Two great sentences from yesterday's Times

From Elizabeth Bumiller's article about McCain:

'I am again deeply disappointed that Senator Obama would not recognize the fact that the surge has succeeded', Mr McCain said in typical, now-daily comments before the refrigerated case of shredded cheese in Bethlehem, Pa.

I know she means the "now-daily" to apply to the comments alone, but the image of McCain returning daily to the shredded cheese case in Bethlehem to whine about Obama is priceless.

Then, from an article about the oil spill in the Mississippi near New Orleans, a LtCmdr in the Coast Guard is quoted on the oil:

this is a heavy, nasty product, problematic in the cleanup.

It won't be difficult to clean up, it will be "problematic in the cleanup!" I love it: The Bureaucratic Sublime.

Come to think of it, McC seems to me lately a nasty product, problematic in the sense-making.

Could Afghanistan become Obama's Vietnam?

Over on economists view, "anne" has been vigorously denouncing Obama's speeches about Afghanistan and Pakistan, and indeed it was a centerpiece of his dramatic speech in Berlin yesterday. Of course he has been able to effectively beat Bush and McCain over the head with how going into Iraq let the US not catch bin Laden and mess things up in Afghanistan, and clearly it is good electoral politics in the US now to take a hawkish position on Afghanistan/Pakistan. The question is whether it will prove to be such a good idea to follow through on all this hawkish talk if he does get elected (which is far from obvious, given that polls have actually been moving towards McCain in this week when Obama has had it about as good as it gets, while McCain has bungling around all over the Sausage Haus of Columbus, Ohio).

After all, as "anne" points out, it was Democratic presidents, Kennedy and then Johnson, who really got us deep into Vietnam, pushed by a pressure not to appear "weak on Communism." If he gets in Obama will certainly be feeling such pressure about being the "War on Terror," which most of us know is a bad misnomer, especially if he does follow through on seriously removing troops from Iraq. Maybe things will go well in Afghanistan/Pakistan, but there are plenty of reasons to be worried, especially about the Pakistan part, where the central government does not want us going in unilaterally, but clearly where the guys we most want to get are hanging out. While Karzai wants us in Afghanistan, the situation there seems to have been gradually deteriorating, and it is far from clear that increasing US (or European) troop presence there will help more than it will hurt by alienating the local population, as happened in Iraq before (and Vietnam longer ago). Overly ambitious promises and an unresolvable situation on the ground could indeed sour an Obama presidency, making those countries his Vietnam. Let us hope not.

California Budget Crisis

California has a deficit estimated at $15 billion. The state is legally bound to balance its budget, but it never does so by resorting to various gimmicks.

California requires a supermajority to approve any budget. Republicans have said they will not accept any budget that involves tax increases and they have enough votes to block any budget. Arnold has suggested raising money by selling the rights to future lottery money, but that is far from sufficient.

His latest ploy is to demand that the state pay workers the minimum wage so long until a budget is passed. As a student of supply-side economics, I know that the best way to get out of a recession is to ruthlessly cut government spending. Business will be so impressed that it will invest even though he cannot afford to buy anything.

If that does not work, Arnold probably have some friends in special effects who could do the trick.

It's NOT international trade. Don't be fooled.

Many people around the world understand that our modern era of globalisation is one in which international trade is between countries. We also tend to believe that such trade involves the indisputable benefit of greater freedom to engage in the act of purchasing and of selling goods and services between peoples of different nations. For example, Tom Palmer from the Cato Institute questions the understanding of people who are unhappy with this vast expanse of trade by asking “Should American wheat farmers be allowed to buy cell phones from people in Finland? Should Ghanian weavers be allowed to sell the shirts and pants they make to German autoworkers?”.[1]

The reality of international commerce paints a vastly different picture, however. Giant multinational corporations dominate the area of international exchange and a very large share of world ‘trade’ is actually between branches of these same corporations. In North America trade associated with U.S. parent multinationals or their foreign affiliates accounted for 54 percent of U.S. exports of goods and 36 percent of imports.[2] Forty percent of trade between the US and Canada in 1998 was intra-corporate.[3]. “Forty percent of the US-Europe trade is between parent firms and their affiliates, and in respect of Japan and Europe, it is 55 per cent; with regard to US-Japan trade, it is 80 %.”[4]


This intra-corporate form of trade appears to be increasing at a rapid rate. In 2005 “U.S. imports between U.S. MNCs and others increased 13.5 percent, and imports between U.S. parents and foreign affiliates increased 8.6 percent.”[5]

John Ralston Saul highlights this new phenomenon in his book ‘The Collapse of Globalism’. He asks why such an “astonishing and continuous expansion in trade [does] not produce broad economic growth, spread wealth and reduce unemployment”[6] There is good reason for alarm. The form of economic growth experienced today is associated with rising productivity rather than increased employment. Real wages have dropped for workers and sources of taxation revenue for one government after another have declined to a point where regressive taxations regimes have now been imposed on domestic populations and public services have been cut back significantly.

