On the Contrary

My guess is that most of you have read the articles in the New York Times about why Apple shipped their manufacturing to China (How the U.S. Lost Out on IPhone Work), and about the horrible conditions in the plants there (In China Human Costs are Built into IPad).  Note I am writing this on an Apple NoteBook, read the articles on my IPad2, and have my trusty IPhone at my side.  But these two articles raise important questions about who we are and where we are going.  And even more important, they raise interesting questions about our conventional wisdom about our problems off shoring jobs and leadership.

Lets start with the first one about why we couldn’t do the work here.  The first article points out a couple of important things.  First the added labor costs are small compared to the total price of the IPad so that was not the driving factor.  What is the driving force is flexibility and speed:

One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

…In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.

For Mr. Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.

Okay, so it comes down to supply chains, and industrial clustering as it is called in the economics world.  Paul Krugman addresses some of this in one of his blogs, Chinese Manufacturing and the Auto Bailout.  There is no question that this kind of organization of people and resources is highly efficient.  But that misses the whole point raised by the other article, is that really where we want to go?

The second article basically points out the human cost of this kind of organization:

However, the workers assembling iPhones, iPads and other devices often labor in harsh conditions, according to employees inside those plants, worker advocates and documents published by companies themselves. Problems are as varied as onerous work environments and serious — sometimes deadly — safety problems.

Employees work excessive overtime, in some cases seven days a week, and live in crowded dorms. Some say they stand so long that their legs swell until they can hardly walk. Under-age workers have helped build Apple’s products, and the company’s suppliers have improperly disposed of hazardous waste and falsified records, according to company reports and advocacy groups that, within China, are often considered reliable, independent monitors.

Is that where we really want to go?  In fact, should the companies whose products we buy be allowed to tolerate those kinds of conditions.  Apple touts its “ supplier code of conduct that details standards on labor issues, safety protections and other topics. The company has mounted a vigorous auditing campaign, and when abuses are discovered, Apple says, corrections are demanded.”  Yeah right.  As the article points out:

Some former Apple executives say there is an unresolved tension within the company: executives want to improve conditions within factories, but that dedication falters when it conflicts with crucial supplier relationships or the fast delivery of new products. Tuesday, Apple reported one of the most lucrative quarters of any corporation in history, with $13.06 billion in profits on $46.3 billion in sales. Its sales would have been even higher, executives said, if overseas factories had been able to produce more.

Nothing drives the train like greed and profit and if we learned nothing from the BP oil spill, it is that even the best intentions sooner or later get subverted to the bottom line.  Without a government enforcing worker safety and health requirements, they slide.   But my favorite insight is what I have always known starting as a lowly Captain flying in Vietnam.  Generals, Admirals, CEOs, and yes even Presidents rarely really know what is going on even with the best of intentions:

In 2010, Steven P. Jobs discussed the company’s relationships with suppliers at an industry conference.

“I actually think Apple does one of the best jobs of any companies in our industry, and maybe in any industry, of understanding the working conditions in our supply chain,” said Mr. Jobs, who was Apple’s chief executive at the time and who died last October.

“I mean, you go to this place, and, it’s a factory, but, my gosh, I mean, they’ve got restaurants and movie theaters and hospitals and swimming pools, and I mean, for a factory, it’s a pretty nice factory.”

Yeah, for a prison Mr. Jobs.  We see what we want to see when we are successful and we make excuses like this is a better life than they would have had, but then some get killed and don’t have any life at all.  And the question is, if this is the model for success, do we really want that kind of success?  As one current Apple executive said:

“You can either manufacture in comfortable, worker-friendly factories, or you can reinvent the product every year, and make it better and faster and cheaper, which requires factories that seem harsh by American standards.  And right now, customers care more about a new iPhone than working conditions in China”

Somehow I find that troubling.  Is the next new shiny toy worth that cost?

In Mitch Daniels’ Response he began by saying, “The status of ‘loyal opposition’ imposes on those out of power some serious responsibilities: to show respect for the Presidency and its occupant, to express agreement where it exists.“  What a boldfaced lie.  There is no “loyal opposition”, just a group of people who want to see the President fail.  One only has to look at what has occurred over the last three years to draw that conclusion.  There are a record number of filibusters, holding the country hostage to their debt demands, and defeating any attempt at improving the unemployment picture.  We have an ideological divide that does not allow the taking of prisoners anymore.  I wish the President would have made that point far more emphatic in his remarks.  We all know nothing is going to happen and now the critical battle is whether we are going to allow the Republicans to eviscerate government and turn us into a two-class society.  It is as simple as that and there is no middle ground.

