Response to Rep. Marsha Blackburn: A True Conservative Tech Policy (via The Prelator)

This article is concerned with net neutrality. A good part of the article focuses on this issue. But the article takes on some other critical issues. One is Congress’ bizarre lengthening of the copyright privilege to seventy years plus the life of the author. It’s tragic in literature but in the tech world it ties up technology is a disastrous fashion. He also discusses new laws under consideration that would make suppliers of net access vulnerable to legal action over the content of their various customers. This would provoke massive censorship of the web not because there is illegality but to avoid the slightest possibility of illegality.

It’s a good article and his conclusions are very close to my own. I wish the author well.

James Pilant

On January 18, Congresswoman Marsha Blackburn gave a speech purporting to give a conservative view of technology policy. As a strong conservative myself, I was deeply saddened to read this speech, which not only displays a deep lack of understanding about important policy issues facing the tech world, but a misunderstanding of the true tenants of conservatism in favor of the very corporate cronyism which Republicans are all too often accused of. … Read More

via The Prelator

Net Neutrality: The More Things Change… (via The PSSI Blog)

Is a major factor in the battle over net neutrality the consolidation of the industry by companies like Google? History suggests that after a period of development the market tends to consolidate and it consolidates with companies that make things simpler. From the author -

The question today is whether this is happening again, and if the Internet is slowly becoming monopolized. Here, think Google, with 70 or 80% of global search volume. Likewise, in social networking, Facebook has become predominant. Apple’s iTunes rules content download in the music sector. We’re consolidating.

See what you think. Read the article and ask yourself if consolidation makes the end of net neutrality inevitable.

James Pilant

The FCC recently cast its vote in creating a net neutrality law.  Basically, this means it’s illegal for a major carrier, say Verizon or AT&T or any of the others, to block or tamper with the speeds of content providers.  In an example posited by Tim Wu, the Columbia Law professor who is said to have originally coined the term “net neutrality,” it would prevent, say, Verizon in partnership with, say, Google speeding up YouTube while slowing d … Read More

via The PSSI Blog

Despite China’s might, U.S. factories maintain edge (via MSNBC.com)

U.S. factories out-produce Chinese manufacturers by more than 40%

Surprising statistic. My impression gathered from the media is that manufacturing is long gone. But America is still number one.

Yet America remains by far the No. 1 manufacturing country. It out-produces No. 2 China by more than 40 percent. U.S. manufacturers cranked out nearly $1.7 trillion in goods in 2009, according to the United Nations.

The story of American factories essentially boils down to this: They’ve managed to make more goods with fewer workers.

The United States has lost nearly 8 million factory jobs since manufacturing employment peaked at 19.6 million in mid-1979. U.S. manufacturers have placed near the top of world rankings in productivity gains over the past three decades.

That higher productivity has meant a leaner manufacturing force that’s capitalized on efficiency.

China is using its political power to enhance its manufacturing, offering tax free zones, only allowing companies to enter their markets if they build in China, and bending or breaking the rules whenever possible. And yet, the United States still wins the contest.

The United States will be the number one economy in the world for the next fifty years. That is my belief.

I find America’s largest competitors to be a pretty sorry lot.

China is a totalitarian state. In terms of quick economic growth, they have great advantages over more democratic societies. They can do what the Chinese are doing. Let me make a brief list for you – subsidize any critical industry to make sure foreigners cannot make inroads in that area; require foreigners to “partnership” with locals for admittance to the economy; use the resources of the state, particularly the intelligence sources and the military to enhance competitive advantage; act ruthlessly against parts of the nation or its population or its minority groups while favoring others; and manipulate economic statistics to paint a rosy, optimistic picture of progress. They might even say something like, “We will bury you.” Perhaps not.

China is a Communist state. It seems at times, that this part of the equation simply doesn’t figure in economic and political discussions. What about the words, Communist State, do American and multinational corporations not get? There were 12 Communist nations in 1989. Now there are five. Does history favor the Communist system?

Will China be the world’s greatest economic power? No. Their economic statistics may one day say so, but reality will still be reality.

If we believe in the idea that capitalism is the most efficient and productive form of economy, how does China even figure in that? Look at the rules and regulations for business in China. Is that the free market?

In Communist China, the law is a creature of the state. In the United States business law is extremely stable and predictable. Is this a predictable safe business environment?

Let me predict what is going to happen to these foreign investments in China.

They will end badly. They will end whenever the Chinese see a profit in doing so. They will end whenever China has an international dispute with a country whose citizens are involved in that investment. And they will end whenever corrupt Chinese officials decide it is profitable and they have a good chance of safety.

