Week of September 29

     The following sad editorial in The Wall Street Journal is symbolic of America’s total industrial base.

From The Wall Street Journal, October 1.

COMMENTARY

Jean Genie

By PATRICK COOKE

Levi Strauss & Co. has announced that it's closing its last factory in North America. Its blue jeans, a spin-off of the Great California Gold Rush, will now all be made overseas. There's the loss of 800 U.S. jobs, of course, but one is tempted also to lament the departure of this all-American symbol, created out of cheap, durable canvas. Yet the fact is that unless you're a gold miner you haven't got much claim on blue jeans any more. They belong to the world now….

     Not only does the production of blue jeans “belong to the world now” (a euphemism for “not made in America”), so does the production of any manufacturing product in existence.

     Although The Wall Street Journal can’t avoid reporting the bad news, at least they can try to minimize its negative impact on the political scene.

     So, they report that “The U.S. poverty level rose in 2002, but income inequality didn't worsen because the rich took a hit, too.” Implication: Gee, everyone—even the rich—is hurting from the recent economic slowdown.

From The Wall Street Journal, September 29.

Income Gap Is Steady,
But Poverty Spreads

WASHINGTON—The U.S. poverty level rose in 2002, but income inequality didn't worsen because the rich took a hit, too.

For most of the past 20 years, those at the top of the income ladder have been the big winners in the U.S. economy. But last year, incomes of the wealthiest Americans fell by the same percentage as incomes of those toward the lower end of the scale, according to Census data released Friday.

Household income of Americans in the 95th percentile slipped by 1.9%, to $150,002 from $152,893 in 2001. Income in the 20th percentile dropped similarly, to $17,916 from $18,256. Percentiles, a scale that divides levels in order of magnitude, is one measure used by the Census Bureau to compare 2002 findings with those of previous years….

Income levels across the board suffered in 2002, according to Census figures. Income in the second-highest percentile slid by 3.3% to $114,112 in 2002 from $117,952 in 2001. Income in the lowest 10% sank by 4.2%, to $10,620 from $11,087….

Though the income disparity didn't increase, poverty levels climbed to 12.1% last year from 11.7%. Nearly 34.6 million people lived in poverty in 2002, about 1.7 million more than the previous year, the data show. Critics of the Bush administration seized on these numbers to lambaste its economic policies….

     Talk about the selective use of statistics. The Journal noted that “Income in the second-highest percentile slid by 3.3% to $114,112 in 2002 from $117,952 in 2001. Income in the lowest 10% sank by 4.2%, to $10,620 from $11,087.” While they admitted that the lowest percentile income slid by 4.2%, they failed to note that the highest percentile just slipped 1.9% (being content to pick the second-highest percentile for comparison).

     Of course, noting that all income categories suffered income declines is almost irrelevant. The fact is that the lowest 10% of Americans suffered the greatest income loss, 4.2%, and all other categories, except the second highest, suffered a 1 to 2% loss.

     In addition, any loss of income—no matter how little—directly affects the daily lives of those at the bottom, while even a significant loss of income at the top has no effect whatsoever on their quality of life.

     All of which is irrelevant to the readers of The Wall Street Journal, who take righteous comfort in knowing that all income levels have had to suffer from the recent economic downturn.

     As poorer Americans continue to see their incomes go down, the Journal gladly reports that the economy—and, thus, corporate profits—continue to grow.

     And, incidentally, of course, working Americans (non-investors and non-high-level-corporate executives) are seeing their jobs go to third world countries.

From The Wall Street Journal, September 29.

Economy Grows At
Faster Pace Than Estimated

The U.S. economy grew at a faster pace than previously estimated in the second quarter, but consumers remain worried about their job prospects.

Second-quarter gross domestic product, a measure of all of the goods and services produced in the U.S., rose at a revised 3.3% annual rate, up from the 3.1% rate previously reported, the Commerce Department said in its final estimate of second-quarter growth. The economy grew at a 1.4% pace in the first quarter.

     Once America’s aristocracy becomes used to extremely high returns on their investments, and high-level corporate executives become dependant on their huge bonuses—it’s hard to ever return to reality.

     Thus, to keep the corporate profits coming in, even in an economic slowdown, the greedy and materialistic figure out ways to maintain their lifestyles.

     At the direct expense of consumers.

From Business Week, September 29.

Fees! Fees! Fees!

Companies can't raise prices, so they're socking consumers with hundreds of hidden charges—and that's creating stealth inflation and fueling a popular backlash

America used to be the land of the free. Now, it's the land of the fee. Companies, hard-pressed for money, are taking every possible opportunity to nickel-and-dime people to death.

Need a monthly brokerage account statement mailed to you? Ameritrade may charge you $2 per statement. Want your hotel room cleaned? The Alexander Hotel in Miami Beach, Fla., will bill you an extra $2.50 daily for housekeeping. Have to return a new camcorder? Best Buy Co. will dock you 15% as a "restocking fee." Want to buy a season ticket for pro football? The New York Jets will make you pay $50 for the privilege of getting on their waiting list.

The U.S. economy has become sneaky. Inflation is officially low, but Americans face an ever-growing mountain of extra charges that are pushing up the true cost of purchases. No area is safe, from retail to finance to travel to sports….

The extra hits—each one typically small by itself—add up to big money. AT&T could bring in as much as $475 million by charging its long-distance customers a new 99 cents monthly "regulatory assessment fee."…

The plethora of stealth charges makes it much harder for consumers to use the Internet to do comparison shopping, as they started to do in the late 1990s. The result is that apparently simple buying decisions are turning into a hopeless and discouraging labyrinth….

The growing significance of extra fees means that inflation is understated. Surprisingly, many add-on charges are not reflected in the Bureau of Labor Statistics consumer price index….

State and local governments are also willing participants in the fee game. Rather than hike taxes, politicians are hitting up Americans with a bewildering array of fees, fines, and penalties. Cash-strapped states will pull in $2.6 billion in new revenues this year by raising more than 200 different fees on everything from fishing licenses to fingerprint processing to driving with new tires….

Nobody figures fees will be eliminated entirely. But as the country recovers from an era of corporate scandal, it's not too much to ask that companies keep prices easy to understand. That way people will know they're getting what they pay for.

     Self-interest is a good thing. It keeps the world running. But greed—excessive self-interest—leads to behaviors that are deceptive, fraudulent, manipulative, and ultlimately destructive to a healthy society.

     This mentality even allows conservative politicians to lie to voters and to maintain the fiction that they can govern without taxing the rich.

     Sound familiar?

     Remember when President Dubya said we had to give tax breaks to the rich so they could invest their money and create jobs? Turns out, a lack of investment capital isn’t the problem, and hasn’t been for at least three years.

From Business Week, September 29.

All Cashed Up with No Place to Go

VCs have $84 billion to invest and an aversion to risky startups

The venture-capital industry is facing an embarrassment of riches. Venture firms have a staggering $84 billion in their coffers to invest, a near-record amount. And institutional investors are eager to give them more dough, anticipating that the tech industry will regain its financial luster…."Even today, after all the problems the business is having, there are tons of institutional investors clamoring to get into the venture business," says Joshua Lerner, a professor at Harvard Business School. "This is what we call the potential overhang."

But the flood of money could turn out to be more bane than boom. For starters, the seemingly endless supply of resources could lead venture capital firms to throw good money after bad, keeping alive faltering companies instead of shutting them down. VCs also are chasing bigger and bigger deals, putting increasing amounts into later-stage projects and even leveraged buyouts. These investments may use up big chunks of capital, but they hardly fit the high-risk profile for which venture firms are traditionally known….

With so much money focused on a few areas of technology, some question whether a new bubble is forming. "I'm nervous that this will result in mindless competition," warns Roger B. McNamee, a veteran tech investor now with Silver Lake Partners, a high-tech buyout fund in Silicon Valley. "The mismatch of capital and opportunity is a real threat."…

     What has been missing all along in this economic slump is the lack of money in the hands of the consumers who will spend it. That’s what creates demand, and demand creates investment, and that creates jobs.

     It’s obvious: to stimulate the economy, we should have given most of the tax breaks to the middle- and low-income worker, who would immediately spend it.

     The ultra-rich already were already spending all the money they wanted to. Their huge tax breaks resulted primarily in investment in other countries—which will further aggravate conditions for America’s workers.

     Even ultra-conservative Forbes magazine is admitting the looming disaster of globalization—corporate America’s strategy to destroy working-class wages and increase profits.

From Forbes, September 29.

Giant Sucking Sound

Battered by the tech slowdown, EDS is shipping white-collar jobs offshore to catch up with low-cost competitors.

The new Electronic Data System office in Mumbai (formerly Bombay) is half a world away from company headquarters in Plano, Tex….

This is where Amit, 24, works. "This is Andy. How may I help you?" he says politely, hour after hour, to the Midwesterners who have forgotten their e-mail passwords or need the phone number of a colleague. EDS hired Amit and 500 of his colleagues—young men and women dressed in khakis or saris—to answer phone calls and e-mails on behalf of American companies that have outsourced tech work or customer service calls to EDS.

Amit and colleagues are paid $1.25 an hour. His counterpart in the U.S. would get $10. On that difference rests whether or not EDS can wiggle itself out of deep trouble. Victimized by cheap outsourcing by competitors, EDS is playing the low-cost-labor game itself now. It is rushing to hire thousands of mostly Asian college graduates like Amit, who are desperate for the kinds of jobs found in the U.S. Frantic to cut costs, EDSplans to hire 13,800 workers by the end of next year—a of its current global work force of 137,000—in low-wage countries like India, Malaysia, Hungary and Mexico, places where starting pay is as low as $2,400 a year. Meanwhile, EDS plans to lay off at least 2,750 higher-paid workers, mostly in the U.S. and Europe.