On Republican leadership, I think we saw it at its most naked form when Rick Santorum was confronted by a woman who again raised the outrageous nonsense about President Obama being a Nigerian Muslim and Santorum pandered to her beliefs (and the amazing crowd of know-nothings around him).  Mitt shows us his leadership when he panders to positions he has rejected in the past, but anything to get by the primaries.  Newt?  Well if lying, deceit, obfuscation, and generating hate is leadership, then bring on the rope and we can call ourselves the lynch mob country.  Ron Paul at least shows some backbone on his unpopular positions on drugs, wars, and sex, but his racist comments and his zany ideas about anarchy as a way of governing lead us to wonder if he thinks deeply about complex problems.  Some leadership when you lie and pander to mob instincts to lead the nation.

I listened to Eric Cantor (ever notice that most of these people are not very bright?) explain how the State of the Union speech (before he had heard it) was just more of the same failed policies.  Really?  Eric and company have never let the President have his policies without being watered down by booby traps that make them ineffective.  But what really ought to make Americans think is that the same old policies are more tax cuts and less regulation.  That is where we have been for the last 30 years and the result is for all of us to behold.  One of the best offensives is to project your weaknesses on your opponent.  This is one giant example of calling what we have not tried except after WWII when our economy was booming, old worn out policies, while calling more of the same that has brought us down and created a two class society change.  You got to love their chutzpah.  But if we listen and follow them, well kiss you kid’s future goodbye.

The President began to throw down the gauntlet, but he should have learned something from Newt’s rise in the polls.  The rabble like clear lines and firm opposition.  Let’s hope this speech was simply a stepping off point for beginning to draw clear lines, confronting failed ideology, and not the lines themselves.  They need to be much more clear and abrupt or the middle class and the appropriate role of government will be lost.

There was an interesting op-ed in the New York times (South Carolina’s Divisive Vote) about what voters told them as they came out of the polls:

“Two-thirds of voters interviewed in exit polls said they made their decision on the basis of the two South Carolina debates, where Mr. Gingrich exploited racial resentment and hatred of the news media to connect with furious voters…He had a much better sense of the raw, destructive anger at President Obama swirling around a highly conservative and combative state, and he reflected it back to voters everywhere he went. “

Now you can argue that this is the New York Time is editorializing about what Gingrich really sold in his debate performances, but then it is an editorial and for most of us, it was obvious what he was selling.  He also sold blaming the victim with his just get a job and teaching poor (black) kids the lesson of work.  And he connected with these old fat white people’s visceral hate of President Obama.  You know, that belief that he is not really an American. If you don’t think it was a racist appeal then:

“It was Mr. Gingrich who pulled the race into the gutter, where he found considerable support. He repeatedly called Mr. Obama “the greatest food-stamp president in American history,” and lectured a black questioner at Monday’s debate about the amount of federal handouts to blacks, suggesting their work ethic was questionable.  On Thursday, in the derisive tones of a radio talk-show host, he said Mr. Obama’s cabinet looked like Mickey Mouse and Goofy.

If you don’t see blatant racial hatred in this you are blind.  But it gets better:

“In one of the most telling results of the exit polls, most voters said that cutting the federal budget was more important than encouraging job growth. At a time when more than 13 million people remain unemployed, these voters do not want the government to do a thing about it, possibly because it might improve Mr. Obama’s re-election chances. “

Here to me is the worst assertion.  There is no discussion of how to get out of our mess.  There is no rational weighing of economic policies, especially against real outcomes we have seen from conservative policies.  What we see is raw, I got mine, screw you.  This is the crowd who are going to send people to Washington “to work together to solve our problems”?  As the article points out:

“South Carolina has moved sharply rightward since Mr. Obama arrived on the national scene. In 2000, 24 percent of state voters said they were “very conservative,” but that number jumped to 34 percent in 2008. Now it is up to 37 percent, according to exit polls. Two-thirds of Saturday’s voters said they supported the Tea Party, reflecting the election in 2010 of four South Carolina freshmen who are among the most extreme members of the House.”

I think America saw all that is wrong with America and the people  who call themselves very conservative in this part of the countr.  Instead of rational discussions about real solutions for tomorrow what we saw was racial, ideological, and class intolerance, perfectly willing to cast the nation aside to hold on to their piece of the pie.  I hope most Americans have as bad a taste in their mouths as I do after watching these candidates and citizens in action.  There is no hope for an economic resurgence with this crowd.