Saul also asks whether the trade between subsidiaries of the same transnational corporations should be counted as trade at all. Then he goes on and adds a few other important queries. Does intra-corporate trade actually have the effect of trade? Why are profits rarely made at each stage of movement? Saul then asserts that these large firms actually intend to create losses in order to avoid taxation; this form of international commerce – unrelated to market competition - makes it possible.

Giant corporations produce goods in countries where governments provide cheap labour and lax (or non-existent) environmental regulations. That’s how they make goods where their constituent parts are put together at the lowest possible cost and then sold as a final product at the highest possible price somewhere else. If we add ‘transfer pricing’ to that strategy[7] and throw in escalating concentration of industry through mergers and acquisitions; well, what have we? I think we have a recipe for global economic meltdown!

1 'Globalization is Grrrreat!' by Tom G Palmer, Senior Fellow, Cato Institute. Cato's Letter - a quarterly message on liberty
Fall 2002, Volume 1 - Number 2

2 United States Bureau of Economic Analysis (USBEA) . As quoted from the ‘Monthly Trade Bulletin’ Volume 3 Number 10

3 United States Bureau of Economic Analysis (USBEA) . As quoted from the Trade Bulletin’ Volume 3 Number 10‘Monthly

4 General Concept of Transfer Pricing
By: Khurram Khan. [t-price.pdf]

5 United States Bureau of Economic Analysis (USBEA) . As quoted from the Trade Bulletin’ Volume 3 Number 10‘Monthly

6 ‘The Collapse of Globalism – and the reinvention of the word’ by John Ralston Saul. Viking Press, published 2005. Page 142.

7 where multinational corporations arbitrarily set unrealistic prices in transactions between parent and affiliates in order to reduce taxes and tariffs, avoid exchange controls and optimize profits.

Al Gore for Vice President of the United States!

I think I have posted this sentiment before, but what the heck. If you don't keep repeating something you are for, people forget it. Anyway, occasionally one reads of mentions that Gore is under consideration, but mostly a bunch of others like Hillary or Edwards or Kathleen Sebelius (and Webb and Strickland before they withdrew themselves) get debated. Whenever I mention Gore to people they seem to frown and view it as somehow unacceptable, getting responses like "what does he bring?" Last I checked the only other candidate who may actually help Obama anywhere (Ohio and Michigan maybe, and the Carolinas) is Edwards, who might be my second pick (heck I was for him for president before he dropped out). But Gore is supported by everybody in the party and might help bring in Florida. There is no question he is experienced and his appearance at the Netroots convention was a big hit by most accounts.

The really big fly in the ointment is that he probably does not want to do it. But, I have not heard any absolute denials out of him. Sure, he did not run for president. But that would have entailed going up against the Clinton machine, which we have seen is a pretty unpleasant thing to do. Running as VP with Obama looks a lot easier. And, it would show serious leadership ability if Obama could talk him into it. Heck, who is there out there that is better than Gore? I cannot name one, not even Edwards. Al Gore for Vice President!!!

35-HOUR WEEK SCRAPPED, NOT

by the Sandwichman

Evidence of the insane prejudice against shorter work time in the Anglo-American media, headlines proclaim, (triumphantly, it appears):

"France ends 35-hour work week"
"France Scraps 35 Hour Week"
"35-hour week scrapped"
But...

Only when one reads the articles, one learns that the law has been "eased" not repealed, President Sarkozy "has been careful not to do away with the popular 35-hour working week completely" and in big companies, "no-one wants to renegotiate the 35 hours and reopen Pandora's Box."

EGAD, DEVEREUX

by the Sandwichman

It was a dark and stormy night... The Sandwichman has dug up the following charming vignette from a novel by Edward Bulwer-Lytton, author of the infamously cliched (and unfairly maligned?) first line, "It was a dark and stormy night...,"

On entering the Piazza, in which, as I am writing for the next century,
it may be necessary to say that Punch held his court, we saw a tall,
thin fellow, loitering under the columns, and exhibiting a countenance
of the most ludicrous discontent. There was an insolent arrogance about
Tarleton's good-nature, which always led him to consult the whim of the
moment at the expense of every other consideration, especially if the
whim referred to a member of the canaille whom my aristocratic friend
esteemed as a base part of the exclusive and despotic property of
gentlemen.

