Thursday, November 27, 2008

Another Reason why The Economist Rocks

Nothing quite like the sarcasm and wit of the editorial board of The Economist. In a leader (November 15, "O give me a home...") discussing the possibility of the Maldives looking to buy a new homeland, as the country looks likely to be a casualty of rising sea levels, the editors expand the discussion to include the U.S.:
And Barack Obama, committed to uniting America, could defuse the nation’s culture wars by purchasing an alternative homeland for those of his countrymen who want more use of the death penalty, less gun control and no gay marriage. A slice of Saudia Arabia’s empty quarter would do nicely: there’s plenty of space and the new occupants would have lots in common with the locals.

Sunday, November 23, 2008

The Future of the "Bolivarian Revolution"

I highly recommend watching the Frontline program "The Hugo Chavez Show" showing this week on PBS. In addition to demonstrating why government efforts to control the commanding heights of the economy are utterly doomed to inefficiency and failure -- it showcases how an elected official can effectively use modern communication methods to build his brand and craft his public image to one's core coalition.

The history of this beautiful country is incredibly tragic. Unfortunately, I believe in the next two years a new monumental chapter of sorrow is about to unfold. The precipitious drop in the price of oil has left Chavez with serious financial difficulties and the inability to continue buying off support from the poor. As his popularity decreases with the public, and former allies turn against him, I fear the methods Chavez will resort to in order to preserve power and enact the "Bolivarian Revolution."

Wednesday, November 19, 2008

The Politics of Fear

I have noticed that individuals pushing an issue agenda keep using fear to advance their narrative in the public's consensus. While there is evidence that fear and negative campaigning does indeed work to elect candidates into office, I do not think this is an effective method to increase public recognition of a political cause or empower a larger minority to demand change. Furthermore, I think ridiculous projections and/or talking points reduce one's ability to grow their coalition and damages the efforts by many who are working to actually achieve progress on the cause.

I'm going to take two examples to illustrate my rationale: radicals in the environmental movement (this post) and the U.S. right-wing campaign against socialism (future post TBD).

Knowing that an individual has said the following statements over the years do you really think that he is an effective messenger to increase the environmental movement's coalition?
  • "the battle to feed all of humanity is over ... In the 1970s and 1980s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now" (1968);
  • "India couldn't possibly feed two hundred million more people by 1980" and "I have yet to meet anyone familiar with the situation who thinks that India will be self-sufficient in food by 1971" (1968);
  • "I would take even money that England will not exist in the year 2000" and "'Smog disasters' in 1973 might kill 200,000 people in New York and Los Angeles" (1969);
  • "in ten years all important animal life in the sea will be extinct. Large areas of coastline will have to be evacuated because of the stench of dead fish" (1970);
  • "before 1985, mankind will enter a genuine age of scarcity . . . in which the accessible supplies of many key minerals will be facing depletion" (1976);
  • "by 1985 enough millions will have died to reduce the earth's population to some acceptable level, like 1.5 billion people" (1969);
  • "by 1980 the United States would see its life expectancy drop to 42 because of pesticides, and by 1999 its population would drop to 22.6 million" (1969);
  • "actually, the problem in the world is that there is much too many rich people..." (1990);
  • "giving society cheap, abundant energy would be the equivalent of giving an idiot child a machine gun" (1992); and
  • "we've already had too much economic growth in the United States. Economic growth in rich countries like ours is the disease, not the cure" (1990)
The answer is clearly a resounding NO!!! I was catching up on some podcasts recently and listened to a Science Friday's from August entitled "Mass Extinction Event on the Horizon?" Host Ira Flatow was interviewing the man responsible for the previous statements... Paul Ehrlich.

Now I strongly consider myself an environmentalist. I believe public policy in regards to the environment must incorporate not only the needs of humans, it must take into consider the interests of plants and animals as we do in fact SHARE this planet with them.