Well we have been inundated by fat white conservatives from South Carolina (or maybe transplants from the North:  See Don’t Blame Rednecks for Newt’s Win) talking non-stop about how they are going to take back the country, stop the massive government spending, and of course, dismantle Obama care.  And Newt, who they just loved because he got in everybody’s face and put them in their place, got their vote.  But as I watch all of this, I can’t help wondering if this is the last hurrah of people so out of touch with the real America and our needs, that they are tricking themselves to think they are selecting the next president.

I am beginning to wonder if the conventional wisdom is completely wrong about a sitting president with over 8% unemployment getting re-elected or as the conventional wisdom goes, not getting re-elected.  I think the more we see of the these selfish little people, who may I add, Newt represents perfectly, the more Americans will recognize a small mostly white, I got mine, go suck eggs crowd that is so not our future.  Most people are figuring out spending isn’t the issue, tax collection is.  The debt isn’t the problem, jobs are.  And of course on the healthcare thing, most people are just starting to understand what is protected and don’t want to give it up again.

No our country, thank goodness, is not reflective of these fat old white people.  Where we are vibrant, it is a very diverse crowd that cares little about conservative social issues, much less about more transfer of wealth to the wealthy.  They want a place that expands their opportunity, not limits it with small thinking.  I think conservatives are living too much in their own echo chamber while the rest of us are seeing what they are really made up of, selfish little people who are holding on to the past at the expense of our future.  Doesn’t mean Obama has the answers, but he is at least awake and is the only hope for not returning to the 19th century.

So I guess my advice is quit watching the news and despairing as you listen to these mindless creatures.  I think the nation gets it, and the more they debate and campaign the more our fellow Americans figure out exactly who they do represent.  November is in the bag.  We need to focus on the Congressional races, because to make change we will have to upset the filibuster and the control of the House by conservatives.

Oh, and one last thought about Newt taking on the “liberal press”.  His much repeated attack on the press for focusing on his dalliances was loved by the conservatives.  It may be what won him the election.  And you know I would agree with him that I could care less about his sex life or his failure to keep his commitments to his wife.  I care about the economy and what the candidates offer.  But that question wasn’t for me.  It was for all the conservatives who scream family values at us and then want to force their religious beliefs down our throats.  It was highly appropriate in that electorate.  The fact that they don’t care about their “family values” tells you all you will ever need to know about their values.  They are whatever they need to be to get what they want.  Do what ever you want and then repent.  The devil made me do it.

For a guy like me who is a Progressive, it is hard to understand conservatives at all.  That’s okay because I understand that we are all a little blinded by our own preconceptions.  But sometimes I hear things and I wonder what planet the other person is living on.  We see the same event and have two totally different realities (and only one of them is the real reality).  Now yesterday I wrote about how out of touch and ignorant were most of those who attended the Republican debate last Tuesday seemed to be, applauding kill our enemies lines.  And while watching Glee, I almost fell off the couch laughing at the scene where Will Schuster goes to his girl friend’s house to ask the parents for her hand in marriage, and comments about the fact that they still have their Christmas tree up and the father, in all seriousness, comments that he is surprised that comrade Obama still lets them have Christmas.

I mean it was a perfect caricature of Obama paranoia, but it was TV fiction after all.  Then I turned on the TV and watched the interview with Jenny Sanford, the ex-wife of South Carolina Governor Mark Sanford, who went on his walk about in Argentina with his girl friend, about Newt’s ex-wife’s interview on his open marriage proposal and his chances in South Carolina.  Here is what she said after condemning Newt:

SANFORD: I am going to watch the debate tonight very carefully. I’m on my way there in a minute with my youngest son Blake and my second son Landon, and I’m going to watch the race very carefully.

I think this race has been very long on rhetoric and sensation and short on substance. And we have some good candidates running. I think all of them could beat Obama easily. I think the debate in our country is mostly surrounding the fiscal issues. And I’m looking forward to hearing what they have to say tonight.

CHRIS MATTHEWS, HOST: Why do you think people like Newt Gingrich bring up issues like food stamps in these discussions? I haven’t heard that phrase in years and all of a sudden it’s all over the place with Newt talking about President Obama being the best food stamp president in history and how people are going to, let’s take a look at this tape from a Newt Gingrich event yesterday, and I want to get your thoughts on whether race is a factor the way Gingrich is talking in South Carolina. Let’s listen.

(BEGIN VIDEO CLIP)

UNKNOWN SPEAKER: I would like to thank you, Mr. Speaker, for putting Mr. Juan Williams in his place the other night. [Applause] His supposed question was totally ludicrous and we support you.*

NEWT GINGRICH: Thank you very much.

