst income inequality since the 1920s. This was engineered by the capitalist class. But what Business Roundtable’s Aug. 19 statement reveals is that the capitalists are frightened they have been found out. Capitalism free of external restraints and with no internal restraints will pillage and exploit a captive population until it rises up in fury. It is such an eruption that today’s capitalists worry is on the horizon. 
Capitalism, because it is such a socially destructive force, saturates the media landscape with advertising to misinform and manipulate the public. It uses its vast wealth to buy up the press, domesticate universities, nonprofits and think tanks and demonize and muzzle its critics. It funds pseudo-intellectuals and pseudo-economists who tirelessly propagate the ideology of neoliberalism, the belief that transferring wealth upward into the hands of the ruling oligarchs is beneficial to society. It forms global monopolies that prey on the public. It wages endless wars in its quest for profit. It equates anti-capitalist agitation with terrorism, meaning, for example, that anyone in the U.S. who attempts to photograph or film the savagery and cruelty of industrial agriculture—one of the primary causes of carbon emissions—can be charged under terrorism acts. And when its pyramid schemes, frauds and financial bubbles collapse, it loots the national treasury and leaves taxpayers with the bill. (In the U.S. economic crisis of 2008, corporations gobbled up $4.6 trillion in public money.)
Bernie Sanders Says in Last Night’s Debate that Richest 3 Americans Own More Wealth than Bottom 160 Million Americans. It’s Actually Worse than That.
Pam Martens and Russ Martens:, September 13, 2019  [Wall Street on Parade]
But according to the real time Forbes’ billionaire listing as of this morning, Bill Gates’ wealth has climbed from $89 billion to $105.4 billion, an increase of 18.4 percent. Jeff Bezos’ wealth has climbed from $81.5 billion to $114.6 billion – an increase of $33.1 billion or 28.8 percent. Buffett has not done as well as his fellow billionaires, growing his wealth from $78 billion to $83.4 billion, an increase of 6.9 percent. 
The new tally for the three billionaires is $303.4 billion or a whopping $58.4 billion more than the bottom 160 million Americans, which includes one in every four children who live below the Federal poverty level
But it only takes adding two more billionaires to make the picture even more oligarchic. Those additional two rank number 4 and 5 on Forbes’ billionaire list this morning: Mark Zuckerberg of Facebook with $69.6 billion; and Larry Ellison, co-founder of Oracle, with a net worth of $65.8 billion. The top five billionaires currently have a net worth of $438.8 billion or $193.80 billion more than the bottom 160 million Americans.

Disrupting Mainstream Economics: Public Banking

California’s Public Banking Act approved by State Assembly after passing the State Senate on Wednesday! Next up: Gov. Newsom's desk
[Public Banking Institute 9-13-19]
California’s groundbreaking Public Banking Act, AB 857, was approved by the State Assembly today for the concurrence vote, 41 Aye's, 22 No’s. The bill required 41 Aye's. The Senate approved the bill on Wednesday, Sept 11, 25 Aye's, 11 No’s.The bill now has 17 co-authors in addition to the two lead authors, Assemblymembers David Chiu and Miguel Santiago.

Next stop: Gov. Gavin Newsom's desk. The California Public Banking Alliance is highly optimistic that Gov. Newsom will sign it, following a very encouraging meeting last month between the Alliance and his office. He has until Oct 13 to approve the bill and make it California law.

Ellen Brown: How to pull off a modern debt jubilee and create a sustainable economy
[Public Banking Institute 9-13-19]
In a recent Truthdig article, PBI Chair Ellen Brown examines the functional, sophisticated, egalitarian credit system of ancient Mesopotamia that endured for two millennia and recommends we apply it today. The key to its success: regularly write off debts. 
“Sumerian kings solved the problem of 'peak debt' by periodically declaring 'clean slates,' in which agrarian debts were forgiven and debtors were released from servitude to work as tenants on their own plots of land. The land belonged to the gods under the stewardship of the temple and the palace and could not be sold, but farmers and their families maintained leaseholds to it in perpetuity by providing a share of their crops, service in the military and labor in building communal infrastructure. In this way, their homes and livelihoods were preserved, an arrangement that was mutually beneficial, since the kings needed their service.”

