06.14.10
Posted in News Commentary, Politics at 4:15 pm by steve
Any science fiction or futurist writer worth his weight in muddy water would tell you that one of the more realistic plots for how civilization grinds to a a bloody end involves protracted resource wars between major players. There is a sense in which both of the first two World Wars can be viewed as resource wars. Japan sought access to cheap resources throughout Asia. Germany sought access to cheap resources throughout the mideast. And British fought to keep access to cheap resources in Africa, India, and the Far East. Ultimately, it is about who is to control resources that virtually every war is fought.
When Dubya invaded Iraq and the rest of the world declared that the whole thing was a charade, an elaborate grab for oil resources, most Americans were skeptical. But now that we see what has happened since, it seems like a most plausible explanation. The control of oil is, indeed, the most economically salient outcome of the invasion.
Iraq has the second largest proven reserves of oil in the whole world, surpassed only by the stated reserves of Saudi Arabia. And since Saudi Arabia keeps their stated reserves constant regardless how much oil they withdraw, nobody completely believes those statements. Which means that Iraq may hold more oil than any nation in the world. Regardless of rank, there are 112 billion barrels of proven reserves and almost twice that much in speculative reserves. At $100 per barrel, the value of the oil exceeds $10 trillion.
The US has spent in excess of $1 trillion on the war in Iraq. It has spent more than half a billion dollars on building the embassy alone. These acts suggest a seriousness of purpose. More telling are the permanent bases it intends to occupy indefinitely outside of populous areas, and the fact that they are located not far from the oil fields they are designed to protect. There can be no question that one [presumed] outcome of the invasion is the political stabilization of the area and improved access to the oil found there. Even the negotiations with Iraqis over the pricing of oil sought major pricing concessions that would have brought significant excess profits to the oil majors who operated there. So there simply can be no question about whether oil was a major motivating factor. The only question is whether it was the only motivating factor.
(I have never heard it argued before, but I think it is worth arguing that the US was willing to move out of South Vietnam at the point where it was decided that synthetic rubbers could do the job once done by natural latex rubbers and therefore Vietnam was no longer a source of an essential strategic resource. Without any rubber, the US’ major industry at the time - the auto industry - would fail. With rubber it would thrive.)
There never was any question about whether the war in Iraq was about terrorism. The Saddam regime was hostile to al Qaida and to radical Wahibbists in general. It was a regime interested in commerce with the west and with the Orient. And it was strongly motivated by sanctions.
Similarly, there never was much question about whether the war in Iraq was about weapons of mass destruction. Iraq had quite visibly dismantled its WMD programs. And there never was much evidence to the contrary. Furthermore, WMD is never the real reason one nation invades another. At least until the statehood of Israel it was assumed that a nation had the right to defend itself against aggressors with what armaments it could assemble.
What of the role of neocons? Neocons had grabbed the reigns of public opinion in the US and controlled most of the high-powered policy decision-making in Washington. Richly financed by the arms industry who sorely needed real action in order to justify continued lavish defense department expenditures exceeding half a trillion dollars per year, Neocons manufactured rationalizations for the war in Iraq. There can be some doubt, however, whether their arguments were purely mercenary or whether they were calculated to serve the interests of some other group.
They had, after all, advocated a US led occupation of Iraq and Iran some years before 2001, suggesting that war with Iraq and Iran had nothing to do with terrorism, in their minds. The level of preparedness for the invasions and for the bodies of law that followed the putative trigger to the invasion is remarkable, suggesting almost prescience on their part. Or perhaps when one prepares to invade nations to extract their resources, a considerable amount of the right kind of theater makes the job politically possible.
The fact that there exists something in excess of $10 trillion of proven oil reserves in Iraq, the fact that there might be two or three times that quantity there, the fact that political instability threatened access to those reserves, and the fact that an occupying force provides powerful incentive to create political stability within Iraq ought to be sufficient to suggest rather forcefully that the primary motivating force for the invasion was access to oil.
The invasion of Afghanistan has always made a little less sense. Afghanistan was the source of opium valued recently at more than $50 billion per year, and the Taliban had shut down the trade in the year prior to the invasion. After the invasion, the trade bourgeoned. So if one were to imagine, hypothetically, that the parties who benefitted most from this revenue stream also were officials instrumental in making the decision to invade Afghanistan, then the invasion would begin to make sense as a means of restoring the opium trade and the revenue that flowed from it. But it was easy to wonder if that was all. In comparison to the bountiful resources captured in Iraq, Afghanistan hardly seems worthwhile. At least until today.
A story in today’s New York Times sets Afghanistan’s mineral wealth in excess of $1 trillion, pronouncing its bounty huge in comparison even to the rich trade in opiates. Bear in mind that it will take twenty years at least to develop and extract its mineral wealth and $50 billion for 20 years is $1 trillion; therefore, if the mineral resources dwarf the opiate trade we are talking more of three or five or ten trillion dollars worth of resources.
This story begins to bring us closer to understanding the real reason for the invasion. The article suggests that this is new information. It also suggests that the information was known by the Soviets during their occupation of Afghanistan in the 1980’s but was unknown and ignored by the US until some time in the last coupla years. That’s a little hard to believe.
Perhaps it is true that before the survey spoken of in the article, the quantity and quality of Afghanistan’s mineral wealth was less certain; but there can be little question that it was completely unknown. Satellite reconnaissance could have scoured the rocky terrain of the country using special spectrographic techniques that would reveal the concentration of every valuable mineral known to man over almost every square foot of the nation. And this could have been done, probably, in the ‘nineties. So a very good estimate of the mineral wealth there could have been known to high level officials a decade ago, maybe two. The specialists who reported back recently could have merely been doing verification work, not exploration work.
So if we consider the total mineral wealth of Afghanistan and Iraq to be a minimum of $20 trillion and possibly as much as $30 trillion or more, and if we consider that the people who profit most from this mineral wealth will be using other people’s money to secure access to it, then the invasions of both countries would seem like a great deal for them.
The hypothetical question is: if there were to exist a great pot of money that was between $20 trillion and $30 trillion in size; and if that pot of money is known to only to a small group of military-industrialists, and if that group needed a good story to provide political cover to use military force to grab the loot, what do you suppose they might do?
If you stood a chance of getting $10 million for a pivotal part in selling half-truths and outright lies to the American public in support of a goal of access to $10 trillion worth of minerals, what would you do? What do you think your next door neighbor would do?
I mean, after all: those resources are unavailable until the region is politically stable. So the invasion physically improves the lives of all who benefit from the commercial successes of industry and trade as practiced in Europe, North America, and Asia. Doesn’t the end justify the means?
Of course it is impossible to prove just by examining events how people were individually motivated, but there can be no question that the wars in Afghanistan and Iraq gave western nations access to tens of trillions of dollars worth of strategic mineral resources that might have been unavailable otherwise. There can be little question that access to resources figured prominently in the decision to go to war. And that no war could be publicly justified on these terms, so there had to be another reason for public consumption.
The resource wars have begun.
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06.05.10
Posted in Energy - NonRenewable, Politics at 9:37 pm by steve
Who’s Bad?
From all the press about Obama and the oil well, you’d think that the President himself descended a mile beneath the Gulf and chewed through the steel pipeline with his own teeth. Had he actually done this, then I think one could argue that the oil spill in the Gulf was at least partly his own fault. But he didn’t. And it isn’t.
So why are political opponents trying to tar and feather Obama for the Gulf Coast oil spill? Let’s look at some possible reasons:
1) It happened on his watch. In 1883 Krakatoa erupted, sending 21 cubic kilometers of earth into the atmosphere. Chester Arthur was President of the US at the time. Despite this disaster, historians judge Arthur on his achievement in passing the Civil Service Reform Act. Lots of things happen on a President’s watch that are not his fault. Katrina itself was not Dubya’s fault. The disaster itself was not the problem. The lack of response was not even the problem. The problem was a rather wretched and deep denial that there was a problem. It was Dubya’s insistence that everything was under control when, in fact, almost nothing was being done. It was denial of a problem when there was a very real problem and denial of services by a federal agency whose reason for existence was to provide those services.
There is no such agency for oil spills. And there was no denial of the problem.
2) Obama advocated for offshore drilling. According to a book review in a recent issue of the Economist, a recent executive of Royal Dutch Shell argues that the reason for the spill is that US policy has forbidden drilling in easy places offshore; therefore oil companies must drill in difficult places. Had oil drilling along the eastern seaboard been allowed - as Obama advocated days before the disaster - BP would not have been drilling where it did in the Gulf. It’s a self-serving argument. It’s not clear that the depth of the well contributed at all to the problem. In fact, it is possible that a deeper well might have made control of the high pressure gas a little easier. So while agreeing with this executive would help our argument, we find it difficult to agree.
Still, it is one thing to advocate for offshore drilling in a responsible way. It is another to chant “Drill, baby, drill” like some mantra by a crazed sex addict. One is an act of reason; the other an act of mischievous passion.
Curiously, it is the people who yelled loudest “Drill, baby, Drill” who are most shrill in their criticism of Obama on this issue. So if we were to give them credit for possessing a shred of sanity, it is impossible that they would be arguing “We ought to drill offshore, but Obama is insane for advocating it.”
3) Katrina and Oil are both disasters to hit the Louisiana coast. Bush got blamed for Katrina; therefore Obama must get blamed for Oil.
In other words, it’s a habit of the mind. Habits of the mind are frequently quite illogical; and they frequently produce ideas that are completely false. But their effects can be quite persistent. So we need to look at this a little more closely.
Katrina is not Deepwater
What do these two events have in common.
1) They affected the Gulf Coast.
2) People were hurt.
3) The effect was big.
4) Someone was president at the time.
5) Both stories got a lot of attention from a bored press.
What is different about these two events:
1) Katrina was a natural disaster. The oil leak is a man-made one.
2) There were several days’ warning in advance of Katrina, none for the oil disaster. So the federal agency charged with preparing for natural disasters, FEMA, could have been doing something to make sure that it was ready to help if help were needed. No such agency exists for oil spills. Even if we were to assume it might be a good idea to cobble together such an agency (and it’s not) it would take years of political wrangling to get it operational.
3) The problem in New Orleans was the failure of a safety system for which the federal government had direct responsibility. The problem with the oil well was the failure of a company to adhere to the highest standard of safety processes. A Wall Street Journal investigation discussed in The Week clearly establishes nearly half a dozen distinct points at which BP departed from industry best practices, sometimes with stark criticism from their contractors. Even procedures required by the US government permit may have been ignored.
4) It is reasonable to make governmental entities responsible in helping to minimize damage during hurricanes and other natural disasters, it is reasonable to expect the government to be responsive when natural disasters strike. Agencies are charged with the task and their work is funded. It is not reasonable, however, to make governmental entities responsible for minimizing damage caused by man-made disasters, especially when those disasters are caused by profit-maximizing activities of companies that externalize the cost of failures. To do so tempts the most egregious abuses. Both the mortgage system bubble and the blown well in the Gulf are examples. Governments ought to step in not to save the institutions themselves, but to save American taxpayers from ruinous results. Sometimes, as in the case of TARP the one has required the other.
5) Bush attempted to use the Katrina disaster for grandstanding purposes; Obama has attempted to use the oil disaster as an opportunity to tighten up what little control the federal government has over the permitting process.
6) Bush supporters have, since Reagan uttered the incantation “Government is the Problem”, argued that less government oversight is unconditionally better. Such reasoning increased the probability of damage from events such as Katrina. Such reasoning increased the probability of an oil spill disaster such as the one in the Gulf. Such reasoning led to the deregulation of the banking industry that led to the need for the TARP program.
In short, it was the idea that “government is the problem” that underlay the real problem in both cases. That Obama opponents don’t immediately see this and capitulate on this dangerous mythology is testimony to the idea that hubris and deception too often trump reason and interest in the common good in US politics.
7) Katrina and events like it are inevitable. They are conditions of nature that arise regardless of how we behave. The question is in how to deal with them. The Bush Administration dealt with them by not showing up for a while. While we would like to believe that spills from offshore oil wells are avoidable - this is the first one in about forty years - they are likely to occur so long those who drill wells are not held to the highest standards and held accountable when they fail to adhere to those standards. In this respect, Obama has been showing up.
