Month: October 2011

One of the recurring subthemes in the news lately has been the need for China to develop a consumer economy.  The latest to exhort the Chinese and their consumers about their frugal ways is The New York Times in a front-page article earlier this week titled “As Its Economy Sprints Ahead, China’s People Are Left Behind.”

The argument in the story is familiar: The policy of the Chinese government to keep interest rates low to consumers and feed Chinese industry with cheap state loans has sent Chinese inflation higher than what the average consumer can earn in a bank account. The result is a population that hoards money instead of spending it on raising their standard of living or quality of life. The couple whom the article features saves two-thirds of its income.  The article never points out that the United States faces the same problem of bank interest being less than inflation.

The article then asserts that to keep its economy growing, the Chinese must develop policies that encourage their consumers to spend more of what they make. It warns that if the Chinese consumer doesn’t get off its duff and start buying things then China will go the way of Japan, which has only the third largest economy in the world.  

The underlying premise of the article is that without growth, an economy must suffer.  It’s the basis of most economic text books and all economic planning in the United States.  It’s taken for granted in virtually every political debate and news story. No politician ever leaves economic growth out when talking about his or her plans. Even thoughtful progressive economists such as Paul Krugman often advocate policies based on the idea that the only strong economy is a growing economy.

But in a world of rapid climate change and diminishing resources, continued growth based on fossil fuels will lead to an ecological disaster for the human race.   As a species and as individual nations, we have to learn to manage economies that do not have to grow to thrive. 

While the makers of waffle irons, video games and golf clubs might not be as happy, wouldn’t the world be better off in the long run if the Chinese people maintain their frugal ways, which stem as much from ancient traditions as they do from active government policy?

Isn’t it possible that the Chinese government has peered realistically into the cold hard facts of the looming ecological disaster, instead of swerving away in disbelief as Americans seem to be doing.  After all, the Chinese currently invest far more money into alternative energy like wind and solar each year than any other country. China tried with some success to curb population growth for years by implementing a one-child policy. Throughout the ages, population growth has been the primary but not sole instigator of economic growth.

There is also no doubt that the Chinese are doing their share of polluting, but they spoil the air, land and sea less per capita than we do in the United States.  If the consumer remains frugal, the Chinese carbon footprint could stay fairly small, and get smaller as the country transitions to alternative energy and makes its industrial processes more environmentally friendly.

I hope that the Chinese government eventually rewards small savers for their service to the country’s growth spurt by raising interest rates on savings deposits.  But other than that, I see very little wrong with the current Chinese economic policies.  Chinese politics, internal security and free speech issues—now that’s a different story. 

Our trip to France ended on a dyspeptic note in its very last phase. After enjoying the comforts of French culture, cuisine and superb organizational skills for 16 days, we stepped into the paranoid world of the U.S. Department of Homeland Security (DHS).

We had cleared our passports at the passport control point and our luggage had cleared customs. We were quickly rolling our bags towards the exit when we ran into another line: We had to go through the entire security process once again, emptying our pockets, taking off our shoes, displaying the laptop, passing our bodies through a zone of light radiation and finally putting ourselves back together. When I say we, I mean every traveler on the plane.

Meanwhile, our suitcases chugged through an X-ray machine and into the bowels of the Pittsburgh International Airport’s state-of-the-1992-art luggage transport system. We were told we would find our suitcases in the L section of the baggage claim area. This re-security operation took the efforts of six people.

Now in what way is the United States safer because DHS wasted everyone’s time and spent all that money redoing what the French had already done? Hadn’t the French X-rayed our luggage, given us an extensive oral questionnaire, put us through the security process and checked our passports on eight separate occasions? French security even searched the Delta airline representative who led us on the bus from the gate to the aircraft. Then upon landing, U.S. personnel checked our passports and our luggage.

Why this extra layer? Does DHS think that people have access to their luggage while in flight? Or that a flight attendant sold someone something dangerous or useful to a terrorist attack that he found in the in-flight catalogue? 

It was impossible for any passenger to acquire or store anything that could be construed as dangerous. The French do as good a job as we do, if not better, in managing security at airports. The rescreening is a total waste of money. As far as my experience and research shows, this recheck of security doesn’t happen anywhere else in the industrialized West.

The federal government would be better off ending these senseless additional screenings and reallocating these wasted funds to creating productive jobs, not “make busy” work.

The Occupy Wall Street movement got a big boost this week when organized labor decided to get involved.  Members of several New York unions came out to Wednesday’s demonstrations and national unions expressed their support. 