Companies as varied as General Electric and Morgan Stanley are making the same calculation. White-collar jobs—in engineering, programming and accounting—are leaving America's shores for low-cost locales at a pace of nearly 4,000 a week, according to Forrester Research. The U.S., Europe and Japan combined are losing 600,000 a year, says McKinsey & Co….

There's also a price to be paid in angry and anxious workers. "I'm sure I lost my job to offshoring," says Richard Randall Mohler, 51, an EDS programmer from Midland, Mich. who earned $68,640 a year until he was let go last year. That job in India pays about $6,500 a year. Mohler remains unemployed and says his former colleagues at EDS are worried, too. "They are all scared to death," Mohler says. "When you can get the same job done for a fraction of the cost, it puts everybody on edge."

Is Jordan the bad guy? If he doesn't export jobs, someone else will.

     "Is Jordan the bad guy? If he doesn't export jobs, someone else will." This one sentence explains two things: the ultimate disaster of globalization for working Americans; and who the bad guys really are.

     First, the inevitable disaster is that the only Americans with jobs will be those who provide products and services that can be produced only in the U.S. And many more millions of those who previously had good-paying jobs will be competing with them in a race to the bottom of the wage scale.

     Second, the real villains are not the businesses who are forced to abandon the U.S. by other businesses without any moral standards. The real villains are the Republicans and conservative Democrats who passed legislation that made this kind of ruthless global competition legal and profitable. In effect, they announced to American businesses that they were removing any and all protections of business persons with moral standards; it's everyone for his own greedy self.

     Forbes warns its sophisticated readers of the pitfalls, not only of investing in so-called hedge funds, but also suggests pitfalls in investing in mutual funds generally. Again, from one of America’s premier conservative financial publications, an unintended message: to privatize Social Security would be a horrible mistake for unsophisticated investors (which includes most of us).

From Forbes, September 29.

Money & Investing

Suckers Wanted

…The big hedge fund story of the moment: accusations from crusading New York State Attorney General Eliot Spitzer that the hedgies are ripping off investors in mutual funds via secret trading arrangements with operators of the mutual funds. If anything, the scandal makes you want to invest in hedge funds, to get in on the illicit gains.

The untold story: Hedge funds are rotten investments, too. A good example of why you shouldn't have anything to do with them comes from Alpha Strategies I, a crossover product of sorts that is like a mutual fund in its mass-market appeal but like a hedge fund with its exotic strategies and high fees….

…do you want to invest in Alpha? Not if you have any brains.

Start with Alpha's murky disclosures, all too reminiscent of hedge funds….

The main reason not to own Alpha, though, is not its past performance but its steep fees, 4% of assets annually….

     This is just a brief excerpt of an extensive article criticizing the mutual fund industry. Investors who are interested in the investment implications of the article should go to the original source.

     The following three excerpts come from the same issue of The Wall Street Journal and, together, describe the disaster that health-care has become in the U.S.

The following three excerpts are from The Wall Street Journal, September 30.

Wal-Mart Cost-Cutting Finds
Big Target in Health Benefits

Restrictions, Tough Stance on Basic Claims
Keep Its Outlays Below the U.S. Average

BENTONVILLE, Ark.—Wal-Mart Stores Inc. is famous for cutting costs everywhere it can. Today a giant target for the world's biggest retailer is the health-care costs of its employees. Wal-Mart makes new hourly workers wait six months to sign up for its benefits plan and doesn't cover retirees at all. Its deductibles range as high as $1,000, triple the norm. It refuses to pay for flu shots, eye exams, child vaccinations, chiropractic services and numerous other treatments allowed by many other companies. In many cases, it won't pay for treatment of pre-existing conditions in the first year of coverage.

The payoff: Last year, average spending on health benefits for each of the company's roughly 500,000 covered employees was $3,500, almost 40% less than the average for all U.S. corporations and 30% less than the rest of the wholesale/retail industry, according to estimates by Mercer Human Resource Consulting, a unit of Marsh & McLennan Cos…. Wal-Mart has been using a team of six people to scour every state for the lowest-cost networks of doctors and hospitals….

"The problem is rising health-care costs," responds Jay Allen, Wal-Mart's senior vice president for public affairs. "We're grappling with it like everyone else."… Wal-Mart also is aggressive in controlling medical costs related to on-the-job injuries. The company says these claims are a related and additional expense on top of the 18% increase in its health-care outlays last year, a rise in line with industry averages.

Mittie Funderburk, 52, says she injured her back in 2000 while moving photo-lab merchandise in the San Angelo, Texas, Wal-Mart. She didn't report the incident until two months later, when growing numbness in one of her legs immobilized her. Her doctor prescribed surgery, and a second doctor, selected by Wal-Mart, concurred. Nevertheless, Wal-Mart fought the claim for months, first alleging Mrs. Funderburk hadn't reported the accident in a timely fashion and then arguing she didn't need the surgery….

Number of Americans Who Lack
Health-Care Coverage Is Rising

Census Bureau Counts 43.6 Million
As Employer-Based Plans Shrink

WASHINGTON—The federal government says 43.6 million Americans lacked health insurance last year. That's more than the population of the nation's 24 smallest states plus the District of Columbia, and it adds fuel to a growing debate about both the cost and availability of health care.

The figures, released early Tuesday by the U.S. Census Bureau, show that 15.2% of Americans didn't have coverage for all of last year, an increase of 2.4 million people from 2001, when 14.6% were uninsured….

More Companies That Self-Insure
Get Stuck With Huge Medical Bills

Some Insurers 'Laser' Sickest Workers

In the game of hot potato that health insurance has become, employers and insurers keep trying to pass rising health costs to each other. Now, insurers are using a tactic called "lasering," which shifts the costs of the sickest workers back into the lap of employers.

Typically, self-insured employers—a common practice under which a company pays most of its employee medical bills—contract with stop-loss, or reinsurance, carriers to pay catastrophic claims. This protects an employer from being hit with a single medical bill that could wreak havoc on its health plan.

But now, as employers seek to renew their stop-loss coverage or obtain new contracts, reinsurance companies are lasering, or carving out, severely ill employees from coverage….

     It’s time to face reality. Our health-care system is broken. It’s been taken over by investors who insist on outrageous corporate profits, greedy high-level corporate executives, and the politicians who support their every desire in Congress and the White House. The health-care of working-class Americans is irrelevant to them.

     Note that five separate members of the Walton family—of Wal-Mart fame—are among the richest 400 persons in the United States. And these selfish people not only don’t give their own employees decent health-care benefits, they are leading the corporate trend to give stingier benefits throughout our country.

     A single-payer government-sponsored program—as already successfully exists in many other civilized nations—couldn’t possibly be less efficient or more costly than our present system, and is long overdue.

     If the following article were to be published in the “biased liberal news media,” conservative critics would say that it was intended to make the U.S. look bad—to such an extent that it was unpatriotic to publish such nonsense.

     This excerpted article, however, came out in The Wall Street Journal, October 1.

U.N. Peacekeeping
Is a Troubled Art

Congo Mess Shows Rich Countries Send Money,
The Poor Send Troops— Operations Often Suffer

BUNIA, Democratic Republic of Congo—Earlier this year, while the world was transfixed by the war in Iraq, the Congolese district of Ituri was on the verge of genocide and the United Nations was in trouble. For months, the U.N. had searched for a military force capable of stopping another African holocaust. No significant power accepted the challenge.

With nowhere else to turn, U.N. peacekeeping chiefs dispatched to the war zone 840 Uruguayan soldiers. It was a moment of excitement for the men, who came from a country that hadn't fought a war in over a century, says one of their officers, Lt. Colonel Waldemar Fontes.

Their mood soon changed as they dropped unsuspectingly into a place they would later term the devil's caldron. Equipped only with rifles and a few armored personnel carriers, the Uruguayans were appalled to find tribal militias rampaging through the dusty streets with machetes and machine guns. Child soldiers chopped Hema residents to pieces and took body parts as souvenirs. Hundreds of cadavers littered the city. …

As the U.N. struggles for relevance in the wake of the Iraqi war, nowhere are its dilemmas and limitations more stark than in its peacekeeping campaigns in forlorn lands. The troubled effort in Bunia shows how the U.N.'s best-known function has languished, as world powers send money, not men, leaving the work to soldiers from the developing world. In effect, the rich countries subcontract the actual soldiering to poor nations….

Since 1995, no major power has put any of its combat troops under the U.N. flag. Instead, countries with bloated armies such as Pakistan, Bangladesh and Nigeria lead the U.N. peacekeeper ranks, lured by cash, on-the-job training and international prestige. "Western countries have essentially created a form of apartheid in peacekeeping," says David Malone, president of the International Peace Academy, a think tank in New York. "The toll is much-less-effective peacekeeping."…

The White House sees this notion of peacekeeping efforts outside the auspices of the U.N.—but with its blessing—as the right approach for Iraq. "We need to be flexible to have different models for different kinds of problems," says Kim Holmes, Assistant Secretary of State for International Organization Affairs. "What we are asking for Iraq falls under this new tradition or model. It's certainly not blue helmets under a U.N. command."

     Sounds almost like a model for what’s happening in the U.S. The rich “chicken-hawks” (those who have never been in a war, but are quite willing to send others) in Congress and the White House send our poor citizens (who have no other opportunity for employment) to war, while the rich collect war profits.

     The evidence against privatizing Social Security continues to build, as the underbelly of Wall Street exposes itself, from one prestigious firm to another prestigious firm.

From The Wall Street Journal, October 2.

Fund Probe Reaches Prudential

The investigations into market timing increasingly are noting the involvement of fund managers. One reason managers might have allowed timers to trade in and out of their funds—despite the fact that such trading can cut into a fund's returns—is that many managers have their compensation tied to how much money they control.