What ought to be baffling to most sane people is the idea that government has no place in regulating the behavior of oil companies; but that it is fully responsible for cleaning up their messes. What kind of a world does that create? A little more care in drilling probably would have averted this particular disaster. And that extra care might have cost a few millions of dollars. But instead, we have a spill that could cost billions in lost product and tens of billions to clean up. Limits on liability externalize that cost, shifting it to taxpayers. If oil companies had to pay more, they would have less incentive to cut corners, and the cost of oil production for them and for us could be a little lower, once the cost of big disasters is properly accounted for as a cost of production.
Oil Must Flow
Americans are totally dependent on oil. It is a dangerous addiction. And it is an addiction impossible to cure before the oil runs out. Until that time, even if we could spill enough oil into the oceans to kill every kind of marine life found there, we will be drilling for oil in the oceans. There is no other choice. To do otherwise means giving up most of the conveniences that we enjoy: things like food and water, good jobs, internet connectivity, and so on. Cheap energy got us all this stuff. And when cheap energy is gone, so will be the stuff. My grandparents lived without the aid of fossil fuel and theirs was a hard life filled with privation. I am not prepared to live it. Neither, I think, is the greenest of the radical greens.
So the oil must flow. What responsibility does Obama have? He has the responsibility to use the event to fix problems inside the federal government’s permitting office. He has a responsibility to use this event to frame America’s oil dependency as a problem. He has the responsibility to push for laws that hold oil companies liable for larger fines when they have some measure of culpability in oil spills.
Moral Hazard
Obama, however, has absolutely no responsibility to protect anyone from the fallout. While it is reasonable to see the government play a role in responses to natural disasters, it is less reasonable that the government should play a role in cleaning up disasters caused by failures of large corporations. TARP, for instance, was not about saving bankers from the consequences of their own bad decisions, it was about saving the American public from those consequences. The American government does not have the expertise to clean up oil spills. Nor is there any reason it should. If oil spills are to be a regular part of American life, then oil companies must be responsible for doing it themselves, or for funding third party efforts to do it.
It might be tempting to say that because no single entity has as many resources to clean up disasters as the federal government, that it ought to be the responsible party. In the case of natural disasters, it makes sense. But in the case of disasters caused by institutions that are acting irresponsibly in order to increase profits as is the case for banks and for oil companies, this line of thinking invites the very kind of excesses that cause disasters.
This is one slippery slope we cannot afford to slide down.
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06.02.09
Posted in Social, Culture, Politics at 10:05 pm by steve
“When GM goes bust, we’re all in trouble.” That way my father’s point of view in the mid 1960’s. At that point in history, GM was the biggest auto company in the world. Perhaps it was the biggest company in the world. Now it is in bankrupcy. Its bondholders, its retired workers, its suppliers, and everyone who had any kind of contractual relationship with GM will be severely burned.
The bankrupcy of GM ought to give us pause. How can a company that was once the world’s largest non-governmental institution be insolvent? If we answer this question well we might learn some very useful things about capitalism, about work, about power, and about anglophone culture. To the extent that we learn useful things and change our practices, we may prevent many more of America’s most powerful institutions from similar failures.
Returns to Scale - And its Limitations
The seeds of GM’s failure were sown early on in its existence. General Motors had grown to be the biggest car company in much the same way that Rockefeller’s Standard Oil had grown - mostly by expanding its economic reach by using profits to buy up competitors and improve margins. It was a practice of using high level economic might that depended very little on other techniques. It required that one acquire competitors by whatever means were effective. Then, one exploited commonality between lines to decrease tooling and production costs. Usually the simple fact of being big enough brought sufficient returns to scale that GM as a firm did not have to be much better than anyone at anything. It did not have to be better at marketing or manufacturing or design or testing. It merely had to be almost as good. Everything else could be done by manipulation of the levers of power.
When Tucker set up a manufacturing line to produce cars in the mid ninteen fifties, GM and other Detroit auto companies used their pull to have him prosecuted for defrauding investors. They claimed he never intended to build cars. The actual cars that he produced were never allowed to be introduced as evidence. He was shut down. He posed a threat to the standard way of doing business. And he was shut down by a manipulation of the legal system.
When the movie was made about his story in the early nineties, a good portion of the dozen or so cars he manufactured, were still roadworthy. Tucker represented the independent, entrepreneurial spirit in America. His ambition was to give Americans the choice of a superior automobile. This represented the peak of Detroit’s power. But five decades of waning power may not have changed Detroit’s way of thinking about the business, much.
In the minds of auto executives, automobiles have just vehicles of exchange. One built them to the lowest possible standard at the lowest possible cost and sold them at the highest possible price. One assumed that the consumer was ingnorant of all he could not see. Beauty in cars was skin deep. And when the paint peeled because of corrosion, that just meant it was time to buy another one. In this view of the business, reliability, performance, and pretty much everything other element of value to a customer were irrelevant if the customer could not sense it at the time of purchase. That meant a kind of race to the bottom.
For decades, Detroit auto companies had their way with the American consumer. Things began to change in 1972. That was when the first oil crisis struck. That was the year the US hit peak oil as predicted by Hubbert in the 1950’s. This would mean that oil production in the US would necessarily decline, and that the US would have to import ever more oil in order to consume the same amount as ever. That was the year OPEC cut oil exports to the US. They did the same in 1977. Oil prices spiked. Jimmy Carter signed a law requiring disclosure of fuel efficiency on each new car. Small cars soon earned a significant market niche.
Detroit exploited that niche by introducing the forgetable Vega and the notorious Pinto. But the Japanese used the event to enter the US market in a different way. An early TV advertisement featured a couple slamming the doors of their Toyota. The implicit message was “It may be a low cost car that sips fuel, but it is still a car of high production value.” The message stuck.
During this decade three Japanese car companies introduced models into the US market: Toyota, Honda, and Nissan. Each of these companies has grown. And, in fact, within the last few years - before the credit crunch - Toyota had already grown to be the world’s largest car company. Toyota has been building cars in the US for two decades using American labor and (some) American parts. And they have been building more reliable cars with less labor input than any other car maker. Honda’s cars are not far behind in terms of reliability. And they generally garner high praise for being fun to drive. Japanese car makers gained ground with American customers by building a reputation for high reliability and high value.
Given that they had serious scale disadvantages at the start, how could Japanese producers have hoped to be successful? There are many answers. The fundamental answer is that they paid less per car for labor and materials and they produced cars that earned for their brands a deserved reputation for reliability and value. And how did they do that?
US businessmen will argue that the labor unions were too strong and that they drew too much capital out of US car companies. This is probably true. But it is probably also true that this is more of an excuse than a reason.
There were two factors that made the labor cost lower for Japanese manufacturers. One is that labor rates were slightly lower. They ran non-union shops and paid wages that were high in local terms but low in comparison to union rates. The other reason was that Japanese had much less labor in their auto assembly processes than the US car companies. The Japanese had evolved a better manufacturing method.
The Stratification Problem
There are several related reasons the Japanese managers were able to get more value from American workers than American managers. One was the idea of KAIZEN. It is the idea of empowering workers to do things that allow them to become more productive. And its’s the idea that workers are invested in their work at every level. They work hard. And this work brings them not just a paycheck, but a meaningful place in society. They engage with all their talents.
Furthermore, position in society - i.e. status - is not a matter of categorical difference but one of function. The world is not split into nobility and “villains;” rather, people higher in the hierarchy have greater responibilities that account for their greater authority. They may have better educations and even better breeding; but they are not somehow categorically different from the people who labor in the factories. These are ideas that are deeply engrained in German and Japanese culture. There is a touch of this same idea in the French notion about work and place in society. It’s much less true in Anglophone countries where the notion of two classes still prevails.
A by-product of the classless workplace idea is that there is a constant dialogue that occurs vertically within an organization. It assumes that decisions are made closest to the groups that will be affected by them. And that competent people with strong training backgrounds, exercising good sense, and motivated by an interest in the success of the organization work out decisions in a way that gains the most advantages and avoids the most pitfals. Management is charged with enabling the virtually continuous flow of incremental improvements by providing financial and engineering support. Management, in this view of the world, derives power from its ability to make good decisions. And to make available the resources to implement.
Even if no practical business decisions were to come out of this dialogue, the dialogue itself creates a kind of shared interest in the business and its operations that knits together people at different levels of the organization. This sense of shared mission allows for give and take in all business arenas including negotiations about pay.
But it also produces good business decisions.
In this model good decisions are both the reason for existence of the power structure, and its product. This vertical dialogue keeps management in the loop about operations. It means that they stay connected with the part of the business that adds the real value.
In Detroit, by contrast, there was a kind of invisible line drawn between workers and management. Management was allowed to set goals and working rules for workers. They were required to make sure the raw materials showed up. And to make sure the finished goods got sold. And to make sure that new products were designed and tooling made. But if there were minor problems that cost time and money on the manufacturing floor, it was the workaround that ruled. The only thing that was to be negotiated between management and workers was compensation.
Similarly, it was assumed that a manufacturing plant, once it was built, was perfect. Nothing could be done to make it work better. Sure, there was an operating budget for keeping things in good repair, but there was no persistent attention paid to the question of how manufacturing processes could be streamlined to make them all better. All decisions were made by people at one level - the highest level with an interest in the outcome. And exempt employees rarely spoke to or saw non-exempt employees except at ceremonial functions.
Reinforcing this separation between workers and management was a culture of entitlement. Whereas in Japan the CEO’s of companies were rarely compensated more than 200 times what workers were; in the US 2000 times or more was not uncommon. Furthermore, the people who ran companies in the US were invariably promoted up through marketing and finance divisions. Anyone who actually knew about and cared about operations was treated as a second-class citizen. A manager might be “rotated through” an operating plant, but he was rarely expected to do much outside of learning what products it made.
Everyone knew that the real money came not from being good at making a product, but by being good at selling it. There may be some truth to that proposition when everyone who is selling cars sells cars that are essentially equivalent in terms of measurable value/cost. But the proposition becomes false when this is not true. Ignore operational excellence long enough and eventually you end up on the wrong side of the value proposition. You lose money. Then you go broke.
Denying the Value Proposition
This is where Detroit has been dangerously wrong for five decades. Early on it embraced designed obsolescence. Then, when Toyota and Honda began delivering cars with greatly enhanced reliability or with measurably superior fuel mileage; when Volkswagon began delivering cars with the road performance and feel that approached that of BMW; and when Volvo and Saab delivered cars with superior safety characteristics, the issue of quality began to plague Detroit. It was clear that one could not simply plead “Rich Corinthian Leather” and sell as many cars as you could ever make. One had to figure out how to deliver value in terms of reliability, drivability, fit and finish.
Improvements in reliability since the early eighties suggest that Detroit understood that it could not afford to be much worse than all its competition in every measurable quality; but it is not clear Detroit ever did get very good at managing the value proposition. When measured against most of their competition, they are both worse than the Japanese in terms of reliability - not just on average but in almost every product line - and worse than the Germans and Scandanavians in terms of performance. Instead of really trying learn how to be better, Ford and GM bought Volvo, Saab, Mazda, and Opel.
But even its foreign acquisitions did less good than they might have. There was enough expertise in those enterprises to teach American managers a few things. But it didn’t happen. Enough of the managers came up in Detroit country clubs that if any outsiders from Europe who understood operational excellence landed in the US, they were immediately gelded. Foreign ways were immediately discounted and failure was swift. The game was the only slightly different overseas. There was nothing to be gained by over-investing in foreign operations, especially in Europe. Rather, the slow strangulation of high profile brands served Detroit’s goal of focusing on high mark-up products without delivering high end performance.
What buying those brands could have brought was people who understood how one can cultivate niche markets and serve specific needs very well and competitively. They might also have brought people who understood how to hire and train highly skilled craftsmen, treat them well, and negotiate with them as adults.
But the idea of exploiting niches is one so foreign to GM that its very name denies the possibility. So what if the people who pay a high premium for a Volvo do so because they perceive high value in not being sliced to bits in the event of an accident? So what if they want to know the car has special features that help prevent accidents as well as limit injury?These all add costs. And they cannot be spread out over the entire product line. So why do it? The simple rule that governed their whole business was a kind of interchangeability of all components across all platforms that improved returns to scale. But it also led to a king of lowest common denominator thinking. The only possible place to spend in making a car better was in optional features that were bolted on at the very end of the manufacturing process
Niche markets simply could not exist in the GM framework of thinking. Then, when in the 1990’s more than half of the automobile market was “niche” markets: when Toyota, Honda, Mazda, Volkswagon, BMW, Volvo, Saab, Hyundai, and a few other companies sold most of the cars, Detroit made most of its money on pickup trucks and SUV’s. By denying the very existence of niches, Detroit had backed itself into a place where it sold niche vehicles. But the niche that they were selling into was soon to be a rapidly contracting one. Meanwhile their costs were higher than the competition because they had counted on returns to scale and consumer ignorance to save their bacon.