(END VIDEO CLIP)

MATTHEWS: Why do you think, Mrs. Sanford, that the voters of South Carolina, at least those there that were cheering this comment by this woman, this regular woman that Juan Williams of Fox News should be put in his place?

SANFORD: You know, I think that politicians can be known to pander to certain audiences or segments on certain issues. But so can pundits. And I think that the press likes to make issues sometimes about things where there are no issues. I mean, I for one live on the coast. My congressman is an African-American named Tim Scott, a Republican of whom I’m very proud. And my governor is an Indian-American woman named Nikki Haley of whom I’m also very proud. So those — for both people that were elected by the electorate here in South Carolina.  So the notion that we have a racial electorate here in South Carolina is absurd and nonsense and frankly just, you know, stirred up by people in the press. And I think that that’s, you know, I think that people in general are sick of politics as usual and part of that is they are sick of the press stirring thing ups with an angle. And you know what, I think that woman is right. People should be cheering.

MATTHEWS: Who in the press do you know has ever brought up the issue of food stamps, ever brought up the issue of how as Rick Perry said the other day in that debate on Monday that South Carolina is at war with the federal government as is Texas, bringing up these old states’ rights issues. The press doesn’t bring them up, the candidates do.

SANFORD: Oh, I think the press brings up all sorts of things. I mean, I think that this race in particular is one as I said that’s long on rhetoric and short on substance, long on the sensational if you will. So, you know, we have 24/7 news these days where we have just a proliferation of channels each one seeking to find things that they can sensationalize. So, if you look hard enough at all these candidates, you can find all sorts of things to sensationalize.I found these comments almost other worldly.

Could she not see the racism or the class warfare that is being conducted by the Republicans?  She commented how South Carolinians had elected an Indian Governor, you know the one who thinks voter ID for a nonexistent problem, is just fine, and does not see the social and racial implications.  Then I thought, she is an evangelical conservative in the 1%.  Obama terrifies them because he is trying to empower the rest of us.   She thinks “we have some good candidates running. I think all of them could beat Obama easily.”  This is the weakest field in the history of Republican candidates and only one really stands a chance (Mitt).  Their fiscal policies are already out there and as I noted yesterday, they cut taxes further for the wealthy, increase the deficit, and raise taxes on the poor.

So I have to ask myself, what is she seeing that I don’t?  Why does she think more of the same will work?  Why doesn’t she see the racial and class warfare that is being conducted, and why does she not see that it’s based on a visceral hate of President Obama, generally based upon false allegations?  Personally I don’t think her candidates could stand a debate on the real issues if we had any fact checking in that debate instead of he said/she said.  It is a study in how we live on two entirely different planets in two entirely different realities.  Now I am starting to get why a walk about in Argentina was not such a wild idea.  Oh and Jenny, I am glad some of your best friends are of color.  And don’t you worry your head one bit about that Confederate flag you guys fly at the capital.  It says nothing about racial insensitivity.  In your reality everything is just fine, people know their place, and Obama is shaking your universe..

By the way, the transcript that I got for this interview was on a conservative blogger’s site showing how she had held liberal Chris Matthews and the media accountable for their liberal bias.  Once again, do we speak different languages?  What I saw was a woman totally out of touch with the reality of the situation.  I sure hope the 99%, which includes a large black population in the South get out and vote this year.  They certainly have enough reason if the states down there in the South will just issue them IDs.

*  The Fox News contributor had raised criticism that Gingrich’s comments about food stamps and poor children’s work ethic were “intended to belittle the poor and racial minorities.” Gingrich had said that if invited to speak to the NAACP, he would urge black people to demand paychecks instead of food stamps. Williams asked, “Can’t you see that this is viewed at a minimum as insulting to all Americans, but particularly to black Americans?” (TheGrio)

That would be us.  From my perch on my hill looking over my vineyard in winter dormancy, what I see is that we are heading downhill and have been in this downhill slide for about the last 30 years or so.  We finally removed regulations from the financial industry and reduced taxes on the rich and the economy is in shambles, we are broke, and our infrastructure is crumbling.  I wonder if there is a connection?  Duh.  Meanwhile I watched a Republican debate the other night where the crowd cheered racism, bigotry, and hate.  Further they looked to blame the victims for their poverty and misery.  I was ashamed that these people were Americans.  Or maybe, I just don’t belong here anymore.  Hope I am wrong about that.

