Previous Weeks' Conservative Press

Weeks of January 5 to March 29, 2004

     This review of the conservative press was started on the week of June 2, 2003. In the brief time since then, note the number and diversity of articles that were published in America's most respected conservative financial publications.

     In one way or another, they clearly demonstrate the hypocrisy of those conservatives who claim that:

     So, grab your barf bag and read on!

     (Note: the abstracts below are presented for purposes of criticism only. Because of copyright laws—and in the interests of brevity and readability—they are necessarily incomplete. Those who are interested in the investment or other implications of the articles should read the originals.)

The week of...

March 29

March 22

March 15

March 8

March 1

February 23

February 16

February 9

February 2

January 26

January 19

January 12

January 5

Week of March 29

    It’s been said, accurately, that economics will never be a science because there are no objective analysts, and every school of analysts creates winners and losers. In other words, every economic theory affects the income and wealth of different categories of people and in different ways.

    Each analyst operates from a base of assumptions: that an economy should benefit the greatest number of people, and even the least should have a comfortable living—or it should benefit primarily the elite, however they are defined, and the lowest on the economic scale should be willing to sacrifice some comforts in return for the leadership by the elite.

    The following front page story in the Wall Street Journal describes the different philosophies perfectly, and illustrates why our current economy is deliberately designed to create an American aristocracy, with its attendant servant class.

From The Wall Street Journal, April 2.

The Future of Jobs:
New Ones Arise,
Wage Gap Widens

Outsourcing, Technology Cut
Need for Rote Workers;
Brainpower Is in Demand
Hot Area: Massage Therapy

… Tens of millions of increasingly skilled Chinese and Indian workers are joining the global economy at a moment when technology can dispatch white-collar work overseas almost instantly—from call centers to sophisticated design projects, the very jobs that discouraged U.S. factory workers hoped their children would get.

The good news: The U.S. almost certainly isn't going to run out of jobs, even though history shows that it's impossible to predict what new jobs will replace those that are destroyed. The bad news: Outsourcing overseas and technology could widen the gap between the wages of well-paying brainpower jobs and poorly paid hands-on jobs….

One unpleasant possibility, acknowledged even by those firmly in the trade-is-good camp, is that jobs will proliferate at both ends of the barbell—and fewer in the middle. The result would be an ever-wider gap between well-paying jobs and poorly paid jobs. That, too, has happened before, as recently as the 1980s when unionized skilled manufacturing jobs evaporated….

The overall pace of wage increases in the U.S. generally tracks growth in productivity, the amount of goods and services produced for each hour of work. But in any economy, wages for workers in high demand rise and wages for others lag or even fall….

Without a major change in policy, such as an increase in the minimum wage or restraints on immigration, or a seismic shift in the economy, such as a surge in unions or limits on imports, the economic forces widening the gap between wages of winners and losers appear strong….

"There are two kinds of lies that politicians tell about outsourcing," says Mr. Levy, the MIT economist. "One is that we can turn it all back. But even if you cut off all trade, technology can do the same things to workers. The other is that education is all that matters. That's true, of course, but only in the long run."…

Without better elementary and high schools, wider access to college and more training of mature workers, the gap between those with well-paying and poorly paid jobs is certain to grow.

Over the next five or 10 years, though, better high schools, more college-student aid and more pervasive workplace training don't seem sufficient to stop outsourcing, trade, improving technology and relentless cost-cutting from widening that gap.

This story betrays the aristocratic goals of today’s conservatives almost better than any other I’ve seen. Consider:

  • "Outsourcing overseas and technology could widen the gap between the wages of well-paying brainpower jobs and poorly paid hands-on jobs.” Of course, that’s the whole point. The established wealthy and their offspring will have lives of luxury, and the poor and their offspring will be their servants.

  • "The result would be an ever-wider gap between well-paying jobs and poorly paid jobs. That, too, has happened before, as recently as the 1980s when unionized skilled manufacturing jobs evaporated.” And that, ladies and gentlemen, is why corporations have always done everything they could to destroy unions. Prior to globalization, unions had at least some power to negotiate for better wages and working conditions.

  • "The overall pace of wage increases in the U.S. generally tracks growth in productivity.” This is one of the most pernicious lies of conservative economists. Wage increases are always the result of power—not productivity increases. Our 40-hour workweek and time-and-a-half for overtime didn’t result from increasing productivity, it was because a progressive President Roosevelt and a progressive Congress passed the Fair Labor Standards Act in 1938.

  • "Without a major change in policy, such as an increase in the minimum wage or restraints on immigration, or a seismic shift in the economy, such as a surge in unions or limits on imports, the economic forces widening the gap between wages of winners and losers appear strong.” This one statement has the real answer for making our economy work for the benefit of working Americans as well as for our current crop of greedy, materialistic and powerful investors (our new class of aristocrats).

        We’ve got to repeat the same kind of 1930’s legislation that allowed our country to overturn the wretched excesses of the 1920s. And it’ll never happen as long as Republicans and conservative Democrats remain in control of Congress and the executive office.

  • "One (lie) is that we can turn it all back.” That’s simply not a lie; we can turn it back. We had globalization in the 1920s (although not nearly as much and with not nearly the detrimental effect on our middle-class) and we turned it back. With the proper legislation, we can do it again.

  • "But even if you cut off all trade, technology can do the same things to workers.” True, but it doesn’t have to be true. Through legislation, we could insist that workers share in the increases of technology and productivity, by, among other things, reducing the national workweek—just as we did in 1938.

  • "The other (lie) is that education is all that matters. That's true, of course, but only in the long run." It’s not even true in the long run. India, China and other countries are also improving the education of their citizens. As always, education isn’t the the key to a good living standard in any country. In every country in the world, it’s those with political power who get most of the benefits from their economy. The only role education plays is that the educated and wealthy are better positioned to exert their political influence than are the poor and uneducated.

  • "Over the next five or 10 years, though, better high schools, more college-student aid and more pervasive workplace training don't seem sufficient to stop outsourcing, trade, improving technology and relentless cost-cutting from widening that gap (between the aristocracy and the poor).” This is the truest statement in the article. And, amazingly, it’s on the front page of The Wall Street Journal.

    Note: this is a very brief excerpt of a very long front-page article and is intended for purposes of criticism only. Those who wish to gain a greater appreciation of the entire issue as presented by the Journal—or feel that I may have misrepresented the article’s intent (and I took pains to make sure I haven't)—should read the original.

     “Bait and switch” is a standard operating procedure for the conservative financial press. They say that outsourcing is good for our country’s progress because that’s the natural result of technological improvements. Then they cite historical precedent in which beneficial technology caused large-scale disruptions in the labor markets.

     But today’s outsourcing is not the result of other countries having superior technologies. Today’s outsourcing is purely a strategy to cut wages for American workers.

