Sunday, September 2, 2018

Week-end Wrap - September 1, 2018

Week-end Wrap - September 1, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

The trans-Atlantic elites appear to have settled, in the past few weeks, on their response to Trump's simple minded trade protectionism. The elites' core argument is that protectionist measures threaten the "global value chains" -- the complex web of world suppliers that provide parts and components for almost all manufactured products.

Conspicuously missing from this core argument is the question, "value for whom?". The USA working class did quite well, thank you very much, when USA industrial companies made everything "in house." The most famous example was Ford's River Rouge plant, which old Henry designed and built to swallow ship loads of taconite, coal, limestone and other raw materials at one end, and spew forth each day a gusher of fully assembled automobiles out the other end.

Of course, it was not a bed or roses for the working class. But making everything "in house" gave organized labor a single -- hence very vulnerable -- pressure point to lean on and threaten. Break up the assembly process into a "global value chain" of four or five hundred or more suppliers scattered about the globe, and the United Auto Workers can only make semi- informed guesses as to where is the best place to picket and strike.

Lambert Strether, in his "Water Cooler" each weekday at Naked Capitalism, has done a great job of rounding up news and articles about Trump's trade war. LS's Sept. 1 front page report on the Council of Foreign Relations report was especially excellent, with some pointed comments.

Trade wars won’t fix globalization. Here’s why 
[Council on Foreign Relations, via Naked Capitalism 9-1-18] 

“We asked policy experts and business leaders: how can countries really reap the economic and social benefits of [Global Value Chains (GVCs)], while avoiding inequality and environmental damage?” • Forty years too late… More: “Short-sighted, protectionist measures ignore and erode the opportunities that GVCs provide for driving inclusive and sustainable growth and do nothing to optimize outcomes.” • I read the thing, twice, and if there’s anything in this about the impact of “GVCs” on the United States working class, I didn’t see it. That’s not to say that the Administration’s policies will help them; just the the CFR and the “policy experts and business leaders” won’t either. Expect continued volatity (and plenty of heart-rending stories, around Xmas time, of how brutal tariff policies are denying toys to little children).
I left a comment, but it was focused not on trade, but on the government's role in promoting economic development.  While I think Auerback’s and Melman’s point that the best engineering talent was diverted by military spending, is correct, it does not mean (as Auerback and Melman argue) that military spending had an entirely negative effect on the ability to compete in other markets. What no one addresses is: Why did USA computer and electronics industries become so successful, while those of Britain did not?

The key, I think, is the conscious policy to deliberately seed new technologies developed under military auspices into the civilian economy. The best recent example was the Moore School Lectures in July – August 1946, which can be identified as the precise point in time when the USA government, following Hamiltonian principles of nation building, acted to create an entire new industry, and an entirely new phase shift in the technological bases of the economy.

This followed historical examples such as the spread of modern metal working machine tools out of the national armories after the War of 1812; the role of the Army in surveying, planning, and constructing railroads in the first half of the 19th century; the role of the Navy in establishing scientific principles of steam engine design during and after the Civil War; and the role of the Navy in creating the profession of mechanical engineering after the Civil War; and the NACA and NASA research that solved many design problems of modern aircraft, such as NASA aerodynamicist's Richard Whitcomb's development of the area rule, supercritical airfoils, and winglets.

The left, unfortunately, in its inexplicable hatred of Alexander Hamilton (such as the left’s false argument that Hamilton wanted to create a political economy in which the rich would perpetuate their wealth, power, and position — easily disproven by comparing the descendants of USA wealthy elites of the early 1800s with the descendants of British wealthy elites of the early 1800s — cannot understand Hamiltonian principles of nation building because the left does not want to understand the difference between wealth and the creation of wealth. Or more accurately, the hoarding of the fruits of wealth, versus the creation of wealth. The left sees Hamilton’s focus on creating new wealth (and, be it noted, Hamilton was explicit in arguing that wealth is created by improving the productive powers of labor) and misunderstands it as coddling of wealth.