But then I open up the paper this morning and I have this WTF moment.  The two articles were, Poll Show Shift in Independent Voters, and Higher Deficits Seen in Romney’s Tax Plan and His Rivals Too.  In the first article, it was noted that for President Obama, “a majority of independent voters have soured on his presidency, disapprove of how he has dealt with the economy and do not have a clear idea of what he hopes to accomplish if re-elected.“  These voters were critical to his election in 2008.  Now I can certainly understand this being a progressive who is extremely unhappy with his handling of the economy.  But then the article goes on to say, “While Republican primary voters say Mitt Romney stands the best chance of defeating Mr. Obama, nearly half of independents say they have yet to form an opinion of him, creating a considerable opening for Democrats to try to quickly define him if he becomes the nominee. ”

Okay, I am not happy with President Obama’s handling of the economy, but I know turning the reins over to Mitt would be a disaster.  What rock have these (and most Americans) been hiding under?  In the second article, it points out that:

“Mr. Romney’s tax plan, which calls for permanently extending the Bush administration’s tax cuts, reducing the corporate income tax rate and eliminating the estate tax , would cut the taxes of people earning more than a million dollars a year by an average of $295,874, according to an analysis by the Tax Policy Center, a nonpartisan research group.  Since Mr. Romney would also allow some of President Obama’s tax cuts to expire, his plan would effectively raise taxes on some people earning less than $40,000 a year. The Romney tax plan would add to the deficit by reducing federal revenues by $600 billion in 2015, a 16 percent cut, the center found.

Some of Mr. Romney’s rivals for the Republican presidential nomination are proposing tax cuts that would widen the deficit even more — which was the point that Mr. Romney was trying to make on Tuesday in South Carolina when he renewed attention to his personal wealth by noting that his effective tax rate is ‘probably closer to the 15 percent rate than anything.’”

Now this is not some flash out of the blue.  Romney, and all of his rivals promise us more of the same.  Let’s cut taxes, gut government, and end regulations.  Let’s continue the transfer of wealth to the wealthy, let infrastructure rot,blame the poor for their poorness, and wait for flow down.  And independents “have yet to form an opinion of him”?  I am left speechless (but alas for you, I can still write).  The morons are in charge of the next election and they haven’t been paying attention.  Now is it going to be a beauty contest?  Policies don’t matter?  If the next election is about chasing after these dim bulbs who have not paid attention as the country has been drowning, and while unhappy with the guy who hasn’t done enough, may vote for the guy who will do more damage, then it is time to think about immigrating.  Are we really a nation that is that clueless about where we have been and where we are going?  What does that say about our media?

No, I am not a big fan of Barrack Obama.  I think he is a nice man who failed to understand the stakes in this game, and failed to understand the real crossroads we were and are at.  I think he thought that the middle ground offered solutions when the middle ground doesn’t exist anymore and never will.  He may be able to turn it around if he has learned the lesson and offers us a real choice here, not pandering to the middle that doesn’t even understand where we are today.  But in my mind, you have little choice in the next election if you want even a glimmer of a hope of starting to improve things.  And anybody who doesn’t see Mitt as the 1% who is totally out of touch with real Americans or our real problems, and offering solutions that don’t add up, and continuing the Bush nightmare economic policies of fueling the rich while waiting for flowdown, is brain dead.

Speaking of brain dead I want to give a big shout out to those Texans who elected Rick Perry, thought Herman Cain had a clue,  the conservative voters of Iowa for electing Rick, Trash the Constitution and bring on theocratic government,  Santorum, the people who elected Michele, I never saw history I couldn’t reinvent along with my friend Sarah Palin, Bachmann, and of course the conservatives at the South Carolina debates for their bigotry, hatred, and just general stupidity.  Isn’t America a wonderful place of opportunity where small, ignorant, hateful, and greedy people have a chance to be President of the United States.  Oh and let’s not forget independents who haven’t decided about Mitt yet.  If we were anymore clueless, we would have self-destructed, or maybe we already have.

Paul Krugman said something that I think a few of us are thinking about more and more, “If we just talk substance about that instead of the campaign for a moment…”.  He was reacting to the discussion of who was ahead, who was behind, who made the most strident attacks, who might be the eventual winner in South Carolina.  We have this never ending coverage of junk about the campaign and no serious discussion about what they are really proposing and what are the chances these policies would do anything for the economy.

As we focus on the Bain attacks, or attacks by Mitt on Obama, could we not examine the substance of the attack instead of the attack itself?  As Professor Krugman pointed out in his blog recently, Untruths, Wholly Untrue, And Nothing But Untruths, Mitt simply lies straight out and the lies get reported without the examination of what he said.  My favorite recently is Rick Perry claiming that Obama is attacking South Carolina by challenging their voter ID law.  State’s rights you know.  When was “state’s rights” ever a reason for anything but discrimination for blacks, gays, or women?  Preventing voter fraud is such a joke since there isn’t any (38 cases brought in a 3 year period, of which a little more than half were convicted) and for Republicans who claim to want effective government, they are focusing money and time on a non-issue when in reality it is all about keeping their opponents from voting.