     Prudential Financials entices new investors with the following assurance: “Our goal is to help you grow your wealth and to help you keep it. As a leader in asset management and insurance, we have the experience and services you need.” Of course, the rookie assigned to you will be competing with their real brokers who are “working on behalf of hedge funds, investment pools for the wealthy and institutions.”

     The following three excerpts go together, since they are directly related. It should be obvious why, but in case you’ve been in a cave for the past 20 years, their connections will be explained below. All three are:

From The Wall Street Journal, October 3.

     These three articles in a single issue of The Wall Street Journal illustrate the total corruption of our entire American corporate culture. The last article just describes the corporate executives who got caught.

     Bear in mind that Grasso’s behavior would never seen the light of day had it not been for a much broader investigation of his overall job performance and recent practices of the New York Stock Exchange.

     The outrageous incomes of practically all the Chief Executive Officers of our major corporations are, in themselves, indictments of their moral standards. A review of other articles throughout this website demonstrate that workers, consumers, and investors are paying dearly for those high incomes via higher prices, scarcities, lost jobs, inadequate health care—and on and on.

     These clowns couldn't get away with all this skullduggery if it weren't for sympathetic politicians in Washington. It’s time for a regime change in in our national government.

Week of September 22

     Now, for the real reason drug companies are so concerned about counterfeit medicines and the public’s safety:

From The Wall Street Journal, September 22.

Drug Companies Cry
'Danger' Over Imports

The pharmaceutical industry is sounding alarms about what it calls a growing danger from counterfeit medicines—especially in drugs bought abroad. The tough talk is a break from drug makers' traditional reluctance to put even the slightest dent in consumers' confidence for fear it could discourage them from filling prescriptions.

But drug companies have found that the specter of bogus medicine is a forceful lever for moving public and policy-maker opinion in the U.S. against imports.

Counterfeits may be a growing problem, but so far, the documented risks pale next to the rhetoric where imports are concerned. In Canada, the main source of drug imports to the U.S., authorities say they haven't detected problems in the supply there. "We're not aware of any counterfeit activity at this time," says Jirina Vlk, a spokeswoman for Health Canada, that country's equivalent of the U.S. Food and Drug Administration.

Drug-company profits are threatened as more Americans buy their medicines from cheaper markets, particularly Canada. IMS Health, which tracks prescriptions, estimates that American consumers are buying $350 million to $650 million in prescription drugs annually from Canada, either over the Internet, by mail order or by driving across the border.

The potency of the safety issue became apparent to the Pharmaceutical Research and Manufacturers of America, or PhRMA, the principal trade group for U.S. makers of brand-name drugs, after it engaged Edelman, a public relations concern based on Chicago and New York, to help develop a communications campaign that would dissuade Americans from importing prescription medicines.

Edelman convened focus groups of people without drug-insurance coverage in St. Louis, Detroit, and Fort Lauderdale, Fla., in March. The firm's report on the research asserts that "fear and accountability 'move the needle' of consumer perceptions" the most. The report recommends that the U.S. industry question the safety and effectiveness of medicines procured elsewhere….

The testing by Edelman indicated that the illegality of drug importation has little effect on consumers' perceptions or their likely behavior. "So what? Speeding is illegal as well," said one focus-group participant, according to the memo. While older people in the groups were less inclined to risk breaking the law, the report says, consumers with a "larger financial burden/higher prescription drug usage" are less likely to worry about abiding by the rules….

Several drug makers, including Eli Lilly and Pfizer Inc., are providing financial support to the National Association of Chain Drug Stores for an effort to combat illegal drug imports. "International mail order is downright dangerous," says Larry Kocot, the group's senior vice president and general counsel. Meanwhile, one of the highest-profile Canadian companies that exports drugs to U.S. consumers defends its safety record. "All of the drugs that we ship into the U.S. from Canada are approved by Health Canada," says Daren Jorgenson, president of American Drug Club, of Winnipeg, Manitoba. "Billions of dollars have been sold into the U.S. over the last four and half or five years from Canada with no reports of injury or death as a result of a counterfeit, outdated or substandard product."

     The big question is why buying drugs from Canada should be illegal in the first place. Isn’t that what the conservative mantra of “free trade in all things” is all about? Of course not. If free trade will cut into corporate profits, it’s lobbyists make sure their stooges in Washington make it illegal.

     Since many Americans see little moral wrong in cutting into corporate profits that are obscene to begin with, about the only course left to the pharmaceutical companies is to deliberately lie to the public with trumped-up charges of supposed dangers.

     Want more demonstration of the real reason for “globalization”? This excerpt demonstrates what is left of the power of labor unions to protect American jobs.

From The Wall Street Journal, September 22.

GM, Ford Win UAW Permission
To Close or Sell Eight Facilities

DETROIT—General Motors Corp. and Ford Motor Co. won permission from the United Auto Workers to close three assembly plants and to sell or close five other facilities under terms of the four-year contract agreement struck last week.

In a contract summary prepared by the union, the UAW said it gave GM clearance to close a Baltimore assembly plant that builds vans. The factory employs about 1,100 workers. The UAW is also allowing GM to close an auto-parts factory in Saginaw, Mich., and to sell a GM division that builds locomotive engines. The union also said that it will allow GM to close the Argonaut Building, a Detroit structure that once housed photographic and real-estate offices. In total, about 3,000 GM workers are affected….

Ford said it won UAW approval to close or sell four plants, affecting 4,500 people. Ford will close two assembly plants: a small pickup-truck factory in Edison, Ill., which employs 863, and a full-size van plant in Lorain, Ohio, that has 1,640 workers. Ford will also close Vulcan Forge in Dearborn, Mich., and Cleveland Aluminum Casting in Ohio….

DaimlerChrysler AG, in its deal with the UAW , got union clearance to close or sell five of nine operations the company has deemed uncompetitive. About 4,700 workers at the company are affected.

     Republicans and conservative Democrats finally have American workers where they want them. Unions have almost totally lost their power to protect jobs. They either agree to more lost jobs—and thus retain some jobs for the immediate future—or they totally lose all their jobs to manufacturers who have no commitments to the moral treatment of workers.

     And this is just the beginning of the end, as American auto manufacturers get totally out of the business of making cars. They are becoming investment bankers—not auto makers—by outsourcing every aspect of manufacturing, even including the assembly of the vehicles, to those countries with the lowest labor costs.

     Business Week joins the crowd in condemning the mutual fund industry. If there were ever any doubt, there isn’t now: As an industry, America’s mutual funds are concerned only with their own profits and incomes, and could care less about the welfare of their investors.

From Business Week, September 22.

How to Fix the Mutual Funds Mess

Hidden fees, lax boards, and now scandal. Here's what has to be done

Used to be, the worst you could say about a mutual fund was that it lost money. Nowadays, there's worse: losing money dishonestly. Thanks again to the crusading efforts of New York State Attorney General Eliot Spitzer, some mutual-fund managers have made the growing list of investment-industry professionals willing to sacrifice investors' best interests for the sake of profits.

On Sept. 3, Spitzer tore the veneer from the almost pristine, 79-year-old fund business. In a $40 million settlement with hedge fund Canary Capital Partners, he outlined a series of improper practices in the trading of mutual-fund shares. Not only were four blue-chip companies implicated—Bank of America, Bank One, Janus Capital Group, and Strong Capital Management—but dozens of others, Spitzer suggested, schemed to bilk investors of billions each year. "Looks like they are taking advantage of investors like everyone else on Wall Street," says James Punishill, an independent analyst with Cambridge (Mass.)-based Forrester Research Inc….

Representative Richard H. Baker (R-La.), the author of a mutual-fund reform bill watered down after pressure from industry lobbyists earlier this year, is sharpening his pencil. And the Securities & Exchange Commission—already miffed over negligent boards, hidden fees, and conflicts plaguing both the mutual and hedge-fund businesses—plans a rulemaking push in coming weeks….

Who's watching out for you? Certainly not the fund's board of directors. Most rubber-stamp management's recommendations, and few bother to negotiate lower fees. The largest mutual funds, in fact, pay money-management advisory fees that are more than twice those paid by pension funds….

Mutual-fund companies have had three years of watching their stock portfolios plunge, and fees along with them. That has tempted some to get creative about enhancing their profits, which has gotten them into hot water with regulators. "Salesmanship and not enough stewardship" rule the day, quips Vanguard's Bogle….

     Again—from one of America’s top conservative financial publications—a solid argument against privatizing Social Security. Note that this is just a brief excerpt from an extensive article that describes the many ways mutual funds and Wall Street takes ruthless advantage of sophisticated, as well as unsophisticated, investors. (As New York State Attorney General Eliot Spitzer put it, they: “…schemed to bilk investors of billions each year. ‘Looks like they are taking advantage of investors like everyone else on Wall Street.’”)

     In the U.S., we live in a world of auction markets. That means that the more money other people have, in effect, the less you have. Nowhere is this more evident than in medical care.

From The Wall Street Journal, September 23.

At One Hospital,
A Stark Solution
For Allocating Care

Galveston Facility Cuts Drugs,
Treatments for the Uninsured

GALVESTON, Texas—Joan Richardson, chief medical director at the hospital of the University of Texas Medical Branch, faced an agonizing decision: Should she approve a $1,500 drug for a 52-year-old woman with metastatic breast cancer?

The patient had no money, no insurance and rapidly fading hope. Three powerful cancer drugs had failed to help her. A fourth, exemestane, offered a slim chance, but strict rules at the hospital barred the drug from being given to patients who couldn't pay for it. Dr. Richardson would have to authorize the money to come from a $25,000-a-month drug fund for indigents—meaning some other poor person who needed a costly drug might not get it….