The intervention of the AFL/CIO means more than just more people protesting and more people getting arrested.  The unions bring two great strengths to the Occupy Wall Street movement:

• Their ability to organize, which could help sustain the protest for many weeks and months.
• The fact that they have an action plan for changing the country’s direction, something that Occupy Wall Street doesn’t yet have.

The movement is also picking up steam in the news media, with coverage every day for the past week.  As late as last week, I saw a lot of Facebook complaints that the news media were ignoring the Occupy Wall Street movement.  I didn’t think it was so then, and it certainly isn’t true now.

And it looks as if our elected officials and candidates have stopped ignoring the Occupy Wall Street movement.  This morning, President Obama said he believes that the Occupy Wall Street movement reflects the current national mode. Amen to the truth!

Until President Obama made his remarks this morning, Democrats have been ignoring or running away from Occupy Wall Street.  Running away would describe the comments of our Vice President Joe Biden, who yesterday compared Occupy Wall Street to Tea-partiers, who in Joe’s version hated the TARP bailout of the financial system.  Of course the easy-to-understand code embedded in Biden’s remark is that both are extremists who have no place in politics.

Now it looks as if Joe Biden’s boss, the POTUS AKA Barack Obama is overruling him and sympathizing with the protestors and unions.  Something else the unions may have been behind since they and trial lawyers are traditionally the two biggest donors to Democratic candidates and the Democratic party.

Let’s hope the Democrats build on Obama’s remarks.  Imagine if Barack Obama or Speaker of the House Nancy Pelosi were to speak at an Occupy Wall Street rally and tell demonstrators what the Dems intend to do about the growing inequity of wealth in this country.  A jobs program.  Higher taxes on the wealthy.  More investment in public institutions.  Wouldn’t that energize many of the protestors to volunteer for and vote for Democrats?

As a former student protestor against the Viet Nam War and for civil rights, I sympathize with and applaud the Occupy Wall Street protestors in lower Manhattan and elsewhere across the country.  As an ardent admirer of Mahatma Gandhi and his disciple Martin Luther King, I believe that widespread peaceful disobedience can help change the direction of a country.

Having said that, after reviewing the news stories about the protests and read the Occupy Wall Street website, I’m shocked that the protestors and organizers really don’t have a plan and have not articulated specific actions that we as a society should take to rebalance the distribution of wealth and income, which over the past 30 years has gotten severely out of whack.  Law and policy have redistributed wealth over the past 30 years, leaving the richest Americans with a much larger percentage of both wealth and income going to the top 1% and 5% of the country, and much less going to everyone else.  And it is law and policy that will have to redistribute wealth again so that we achieve the more equitable society that we enjoyed throughout the 50’s, 60’s and most of the 70’s of the last century.

In OpEdge, I have written many times about specific actions that we should take to create a more equitable distribution of wealth and income, but here’s a quick list of some of the major actions we could take:

• Raise the minimum wage
• Raise income taxes on the highest incomes and institute a wealth tax, such as they have in France.
• Rebalance our labor laws in favor of unions, which historically have raised working people into the middle class.
• End the capital gains tax discount or limit it to true investment in creating new jobs and wealth, instead of allowing people to get a tax break when they profit from a sale of stocks or bonds in which the money goes to someone other than the company creating the new jobs.
• Invest in national and state-wide programs to repair our broken public infrastructure of mass transit, public education, roads, bridges and sewer systems, which will create jobs and strengthen our public institutions.
• Only import goods from nations that pay the same wages that we do and have high worker safety standards.

There are other policy and law changes I could recommend, but I don’t want to dwell on these points, each of which can be argued and refined.  Instead I want to focus on the actions that we must take to make our elected officials implement the changes necessary to save our country.  I write “save our country,” because one of the lessons of world history is that countries in which the distribution of wealth becomes less equitable over time virtually always decline and those in which the distribution of wealth becomes more equitable virtually always flourish.

Our elected officials will for the most part ignore or downplay the significance of the protests and the protestors, just as they have ignored and continue to ignore the will of the American people on such issues as exiting Iraq, punishing Wall Street manipulators and raising taxes on the wealthy.  They ignore us and listen to the big banks and large corporations for one reason only: Money.  Politicians embrace the positions of big money and the mainstream news media directs its coverage primarily on the big money candidates.

But money is not votes.  While the media and politicians count money, election officials can only count votes. If we want to change the direction of the country, we need elected officials who will pass new laws and pursue new policies.