"Egad, Devereux," said he, "do you see that fellow? he has the audacity
to affect spleen. Faith, I thought melancholy was the distinguishing
patent of nobility: we will smoke him." And advancing towards the man
of gloom, Tarleton touched him with the end of his cane. The man
started and turned round. "Pray, sirrah," said Tarleton, coldly, "pray
who the devil are you that you presume to look discontented?"

"Why, Sir," said the man, good-humouredly enough, "I have some right to
be angry."

"I doubt it, my friend," said Tarleton. "What is your complaint? a rise
in the price of tripe, or a drinking wife? Those, I take it, are the
sole misfortunes incidental to your condition."

"If that be the case," said I, observing a cloud on our new friend's
brow, "shall we heal thy sufferings? Tell us thy complaints, and we
will prescribe thee a silver specific; there is a sample of our skill."

"Thank you humbly, gentlemen," said the man, pocketing the money, and
clearing his countenance; "and seriously, mine is an uncommonly hard
case. I was, till within the last few weeks, the under-sexton of St.
Paul's, Covent Garden, and my duty was that of ringing the bells for
daily prayers but a man of Belial came hitherwards, set up a
puppet-show, and, timing the hours of his exhibition with a wicked
sagacity, made the bell I rang for church serve as a summons to
Punch,--so, gentlemen, that whenever your humble servant began to pull
for the Lord, his perverted congregation began to flock to the devil;
and, instead of being an instrument for saving souls, I was made the
innocent means of destroying them. Oh, gentlemen, it was a shocking
thing to tug away at the rope till the sweat ran down one, for four
shillings a week; and to see all the time that one was thinning one's
own congregation and emptying one's own pockets!"

"It was indeed a lamentable dilemma; and what did you, Mr. Sexton?"

"Do, Sir? why, I could not stifle my conscience, and I left my place.
Ever since then, Sir, I have stationed myself in the Piazza, to warn my
poor, deluded fellow-creatures of their error, and to assure them that
when the bell of St. Paul's rings, it rings for prayers, and not for
puppet-shows, and--Lord help us, there it goes at this very moment; and
look, look, gentlemen, how the wigs and hoods are crowding to the
motion* instead of the minister."

* An antiquated word in use for puppet-shows.

"Ha! ha! ha!" cried Tarleton, "Mr. Powell is not the first man who has
wrested things holy to serve a carnal purpose, and made use of church
bells in order to ring money to the wide pouch of the church's enemies.
Hark ye, my friend, follow my advice, and turn preacher yourself; mount
a cart opposite to the motion, and I'll wager a trifle that the crowd
forsake the theatrical mountebank in favour of the religious one; for
the more sacred the thing played upon, the more certain is the game."

"Body of me, gentlemen," cried the ex-sexton, "I'll follow your advice."

"Do so, man, and never presume to look doleful again; leave dulness to
your superiors."

And with this advice, and an additional compensation for his confidence,
we left the innocent assistant of Mr. Powell, and marched into the
puppet-show, by the sound of the very bells the perversion of which the
good sexton had so pathetically lamented.

THIS CRIME CALLED BLASPHEMY

by the Sandwichman,

"This crime called blasphemy was invented by priests for the purpose of defending doctrines not able to take care of themselves." - Robert Green Ingersoll.

"To compel an employer to hire men for only eight hours and to compel the employe [sic] to work no longer than eight hours is certainly un-American." - David McLean Parry.

Consider a single individual with a utility function U (y, ℓ ) where y is income and ℓ is leisure. Both y and ℓ are 'goods', i.e. the consumer prefers more of each.

Suppose this person has non-labor income of G, and can work as many hours, h, as she wishes at a wage of w per hour. Total time available for the only two possible activities, work (h) and leisure (ℓ) is T.

If she allocates her time between work and leisure to maximize her utility, what can we say about her decisions, and about how these decisions will respond to changes in the exogenous parameters, w and G?

Three questions:

1. In what sense can w and G be said to be "exogenous"?

2. Defend the proposition that an individual "can work as many hours as she wishes at a wage of w per hour."

3. In what way does the supposition of the static labor supply model that individuals are free to work as many (or few) hours as they wish differ from the Parry doctrine that regulation of the hours of work by law is "un-American"?

To assume that wages are "exogenous" to the number of hours worked is to assume either that there is no effect on productivity from variation in hours or that there is no effect on wages from variation in productivity. Those assumption are not mere convenient simplifications but rather egregiously violate core principles of marginalist analysis.