But let us not just pick on the Republicans.  It does not matter which side of the isle you are on, the media fails to report at all on the substance of any issue and focuses once again on a he said/she said debate completely dumbing down the nation.  We need an honest discussion about our path forward.  We don’t need to know wild allegations, we need to know if what these people are proposing stands the test of examination.  Most of what the Republicans (who are getting all the coverage right now) are proposing is drivel that is retooled George Bush.  If the media would expose what they are proposing instead of doing People Magazine coverage of the candidates, we might start to get somewhere.

Here is a list for you and you can judge for yourself:

1. If you still doubt global warming you are stupid. Science is settled and yet we have a litmus test in the Republican Party to deny it.
2. If you think lower taxes are the answer to our problems, examine actual tax rates paid (lowest in 50 years) and ask yourself where are the jobs.
3. If you think less regulation is the answer, just how did the financial meltdown occur again?
4. If you think government can’t create jobs then why are you arguing that we can’t cut military spending because it will kill jobs?
5. If you think Obama is the socialist devil, compare his policies to the historical record and he is right of center (see Andrew Sullivan’s article in Time Magazine)
6. If you think competition in medical insurance will solve the problem, how come Medicare Advantage is more costly than just Medicare?
7. If you think that we need to depress wages and benefits to be competitive, explain who that will benefit, workers with less disposable income, or the 1% selling overseas?

Here is the real question we ought to be asking in this campaign:  Why are we even considering people who pander to the most ignorant in our society to get the nomination?  These are people who deny science, reinvent history, want religion back in our politics, use veiled racism and discrimination, and want to return us to a 19th century horse and buggy economy and nation.  The fact they would do that ought to be a disqualification for office.  When oh when are we going to have an adult conversation about any of our problems.  Not with Republicans, that’s for sure.  I can’t wait until the general election and see if the Democrats also pander to us instead of a real policy discussion about the way forward.

This is not a new post since I have prognosticated on this before.  Europe or the Euro in the peripheral countries is doomed.  This will hurt our economy and by how much is uncertain.  But I think more than many think because so much lending and unrecognized debt is out there (from U.S. banks) that it could send us reeling again.  I can make this really simple and others like Paul Krugman have been outlining this forever.  There are three problems:  Austerity, lack of any stimulative spending or easing of the money supply, and the inability to devalue the Euro country by country.

The first two kind of go together although they are all interconnected.  The belief that austerity, that governments who cut back and raised taxes to deal with their burgeoning debt, would allow confidence to grow in that stewardship and debt costs (the cost of the perceived risk) would go down and business would develop the confidence to start reinvesting in their economies, has not panned out.  Actually it has never panned out and the whole idea that it would work, although conventional wisdom, was not born out by history.  It has never worked and in the near term you can look at U.S. Depression, Japan, England, and of course any country in Europe and you have all the data you need to show that this was an illogical idea.  But as Paul Krugman likes to say, it is what all the really Very Smart People (VSP) were saying would work.

The problem is two-fold and is a function of the belief that supply drives the economy, not demand. First as a government starts to reduce benefits, layoff workers, and raise taxes, demand in terms of people having an income to buy goods and services to stimulate their economy sharply declines.  Businesses aren’t going to supply products because they think the economic state of the state is improving until there are real people with cash to spend on a product (Demand drives supply, not supply drives demand).  So there is no business investment that might grow the economy.  Second, as things worsen, and there is no stimulus spending to help with the constricting economy, this become politically untenable. The economy just gets worse and worse and debt cost continue to rise, while the need for funds (borrowing) in a depressed economy grows as their economy falters further.

This austerity might have had a chance if there was stimulus spending to, in the word of an old Vietnam veteran, provide a light at the end of the tunnel.  If austerity in terms of higher taxes to pay down debt had been coupled with job creation through stimulus spending, the austerity forced by higher taxes and some cuts in programs could be offset somewhat by at least having a job and being able to survive.  Then as the debt was slowly reduced, people could still have work and be able live and see some hope in the future.  But there was none of that and by the way, that is our way forward in the U.S., but Republicans won’t allow it.