Here then are the steps I propose that we take to reclaim America:

1. Formulate a one-page set of specific actions that we will demand of any candidate that wants our support. I would think that this “Contract with the Real America” will include many of the actions I propose above, stated with more precision, e.g. “Impose an annual 2% tax on all net assets more than $1.0 million a year per taxable entity, and a 5% tax on all net assets of more than $10.0 million.” While my example uses one of my more radical proposals, I understand that the “Contract with the Real America” will have to be watered down a bit from my personal vision to resonate with the majority of Americans.
2. Identify local and national candidates (most likely Democrats or independents) who will back some, many or most of the actions proposed in the list.
3. Go to caucuses and support those candidates.
4. Volunteer for voter registration drives focused on those most likely to vote for progressives and left-leaning Democrats, e.g., students, the poor and minorities.
5. Engage in local “take people to the polls” campaigns on every election day (not just the presidential elections).
6. Vote in every election.

The other side has the money, but the rest of us have a very powerful tool in social media, a tool with which we can speak directly to people.  The organizers of Occupy Wall Street have used social media with some effectiveness to organize the protest. But with no plan of action, all the protests do is allow people to let off some steam.  Venting is fun, but at the end of the day it accomplishes nothing except to give people the illusion that they have acted.

When you say, “I think” or “I believe,” you haven’t really told a lie, since it’s what you “believe.”  So we can’t call Texas Governor Rick Perry a liar for having said over the weekend that he thinks that limiting carbon emissions would devastate the economy.  I suppose we’ll have to settle for calling him misinformed or stupid. 

Or perhaps we could connect his statements to the fact that he comes from a state dominated by oil and gas interests from whose financial troughs he has been feeding like a ravenous pig for years.  In that case, he’s a cynical politician who puts his own best interests above addressing a pressing threat to the entire world community.

Perry’s false claim that limiting carbon emissions will hurt the economy is one that many have bandied about for years, but just because you keep repeating something doesn’t make it so. 

To be sure, complying with stiffer pollution standards will cost money, but no one is going to burn that money or bury it in the ground.  It will be spent to create, buy and operate new technologies.  And that means jobs.  Other new jobs will be created for industry to manage and for government to oversee compliance.  FYI, I wrote “create” new technologies, but I want to point out that many of the technologies needed to  address the carbon-emissions challenge already exist; industry flacks tell us they’re too expensive, but isn’t that what the car companies said for years about seat belts and airbags? 

There is no doubt that the cost of many things will increase as the cost of producing electrical energy and running carbon-emitting industrial processes rises, just as the cost of phone service rose when phones were made Internet-capable and the cost of food rose when we began to institute safety and health standards more than 100 years ago.  Often, though, what happens when a new feature is added to existing goods and service is not a rise in the cost to the consumer, but a decrease in the profit made by the companies selling the goods and services.

At the end of the day, establishing new environmental regulations will lead to a transfer of wealth from the profits of oil companies, electrical utilities and heavy industry to pollution abatement companies and the people holding the many new jobs that will be created. To the degree that consumers will pay more, they will benefit from the new regulations, which will slow down global warming and enable everyone to breathe cleaner air.  Of course, cleaner air will lead to fewer lung ailments, which will hurt the medical industry.  The real threat to the economy then will be that with fewer people ill, our healthcare sector will shrink.  But is that such a bad thing? I don’t think so.

Of course, when I write, “Is that such a bad thing?” I am referring to society in general.  It will be a bad thing for Perry and the people who are backing him financially.

Before signing off, I want to consider one of the comments in Cowboy Rick’s most recent pronouncement on global warming that shows that there is some subtlety in this former C student: “Are we as a country willing to take this science as incontrovertible and put in place cap and trade legislation that will devastate this country economically?”

Cap and trade sets up a marketplace for pollution in which polluters buy “credits” from non-polluters instead of actually ending their own pollution.  For example, let’s say Company A has lowered its emissions.  Company B pays Company A for the right to consider the decrease in Company B’s pollution its own.  Multiply these transactions thousands of times and you have a new marketplace in which “credits” are bought and sold like stocks and bonds.  If it sounds confusing, complicated, inefficient and unnecessary, that’s because it is.  But it has the “advantage” of being a “market-based” solution in an area in which a market is not needed.  To my mind it would be far easier just to make the polluters spend the money to stop polluting. 

Perry’s either/or is not “either we continue to pollute or we regulate,” but “either we continue to pollute or we establish cap and trade.”  I suppose he figures that if we’re going to tackle global warming, we might as well at least uphold his cherished myth that markets always work and are always right.