Predatory Finance 

The Wall Street Campaign to Stop Elizabeth Warren Officially Began on September 10, 2019
Pam Martens and Russ Martens: September 11, 2019 [Wall Street on Parade]
But the most outrageous and egregious attack on Warren came yesterday from the Wall Street Journal....

titled “Warren’s Assault on Retiree Wealth,” and was written by Phil Gramm and Mike Solon. Gramm is the former Republican Senator whose name appears on the Gramm-Leach-Bliley Act, the legislation that repealed the Glass-Steagall Act. It was that repeal that allowed Wall Street’s casino investment banks to merge with commercial banks holding Federally-insured deposits. And it was this dangerous combo that led to the epic crash on Wall Street in 2008 and the ensuing economic collapse in the U.S. – the greatest collapse since the Great Depression. 
Gramm was not only a registered lobbyist for the global investment bank, UBS, but he formed his own lobbying firm, Gramm Partners....
Michael Solon, the co-author of the piece in yesterday’s Wall Street Journal, worked for Gramm in the U.S. Senate for 14 years. According to Solon’s current LinkedIn profile, he was a principal in the lobbying firm, Capitol Legistics (yes, that’s the correct spelling) whose corporate clients include the powerful Wall Street firm, Blackstone, and the powerful Wall Street law firm, Akin-Gump. Solon’s LinkedIn profile also shows him presently working for another lobbying firm, US Policy Strategies, whose largest client for the past five years has been Goldman Sachs, which has ponied up $1.685 million bucks to the lobbying firm.
Gramm’s wife is Wendy Lee Gramm, the former Chair of the Commodity Futures Trading Commission (CFTC) from 1988 to January 1993, who gave Wall Street exactly what it wanted in leaving its dangerous derivative contracts free from Federal regulation until the crash.

Restoring balance to the economy

City officials offered $2.5 billion to buy Pacific Gas & Electric’s energy system, but the utility company doesn’t want the deal.

Economics in the real world


Poverty is, in my view, a death sentence. The poorest older Americans die at twice the rate as the richest.

We must end our country’s obscene inequality and ensure basic economic security for all—or we will condemn an entire generation to early death. https://www.washingtonpost.com/business/2019/09/09/poor-middle-class-americans-are-much-less-likely-survive-into-their-seventies-than-wealthy-federal-report-says/ 



Poor and middle-class Americans are much less likely to survive into their 70s than the wealthy, federal report says
Over three-quarters of the richest 50-somethings in 1991 were still alive in 2014, the report found. But among the poorest 20 percent of that cohort, the survival rate was less than 50 percent, according to the analysis by the Government Accountability Office, a nonpartisan congressional research agency. 
The report finds that while average life expectancy increased over that period, it “has not increased uniformly across all income groups, and people who have lower incomes tend to have shorter lives than those with higher incomes.” 
“Over time, the top fifth of the income distribution is really becoming a lot wealthier — and so much of the health and wealth gains in America are going toward the top,” said Harold Pollack, a health-care expert at the University of Chicago who was not involved in the creation of the report. “In these fundamental areas — life expectancy, health — there are these growing disparities that are really a failure of social policy.”
Trump Trade War Cripples Capital Spending
[Wall Street Journal, via Naked Capitalism 9-9-19]
“U.S. manufacturers are investing less in their factories and workforces as they cope with uncertainty from the trade dispute with China…. [S]ome companies are putting business plans on hold and others are cutting capital spending, decisions that will ripple across supply chains as suppliers adjust to a leaner purchasing market”.... Truck maker Navistar International Corp. expects to spend 25% less on capital projects this year compared to last year, and Caterpillar Inc.’s capital spending dropped 16% in the June quarter from the year before. U.S. imports of capital goods also fell in July to the lowest level since 2017. Company executives says the shifting contours of the tariffs between the U.S. and China have made it more difficult to forecast sales and costs, and making a choice to invest more of a gamble.”


Climate and environmental crises

“Alaska’s Sea Ice Completely Melted for First Time in Recorded History” 
[Truthout, via Naked Capitalism 9-9-19] 
“Also for the first time in recorded history, Alaska’s sea ice has melted completely away. That means there was no sea ice whatsoever within 150 miles of its shores, according to the National Weather Service, as the northernmost state cooked under record-breaking heat through the summer.”
Climate Change Will Create 1.5 Billion Migrants by 2050 and We Have No Idea Where They’ll Go 
[Motherboard, via Naked Capitalism 9-14-19]
What if We Stopped Pretending the Climate Apocalypse Can Be Stopped? 
[Interesting Engineering, via Naked Capitalism 9-10-19]
What could go wrong? Might give new meaning to "blue screen of death."