     What’s happening today, and the Journal’s illustrations, are as different as night and day.

From The Wall Street Journal, March 29.

Finding Lessons
Of Outsourcing
In 4 Historical Tales

Technology, Trade, Migration
Often Shook Job Market;
Politics Can Slow Effects
Farmers Fall Prey to Railroads

What could be a more modern dilemma? High-speed data links allow employers to ship white-collar jobs from rich countries to India, China and other nations where workers earn far less.

Yet losing skilled jobs to low-wage foreign competition is as old as the Industrial Revolution. In the 1830s, the British textile industry became so efficient that Indian cloth makers couldn't compete. The work was outsourced to England, with disastrous consequences for Indian workers…

In the early 1800s, skilled weavers in Britain who worked on hand looms considered themselves a protected class. For a while, the government banned the use of textile machinery that could do weaving more efficiently and even barred emigration by mechanics as a way to keep technology bottled up in Britain….

The Luddites, often seen as a symbol of futility, were the first of a series of resistors to technology. The Homestead strike of 1892—in which seven Pennsylvania steel workers and three Pinkerton detectives were killed—was sparked by Andrew Carnegie's efforts to automate steel production. In the 1960s, U.S. union protests over "de-skilling"—replacing machinists with automated tools—ended peacefully with unions accepting no-layoff pledges in exchange for new technology….

Lower tariffs make it easy for China to export clothing and electronics to the U.S., battering workers in those industries. But overall, many Americans benefit because the imported goods drive down prices….

Congress is discussing regulation and tax policy to hinder the practice. History shows that in a battle between politics and technology-driven change, betting on technology isn't a sure thing.

     Today’s outsourcing is NOT “technology-driven change.” It’s worker wage-destruction” change.

     Sure, today’s workers, as a class, are benefiting slightly from lower prices. But they are losing out big-time because their wages—relative to prices—are actually going down. And unemployed workers can no longer afford to buy products, no matter how cheaply priced.

     Who are the real winners from outsourcing? Investors and top corporate executives, of course.

     The following two excerpts from the same issue of the same publication go together. They demonstrate the chronic bias in favor of rich investors and against working Americans.

From Forbes, March 29.

The Pension Bomb

By William Baldwin

Pensions are a big waste of money. What do you say we just abolish them? Especially government pensions….

Some, mostly unionized, industries cling to old-style pensions—autos, steel, airlines. They use the system to foist costs onto competitors and taxpayers. If a company doesn't have the cash to give workers a pay raise, it will fatten their pensions instead. When it goes bust, the federal Pension Benefit Guaranty Corp. has to make good on the promises.

For similar reasons, politicians are in the habit of favoring mañana pay--later generations of taxpayers will get stuck with the bills. What a shame that New York City cops and firefighters get half-pay retirement after 20 years. Good ones who should stick around quit their jobs at age 42. Bad ones who should be fired long before then are allowed to stay, because it would be too cruel to erase that precious retirement benefit. There's a perverse incentive for workers nearing retirement to pad their final paychecks with overtime….

From Forbes, March 29.

Connoisseur's Guide

The Best Men's Shoes

By Neal Santelmann

…While shoe shopping may not mean the same for a man as for a woman, it would behoove many men to spend a little more time weighing their options the next time they need to stock up on footwear. Contrary to what many people might think, there is a considerable difference between makes and styles, even if it is not always apparent to the untutored eye. The result, too often, is that men end up buying cheap, uncomfortable or overly trendy shoes when, with a little bit of extra thought, they could have spent their money on a shoe that would have lasted them happily for years. In other words, a wingtip is not a wingtip is not a wingtip….

The question, of course, is why a man should choose to wear anything other than Rockports or sneakers. For one thing, a well-made shoe can, and should be, extremely comfortable. For another, a well-made shoe sends the rest of the world a signal about the wearer. More than any other article of clothing, shoes can influence how others view us, not to mention how we view ourselves. There's a reason, after all, why mothers traditionally advise their daughters to first look at a man's shoes….

To start you down the path of sartorial shoe splendor, we've selected nine shoemakers that will help you put your best foot forward. They range in price from $360 to $1,000-plus; in manufacturing from custom-made to factory produced; and in style from edgy contemporary to classically traditional. And they're all ready for stepping out.

     Let’s face it. Those who can afford to pay $360 to $1,000-plus for a pair of shoes will never understand the necessity of pensions for workers who don’t make enough money to save for retirement.

     In almost every issue, Forbes has similar articles glorifying conspicuous consumption, and criticizing any governmental or corporate policies that benefit workers.

     From the reasons for going to war with Iraq, to assaults on the environment, to the health of our economy—the top members of the Bush Administration are simply a group of deliberate liars.

From Business Week, March 29.

Lies, Damn Lies—And Job Statistics

Critics have yet another gripe about the Economic Report of the President, which the White House Council of Economic Advisers (CEA) sent to Congress on Feb. 9. In a Mar. 17 trade complaint, the AFL-CIO blasts the Administration for misleading data about factory job growth. The CEA report explains that although foreign trade wiped out thousands of jobs in low-skill industries such as textiles, it also helped boost high-skill factory employment. From 1950 to 2000, jobs soared 207% in the instrument industry, 102% in printing, and 77% in electronic equipment.

But labor contends that the head count ended conveniently early for the Bush Administration. Citing Bureau of Labor Statistics data, the AFL-CIO shows that after the year 2000, jobs in those industries actually fell—by 30% in electronic equipment, 12% in instruments, and 15% in printing. The CEA and the White House declined comment.

     And when these deliberate liars are caught, all they can do is either decline comment or try to discredit those who are telling the truth.

     To Business Week’s credit, it occasionally allows an objective observer write an opinion piece for its magazine.

From Business Week, March 29.


This Recovery Could Be Built On Quicksand

By Laura D'Andrea Tyson

…By this point in a normal economic cycle, a virtuous circle of mounting production, employment, and incomes and their multiplier effects on household consumption could be counted upon to make the expansion self-sustaining without additional policy stimulus.

But this cycle has not been a normal one. According to the Economic Policy Institute, this is the first time since 1939 that the number of jobs has not recovered to pre-recession levels nearly three years after the recession's onset.

Real weekly incomes fell last year for workers in the bottom half of the wage distribution. And overall labor incomes, excluding bonuses and one-time payments, have been virtually stagnant for nearly three years. At this point in a normal recovery, total real labor compensation would be up by about 2.6%. Instead, it is down by more than 3%.

As a result of anemic job and wage growth, America's consumers are missing about $350 billion to $400 billion in income, compared with past cycles.

Unless employment and wage growth pick up sharply soon, consumption spending is likely to slow significantly, jeopardizing the expansion during the politically sensitive second half of the year….