The rules restricting drugs at this 795-bed hospital are part of a bold experiment in allocating health care at a time of rising costs. In most other U.S. medical centers, decisions about who gets scarce resources such as expensive drugs and surgical procedures are often made on an ad hoc basis—with few formal guidelines for doctors and nurses on how to help their patients while hewing to budget restrictions.

But UTMB, as this state-supported hospital is known, has developed a detailed playbook to help determine exactly who gets treated and who doesn't. Its rules require that patients undergo financial screening before they can be admitted and that virtually everybody pay a fee before seeing a doctor. For patients who are poor or uninsured, the rules restrict or proscribe the use of certain drugs and treatments….

Unlike most hospitals, UTMB is also blunt about its need to limit some services on financial grounds. "We are rationing," says John Stobo, UTMB's 62-year-old president and chief executive….

     Rationing medical care—which, in effect, often eliminates health care for the uninsured or poor—is not the fault of specific hospitals or doctors. They have limited budgets and have no easy choices in the matter.

     The fault is in the health care system itself—from insurers to drug companies to legal firms to administrators: top corporate executives are making multi-millions in income, corporations are making huge profits, and millionaire and billionaire investors are cleaning up on the stock market. Those inflated incomes result from the huge prices charged for everything from the health care itself to the insurance people must pay to protect themselves.

     In a broader context, the stagnant wages of workers over the past 30 years, reduced income taxes on the wealthy, and federal legislation that favored investors over workers—have resulted in many people not having enough money to meet the inflated costs of health care or insurance, while others, who have financially benefited from this inflation—have no problems with the system.

     Those who fight for a system that rations health care —Republicans and conservative Democrats—don’t want it changed because it results in less corporate profits and may increase tax rates on the wealthy. Naturally, they charge anyone who tries to make the system more equitable as being socialists or communists.

Actually, they are just capitalists who have a conscience.

     Public outrage about Dick Grasso’s 140 million dollar payoff stimulated all kinds of counterspin from America’s right-wing. After all, the public’s acceptance of greed as a new American virtue is crucial to our established wealthy. It’s an important factor in keeping voters from electing politicians who will bring back a progressive tax system.

     The following excerpt from a The Wall Street Journal editorial is typical of the conservative spin.

From The Wall Street Journal, September 24.

Who Decides How Much Is Too Much?

By HOLMAN W. JENKINS, JR.

In all the folderol about Dick Grasso's paycheck last week, one question worth pondering is how did it come to be everybody's business what he was paid? The money isn't yours or mine but comes out of the revenues of the New York Stock Exchange, owned by its 1,366 seatholders. They're the ones who get socked with the costs of the exchange (including the onerous new "technology" fee that keeps the exchange's head above water these days)….

Whatever you think of the exchange's defenestrated impresario and its goofy board of directors, the spectacle put on by Mr. Grasso's critics was hardly more attractive, full of self-righteousness and the kind of chicken-bleep hostility that isn't even brave enough to find its own target but simply looks around for a socially approved punching bag. The mob's behavior, rather than Mr. Grasso's, may end up supplying the odor that lingers.

Perhaps it's time to remember that fat pay—even misguidedly fat pay—is not an offense against anybody's rights. Luck was the biggest factor in tipping over the old salary scale at the exchange….

It's no skin off anybody else's back if his employer paid him too much, and looking over the past 20 years, one might readily conclude that we all benefit from the willingness of companies to wave big money carrots in front of their servants….

Little hissyfits of envy, like the one we witnessed in the Grasso case, might seem an expensive luxury when measured against the benefits of a fertile, lively economy, even one that occasionally offends us by delivering dramatic paydays to a few conspicuous public figures. David Altig, an economist at the Cleveland Fed who has studied income inequality, once put the anti-envy case this way: "I would gladly see you gain a zillion dollars of real income if doing so would obtain a billion for me, even if the distribution of our incomes becomes more unequal in the process."…

     The absurdities in this editorial are too numerous to deal with briefly. However, the crucial economic fallacy—that this editorial suggests, and that needs to be exposed to public scrutiny—is that wealth is not a zero-sum game.

     Wealth is a zero-sum game. When Jenkins Jr. questions “how did it come to be everybody's business what he was paid?,” he suggests that no one is hurt when Mr. Grasso’s investment advisors buy hundreds of rental homes for the benefit of his heirs. Those homes are taken off the market, and the prices of housing and rents continue to go through the ceiling—at great cost to the poor and middle-class.

     “The money isn't yours or mine but comes out of the revenues of the New York Stock Exchange.” Not true. The money did come from you and me, in the form of higher prices for the products and services that ultimately financed the entire financial community in New York.

     "Luck was the biggest factor in tipping over the old salary scale at the exchange." Not true. Luck had nothing to do with it. It was all part of a planned strategy by the "good 'ol boys club" to feather each others' nests, and at the direct expense of the clients of the New York Stock exchange. It's the same strategy that corporate executives have been using for the entire century, but especially in the past 25 years.

     “Little hissyfits of envy, like the one we witnessed in the Grasso case, might seem an expensive luxury when measured against the benefits of a fertile, lively economy, even one that occasionally offends us by delivering dramatic paydays to a few conspicuous public figures.” Wrong. It’s not envy, it’s anger. Anger against the greedy jerks at the top of our society who have destroyed working-class wages for the past 25 years—just so they could be incredibly rich. This “lively economy” has been a boon to rich investors and top corporate executives, primarily because it was a premeditated disaster for America’s workers.

     "I would gladly see you gain a zillion dollars of real income if doing so would obtain a billion for me, even if the distribution of our incomes becomes more unequal in the process." That’s probably true at the billion- and million-dollar levels. But it’s not true at the level of working-class wages. They’ve been stagnating for the past 25 years, while the rich have driven up the costs of everything from medical care to rents.

     The fallacy, “wealth is not a zero-sum game,” is one of the most important propaganda ploys of right-wing America, and it needs to be confronted at every opportunity.

     Good times have come back for investors: companies are announcing employee cutbacks and the stock market is celebrating.

From Barron's, September 22.

Sackings Help Some Stocks Surge

…While the most recent data released Thursday showed fewer people filing for state unemployment insurance, other disquieting trends suggested an overall deterioration in the jobs scene. The four-week moving average of jobless claims, considered to be a truer, less volatile measure, rose to 410,750 for the week ending Sept. 13 from 408,750 the previous week. The number of jobless drawing benefits rose to about 3.7 million in the week ended Sept. 6, the highest level since late June. In leaving interest rates unchanged at 45-year lows Tuesday, the Federal Reserve's Open Market Committee cited the fragile jobs picture.

Nonetheless, investors focused on the sunnier side of the stats, including a steadily improving leading-indicators index, which has risen four months in a row, as well as two straight weeks of lower mortgage rates. Broader averages shot higher, rallying more than 100 points on Tuesday and Thursday, and reached new 52-week highs by week's end despite giving back some gains in Friday's volatile "quadruple witching," in which four sets of options and futures contracts expire. The Dow Jones Industrial Average gained 1.8% to end the week at 9644.82, and the S&P 500 rose 1.7% to 1036.30, levels not seen in 15 months. The Nasdaq powered ahead by 2.7% to close the week at 1905.70, breaking through the important 1900 mark, putting it nearly back to heights reached in March 2002.

Indeed, contrary to being concerned about weakness in the job market, investors showered largesse on those companies that continue to cut costs.

Long-distance telecommunications provider Sprint vowed Wednesday to cut expenses by 5%-7% in the next three years by eliminating $1 billion a year. The number of job losses expected wasn't specified… Sprint PCS, which reflects the wireless business, advanced nearly 5% to 6.10….

Wednesday, R.J. Reynolds Tobacco Holdings said it planned to cut 2,600 jobs, or 40%, of its workforce in the next year, mostly at its Winston-Salem, N.C., headquarters….

RJR stock jumped 16% after the announcement to end the week at 39.81….

     People don’t remember that back in 1960, college professors, economists, politicians and corporate executives were promising workers that they would benefit from increased corporate profitability, and that they should contribute their best efforts to help it happen.

     Just as the 60-70 hour workweek of the 1920s gave way to the 40-hour workweek—and better working conditions and better benefits—employees could look forward to a 3-day, 30 hour workweek and even better benefits.

     That’s before the 1980s and conservative economics and the adulation of greed came along. Now, employees are simply an expense to be minimized. (“investors showered largesse on those companies that continue to cut costs.”) Today the only ones who profit from the corporation’s successes are the investors and top corporate executives. The employees who made the corporation successful to begin with get sacked.

     It has nothing to do with fairness, or even sound economics. It has everything to do with power, and today—because of their Republican representatives in government—corporations have all the power and employees have none.

     Anyone who doubts that Clinton and Gore were disasters for working-class Americans should read the editorials in The Wall Street Journal.

     Whenever the Journal supports someone, you know it’s got to be a bad sign. And when they oppose the leading Democratic presidential candidates—for opposite reasons—you know it's got to be a good sign for them.

A The Wall Street Journal editorial, September 25.

Trading Places

…We had our differences with Bill Clinton, but there's no doubt one of his achievements was leading his party away from protectionism. Open trade was a pillar of his New Democrat philosophy. He and Al Gore routed the AFL-CIO and Ross Perot to pass Nafta in 1993, followed by bills to create the World Trade Organization and allow most-favored nation trading status for China. A decade later all three have contributed to American prosperity.

But without a Democrat looking out for the national interest from the Oval Office, the party is now slipping back toward trade parochialism. On Capitol Hill, the party's regional and union interests have become dominant; most Democrats opposed giving President Bush new trade negotiating authority last year. More ominous still is the rhetoric coming from the Presidential candidates….