Straw Wars: The fall of plastic, the rise of paper, and the gold rush at the center of 2019’s unlikeliest cultural battle.
[Slate, via The Big Picture 9-14-19]


GND - An opportunity too big to miss

“Bernie Sanders’ green deal – $216 billion for electric trucks” 
[Freight Waves, via Naked Capitalism 9-12-19]

Report: Renewables now cheaper than new natural gas plants
[Fast Company online , via American Wind Energy Association 9-12-19]
New power plants fueled by natural gas are now more costly to build in the US than a combination of wind, solar and batteries for the same purpose, according to a report by the nonprofit Rocky Mountain Institute. "In 2019, given what is needed on the grid today, we show that these technologies have crossed the line and become the cheapest way to add electricity to the grid," RMI's Chaz Teplin said.
The Green New Deal Is Cheaper Than Climate Change: The economic cost of allowing temperatures to rise even a couple of degrees above that target is simply staggering
[The Nation, via The Big Picture 9-8-19]

Disrupting mainstream economics


Thomas Piketty’s New Book Brings Political Economy Back to Its Sources
[Pro-Markets, via Naked Capitalism 9-12-19]

“People Are Homeless Because of the Failure of Our Capitalist Economy”
[Jacobin, via Naked Capitalism 9-8-19]
[Caitlin Johnstone, via Naked Capitalism 9-8-19]

“What Bernie Sees in the New Deal” (interview) 
Seth Ackerman [Jacobin, via Naked Capitalism 9-10-19] 
“[Sanders] also says his campaign is about extending the principle of democracy to the economy with ideas like worker ownership funds. Decommodification and democracy at work are big parts of what socialism has meant from the very beginning. The earliest models of socialism that people fought for would sound remarkably modest today. In the early nineteenth century, the first socialist mass movement in France was pretty vague about socialism’s definition, but what it often meant in practice was a government program to give unemployed workers loans to start cooperatives. That was the de facto program of a literal revolutionary movement, with bloodshed, barricades, and all the rest of it.  
Politics changes over time and so do definitions of socialism. When we look at Bernie’s concept of socialism, we should remember that Marx and Engels always said it was more important to have a real movement of workers who understand their real interests than it is to have a perfect, doctrinally correct program. When Engels talked about American politics in the late nineteenth century, he said he much preferred the populistic Knights of Labor or “agrarian reformers” to the hyper-orthodox Marxists of the Socialist Labor Party, who sounded like Marxoid robots when they talked. He much preferred the messy, ideologically incoherent Knights of Labor because they actually represented a real movement of workers fighting for some kind of egalitarian vision in opposition to the established order.”
Real Economics has been one of the few blogs on the internet to consistently push for greater understanding of the agrarian populist movement of the 1870s-1890s. Note especially the subject of the June 2010 post -- some six years before Brexit, Sanders, and Trump forced the word "populism" back into common, though usually incorrect, use. 

Health Care Crisis

Inside the drug industry’s plan to disarm the DEA 
[Washington Post, via The Big Picture 9-14-19

Three Ways to Fix the Drug Industry’s Rampant Dysfunction 
[Wired, via Naked Capitalism 9-11-19]

Medicare for All Would Cut Poverty by Over 20 Percent 
[The Hill, via Naked Capitalism 9-14-19]

[Bloomberg, via Naked Capitalism 9-13-19] 
Lambert Strether notes: "So much for Obamacare bending the cost curve."

Information Age Dystopia

“Uber Undone” 
[The Baffler, via Naked Capitalism 9-11-19] 
“Kalanick, who Waymo considers to be something of an unindicted co-conspirator, is the name at the center of the cork board, to whom all the strings of Uber’s sprawling improprieties and disasters can be traced. He urged Uber to ignore local taxi commission rules, presided over the creation of a software designed to fool city regulators, rejected any meaningful financial oversight, and built a corporate culture that became globally renowned for its callous treatment of its workers. Silicon Valley began this decade as the bleeding edge of the American economy, where new technologies were said to be building a better future for the whole planet. By its end, the American tech industry will be largely viewed as the labor-destroying, profit-hungry behemoth that it truly is. While Facebook’s inadvertent election-rigging and Google’s near-monopoly on digital advertising might draw more attention as the culprits behind that pendulum swing, it is Uber’s Randian capitalism that most transparently lays bare Silicon Valley villainy. And even from outside the C-suite, from which he was ejected in 2017, Kalanick remains its smug, unapologetic face.” • “Unindicted co-conspirator.” Great idea for a T-shirt. A very expensive one.
Alabama Tracking Students’ Locations To Penalize Them For Leaving Games Early 
[New York Times, via Naked Capitalism 9-8-19]
No, this is not satire or a parody. 'Bama's football coach wants to see the stands filled with students to the very end of the game, and this inanity is the result.