Now comes the real sticker in all this, unequal economies with the same currency, the Euro.  This is probably the part that is hardest for most people to understand.  If a country has its own currency, then its value can change in regard to other currencies making its goods and services either cheaper or more expensive than other competing countries.  Everybody loves a strong dollar because when we travel in Europe, we can buy more stuff, but our stuff costs more and depresses our exports.  The other part of this is the cost of borrowing.  If a country on the Euro goes bankrupt, well, kiss your investments goodbye.  If a country has their own currency and printing presses, they simply print more money, albeit devalued.  The prime example of this is Sweden and Denmark.  They have similar economic markers, GDP, debt of GDP ratio etc., but Denmark gets much better borrowing rates because  while they are not on the Euro, they are pegged to it, but could crank up the printing presses if necessary.

So if you are a net importer nation, like the periphery countries, to become an exporter country and create jobs you cannot devalue your currency to make your exports more competitive, you have to deflate your economy.  That means you earn less and your cost of living is lower.  Once again we are reducing demand by decreasing currency in people’s hands and we are are the spiral downward.  Note that Germany likes to think they showed the way with their austerity program after the 2007-2008 recession.  The difference is they were a net exporter, and their economy continued to grow because they were in the favorable position.  They could afford their austerity.

So when you add forced austerity, no stimulus spending, and deflation of the economy because of the common Euro currency, Europe is headed for the rocks.  It is past doing anything about it.  The Euro might have been saved if actions to stimulate along with austerity were put in place a year ago, but we have past the point of no return.  The Euro might survive in the interior countries, but for the poorer countries, their only salvation is to bail out.  Hopefully the Obama administration has a plan for when all this occurs, maybe more shovel ready spending?  Let’s hope they have a little more strategic plan this time.

Anyway that is how a guy who knows nothing about economics but lives on a isolated hill in the middle of a vineyard sees it as he is not inundated with the groupthink of the modern culture.  But what do I know?

That’s the defense of Bain and Mitt we heard this weekend.  Creative destruction (CD) is the concept that as technology progresses and markets advance, businesses have to reinvent themselves and this could be a painful process, but in the end it is a benefit to all of us.  Kodiak comes to mind as a company that did not make the transition from film to data.  CD was used by Fareed Zakaria on his show GPS when interviewing Paul Krugman about what he felt was Paul’s unfair attack on Bain in Paul’s column on Friday.  It was also used by George Will on This Week with George Stephanopoulos.  Each in order.

On Fareed, Paul stood his ground pointing out that “it’s actually wrong to think about Bain as having either created or destroyed jobs. On balance, it led to the destruction of relatively good jobs and replaced them with jobs that are worse.   No different. This is what private equity has done, to a large extent, in the U.S. economy. I don’t – I don’t think Bain stands out as an especially bad member of that industry, but that industry is – is doing stuff that is good for corporate bottom lines, but not terribly good for workers. “  He went on to point out that “the main point is that Romney is saying I should be president because I know how to create jobs, and he actually does know how to make a lot of money in private equity, which is not at all the same thing as creating jobs. It’s not all the same thing as – as what’s involved in – in running macroeconomic policy.”

So in the first use of the CD defense, what is pointed out is the jobs that are left are poorer paying, with less benefits, and in an economy that is screaming for demand, this won’t help.  As Paul points out, this may be a great way to make money, but making money is not the same as creating jobs, and if this happens across the board, i.e. in the macroeconomy, yikes.

On This Week, George Will took up the CD defense:  “And I think the American people understand this. George, the part of our society that has seen the most creative destruction is the intensive industry of agriculture. A hundred years ago, 30 percent of the American people were working in agriculture. Today it’s less than 2 percent. I don’t think the Americans are upset by that. was a reality for our farmers where 30% of our population use to be in the profession and today there is less than 1% (his numbers), and nobody seems to mind.”  I find this rather funny in the sense that in Greece where their austerity has killed their better paying jobs, Greeks are returning to the land to eek out a living (NYT).  George is trying to paint the picture that this is just the healthy process of capitalism.  But I would argue that there is creative destruction, and then their is creative destruction.

Paul Krugman did a good job of drawing this distinction:  “…the fact of the matter is that creative destruction is a great thing when the economy is near full employment and when the issue is clearing away the deadwood and getting new companies, we can make that case.  But that’s not the world we’re living in right now. We’re living in a world that is kind of in a low-key version of the Great Depression, an economy with 13 million people out of work, with 4 million people out of work for more than a year.  What you really need, substantively, is you need something that is about creating demand, about expanding employment. We don’t want ruthlessness.”