     This is another person telling the truth—as opposed to the propaganda from the Bush Administration about what a great economy this is.


     Here’s still another voice warning the public about abuses in the mutual fund industry.

From Business Week, March 29.

No Rest Yet For Fund Reformers

What's the real mutual-fund scandal? Excessive fees, says John Bogle. The Vanguard Group founder believes regulators' next target will be exorbitant management fees and portfolio-trading costs. By Bogle's count, investors shell out nearly $100 billion a year on those fees, which eat into overall fund returns.

Other targets for reformers: the practice of stocking newer funds with initial public offerings to pump up returns, and 401(k) plans, which need better disclosure. "We've got to put shareholders back in the driver's seat," he says….

     Even if Bogle’s criticisms are acted upon—you can count on it: Wall Street will think of new ways to screw the investor.

     And that’s the industry that Republicans want to handle the funds of retirees when Social Security is privatized.


     Undoubtedly, supporters of globalization will cite the article below as proof that outsourcing will create jobs in the U.S. After all, here’s an example of Indian firms creating jobs in the U.S.

     Can you spot the fallacy?

From The Wall Street Journal, April 1.

Outsourcing to India Sees a Twist

technology and call-center companies are setting up operations in North America, driven by a desire to be closer to top clients and by political pressure over the outsourcing of U.S. jobs….

As Indian companies do more elaborate work for U.S. clients, proximity becomes vital, Indian executives say, which outweighs the often higher costs of operating in North America….

Not all Indian companies embrace the idea of setting up shop in North America. Many technology companies say India's low-cost labor is their main competitive advantage. Expanding operations in the U.S. "makes no economic sense at this time," says Vikram Talwar, chief executive of Exlservice Inc., a call-center operator based in the U.S. but whose 3,400 workers are nearly all in India. An Indian call-center worker earns about $200 to $300 a month, about a tenth of the comparable U.S. wage….

A number of Indian companies are choosing to establish a base in Canada, which offers proximity to the U.S. but cheaper skilled labor and tax rebates that can help Indian companies limit costs. And Indian executives say U.S. clients appear more at ease with shifting work to Canada than to India, which has become a magnet for political attacks against outsourcing.

But opponents of U.S. companies' outsourcing practices say that setting up shop in Canada instead of India shouldn't shield companies from criticism. "We should be just as concerned about jobs moving to Canada as jobs moving to India, especially when the private sector hasn't created jobs" in the U.S., says Marcus Courtney, president of the Washington Alliance of Technology Workers, a local of the 700,000-member Communications Workers of America union....

     Sure, Indian firms have found it necessary to create jobs in this country—but only because the much larger number of employees in India need to have a few people in this country to serve as a direct interface with American customers.

     As the article acknowledged, “India's low-cost labor is their main competitive advantage,” and “Expanding operations in the U.S. ‘makes no economic sense at this time.’”

     And that single sentence is the key to understanding the entire article.

Week of March 22

     At a time when corporate profits are at a 20-year high and the stock market is soaring—and wages of workers are stagnating and they are working harder under more stressful conditions—the greed of investors and their supporters becomes even more apparent.

From The Wall Street Journal, March 26.

Costco's Dilemma: Be Kind
To Its Workers, or Wall Street?

When it comes to workers, companies can be accused of not paying enough—or paying too much.

Wal-Mart Stores Inc.'s parsimonious approach to employee compensation has made the world's largest retailer a frequent target of labor unions and even Democratic presidential candidate John Kerry, who has accused the Bentonville, Ark., chain of failing to offer its employees affordable health-care coverage.

In contrast, rival Costco Wholesale Corp. often is held up as a retailer that does it right, paying well and offering generous benefits.

But Costco's kind-hearted philosophy toward its 100,000 cashiers, shelf-stockers and other workers is drawing criticism from Wall Street. Some analysts and investors contend that the Issaquah, Wash., warehouse-club operator actually is too good to employees, with Costco shareholders suffering as a result.

"From the perspective of investors, Costco's benefits are overly generous," says Bill Dreher, retailing analyst with Deutsche Bank Securities Inc. "Public companies need to care for shareholders first. Costco runs its business like it is a private company."…

     “Public companies need to care for shareholders first.” “First” doesn’t quite describe it. Most public companies are taking care ONLY of their shareholders—and the CEOs who look for them. Employees have the status of raw material or machines, and have no vested interest in the success of their corporations (except that they may keep their miserable jobs).

     In today’s environment, employees are only an expense to be minimized—nothing more.

     Any observer who rates Wall-Mart as a better overall corporation than Costco has to be a right-wing Republican crackpot.

     In 1938, with an unemployment rate of 19%, Roosevelt and a progressive Congress passed the Fair Labor Standards Act. It established the 40-hour workweek, with time-and-a-half for overtime, and prevented children under 16 from working full-time non-farm jobs. In effect, it spread out the work among more workers, and increased their share of corporate profits.

     That was our country’s answer to the problem of high unemployment and the unfair distribution of the fruit of the labors of working Americans. It was based on the moral assumption that productivity improvements should be shared with workers, as well as with investors and top corporate executives.

     The following two excerpts from the same issue of Business Week demonstrate the total turnaround in values in our country, as investors and top corporate executives create conditions in which they take all the benefits or productivity improvements, and share virtually none of the benefits with their own workers.

     Indeed, when workers themselves become more productive, more of them get fired. They then enter the labor market and create additional downward pressures on job rates for their entire class of income earners.

     A new class of aristocracy is now in charge of our government. In effect, they’ve won the class war against those who actually work for a living.

From Business Week, March 22.

The Price Of Efficiency

Stop blaming outsourcing. The drive for productivity gains is the real culprit behind anemic job growth

What on earth is going on in the U.S. labor markets? Demand for goods and services is the strongest in years, and profits are going through the roof. Companies are spending again on new equipment, while starting to restock their depleted inventories….

After more than two years of economic recovery—and with only 364,000 new positions created since payrolls turned up last September—the oft-repeated assertion that strong job growth is just around the corner is starting to ring hollow….

So what accounts for the shortfall? To many Americans increasingly anxious about their prospects, the culprit is clear: the outsourcing, or offshoring, of manufacturing and, increasingly, white-collar jobs….

But if the outsourcing of jobs to India, China, and other low-wage centers has caused some of the U.S. job losses of the past three years, it is hardly the primary explanation for the weak job market. Instead, the continued ability of U.S. companies to squeeze out productivity gains on the order of 5% annually, since the recession ended, is having a far greater impact on the jobs picture….

China's emergence as a low-wage powerhouse, for one, has stiffened global competition and forced U.S. companies to become even more efficient. At the same time, the demands for profits by a growing investor class have heightened the pressure on corporations to keep costs low….