China will not be the next great power on earth. What they will become is in many ways is not clear but the one thing we can be sure of is that a Communist dictatorships will not end well.

James Pilant

The dynamics of employee dissent: whistleblowers and organizational jiu-jitsu (via FAA Whistleblowers Alliance)

In the modern age, whistleblowing is one of the most effective means of bringing corporate organizations to justice. It is hard to understand what is going on inside a giant organization from the outside. Modern corporations, have their own buildings, their own security systems, their own police forces (security), their own legal systems (company policy, administration and legal staff).

Corporations are hybrids, not quite businesses and not quite independent states. They are a monolithic stack of sole proprietorships and partnerships melded together.  In organization they are most like municipalities. They have a certain resemblance to the city states of Ancient Greece, each city loyal to Greece but fiercely guarding its own independence and its own prerogatives. 

Enforcing the law against these types of organizations is more a matter of espionage than criminal investigation. Detecting a corporation committing a crime is like trying to penetrate the security apparatus of a small foreign country.

Law enforcement can scan through newspapers and magazines, tap the rumor mill and watch the multiple civil suits filed for and against these organizations. But even then, what do they really know about an organization with thousands of members spread over three or four continents? Not much.

But take one individual inside the organization and combine that one person with just a little authority to access data and a computer work station, and you can gather more data about organizational crime in twenty minutes than independent sleuthing for weeks.

These individuals are a precious last line of defense against corporate wrong doing.

This society should welcome and protect these people. It has been said, “Let justice fall like rain.” It seems a garden hose sprinkle is more acceptable in the popular and business press. They don’t like whistleblowers, and could that be a surprise to anyone? Power and the money it brings may well be the biggest religion of the 21st century, the first truly international religion.

Against the religion of Power equals Money, the notions of law, duty and religious devotion probably appear a little quaint, more than a little obsolete.

Nevertheless, the whistleblower is important to maintaining some element of the rule of law in this country. And remember, the whistleblower is very close to the sole line of defense in discovering corporate wrong doing in other nations directed at the United States.

This article discusses how a whistleblower can use strategy to survive the inevitable fallout more successfully.

You may very well find yourself in the position of knowing what you should not and having to live with the decision of what to do. Read the article, put some knowledge on your plate, so you don’t have to start out cold when the crisis comes.

James Pilant

The dynamics of employee dissent: whistleblowers and organizational jiu-jitsu By Brian Martin with Will Rifkin Go to Brian Martin’s publications on whistleblowing Brian Martin’s publications on backfire (political jiu-jitsu) Brian Martin’s publications Brian Martin’s website We thank Bill De Maria, Hugh DeWitt, Wendy Varney, Tom Weber, Deena Weinstein and an anonymous reviewer for valuable comments on drafts of this paper. Abstract Whistleblowing … Read More

via FAA Whistleblowers Alliance

China Takes American Jobs

From The Ethics Sage, Steven Mintz – The article is called, Offshoring in the Phillipines and China.

Here’s an excerpt.

In an effort to foster growth in its outsourcing industry, China  announced that the government will not be levying operating taxes on offshore service outsourcing business in 21 cities until 2013. The policy covers firms specializing in IT outsourcing, business process outsourcing and knowledge process outsourcing. The initiative is expected to boost China’s already robust growth in the industry, where the country enjoyed a 21 percent year-on-year increase to $23.6 billion in 2009.

So, the Chinese are pursuing a deliberate national policy of moving jobs to their country, jobs from the United States.

Don’t we have legislators and a government? Oh, I forgot, out sourcing is good for the financial industry. There is no concern for the rapidly dwindling middle class. It’s as if we had a government for and devoted to observing the flight of jobs in a thoroughly disinterested manner like a scientist examing microbes under a microscope. The middle class microbes have to be watched. They could interfere with profits.

James Pilant

A thought?

The New Financial Elite – The Rich Are Different

Chrystia Freeland has written an article in The Atlantic called The Rise of the New Global Elite.

Here is a sample -

Meanwhile, the vast majority of U.S. workers, however devoted and skilled at their jobs, have missed out on the windfalls of this winner-take-most economy—or worse, found their savings, employers, or professions ravaged by the same forces that have enriched the plutocratic elite. The result of these divergent trends is a jaw-dropping surge in U.S. income inequality. According to the economists Emmanuel Saez of Berkeley and Thomas Piketty of the Paris School of Economics, between 2002 and 2007, 65 percent of all income growth in the United States went to the top 1 percent of the population. The financial crisis interrupted this trend temporarily, as incomes for the top 1 percent fell more than those of the rest of the population in 2008. But recent evidence suggests that, in the wake of the crisis, incomes at the summit are rebounding more quickly than those below. One example: after a down year in 2008, the top 25 hedge-fund managers were paid, on average, more than $1 billion each in 2009, quickly eclipsing the record they had set in pre-recession 2007.