[Asia Times, via Naked Capitalism 9-13-19]
...Huawei has called the American intelligence community’s bluff. Huawei founder Ren Zhengfei offered to license his company’s technology to the West and allow Western companies to take it apart, re-write the source code, and otherwise purge it of any possible trace of Chinese hacking, in an interview with The Economist
It is this 5G technology – central to Huawei’s future revenue growth – that Mr Ren said he was ready to share, in a two-hour interview with The Economist on September 10th. For a one-time fee, a transaction would give the buyer perpetual access to Huawei’s existing 5G patents, licences, code, technical blueprints and production know-how. The acquirer could modify the source code, meaning that neither Huawei nor the Chinese government would have even hypothetical control of any telecoms infrastructure built using equipment produced by the new company. Huawei would likewise be free to develop its technology in whatever direction it pleases.

Oligarchy's Elites Dysfunction 

[Splinter News, via Naked Capitalism 9-10-19] 
“If there’s any lesson to be gleaned from this, it’s that liberal think tanks like the Center for American Progress are not a friend to media workers, or workers in general. These places, and the people who run them, spend an inordinate amount of time trying to ‘unify’ all of the various wings of the progressive and liberal movements (with a desire for less input from some wings than others, I imagine) under the banner of being on the same ‘team’ against the Republican Party. But it ultimately didn’t matter that these bosses were liberal and nice, rather than being some obvious shitbag like Joe Ricketts. The workers at this site still got jerked around for quite a long time before being unceremoniously dumped under the reasoning that the media industry just isn’t profitable enough. (This coming from an organization that gave the totally cash-poor Georgetown University law school over half a million dollars in 2017.) The fact is that these people, as they have proven time and again, will never really be on the same ‘team’ as workers. If CAP is the best that liberals can do when it comes to creating moral and principled institutions to further the progressive movement, it’s worth asking: With friends like these, who needs enemies?”
In his 2016 book Listen, Liberal: Or, What Ever Happened to the Party of the People?, Thomas Frank identifies the real struggle very precisely: it's the professional class versus the working class. 


“Is Meritocracy to Blame for Our Yawning Class Divide?” (review)
[Thomas Frank, New York Times, via Naked Capitalism 9-11-19]
Reviewing Daniel Markovits’ The Meritocracy Trap: “in other ways Markovits doesn’t go nearly far enough. When he squares off against the meritocratic elite, he keeps pulling his punches, assuring us that its members’ educational credentials really are excellent, that their skills are real and that they work extremely hard. At times he even seems to lament the psychic toll that all that work takes on our white-collar professionals, as though one might simply persuade them to give up their system of privileges. A more resolute critique would zero in on the fraud and folly and hubris that always seem to accompany the deeds of the best and the brightest. A fuller account of the last real-estate bubble and the global financial crisis would have been helpful here; or the story of the Wall Street bailouts, when one set of high-achieving professionals simply forgave the sins of another; or a comprehensive discussion of the 2016 presidential election, when the Democratic team of geniuses managed to lose to the most unpopular presidential candidate of all time…. we have this book, which forcefully interrupts the comfortable bath of self-flattery in which our well-graduated professionals pass their hours.”

War on Workers


Focus on North Carolina

Jim Crow Steals N Carolina 9th CD 
Greg Palast [via Naked Capitalism L 9-13-19]

I'm not sure how to categorize the following, but it is important as a very graphic reminder of the simple human suffering caused by conservative / neoliberal economic policies. And it is that suffering which is fueling the populist revolts which support Brexit, Sanders, Trump and other disputers of the  status quo. 

“Democrats see silver lining in suburbs, but rural challenges remain after close loss” 
[Reuters, via Naked Capitalism 9-13-19] 
“McCready won the densely populated Charlotte suburbs in Mecklenburg County by 12 percentage points, continuing the national trend of traditionally Republican suburban areas shifting toward Democrats as highly educated voters tire of Trump. Those gains were not enough to overcome a poor performance in rural counties like Robeson and Bladen.” 
The graphic part was added by Lamber Strether, and it deals directly with North Carolina
As it turns out, Chris Arnade visited Robeson County for his book, but that chapter didn’t make the cut. Since Arnade sets his tweets to auto-delete, so here are some screen shots:
So, Robeson County is diverse. And (see above) flipped from Obama to Trump. One wonders why:
(Lumberton is in Robeson County.) Democrats winning Republican suburbs while losing Robeson County says nothing good about the party’s direction. I was commenting as early as 2015 (herehere) that voting for Trump was a gigantic upraised middle finger, and here we have one such in real life!