The returns on investment in new labor-saving, high-tech equipment have soared. Given that labor accounts for about two-thirds of the cost of making and selling products, greater labor productivity in today's global economy is tantamount to corporate survival. As a result, productivity is growing even faster now than in the late 1990s. And it's a real job killer this time: A one-percentage-point increase in annual productivity growth costs about 1.3 million jobs….

Increased use of temps also reflects the new flexibility of the U.S. workforce. Instead of "just-in-time" inventory management, companies are now talking about "just-in-time" labor. However, that increased flexibility, along with rapid technological change, is what facilitates the process of creative destruction—destroying jobs in the short term but making the economy stronger over the long haul. Unlike in Europe, where greater union power makes labor markets more rigid, it is easier for U.S. companies to hire and fire….

Productivity: Who Wins, Who Loses

The U.S. is reaping big—but uneven—gains from its highly efficient workforce

… During the 1980s and 1990s, we wanted more productivity growth, we prayed for more productivity growth—and now we're getting more than we ever expected. Since the start of the recession in March, 2001, output per hour has risen at an astounding 4.6% annual rate. That's far ahead of the 1.8% productivity growth of the previous recession and recovery of the early 1990s….

High productivity has enabled corporations to boost the bottom line while holding down price increases. Corporate operating profits are up $223 billion in the past year, according to the latest data from the Commerce Dept., while an astonishingly low inflation rate averaging 1.5% a year since 2001 has saved consumers hundreds of billions of dollars….

What's lacking so far from the productivity boom—and it's still very early—are new and innovative industries that create jobs to replace those that are lost. In the second half of the 1990s, productivity growth accelerated as big companies became more efficient and manufacturing jobs were outsourced overseas. But overall employment rose sharply as the technology sector expanded, adding not just engineers and programmers, but also marketers, cable installers, Web site designers, and all sorts of high and low-end jobs….

…this recovery has left the unemployed and poor behind while mainly helping owners of assets such as stocks and homes, who also tend to have higher incomes. And although inflation is low, so is wage growth for most of the population.

Indeed, the only group whose wage gains are significantly outpacing prices are managers and executives. Already the best-paid workers in the economy, their real wages have risen 2.6% over the past year, aggravating income inequality….

There are two possible ways that the current productivity boom could play out. In the absence of innovative new industries, the worst fears of pessimists will turn out to be true: Job growth will stay sluggish, demand will eventually sag, and over the course of the next decade, incomes will be driven down under the continued pressure of competition from China, India, and other low-wage countries.

The other, more optimistic alternative is that a new industry arises to take the baton from information technology as the leading sector of the economy. For example, biotech today is in the same situation as info tech was in the 1980s—a relatively small industry in terms of jobs but with enormous potential….

     Obviously, the problem workers have is not their increasing productivity—it’s their lack of power. Until they get more power, by voting progressive politicians into office, “the worst fears of pessimists” will turn out to be their future.

     The promise of the false optimists—that new industries will provide laid-off workers with jobs—is either a deliberate lie or the ramblings of people who have been conned by the deliberate liars.

     There’s no way millions of 40-65 year-old workers can be trained into new productive professions that will pay decent incomes. As more people enter a new industry, the same thing will happen to them as has been happening to workers generally. Investors will pit them against each other—in that new industry—in the race to the bottom for wages.

     As bad as the world economy is for people who actually work for a living—it’s going to get worse.

     Not only are world-wide wages declining in a race to the bottom, the consumers of the workers’ products may not get a price break as a result.

From The Wall Street Journal, March 22.

Apparel's Loose Thread

With End of Trade Quotas,
Will Clothes Cost More, Less?
One Safe Bet: China Will Gain

HONG KONG—In a conference room at his company's office here, veteran clothing buyer Robert M.K. Yau is surrounded by samples of garments stitched all over Asia. The clothes run the gamut from a simple, button-down woman's dress shirt made in Malaysia for Brooks Brothers to a fancier, crepe-de-chine cocktail dress made in China and destined for a Casual Corner store in the U.S.

Mr. Yau, a middleman who buys clothes directly for Retail Brand Alliance Inc.'s Casual Corner and Brooks Brothers stores, among other company brands, believes some of the merchandise he buys will be cheaper next year. That's when decades-old quotas governing the world garment trade are set to expire….

Without quota premiums, "a $5 T-shirt becomes a $3.50 T-shirt," says Mr. Yau, who has been in the garment business 40 years. That cuts costs for retailers. They also could save money by concentrating their operations in fewer countries after quotas end, since they no longer will be limited by quotas to buying a certain number of garments from any one country. That move is likely to let China boost its share of the world clothing trade even further….

The quota system was created in the 1960s by developed countries including the U.S. and those in the European Union to protect their own textile manufacturers from cheap foreign competitors….

But whether big U.S. retailers from Wal-Mart Stores Inc. to Saks Inc. will pass those savings along to their customers is a matter for debate. Those on the front lines of the garment trade in Asia, which produces about 42% of the world's apparel, say U.S. consumers may not benefit, at least in the short term.

Peter McGrath, the globetrotting chairman of J.C. Penney Co.'s purchasing group, says he doubts consumers will see an immediate difference. "For the near term, I don't think we're going to see a decline in retail or cost prices for textiles and apparel coming into the United States."

That's partly due to retailers' thirst for profit. The incentive for retailers to give consumers a price break after quotas disappear is rather weak, some garment-industry professionals say. Most U.S. consumers already are conditioned to pay a certain amount for basic items—$40 for a pair of khaki pants, $60 for a wool sweater, these people say….

Meanwhile, manufacturers in China have reason to welcome the end of quotas, while clothing makers in smaller countries are likely to be worried….

     We’re now seeing the final stage of globalization: the Wal-Marts of the world have totally defeated the world’s workers. We now have reached the bottom for wages (in China), and even the workers in other impoverished areas of the world—but who still make more than Chinese workers—will lose their jobs.

     And, of course, Wal-Mart will still charge as much as it possibly can for textile products sold to Americans. And as they drive out corporations with higher moral standards—prices will go up even more, as the most powerful and most ruthless corporations split the spoils of class warfare.

     Eventually, everyone will understand the true reason Republicans and conservative Democrats support globalization: It enables investors to drive down the incomes (labor costs) of everyone who works for a living.

From The Wall Street Journal, March 23.

Next on the Outsourcing List

Job Shift to Cheaper Countries
Could Threaten More Careers:
Analysts, Architects, Attorneys

…The list of jobs being affected by the movement of U.S. work to lower-cost countries around the world is growing. American companies have shipped computer-programming and call-center jobs to educated workers in India, the Philippines, Mexico, Canada and elsewhere for the past decade. Now, workers in a wide range of other fields, from accountants to electrical engineers, are discovering that their jobs aren't immune from offshore outsourcing.