The Democrats insist they don't oppose free trade but only that any new trade agreements must have "labor and environmental standards" written into them. Dr. Dean has told several interviewers that he would withdraw from the World Trade Organization and Nafta if they weren't altered to ensure that foreign workers have "the same labor laws and labor standards and environmental standards" as the U.S….

     Realize what the Journal is saying here. Clinton/Gore “routed the AFL-CIO and Ross Perot….” In other words, they joined the Republicans and the conservative cause and betrayed the interests of workers, which resulted in the giant sucking sound of jobs leaving the U.S., which Ross Perot and many others predicted.

     The “decade of prosperity” that it created was actually the Journal’s version of prosperity: stagnant wages, soaring corporate profits, and a skyrocketing stock market.

     And its been downhill for American workers ever since.

Week of September 15

     This is typical of the news coming from the conservative press today: greatly increased productivity as a result of technological advances, rising corporate profits, a great stock market, and signs that the present economic recovery will continue.

     The news for workers, however, isn’t as rosy. They get laid off, replaced by outsourcing, and experience increased job pressures because of competition from other corporations, etc.

From Business Week, September 15.

Productivity: Still Getting Stronger

Tech-driven productivity is powering profits, stock prices-and now, spending

It has been a long time since prospects for the U.S. economy looked this good. Profits are up, capital spending is rising, and inflation remains under control. Even ailing manufacturers are showing signs of life, with the Institute for Supply Management reporting on Sept. 2 an upswing in factory orders and production. And following the second quarter's surprisingly strong 3.1% gain in gross domestic product, economists are scrambling to revise their second-half forecast skyward. Many now think growth could finish the year at a healthy 4% clip.

But the most important news is the continuing surge in productivity….

The continued surge in productivity is a key reason why profits have strengthened considerably in recent quarters even as growth remained tepid. Even now, pricing power remains nonexistent in many sectors, and capacity is excessive. Yet ever-improving productivity has enabled companies to squeeze costs and rebuild their bottom lines….

Yet technology explains only part of the productivity boom. Economists also failed to appreciate how tighter management could contribute to efficiency gains year after year. Practices such as benchmarking performance against comparable companies, outsourcing, use of temporary workers, and business-process redesign have not only raised the level of productivity but raised the rate at which companies improve. Companies are also quicker to resort to layoffs. Painful though that might be, it helps avoid the big drops in productivity that come from having far too big a workforce when orders dry up….

That means that over the longer term, the economy is capable of higher growth without inflation than many economists have predicted. If long-term productivity is now closer to 3% and the labor force is growing at 1% a year, output can grow steadily at roughly 4%.

There is a downside, of course. While it's good for the economy as a whole, rising productivity accounts for the jobless recovery the U.S. has seen so far -- and will continue to see for some time. Since rising productivity lets companies meet new demand without adding workers, GDP will have to grow at a higher rate than in the past before new jobs are created. Most economists think it will take a long period of growth above 4% for the unemployment rate, now over 6%, to fall back to 5% or so….

     What’s missing from this article is any mention of corporate obligations to its own workforce, or any moral consideration of the inequity of giving all the results of improved productivity to just investors and the top corporate executives.

     This is a direct violation of the promises that were made to workers during the 1950s, ‘60s, and ‘70s—when they were encouraged to put their best ideas into productivity improvements. Economists and politicians of those decades promised workers that they would continue to benefit from productivity improvements, just as they had during the previous three decades.

     Economists, politicians, management consultants and corporate executives were promising 35 hour work weeks, 5 week vacations, better health, education and pension benefits, etc.

     With the arrival of the 1980s and conservative economics and politics, all promises were to workers were forgotten. All the benefits of productivity go to investors and senior corporate executives, and workers are forced to work harder than before, because they must compete with workers from impoverished countries.

     When will the insanity stop? In the not too distant future, the only jobs left in the U.S. will be those that require a physical presence in this country. Jobs like waiters and waitresses, dentists, garbage handlers, and retail clerks.

From Barron's, September 15.

Call-Center Shuffle

As telemarketing jobs vanish or migrate, who'll absorb the glut of space left behind?

…So many call-center jobs that were moved to rural areas are now being pushed to cheaper Ireland, India and the Philippines….

Other firms closing call centers: Starwood Hotels & Resorts Worldwide, Harrah's Entertainment, Best Western International, InterContinental Hotels, Marriott Vacation Club, Cendant and Carlson Hospitality Worldwide. Carlson, which operates a number hotel brands, including Radisson and Regis International, has closed its call center in Albuquerque, N.M., consolidating those jobs into its Omaha, Neb., center. But that's its only remaining call center in the U.S. The others are in Mexico City, Dublin, and Sydney, Australia.

Technology and telecommunication call-center jobs are being transferred overseas, too. Earthlink, according to The Wall Street Journal, shut six of nine such U.S. facilities, opening a large center in India. Other companies moving overseas for customer service include AOL, Yahoo and IBM. Convergys, which provides customer service, technical support and telemarketing services, employs thousands in India and the Philippines. And it's not just the lower salaries. Many foreign call-center workers are university graduates—unlike most of those in the U.S….

So while call centers business should continue thriving—despite Do Not Call and the Internet—the real estate it will occupy is, increasingly, outside the U.S.

     These jobs are leaving our country because conservatives have created a political climate that has shifted all the power to corporations and away from workers. Corporations can drive down wages with impunity, and that’s exactly what they are doing when they abandon American communities and go to other countries. And that’s the only reason they’re doing it.

     Think of the following article the next time huge media corporations lobby Congress to pass laws which will allow them to swallow even more of the media.

From The Wall Street Journal, September 15.

How Media Giants Are
Reassembling The Old Oligopoly

Mix of Broadcast, Cable Proves Lucrative
In Making Many Deals, Promoting Shows

Two years ago, Mattel Inc. gave CBS a choice. The network had refused to broadcast the toymaker's movie "Barbie in the Nutcracker" in prime time. So Mattel threatened to pull millions of dollars of advertising from the Nickelodeon cable channel—owned by CBS parent Viacom Inc.

Viacom, which had spent a decade bulking up with acquisitions, now wielded its new clout, according to people familiar with the situation. If Mattel made good on its threat, Viacom said, it would be blacklisted from advertising on any Viacom property—a wide swath of media turf that also includes MTV, VH-1, BET, a radio broadcasting empire and even billboards. Mattel backed down, and the Barbie movie ended up running during a less-desirable daytime period….

…the media giants have discovered that owning both broadcast and cable outlets provides powerful new leverage over advertisers and cable- and satellite-TV operators. The goliaths are using this advantage to wring better fees out of the operators that carry their channels and are pressuring those operators into carrying new and untried channels. They're also finding ways to coordinate promotions across their different holdings….

Entertainment giants such as Viacom, NBC parent General Electric Co. and Walt Disney Co., which owns ABC, now reach more than 50% of the prime-time TV audience through their combined broadcast and cable outlets….

The big media companies are quietly re-creating the "old programming oligopoly" of the pre-cable era, notes Mr. Wolzien, a former executive at NBC. Of the top 25 cable channels, 20 are now owned by one of the big five media companies….

     Sounds like a true gentleman’s industry—with high moral standards for serving the public’s interest—doesn’t it?

     Finally some good news. Poor countries are coming to the defense of their small farmers, and not all agricultural trade policy will be geared to benefit the huge corporate farms of rich countries.

From The Wall Street Journal, September 15.

Trade Talks Fail Amid
Big Divide Over Farm Issues

Developing Countries
Object to U.S., EU Goals;
Cotton as a Rallying Cry

CANCUN, Mexico—In a severe blow to the future of global trade negotiations, talks here among 146 countries collapsed in a dispute between rich and poor countries who failed to bridge differences over farm subsidies and other issues that have plagued trade-liberalization efforts for years….

From the start, however, the talks in this Caribbean resort exposed raw differences between the world's rich and developing countries over what further trade liberalization means.

The talks all along hinged on how deeply the rich countries, particularly Europe, would be willing to slash their huge farm-subsidy programs. Developing countries say the $300 billion a year in rich-country farm payments depress world-wide crop prices, making it difficult for their own farmers to compete….

"The pretense of the development objective has finally been rejected and discarded," said a furious Indian Commerce Minister Arun Jaitley. Instead of special treatment for poorer countries, he said, the WTO was creating new carve-outs for powerful developed countries.

Some delegates said the shifting balance of power within the WTO contributed to the impasse. Not long ago, the U.S. and the EU could largely dictate events at the global trade body. But developing countries have become increasingly well organized and willing to throw their weight around….

• small investors usually get taken by Wall Street,

• investment professionals and exchange officials drain huge amounts of money from the system with their outrageously high fees and salaries,

• improper trading practices by insiders take advantage of little investors, and, in sum,

• why Social Security should not be privatized.

From Business Week, September 15.

How Eliot Spitzer Makes the SEC Look Stodgy

Will Spitzer's mutual-fund probe get the feds moving faster?

Eliot Spitzer, New York State's attorney general, is at it again. Like Batman out to save a sordid Gotham City, he continues to pursue and torment the professional investment community, vowing to end everything from fraud to conflicts of interest that affect investors. Now, he's taking on the mutual-fund industry.

On Sept. 3, in an energy-infused press conference, Spitzer said "illegal trading schemes" allowed at least one hedge fund to buy mutual-fund shares at prices that were not available to most other investors….

But while Spitzer continues to grab headlines, many wonder: Where is the Securities & Exchange Commission?… Now, expectations are high that Spitzer's big splash will spur the SEC to adopt those measures quickly, and perhaps more….

Says Mercer Bullard, a law professor at the University of Mississippi and founder of Fund Democracy, a mutual-fund advocate: "The real failure has been on the enforcement side. The SEC has done nothing to show that it really means business."…

Says Russel Kinnel, Morningstar's director of fund analysis: "One of the reasons that funds are so popular is the perception that they're very ethical—they supposedly treat the little guy like the big guy. But clearly, they haven't done that here."…

From Business Week, September 15.

