Wednesday, November 13, 2013

Arriving Too Soon to a Theater Near You

            In recent remarks to the National Broadcasting Company, Secretary of State John Kerry expressed his dissatisfaction with the official stories of President Kennedy’s assassination.  On Sunday, November 10, 2013, N.B.C.’s David Gregory asked Kerry to elaborate on his statement that, “To this day, I have serious doubts that Lee Harvey Oswald acted alone.”  Understandably reluctant to be labelled a conspiracy theorist, Kerry refused to be drawn out; but it was still a telling exchange: 
            Kerry:  No.  I just have a point of view.  And I’m not going to get into that.  It’s — you know, it’s not something that I think needs to be commented on, and certainly not at this time.
            Gregory:  Do you think the conspiracy theories — his involvement with Russia, motivation from the Soviet Union or Cuba — are valid at some level?

            Unfortunately, but somewhat predictably, Gregory asked about foreign motivation for the murder.  Apparently, he is unaware that all of the crimes committed in support of the lone assassin story were perpetrated by domestic entities. 
            In 1963, murder of the President was not a federal offense; jurisdiction for the assassination rested in Texas.  Consequently, the removal of Kennedy’s body from Dallas was a crime.  The Russians didn’t do that; the Secret Service did.  The autopsy at Bethesda Naval Hospital, where the prosectors were ordered to remain silent on pain of court martial, was a crime; but the Navy did that, not the Cubans.  Gangsters didn’t make up the story about alleged assassin Lee Oswald going to Mexico City in September of 1963; the C.I.A. did that.  Those crimes, and many more, were committed to protect Kennedy’s killers. 
            In a nutshell, the official history of the crime goes like this.  “We’re innocent; it was that guy over there with the $3 rifle.”[1]  Millions of people found that claim to be ridiculous; so, a dozen years later, the perpetrators changed their alibi.  “We’re innocent, but we think the mob might have been involved.”
            The Warren Commission was an accessory after the fact to the murder of J.F.K.  The House Select Committee on Assassinations was an accessory after the fact to two murders — John Kennedy and Dr. Martin Luther King.
            The Commission and Committee stories are fairy tales.  Yet, some people who discounted the first story nevertheless bought the second version!  Author and syndicated radio and tv host Thom Hartmann is one of those people.  On November 12, 2013, Hartmann appeared with Amy Goodman on Democracy Now! and briefly discussed the assassination:
            Hartmann:  Yeah, yeah.  The — with virtual certainty, I can say that, you know, it was the mob who killed Jack Kennedy.  At that — in that context, I mean, there was involvement of others within our government and whatnot, but principally it was the mob…
             “[O]thers within our government and whatnot” were involved, but organized crime killed the President.  Hartmann is virtually certain of that. 
            He can’t explain the Magic Bullet Theory or the Magic Ammunition Clip Theory.  He doesn’t know where the spent shells found in the Texas School Book Depository went.  He can’t explain why x-rays of the President’s skull don’t show an entrance wound in the back of Kennedy’s head.  He can’t explain any details of the crime.  But he is virtually certain that gangsters did it.  His book, Legacy of Secrecy: The Long Shadow of the JFK Assassination, is being made into a movie starring Leonardo DiCaprio.
                        Goodman:  And when is the movie coming out?
                        Hartmann:  We’ll see.  Hopefully next year.

[1]  That’s not a joke.  The Mannlicher-Carcano rifle supposedly used in the shooting sold for three bucks wholesale.  “Oswald” bought it retail for twelve and change.

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Saturday, November 02, 2013

Stale Air

            The approaching anniversary of President Kennedy’s assassination was certain to bring with it new tales of how the U.S. intelligence apparatus did not kill him.  And sure enough, a new we-didn’t-do-it account of the murder landed in bookstores this fall — A Cruel and Shocking Act:  The Secret History of the Kennedy Assassination, by investigative reporter Philip Shenon. 
            Dave Davies interviewed Shenon for the N.P.R. program Fresh Air, broadcast on October 28, 2013.  Unfortunately, like many other interviewers on this topic, Davies apparently knows nothing of any importance about the case.  So when Shenon launched into the F.B.I.’s role in the investigation, Davies was unable to ask a single insightful question. 

            Shenon:  Very early on, I mean within 48 hours of the assassination, FBI Director J. Edgar Hoover determines in his own mind that Oswald acted alone, there was no conspiracy, there’s really not much to investigate here…

            In reality, Hoover had no doubt that there was a conspiracy.  
            The C.I.A. reported that Oswald went to Mexico City in September of 1963 and contacted the Cuban and Russian embassies.  The Agency had photos of “Oswald” in Mexico City and recordings of “Oswald’s” phone calls.  Within 48 hours of the assassination, President Johnson asked Hoover about that trip.