Obviously, without this Hamiltonian concept of nation building, Trump's jingoistic protectionism will not work very well. Especially since protectionism was one of only four major policies in the Hamiltonian American School: 1) protectionism; 2) internal improvements, what we today call infrastructure; 3) a national banking system that encouraged investment in real economic activity and discouraged investment in speculation and usury; and 4) a Doctrine of High Wages.
by Lori Wallach [Public Citizen, via Naked Capitalism 9-1-18]

Trump’s NAFTA Deal Simply Can’t Solve America’s Manufacturing Problems
by Marshall Auerback, September 1, 2018 [Alternet, via Naked Capitalism 9-1-18]
The new and improved NAFTA deal won’t mean much, even if Canada ultimately signs on. The deal represents reshuffling a few deck chairs on the Titanic, which constitutes American manufacturing in the 21st century: a sector that has been decimated by policies of globalization and offshoring. 
Additionally, what has remained onshore is now affected adversely to an increasing degree by the Pentagon. The experience of companies that have become largely reliant on military-based demand is that they gradually lose the ability to compete in global markets.... 
Let’s drill down to the details of the pact, notably automobiles, which have comprised a big part of NAFTA. Under the new deal, 25 percent of auto content can be produced elsewhere than North America, a reduction from 37.5 percent that could be produced outside before, because of the multinational nature of every major automobile manufacturer. Twenty-five percent is still a very large percentage of the high-end auto content, much of which is already manufactured in Europe—especially expensive parts like engines and transmissions, especially for non-U.S. manufacturers, that won’t be much affected by this deal. 
Additionally, much of the non–North American auto content that can be or is being manufactured in Europe is the high end of the value-added chain. Certainly the workers producing the engines and transmissions have higher-than-$16-per-hour wage rates, which are trumpeted in the new agreement as a proof that more “good jobs for working people” are being re-established by virtue of this deal. Since when is $16 per hour a Trumpian boon for U.S. auto workers? Objectively, $16 is only 27 percent above the 2018 Federal Poverty Threshold for a family with two kids; even worse, $16 is only 54 percent of today’s actual average hourly pay ($29.60) in U.S. automobile manufacturing, according to 2018 BLS numbers
But beyond cars, here’s the real problem: Although the ostensible goal of all of Trump’s trade negotiations is to revitalize American manufacturing, the truth is that U.S. manufacturing basically suffered a catastrophic setback when China entered the World Trade Organization (WTO) back in 2001. Along with liberalized capital flows, the extensive resort to “offshoring” of manufacturing to China has sapped the American manufacturing capabilities, as well as engendering a skills shortage. This includes (to quote a recent Harvard Business Review study co-authored by Professors Gary Pisano and Willy Shih):

“[the] tool and die makers, maintenance technicians, operators capable of working with highly sophisticated computer-controlled equipment, skilled welders, and even production engineers [all of whom] are in short supply. 
“The reasons for such shortages are easy to understand. As manufacturing plants closed or scaled back, many people in those occupations moved on to other things or retired. Seeing fewer job prospects down the road, young people opted for other careers. And many community and vocational schools, starved of students, scaled back their technical programs.”

Trump threatens to pull US out of World Trade Organization
[BBC, via Naked Capitalism 9-1-18]

Inside Trump’s Judicial Takeover: How conservative operatives and Senate Republicans are helping the president pack the courts at a record pace. 
[Rolling Stone, via Barry Ritholtz' The Big Picture 8-25-18]

Hail to the Chief : Radical reactionaries of Republican Party threaten the republic
By Michael Tomasky, August 16, 2018 issue [New York Review of Books]
Senators Jeff Flake and Bob Corker, are giving up the fight and retiring, while much of the congressional GOP is instead laying the groundwork for an all-out assault on Mueller when a report hits. The Supreme Court, which will presumably soon have two Trump appointees, is far more political and less independent than the Supreme Court that in 1974 ordered Richard Nixon to hand over his tapes. Trump’s base, as long as he is deporting asylum-seekers and inveighing against knee-taking football players and fake news journalists, grows more and more besotted. And undergirding it all is the Fox News Channel, now a pure propaganda network, from which Republicans take their cues and get their talking points.

It's worth stepping back here to review quickly the steps by which the Republican Party became this stewpot of sycophants, courtesans, and obscurantists. It’s easy to forget these things, but it’s not as if Trump announced his candidacy in mid-2015 and all this self-abasement suddenly happened.... 
....the Republican Party has essentially ceased to be a political party in our normal understanding of the term and has instead become an instrument of one man’s will. Fifty years ago, the GOP was an amalgam of different factions that often disagreed among themselves—New England liberals, the heirs of the “Free Soil” moderates, prairie conservatives, Wall Street money people. Then in 1980, the new “movement conservatives” gained the upper hand. Incrementally, they took over. Incrementally, they moved ever more rightward, egged on by the new right-wing media. 
All that was bad enough for the country—it led us to a war waged under false pretenses against an “enemy” that hadn’t attacked us and a campaign to dismantle a social compact carved out over the course of a century. But at least through all those phases, the Republican Party remained committed to the basic idea of democratic allocation of power. Since the Civil War, Democrats and Republicans have fought sometimes fiercely over their ideological goals, but they always respected the idea of limits on their power. 
No one had come along to suggest that power should be unlimited. But now someone has, and we have learned something very interesting, and alarming, about these “conservatives,” both the rank and file and holders of high office: their overwhelming commitment is not to democratic allocation of power, but to their ideological goals—the annihilation of liberalism, the restoration of a white ethno-nationalist hegemony. They know better than to speak of such things openly....