The middle class is devastated and will continue to be. The difference between the middle class and the new class of the wealthy is so large as to be difficult to understand.

Try this example -

As an example, she described a conversation with a couple at a Manhattan dinner party: “They started saying, ‘If you’re going to buy all this stuff, life starts getting really expensive. If you’re going to do the NetJet thing’”—this is a service offering “fractional aircraft ownership” for those who do not wish to buy outright—“‘and if you’re going to have four houses, and you’re going to run the four houses, it’s like you start spending some money.’”

The clincher, Peterson says, came from the wife: “She turns to me and she goes, ‘You know, the thing about 20’”—by this, she meant $20 million a year—“‘is 20 is only 10 after taxes.’ And everyone at the table is nodding.”

Only ten million. Worse, this new elite is acquiring a global perspective. In other words, their attachment and loyalty to the people of America is becoming fragile indeed.

The good news—and the bad news—for America is that the nation’s own super-elite is rapidly adjusting to this more global perspective. The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.

I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”

He’s right, it sounds harsh. He has all the qualities necessary in Bond villain.

At last summer’s Aspen Ideas Festival, Michael Splinter, CEO of the Silicon Valley green-tech firm Applied Materials, said that if he were starting from scratch, only 20 percent of his workforce would be domestic. “This year, almost 90 percent of our sales will be outside the U.S.,” he explained. “The pull to be close to the customers—most of them in Asia—is enormous.” Speaking at the same conference, Thomas Wilson, CEO of Allstate, also lamented this global reality: “I can get [workers] anywhere in the world. It is a problem for America, but it is not necessarily a problem for American business … American businesses will adapt.”

 Why should they worry about American workers? They are virtuous and we just don’t understand. They don’t understand why we don’t understant. (I have serious doubts any of these individuals read my blog save for amusement.)

As a consequence of this disconnect, when business titans talk about the economy and their role in it, the notes they strike are often discordant: for example, Goldman Sachs CEO Lloyd Blankfein waving away public outrage in 2009 by saying he was “doing God’s work”; or the insistence by several top bankers after the immediate threat of the financial crisis receded that their institutions could have survived without TARP funding and that they had accepted it only because they had been strong-armed by Treasury Secretary Henry Paulson. Nor does this aloof disposition end at the water’s edge: think of BP CEO Tony Hayward, who complained of wanting to get his life back after the Gulf oil spill and then proceeded to do so by watching his yacht compete in a race off the Isle of Wight.

I want you to go and read the full article.

James Pilant

Dylan Ratigan Challenges The Current Beltway Definition Of “Free Market”

Dylan Ratigan has a interesting essay in the Huffington Post. As is usual with his writing, the indignation boils over. I find this very pleasing. My indignation boils over from time to time. I have long been struck by the beltway commentator constant refrain, “free market.” It is used over and over as a cure for every economic malady. I can’t help but believe they don’t know the subject. Little industrial or financial business in the United States can be considered free market in any traditional sense: Our agricultural products are heavily subsidized; our financial industry is favored by a host of friendly laws as well as being able to borrow money from the Federal Reserve at zero percent interest.

What’s free market about any of that?

Here’s a quote from Ratigan’s essay -
Here we find ourselves today in a similar situation, where six industries have a stranglehold over Washington. And the draining of our current and future wealth will only continue as both the media and the political class not only tolerates but spreads the phrase “free market” when the reality doesn’t match the rhetoric.

Our politicians continue to take money from massive corporations to subsidize them in a rigged marketplace that only cares about protecting the incumbent structure. At the same time, the American people are drowning in a red sea of debt caused by perpetuating banking, health care, energy and defense systems that are expensive, ineffective and protected from competition.

So I have a challenge for those so-called free market Republicans who rode a wave of voter discontent into Washington. I challenge you to end massive corporate subsidies. To end tax loopholes. And to end rigged trade with China and release the true power of free markets.

This can no longer be simply a talking point to win votes. Because this broken system is not only costing American jobs… it’s costing us the very prosperity and freedoms that this country was founded on.

If we actually had an intelligent discussion about the economic future of this nation, the great mass of citizens would benefit. The kind of “single phrase” thinking currently in vogue only benefits the status quo. We can’t begin to address these issues until the appearance of intelligent thought is replaced by the real thing.