            Johnson:  Have you established any more about the visit to the Soviet Embassy in Mexico in September?
            Hoover:  No, that’s one angle that’s very confusing for this reason.  We have up here the tape and the photograph of the man who was at the Soviet Embassy using Oswald’s name.  That picture and the tape do not correspond to this man’s voice, nor to his appearance.  In other words, it appears that there is a second person who was at the Soviet Embassy down there[1]  (Italics added.)

(Left:  "Oswald" in Mexico City)
            Hoover had proof, photographs and tape recordings, that someone impersonated Oswald in Mexico City.  In September of 1963, Oswald was a nobody.  Why would someone want to impersonate him?
            In the interview, Shenon repeated one myth after another — that the missing autopsy photos were held by Robert Kennedy; that Jacqueline Kennedy chose to have the autopsy conducted at Bethesda Naval Hospital; that Jack Ruby insisted there was no conspiracy; that Oswald was under surveillance in Mexico City; that he met with a K.G.B. officer responsible for assassinations in the west; that the F.B.I and the C.I.A. didn’t connect the dots;[2] that the Zapruder film was a “clock of the assassination”; that Lyndon Johnson thought Fidel Castro was behind the murder…
            The only genuinely instructive part of the interview concerned the influence of Oliver Stone’s movie, JFK.  Public response to the movie prompted the President John F. Kennedy Assassination Records Collection Act of 1992 which resulted in the release of millions of pages of documents.  Shenon said that his own research benefitted from that material, but I find his assertion very hard to believe.
            Philip Shenon told N.P.R. that the destruction of evidence in the case was a major theme of his book.  The F.B.I. and the C.I.A. lied about the crime, but they only did so because they had failed to prevent the assassination and wanted to cover their butts.  There was no conspiracy. 
            I would remind investigative reporter Philip Shenon that the removal of President Kennedy’s body from Dallas was a crime.  The autopsy was a crime.  The destruction of evidence was a crime.  The fabrication of evidence was a crime.  The federal government didn’t have jurisdiction in the case and the Warren Commission didn’t have the legal authority to classify evidence, so that entire process was a crime.  Thank goodness there was no conspiracy!  I’d hate to think all those crimes were committed to protect Kennedy’s killers.

[1]  Deb Reichmann, “Oswald no longer thought to be voice on tape,” Chicago Sun-Times, 11/22/1999, p. 20.  Reichmann’s title was a bit odd; Oswald was never thought to be the voice on those tapes.  Intelligence analyst John Newman quoted the same phone call between Johnson and Hoover in his 1995 book, Oswald and the CIA.
[2]  The C.I.A. absolutely connected the dots in Mexico City because they invented those dots.  C.I.A. officer David Atlee Phillips admitted in 1978 that there was no evidence Oswald was photographed in Mexico City or that he visited the Soviet Embassy.  In fact, there is no evidence that he went to Mexico City at all.

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Saturday, October 12, 2013

Rhyme of a Recent Marriner

            Marriner Stoddard Eccles was born in 1890, one of twenty-one children.  His father, David Eccles, was a Mormon immigrant from Scotland who settled in Utah, married two women, became a businessman, and made a fortune.
            At the age of twenty, Marriner went to Scotland as a missionary; but he returned to Utah two years later after his father’s death.  He became a bank president when he was twenty-four, and a multi-millionaire tycoon by the time he was forty.  He was a director of railroad, hotel, and insurance companies, head of a bank holding company with twenty-six banks, and president of four other companies when the stock market crashed in 1929.
            Thanks to his diversification, he survived the Great Crash, but the experience changed his mind.  Decades later, in his memoirs, he wrote:

            Men I respected assured me that the economic crisis was only temporary and that soon all the things that had pulled the country out of previous depressions would operate to that same end once again.  But weeks turned to months.  The months turned to a year or more.  Instead of easing, the economic crisis worsened.

            To preserve his banks, Eccles called in loans and reduced credit, but he began to suspect that by tightening their belts, banks were saving themselves at the expense of the larger society, that:

            in seeking individual salvation, we were contributing to collective ruin.

            Eccles was an economist from the general equilibrium school, yet he rejected the prevailing notion that the crisis was somehow the result of “natural economic laws.”  He saw it as the work of men:

            with great economic power [who] had an undue influence in making the rules of the economic game, in shaping the actions of government that enforced those rules, and in conditioning the attitude taken by people as a whole toward those rules.  After I lost faith in my business heroes, I concluded that I and everyone else had an equal right to share in the process by which economic rules are made and changed.

            In 1933, he testified before a Senate committee investigating the crash.  He disputed the view that the downturn was the result of previous extravagant spending, pointing instead to leveraged debt:

            The debt structure has obtained its present astronomical proportions due to an unbalanced distribution of wealth production as measured in buying power during our years of prosperity.  Too much of the product of labor was diverted into capital goods, and as a result what seemed to be our prosperity was maintained on a basis of abnormal credit both at home and abroad.  (Emphasis added.)