"You've got to look in the rear-view mirror when there's someone else coming on the job scene who can do what you can do for less," says John McCarthy, a Forrester Research Inc. vice president. He estimates that as many as 588,000 U.S. white-collar jobs will be "offshored" by 2005—and a total of 1.6 million by 2010. The U.S. had a total of 138.3 million employed workers at the end of February….

In some fields, there is theoretically no reason why the majority of positions couldn't be sent offshore, much as furniture and textile companies gradually moved production overseas or imported foreign-made products. So-called placeless jobs that don't require face-to-face customer interaction are increasingly at risk. Information-based jobs are especially vulnerable, because it is easy and cheap to transmit data almost anywhere these days….

…some job fields in the U.S. are regulated so closely that they are relatively insulated against offshoring. While radiologists often are mentioned as likely casualties as jobs move abroad, federal laws require that anyone interpreting X-rays and other images for U.S. hospitals be trained and licensed in the U.S….

Here are several fields that experts say could see an increasing amount of U.S. work moved to other countries:

Accountants and tax professionals….Technical writers….Architects and drafters….Legal and investment research….Insurance claims processors….

     It’s not just the accountants, technical writers, architects, researchers, etc. who lose their jobs who lose out in the globalization craze. It’s everyone in their income class who now must compete with unemployed colleagues for the remaining jobs.

     The beneficiaries of globalization: investors and top corporate executives—the supporters of Republicans and conservative Democrats who made the laws that allowed it to happen.

     Despite Barron’s editorial policies advocating the privatization of Social Security, they still publish articles like the following, which clearly describe the utter corruption of the securities industry.

From Barron’s, March 22.

Explaining Eliot Spitzer

The New York State attorney general understands how to use power

By Robert Abrams and Joel Cohen

NEW YORK STATE Attorney General Eliot Spitzer is relentless. He not only attacks time-honored, although questionable, practices on Wall Street that he refers to as "low-hanging fruit," ready to be plucked. He also thinks outside the box in a way that upsets regulators at institutions, such as the Securities and Exchange Commission, that will be around—and still regulating the marketplace—long after his tenure as attorney general is over.

He's going about his business exactly as he should be.

Spitzer creates marketplace unease because he aggressively attacks practices deemed by some as "business as usual," such as investment bankers who effectively dictate recommendations to the "independent" financial analysts in their houses, and mutual-fund managers who "market-time" their funds. And he gives no safe harbor to regulators either, using the phrase "regulatory capture" to describe those who are institutionally in the hip pocket of the markets.

In the wake of the recent scandals, Wall Street executives fear not only for their own financial exposure and personal liberty. They also fear that their institutions, which are vital to the American economy, might be obliterated like the accounting firm Arthur Andersen after a simple, easy-to-get, vote of a grand jury. In the Andersen case an indictment was all it took to destroy the firm; the conviction was almost beside the point….

Competition is good, even among government regulators. Former SEC Chairman Levitt, known for his toughness, recognizes that some abuses should have been addressed earlier, and that they have only been attacked now because of Spitzer's imaginative tactics…. A discriminating eye by a dedicated marksman is the market's best protection….

     Two points: First, if it were not for an aggressive state attorney general, Spitzer, Wall Street would be just as corrupt as it was two years ago. It gets increasingly obvious that Wall Street—in the interest of its own profits—will resist any pressures to treat the public fairly.

     Second, that’s the same industry that the Republicans want to handle the private accounts of retirees after Social Security is privatized.

     If you want to know why Republicans always want to let the free market protect the environment, read on.

From Fortune, March 22.

Why $2.18 Gas May Be a Good Thing

The war didn't usher in an era of cheap fuel, but that may not be so terrible.

By Nelson D. Schwartz

If ever there was an argument about why last year's invasion of Iraq wasn't a war for cheap oil, it can be found at service stations across California. In early March the cost of a gallon of gas in the Golden State hit an all-time high of $2.18, and across the country things aren't much better—filling up a Ford Explorer in Ohio will set you back $40, enough for a night out for two at the Olive Garden….

"We are just not as energy intensive as we used to be," says David Wyss, chief economist for Standard & Poor's. "Back in the early 1980s the average household spent more than 8% of their income on energy. Today they spend about 4.5%."…

"In the long run prices are likely to go up, so it's better to start adjusting to it now than getting hit with a shock later." Indeed, the low oil prices that prevailed for much of the 1980s and 1990s were a direct result of the gains in fuel efficiency that followed the oil shocks of the 1970s. Says Wyss: "Maybe at $2.50 a gallon, people will think twice about buying that six-mile-a-gallon Humvee."

     So, the Republican solution to the destruction of our environment is let the free market price poor people out of the consumption of energy. That way, the environment doesn’t deteriorate so fast, and the wealthy can drive their Humvees to their hearts’ content.

     Republicans certainly wouldn’t want government environmental regulations to make them give up their luxuries or to inconvenience their corporations. Only poor and middle income citizens should have to make any sacrifices for the betterment of our country.

     If you ever doubted the commitment of American corporations to the free market—you were justified.

     They only believe a market is truly free when they can control it.

From Fortune, March 22.

Pfizer Is Itching to Start a Drug War With Canada

The No. 1 drugmaker cuts off two Canadian wholesalers it says are supplying retailers that sell to Americans.

By Roger Parloff

From the looks of it, Pfizer is gearing up for a drug showdown. In late February the No. 1 drugmaker cut off two Canadian wholesalers that it said were supplying retailers who sell to Americans. It was the most dramatic escalation to date in the raging war between Big Pharma and American seniors over the illicit practice of importing cheap prescription drugs from Canada.

Due to Canadian price regulations, brand-name pharmaceuticals are often 30% to 80% cheaper in Canada than in the U.S. …

     What’s especially galling about this situation is that “Big Pharma” is already one of the most profitable industries in the U.S. Incidentally, it is also one of the biggest contributors to our two political parties—which has a lot to do with their profitability.

     Who does Wal-Mart pay-off to get favorable pro-business, anti-labor, anti-environment legislation in Washington? Republicans, of course.

     And what industry was able to get protections from the Republicans against the immoral Wal-Mart “strangler”? Republican bankers, of course.

From The Wall Street Journal, March 24.

Wal-Mart Opens for Business
In Tough Market: Washington

Famously Apolitical Retailer
Plunges Into Lobbying
And Becomes Top Donor
A Big Defeat on Banking

WASHINGTON—China’s entry into the World Trade Organization was essentially a done deal in the late 1990s when Wal-Mart Stores Inc. executives discovered a problem: U.S. negotiators had agreed to a 30-store limit on foreign retailers operating in China, an insufficient figure for the ambitious Arkansas retailer….