Fewer slogans, more thinking.

James Pilant

Will The Deficit Kill Us?

Joseph White has written a timely article. In the past few weeks we have been deluged with dire warnings about the deficit, sometimes they featured the Chinese, sometimes the destruction of social security; it was all very dramatic. Then when the continuation of tax cut became an issue, it all faded a way until the wealthy were assured their tax cuts. It was a budget buster of colossal size, totally unsupportable. It will cripple the government in financing every expenditure save those supported by their own fees.

Now that the wealthy have their money, the deficit has returned as an issue. We must cut back on entitlements. We must find cuts in education, etc.

The two-faced asinine clowns of the beltway would be funny if they weren’t taken so seriously.

Joseph White in the article quoted below has doubts as to the importance of deficit reduction.

I have similar doubts about the dangers of the deficit. However, the idea of deficit reduction now in the midst of the Second Great Depression strikes me as far more serious and dangerous. Such austerity reduces the size of any recovery and delays it. I have seen estimates of up to ten years of recovery to return to 2007 levels of employment.

We need a serious national discussion about expenditures. We will not get it from Obama’s stacked commissions or the “beltway boys.” The big act is that these are not matters of dispute. “Everyone recognized the danger of deficits.” “Like a well functioning family, a nation must not have any debts.” Etc.

Those are not settled matters. There are far more nuances to national debt management than any family budget.

As usual, I call with little hope for actual intelligent thought.

This is written by Joseph White at the Financial Times –

In the 1980s, deficit hawks recognized that, in the words of former CBO Director Rudy Penner, , “the crisis is there is no crisis.” In other words, the deficit wasn’t actually hurting people much. But it could, eventually, like “termites in the basement” as former OMB Director Charlie Schultze put it. How could this be dramatized?

One approach was to make arguments about the economic good that would be accomplished by reducing deficits. The idea was that lower deficits would produce greater national savings so more investment and a larger economy. Unfortunately, the standard economic estimates (such as by CBO) did not project enough extra growth to convincingly justify the pain of the deficit reduction. (Would you have abolished the Navy and Medicaid so that the economy would be 3% bigger thirty years later?). So deficit hawks promoted two other arguments, each of which should sound familiar.

One was to invent scenarios about what would happen if absolutely nothing were done for decades – a highly implausible case, but one that could, with sufficient assumptions, lead to economic disaster. The point was to promote so much fear that the goal of deficit reduction would take precedence over messy, uncomfortable subjects like the consequences of any particular means of reducing the deficit.

The other was to claim that “the markets” would eventually turn against the U.S. government and U.S. economy because of the spiraling debt, forcing some sort of payback that would make everyone miserable. …

I had never thought about it the way he presents it. I think this is similar attitude to Paul Krugman.

I recommend it to your reading and thought.

James Pilant

Mozilla Firefox Unstable?

My Firefox browser has become increasingly unstable over the last few weeks. Is anybody else having the same problem?

James Pilant

$250,000 And Poor

That headline caught my eye. This is from The Fiscal Times. The whole article is called Down and Out on $250,000 a Year.

My first response was to see how far I could read before I got the joke. But I was wrong. This is not a joke story or a satire. From the article -

By most measures, a $250,000 household income is substantial. It is six times the national average, and just 2.9 percent of couples earn that much or more. “For the average person in this country, a $250,000 household income is an unattainably high annual sum — they’ll never see it,” says Roberton Williams, an analyst at the Tax Policy Center, a nonpartisan think tank in Washington, D.C.

But just how flush is a family of four with a $250,000 income? Are they really “rich”? To find the answer, The Fiscal Times asked BDO USA, a national tax accounting firm, to compute the total state, local and federal tax burden of a hypothetical two-career couple with two kids, earning $250,000. To factor in varying state and local taxes, as well as drastically different costs of living, BDO placed the couple in eight different locales around the country with top-notch public school districts, using national data on spending.

A reader begins to get the idea that we are going to explore the difficulties of getting by on this sum of money each year. So, you read further on, things like this -

Some of the expenses incurred by couples like the Joneses may seem lavish – such as $5,000 on a housecleaner, a $1,200 annual dry cleaning tab and $4,000 on kids’ activities. But when both parents are working, it is impossible for them to maintain the home, care for the kids and dress for their professional jobs without a big outlay.

And it keeps going like this. If I was from a distant part of the world with no knowledge of the United States, I might have gotten teary eyed. However, I do live here and I’m not going to cry over those suffering with a quarter of a million dollars in income.

Why don’t you read the article? If you feel sorry for them and wish them better, please let me know.

James Pilant