            With so much money flowing into financial products, there was not enough left among the middle and lower classes to sustain spending:

            This naturally reduced the demand for goods of all kinds, bringing about what appeared to be overproduction, but what in reality was underconsumption measured in terms of the real world and not the money world.  This naturally brought about a falling in prices and unemployment.  Unemployment further decreased the consumption of goods, which further increased unemployment, thus bringing about a continuing decline in prices.  Earnings began to disappear, requiring economies of all kinds — decreases in wages, salaries, and time of those employed.
            And thus the vicious cycle of deflation was continued until after nearly four years we find one-third of our entire working population unemployed, with prices of everything greatly reduced, raw products of all kinds selling at an unprecedentedly low level; our national income reduced by 50 per cent with the aggregate debt burden greater than ever before, not in dollars but measured by present values which represents the ability to pay; fixed charges, such as taxes, railroad and utility rates, insurance and interest charges close to the 1929 level and requiring such a portion of the national income to meet them that the amount left for consumption goods is not sufficient to support the population.

            Eccles understood that demand drives the real economy.  He argued that when business fails, it is the responsibility of government to protect the citizens by giving them the means to earn money.  Unemployment means money is not being circulated:

            Of course we are losing $2,000,000,000 per month in unemployment.  I can conceive of no greater waste than the waste of reducing our national income about half of what it was.  I can not conceive of any waste as great as that.  Labor, after all, is our only source of wealth.
            I repeat there is plenty of money today to bring about a restoration of prices, but the chief trouble is that it is in the wrong place; it is concentrated in the larger financial centers of the country, the creditor sections, leaving a great portion of the back country, or the debtor sections, drained dry…During the period of the depression the creditor sections have acted on our system like a great suction pump, drawing a large portion of the available income and deposits in payment of interest, debts, insurance and dividends as well as in the transfer of balances by the larger corporations normally carried throughout the country.

            Eccles presented five main points to repair the economy — federal spending to assist the destitute and the unemployed, works projects, regulations on business, refinancing mortgages, and canceling the debts of our World War I allies.  Our allies could not buy our products if all their money went to debt service.  He also recommended federal bank insurance, tax reforms, a minimum wage, unemployment insurance, and regulation of the stock market: 

            Such measures as I have proposed may frighten those of our people who possess wealth.  However, they should feel reassured in reflecting upon the following quotation from one of our leading economists:

            It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving.  They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they can not save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying.  It is for the interests of the well to do — to protect them from the results of their own folly — that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit.

            Eccles was nominated to chair the Federal Reserve in 1934, where he served for fourteen years.  After he retired, he wrote in his memoirs: 

            A policy of adequate governmental outlays at a time when private enterprise is curtailing its expenditures does not reflect a preference for an unbalanced budget.  It merely reflects a desire and the need to put idle men, money and material to work.  As they are put to work, and as private enterprise is stimulated to absorb the unemployed, the budget can and should be brought into balance, to offset the danger of a boom on the upswing, just as an unbalanced budget could help counteract a depression on a downswing.

            Eccles concluded that the Great Depression was not caused by excessive spending in the 1920s but by the great inequality of wealth distribution:

            As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery.  Instead of achieving that kind of distribution, a giant suction pump had by 1929-1930 drawn into a few hands an increasing portion of currently produced wealth.  This served them as capital accumulations.  But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants.  In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing.  When their credit ran out, the game stopped.

            The policies developed to cope with the Great Depression served us well for years, so of course they were opposed by the political right.  Claiming that government is the problem, not the solution, they fought successfully to eliminate the very regulations which had saved them decades before.  The Crash of 2008 was followed by the usual right-wing demand for government austerity to further cripple the economy.  They wanted to save the banks at the expense of the larger society, and they got their way.  Since then, they have opposed anything and everything that would actually help ordinary citizens.  It’s 1930 all over again.

            History, Mark Twain quipped, doesn’t repeat itself, but it does sometimes rhyme.  We’ve already had another crash, so we could use another Marriner Eccles — and sooner rather than later.

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Friday, October 11, 2013

Aristotelian Economics

            The Italian scientist Galileo Galilei supposedly dropped two metal balls of different weights from the Leaning Tower of Pisa and thus experimentally confirmed the existence of a gravitational constant. 
            Such is the legend, anyway.  An experiment of that sort was actually carried out in 1586 by a Flemish scientist named Simon Stevin who dropped two lead weights from a 10-meter tower.  His results were published, and Galileo may have heard of them; but he had already used other means to determine that different weights fall at the same speed. 
            The famous event at the Tower of Pisa was the work of an Aristotelian professor in 1612 attempting to refute Galileo.  As it happened, the two balls hit almost, but not quite, at the same time, doubtless as a consequence of imprecision in executing the drop.  Nevertheless, the result was touted as proof that Galileo was wrong.  His response was sharp enough to leave a mark:

Aristotle says that a hundred-pound ball falling from a height of one hundred cubits[1] hits the ground before a one-pound ball has fallen one cubit.  I say they arrive at the same time.  You find, on making the test, that the larger ball beats the smaller one by two inches.  Now, behind those two inches you want to hide Aristotle’s ninety-nine cubits and, speaking only of my tiny error, remain silent about his enormous mistake.[2]

            Economics is called the dismal science, and it has more than its fair share of Aristotelian professors.  In the face of repeated failures, they cling to a faulty model — the general equilibrium theory — and ignore the evidence piling up around them.  Every time they are proven wrong, they tweak the numbers and nudge the assumptions and proceed to the next goof.  This wouldn’t be a problem except for the fact that they dominate the policy-making process in Washington, D.C. 
            The general equilibrium theory was proposed by the French economist Leon Walras in 1874.  Kenneth Arrow and Gerard Debreu updated the theory in 1951 and proved mathematically that it was correct if:

            1)  The markets are perfect
                        everyone has the same information
            2)  There is a full set of insurance markets
                        insurance is available against every conceivable risk
            3)  Capital markets are perfect
                        loans are always available at appropriate rates
            4)  And there are no externalities or public goods

             Those are some pretty big ifs.  They are so restrictive that they render meaningless the notion of efficient markets.  For example, pollution is a huge and costly externality that can’t be “assumed away.”  Insurance markets are not complete, loans do dry up, and we have public utilities and roads.  If everyone has the same information, no one can ever gain advantage through innovation or insider trading.  According to the general theory, there can never be any stock market bubbles because prices convey all the relevant information.  If the labor market always clears, there can be no unemployment; or unemployment must be of such short duration that no intervention is needed.

 Conservative economists responded to criticisms of the general model by:
a)  treating them as theoretical niceties — hey, markets are almost perfect                                                                                OR
b)  conceding that markets are inefficient but insisting government is worse

            In other words, they dismissed the contradictions and soldiered on. 
            Subsequent efforts to prop up the theory simply added more questionable arguments.  Milton Friedman of the so-called Chicago school of economists, introduced “monetarism” — the idea that the proper role of the Federal Reserve was to increase monetary aggregates at a fixed rate (the rate of growth of output) and let the market do the rest.  He suggested the Federal Reserve turned the recession of 1930 into the Great Depression by reducing the money supply, which led to currency hoarding, which cut spending, which killed jobs, etc. 
            However, bank failures, not the Federal Reserve, led to currency hoarding and the resulting downward spiral.[3]  There was no federal deposit insurance, and the rate of output was falling.  The Federal Reserve didn’t reduce the money supply; but the Fed didn’t increase it, either.  In a sense, the Fed anticipated the young Friedman’s future theory!  And it didn’t work out very well.  Since then, increasing the money supply has become a standard tool for fighting recessions.[4]
            Friedman’s notion of “free” (as in unregulated) banking was imposed by force in Chile after President Allende was assassinated in 1973: 

Free banking did lead to a burst of economic activity as new banks were opened and credit flowed freely.  But just as it didn’t take long for America’s unregulated banking to bring the American economy to its knees, Chile, too, experienced its deepest downturn in 1982.  It would take Chile more than a quarter of a century to pay back the debts incurred… (Joseph Stiglitz, The Price of Inequality)

            To be sure, other improvements appeared as the general theory became the “classical” theory and then the “neo-classical” theory.  Joseph Schumpeter muscled innovation into the mix with the notion of creative destruction, characterizing markets as dominated by monopolists who are displaced by innovators who become the new monopolists.  In short, he described competition for markets rather than within markets.  But monopolists wouldn’t sit around meekly waiting for innovators to take over.  They would use their clout, especially in the absence of regulations, to deter innovation or steal ideas outright.  The process Schumpeter detailed was anything but efficient.
            One school of thought held that wage structures are too rigid.  From that perspective, unions, minimum wage laws, unemployment compensation, and policies to maintain wage stability are bad because they interfere with “market efficiency.”  That’s why so many on the right blame workers for unemployment.  Teachers are greedy, don’t you know; policemen and firemen are greedy.  Similarly, mortgage scammers blame homebuyers for the mortgage crisis, and throw in an insult to boot — “You should have known better than to trust us.”

            Aristotle is sometimes called the Father of Natural Science; however, he was nothing of the sort.  He claimed women have fewer teeth than men; but although he was married twice, he never asked either Mrs. Aristotle to open her mouth so he could count her teeth.  He used the powers of his mind and reasoned it out.  He held that mice arise spontaneously from damp hay, but he didn’t test that theory.  He reasoned it out. 
            Aristotle died 2335 years ago, and scientists no longer appeal to his authority.  The classical model of equilibrium is slowly being supplanted by a new paradigm of how information affects markets, but adherents of the old theory are very much alive and kicking.  In response to the Crash of 2008, Aristotelian economists pushed the policies of Herbert Hoover!  They extol free markets as long as the markets are rigged in their behalf.  They oppose government intervention until they need to be bailed out.  They reject regulations for the very same reason that muggers don’t like policemen. 