"Suppose that supply has no effect on price and that price has no effect on demand." What kind of "economic model" could one construct based on that statement? That is the level of incoherence exhibited by the static labor supply model.

The blasphemy committed by advocates of shorter working time is not -- as claimed by economists -- an assumption that there is a fixed amount of work to be done regardless of the cost of labor. The blasphemous assumption of shorter work time advocates is that individuals are not free to work as many or as few hours as they wish at a given wage. Their crime is thus not committing a fallacy but refusing to be conned by one.

Here is the second chapter of my new book

Second Chapter of "The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers" (doc)

New Interview with Bob McChesney on The Confiscation of American Prosperity

http://will.uiuc.edu/media/mediamatters080720.mp3

We're going to sit at the Welcome Horizon one of these days, Hallelujah!

Bush can't seem to get the SOFA he wants from Maliki. Heck, there's an IKEA right down 95 in Virginia - maybe he ought to go there. Maliki offers to throw in a Table, but Bush wants an Horizon instead. How many people does he imagine want to have dinner with him? Sheesh!

The End of the Axis of Evil?

President Bush has now sent the Undersecretary of State to meet with Iranian nuclear in multi-party negotiations without Iran meeting the demanded conditions. A deal has been cut with North Korea regarding its nuclear program, in effect returning more or less to something similar to the deal Clinton cut that Bush abjured a few months after he got into office (except that now the North Koreans have actually tested nuclear weapons). And he has been reported to have acceded, sort of, to the demand of Iraqi PM al-Maliki to some sort of "time horizon" for the withdrawal of US troops from Iraq as part of Status of Forces Agreement. Many consider this to be a triumph of Condoleeza Rice over Dick Cheney in the waning days of the Bush administration as Bush becomes desperate to have some kind of historical legacy in the face of his continuing decline in the polls. It looks like the end of the Axis of Evil as the major focus of his foreign policy, as various hardliners complain.

It was always my view that Bush's invocation of the "Axis of Evil" was his bid to be the next Ronald Reagan, who had his "Empire of Evil" speech, rather than being a "wimp" like his dad, as Cheney kept whispering in his ear while pushing the invasion of Iraq and the dumping of the Clinton Korea policy. The change in the Korea policy was predicated on a similar outcome that Reagan was advertised as having gotten, a collapse of the North Korean regime like how the Soviet regime collapsed (although that happened during the presidency of Bush, Sr., and Reagan spent his whole second term being friendly with the perestroika leader, Gorbachev, who would make the moves that would lead to that outcome). But, the North Korean regime tested a bomb rather than collapsing, the Iranian regime (which had helped us against the Taliban in Afghanistan prior to Bush's speech) was strengthened by our overthrow of Saddam Hussein and got a much more anti-US leadership in reaction to our casting them as part of the "Axis of Evil," and the disasters in Iraq have been too numerous to bother listing, even though we are now at a point where Bush could declare "victory" (Saddam gone and a semi-stable, semi-democratic regime in place) and bring our troops home. Maybe Bush is finally almost growing up now that his presidency is nearly finished?

Public corporations disguised as private enterprise

The premise put to global citizens is that corporations are purely private entities serving private ends and that the Western economies operate on the principle of the ‘free market’ which is an ideology that supports the economic system of capitalism. ‘The market’ is sacred in a society that operates under such a paradigm, therefore government and citizens have been prohibited from intervening in the workings of it.

We are told, on the other hand, that the ‘public’ realms of our society consist of such things as ‘government’ and ‘democracy’. (Albeit I am concentrating on the very limited ‘public’ areas that get the major media focus today).

‘Government is put forward as an essential evil; as a bureaucracy that must function in order to acquire the taxes necessary to perform its various functions such as to regulate industry (only when it is absolutely essential), to build public roads and bridges and to provide crucial social infrastructure and services such as ‘defense’ and basic education services.

The other public realm I mention, ‘democracy’, has several critical elements, the most essential being IMHO ‘the active participation of the people, as citizens, in politics and civic life.” [1]

But what happens when these two critical ‘public’ realms – government and democracy - are taken over by a relative handful of ‘private’ corporations operating in the ‘free market’?

This is a big subject and again for the benefit of practicalities I limit this discussion to a tiny area of exploration.