Enemy Actions

The Secret Files of the Master of Modern Gerrymandering 
[New Yorker, via The Big Picture 9-8-19]

Thursday, September 12, 2019

Boeing continues its downward spiral


The plight of Boeing continues to fascinate me. Dad's cousin was a machinist / toolmaker for them from the 1940s to the early 1970s—from the B-29 to the 727. One Sunday afternoon I listened to him explain the problems of producing the tooling for the 727's tail section. Not only did the tail carry important control surfaces, the designers had run a third jet engine through the middle. Not surprisingly, making all this work required fabricating some complex shapes out of high-strength aluminum alloys. This was before computerized milling machines so these tools were built with slide rules, micrometers, Bridgeport mills, and a whole lot of skills. The resulting aircraft exceeded every important performance projection by at least 5%, thousands were made, and there are still people who argue it was the fastest subsonic airliner to ever fly.

My brother-in law was the guy who specified for Boeing which welding method would be used for every part that would be joined using heat. For every potential operation, he would test several welding methods, X-ray the results, and then break the weld to see how much load it would take. His results became part of Boeing's institutional memory. Any time folks needed to weld up a landing gear, or whatever, they could check to see what methods had been certified. My brother-in-law had not gone to engineering school but he was so good at what he did, he was given a "field promotion" to engineer by the company (along with the increased pay grade.) Such was the "old" Boeing.

According to his account, old Boeing began to die with the merger of Boeing and McDonnell Douglas on Aug. 1, 1997. The value of the transaction was $16.3 billion. McDonnell Douglas had been on the ropes for awhile and their senior management had turned to the Wall Street sharpies for "help"—the kind of help that stressed share prices and political connections to the Defense Department over the real work of building quality airplanes. These folks came to Boeing in the merger and began an assault on the company's engineering culture. On February 9, 2000, Boeing's engineers actually went out on strike—egged on, no doubt by the designated management fool / Wall Street darling named Debbie Hopkins who wondered aloud, "Just why does Boeing need engineers anyway?" I don't know Debbie, maybe it's because punching a hole through the air at nearly 600 mph is really hard to do. Maybe it's because without engineers, Boeing does not exist.

Anyway, shortly after the SPEEA strike was settled, my brother-in-law quit in disgust and found a peaceful job teaching non-ferrous welding at a Tacoma community college where he worked into his late 70s. Debbie was soon fired but her work was done. The rot at Boeing soon showed up in airplanes that had serious quality issues. I did a post in 2013 about the troubled Dreamliner and now the 737max fleet is grounded.

Wednesday, January 30, 2013

The Dreamliner is grounded

If anyone ever needs a lesson in what happens when Predators take over a Producer company, Boeing will do perfectly.  In it's glory days, Boeing pretty much defined a Producer company.  Engineers ran the show.  The company would occasionally bet the farm on a breakthrough product.  There was a sense of pride you could feel the moment you passed through the plant gates.  And people who knew aircraft were often fanatically loyal to their output (It's Boeing or I'm not going.)  Yes, there were other companies that made large aircraft but sensible people would often ask "Why?"  Boeing was so sure about its products that for decades, it only had one salesman.  One was plenty because everyone knew what buying from Boeing meant.

And then it started to unravel.  In 1997, Boeing merged with McDonnell Douglas, a company that had lost its airplane-making chops and had become just another cost-plus supplier hanging off the big Defense Department teat.  Boeing also had significant ties to the defense industry but were babes in the woods compared to the sharpies from McDonnell Douglas.  Soon the sharpies were ensconced in senior management at Boeing and the rot began to set in.  The open assault on Boeing's engineering culture came out into the open during the SPEEA (Society of Professional Engineering Employees in Aerospace) strike of 2000.  The cordial atmosphere between the engineers that designed Boeing's products and the engineers that managed the company was broken.  Management even moved the headquarters to Chicago from Seattle to show the divorce was final.

Once the Boeing Producer / engineering culture had been trashed, the chance for breakthrough, industry-defining projects was trashed as well.  The Dreamliner, which was not even that revolutionary to start with, became an expensive, ongoing fiasco that demonstrated the truth of the most famous sign carried during the SPEEA strike "No nerds, No Birds."  And so now, after several years of delays and $Billions of cost over-runs, the few Dreamliners that have been delivered are grounded.  The problem isn't even an aerospace problem but rather faulty lithium batteries.  If the Predators of the "new" Boeing management were actually capable of feeling shame, they would be resigning en mass. Yeah, that's going to happen (NOT)!