The $140,000,000 Man

What Dick Grasso's excessive payout reveals about how he runs the New York Stock Exchange

… To Grasso's detractors, what matters most is not his financial performance but his moral leadership—and in that realm, they maintain, Grasso is sorely wanting. On Sept. 2, SEC Chairman William H. Donaldson fired off a letter demanding that the NYSE explain, in detail, how it determined Grasso's pay package. And as if to drive home the point, the SEC released the letter, which contained an extraordinary public bawling-out of a sitting NYSE chairman. "In my view," Donaldson wrote, "the approval of Mr. Grasso's pay package raises serious questions regarding the effectiveness of the NYSE's current governance structure." Even before the paycheck bombshell, institutional investors were going public with long-festering complaints about improper practices on the NYSE trading floor…. … the public's patience with the NYSE is growing short. For years, Dick Grasso has been the undisputed overlord of a private entity that all too often has paid lip service to its public purpose. It's a long-running act. But an experienced showman like Grasso ought to know better than anyone when a long-running act is starting to wear thin.

     As if the credit card industry needed another example of how they deliberately “educate” the most vulnerable members of the public to become financially irresponsible—here’s another one.

From The Wall Street Journal, September 16.

A Bonus for Blowing Off Your Bills

Credit Cards Offer Rewards
For Carrying a Balance;
5% Back vs. 13% Interest

"Hey—We know you're not dumb," says the come-on from Citigroup. "You can tell a good deal when you see one."

Then comes an offer of questionable generosity: Up to 3% cash back on all credit-card purchases—but only during months when you don't pay off your monthly balance.

Just when you thought you'd seen everything from the credit-card industry, now come cards that reward customers for not paying their bills. The conventional wisdom is that it rarely makes sense to carry a balance on a credit card. But, in fact, 61% of Americans do. That accounts for the bulk of credit-card company revenues, making it only a matter of time before the industry's rewards-and-miles obsession came rolling their way….

Do the extra rewards from these rewards-for-debts credit cards compensate consumers for the interest costs associated with carrying a balance? Almost never, since the interest charges range from 8.99% to 16.99%….

Still, some of the pitches are aimed at people who are just beginning to learn about credit and managing their own finances. The Citibank card is targeted specifically at students. It offers 3% cash back on all purchases but only during months when you don't pay off your entire bill. Write a check for the full amount each month, however, and there's no rebate at all….

     Incredible. And the executives of these companies probably have advanced degrees in some of America’s most prestigious colleges and universities. Aren’t any of them teaching ethics?

     If you need any more reasons to believe that our health care industry in broken and needs substantial revision, check the article below.

From The Wall Street Journalk, September 16.

Health Club:

Behind Medicare's Decisions,
An Invisible Web of Gatekeepers

TUCSON, Ariz.—One evening in 1986, while Chris Erringer was sitting in his Toyota Land Cruiser, a stranger approached him and shot him under the right eye….

The attack left Mr. Erringer a quadriplegic, with painfully knotted back and neck muscles….

Then, in September 1999, came a letter that would change his life again. Medicare would no longer cover the injections. "It didn't really explain why," he says. "It just said no."…

Finding the answer took Mr. Erringer more than a year of frustrating arguments and appeals, a legal crusade that turned into a class-action suit against Medicare's bosses. The decision-makers, it turned out, weren't in the massive Baltimore headquarters of the federal Centers for Medicare and Medicaid Services, which runs the Medicare program for nearly 40 million elderly and disabled Americans. The real authority lay in the hands of a North Dakota insurance company—one of the hidden gatekeepers of American medicine who ration health care.

About two dozen of these government-contracted insurers handle the claims for doctor visits and hospital outpatient procedures submitted to the $250 billion-a-year federal program. The Medicare agency, commonly known as "CMS," sets national policies on coverage for some items, including expensive new technical advances.

But the agency gives the insurers--whose territories cover multiple states or even whole regions—broad authority to fill in the blanks, laying down local rules on what Medicare will cover and what it won't. The result: Decisions on everything from trigger-point injections to psychiatric services to the use of ultrasound and CT scans are in the hands of the insurers and their little-known medical directors….

"It's rationing. It's a way to limit things," says Grant Bagley, a former top Medicare coverage official who now represents manufacturers, providers and beneficiaries as a partner at the Arnold & Porter law firm in Washington….

     Not covered in this article about the invisible gatekeepers who ration health care—are the outrageous incomes of all the top players in the medical industry who have made it so expensive in the first place: hospital and HMO administrators, health insurance executives, pharmaceutical industry executives, many doctors and specialists, and the investors in all aspects of the health care industry who put pressures on executives for excessive profits.

     The following two articles go together. As frequently noted about other articles in this website section, they demonstrate the disaster that would follow privatizing Social Security.

From The Wall Street Journal, September 17.

Struggling to Retire on $1 Million

Advice for a Thrifty Couple
Overexposed to a Few Stocks;
Getting Past a Fear of Bonds

Jim and Sue May have accomplished the dream of so many savers: The Kentucky couple has amassed a nest egg exceeding $1 million—and on a combined income that, in the best years, never topped $100,000.

Now, the Mays have a worry: Is even a million enough for a comfortable retirement?…

From time to time we're asking readers like the Mays to expose their portfolios and their worries in exchange for professional guidance from three financial planners. This time, we consulted planners from Pillar Financial Advisors, Mayhew Asset Management and Zussman Financial Advisors.

The planners all agree the Mays should be able to afford the retirement they seek, so long as they restructure their portfolio now….

     Roughly once a month an article similar to the above comes out in one of our prestigious financial publications. The message always is: even the rich have serious challenges planning for retirement, and it requires the ability to consult with financial advisors.

     Think of the challenges for the bottom 80% of Americans, who—if the Republicans have their way and privatize Social Security—will have to manage their own meager funds.

     Under a privatized Social Security system, not only will retirees have to manage their own funds, they will have to rely on brokers like the ones described below:

From The Wall Street Journal, September 17.

NASD Says Firm Gave
Improper Rewards

Morgan Stanley, Official Fined;
Incentives Used to Boost Sales
Of Proprietary Mutual Funds

NEW YORK—The National Association of Securities Dealers charged securities firm Morgan Stanley and one of its top executives with improperly rewarding the firm's brokers with tickets to concerts, sporting events and other noncash incentives valued at more than $1 million in an effort to boost Morgan Stanley's sales of in-house mutual funds and variable annuities….

The NASD's charges target the heart of Morgan Stanley's system for motivating its brokers to sell the firm's own lines of mutual funds to investors rather than funds run by outside that also are available for sale through its brokers….

"This action points to a culture that put tremendous pressure on its brokers to not let down the rest of the team regardless of whether or not it was in the best interest of investors," said Mary Schapiro, vice chairman of the NASD, which regulates mutual-fund and annuity sales….

Week of September 8

     The utter corruption of corporate America is becoming clearer every day. Remember the CEOs of recent years who demanded multiple millions of dollars for their ability to improve the corporate bottom-line?

     The following excerpt describes one of the many fraudulent ways they were able to do it.

From Business Week, September 8.

Economic Viewpoint

The Great American Pension-Fund Robbery

By Robert Kuttner

America's corporate pension system is said to be facing a perfect storm: Equities have taken a big hit (they are still way off their highs), and returns on bonds have plummeted, leaving pension funds with reduced earnings to pay benefits. In addition, corporate downsizing and lengthening life spans have left many companies, particularly in manufacturing, with a rising ratio of retirees to active workers. U.S. Treasury Under Secretary Peter R. Fisher has testified that pensions are underfunded by $300 billion—far exceeding the resources of the government's Pension Benefit Guarantee Corp.

But if pensions are under water, the cause is less a perfect storm than a leaky boat ravaged by pirates. For more than a decade, corporate sponsors of pension plans have been systematically looting them. The great pension raid is of a piece with the other accounting deceptions of the 1990s, and it had the same motivation—to boost reported earnings and stock prices….

Among the favorite gimmicks for creative theft of pension assets:

• Project an unrealistically high rate of return and claim that the plan is overfunded….
• Convert from conventional plans to "cash-balance plans."…
• Redefine employees as independent contractors.…
• Sell off units that have older employees, who then lose their pension benefits….
• Declare bankruptcy, but set up a special bankruptcy-proof pension plan for top executives as an off-the-books trust….

Once, pension plans were intended to induce loyalty and long service in workers. Now, big corporations and their executives seem to care about only one category of worker—top managers, who loot the plans while protecting their own assets. Ordinary long-tenured employees are deemed liabilities.

The remedy for depleted pension funds is much tougher regulation. But the Bush Administration wants to weaken anti-discrimination rules to make it even easier for top executives to have one set of rules for employees and another for themselves….

It's fine to have an Administration that prides itself on being pro-business. But don't the tens of millions of employees who loyally serve Corporate America also count as part of business? Shouldn't their pensions be protected as well?

     With monotonous repetition, the Bush Administration has again demonstrated its total disregard for the welfare of America’s workers—and its commitment to help its corporate supporters to get incredibly rich.

     In one sense, the following three articles are similar: they demonstrate again that—despite all the recent reforms—Wall Street is still a jungle for the unwary and the unsophisticated.

     As they both point out, even the experienced investors who read Business Week and The Wall Street Journal need to be warned of the pitfalls awaiting anyone who counts on the integrity of the securities industry.

From Business Week, September 8.

Commentary: The Myth of Independence

….investors shouldn't be lulled into thinking that independent research is the holy grail for stockpicking. Some academics who study financial markets question whether stock research has much value at all, given the amount of information bouncing around the markets. Untainted research is obviously preferable to the flawed kind, but it's no silver bullet.