In Washington, Wal-Mart has five lobbyists on its payroll, and a bench of hired guns led by Thomas Hale Boggs Jr., one of Capitol Hill's best-known lawyer-lobbyists. The company's political action committee was the biggest corporate donor to federal parties and candidates in 2003, with more than $1 million in contributions—up from $182,000 during the 1997-98 election cycle, according to Federal Election Commission disclosure reports. Wal-Mart's PAC ranks as the second-largest in Washington, according to the Center for Responsive Politics, a nonpartisan organization that tracks political giving….

Unlike most corporations, which contribute to both parties in rough proportion to Congress's partisan split, about 85% of Wal-Mart's checks go to Republicans. And recently Mr. Allen was named a "Pioneer" by the Bush campaign, meaning he has raised at least $100,000 by getting friends and colleagues to make contributions of up to $2,000 each.

The partisan giving is a nod to Wal-Mart's hostile relationship with organized labor and its dependence on free-trade agreements. Wal-Mart defends its lopsided support, saying it's supporting pro-business candidates….

Wal-Mart's pivot toward politics coincided with its rise to become the nation's largest retailer, one with enough market clout to drive down consumer prices, bust through trade barriers and force competitors to demand cost-saving concessions from labor unions….

Small bankers pleaded with Congress to spare them the fate of mom-and-pop hardware and variety stores, which, they said, were strangled by Wal-Mart. "It totally moved the ball into our court," recalls Bill McQuillan, president and chief executive of City National Bank of Greeley, Neb., who testified on behalf of the community bankers.

Lawmakers inserted a clause in the banking bill barring retailers from buying thrifts….

     The news about our money-dominated political system is so consistently bad, one wonders if we can turn it around soon enough to save our country.

     Again, the conservative press documents one of the real reasons corporations are locating in other countries: they can destroy the environment at will—with no governmental restrictions.

From The Wall Street Journal, March 24.

Polluters in China Feel No Pain

When a fertilizer plant in southwestern China tried to expand production earlier this month, it inadvertently dumped so much nitrate and ammonia into the local river that the chemicals killed 440,000 pounds of fish, halted farm irrigation in the area and poisoned drinking water for several cities downstream.

About the only people who haven't felt any fallout so far: senior officials who run the polluting factory, the Second Fertilizer Factory of the state-owned Sichuan Chemical Works Group Ltd. in the city of Chengdu. "We should have the power to shut down a plant like that immediately, but we don't," says Pan Yue, deputy director of China's State Environmental Protection Administration. "We can only fine them, and such a small amount at that," he said. "They basically decide it's a cost that doesn't matter."

Such is the conundrum facing China's largely toothless watchdog in charge of protecting an increasingly damaged environment. As the country's economy continues to race ahead, it is paying the costs associated with the fast pace of growth. New and bigger factories have fueled the economy and created jobs, but they also are jacking up energy demand, straining natural resources and fouling the air and water.

Top leaders are taking notice of the problems, but they haven't armed China's environmental watchdog with effective weapons to tackle them….

     Isn’t it time that the globalization advocates gave up the pretension that globalization is good for us?

Week of March 15

     Whenever a headline doesn’t make sense, just look through the article. Often a single sentence will tell you what the reality of the situation really is.

     Consider the following article that supposedly tells us what a great thing outsourcing is for creating jobs in the U.S. Can you spot the sentence that holds the truth?

From The Wall Street Journal, March 16.

Can Generate
Jobs in the U.S.

Global giants aren't the only companies cutting costs by shifting jobs overseas. Increasingly, small businesses are finding that "offshoring" jobs is a boon to their bottom line—and sometimes gives them room to create new jobs at home.

For example, when Rajeev Thadani wanted to expand Claimpower Inc., his medical-billing service in Fairlawn, N.J., he chose to outsource some of the work to India. But unlike most companies going this route, his business had just five other employees at the time.

Mr. Thadani, who runs the company with his wife, flew to his native Bombay in 2001 and hired four locals to help file insurance claims on behalf of New Jersey doctors. They use a software system that Mr. Thadani, a programmer by trade, developed specifically for the task.

Today, he employs 35 people there. Since he pays his Indian employees the equivalent of $133 to $663 a month—quite good by local standards—he can charge doctors less than his competitors and has more time to offer specialized attention. That has given his business a big lift: In a little more than two years, he says, his client list has soared to 41 doctors from 10, and his firm's annual revenue jumped to $700,000 from $100,000….

At a time when the U.S. has lost 2.3 million jobs over the past three years, foreign outsourcing—to India in particular—is frequently blamed for the jobless economic recovery. But recent employment trends suggest the moves also can trigger the creation of new U.S. jobs….

     The sentence that holds the key to the whole outsourcing issue: “he can charge doctors less than his competitors.” The article doesn’t care to publish the number of jobs his competitors lost in this country—because Rajeev undercut them with poorly paid (by U.S. standards) Indian workers.

     By abandoning American workers, and slashing his wage costs, Rajeev increased his business by 300%—and took business away from others who were servicing the 31 doctors previously, and employing U.S. workers.

     The few additional workers he hired in this country are required to deal with the much larger number of Indian workers who got the lion’s share of the newly created jobs.

     The Wall Street Journal’s hypocrisy is subtle, but brazen nonetheless.

     Can you spot the Wall Street Journal's con in the following article? Hint: How do you define “more work”?

From The Wall Street Journal, March 15.

More Work Is Outsourced to U.S.
Than Away From It, Data Show

WASHINGTON—Despite the political outcry over the outsourcing of white-collar jobs to such places as India and Ghana, the latest U.S. government data suggest that foreigners outsource far more office work to the U.S. than American companies send abroad.

The value of U.S. exports of legal work, computer programming, telecommunications, banking, engineering, management consulting and other private services jumped to $131.01 billion in 2003, up $8.42 billion from the previous year, the Commerce Department reported Friday.

Imports of such private services—a category that encompasses U.S. outsourcing of call centers and data entry to developing nations, among other things—hit $77.38 billion for the year, up $7.94 billion from 2002. Measuring imports against exports, the U.S. posted a $53.64 billion surplus last year in trade in private services with the rest of the world.

Under government accounting, when a U.S. company opens a technical-support center in India that handles inquiries from the U.S., that is considered a U.S. import of services. When a U.S. lawyer in New York does work for a German auto company or a New York investment banker works on a deal for a Japanese company, that is an export of services….

Despite the developments in services trade, the current-account deficit, the most inclusive measure of the U.S. trade gap, hit another record in 2003, reaching $541.8 billion, or 4.9% of the gross domestic product, up from $480.9 billion in 2002, or 4.6% of GDP….

     In order to justify outsourcing, the Journal must try to prove that the U.S. benefits from globalization.

     However, it defines work in terms of the dollar value of what is outsourced, not the number or kind of jobs.