How can Governments collect sufficient taxes, for example, to fund essential services and infrastructure? Large corporations now control the majority of the nation’s economic output [2] and can evade taxes very easily? “In 2002 half of the world's 500 billionaires and a third of the 27 million millionaires call[ed] the USA their home. They own controlling interests in most of the large corporations that dominate the economy.” [ 3] Today, the trans-national nature of big business mean that these organisations can engage in tactics such as ‘transfer pricing’ [4] “Transfer pricing is probably the single most important reason that so many major corporations pay little or no federal income tax.” [5]

How can the public asset of democracy work in a society where citizens can no longer participate in the mass media? In 2004 the major American broadcast networks - ABC, CBS, NBC, and Fox - owned fully or partially nearly 80 percent of the new series they aired. This created a ‘market’ environment where most of the independent media businesses were either swallowed up by one of the big media companies “or driven out of business altogether.” [6] The creation and dissemination of news follows a propaganda model according to Noam Chomsky in his book entitled ‘Manufacturing Consent’. Information is filtered in a way that serves the information to the needs of the powerful. [7]

In the last decade the emergence of the Internet has resulted in the only opportunity ordinary citizens have had to be published and thus sidetrack the filters imposed by ‘private’ media corporations. Fortunately, ‘net neutrality’ has reigned up till now. ‘Net neutrality’ “is the principle that you should be able to access whatever web content or services you choose, without any interference from your Internet service provider. However, no law or rule protects citizens facing obstacles to getting access to the information on the Internet.” [8] The Communications Opportunity, Promotion, and Enhancement Act of 2006 (COPE bill) “would make it impossible for those protections to be written into law or rule, making all of us vulnerable to big companies who would like to "own" the Internet and mine it for profit. Some companies like Verizon and Comcast have already announced plans to create a two-tiered Internet, where some websites and services would travel in the "fast lane" - for a fee, of course - and the rest would be relegated to a "slow lane."” [9]. This is likely to be the beginning of a host of changes aimed at limiting the free flow of information and discussion on the Internet.

Clearly, if people around the globe are to benefit from areas of public good then those arenas must be specifically defined and separated once and for all from an unfettered market. If we fail to do this we will end up with a ‘private’ rather than a ‘public’ government and live in a society that is completely organized on the basis of private profit for a tiny few; with devastating consequences. That’s if we don’t already.

I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country…
corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.

Abraham Lincoln. November 21, 1864 in a letter to Colonel William F. Elkins

[1] Lecture at Hilla University for Humanistic Studies
January 21, 2004

[2] Charles Derber wrote in his book ‘Corporation Nation – How corporations are taking over our lives and what we can do about it’ (ISBN 0–312-25461-X, 1998 page 90,) that “the myth of small business as the backbone of the American economy has not been true for fifty years.”

[3] Facts on the US Economic Empire
by etra Jaimers. Eat the State. Volume 7, #3 October 9, 2002

[4] Transfer pricing is the understatement of a corporation’s income through the overstatement of its costs by way of that corporation charging itself inflated prices for goods from one of its own international subsidiaries to another.

[5] Global Shell Games - tax evasion by multinational corporations - Statistical Data Included
Byron L. Dorgan. July 2000. Washington Monthly.

[6] My Beef With Big Media
How government protects big media--and shuts out upstarts like me.
By Ted Turner. July/August 2004

[7] Manufacturing Consent - A Propaganda Model - excerpted from the book
Manufacturing Consent by Edward S. Herman and Noam Chomsky. Pantheon Books, 1988

[8] Communications Opportunity, Promotion, and Enhancement Act of 2006

[9] Communications Opportunity, Promotion, and Enhancement Act of 2006

Means Testing Medicare

Tyler Cowen is my favorite conservative. Sometimes I actually agree with -- not very much, but sometimes I do. Today in his New York Times article he advocates means testing for Medicare. He acknowledges the possibility that means testing will make Medicare a welfare program, causing it to lose support -- but he suggests that things are so dire we do not have another choice he does not seem to take seriously Mark Thoma's suggestion that single-payer could create substantial cost savings.

I am not sure how big a threat Medicare really is. Any sane political system would find massive savings in the defense budget, but sanity is a scarce commodity. Taxes on the very rich and taxes on purely speculative activities could go a long way to supplement Medicare. Unfortunately, such policies will not be discussed outside of third-party politics.

A Different Kind of College?

The New York Times has a fascinating article about Berea College, a school that has no tuition, but expects students to work 10 hours a week. The school has a healthy endowment of $1 billion, but seems to use it for supporting education rather than fancy buildings.

I never heard of the college before last year when I saw a flyer on the Internet for small summer program to study imperialism and then spent time with families in Mexico. One of my students got accepted and was enthusiastic about the program, but I have never thought to inquire about the college.

I assume that without tuition at the college lacks the bloated bureaucracy that characterizes most higher education today. The article might just be excessive hype, I hope that is not the case.