             They’ve reasoned it out.  They’re wrong, but they don’t care because the argument isn’t really about economics anyway.  It’s about who rules.

[1]  Cubit — orig. the length of the arm from the end of the middle finger to the elbow, roughly 20 inches.
[2]  John Gribbin, The Scientists, Random House, New York, 2002, pp. 76-77
[3]  In fact, in 1933, soon-to-be Fed chairman Marriner Eccles told the Senate there was plenty of money to support prices, but it was in the wrong place.  It was concentrated in the financial sector, not dispersed in the hands of consumers.
[4]  Which tells us a great deal about efforts to curtail government spending after the Crash of 2008.  Republicans are actively undermining a recovery — and not because of high-minded adherence to economic verities.  In the spirit of Friedmanism, they see the current crisis as an opportunity to strong-arm the nation into still more ruinous forms of the general equilibrium theory.

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Friday, September 27, 2013

Wealth and Democracy

            Wealth and Democracy,[1] by Kevin Phillips, is a history of the connections between money and politics through the last five hundred years or so.  Packed with charts and graphs and fascinating details, the book resists simple encapsulation.  However, I’m going to give it a try, starting with Spain.

            Spain under King Ferdinand and Queen Isabella produced wool, textiles, and steel.  But that began to change when plunder from the New World arrived.  Crown revenues doubled and then doubled again, but the money was not  invested in Spain’s real economy: 

     In the words of one seventeenth-century Spaniard, “The possession and abundance of such wealth altered everything.  Agriculture laid down the plough…trade put on a noble air, and exchanging the work-bench for the saddle, went out to parade up and down the street.”  (Wealth and Democracy, p. 179)

            Instead of improving Spain’s infrastructure, the wealthy wasted their riches on extravagance and foreign adventures.  The decline in agriculture and industry meant a decline in jobs, squeezing the middle-class and increasing the divide between rich and poor.  Hidalgos (gentlemen) were exempted from taxes, and the middle-class faced an ever-growing tax burden. 

            As the finance sector surpassed agriculture and industry, the influx of easy money drove up prices, making foreign goods cheaper and further undermining domestic production.  Predictably, the rich invested more and more money in foreign countries offering higher rates of return:

     “The result,” according to a leading historian, “was the growth of a powerful rentier class in Castile, investing its money not in trade or industry but in annuities.”  (p. 180)

            In 1600, Martin Gonzalez de Cellorigo wrote that Spain had:

“come to be an extreme contrast of rich and poor, and there is no means of adjusting them to one another.  Our condition is one in which we have rich who loll at ease, or poor who beg, and we lack people of the middling sort, whom neither wealth nor poverty prevents from pursuing the rightful kind of business enjoined by natural law.

…[Wealth is] being dissipated on thin air — on papers, contracts, censos, and letters of exchange, on cash, and silver, and gold — instead of being expended on things that yield profits and extract riches from outside to augment the riches within.”  (p. 180)

            Successive rulers mortgaged future shipments of gold and silver to pay for war.  Eventually, despite the flood of plunder from the New World, two-thirds of Spain’s revenues went to debt service.

            The Dutch empire followed a similar trajectory.  Its finance sector outstripped agriculture and industry.  The middling sort dwindled, and the Dutch empire collapsed: 

Finance began to displace hands-on commerce.  As early as the 1650s, traders in Amsterdam had complained that the ruling burgomasters and regents, once themselves in trade, now “derived their income from houses, land and money at interest.”  (p. 181)

James Boswell’s notes from a 1764 visit are often cited:  “Most of their principal towns are sadly decayed, and instead of finding every mortal employed, you meet with multitudes of poor creatures who are starving in idleness.”  (p. 182)

Isaac Pinto, a Dutch economic writer, had found it worrisome in 1771 that bonds, shares, and foreign funds “were the linchpin of civic wealth and status, the principal pillar of the social system, a system quite unlike that existing in other countries.”  (p. 183)

            Britain’s empire also went down that road and arrived at the same destination.  Wealth brought sloth, not jobs, and widened class divisions.  Infrastructure was neglected; the middle-class shrank.  Colonial Secretary Joseph Chamberlain worried that financialzation of the economy made the country richer and weaker, a mere “hoarder of invested securities.”  From 1870 to 1906, Britain’s share of world manufacturing production was cut in half.  Wages fell while the upper crust pursued stocks, bought yachts, and shot pheasants.  In 1908, Winston Churchill wrote:

“The seed of imperial ruin and national decay — the unnatural gap between the rich and the poor…the swift increase of vulgar, jobless luxury — are the enemies of Britain.”  (p. 171)

            Does any of this sound familiar?  It should.  The economy of the early United States was based primarily on agriculture.  Industry gradually surpassed agriculture, and the U.S. became the greatest creditor nation on earth.  But the finance sector, growing by leaps and bounds, overtook industry in the 1980s and 90s. 
            Now, we are the greatest debtor nation on earth.  Jobs are shipped abroad; cheap foreign goods pour in.  Infrastructure is crumbling.  The gap between the well-off and the destitute is greater than at any time in our history.  The rich clamor for lower taxes — or no taxes at all.  They seek the return of primogeniture and entail[2] through the elimination of estate taxes.  The tax burden falls ever more heavily on the middling sort who are shrinking in numbers.  When our riches are not being dissipated on the thin air of derivatives, they are wasted on war. 