One question corporate strategists never quite wrestled with was this “Will the SUVs and Pickup Trucks supplant other kinds of autos?” Detroit simply did business as if the answer had to be “Yes.” But that is a daft proposition on the face of it, for it assumes that everyone is either a soccer mom or a farmer/construction worker. And that probably accounts less than 20% of the US population. In an age when fuel prices must rise because of limitations on natural resources, it is insane build a business model on the proposition of building ever larger, more fuel-guzzling vehicles.
By contrast, it is reasonable to argue that one must have at least a meaningful token position in small autos. Because the markups are so small, doing so forces one to hone manufacturing toward operational excellence. One might actually become a far better car company by competing in the economy classes and losing a token amount of money every year at it than by avoiding it and avoiding the whole question of operational excellence.
Furthermore, one knows that eventually fuel must become expensive. So making small cars keeps one in a position of being able to move toward smaller cars the next time fuel prices go up. This is but one strategic error Detroit has made. And it has been making it since the 1970’s.
By the mid 1990’s one might argue that Detroit must have chosen to build trucks and SUV’s out of necessity - the necessity of a set of companies playing a losing hand. Detroit’s niche had always been to make cars that were cheaply wrought or ones that were wasteful of resources. The Japanese had no domestic markets for these vehicles, so Detroit could still have some advantages here. So it focussed on these areas. But even here it was not safe. Toyota brought its skill in making reliable cars to the truck and SUV market. It leveraged it reputation for reliability and scored meaningful hits on Detroit’s home turf with the likes of the Toyota Land Cruiser.
Bad Decisions - Consequence of Culture
We might all disagree about which decisions were GM’s worst. Or which choices doomed Detroit to failure. But the simple fact that it has been losing market share to Toyota and Honda for four decades is a testament to the fact that it is making worse decisions than Toyota and Honda for four decades. Back in the mid 1980’s there was an article in a major business publication that told us Japanese management held US workers in high regard for their skill, knowledge, dedication, and energy; but they viewed US managers with contempt. Perhaps there is something to be learned from the way managers of Japanese and continental European companies manage.
Since that moment, the Japanese had their little problem with banking, suggesting that not all Japanese ideas are uniformly good. But we have had our own little problem with banking. And during the two decades of retrenchment in Japan, the Japanese have continued to invest heavily in their own automated manufacturing lines. The Japanese have more industrial robots per capita than any nation on earth.
Whether this is a good business practice remains to be seen, but there can be no question that the Japanese are serious about being good at manufacturing. Americans, on the other hand, are serious only at being good at investing. It’s good to be good at investing. But it’s a short-sited view. The people who invest capital usually get the short term return; but it is generally where manufacturing operations are profitable that great wealth is generated. When a nation ships its stock of capital offshore, the bulk of the wealth generated from that capital accrues offshore. The Germans and Japanese understand this well. Americans seem completely oblivious.
The idea of investing to improve on-shore productive capacity fits hand-in-glove with the idea of Kaizen. For example, if one finds that one is paying manufacturing workers too much to make a good profit, then the goal must be to improve the productivity of the workers by increasing automation. Or by using some other high impact technique such as building out the product line so that even with marked increases in productivity, there is still a need for each worker. But in every case it requires a kind of joint interest in the long term success of the business. One cannot manage from quarter to quarter or year to year. One must take a long term view of the the business that , in ten years, sets one’s own organization far ahead of where it is today. In the case of the Detroit car company, long term is defined as being roughly the duration of a labor contract - a couple of years, maybe. And every technological change is fought because it increases business risk -especially changes that would bring big improvements in anything.
A great example of this is the Fiero. In the early 1980’s an ambitious manager decided to build a mid-engine two-seater sports car within the Pontiac brand. For reasons that are impossible to understand, he got enough support to start production. The car was ambitious for a number of reasons. One was that it used all plastic (through color) body panels that were virtually immune to denting, rusting, or scratch damage. The car was well received by the press. During its one or two years in production it sold well and it had even garnered its own cult following. What was truly amazing was that it broke every rule in the book. It was well built, reliable, sporty, stylish, and yet it sold for about the cost of a subcompact. When Pontiac stopped production everyone outside Detroit asked “Why?” To many, it seemed like the best answer was because it simply went too far. It appeared that the most compelling reason for its being withdrawn was that it was so good it made everyone else look bad by comparison. And, if the rumor is correct, that was the end of that particular manager’s career at GM: he was fired because he was so damn successful at creating customer value.
Inside American business, the problem of making bad decisions, is not just an issue of choice. It is an issue of identity. The process is lampooned weekly in Scott Adams’ Dilbert cartoon strip and the BBC program The Office. Americans make bad decisions partly because we have embrace bad mental habits in our mental conception the workplace and the various relationships that exist in that context.
The Wrong Work Ethic
One of the issues is that management in many companies in the US operates on a “clubby” mentality: The company is viewed as a club. The offices are its clubhouse. (We are tempted to think of nine-year-olds and treehouses…) Exempt employees are its club members who are elected for their good looks, brains, and athletic prowess. Or maybe because they are well connected. Education at an exclusive, expensive private university is a kind of imprimateur marking suitable club members.
Issues of technical competence are of little or no importance. Showing up at work matters not because it allows one an opportunity to work and produce wealth, but because it is symbolic of commitment to the club. It is possible for institutions to get by on this sort of culture for some time. But when they are pitted against rivals that have more productive ethics, they are doomed to failure.
A friend of mine worked in the IT branch of a major financial company in Manhattan. He joked that people showed up at 9:00. They would drink coffee and hang out in each other’s offices until lunch. Then, to look industrious, they would have sandwiches delivered to their offices. Then they would hang out in each others offices until about 3:00. At about 4:00 everyone would realize that they had a day’s worth of work to do. They would go to their own offices and work until 8:00 or 9:00 pm. Then they would go home. They would return the next day dog-tired and incapable of mounting any meaningful effort. So they would spend most the day going from office to office bragging about what long hours they worked. One’s work status depended most on being present and visible. And maybe on being good looking or witty.
In a business publication some time ago I remember reading of how German workers who came to the US were shocked at the lax culture. They were shocked to see how US workers treated the work place as a place for socialization. In contrast, when in Germany they would go to work, hardly ever talk to their cohorts at work, and then leave promptly at 5:00. Evidently the French do much the same, except they leave earlier. Paris’ afternoon rush hour starts around 2:30. The European conception of the workplace is that it is a place to work. It is not a place to socialize. Europeans work hard, expect results, and go elsewhere to socialize.
Common to the European and Japanese cultures are ideas that value training, competency, focus, and hard work. It assumes specialization and specific spheres of influence based on technical competency. This body of thinking has many consequences. One is that Japanese and European exempt employees can be quite effective during their work days. The French, for example, have the highest GNP per hour worked. Another is that when one views the work place as a place to produce output rather than a place to acquire status, one behaves toward problems differently.
This idea of technical competency allows all decisions to be made at the lowest level possible. It assures that exceptions are handled more quickly and in ways that will typically have the leas possible negative impact on the business.
By contrast, in “clubby” cultures, decisions are management’s reason for existence. And problems are signs of failure. Should ever a problem rear its head in an institution with clubby nature, the management reaction is simply to make the problem go away. The first two or three steps involve a denial of the problem’s existence. In some cases evidence of a problem disappears after it has been denied effectively at high levels. A good chain of management is defined by its ability not to cause problems to be solved, but to cause them to disappear. If nothing else works, one simply silences the person who brought the problem to the attention of others. There are hundreds of techniques to doing this ranging from discrediting the person to firing them. There are firms where such techniques are much more useful in acquiring positions of rank than are demonstrated ability in actually making the reason for the complaint disappear.
In such an atmosphere, the very act of observing a problem tempts disclosing it. And disclosure means punishment and tempts dismissal. This trains the whole organization to be oblivious to problems and to deny problems in the face of any and all evidence of problems. Only management consultants are allowed to see problems. But even here, management consultants must go around to every business of the same kind, see that everyone’s business is in serious danger of collapse because of the same problem, then they must recommend to all their clients some incremental solution that poses no threat either to the entrenched power structure or to the way the company sees itself. In such a culture, it is only a matter of time until the institution collapses.
Specialization and Technical Competency
Not every US company has this sort of a problem. A friend of mine worked at Hewlett Packard in the early nineties. HP had come up as a maker of high-end electronic instrumentation. It had a reputation for no-holds-barred product excellence and high margins. It had just gotten into the laser printer business, and it had brought its culture of excellence into that business. This friend would tell me stories about the way business decisions were made at HP.
One of the questions that people frequently asked in business discussions was “Are you technical or non-technical?” The assumption behind this question was that two kinds of issues bear on a business decision. One is technical issues. These are ones that require a deep understanding of the way things actually are. You cannot convince a broken glass that it is not broken. You either have to repair it or get a new glass. Technical people are good at understanding this sort of thing - much better than non-technical people, usually. The other type of issus is non-technical issues which deal much more with the way things are perceived, the way people are influenced, the way power and resources flow within an institution. Technical people are sometimes much less good at understanding these sorts of things. So when a person makes an assertion in a business meeting, it is helpful to know whether that assertion is backed by the authority of expertise.
No good business plan of action could go forward unless the technical people understood how to overcome the technical obstacles. No business plan could go forward unless the non-technical people understood how to overcome other kinds of business obstacles. The question implicitly gives credence to this idea. ( We note in passing that the question could persist long after the practice of managing in the way we just mentioned has ceased. For instance, it could be used to disqualify people from voicing legitimate concerns. And in such cases it would serve a purpose opposite to the one we attributed to it..)
The question itself betrays a number of bits of brilliance that might help explain HP’s early success. It suggests that business decisions take into consideration technical and non-technical ideas. It suggests that competence and good judgment in one’s field of expertise ( technical or non-technical) are highly valued. It demonstrates an implicit assumption that people are expected to come to the table with core competencies, and that decisions rely on the competencies and good judgements of all specialists. This is a sign of a workplace where work is defined in terms of delivering value to customers more than it is in terms of gaining personal status.
Decisions are not imposed from the top down. They percolate up from the operating groups of the company. It is suggestive of the idea that people at all levels are expected to voice objections and suggest problems before decisions are made.
This is an idea completely consistent with the Japanese idea of kaizen. It is an idea consistent with the continental European idea of highly trained crafts-people. It is an idea NOT consistent with the idea of business place as club. It is not consistent with the Adam Smith idea that a person in a craft or trade can learn all that there is to know about it with three weeks of on the job training.
Canary in a Coal Mine
The failure of GM is not a result of the financial crisis. My wife, who spent twenty some years as an executive in a health-care company predicted six years ago that GM would collapse if it did not get its health care related expense problems fixed. And, in fact, a huge part of GM’s financial collapse owes to financial obligations it owes in support of health care costs. Had the UAW been served by the Japanese health care system, those costs would already be something like half of what they are today and GM might not yet be entering bankrupcy. So GM’s failure ought to tell us something about the cost of not fixing health care in the US.
But Rick Waggoner, until recently the chairman of GM, insisted right up until the day he was thrown out that GM would never seek bankrupcy protection. Either he was completely delusional, or he was unwilling to publicly admit a serious problem. What is scary is that within the clubby atmosphere of the Detroit business world it is precisely this aspect of his behavior that was the most likely to get him the chairmanship. And it was the most likely to keep him there while that mentality was responsible for filling the chairman position.
The clubby practice of denying problems has kept Detroit from being as good as its competition at design, manufacturing, or reliability for something like five decades. It has imperilled American Motors, Chrysler, Ford, and GM. AMC went out of business long ago, though its Jeep brand - still plagued with reliability problems ( ironically ) staggers on as part of an ailing Chrysler.
It is inevitable that a few brands will disappear over the next decade. It will not be long before the category “commuter car” becomes a special category. And, in fact, it will not be a great surprise if some cities begin to try to create special incentives to drivers to use smaller, cheaper electric powered commuter cars.
But the bigger question is how far will the Anglophone world need to fall behind the rest of the world in order to discover that:
1) Operational excellence and technical competence counts. The notion of continuous improvement implicitly acknowledges the idea that problems exist and need to be solved. It implicitly depends on technical competence and good judgement.