From Business Week, September 8.

The Latest Magic in Corporate Finance

For their part, the companies say they aren't hiding anything. Instead, they're doing the deals to get cheap capital, they say…. However, Christopher Senyek, an accountant at Bear Stearns who looked at more than 100 of the contingent convertible issues, says public information on the deals is often "sketchy at best," making it hard to gauge their impact on stock prices.

From The Wall Street Journal, September 8.

How Market Timers Can
Drain Returns For Some Investors

Long-term mutual-fund holders are disadvantaged in several ways. Waves of cash flowing rapidly in and out of a fund increase the commissions that managers pay to buy and sell securities, and those expenses eat into returns. Rapid withdrawals can force managers to sell some winning investments to pay off those selling their fund shares. And to offset fast trading, some fund managers hold a larger portion of their assets in cash than otherwise would be necessary, a move that dilutes fund returns when markets are rising….

     These were just three more brief examples (in one day) of the hypocrisy of conservative economists who want to privatize Social Security, and to let loose the Wall Street barbarians to prey on America's workers.

     These were extensive articles and only brief excerpts were used to demonstrate a point. Those who are interested in the actual investment implications of the issues cited should go to the original articles.

     Remember Bush’s reasons for giving our richest Americans a huge tax cut? It was to stimulate investment and create jobs. As usual, Bush addressed a problem that didn’t exist. Our economy wasn’t weak because of a lack of investment money, it was because poor and middle-class consumers didn’t have enough money to buy the products they needed.

     The real problem of recent years, as the Wall Street Journal describes it, has been “capacity glut.”

From The Wall Street Journal, September 8.

Long a Drag on the Economy,
Capacity Glut Begins to Ebb

"In the flush years, the 1990s, we could absorb that," says Anne Marie Gattari, a spokeswoman for Ford. "We can't any longer." The Big Three want to end the moratorium in the new contract now being negotiated. Ford, the most financially strapped of the three, wants to reduce its current North American capacity of 5.7 million units to 4.8 million, its normal level of annual sales….

     This is beginning to sound ominously similar to 1929, when the richest Americans had 44% of the privately held wealth in the nation. It was reduced to 19.9% in 1976, but rose to about 42% in 1998 and is probably close to 44% again today.

     Again, investors seem to have most of the money, but their consumers don’t have enough to buy the products they need. Even with all this going on, corporate America's biggest concern, of course, is their ability to "boost profits and resist pressures to cut prices."

     In this regard, the Journal seems to think the economy is getting better. Let’s hope so, even if the corporations take most of the profits, at least workers will have jobs. But don’t count on it, with the current crowd we have in Washington wanting to pursue the same policies that got us into trouble in the first place.

     It has taken some time for the world to wake up to the disastrous effects of globalization and the WTO—for most citizens of all nations. The issue has never been, and still isn’t, rich versus poor nations as whole entities. The issue has been rich versus poor citizens in all nations, rich and poor alike.

     The wealthy of both rich and poor nations have formed a club, called the WTO, to ensure the continued accumulation of wealth by pitting workers of the world against each other, and calling the barbaric practice “free trade.”

     Unfortunately for the rich, conditions have gotten so bad that there are real threats to political stability throughout the entire world. Thus, we are seeing the WTO's problems described in the following excerpt:

From The Wall Street Journal, September 9.

Post-Iraq Influence Of U.S.
Faces Test At New Trade Talks

Activists are criticizing the agreement. One criticism is that it's worded so vaguely nobody can be sure how it will work. Some fear that poor countries lack the legal sophistication to take the steps needed to receive the drugs. The nations have to find a foreign company to make the drugs for them and then inform both the drug maker that holds the patent and the WTO's committee on intellectual-property rights. Finally, they have to be prepared to fight a challenge to their use of the drugs at the WTO's dispute-settlement body. Several countries, including the Philippines and Kenya, had last-minute worries about the deal but agreed in the face of heavy-duty U.S. arm-twisting.

     America’s self-interest, bordering on naked greed, is evidenced by the U.S. negotiator, Mr. Zoellik, who insisted that poor nations put their poor farmers at a severe disadvantage—if America’s giant corporate farms are to give up some of their own protections and subsidies.

     The U.S. is among the last nations on earth willing to risk public health in the name of corporate profits. Not only that, we pressure other nations to go along with us in our gambling with the future of mankind.

From The Wall Street Journal, September 9.

U.S. Opposes EU Effort to Test
Chemicals for Health Hazards

"It's not the mandate of those agencies to do what they're doing," contends Joe DiGangi, a scientist with the Environmental Health Fund. "The government has adopted the industry position and tried to sell it," he says….

     Could the close connection between the Bush Administration and the worst aspects of corporate America be clearer?

     The corruption caused by political incest continues.

From The Wall Street Journal, September 10.

Many Ties Link Pension
Lobby To Regulators

Ms. Bradshaw, the Treasury spokeswoman, objected to questions about the party. The policy positions of those invited to the party "had no bearing on whether they were invited or not," Ms. Bradshaw said. "This was two buddies throwing a party for friends."

     The pretended innocence of it all is especially disturbing: "This was two buddies throwing a party for friends." Even if that was true, it demonstrates a total lack of appreciation for the inbred biases that color political decision-making. When the regulators and the regulated—just friends—get together to schmooze, corporations always win and the public always gets screwed.

     Again, it’s Republicans and big business against working Americans. This Wall Street Journal editorial endorses the removal of protections of the rights of organized federal employees to earn decent wages and to have humane working conditions.

From The Wall Street Journal, September 9.

The Union Libel

The effort can't succeed, of course, unless some Republicans cooperate. In the House, GOP Members Jack Quinn (New York), Steve LaTourette (Ohio) and Ron Kirk (Illinois) are among the wobbly. Over in the Senate, New Jersey Democrat Frank Lautenberg is expected to attempt a filibuster, and GOP Senators Jim Inhofe of Oklahoma and Jim Talent of Missouri are listening too closely to the union libel. If Republicans help defeat this gift to taxpayers, we'll know they no longer believe in smaller government.

     Apologies: Just another article in the continuing series about the corruption of America’s securities industry—and why Social Security should not be privatized.

From The Wall Street Journal, September 9.

Will Funds Disclose More—Publicly?

"To restore faith in the fund industry, it's not just important that everyone gets the same [fund-trade] execution, but also the same [portfolio] information," says Russ Kinnel, director of fund analysis at researcher Morningstar Inc. "It doesn't take any more effort to post a fund's portfolio to a Web site than it does to e-mail it to a hedge fund."

Week of September 1






     The following two Wall Street Journal articles go together: first, the news report that details the looming disaster of the misguided Iraq war. Second, the editorial that—despite all the evolving evidence—still tries to convince voters that Republicans are strong on defense and Democrats are weak.



From The Wall Street Journal, September 5.
The Postwar Bill
For Iraq
 Surges Past Projections

Sabotage, Looting Take a Heavy Toll;

Oil Revenue Flows, but Only Weakly






Rebuilding Iraq is turning out to be far more expensive than the Bush administration predicted just months ago, with U.S. taxpayers likely to foot much of the tab.
… officials involved in the process say the U.S. tab for helping to rebuild and sustain Iraq through next year—aside from the $3.2 billion already put into the effort—could exceed $10 billion. On top of that, the administration expects to spend as much as $50 billion next year to keep tens of thousands of U.S. troops in Iraq, beyond the $70 billion Congress approved earlier this year to pay for the war and its immediate aftermath.
That picture is strikingly different from the one the Bush administration sketched out before the war in Iraq began. Then, the official message was simple: Unlike Afghanistan, oil-rich Iraq would largely pay its own way. "We're dealing with a country that can really finance its own reconstruction, and relatively soon," Deputy Defense Secretary Paul Wolfowitz told Congress a week after the war began. Oil revenue, he predicted, "could bring between $50 billion and $100 billion over the course of the next two or three years."
That estimate, which was predicated on aggressively optimistic assumptions, now looks off course. In reality, Iraq seems likely to fall short of even the $12 billion to $14 billion in oil revenue next year that coalition officials say they expect.
The mounting price tag for Iraq comes as President Bush grapples with a yawning deficit at home, expected to hit $480 billion next year, and continued hostility among many erstwhile allies in Europe that might otherwise contribute. All this could become a major political liability for Mr. Bush moving into the election season next year….
Bechtel Group, hired to do $680 million in U.S.-funded infrastructure repairs, estimated soon after it arrived in Iraq this spring that putting the country in working order would cost at least 24 times that much. L. Paul Bremer III, the top U.S. official in Baghdad, in recent weeks has made even higher estimates….
That means that outside sources—some combination of the U.S., Europe, Japan, Persian Gulf nations and international financial institutions—may have to contribute more than $16 billion to Iraq's budget and rebuilding needs next year, aside from the military costs of occupation. And, unfortunately for the U.S., there isn't much sign of serious help from elsewhere, thanks in part to lingering prewar tensions between the U.S. and many allies….


------------------------------------

From The Wall Street Journal, September 5.
John Kerry Puts the Big
 
Issue Before the Voters


By DANIEL HENNINGER

… the Democratic Party is not quite a normal party now. It has become the antiwar party. It is the hell-no-we-won't-ever-go-party. Which is why Howard Dean, the most antiwar candidate among the party's presidential hopefuls, is stretching his lead in polls based on phone calls to Democratic warrens, with the result reflecting what Salon.com's David Talbot calls "the party faithful's passionate mood."…
I don't doubt that a President Kerry or even a President Dean would deploy the U.S. military on relatively modest missions—a Haiti or Liberia, or Somalia. But an Iraq war? A strike and follow-through against North Korea? After Vietnam and no matter that September 11 happened, and no matter what the merits, Mr. Kerry and the others (perhaps excepting Sen. Lieberman), give the impression they would not act, or not act in time. They would consult, specifically with France, Russia, Germany and the U.N. secretary general.
There is no way to know with certainty whether any of them would act on the scale of the Iraq war on behalf of American security. But Mr. Kerry has usefully raised the issue. It won't be sufficient to say they would have "done things differently." The real question is whether they would do it at all.