            The political right looks at the staggering wealth compiled by a tiny percentage of Americans and calls it progress.  See?  The system works!

[1]  Phillips, Kevin, Wealth and Democracy: A Political History of the American Rich, Broadway Books, New York, 2002
[2]  primogeniture: the condition of being the first born of the same parents
   entail: law to limit the inheritance of real property to a specific line of heirs

Thursday, September 26, 2013

Raise the Wage!

            It’s time to raise the minimum wage; in fact, it’s past time.  It would help our economy grow; it would increase federal and state revenues; it would decrease current and future government spending; and it would bring the United States into the family of civilized nations.

            The federal minimum wage today, in real dollars, is lower than at any time since 1956.  Last July, Neil Cavuto on Fox News talked about his first job, when he earned $2.00/hr.  If the minimum wage had kept pace with inflation, it would be $9.47/hr. now.  The $9.00/hr. wage proposed by President Obama wouldn’t even bring wages up enough to cover inflation.

            The claim that the worst effects of a higher minimum wage would be felt by small businesses is partly true and mostly false.  During my stint in the restaurant business, the minimum wage went up several times.  But the cafe where I worked didn’t get into trouble because labor costs were too high.  Even after multiple increases, bumping up prices occasionally by a nickel — not on everything, but only on a few items — was enough to offset the higher wage. 

             In Illinois, the minimum wage for tipped employees is $4.95/hr.  For untipped employees, it is $8.25/hr.  On April 5, 2013, the Sun-Times ran an editorial opposing an increase in the minimum wage, arguing that the raise would drive jobs out of Illinois to neighboring states with lower minimums.
            A decade ago, when the Illinois minimum wage reached $5.15, a version of that editorial hit the papers.  As the minimum wage went up to $6.50, $7.50, $8.00, and so on, the editorial reappeared.  Yet amazingly, in all that time, Dominos Pizza did not abandon the Chicago market for the comparative advantage of Iowa.  Payless Shoes didn’t pack up and leave.  Neither did Target.  None of the national chains did.  (And if they had, wouldn’t that have been good for mom-and-pop operations in Illinois?)  The reality is that if you live in Chicago and want a pizza, you are not going to drive to Indiana to get it.[1]  
            Nor are you going to fly to Indonesia.  Global competition has nothing to do with food service, retail sales, or the great majority of other minimum wage jobs — or even many higher wage jobs.  Carpenters in America are not competing with carpenters in China.

            Earlier this year, McDonalds published a brochure for its employees laying out a sample budget — how to live on McDonalds’s wages. 

Screen capture from
            But course, you can’t live on McDonalds’s wages.  Notice the two top lines on income — first job and second job.  To earn $2060 after taxes, an employee in Illinois making $8.25/hr. would have to work 70+ hours per week. 
            Now look at expenses.  Nothing for heating, and food isn’t listed at all.
            Suppose the monthly expenses for “savings” and “other” went entirely to food costs.  That works out to $6.66 per day.  That’s one McDonalds meal for dinner each day — and nothing else.  No breakfast, no lunch, no late night snack.

            Some commentators contend that a higher minimum wage would mean the end of teenagers working at fast food joints, but they’re wrong.  If the minimum goes up, fast food joints will still have to hire someone.  Besides, only about 20% of minimum wage workers are teenagers.[2]  The median age of fast food workers is 28.  McJobs aren’t just for teenagers anymore.

            Economists are divided on the question of whether a higher minimum wage would increase unemployment.  The connection is not clear-cut; a lot of factors are involved.  So I put together my own graphic about the situation in Illinois. 

            At least for Illinois, it is clear that, until the decline and fall of the economy from 2007 through 2009, employment rose with the minimum wage.  Correlation doesn’t prove causation, but the available data does not support the notion that the minimum wage increased unemployment.

            What the graphs don’t show, but what should be obvious, is that raising the minimum wage means people have more money to spend.  And guess what, they would spend it at businesses! 
            On Friday (8/16), I heard a radio report about an intriguing analysis of the minimum wage.  Assume Walmart and McDonalds increased their minimum pay to $15.00/hr. and passed the entire added expense on to their customers.  On average, the cost of a visit to Walmart would go up 46¢.  The cost of a visit to McDonalds would go up 25¢.
            Naturally, the U.S. will not go to a $15 minimum wage because that would approach the minimum wage of Australia; and they’re supposed to copy us, not the other way around.  But what about a smaller increase to, say, $10.00?
            The Bureau of Labor of Statistics reports that there were 127 million wage and salary workers in the U.S. in 2012.  3.6 million — or 2.83% — were at or below the federal minimum wage.
            Last March, Dr. Arindrajit Dube, professor of economics at the University of Massachusetts, testified before the Senate, along with business owner David Rutigliano and others, about the minimum wage.