2) Decisions must be made on the basis of information not just on the basis of preserving power. When considerations of power usurp the decision making process, bad decisions are made. And the consequence is a more serious erosion of power. Power is a natural consequence of good decisions.
3) The workplace is a temple for the sacred purpose of generating wealth, and power is a natural consequencs of being good at this. If one thinks of the workplace as being a place to gain status or power first, then one risks trading business assets and advantages for personal gain. That’s a morally reprehensible point of view.
4) Entitlements don’t create wealth; they create fiefdoms, slave plantations. What creates wealth is an efficient means of production or distribution. And what creates excess wealth is an incrementally more efficient means of production or distribution. Once everyone else has learned your tricks, you need to create new ones; so you must cultivate expertise and set it to work within a culture that is very good at defining and implementing low risk incremental change.
GM’s failure ought to teach us these lessons. If we learn them well, we might yet forestall a general economic disaster. Apart from the sheer monumental good fortune of its accidental discovery five centuries ago, America’s good fortune as a nation stems from healthy institutions of all sorts. It depends completely on a low level of institutional corruption and on a high level of sanity, wisdom, expertise, and business intelligence. It depends on hard work at all levels. It depends on productivity at all levels. It depends on management that is actively engaged in identifying problems and fixing them. It depends on capital and on a continuous re-investment of profits in the efforts that improve effectiveness at all levels. It depends on a high level of trust and trustworthiness among all interested parties in an institution.
All of these attributes were compromised by the clubby atmosphere that smothered Detroit. GM is bankrupt. So are the practices that got it there.
Permalink
04.16.09
Posted in Policy, Snark and Snarkier, Politics at 2:20 pm by steve
I just bought these great glasses. I put them on and everyone says “My, you look thinner.” Now, when I go into banks tellers smile at me. When I go into restaurants, waitresses smile at me. When I go into gymnasiums people nod approvingly. I walked into my doctor’s office wearing them. They took my weight and blood pressure. The doctor looked at the numbers and said “Well, I wouldn’t really worry about these numbers because obviously they are irrellevant to you. I can see that you aren’t fat.” These are really great glasses. And, in fact, they are so good that they make me want to get out more. Who knows maybe I will eventually come to resemble the new me everyone sees. Or perhaps not.
The magic glasses parable came to me as I was contemplating the article at the Economist (link above) advocating more transparency and less regulation. At first I saw it differently; but I think it is useful to consider the possiblity that our society is simultaneously embracing more government involvement and less transparency in the world of finance. That, in fact, if banks get to magically make risk go away by using less conservative and more abstract valuation models they may be donning the kind of magic glasses we talked about; that may make them look better in the short term. But in the longer term it is bound to make them less stable when downturns occur.
I will be the first to advocate for temporary government involvement because it is better than collapse - which seems the only other alternative. But long term governmental direct participation industry, commerce, and allocation of resources always tempts corruption. Lack of transparency aids in hiding corruption. The only answer is free markets and sound, well enforced regulation. The question for government is not whether it ought to govern (as the whole of the Republican party apparatus appeared to advocate for some time) but how?
The answer is “well.” And the means to that is by discussing policy openly. While I just happen to agree with most of Obama’s policies, it is not his policies that I find so deliciously refreshing as it is his style of governance. He welcomes discussion and is open to dissent. He proposes key principles upon which we can agree and he lets us focus on working out the details in open discussion. This kind of discussion is illuminated by transparency. Transparency - the free and open flow of all information crucial to making a decision - is of vital importance to the proper function of markets and democratic governments. Systematic behaviors that stifle transparency or promote bad judgement in light of good information ought to be considered corrosive to the very liberal principles upon which these institutions are built.
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04.11.09
Posted in Culture, Politics at 11:48 pm by steve
When the word came to Shabu that his father’s powerful friends had convinced him that Shabu’s governance had been so terrible, and that his advocacy for the tribe had been so inept that Shabu could no longer rule the great city, Shabu was very angry. He called a great council of his advisers to find out what action to take.
“In the first place, there is no hope of defying your father. He is a god to the most powerful families in both military and commerce. Most of the men loyal to you owe their places in your government to your father; and they are, therefore, more loyal to him than to you. But you can stall for time. Tell him you need four years to prepare the new prince to rule the Great City. “ This was the first item of unanimous consent.
“In the second place,it is imperative that we reward our friends for their support. So we must write IOU’s from the public coffers to those who supported us. These must be such great sums of money that there is no hope that all the people of the great city now living will be able to pay them off in their lifetimes. And so their children will be forced to work as slaves to fulfil the promises we made to our friends.”
And so the arms merchants and the prayermakers and the owners of great estates were given heaps of gold and promises for more gold than was in the whole kingdom.
“In the third place, there is no question of your leaving the Great City in a condition that can be easily governed. You must divide its inhabitants into factions. The rich vs the poor. The north vs. the south. The uplanders vs the valley dwellers. The worshipers of Vall against the heathen. The old against the young. The men against the women. Even the blind must be turned against those who might help them navigate the world in blindness.”  Shabu’s men hired prayermakers to shout from the towers of the minarets. In the rich neighborhoods the prayermakers heaped scorn on the poor for being stupid, uneducated, dirty, shifty, lazy, untrustworthy, and poor. In the poor neighborhoods prayermakers heaped scorn on the rich for being greedy, insensitive, lazy, criminal, and abusive of public trust. The educated were turned from issues of policy to issues of personal well-being. The underclasses were taught to trust only the prayermakers. The heathen were taught to despise the simplicity of the faithful. The faithful were taught to dispise the waywardness of the heathen.
“Finally, we must present the new prince with a problem so big that no other problem seems important and so difficult that there exists no acceptable solution. Then, when he takes power we can mock him from every corner of the Great City both for what he does and for what he does not do. And we can mock him regardless of the choices he makes.”
Shabu’s advisers were at a loss to know what sort of problem would be big enough, serious enough to satisfy these criteria. But Shabu had a quiet adviser with a bald head and a gravelly voice named Ynech. “Suppose the great city were on fire.”
“But we have well trained men. We have equipment. We have procedures. We have firebreaks. We have water in great vessels.”
“So, we need to move the trained men into another country to fight a war. We need to hire mercenaries who are actively hostile to procedures and training and who love nothing better than to get drunk while on duty. We need to sell the equipment.  We need to store cooking oil in great open pottery vessels all along the firebreaks so that a single rider on a horse with a torch and a great hammer can ride from vessel to vessel at night, lighting the oil and breaking the pots. And in this way he can set light to the whole of the Great City in an hour’s time. Have the prayermakers invent reasons for each of these new policies.”
So it was ordered. So it was done.
Even before the day of that Shabu was to hand governance of the Great City over to young prince Ambao who would replace him, citizens of the city were nervous about the pots of oil lining the great fire-breaks. A few of those pots had already been set alight “to light the darkness and make the city safe at night.” But it was evident there were cracks in many of the pots, especially the ones that were lit. Where were the firemen? The firemen had been sent away. What about their untrained replacements? They were lying in a stupor in the brothels.
What about the idea of men taking up their own fight against the threat? The pots of oil had their own guards whose public purpose was to keep the pots safe. These guards would let no man near the fire breaks. But little known to the citizenry, each guard had hidden a hammer nearby. And on the agreed signal, they would break the pots. It would not take an hour to set the whole of the Great City alight. It would take twenty seconds. Ynech’s plans were always technically brilliant.
Finally the day arrived. Shabu and his small council left the Great City. As soon as they were outside the city walls, the signal was given. And in twenty seconds the whole of the Great City was in flames.
Young Ambao had seen it coming. But he was not in a strong position. If he accused Shabu of orchestrating the fire, he would lose his place to a prince less able and less principled than he. All he could do was to fight the fire. This would not be easy. Not only were the firefighters gone, but a year back Shabu had imported slaves who, bucket by bucket had drained the lake to irrigate a crop of indigo that his minions had processed into dye and sold to Distant City. There was only enough water for drinking and bathing until the next seasonal rains. The only other resource was a huge heap of heavy twill fabric.
So Ambao organized the people of the city into brigades. Their goal was not to put out the fire where it burned out of control - these areas were lost - but to keep the fire from spreading to new places by beating out young flames with the heavy twill cloth. A tiny amount of water was applied to the cloth until it was just damp. Then the cloth would be swung at tongues of flame as they moved into new territory. This effort would save great swathes of the city, even as others were lost.
It was a great gamble since the twill cloth had some value on the open market but there were few out-of-town buyers for Great City real estate. He was destroying a thing of commercial value to save something that was not. So maybe from a purely commercial standpoint it was not a sound decision. But before the rainy season would come winter. And people of the Great City would die of freezing weather if too many of the homes were destroyed. Furthermore, Great City did much business with entities from far places. And if the whole city burned, all of this would be lost. Much more than the value of the buildings would be destroyed by fire. And hundreds of time the value of the cloth would be lost.
Still, it was a gamble.  It might not work. Groups of untrained men, women, and children swatting flames with wet twill was not a pretty site. People did not know how to wield the twill well. Some tried to take on flames that could never be put out this way. Others simply folded up the twill and planned to sell it at a profit when the stocks ran out. But many of the citizens fought the flames well and bravely. Many homes were saved. And many places of business with their stocks of goods survived, too.
This did not, however, cause the prayermakers and the other friends of Shabu to issue utterances of praise. Instead, they mocked the efforts.
“Ha! Ambao has undertaken to fight fire with combustable materials! He is a fool. And those who follow him are slaves and idiots.”
Or
“Ha! Look how Ambao is wasting water. All that water is going to be needed for spring planting of indigo, if the rains are late.”
Or
“Great City never burned like this while Shabu was prince of the city. What kind of ineptitude on the part of Ambao caused this conflagration?”
These kinds of questions and comments were yelled from the minarets by the prayermakers. They were shouted from the high windows in the quarters where men of commerce lived. There were even men in the poor neighborhoods who earned their meager livelihoods by whispering these same doubts to whom might listen.
Even as we speak, the Great City is burning. Even as we speak, Ambao is fighting the fire. Even as we speak Shabu’s friends are mocking his efforts.
What must prince Ambao do next?
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06.09.08
Posted in Uncategorized, Social, Culture, Politics at 1:33 pm by steve
Hillary Clinton came within a handful of votes of being the first woman to clinch the Presidential nomination from a major political party in the US. That’s an accomplishment all of us can be proud of. It changed the assumptions of electoral politics and creates many reasons to hope for a bette future. Hillary stands to be the proudest for she put the most at risk. It was her talents more than those of any other single person that led to her success.
Clinton’s monumental achievement came with great investment by people who identified with her ideals and with investment by people who paved the way for her. It would be a grave mistake to imagine that Hillary’s success depended exclusively or even primarily on women; for that would severely underestimate the breadth of support she had. She had support from every identifiable group.
If one is looking at Clinton’s success in terms of gender, one would trace the line of history backwards. In recent history there are womens’ organizations such as NOW that contributed much in terms of effort and in terms of helping us see society in a way profoundly different from how it was seen just fifty years ago. But the arc of change goes back much farther.
In the early twentieth century one finds women campaigning successfully for voting rights. Thier sucdess brought women into the political arena in an explicit way, a way that was unprecedented in agricultural and post-agricultural societies.
Before that one can find the successful reigns of Victoria and Elizabeth as examples of female leaders who proved both more durable, more serious, and more wise than almost all their male predecessors in the same role. During Elizabeth’s reign Shakespeare wrote, the British started permanent settlements in the new world, and the Spanish Armada was defeated. By the time of her successor, England was a very different place. A century ealier it had been a forgettable minor appendage to Europe. A century later it had become one of Europe’s most powerful and influencial nations.
In a similar way, England was transformed under Victoria into the world’s most successful and sprawling empire. In light of recent American history, what is remarkable about this feat was the fact that one could send British aristocrats into foreign lands such as India for decades at a time and they would persistently and energetically pursue primarily the interests of the crown, subjugating and suppressing the impulse to take unfair advantage of the situation. And when corruption occurred, it was generally dealt with in effective ways. The durability and scale of the arrangement is sufficient testimony to the greatness of the enterprise. Victoria’s dogged sense of decency and restraint was crucial to the success of the enterprise. It is almost impossible to imagine England managing the task under a male monarch.