     Remarkable. The news story details the disastrously poor planning and decision-making of the Bush Administration, and the terrible mistake of going alone without the U.N. and others. 
     And in the same Journal issue, the editorial criticizes Democrats for doubting the wisdom of going to war with Iraq in the first place, and then wanting to get the support of other countries and the U.N. in the second place.
     Being “strong on defense” doesn’t equate to going to war with Iraq. It means you correctly analyze likely terrorist threats and allocate your recourses according to priorities that make sense. For more on this, see How the Republicans Beat the Democrats on Spinning Iraq.












     The stock market continues to go up, investors and corporate executives see their incomes continue to go up. And competition among Americans for jobs continues to reduce working-class incomes.


From The Wall Street Journal, September 5.
Payrolls Drop by 93,000 Jobs

As Unemployment Rate Declines



WASHINGTON—Employers cut jobs for a seventh consecutive month in August, as the labor market remained in a funk despite the economic recovery gaining steam.
Nonfarm business payrolls declined by 93,000 last month, the Labor Department said Friday. The cut, the steepest in five months, brought total job losses since the start of the year to 431,000. The unemployment rate fell a tenth of a percentage point to 6.1%….
The numbers highlighted the peculiarity of the current economic recovery. The economy grew at a solid 3.1% annual rate in the second quarter, and forecasters are betting third-quarter growth will be at least 5%.
But employers keep cutting payrolls. One reason is a surge in productivity, which rose at 6.8% in the second quarter. That allows companies to delay hiring until profits improve and the economy recovery has solidly taken hold….
August's job cuts were broad based and remained heavy in manufacturing, a sector that suffered the brunt of the economic downturn. Manufacturers shed 44,000 jobs last month, raising the total of jobs lost in the sector to about 2.7 million over the last three years. President Bush on Monday announced he was creating a new assistant-secretary position in the Commerce Department to focus on revitalizing the factory sector….


     A key issue has been omitted from the above excerpt. A major reason for increased productivity of American industry amidst declining payrolls is that employees are under the threat of losing their jobs, and are much more willing to work harder under more stressful conditions.
     Republican politicians and corporate America have working-class Americans exactly where they want them. However, there are signs that they may be beginning to realize that they have taken things too far. This lopsided economy is bound to crash if workers don’t start getting more income to spend.
     Although globalization has led to the rapid accumulation of wealth to America’s investors and corporate executives, the massive exodus of jobs to other countries is beginning to worry even some moderate Republicans.  











     The effects of corporate greed and misbehaviors are rapidly multiplying, and the economic news continues to get worse—especially for those who didn’t benefit from the economic boom of the 1980s and ’90s. 


From The Wall Street Journal, September 5.
Warning of Pension-Plan Shortfall

Raises Pressure for Financial Fix




The government agency that insures 44 million workers' retirement benefits said the nation's pension system is in worse financial shape than previously believed, a politically charged warning at a time when economic uncertainty, unemployment and rising fears about the loss of manufacturing jobs overseas already are stoking debate in Washington.
It raises the prospect that companies could be forced to contribute more to the government insurance plan, that benefits to retirees could be reduced and even that taxpayers ultimately could have to bail out the pension-guarantee program….
The Bush administration wants Congress to approve legislation that would ease the pension burden on companies for two years, allowing for the economy to turn around. After that, the administration is proposing a transition period of three years that would end with tougher, long-term rules for determining pension-contribution requirements. Democrats such as Rep. George Miller of California are calling for greater disclosure of existing problems, so workers can judge for themselves how likely they are to receive the benefits they've been promised.
Business groups, meanwhile, are pressing Congress for changes that could permanently ease their pension burden….


     It’s the usual cast of characters: Republicans and business groups wanting to protect the profits of corporations and minimize protections of employee retirement benefits. And Democrats who want to protect the interests of retired workers.
     No matter how this is resolved, you can count on it: Corporate executives who caused the problems will continue to get income increases, the American taxpayer will pay through the nose, and benefits to retirees will be reduced. 











     For those who have been victimized by the economy of the past 25 years (at least) The Wall Street Journal is always looking for good news among the bad. It has finally found some. There are terrible jobs out there for those who want to work.




From The Wall Street Journal, September 2.
Why Some Jobs Go Begging

Despite Weak Labor Market



While many Americans feel insecure about their jobs in the current tough labor market, workers in certain fields enjoy a surprising degree of job security.
These careers often have industry-specific reasons for their strength, but typically they have three things in common: Many require considerable training and certification even though pay levels can lag behind those in other careers. None of these jobs can be outsourced to lower-cost nations. And the most secure jobs are often seen as undesirable to many job seekers.
Among these are many positions in health care, which often is stressful and can have higher injury rates than some construction jobs. Another field, selling cars, takes relentless effort and garners little respect….
More than nine million people, from computer programmers to factory workers, are looking for work. Millions more say they don't make as much money as they should….
Barbara Williams, a 58-year-old clinical nurse specialist at Dominican Hospital in Santa Cruz, Calif., watched younger nurse colleagues depart in the 1990s. The fast pace of the work and rising number of patients assigned to each nurse led to burnouts and career switches. Pay was another issue. In 1998, nurses, who attend college for two to four years, made an average annual salary of $43,070, not competitive in many regions with jobs requiring a similar level of education. "If they were young and able to, they walked out," Ms. Williams says. The result: The Labor Department projects nursing will be one of the top generators of new jobs during the coming decade.


     The last example of nursing is an excellent demonstration of how corporate greed and conservative economics combined to almost destroy one of our most revered, and desired, professions. For the past 20 years nurses have found their pay and working conditions deteriorate, simply because they had no negotiating power compared to pharmaceutical companies, insurance companies, hospital administrators, and organized physician groups. 
     Wealth is a zero-sum game (see Zero-Sum), and in one way or another, those groups were responsible for recklessly cutting the costs of nursing in order to increase their own incomes.


     Unfortunately, other groups of workers won't be as lucky to see their pay and working conditions improve, as apparently is happening in nursing. Increasingly, working Americans are going to find that their jobs must fit the three requirements described above:

 Considerable training and certification even though pay levels can lag behind those in other careers (or lower pay for the same level of work they did before). 
The jobs cannot be outsourced to lower-cost nations (just how many of those are left nowadays?) and 
 The jobs must be seen as undesirable to many job seekers.

     What a glorious society conservative economists and politicians have created for us.








     It always starts slowly. A corporation like GM sets up a new labor force in another country. They train them, give them the very best technology and equipment, and pay them somewhat better wages than they could get otherwise.

     As the foreign workers develop their expertise, they begin to take the jobs of much higher-paid workers in the U.S. to produce products, technology, or services intended for the U.S. Eventually, they replace virtually all the U.S. workers, except those who must physically be present in this country.

     The corporation’s investors and top executives benefit financially from the reduced labor costs and the American consumer may get cheaper products and services. 

     But it’s the replaced U.S. workers who make all the sacrifices, and their numbers are growing rapidly. 



From Business Week, September 1.
China's Design Dream Team

Industrial designers are making a mark

…Today, though, Sun (Yunbo) is one of 21 Chinese designers working on the Buick Excelle, an new sedan that General Motors Corp. plans to start selling in China this fall. “Now auto design is natural for me,” Sun says.

Sun is at the vanguard of a trend that’s shaking the world of design. As China grew into an export powerhouse over the past decade, most of what its factories churned out was designed elsewhere. Now, like the Japanese in the 1970s and the Koreans in the 1990s, Chinese companies are keen to reap the higher margins and market share that often reward flashy, well-designed products. "Our goal is the transition from 'Made in China' to 'Designed in China,"' says He Renke, chairman of the industrial design department at Hunan University….

Even so, it may be a while before designers in Milan, London, or Detroit need to worry about finding a new line of work. So far, most Chinese designers have simply tweaked color and form for export products, while conceptual work on new cars, appliances, and electronic gadgets is done in Europe or the U.S. "They have good designers, but they don't know the U.S. market" in many products, says Jerry W. Edwards, executive vice-president for merchandising at retailer Home Depot Inc., which hires Chinese subcontractors to produce items such as faucets and ceiling fans….

For a glimpse of the future, check out 28-year-old Fang Zhen, who works with Sun at GM. He sports orange hair, favors black T-shirts and cargo pants, and looks to Italy for inspiration. "First, I want to be the Giorgio Giugiaro of China," says Fang, referring to the legendary Italian who designed Alfa Romeos, Lamborghinis, and the 1967 Oldsmobile Toronado. "Then I want to be a top auto designer globally." With that kind of ambition coming out of Shanghai, designers in the West may want to keep one eye on the rearview mirror.


     When the time comes to face the fact that we have totally destroyed—not only America’s middle class, but also the upper-middle class—will those who profited from the globalization craze be willing to voluntarily pay for the social dislocations and problems they have created? I wouldn’t count on it.

     It’s going to take a new batch of politicians who aren’t afraid of being called “traitors of their class” (as was Roosevelt), and a new “new deal.”

     Corporations can always think of reasons for swallowing smaller companies and getting bigger. They never mention one of their best reasons: Like Donald Trump, when you get really big—and the economy, jobs and economic stability are threatened—there’s no way the politicians and banks will allow you to fail. Of course, in the case of these accounting firms, it’s the sheer lack