However, it blows my mind why anybody takes Ehrlich seriously or would give him a platform to spew his nonsense... unless they are against growing the global coalition to take public policy measures to combat climate change and pollution caused from human activities. Ehrlich had the audacity to claim:
  • "the United States is going to be 439 million people by 2050. That's roughly 300 million people more than anybody has ever given a reason for having alive in the United States at one time";
  • "I think people need to be scared (of future environmental devastation)... Fear ought to be a big incentive now if we care anything about our children or grandchildren world" (Paul, fear doesn't work if you have 0 credibility);
  • "we don't even have a population policy! In the United States we argue about immigration policy without having a population policy. It's kind of like designing an airplane that can load 100 people a minute and when you say how many should it fly and you say well don't worry about that just design a plane that will load 100 people a minute." (Seriously? First off, government doesn't belong in the bedroom!!! Beyond that, Paul has consistently ignored evidence showing that as economic material well-being goes up, birthrates go down & the role technology can and will play to produce goods consumers want far more efficiently.)
This nonsense and tactical advise does not and will not convince anybody who is not a part of the growing environmental coalition to join -- it only reduces the credibility of the movement as a whole and damages the credibility and validity of the environmental brand. For the sake of the planet, please stop giving Ehrlich anymore media opportunities to tarnish the hard fought gains the environmental movement has made with the American and global public.

Tuesday, November 18, 2008

Why I am against the Proposed Bailout of the Big Three

Reposting my thoughts I e-mailed to a few friends the other day. The remarks in quotations are statements from a really good friend of mine.
"No other industry has been similarly crippled because external circumstances - fuel prices - don't have such a major effect on the health of any other industry."

Fuel prices are NOT the reason the American auto industry is having problems. That is an absurd argument. Why are Toyota, Honda and other foreign manufacturers still in the black? The foreign companies have achieved profitability in America mainly by setting up their factories in Southern and border states where they could avoid the UAW, and thereby introduce efficient methods of production.

"The automakers also rely heavily on loans and bonds to operate; the complete collapse of the credit market was another factor beyond their control."

Not really. Only a couple of years ago, GM was paying $5 billion per year in health benefits to retirees and current employees. The UAW was intent on saddling GM, Ford and Chrysler with absurdly high benefit liabilities knowing if all else failed government would pick up the tab.

There is a reason foreign automobile companies have easier access to credit -- they are simply run better and limit the power unions have.
Back to the principle point at hand.... why bankruptcy is the needed cure and why the bailout is a bad idea.

Bankruptcy Needed

1. Bankruptcy would help GM and Ford become more competitive by allowing them to rip up significant parts of their labor contracts with the UAW. Allowing the big three to dramatically reduce their health care liabilities to past and present workers and reduce the wages of current workers would lead to dramatic cost savings. I doubt this is possible without declaring bankruptcy.

Here is an analogy for you... United Airlines. By entering bankruptcy it was able to reduce its inflated cost structure by breaking contracts it had with the pilots union and other employee unions. It exited bankruptcy a slimmer and more efficient airline. Although it remains to be seen if UA can still survive, it is in much better shape to compete than before it entered bankruptcy.

2. Bankruptcy would force a massive reorganization. The current management would be forced out and allow the firms to reorganize and become more productive and efficient firms.

Why Bailout Bad

1. A bailout of the big three without forcing fundamental change in how these firms are managed will only result in another round of $25-$50 billions checks in the very near future. It is simply a terrible idea to simply write a check to the auto industry without demanding major, major restructuring of its labor contracts. Without that the money will simply go down a rat hole and the automakers will just be back again in a year or two asking for more money. Why should we as taxpayers subsidize a business model imposed on the big 3 by the UAW that is fundamentally not feasible?

The Democrats need the mid west for political power, and rely on the UAW and other unions to get out the vote. No way are the Dems going to get the needed massive concessions out of the UAW to allow the Big 3 to be able to compete without subsidies against foreign car companies that are profitable without massive government subsidies.

2. Government is inherently bad about picking economic winners and losers. Rewarding political patronage and enhancing electoral power is more important than creating a viable profitable business.

3. What is the objective of the bailout? To save jobs? At least with the bailout of the financial sector we have an objective of keeping banks capitalized enough where they can continue to lend money. Pretty straightforward.

We just don't have any good blueprint for what we want them to do!!!
"what matters is getting the policy right so that we don't put too many people out of work, on the one hand, or waste the government's money on the other."

I would argue that a bailout in of itself is a waste of taxpayer money. Government should not be in the business of deciding economic winners and losers -- that my friend is socialism.
Bottom line is Detroit needs to dramatically cut production, wages and health care costs.