Wednesday, September 11, 2019

Running on empty


DW looks at the institutional impediments to change in the all-powerful automobile industry. And OMG are the car folks all powerful—for some very good reasons. Germans invented the internal combustion engine—both gasoline and diesel. The nation's driver associations have even managed to keep parts of the autobahn speed-limit free. And should a driver do something seriously stupid and crash, the authorities have access to rescue crews on hair-trigger alert. This is not to say the rest of the country always approves of these James-Dean wannabees setting transportation policies. Environmental activists recently managed to ban automobile traffic in central Stuttgart—the home of Porsche and Mercedes Benz.

But the serious power is still held by the manufacturers and their conventional wisdom which says—the automakers are the most important element of the German economy and you tamper with them at great risk. In that nearly rules-free environment, they twiddled their thumbs and made fat profits from ICE cars. Now their biggest market, China, is demanding that they get serious about selling electric cars. This is proving much harder than it looks—and WAY more expensive. Here DW has captured a fascinating look at smug auto executives spouting the conventional wisdom / Institutional Inertia.


Sunday, September 8, 2019

Week-end Wrap – Political Economy – September 7, 2019

Week-end Wrap – Political Economy – September 7, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Economics as Cultural Warfare 

A number of articles, stories, and commentaries have begun appearing the past month which indicate a growing understanding the murderous effects of conservative a.k.a. neoliberal economic ideology. Last week, I especially liked the direct, confrontational title of “Why Libertarianism Will Kill Us All”
by Nathan J. Robinson, in Current Affairs. In May, even Bloomberg was forced to acknowledge “Former Boeing Engineers Say Relentless Cost-Cutting Sacrificed Safety” in the 737 Max.

This week the number of articles along these lines merited a new topic subtitle, which I also used to link to an article I posted in March 2019 about the economic ideas of Adam Smith. As the title of a March 2019 article co-authored by Suresh Naidu -- author of the post below about Robert Bork --states plainly: Ideas Have Consequences: The Impact of Law and Economics on American Justice. 

While I welcome this emerging new clarity about the bloody costs of conservative a.k.a. neoliberal economic ideology, I am troubled that the ideology of republicanism continues to be overlooked as the obvious answer. As I wrote in March 2019 (Liberals and the Left Fail to Notice – and Celebrate – the Intellectual Death of Conservatism), "The actual conception of civic virtue in a republic is by its very nature fundamentally contrary to the basic tenets of capitalism...republicanism will never be in harmony with market capitalism." Almost all the proposals for reforming the USA economy --including by Senators Elizabeth Warren and Bernie Sanders -- amount to the imposition of state regulation without fundamentally addressing the economic beliefs and ideology of elites. This is why I place such importance on the work of Ian Welsh, and why the Business Roundtable's recent critique of the theory of shareholder value is an important indicator of elites' thinking. Will elites actually change their thinking? Or are they merely beginning to formulate a response to the growing resistance to the economic ideology they have promoted for the past three quarters of a century to roll back the New Deal? Is it even possible for a leopard to change its spots? 

How Economic Decisions Are Made
Ian Welsh, September 5, 2019 [IanWelsh.com]
....money is a social construction, and price signals are not given by God and nature: they are choices. Political choices. That isn’t to deny some physical reality behind them, but that reality has obviously been elided, when in America, the life spans of some demographic groups are dropping while super-yachts and luxury condos are hot to trot. 
All systems have to do only one thing: whatever is required to keep the system in power.
That’s all they have to do. Whether or not human welfare is advanced or not; whether or not we care about animals or nature is irrelevant to the raw calculus of power and staying in power, until it effect staying in power. 
If the hoi polloi can be kept from revolting or demanding (remember demands are based on “or else,” they are not requests) well then, the powerful will not do anything that does not increase their power or money. They will only care about human welfare outside of their own group if they feel they must, or if, as happens occasionally, they see their group as being something other than the elite group. 
Right now elites don’t care about other humans enough to reshape the money and political systems (the same thing, ultimately) to prioritize human welfare, avoid a great-die-off, or stop climate change. This is clear. It is not arguable, it is a fact, based simply on their actions.
THE SCALE OF WHAT WE’RE UP AGAINST: A giant amount of money will be spent trying to convince you to disbelieve obvious truths…
[Current Affairs, via Naked Capitalism 9-6-19]
The Koch version of free-market capitalism, which is the one pushed at the American Enterprise Institute, the Cato Institute, the Heritage Foundation, the Foundation for Economic Education, FreedomWorks, the Hoover Institution, and the Heartland Institute, is a simple creed, one that goes as follows: 
I believe that freedom is good and that people should be left to pursue their own ends as they see fit. The market knows best, and government regulation is a misguided attempt to second-guess people’s decisions about their own interest. People and corporations should pursue their self-interest under conditions of freedom, because in a marketplace of voluntary transactions, everyone’s interests will end up being served.
....It’s only when you think for a bit, and work out the implications, that you realize something that sounds perfectly innocuous actually has horrifying implications. What about child labor laws? Oh, well, that’s just the state stepping in to prevent a beneficial transaction between the child and the employer. We’re “taking away opportunity from children,” as libertarian economist Jeffrey Tucker put it in a Foundation for Economics Education article called “Let The Kids Work.” Oh, what about price gouging? Well, you’ll read in the Wall Street Journal that price gouging is Actually Good, because it’s a Mutually Beneficial Transaction between someone in desperate need of a thing and someone willing to part with it.