     Therefore, a large number of good-paying low-level jobs are lost to outsourcing to other countries, while a few high-paying high-level jobs are gained. The dollar value is favorable, but the number of jobs involved is unfavorable.

     And, naturally, it’s the low-level worker in this country who makes all the sacrifices, while the high-level professional or businessman prospers. The wealth and income disparity between rich and poor continues to grow.

     If you want to know the true state of the economy, never rely on the public pronouncements of conservative economists or politicians on radio or TV.

     In order to convince the public that Bush’s tax cuts on the wealthy are working, they always put the best spin possible on any data, no matter how absurd their conclusions.

     The best way to find out what they really think is to check out their advice to investors. In their investment letters, they are forced to tell the truth. If they didn’t, their readers would abandon them.

From Barron’s, March 15.

Look Out Below!

The Steve Puetz (investment advice) Letter

March 12 -- This past week, stock investors finally began paying closer attention to the worsening employment outlook. On the surface, by only looking at indicators such as weekly initial unemployment claims and the US unemployment rate, the employment situation seems to be improving. However, the decline in the unemployment rate came at the expense of the nearly 4.5 million discouraged workers who are no longer counted as part of the national work force.

Over the past three years, the 1.5% drop in the participation rate reflects the millions of discouraged workers who are no longer counted as part of the labor force. Last month's participation rate was the lowest level in sixteen years!

If discouraged workers were counted as unemployed, then the unemployment rate would be closer to 8% rather than the current official 5.6% rate. What is so different about the current employment environment is that an unusually large percentage of workers who lose their jobs never find a new one. After their unemployment benefits end, government statisticians officially exclude them from the work force….

     The real, unvarnished conclusion of conservative economists and politicians: Bush’s tax cuts for the wealthy simply aren’t creating jobs. (As Clinton’s tax increases on the wealthy in the early ’90s did.)

     Robert Kuttner gives us the true scoop about Social Security in the normally conservative Business Week.

From Business Week, March 15.


Social Security: Finally, An Honest Debate

By Robert Kuttner

Federal Reserve Chairman Alan Greenspan lobbed a useful, if unintended, grenade into the Presidential campaign when he abruptly urged Congress to cut Social Security benefits. Until Greenspan's testimony, President George W. Bush had been insisting that we could have permanent revenue losses from his massive tax cuts without any harm to important social benefits.

Even as Greenspan's testimony was reverberating in the country, Bush was out campaigning to make the tax cuts permanent. Greenspan's little explosion may have been aimed at social entitlements, but politically it will do far more damage to the Bush campaign by lighting up realities that Bush would prefer to keep hidden.

CONSERVATIVE REPUBLICAN FOES of Social Security have been telling Americans for years that the country won't be able to afford the huge entitlements the government has promised them. This message serves the political purpose of shaking voters' faith in the Social Security system, especially younger voters, who start wondering if Social Security will be there for them. They are prompted to ask: If Social Security is going bankrupt and I'm not going to benefit anyway, why not shift my payroll taxes to private accounts now? This then plays into the political hands of Social Security's would-be privatizers.

But let's pause a moment for some facts from the 2003 Social Security Trustees' Report. It turns out that the fiscal crisis of Social Security is grossly exaggerated by its political enemies. The trustees project Social Security balances forward for 75 years. Their report uses pessimistic annual growth assumptions of just 1.6%. Even so, the 75-year shortfall is projected at just $3.8 trillion, or just 0.73% of gross domestic product over this time. By contrast, the Bush tax cuts equal $8.7 trillion, or 1.68% of GDP over 75 years, according to Peter Orszag of the Brookings Institution, and new proposed tax cuts would push the cost to over $12 trillion.

If the Bush tax cuts are pared back by less than half, the money can be used to replenish Social Security, and the vaunted "crisis" disappears. Whether to cut Social Security benefits for the 96% of Americans in the system or reduce tax cuts for the top 2% is, of course, a political choice. But it's one that the Bush Administration would rather not squarely face and one that Senators John Kerry and John Edwards will keep center stage in their campaigns….

All of the conservative proposals for restoring the Social Security system's health are different forms of cuts in benefits. Raising the retirement age is a reduction in benefits. So is fiddling with the cost-of-living formula. Partial privatization is the most costly and intellectually dishonest fix of all. Not only would it reduce the guaranteed part of the retirement package, but it would require the government to borrow $2 trillion to $4 trillion to keep paying benefits to current retirees while payroll taxes of younger Americans were diverted to new personal accounts. The President has insisted that, in the new privatized system, everyone would get benefits at least as good as those under Social Security. But that would require a government guarantee for the performance of everyone's financial portfolio….

     Business Week readers can no longer claim ignorance when they try to support Bush’s tax cuts and his attempts to raid Social Security.

     The following two articles from Business Week appear to be quite different in content, but actually have much in common. They both represent the conservative economic view that a nation must always be importing cheap labor if an economy is to grow.

     As living standards get better for established workers—and their wages go up, it is necessary to import people who are desperate for a job (it’s called “increasing the labor supply”) if corporations are to keep an effective lid on wages.

From Business Week, March 15.

The EU Is Choking Off Its New Blood

Barring workers from new member states will only prolong economic stagnation

When George W. Bush recently proposed legalizing the status of up to 9 million illegal immigrants residing in the U.S., it reminded some Europeans of just how differently Americans approach the idea of pumping fresh blood into the workforce. "If any Prime Minister in Europe stood up in Parliament and announced something like that today," says Denis MacShane, Britain's Europe Minister, "he'd be dead in the water."

That sense of political expediency, paradoxically, is leading Europe's political leaders to shoot themselves in the foot, an area where they have few equals. Immigration fear is driving the region to miss out on its biggest chance for an energy infusion in years.

It's glaringly obvious that Europe's top priority is reversing its dismal economic record. Over the past decade, the euro zone's average annual growth rate has clocked in at an anemic 2.1%. So the idea of eight raring-to-go nations of ex-communist Eastern Europe entering the EU as full members on May 1 ought to be great news for growth. All those youthful, well-trained Czechs, Poles, and Latvians—what better way to turbocharge Europe's aging, cosseted workforce?

Not if European politicians can help it. One by one, the Old Europe countries of the EU are slamming the door on the workers of the New Europe. When membership agreements were being negotiated with former East Bloc countries last year, EU countries were allowed to restrict, for up to seven years, the right of new EU citizens in the east to work and live freely in the west. But this was done at the particular insistence of high-unemployment Germany and Austria, and for a while they were the only ones to plan immigration barriers.

Yet with the May 1 enlargement fast approaching, countries that once prided themselves on open immigration policies are doing an about-face. Across slow-growth, high-unemployment Europe, fears of being overrun by immigrants are rising….

Why Are Latinos Leading Blacks In The Job Market?