Senator Elizabeth Warren:  During my Senate campaign, I ate a number 11 (meal) at McDonalds many, many times a week.  I know the price on that — $7.19.  According to the data on the analysis of what would happen if we raised the minimum wage to $10.10 over three years, the price increase on that item would be about four cents. 
            …I think, Dr. Dube, you’ve looked at the inflationary effects of increasing the minimum wage.  Can you just give us a quick summary on this data?

Dr. Dube:  I think it is uncontroversial amongst economists that a minimum wage increase of this sort would not have a noticeable impact on the overall price level…So the effects on the overall price level?  Very small.
             In short, the number of people potentially affected by a higher minimum wage is less than 3% of the work force; so the cost to businesses would be marginal.  The claim that raising the minimum wage would have terrible effects on the wage/price spiral is false.  It’s a ghost story promoted by fear-mongering about socialism and based on the likelihood that the listener doesn’t know the facts.  
            To the right wing in America, raising the minimum wage to keep pace with inflation is out of the question; and raising it to keep pace with productivity would be little short of treason.
            It’s not hard to see why they think that.  According to the Sun-Times, if the minimum wage had kept pace with productivity, it would now stand at $21.72/hr.!  In other words, for the past five decades, the profits generated by increased productivity have gone almost exclusively to capital — not to the people who actually do the work. 
           The losers in this whole process have been workers and taxpayers.  Walmart advises new employees to apply for food stamps (!) — which you and I pay for through our tax dollars.  Keeping the minimum wage low means that it will cost all of us more in future Medicare and social security payments.  The Walton family is the richest family on the planet.  Why are we subsidizing them?  Is that the free market at work?
            When the minimum wage does not keep pace with inflation or productivity, it becomes a means of transferring wealth from the poor to the rich.  And that is the real reason why the largest employers of minimum wage workers oppose raising the wage — not because they would lose money, but because the growth of their wealth would slow down just a tiny bit.

[1]  The editorial did not distinguish between service sector and manufacturing jobs.  Even so, it is clear that manufacturers would not leave the state because of the so-called QWERTY principle; but that’s a discussion for another time.
[2]  Betsey Stevenson, associate professor of public policy at the University of Michigan and former chief economist of the Labor Department.

Tuesday, September 24, 2013

From Where We Were to Where We Are

1898     Remember the Maine.  Cuba was fighting for independence from Spain; the United States was looking for a pretext to intervene.  The U.S.S. Maine blew up and sank in Havana harbor.  The U.S. blamed Spain and thus began the Spanish-American War.  The U.S. acquired Puerto Rico and, for a time, the Philippines.

1941     The Japanese attack Pearl Harbor.  Hawaii commanders General Walter Short and Admiral Husband Kimmel are impugned for dereliction of duty but denied courts martial.  Between ‘41 and ‘45, nine investigations follow.  Congress will eventually release a 39-volume compilation of evidence and testimony.

1942     The office of Coordinator of Information becomes the Office of Strategic Services, forerunner of the Central Intelligence Agency.

Early 50s     The C.I.A. begins a heavily funded effort to gain influence in the arts and media.  The program will last nearly 20 years.  In the late 1950s, the Select Committee on Improper Activities in Labor and Management, the [John] McClellan Committee, investigates the influence of organized crime.  Senator John F. Kennedy sits on the Committee, and Robert F. Kennedy serves as counsel.  In R.F.K.’s subsequent book, The Enemy Within, he describes what he calls the Private Government.

1951     With the help of officer Everette Howard Hunt, Jr., the C.I.A. acquires film rights to George Orwell’s novels, Animal Farm and 1984.

1959     The U.S. begins anti-Cuba plots.  These will lead to Operation Zapata, the 1961 Bay of Pigs invasion, and to conspiracies to kill Fidel Castro.

1962     The Joint Chiefs of Staff present Defense Secretary Robert McNamara with a report on Operation Northwoods — proposals for creating pretexts for action against Cuba, including some “Remember the Maine” scenarios.

1964     The President’s Commission on the Assassination of President John F. Kennedy, the Warren Commission, issues a report and 26 volumes of evidence and testimony.  The U.S.S. Maddox is apparently attacked in the Gulf of Tonkin by the Vietnamese.  The ensuing Gulf of Tonkin Resolution effectively transfers war powers from Congress to the presidency.

1968     Reverend Doctor Martin Luther King, Jr. is killed in Memphis, allegedly by James Ray.  Senator and presidential hopeful Robert F. Kennedy is shot to death in Los Angeles, allegedly by Sirhan Sirhan.