White-Collar Criminals Got Off Scot-Free After the 2008 Financial Crisis — and That Helped Fuel President Trump’s Rise
By Marshall Auerback, August 28, 2018 [Independent Media Institute, via Naked Capitalism 8-28-18]
As we approach the 10th anniversary of the 2008 crash, ProPublica’s Jesse Eisinger reminds usthat no top bankers were ever “held accountable for the biggest financial crisis since the Great Depression… No one. No top officer from any major bank went to prison.” All of these instances of corporate corruption occurred well before Trump’s election. Trump stands accused of much the same. But how do you make a political case for the latter’s impeachment on the grounds of corporate corruption (even as the president virtually daily violates the Constitution’s Emoluments Clause), given the earlier reticence of multitudes of politicians, regulators, and DOJ officials to prosecute similar white-collar crimes whose impact dwarfed those allegedly committed by America’s 45th president? 
....The guilty plea of Michael Cohen was announced with great fanfare by Robert Khuzami, the current Deputy U.S. Attorney for the United States Attorney’s Office for the Southern District of New York. He proclaimed that Cohen’s conviction “serves as a reminder that we are a nation of laws, with one set of rules that applies equally to everyone.” 
If Khuzami’s name rings a bell for some, it is because he was once the General Counsel for the Americas for Deutsche Bank from 2004 to 2009, and then went to the SEC as head of enforcement. In the latter position, Khuzami’s intense conflicts of interest from his previous role at DB guaranteed there would be no serious investigation of collateralized debt obligation (CDO) abuses. Indeed, his career exemplifies the revolving door culture that has characterized the D.C.-Wall Street nexus, which makes one prone to regulatory capture, and correspondingly lax when it came to prosecuting the very rule of law that Khuzami himself trumpeted in the wake of the Cohen convictions. There is a balancing act for people like Khuzami, needing (per Eisinger) “to display their dazzling smarts but also eventually needing to appear like reasonable people and avoid being depicted by the white-collar bar as cowboys unworthy of a prestigious partnership.” Even though, as Yves Smith of the economics blog Naked Capitalism noted, Deutsche Bank was patient zero of CDOs designed to fail for the benefit of subprime shorts, under Khuzami’s tenure at the SEC, the German bank attracted virtually no scrutiny. This, despite the fact that DB’s leading salesman of this toxic junk, Greg Lippmann, figures prominently in all reasonably researched accounts of pre-crisis CDOs. So much for the idea that “one set of rules… applies equally to everyone.” 
The Democrats’ largely absentee approach to the problem of white-collar crime could well explain why the party and the special independent prosecutor continue their efforts to make the case for “Russian collusion.”
How Does 2008-09 Global Financial Crisis Fit Into Economics?
Barry Ritholtz, August 22, 2018 [The Big Picture]
A group of students at Manchester University in northwest England registered their acute dissatisfaction with the failure of the economics profession as a whole to forecast the financial crisis and warn policymakers, companies and individuals of the dangers they were facing.In response, they formed an association called the Post-Crash Economics Society — to lobby for changes in the teaching of the discipline.

I have argued that income injustice has skewed national income accounting so badly, that economic statistics have become very misleading. If the incomes of the top one tenth of one percent increase by $500 billion, while the incomes of everybody else decline by $300 billion, the GDP would show growth of $200 billion despite the reality that the economy was doing much worse for 99.9% of people. As with so much of economic policy, this is an issue that should have been addressed by the Obama administration immediately following the 2007-2008 crash, but wasn't. Perhaps that's just as well: this could be a very potent line of attack by Democrats against Republicans today. 