One of my favorite books for understanding the real nature of free-market capitalism is Walter Block’s Defending the Undefendable. Block, a right-wing libertarian, goes through various different categories of unpopular people, and shows how they are actually heroes performing a public service. Slumlords? They provide houses! Blackmailers? They’re merely offering the service of not disclosing information—would you rather they just released the damaging information? Drug dealers? It’s a product—you don’t have to buy it! Ebenezer Scrooge? He was investing his money and building the economy! Block concludes that these people “do not violate anyone’s rights, so they do not violate basic morality.”

For Block, “respecting property rights” and “basic morality” are identical, meaning that I can be as nasty to you as I want so long as I don’t steal your furniture, and still be an upstanding person. Employers can mistreat employees—by sexually harassing them, belittling them, working them to exhaustion, and they haven’t done anything wrong, because it’s a Free Market Transaction that the employee could theoretically walk away from....
“Monopolist’s Worst Nightmare: The Elizabeth Warren Interview”
David Dayen [The American Prospect, via Naked Capitalism WC 9-3-19]
Elizabeth Warren: I believe the central question in America today is who government works for. Yeah, it’s got a lot of different directions, but that’s the fundamental one. Is it just going to work for the rich and the powerful, or is it going to work for everyone else? Antitrust cuts right to the heart of that. We’ve had a government that has kissed up to every giant corporation for decades. It has weakened antitrust enforcement, looked the other way on mergers, passed on deals that everyone knew were anti-competitive and would be bad for the economy and bad for competition but good for the bottom line of the companies that wanted it. And no one so much as fluttered an eyelash over it. And that’s started to change. And I think—So here’s my thinking: it’s because we’re focusing more on what’s wrong in this country. It’s not like somebody woke up and just said “antitrust”—we’re not that nerdy—but it’s about what’s wrong in this country. And as people increasingly see that the problem is not an overreaching government, the problem is a government that won’t get in the fight on the side of the people. Antitrust becomes one of the clearest places to see that.

Wednesday, September 4, 2019

Greta Thunberg comes to New York


The Fridays for Futures movement inspired by the frankly incredible Greta Thunberg has been fun to follow since it started only a year ago. She was a disgusted child who decided to skip school to camp out in front of the Swedish Parliament. The goal was to remind the politicians that they were not doing enough to arrest the climate crises. Her logic was absolutely impeccable:
  • The scientific consensus is that unless there are significant changes in how societies operate, we only have twelve years before the CO2 tipping points have been breached and all hell is going to break loose.
  • The most commonly reported tipping point was 1.5°C (2.7°F) We are almost there.
  • 2018 broke records for high temperatures and widespread forest fires in Sweden. Anyone who wasn't frightened to death by these developments was probably clinically unconscious. It was an amazing demonstration of what environmental collapse could look like.
  • Greta did the math. She was 15. 12 years and she would be only 27. This is a very grim future.
  • "Why educate yourself to be a useful and productive citizen when the future is so hopeless?" reasoned Greta. Besides, she was extremely studious so missing a little school to make a political point seemed a logical path. Her grades weren't going to suffer.
A typical angry teenager, she distilled her beef with the world in the perfect summation, "You adults are shitting on my future." It is almost impossible to imagine a more powerful battle cry if the goal is to unite the world's young into a vast protest movement. But I am almost certain that not even Greta had any idea of the firestorm she was igniting.