1970     Everette Howard Hunt, Jr. “retires” from the Agency to take a job with the Robert R. Mullen Company.  James McCord also retires to strike out on his own.  Both men will soon figure prominently in the Watergate scandal.

1971     The Pentagon Papers reveal the secret history of the Vietnam war.  The U.S.S. Maddox had been part of Operation Plan 34A.  34A included bombings by Thai pilots flying U.S. planes, coastal raids, and kidnappings; the military denies that provocation was the goal.  The wording of the Gulf of Tonkin Resolution was prepared by unidentified figures in the administration four months before the “attacks” occurred.

1977     Carl Bernstein reports on intelligence assets in the news media.  The New York Times reports on the Agency’s role in the publication of over 1000 books.

1979     The House Select Committee on Assassinations issues a report and 24 volumes of evidence and testimony in the murders of President Kennedy and Dr. King.  The Committee concludes that conspiracies were behind the crimes but is curiously unable to pin down details.  The Department of Justice remains inert.  Critical documents on the assassinations are classified for 50 years.

The 1980s     American hostages in Iran are released on the day President Ronald Reagan takes office.  Exposure of the Iran-contra-cocaine operation will continue into the 1990s.

1985     Liberty Lobby, the publisher of Spotlight, prevails against a defamation suit brought by Everette Howard Hunt, Jr.  A Spotlight article concerned Hunt’s lack of an alibi for November 22, 1963, and a possible C.I.A. strategy of “limited hang-out” during the House Select Committee on Assassinations hearings.  If the Committee learned too much or broke free of control, Hunt could be sacrificed.

1988     The investigative files on the murder of Senator Robert F. Kennedy are opened only to find they have been eviscerated.

The 1990s become the Decade of Disclosure.  New details emerge in the J.F.K. murder, Pearl Harbor, the Gulf of Tonkin Incident, Operation Zapata, the killing of Malcolm X, and other events.

1991     Oliver Stone’s movie, JFK, ignites intense interest in the assassination of President Kennedy.  Congress responds in 1992 with powerful new disclosure legislation.  By the time the Assassinations Records Review Board expires in 1998, they have compiled an archive of over 4.5 million pages, covering a breath-taking range of details.

1993     Elderly and ailing Loyd Jowers confesses his part in the King assassination on A.B.C.’s Prime Time with Sam Donaldson.  Jowers names others involved, some of them Memphis policemen.

1995     Critical documents on Pearl Harbor are declassified, including a 1940 action proposal from the Office of Naval Intelligence which laid out an 8-step plan to provoke the attack.  In the next few years, Congress and the military will posthumously exonerate Short and Kimmel without admitting foreknowledge of the attack.

1996     300 surviving Vietnamese commandos, recruited decades ago by the C.I.A., are belatedly compensated for their work in Op Plan 34A, which included the “attacks” in the Gulf of Tonkin.  The legislatively arranged payments prevent a trial.  A second group of commandos is paid for Op Plan 35A.

1998     James Ray dies in prison.     1999 — Loyd Jowers is found guilty in a civil suit brought by the King family, who ask for $100 in damages.     2000 — Jowers dies without ever facing questioning from state or federal authorities.

2001     Vice-President Dick Cheney heads secret meetings on energy.  The committee maps oil fields and drilling sites in Iraq and develops a list of buyers.  Henry Kissinger is named in a suit by the survivors of Chilean General Rene Schneider.  The next day, some planes crash into some buildings.

2002     U.S. survivors of Japan’s attack on the Philippines seek compensation.  They were not evacuated in 1941 so the Japanese would not suspect the U.S. had broken the Japanese codes.  Canada, England, Norway, Singapore, and Australia have already made payments to their citizens captured by Japan.  Congressional investigative documents on the murder of Dr. King remain secret.  In California, where Sirhan Sirhan is imprisoned for the murder of Robert Kennedy, a writ of habeas corpus is inching its way through the courts.  The U.S. and England agree to “fix intelligence” around the coming attack on Iraq.

2004     The aging and ailing Everette Howard Hunt, Jr. makes a written and tape-recorded confession of his knowledge of the conspiracy to kill J.F.K.  Hunt names others involved — Frank Sturgis, David Atlee Philips, Cord Meyer, David Morales, and more — all connected to the C.I.A.  Hunt dies three years later; his son discloses the tape-recording; and Hunt’s confession doesn’t make the evening news. 

2008     Oil industry executive Richard Cheney considers plans to start a war with Iran by having U.S. forces, disguised as Iranians, fire on U.S. forces.  (The J.C.S. had a similar scheme in mind for Cuba in 1962.)  Halliburton moves to Dubai, beyond the reach of U.S. enforcement agencies.  The bank bailouts begin.

2013     45th anniversary of the murders of Dr. King and Senator Kennedy.  50th anniversary of the murder of President Kennedy.

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