Understand what Bain was all about, making money, and it did handsomely from taking over companies, restructure them to be more profitable by reducing wages and benefits, taking out their profits through creating debt in the company, and then if the company survived, an additional profit selling that off.  How does that translate to improving the overall economy, unless we think good employment is everyone with a reduced standard of living.  No, the Mitt rendition of CD is not how we ought to restructure our economy and the lessons Mitt learned from it have nothing to do with running our nation.  If you want to look at an example that worked and saved jobs, look to the restructuring of the auto industry that we bailed out and brought back to profitability.  The point here was to save jobs and keep an industry in the U.S.  Remember who was dead set against that?  Our boy Mitt.

On another note on our economy:  The conventional wisdom seems to be shifting with an understanding that austerity by itself will not help either Europe or us.  The new conservative language is austerity with “smart” investment.  Another no-Duh moment where the stupidity of shovel ready jobs comes back to haunt the Democrats and President Obama when their stingy  stimulus program was not carefully planned for our future.

In a work, yes.  Okay, I will explain.  With the coverage of the South Carolina primary, there was the required interview with a Tea Party leader about which way the Tea Party would lean.  My thought was run crazy candidates and then see which the crazies prefer.  This is rational?  Then I thought, who cares what these people think, it is all nonsensical.

The Tea Party sprang up from pure anger.  That is what distinguished these folks was that “they were mad as hell and were not going to take it anymore.”  Take what was the question.  It was in my opinion a reaction to too many changes and they were terrified little people.  First you have the crashing of the economy and the dawning of the idea that things might not be better for our children than they were for us.  Then you have the election of a black President who wanted to bring change to government.  Finally you have the recognition that government wasn’t working for them.  Bring on irrational fear and a claim to take back their government, which nobody took from them.  This was highlighted by their blaming government for everything bad and telling politicians to keep government’s hands off their Medicare.  Duh.

The present day Tea Party seems to be divided into three groups.  The first are the social conservatives and read this as evangelical Christians.  They want government to enforce their idea of religious values on the rest of us.  They are the ones who can’t vote for Mitt because he is a Moron and think Rick Santorum is making sense with banning contraception.  They are a little confused about the “Enlightenment” and the Founder’s brilliant move to create a government devoid of religion (or maintaining a balance so no one religion could dominate).  They have been busy reinventing history to claim we are a Christian nation.  They would bring us theocracy and restart religious civil wars.  So much for this group.

Then there is the libertarian group that would like to return us to the 19th century.  They love Ron Paul.  Once again we have a failure to think deeply.  They want government out of their lives (unlike the last group that wants government to their enforce their religious views), but they haven’t thought it through.  These are the people who love their Social Security and Medicare (they earned it!) but think government is the problem.  They are the group most responsible for the election of those in Congress who have stopped anything from happening.

All you have to do is to question these folks closely on their views and policy choices and then ask hard questions about the consequences of those policies that might impact them to show the irrationality of their policies.  Let’s cut taxes, stop regulation, and reduce government, and then all the complex problems that face us will just go away and the deficit will just magically disappear?  Who will build the infrastructure?  Who will ensure that higher education is affordable?  Who will ensure clean air and water? And it goes on and on.  These are the people who are totally out of touch with the reality of what government has already done for them and they simply do not want to uphold their end of the responsibility bargain.  The lessons of history are lost on them.

Then there is the last group that understands that government isn’t working for them and they are mad as hell and are lashing out at government.  They are the ones who are really aligned with the 99%.  They are neither Progressives or Conservatives in the sense that they are not pushing a political agenda, but really just want to throw the current bums out.  They are the only ones who are making sense in this group although unless their anger is channeled toward effective changes in government, just throwing the bums out and electing other angry people doesn’t really fix the problem.  This is the Mitt crowd because they want to throw Obama out and replace him with the most likely candidate to do that.

The bottom line here which no one seems to want to examine is that the Tea Party and their “choices” are irrelevant to addressing the problems that face us.  None of these people are offering policy choices or candidates who represent these policy choices that address the reality of our situation.  So what they think or where they are leaning should only be news in the sense that we want to make just the opposite choices if we hope to do anything effective.  Many writers have commented at how decent and earnest these people are and they are serious.  All that is true, but their choices are moronic.  I have very good friends whose political choices defy logic and good sense.  They stay good friends because I don’t challenge their thought process, but the media in this election must do just that if we are to understand that being mad is not a political policy that will help the country.

Note:  Where does Newt fit?  Newt is sort of the the default candidate of all these groups if their preferred candidate falters.  We must not forget that there are non-Tea Party conservatives that for the most part will either vote for Mitt as the most electable or Newt as a fall back.  Where is Jon Huntsman?  He is rational so he has no chance whatsoever.