The extraordinary level of common sense we find in the writings of women authors of the early ninteenth century, most notably Jane Austin, does much to aid the cause. Austin digs deep beneath the facades of wealth and privilege to get to the essential qualities of humanity - the qualities that create durable society.
This whirlwind tour we use to suggest that in Anglophone history women have proven themselves repeatedly in the political sphere. There is little question that the world is better off when intelligent, well-educated, and serious women play central roles in culture and politics. There ought to be more of them.
Our purpose here, however, is not to talk about identity politics, but to show how feminism and the values that women preferentially hold are essential in a well-functioning political arena. And to suggest that women and men alike might be better served by focussing less on identity politics than on ideas of justice and fairness.
In some hypothetical ideal world gender would be irrelevant. Leaders would make good choices. And most reasonable people would agree with those policy choices seeing them as effective and just. A good leader would be a leader who could identify the most effective and just policy positions and who could best persuade others to follow, to adopt those policy choices.
When we say effective we are thinking in a sort of utilitarian way, the most good for the most people. Or, when it comes to the obligation of governments to minimize certain kinds of dysfunction and dissatisfaction, the least amount of ill of any given sort for the most people. When we say just, we mean that policies are completely blind to all the sorts of factors that divide people: race, gender, ethnicity, class, wealth, build, amount of hair, and so on. Or, if they are not blind, they compensate to some degree, for societal factors and practices that might be judged unjust. And they do so in a way that knits society together more closely.
Many things stand in the way of such an ideal world. One is that people generally choose to associate with people who are - in some way or another - like themselves. It’s why men associate with men. And women associate with women. It’s why people with common ethnic backgrounds tend to associate with other people with similar ethnic backgrounds. It’s why people tend to hire people who remind them of themselves. It’s also why people tend to vote for people who remind them of themselves. It’s a natural tendency. But it can produce unfortunate outcomes. Because men tend to care most about power, they seek it most vigorously and are over-represented in all the seats of power. Powerful men, then, tend to promote other men for reasons we just explained.
Feminists complain about a persistent, insular, and dysfunctional patriarchy. It plagues politics and corporate governments causing the same kind of pain and difficulty in good reasoning that a perpetual migrain headache might cause.
It’s an accurate observation in many cases. The problem with men arises from the fact that in agricultural and post agricutural societies the culture is almost completely derived from principles of individual property ownership. And property ownership is one of the primary distinguishing characteristics of mating priviledges for males.
In this context it is nearly always (assumed to be) in the male’s best (evolutionary) interest to magnify the power difference between himself and the next male lower on the economic scale. Thus, males tend to build highly vertical heirarchical societies with great inequality. And they tend to be cruel to those of lower status. It’s a tendency that is deeply embeddeed in the psyche; it is one that we inherit from other primates such as the ancestors common to us and baboons. It is one we share with most social mammals including most pack and herd animals.
The grave problem with this culture is that it tends to produce a small number of very rich people and a large number of very poor ones. This leads to social unrest and ferment. And this, in turn, leads to violence. That this is almost entirely absent from North America’s history is an artifact of the huge bounty of natural resources its European settlers have enjoyed by virtue of settling a huge almost empty continent. But when that bounty becomes sufficiently depleted, the process will be observed here, too.
Societies have responded to pressures of shortages in two ways. One is primarily suppressive. Armed forces put down the revolt and suppress violence. Experience in Latin America over the last century might teach us that so long as there is profound inequality and widespread social discontent, there cannot be peace in a society.
By contrast, some societies have worked over the millennia to inculcate a strong sense of interconnectedness and interdependence - one that drives a kind of personal industry. It’s not hard to see this in certain northern European and Oriental societies. One of the side-effects of this culture is that there is more of a sense of shared purpose and shared destiny. The differences between the upper and underclasses are smaller. There is a stronger sense of group identity.
So what does all this have to do with feminism? If one views feminism through a Marxist lens, seeing it as a kind of class struggle in which men are cast as the boursoisie and women as the proletariat, then what we have talked about has nothing to do with feminism. But recall that Marxism calls for the total destruction of the bourgoisie and the elimination of capital. Metaphorically speaking it’s a kind of “kill the patient” practice of medicine. Most males would like to believe that most females might actually be just a little happier with some kind of male presence. If this were so, a different model would be called for. What kind of society are we aiming for? And what kinds of cultural practices will serve that end? These become the central questions.
These questions lead us to explore a little more carefully the complementary roles that men and women play in society. We have already pointed out that the role men play is primarily competitive. By contrast, we might see that historically the role that women have played has tended to be more cooperative. That this tendency exists is a fact of nature. How we channel it is a matter of culture.
The ideas of fairness and justice, of cooperation and interdependence, of an interconnected and roughly equal society are ideas that tend to be more closely linked with the female psyche. It would be wrong to assert that they are exclusively female impulses or ideas. But it would be just as wrong to assert that they are so prominent or find expression so persistently in the male population as they are and do in the female population. On average, women tend to view the world a little less competitively and a little more cooperatively than do men.
It’s a pattern with deep biological roots. The differences can be seen in many mammalian species. It is quite common for sibling females to care for each others’ young. It is a practice observed in primates, in bats, and in felines. We observe here the evolutionary foundation for the general tendency of women to be just a bit more sensitive to the needs of others, to be just a little more cooperative, to be just a little more fair, to identify just a little more with the needs of the downtrodden is a tendency that leads us to reasonably expect women, on average, to be better at creating and executing policies and practices that are fair, inclusive, broadly based, just.
Arguably, it is precisely this impulse that enables humans to form societies. And it is our sense of empathy that makes possible the deep level of cooperation that holds society together.
Society needs to balance competetive and cooperative forces. Competetive forces, properly managed, tend to disribute power. They tend to spur economic and personal development. They tend to drive change. They tend to move people and institutions toward excellence. They even drive societies to exercise cooperation on ever larger scales.
But if they are not managed scrupulously they have a tendency to concentrate power. When combined with a sort of laziness and a sense of entitlement, competition creates social classes and class barriers. And this leads to societal inequities. Cooperative forces can interfere with the negative effects of competitive forces. The happiest and most durable societies strike a careful balance between these two impulses and practices.
When one sees a homeless person freezing on the sidewalk it is a sense of fairness that prompts one to get city council to designate some warm building for the purpose of housing such people on cold nights. And to use tax dollars to heat the building. At one level, to take up the cause of the less fortunate is a simple act of human kindness.
At another level it is an act of enlightened self interest. The economic and societal forces that caused this person to rot in the street no doubt are at work elsewhere. If the collection of such people becomes too large and if their plight becomes too hopeless, discontent and dispair will create violence. At first it will be private and incidental. But eventually it will become public and general, if the underlying causes are not addressed.
It is a sketchy argument, but we have established at least some reason to believe that ideas about fairness, justice, and cooperation strenghthen society and make it a happier and more productive place. Some of the cooperative ideas we talk about are ones that have seen little expression in the political arena in over three decades. They are ideas we need to relearn in context of contemporary political and economic realities.
Feminism’s great success is that it has allowed women to adopt the methods used by men to get and hold on to power. It has made women economically and poltitically powerful as they have never been since the dawn of the agricultural age. This is a great and laudable achievment. It rightly ought to be celebrated. And its gains ought not be easily or frivolously given up. Hillary Clinton’s candidacy is proof of how far modern feminism has brought our society. It gives us cause for celebration.
But the gains have come at a cost. And everyone has paid. In some sense the cost has been paid most by the ones who have gained most from the change. Women who have gained economic power have too frequently had to trade away important relationships. Or they have had to adopt corrosive methods. Or they have had to live dual lives as homemakers and as professionals. The whole experience leaves many feeling empty, drained, exhausted, incomplete.
Men have been slow to make the paths easier for the women they care about. As John Fowles put it “the great failure of feminism has been its failure to free men” from their assumed gender roles. That is not a criticism that any feminist who finds some sense of dissatisfaction with the status quo ought to dismiss lightly. Or any man who loves a woman with any modicum of independent spirit. Yet it is a criticism rarely taken up. Feminists, even when they see all the problems being caused by men seem to imagine that all the solutions lie in women becoming more like men rather than the opposite being true.
The consequence of this has been that many women who gain economic power lose things that women hold more dear; a rich relationship with a spouse, a stable home environment, a secure space in which to raise children. It is an unreasonable cost. In many cases an unbearable cost. And it is little wonder that many women have rejected the whole game. They are not necessarily stupid or lazy or slavish or backwards.
It might mean, instead, that they cling to a set of values that embrace things that many people find more meaningful than power and wealth. They forgo some measure of these things for a kind of personal satisfaction that comes from close relationships. The feminist ideal, if it is concerned with a broad well-being of women must honor this choice and work for societal institutions and structures that ensure those who make such choices do not get left behind economically or politically. Doing this well will encourage men to adapt better to a world of more equally shared experience.
The more hidden consequence of this game is that the most powerful and influencial women, as they moved onto what once was seen as men’s turf, needed to adopt mens’ competitive methods to be successful. They needed to frame their actions in the same dog-eat-dog terms. To a profound and sometimes disturbing extent they had to become men not just in the best senses, but also in the worst of them. The side effect of this practice has been that influencial women have actually been much less effective than their predecessors in promoting ideas of fairness and cooperation in the political marketplace.
The cost has been borne by the poorest 99% of Americans. Unemployment, ineffective systems of health care, crumbling infrastructure, failures in education, ossification of the social class structure, environmental degredation, erosion of the middle class, these are but few of the devastating effects of this shift in focus away from cooperative ideas of fairness and justice that corresponded temporally with the coming of age of the modern womens’ movement.
Even the current banking crisis can be framed in relationship to this idea. If one views banking as being primarily a service for creating and preserving capital on the broadest scale, then the stodgy regulated bank of pre-deregulation days (i.e. pre-1996) could be seen as a powerful social institution in service of a primarily cooperative ideal. It would never create a great deal of financial wealth for the bank itself; but its social purpose was to enable others to build and accumulate wealth. And this it did well, efficiently, dependably. It’s a very conservative point of view. And it is one that puts cooperative and broad societal needs ahead of the needs of shareholders in banks.
As we have already suggested, this is but one of dozens huge policy areas in which America’s most powerful and influencial women, by moving onto the same turf as America’s most powerful men failed to check a potentially harmful policy change.
All of these changes were part of the Reagan Revolution. It is, of course, completely inaccurate and unfair to lay the blame for all of the failures of the Reagan Revolution at the feet of feminists. In fact, women have become an ever increasing portion of the political resistance to that revolution. The Reagan Revolution was simply a kind of reaction to several decades of moderate liberalism. Americans had forgotten the costs of unchecked greed and institutional corruption in government. And the false promises of the that revolution had a kind of seasonal appeal to a vocal, if slight majority. But the return to sanity in public policy will be achieved most expeditiously if women can succeed in changing the cultural values.
If we are to achieve the noblest of ends to which the feminist cause aspires, namely, to elevate the dignity and fulfilment of all people to the highest level possible, it will become important to refocus on the ideas of shared causes, common good, fairness, and justice. And women, as always, are in the best position to start that societal change by demaning fair treatment of each other from their children. ( We say women neither because it is necessarily or uniformly women who wil do this - some men are in a better position - but because we have identified the ennobling cooperative ideas with women. If the message is to stick it needs to come from men just as clearly and broadly as it comes from women.)
Even as the Bush administration proves beyond a doubt the blatant bankrupcy of the pure laissez faire approach to economic development; even as it proves the corrupting power of concentrated media in service of big government and of an avaricious military industrial complex; even as it is locked into a tailspin of lawlessneess and degeneracy; even as it attempts to commit America ot an endless and counteproductive war; even as it proves the wanton destructiveness of its policies on all fronts - political, social, and economic, the traditional approach of feminism fails to attack the doctrine common to all of these failures.
It’s a doctrine eschews all cooperative principles that spring from empathetic impulses and embraces instead world bounded entirely by force and coercion. If feminism is to serve best whom women love most, it must learn to reach us where our noblest impulses originate. It must learn to cultivate and nurture these impulses; to educate them in ethics and civic-mindendnesss. And it must school us again in the study of the arts, for a society that cannot sing or write or paint or dance is a society impoverished beyond imagination. The only mode of expression left is violence.
It must learn to train men and women alike to be able to think in corporate, cooperative terms. It must teach men and women alike to take ethics seriously and to judge all transactions with a view to fairness. It must help us realize the power of associative joy.