I feel very betrayed’: Basic-income recipients react to one of the world’s largest experiments suddenly being canceled 
Business Insider, via Naked Capitalism 8-29-18].
“I think this is a perfect example of how an UBI would work; get canceled as soon as a conservative gets elected.: Moi [Lambert Strether] We warned about this early on, with the Speenhamland system leading to the backlash of the Poor Law of 1834, designed to punish the poor and included workhouses which deliberately broke up families.

What Happened at Camp Lejeune
by Lori Lou Freshwater [Pacific Standard, via Naked Capitalism 8-26-18]
I grew up drinking and bathing in the toxic waters around a military base in North Carolina. Thirty years later, I went back to investigate.

Tens of Thousands of Adults Line Up for Free College in Tennessee
[Inside Higher Ed, via Naked Capitalism 8-28-18]].
“State officials had initially anticipated 8,000 adult learners to apply for the program, which expanded the popular tuition-free Tennessee Promise. But a week before the start of the new college semester, more than 30,000 adults had applied for the scholarship according to state education officials.”
Lambert Strether notes:
While liberal Democrats busy themselves deriding such programs as ponies and unicorns, while Tennessee, with a Republican governor and a Republican legislature, passes it.
California passes strongest net neutrality law in the country
[The Verge, via Naked Capitalism 9-1-18]

The undertakers of Silicon Valley: how failure became big business” 
by Adrian Daub, August 21,2018 [Guardian, via Naked Capitalism 8-28-18]
“That’s the funny part of the tech industry’s narrative about itself. For tech, failure is always assumed to be temporary; for everyone else, it’s terminal. Taxicab companies are going out of business because they’re losing money? Creative destruction, my friend – sink or swim. Uber hemorrhages cash? Well, that’s just a sign of how visionary the company is. This double standard justifies the exploitation of workers outside of the tech industry – and, in certain cases, the exploitation of workers within it.”

If you have a Yahoo account your emails have probably been scanned to figure out what you buy — and they may have been read by employees of the company
[Business Insider, via Naked Capitalism 8-29-18]

Report: Baylor University Secretly Infiltrated Sexual Assault Survivor Groups
[DeadSpin, via Naked Capitalism 8-29-18]

Calif. Assembly OKs bill mandating 100% renewables by 2045
[Los Angeles Times (tiered subscription model) (8/28), The New York Times (tiered subscription model)(8/28), via American Wind Energy Association]
The California Assembly advanced a bill Tuesday that, if passed by the Senate and signed into law, would require the state to source all of its electricity from clean energy sources by 2045. The bill would also increase the state's 2030 renewables goal from 50% to 60%.
Opinion: Federal government is dropping the ball on grid reform
[The Hill (8/29) , via American Wind Energy Association]
Electrical grid reform and resiliency are important issues, but the Trump administration's efforts to tackle the subject are misguided, write Michael Wu and Kevin Johnson. "A more distributed energy grid, with thousands of energy generation and storage sources, will be inherently more difficult to disrupt than one built around large centralized power plants," they write.
Orlando, Fla., and nearly 300 US cities and counties have pledged to uphold the Paris climate accord's commitments and are exploring 100% renewables, electric vehicles and other outlets to reach those goals. Sierra Club Executive Director Michael Brune touts the role local leaders have in this process, noting how they mobilize action to keep lawmakers and utilities accountable.
Wind and other renewables accounted for nearly 20% of all electrical generation in the US during the first half of 2018, statistically break-even with nuclear's contribution, reports the SUN DAY Campaign, which used Energy Information Administration data.
Prototype bionic eye created with custom 3D printer
by Ben Coxworth, August 29, 2018 [, via Naked Capitalism 8-30-18]
A McAlpine-led team began with a hemispherical glass dome, similar in size and shape to the back of a human eye. Using a custom-built 3D printer, they then added stripes of an ink containing silver particles – the ink successfully dried in place, as opposed to running down the inside of the dome and pooling at the bottom. Finally, over top of that ink base, a printed layer of a semiconducting polymer was added. 
The result was an array of 3D-printed photodiodes, which are capable of converting light into an electrical current with an efficiency of 25 percent. McAlpine's team is now planning on boosting that efficiency, and incorporating many more of the photodiodes into a single dome. Ultimately, it is hoped that the technology could be used to create a fully-functioning bionic eye, which would restore a blind recipient's vision by stimulating their optic nerve in response to perceived light. 
Additionally, the scientists are looking at ways of printing the photodiodes onto a soft hemispherical material that could be surgically implanted into the back of a patient's existing eye, where it would replace the retina.

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