She has spoken to the European, British, and French Parliaments. She went to Davos to scold the filthy rich for their role in the crimes against the climate. She has been nominated for the Nobel Peace Prize. And her latest was her decision to address the UN General Assembly which meant a transatlantic trip. Since she doesn't fly, this left her with few options. The one she chose was to sail on an environmentally-friendly racing yacht.

Sunday, September 1, 2019

Week-end Wrap – Political Economy – August 31, 2019

Week-end Wrap – Political Economy – August 31, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

How meritocracy became oligarchy

How Life Became an Endless, Terrible Competition
[The Atlantic, September 2019 issue]
Harvard, Princeton, Stanford, and Yale collectively enroll more students from households in the top 1 percent of the income distribution than from households in the bottom 60 percent. Legacy preferences, nepotism, and outright fraud continue to give rich applicants corrupt advantages. But the dominant causes of this skew toward wealth can be traced to meritocracy. On average, children whose parents make more than $200,000 a year score about 250 points higher on the SAT than children whose parents make $40,000 to $60,000. Only about one in 200 children from the poorest third of households achieves SAT scores at Yale’s median. Meanwhile, the top banks and law firms, along with other high-paying employers, recruit almost exclusively from a few elite colleges.

Strategic Political Economy

“Boeing’s Crashes Expose Systemic Failings”
[Der Spiegel, via Naked Capitalism 8-26-19]
Lambert Strether notes "This is brutal, a must-read." 
"It is impossible to tell the story of the 737 Max -- indeed, the story of Boeing's entire recent history -- without taking a closer look at Airbus. The self-confident Americans underestimated their European competitor's strength, not wanting to believe that Airbus's ascent to become the world's second-largest aircraft manufacturer was the kind of economic miracle that changed the entire game. Founded in 1970, massively subsidized by European governments and heavily promoted by an industry that was deeply invested in its success, Airbus was able to revolutionize the global passenger jet market in the course of just three decades. And then came the wonder of 1999, when Airbus received significantly more orders for its aircraft than did its American rival, despite the fact that Boeing had just merged with erstwhile competitor McDonnel Douglas a few years before.... 
“And this all comes at a time when the Airbus-Boeing duopoly has been developing cracks. The two may still be the world’s undisputed aerospace leaders, but companies in China, Russia and Japan are in the process of grabbing a bigger piece of the pie. Furthermore, it has become easier to build airplanes because a highly specialized global market of suppliers has developed that can deliver almost any part in the desired quality at the desired moment in time. The times when airplane construction was a calling card of unattainable technological excellence are coming to an end. Things are becoming more difficult, especially for Boeing.”
Outsourcing comes back to bite you in the ass. Every time. USA has "free traded" away the family jewels. 

“The Cherokee Nation Nominated a Delegate to Congress as Stipulated in Treaties” 
[Teen Voguevia Naked Capitalism 8-26-19] 
“The Cherokee Nation announced last week that it has, for the first time in its history, nominated a delegate to the United States Congress in accordance with provisions in treaties the tribe has with the federal government. In a Thursday press release, Principal Chief Chuck Hoskin Jr. nominated the Cherokee Nation’s vice president of government relations, Kim Teehee, for the job.”

The Failure of Establishment Neoliberal Economics

Business Roundtable Has A Lot to Prove
Barry Ritholtz, The Big Picture 8-26-19
For 47 years, the Business Roundtable has lobbied on behalf of corporate America. Much of that time, it maintained the fiction that the sole purpose of a corporation was to maximize profits on behalf of shareholders. This philosophy has been under assault for several years now, and this week the Business Roundtable announced it wants to put it to rest.In a widely circulated memo, the 200-member organization reversed itself, writing that “shareholder primacy” is no longer the sole purpose of a corporation. Instead, corporations must include a commitment to “all stakeholders,” which includes customers, employees, suppliers and local communities....But turning this aircraft carrier around won’t be easy, in large part because of the group’s own history. Indeed, the Roundtable has spent most of the past four decades advocating against the interests of those exact stakeholders. To cite some of the more notable examples:
— It fought the rise of labor unions and pro-union legislation;
— Helped to defeat antitrust bills;
— Prevented the formation of the Consumer Protection Agency;
— Opposed corporate governance changes to make boards of directors and CEOs more accountable to stockholders;
— Fought proper accounting of stock options given as compensation to executives and insiders;
— Opposed increases in the national minimum wage (it now favors increases);
— Lobbied to prevent restrictions on executive compensation;
— Fought legislation that would create cleaner energy and address climate change;
— Pushed for corporate income-tax cuts;
— Supported anti-consumer Supreme Court decisions, including the fiction that corporations are legal people, and that campaign donations equal speech.