The only hope for America as a democratic society, the only hope for the West as a bastion of freedom, the only hope for the ideals of equality and personal dignity enduring as principles of government is for the empathetic ideas, the cooperative ideas, the inclusive ideas that draw us together with the noblest of intentions to displace the meaner spirited ones of the Reagan Revolution - the ones realized in the housing bust, the perpetual war in the mideast, the lawlessness of the executive, the endless trampling of Constitutional rights.
These are the ideals that women preferentially bring to the political arena. Not all women do so. Nor are the ideals absent from men. But women as a group tend to be just a little bit better here than men are as a group. If we focus like a laser on building up the importance of cooperative ideas, of creating members of society who understand not just how to gain advantages but also how to preserve the benefits of a deep and broad societal interconnectedness, we can rebuild a society in which the satisfactions for which feminism rightly aims are expressed more naturally and broadly within society.
If we promote values that women preferentially possess, we shall arrive at a political point where women naturally hold a large portion of the most important positions in government and commerce. Neither men nor women will think twice about gender or race; but only in terms of the right mix of personal characteristics and competencies for these positions. The ultimate goal of identity politics will be satisfied; and the solution will be one that is neither forced or unnatural. The solution will be robust, sustainable, pleasing. It will produce a world that we all can find more satisfying. It will make Hillary Clinton’s success both more durable and more ennobling.
Permalink
06.08.08
Posted in Rant and Rave, Snark and Snarkier, Politics at 9:53 pm by steve
The Secret Plan* to Portray Obama as a Pederast
I was sweeping the floors down at the neocon headquarters the other day when I overheard a few prominent neocons discuss a few dirty tricks that would make Nixon’s “dirty tricks” crew green with envy.
K: What do you think, is “Obama the Marxist” idea getting traction?
F: People are idiots. We tell them a hundred times that Obama is a Marxist and he will be a Marxist.
K: So where are we in that process?
G: Not far along. We need to swing about fifteen percent of the electorate and any movement so far is much less than the margin of error.
K: There’s lots of time before the election. Think we can reach the middle on this one?
G: We can certainly energize the base. We can swing a few of the aging “better dead than red” “yellow dog Democrats” in the South. We can give a lot of traditional Republicans second thoughts about abandoning their beloved GOP. They might go into the booth intending to vote for Obama but emerge having voted for McCain.
K: Whether they realize it or not. (All Laugh.)
G: We expect to count the vote this time around, too.
K: Okay, so the Marxist thing doesn’t completely solve the problem, it just stops the bleeding. What else do we have?
F: There is race. As I said before “I say Obama is a racist. And unless he can prove otherwise, he is one.”
K: Sound’s like children’s game of cooties.
F: That’s politics today, isn’t it, Bill?
K: But of course, you are right, Bill.
G: “I know it’s true, like all fundies:
God wrote it clearly on my undies.”
F: Don’t knock divine revelation; it takes whole peoples where reason dare not go.
K: Race is tricky ground, because if one appeals to race explicitly, the process backfires. But there are dozens of indirect approaches. The swiftboating approach is a good one. Produce fake associates who portray him as racist. Guilt by association is good, too. Portraying his preacher as anti-American was a great start.
F: Why not provoke a few of the more volatile black leaders. High visibility guys like Sharpton or Jackson tend to grate on the independent voter. There are even non-racist Democrats who find the demagoguery of these guys to be strongly distasteful. If guys like this could be broadcast saying outragiously racist things in a speech supporting Obama, we could turn half the white voters in America away from Obama.
G: It’s a thought. Obama would be in the difficult position of having to choose between distancing himself from men who are closest to his core supporters and allowing guilt by association to poison his candidacy. In one case he alienates his base. In the other case he is painted as a racist.
K: We have some good speechwriters who work for Democrats. Let’s see what we can do. If we can get the right connections, we’ll set up a media event.
F: What about the Islamist tag? I mean, he has an Islamic name.
G: Hussein, mother of all bad guys in the Mideast. And Osama, father of all bad guys in the Mideast. Son of a divorced white woman and a black foreigner. How does such an evil person even get to be a candidate? (Chuckles)
K: Pillory Hillary. Rush did most of the groundwork. But you wrote the book on it, Jonah.
G: It was a close call.
K: The Islamist tag seems to work pretty well with the poor white trash. It might make a difference in the heart of the Appalachians. But the real question is whether the independent voter can be persuaded that Barak Hussein Obama is actually an islamofascist. If he chooses Hillary, it will be easier. Even if he himself is not one, he associates with them. End of story.
G: But if he doesn’t choose Hillary?
K: It’s not clear to me that there is a lot to gain from this fight other than to energize the base.
G: But the Sharpton thing can be exploited here. Sharpton is viewed widely as also being antisemitic. So if one could provoke Sharpton to really alienate every Jewish person in America, one might swing a big chunk of the liberal Jewish vote.
K: We’ll work that into the racism project. It will be a good two-fer, racism and anti-semitism. What else?
G: That he is a crook, and a pederast.
K: Crook? What does that get you?
G: I see your point. Nobody gives a shit that Dubya broke the law. Over and over. Law means nothing. But sex: everyone understands sex.
F: You think you can get that to stick?
K: The idea is to sow seeds of doubt, then nail the issue at the last minute. On the issue of Marxism, we just keep repeating the same old stuff. We have dozens of footsoldiers; guys at think tanks, guys who mysteriously resigned from Congress, and so on. On the more scary issues we use more subtle tactics. Like starting the rumor that the guy denies being a pederast.
F: Ha, Ha, why would anyone deny being a pederast if they weren’t one? There simply would be no question.
G: But that’s just the start, right? The rumors of denials will just set up the mental frame for the big putsch.
K: We have radio talk-show hosts and guests who are perfect for the job. They will float the rumors for weeks; and the rumors will be persistently lambasted in the “liberal media.” This will keep the idea in circulation. Meanwhile, find someone who has a bone to pick with Obama personally, someone who has a twelve year old son. Pay them a few hundred thousand to claim that Obama solicited sexual favors from their son. Hold the press conference on Halloween to announce the charges. By the time the law-suits are settled and people understand what really happened, McCain will be out of office.
G: It’s a slam-dunk. I have to give you and your father credit, Bill. Over the last fifty years you have reduced public discourse to pure pablum and reduced the reasoning powers of the public to the sub-moronic level; their capacity for critical thinking is inferior to that of the nematode. Fifty years ago the kind of approach you advocate would have been unthinkable. Today it’s actually the most effective approach.
K: You give me too much credit, Johah. The American impulse to be motivated in political choices by material gains rather than by moral reasoning, and to be people of action rather than people of thought has always made them perfect candidates for this kind of treatment. It’s just an accident of history that we’re the first people in a long time to really capitalize on the gap. So long as Americans choose warriors and giants of commerce as heroes rather than philosophers, true moral leaders, and insightful men of science, our jobs will be easy.
G: I’ll tell you, this is the team to be on. There’s some serious thinking and long term planning going on. Thinking up dirty tricks is diabolically fun. It pays very well. And we never lose.
K: We never lose.
*The conversation is purely fictional. Any resemblance it might bear to persons, institutions, events, conversations orl dirty tricks - real, planned, or imagned by others - is purely coincidental.
Permalink
06.06.08
Posted in Policy, Politics at 11:14 pm by steve
I was in the middle of my first order of salsa from Amazon.com when I got the message “Http/1/1 Service Unavailable.” That was at roughly 11:45. As I write this at 3:14, the service is still down. By some measure, Amazon.com is the world’s largest retailer. Not in sales volume, but in terms of reach. No retailer offers more SKUs. Now, the fact that Amazon.com is down for three hours is not the end of the world. In fact, I may be the only person to notice it. If anyone else did, they would probably do what I am doing, feel a little put out and try again later. But what the service outage does suggest is that the internet, for all it does achieve, is built on technologies not immune to Murphy’s law. This particular failure is not a failure of the internet, but it is a failure of one of the world’s most prominent internet-only businesses.
It reminded me that big things fail. It reminded me of a perpetual worry I entertain, which is that we are not smart enough to manage the technological society we have created. It is not an opinion I have always had; but it is one that has gradually crept up on me. More and more, it seems to me, the world is becoming cheaper, more tawdry, and more prone to great breakdowns.
Before Chernobyl I had the sense that society in all its technological compexity might be sustainable. Sure, almost every important facet of production and distribution - if it was to be understood with any depth - required graduate study in some specialized field. But the educational system was pretty good at promoting competent people, and the number of highly skilled positions need not necessarily extend beyond the pool of qualified people.
Chernobyl marked the start of a change in my attitude that was reinforced by a move from Texas to New Jersey. When I considered the great accident at Chernobyl I understood that anyone who took an undergraduate heat transfer course and who knew what film boiling was would be smart enough to avoid the act that caused Chernobyl to blow up. In the US that would translate to tens of thousands of engineering students per year. When I studied heat transfer as a graduate student, I learned that most of the analytical solutions to difficult heat transfer problems were done by Russian workers. So to the extent that the development of analytical techniques to solve problems develops more robust understanding of the problems, the Russians were arguably in a better technical position. They arguably had a more qualified pool of people to choose from. And Chernobyl was one of Russia’s most expensive pieces of technological equipment. So they would put good people there. So how would one explain the accident? The accident was not caused so much by lack of personal talent as it was caused by lack of institutional wisdom.
One might argue that the meltdown at Chernobyl was caused by two big factors. One was that the Russians were not as obsessed with safety as are people in the West. Solzhenitzyn noted this obsession and thought it made westerners do silly things. We will, one day, argue that the West’s obsession with controlling everything to the point of denying death has hidden costs and that those costs we may one day not be able to afford. The argument is especially useful in considering health care costs. But this tendency to believe that everyone can cheat death does have its payoffs; one is that all nuclear reactors in the West have robust containment buildings that assume the kind of scenario that occurred at Chernobyl.
Another factor might be hubris. It may be something about the way people self-select for occupations. In the West, the engineer tends to be a cautious type of person. In the Soviet Union, technical people were better rewarded and tended to reach star status more regularly. So, perhaps, technical fields attracted a different kind of person. And the institutional pressures were more focussed on producing high-visibility success than they were on avoiding costly failures.
In any case, Chernobyl demonstrated Murphy’s Law, “If anything can go wrong it will.” And ever since that time I have had the creepy feeling that we are not smart enough to manage the technical world we have created. By smart enough I may not necessarily mean as individuals, I mean as a society. Individually, the Russian engineers were smarter than American ones. But somehow the incentives got rigged in a way that made smart people do stupid things. As Deming, the creator of modern day quality control put it “A broken system will defeat a really intelligent person every time.”
The examples of failures are many. And as a technical person, I find some of them astonishing.
At one point in time our household had DSL service through one of the free-world’s largest telecom companies. Each evening at roughly 6:00 the service would simply crash. You could not ping the name server. Multiple visits by tech support people took place. Everyone denied that what was happening could happen. Then they would see it happen. There were phone calls to vice presidents and high-powered tech support people. After some period of time it became clear that the problem had to do with the details of the way the database of IP adresses was updated at the company. Perhaps a hundred man-hours were expended in trying to resolve the problem. In the end everyone gave up. We switched to cable-modem service. It works despite the fact that even though contractors are paid to bury the wires twelve inches in the ground they can frequently be observed lying just beneath the mulch in the garden beds.
And then there is electrical service. Consider that moment a few years ago when the entire northeast went without power for a few days because of a computer switching glitch in a station outside Cleveland, OH. I was spared that outage; but for the previous six summers a bad transformer in my neighborhood took down power service during the dog days of summer for four to eight hours at a time. I would tell my wife “this never happened when I lived in Zambia. If I am going to live in a third world country, I want the cost of living to be lower than it is in New Jersey.”
What quality was it that made electrical service in a third-world nation more reliable than it is in New Jersey? Part of the answer might be that it actually wasn’t; my experiences in the two places may not be representative. But part of the answer is due to a shift in attitude. In the middle of the twentieth century the public assumption about utilities was that they be completely, 100% reliable. It was an attitude that the west projected even into third world nations. Reliable service was just part of doing business in the regulated utility era. Unreliable systems made rate increases impossible; and at the same time, guaranteed rates meant that some amount of redundancy could be built into the system. It certainly did increase the cost of generating and distributing electricity; but it did prove highly reliable.
In the post-Reagan era, by contrast, the reliability issue is not seen as a fixed constraint but as a simple business issue. If a utility outage causes a billion dollars in damages and takes the lives of two hundred people, but the companies involved can escape responsibility for the losses, then there is simply no financial reason to invest in upgrades to power distribution systems that improve or maintain any given level of reliability. Things break down at whatever frequency maximizes profit. Take the argument very far, and before long electrical service becomes something with rolling outages built into the design. One just starts hoping that one will have power for the few hours of the day one needs it most. But the issue of economics ensures that the power will always fail just after noon on all of the hottest days of summer and not be restored until midnight. It produces a nightmarish kind of existence; but it’s the kind that perfectly unconstrained free markets would deliver when they are free of any kind of responsibility to deliver service in a reliable way.
Fortunately, electrical power companies assume liability for some kinds of losses due to power outages; but not all kinds. When I worked in the solar power industry in Michigan, the process equipment that we used would go out of kilter if power went down for even half a second. It took several hours to set up again. We would lose half a day of production, minimum, with each outage. And every thunderstorm in summer had its associated outage. But the power company flatly denied that a power outage existed if the power was out for less than some period of time - ten minutes or an hour.
How many other things break down? Almost everything. I was in a hospital emergency room for a few hours not long ago. At the first station there were six beds and one head nurse. And in the ninety minutes between arriving and being transferred to another station when this one closed, the nurse got three material facts wrong relating to patients in her care. That’s a rate of about one fact in thirty minutes. Or about 4000 mistakes per working year. In this case it turns out that one mistake she corrected. Another mistake was corrected for her at the insistence of a patient. A third mistake had no bearing on the case at hand. But it is just a matter of time before this nurse makes a mistake that costs a life.
Most people in the medical field, fortunately, are somewhat less prone to mistakes; yet collectively, people make mistakes all the time in the medical profession. Medical mistakes are the single leading cause of death. If misdiagnosis is included as a kind of medical mistake, then medical mistakes are responsible for at least three deaths in eight in the US. It’s not because everyone is incompetent as the nurse in question. It is because the systems are not designed with the question of outcomes in mind. Dead patients still pay their medical bills.
With Amazon.com, the whole of the business depends on a reliable internet presence; so one can be assured that the company will do what it can to prevent the kinds of problems that cause the site to go down for three hours at a time. But incentives in other areas of activity are not so clear. The goal of good government policy is to rig the incentives so that businesses actually act in the best interests of their customers; for profit does not always motivate this kind of behavior. It certainly does not in health care. It does not necessarily do so in the case of utilities. It frequently does not in the case of monopolies and businesses with little competition. And as one learns in the second week of introductory microeconomics, in the case of oil and food, profit is maximized when there is not enough to go around. Sometimes things get broken by accident. Sometimes they are broken purposefully for business reasons.
Permalink
05.04.08
Posted in Policy, Politics at 2:10 pm by steve
Global warming, free trade, biofuels, water resource management, energy availability, and over-population. What do these factors have in common? They all affect the cost of grain around the world. Grain has been going up in price, more than doubling in price in one year.
The cause is a kind of perfect storm; a combination of many factors hitting the market at once. Unusually warm temperatures have caused significant drops in grain production in northern China, perhaps in other regions. Free trade has driven local farmers out of the market in many poor nations. It has also made two of the world’s most populous nations richer; and as a result the peoples of those nations wish to eat better. This generally involves eating foods that take more resources to produce. Biofuels efforts have drawn a huge amount of grain off the global market. Water resources - aquifers such as the Ogallala in the plains states - are being depleted. And oil prices are escalating. This raises the cost of mechanized production and it raises the cost of fertilizer made from petroleum ( i.e. most of the nitrogenous fertilizer used in agriculture. )
The Grain Shortage
The problem is so severe, so widespread that WaPo has run a whole series of articles on the issue.
The food price shock now roiling world markets is destabilizing governments, igniting street riots and threatening to send a new wave of hunger rippling through the world’s poorest nations. It is outpacing even the Soviet grain emergency of 1972-75, when world food prices rose 78 percent. By comparison, from the beginning of 2005 to early 2008, prices leapt 80 percent, according to the United Nations’ Food and Agriculture Organization. Much of the increase is being absorbed by middle men — distributors, processors, even governments — but consumers worldwide are still feeling the pinch.
The Economist dedicated a large portion of a recent issue to the crisis. Food crises are an almost perpetual souce of news. At any given point in time one can find a few parts of the world where food is scarce. The reasons usually have something to do with bad weather, war, or bad government policy. They almost always have something to do with poverty and overpopulation as well.
But this time it is different. It is a fundamental problem of there not being enough grain. We need to take it seriously. Changing distribution patterns will not solve the problem. In a kind of strict sense the free-marketeer is right. The free market left to its own devices will solve the problem. And if we simply do not care how many billions of people starve to death, and how much strife, death, and destruction this causes, then we may grant them this point. If, however, we care just a little, then we need to think about what can be done to alleviate the immediate problem and what can be done to move toward a durable solution.
To most Americans this is pretty much an abstraction because the cost of grain is such a small portion of our annual income that what grain costs, per se, doesn’t seem to have much impact on our standard of living. But the same is not true in almost any non-European nation.
Late last year, just as corn prices began to escalate there were protests in Mexico. The price of tortillas, a staple food in Mexico City had recently doubled. Since the tortilla is the cheapest source of calories in the Mexican diet, such a change hit hard. The government intervened to help stabilize prices, but many reasonable people worried that the action would, in fact, precipitate a more severe shortage.
Since then, much has happened. In Haiti, recently, the government collapsed under political pressure for its bad handling of food and agricultural policy. That hunger should hit Haiti early when food prices would rise is never a surprise because the nation is so densely populated that it perpetually lives at the very edge of disaster. (Jared Diamond in Collapse) But this fact does not make the human misery of starvation any less real.
The problems have hit many large nations. India and Egypt have banned the exportation of rice. South Korea, China, and Japan are bidding up food prices at an unprecedented pace. Violence has hit many nations (WaPo)
At least 14 countries have been racked by food-related violence. In Malaysia, Prime Minister Abdullah Ahmad Badawi is struggling for political survival after a March rebuke from voters furious over food prices. In Bangladesh, more than 20,000 factory workers protesting food prices rampaged through the streets two weeks ago, injuring at least 50 people.
and
The food price shock now roiling world markets is destabilizing governments, igniting street riots and threatening to send a new wave of hunger rippling through the world’s poorest nations. It is outpacing even the Soviet grain emergency of 1972-75, when world food prices rose 78 percent. By comparison, from the beginning of 2005 to early 2008, prices leapt 80 percent, according to the United Nations’ Food and Agriculture Organization. Much of the increase is being absorbed by middle men — distributors, processors, even governments — but consumers worldwide are still feeling the pinch.
This food crisis has a number of related causess. What is special about this crisis is that
- it is global.
- it is not a problem reasonably related to distribution.
- its causes are not special but general. Not temporary but enduring.
- the forces that caused the shortage are all going to get more severe, in the absence of serious intervention.
Global Warming
Global warming is arguably the smallest component of this particular instance of global food shortage. There have been some large areas in northern China where unseasonably warm weather has led to crop failures, but it would be hard to argue that a pattern of unusual climatological conditions caused crop failures on a kind of global scale. That said, gobal warming is likely to play an increasing role in agricultural problems. In a number of highly populated nations such as Vietnam, a very large portion of the arable land is within a foot or two of sea level. And if sea level rises by a foot in the next century - as it is likely to do - these fertile areas will be inundated. Huge swathes of fertile land that exist where major rivers such as the Mekong in Vietnam, the Mississippi in the USA, and the Yellow River in China will be inundated and rendered useless for the crops now grown there. Global warming did not cause this famine; but it might play a very big role in the future.
Biofuels
Recent changes in energy legislation have led to a significant amount of corn being used to create ethanol. Separate analyses by Patzek and Pimental suggest that it actually takes more petroleum to create a gallon equivalent of ethanol ( in terms of energy ) than is available in that ethanol. Other workers have suggested that there might be a slight gain; but whereas a viable primary source of energy at some point in the future mightl have a gain of ten to one or three to one, there is virtually no hope that ethanol from corn, under any scenario will reach two to one. Something like half is used up just separating the water from the ethanol. Something like a third is used up as nitrogenous fertilizer for to grow the corn. And we can quibble about the remaining sixth. But by any measure, it’s a bad idea to view ethanol production from corn as a primary source of fuel. It is not.
Dispite this argument, the US government has granted huge subsidies to businesses who would ferment corn starch and distill the resulting fluid into ethanol. According to the GAO more than a fifth of corn production is now used to make ethanol. It’s a number that has been growing sharply over the last three to five years. And it almost certainly accounts for a large part of the price increases in corn that have rocked the world economy.
Peak Oil
There is hardly a major developed field on record today that is not well past peak production. Russia was thought to be awash in oil just a few years ago but there seems to be evidence that production there is falling. It is off sharply in the North Sea. And the productive Caribbean wells of Pemex are down in production. Wells in the continental US peaked in the early seventies. And there is some question about whether the Saudi fields have as much oil as claimed; their claimed reserves fail to be reduced by the production of oil.
New fields are being found and developed, but it has been some time since the discovery of new oil reserves matched the rate at which oil is depleted from existing ones. This is not a sustainable game. And we are on the downward sloping edge of the curve. Presidents at oil majors have argued “it’s not that there isn’t enough oil; it’ s that there isn’t enough oil where we can safely develop fields.” So there is a question whether this would change if the geopolitics of central Asia and Africa were materially different. But it is more of an academic question than it is a practical one. Oil that one cannot extract doesn’t count; not until you can extract it.
This peak in production comes at a precise moment in history when the level of wealth in China and India is beginning to allow a significant portion of people to buy cars. So a dwindling supply occurs precisely when there is burgeoning demand.
Because the chief variable costs associated with growing grain are energy costs, most especially the cost off nitrogenous fertilizer, and because nitrogenous fertilizer is derived from natural gas, the price of oil and gas will play a powerful role in the price of grain by strongly affecting the price of production. Furthermore, if one can cheaply convert food to motor fuel, then there is an implicit tension between eating and operating mechanical equipment - driving, flying, mowing the lawn. The lower limit on the price of grain is determined by its value as a fuel.
A shortage of oil drives up the cost of oil and gas alike. It therefore drives up the production cost of grain, the tranportation cost of grain, and the value of grain as a biofuel. In the absence of biofuel conversion, rising oil prices simply drive up the cost of grain production. But with efficient biofuel conversion, the price of oil also sets a lower limit on the value of grain as a feedstock for ethanol.
With subsidized and inefficient biofuel conversion, the picture is even bleaker. You burn more oil in making ethanol than you gain in energy from the ethanol. The process means that you simultaneously have less energy and less food. They are both more expensive. You spend more money for food and fuel.
If one were a cynic and if one believed that the Bush or Cheney family or any of their political backers had any interests in oil or oil service companies and that these interests were driven up in value by a the spiralling price of oil, then one might imagine that the reason the US is rushing headlong into the grain-to-ethanol business is to create a shortage of oil and to drive up prices.
(It seems bizarre to me to argue this because had I not run the I’d be an avid supporter of biofuels. I’d like to believe that biofuels might one day be a significant sustainable source of energy. And I know that you have to start with a solution that is less than optimal. So I would normally expect myself to be supporting ethanol production from biomass. But the current policy situation is difficult to explain in any rational manner, )
Water Shortages
A material amount of the world’s grain is grown with some irrigation. And a significant portion of that depends on water in non-renewable aquifers or in aquifers that are being drawn down much faster than they are being replenished. Today, while there is water we are suffering from grain shortages. In a matter of a few short years or decades, major aquifers in the US, India, and China will be empty. And the amount of grain we now produce will no longer be possible. The amount of energy and expense required to move water from where it exists to where it is needed will be overwhelming. This bodes ill for future grain supplies. If we have hopes of doing this, we need some really cheap and ever-enduring source of energy. But we don’t
A recent article in The Futurist suggested that only 15 percent of the grain grown in the US depends on irrigation water from the rapidly depleting Ogallala aquifer. But it suggests that India and China may be in a less favorable position.
It sounds quite rosy for the US. The US will have a excess capacity in food production so long as it has an ample and secure energy supply. Efficient manufacturing nations such as China will need to import a large amount of food from the US. And they will be able to trade many goods for food. It sounds pretty promising, but a lot depends on whether the US can maintain its manufacturing base, support its currency, create a reliable and sustainable primary energy supply. If so, then the amount of grain the US would likely send abroad would likely not cause hunger pangs stateside. But if China succeeds in cornering the world’s supply of raw materials and if most manufacturing is done in the Orient, then the US will risk becoming a kind of peaon state.
Whatever happens at a national level, at an international level, the poor will be starving. That’s happening today. But if one cut world grain production by fifteen percent and if eating habits of the more economically successful nations did not materially change, it would mean many tens of millions might not be able to afford to eat. It will no longer be a question of distribution. it will be a question of production. There will be no easy solutions.
Free Trade
Free trade, in the long term, is supposed to guarantee that no economic good ever experiences shortages; the theory is that the price will go up, more will be produced, and viola, we’re back where we started. Except it doesn’t work for goods that actually have a finite supply; fertile land, fresh water, oil, stuff like that. Therefore it does not work for grain whose production capacity is limited by the availability of each of these limited resources.
The Economist recently ran a series of articles on the global food shortage. The editors of that newspaper pretended that nothing but market forces are required to stay a food shortage; but it is hard to buy that idea. It assumes that the reason there have been few food shortages in Western Europe and the US over the last several centuries is because of the marketplace alone. But it is not. It is because an efficient marketplaced operated in a space in which there was ample capacity to produce food. At some point in time it is almost inevitable that global population will be limited by food production. And at that point in history, a fair portion of the human population will have less to eat than they need. It will not be a question of more efficient markets. The physical stuff required to produce grain - fertile land, fresh water, energy and fertilizer will not be in sufficient supply to grow the amount of grain necessary to feed the whole human population.
How long it will be before we get to that point is a matter of some question. It may be a decade. It may be five decades. If there is another great, massive revolution in crop genetics it might be eight decades. If humans learn, in the intervening time period to farm the oceans it might be twenty decades. But already humans consume something like twenty percent of the energy that plants turn into sugar. And a good portion of that energy is required to mainain soil fertility. So we might just be able to double the amount of food we produce on land - assuming we can find the water and energy sources to do so.
For some short period of time the high price of grain will have a beneficial effect on small farmers who are land owners in nations like Mexico. Two years ago they were not able to produce corn at a cost competitive with the corn imported from the US. So they quit. Today that is not the case. So they can grow corn again and make a living at it. This will increase corn production a bit in the short term. Similarly, there was an interesting piece in the Economist that suggested that a recent government initiative of subsidizing fertilizer and seed corn succeeded more by accident than by virtue of being good policy. But measured in terms of whether it produced a lot of corn, it was a raving success. If Africa were to be stabilized, its food production capabilities would, no doubt, add some to the equation for a while. So long as high fertility rates persist, it will always be less than two generations of developmental stasis, or less, from catastrophic starvation.
So the free market will adjust to high grain prices by committing more land to grain production. And more labor. Economic theory says that this land will be poorer than the land now in production. It might, therefore, become exhausted earlier. In any case, once this minor adjustment is made, there is not much wiggle room. There is talk of bringing more acreage in the US under cultivation.
It may not be a bad idea. But it is true that committing land to corn production takes a toll on soil fertility. One may trade short term gains for longer term losses. To understand the issue, one would need to have a robust model of soil fertility, one that specified how much energy is required to sustain the soil flora that sustain economically important plants.
The Malthusian Crunch
Most of the food shortages since the start of the twentieth century have had distribution as a fundamental component. Current (then) agricutural practices were sufficient to produce enough food for everyone in the world. The problem was to transport the food to where it was needed. And to pay for that transportation. Under such conditions it is easy to argue that food supply is simply a matter of supply and demand. If the price of food went high enough in places where it was in short supply, the free market system would move food to that location. Problem solved.
Except, not really. Because in most places where the supply of food was short, there also existed little or no manufacturing. So the people who were starving had little to trade for food. In the case where there actually is an ample supply of a good, the free market sometimes fails to deliver that good where it is needed. That is an interesting problem. It suggests that the free market is good at allocating resources in a particular way, but sometimes the consequences of that are not desirable by certain important measures. Still, problem is fundamentally different from the problem we face right now.
The current problem is not fundamentally about distribution it is fundamentally about production. The problem we face now is that food is scarce on a global scale.
Westerners have been able to dodge the Malthusian crunch for five centuries thanks to the rapidly expanding western frontier. It was not until the late ninteenth century that the Dakotas were settled by Europeans. And it was well into the twentieth century that distribution became completely effective in drawing its bounties to urban markets effectively.
Mechanization, chemical fertilization, and irrigation all increased the productivity of these vast but otherwise marginal agricultural areas. irrigation and chemical fertilization expanded their productivite capacity in mid-century; and genetic manipulation did so later on. But the frontiers physical and intellectual that have brought us to this point in history have been pushed about as far as they can go.
If one looks at the fundamental biochemistry governing the way plants turn sunlight into sugars, one discovers that humans exploit a rather large portion of the available energy already. If I remember correctly, E. O. Wilson (in Consilience) estimates it at about twenty percent. This means that tinkering with genetics can only bring marginal improvements. To get the kind of bounteous excess that we enjoyed in the mid twentieth century, scientists would have to re-invent photosynthesis to be two or three or ten times as efficient without sacrificing anything else. Or we would have to learn how to cultivate crops in the parts of the ocean now barren of life. Marginal changes will mean that most of humanity is reduced to living on the margins - as has been the case for most of human history.
This food crunch rightly ought to warn us that it is not axiomatic that free markets alone have been responsible for the excesses in food production in the western world. It is at least in part due to a really big accident of history. This experience can warn us that all limited resources run out. And that rising prices do not always succeed in producing enough of the item in question.
Actions
So what should we do?
- Encourage wind and solar energy production in a durable, systemmatic way.
- Price water, oil, and coal at a level that more nearly reflects the value it creates for society, one that more nearly reflects its replacement price. Use the excess to encourage conservation and sustainables.
- Set up and fund free fertility control services around the world.
- If the political viability of such services is threatened by controversial issues, do what can be done first.
- Encourage every nation to create, fund, and sustain organizations that guarantee the welfare of its aged. There is almost a perfect corellation between this and low fertility rates.
- Create incentives to build desalinization plants for coastal California cities, Arizona cities, and Texas cities.
- Create business incentives and supports for businesses that turn America’s bountiful foodstuffs into high value-added food items.
- Provide minor incentives and/or supports to trading companies that trade high value added food and food derivatives overseas.
- Streamline the nuclear plant design and permitting process, creating a small family of related pre-approved designs as France has done.
- Build nuclear plants. The oil in Iraq has cost America between half a trillion and two trillion dollars. For that price we could have built enough nuclear power generation plants to generate the power extracted from oil we still do not have. And they would continue generating power long after the oil is used up.
- Reprocess the fuel
- Use waste heat from nuclear plants to distill ethanol from cellulosic biomass.
- Use cellulosic materials to make ethanol, do not use foodstocks
- Study soil fertility and understand how much food energy must be pumped back into the soil to sustain fertility. My guess is that it’s much more than we have assumed.
- Fund studies that demonstrate ways of nitrogenating soil effectively without the use of fertilizer derived from fuel
- Develop crops efficient at producing oils; vegetable oils need little refinement; and if waste heat from nuclar power is not to be used in alcohol distillation, this fact reduces the energy input of the fuel. It therefore substantially increases the gain by a huge margin. ( We note that if soybeans could be made efficient at producing both oil and soil nitrogen, they might be a very valuable crop… )
- Fund fusion research and development seriously.
- Fix healthcare so that it works better and uses less money. The current system is killing the US economy.
- Teach civics. People who are can think critically about the ethics of greed are less likely to be caught by its traps and to starve in them
If we do all of these things promptly, and if we do all of these things well, then there is some hope that we might stay ahead of the Malthusian limit for a few decades.
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04.02.08
Posted in News Commentary, Politics at 5:41 am by steve
There is an old saying variously attributed to Eleanor Roosevelt, Winston Churchill and Arabic mythology:
Third rate people talk about people.
Second rate people talk about events.
First rate people talk about ideas.
We wonder if the concept cannot be extended to the speech of political candidates. I think it also happens to be true of political reporters.
Third rate candidates talk about events.
Second rate candidates talk about issues.
First rate candidates talk about principles.
Think of Lincoln’s Gettysburg address. It was an address about an event, yet it made only a passing reference to the event. None of the battles or generals were mentioned, not even Gettysburg. Lincoln eschews talk about slavery as well. The speech is not about issues. Rather, Lincoln appeals to the noble principles upon which the nation was founded. He links the events and the issues to this set of noble principles. And the language he uses is terse, precise, memorable, compelling, ennobling. In remembering it we are made better. This is the stuff of good political discourse.
Aside from this example, there are several reasons to believe that speaking in terms of principles is desirable.
At one level we believe that intelligence is a desirable quality in a candidate. One important sign of intelligence is the ability to deal with abstractions. We note that issues tend to be abstractions about events. And principles tend to be abstractions about issues. Candidates who are capable only of talking about events, we have reason to believe, are probably not terribly bright. If a candidate only talks about issues it may be that they are incapable of fitting arguments about issues into a principled framework. Or it could mean that they don’t have a principled framework. The former is a sign of inadequate intelligence. The latter is a sign of a habit of expediency, laxity, sloppy thinking, or compromised principles.
The ability to speak articulately about principles and their relationships to issues and evvents is a clear sign of two forms of intelligence - the ability to make good distinctions and the ability to synthesize disparate facts into meaningful frameworks of knowledge.
The skill also confers a persuasive advantage. Politicians have who speak articulately in terms of principles frequently can get some broad agreement on a lofty principle long before they might be able to can get agreement on the policy details of an issue. And it is frequently true that when one gets agreement on principles, a good policy is easier to hammer out.
One of the great problems Hillary has had in her political carreer is that she has thought much more carefully about how to fix problems than she has about how to lead people toward a reasonable answer. She gets stuck in the details. She does not get early agreement on principles.
Her proposition for a single-payer health plan was among the most timely and important issues that faced Congress in 1992. Had it passed, it would have been seen decades later as Clinton’s most profound political contribution. Had it passed, a significatn number of the problems the US healthcare system now faces would be less severe. Her failure was not in getting the right plan. Her failure was in getting other people to buy into it.
Instead of going about Congress getting people to buy into a set of governing principles and getting thoughtful people with access to the press to advocate for those governing principles, she attempted to sell a fully formed plan. The surprise is not that she failed. The surprise is that she came so close to success using methods doomed to failure. While it was true that Hillary wowed Congress with her command of the facts and with the compelling logic of her arguments, opponents exploited fear and greed and turned the public against the plan.
But, I think, this need not have happened if Hillary had made the case for a set of principles. For instance, that the US should not rank after Cuba in infant mortality. It’s not even a first world ranking. Which politician is going to argue “No, no, America cannot afford to be as good as Cuba at protecting the health of the unborn and newlyborn?” This statistic, by the way is a metric of how access is severely limited for a substantial population of the poor. When they get very sick, they go to the emergency room where they are treated for five, ten or a hundred times what it would cost had they been given the right preventative care. The cost of treatment is higher and the outcomes are less favorable. So one might argue we need solutions that simultaneously achieve better outcomes, and ultimately cost less. Well, giving the right kind of free care to the indigent would absolutely achieve this end. For the fact that the indigent do not pay for emergency care does not mean that we do not.
I recently read a piece entitled “When Obama Channels Reagan.” It was actually about Obama invoking Reagan, but it got me thinking. Reagan was pretty good at talking about principles. He was good at getting agreement on those principles. Now it is my own opinion that a significant number of the principles that he sold were cheap, tawdry, and ignoble. Many were swindles and cheats, lies and deceptions, frauds and fictions. But that’s not the point. The point is his persuasive methods were effective. And it happened that I had just been thinking today that Obama does, in fact, share some of Reagan’s ability to talk about principles and to get us all to agree on them.
Obama is skilled at finding common ground and starting a discussion about change from that point. This is a powerfully effective technique. It is a technique that has some hope of swaying people who may not already agree with you. It is a technique in which Hillary displays not quite so much skill as Obama. Nor, I think, does Hillary show quite so much skill at it as McCain. For this reason, I think that Obama has a better chance in November against McCain. I will disagree with some of his policies; but I do believe that if he succeeds in advocating for a set of nobler principles to supplant the bankrupt ones of the Reagan legacy, the US and the world will be a better place for it.
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