The booming Hispanic labor force turns out to have an unexpected side effect: Latinos are outperforming blacks in the job market. Part of the reason stems from the fact that many Hispanics have less education or are vulnerable illegal immigrants willing to work for less pay. Economic and cultural factors play a role, too, say some experts, such as Latino immigrants' higher willingness to change cities to find a job. Add it up, and "many are hired to do work that blacks once had," says the Reverend Jesse Jackson.

     It always happens the same way. To cut wages, politicians adopt policies that allow corporations to import immigrants who are willing to withstand terrible working conditions and low pay. As the society begins to disintegrate, conflicts erupt between the established workers and the new ones—even though the villains of the scenario are those in political power who caused the problem.

     And the scenario is playing out in both Europe and the U.S., although it looks like Europe is beginning to reverse the destructive trend.

     The disparity between rich and poor continues to grow to astounding proportions, as globalization pits workers of the world against each other.

     The three following closely associated items from Forbes tell the story from the standpoint of the beneficiaries of globalization. For the stories of those victimized by our billionaires, just read the material throughout the rest of this website.

From Forbes, March 15.


Rising Tide

The elite ranks of the world's billionaires gained 64 new members in the past year…

After two years of falling fortunes the ultrarich got even richer in 2003. The collective net worth of the world's wealthiest jumped half a trillion dollars in the past year, to $1.9 trillion. The biggest gainer in sheer dollars was Warren Buffett, who added $12.4 billion to his net worth and now is only a few billion dollars shy of ending Bill Gates' ten-year reign as the richest person on the planet.

This year FORBES reports a record 587 billionaires….


...SARS and the Avian Flu did little to hurt these fortunes. This year Asia adds 17 billionaires to its roster. All 9 Billionaires in India, including 2 new faces, turned in gains....

Middle East and Africa

...The gulf markets rallied on Saddam's capture and a boom in construction. One weak spot: Israel, whose economy grew just 1.3%. The region is now home to 26 billionaires, including 6 newcomers, with $85 billion in total worth....

     Asia, the Middle East and Africa—places of unbelievable poverty—and the rich are getting richer off of their own workers. Globalization isn’t making all countries richer. It is just making the rich of all countries richer.

     The following excerpt is yet another example of corporate greed masquerading as legally accepted accounting practices.

From The Wall Street Journal, March 16.

How Cuts in Retiree Benefits
Fatten Companies' Bottom Lines

Trimming a Health-Care Plan
Creates Accounting Gains,
Under Some Arcane Rules
A Shield Against Rising Costs

…Time for a reality check: In fact, no matter how high health-care costs go, well over half of large American corporations face only limited impact from the increases when it comes to their retirees. They have established ceilings on how much they will ever spend per retiree for health care. If health costs go above the caps, it's the retiree, not the company, who's responsible.

Yet numerous companies are cutting retirees' health benefits anyway. One possible factor: When companies cut these benefits, they create instant income. This isn't just the savings that come from not spending as much. Rather, thanks to complex accounting rules, the very act of cutting retirees' future health-care benefits lets companies reduce a liability and generate an immediate accounting gain.

In some cases it flows straight to the bottom line. More often it sits on the books like a cookie jar, from which a company takes a piece each year that helps it meet its earnings targets….

The new Medicare law means some companies can get federal subsidies (and thus fresh accounting gains and earnings) even if they shift part of the cost of their retiree drug coverage to the retirees themselves. That's because the way the law is written, the subsidy is based on the whole cost of a company's retiree drug program—including the part retirees have to pay for.

     This excerpt demonstrates that ethical standards have absolutely nothing to do with the behaviors of corporate executives. If an action is legal and it benefits the corporate executive—then that’s all that needs to be considered, no matter who is hurt in the process.

     I apologize for the redundancy. There have been so many articles of the same nature as the following.

     However, it’s so vitally important to working Americans, the repetition is justified.

From The Wall Street Journal, March 17.

Fed Looks at Several Approaches
It Can Take When Raising Rates

WASHINGTON—Federal Reserve officials are quietly beginning to contemplate a formidable challenge: How and when to lift interest rates from a 46-year low to more normal levels without disrupting the economy or financial markets…. The Fed also repeated earlier vows that it can be "patient" about raising rates because of low inflation, ample unused factory capacity and still-high unemployment…. Raise rates too soon, and the recovery may be aborted. Raise them too late, and inflation may bubble back. Do it clumsily, and both markets and the Fed's credibility could be injured…. The usual recipe for pushing inflation up is to let the economy grow so fast for so long that it exceeds its normal capacity limits, putting upward pressure on prices and wages….

     So, again, the people who keep telling us that we should not be envious of the rich—are the very same people who watch the incomes of workers like predatory hawks.


     An increase in workers’ wages are always considered inflationary and, therefore, bad news for corporate profits and wealthy investors. The job of the Fed is to keep interest rates just right: not so high as to cool off the economy and cut off easy corporate profits—but high enough so the economy doesn’t grow so fast that wages may go up. That’s the delicate balance the article is describing: “Raise rates too soon, and the recovery may be aborted. Raise them too late, and inflation (rising wages) may bubble back.”

     You’ve been hearing a lot lately about how “productive” American workers have been recently.

     This is how corporations do it.

From The Wall Street Journal, March 17.

Bank of America
Plans Job Cuts
Of Up to 13,000

Bank of America Corp. is planning to cut as many as 13,000 jobs as it completes its acquisition of FleetBoston Financial Corp., according to people familiar with the expense cuts.

The job cuts would come through layoffs and attrition from the operations of both banks and will begin in April to coincide with the expected completion of Bank of America's $48 billion purchase of Fleet, according to these people. The job cuts, which range from 12,000 to 13,000, amount to about 7% of Bank of America and Fleet's combined work force of 181,000….

Investors now are waiting to see whether Bank of America can make good on its promise, made in October when the merger was announced, to achieve $250 million in cost savings this year and $1.1 billion in 2005. Those projected expense reductions were met last fall with some skepticism by investors because Bank of America officials didn't provide details on how the $1.3 billion in cost savings would be achieved….

Bank of America executives have said some of the cost savings will come from overlapping vendor and software costs as well as back-office processing centers.

Bank of America is in a tricky situation. It must show Wall Street investors that it can achieve the cost reductions, even as it tries to avoid angering employees and customers in New England. Last fall, bank executives said a key condition of the deal was a pledge by Bank of America to maintain employment levels at Fleet's New England operations….

     The key to productivity is simple: fire many employees, force the remaining employees to work harder (because “competition demands it,”), and reduce the quality of service to customers. And shazam, higher productivity.

     And, of course, the CEOs give themselves huge bonuses for being such brilliant leaders. Kenneth D. Lewis, Chairman President and CEO of Bank of America Corp. raked in $21,068,119 in total compensation in 2002, including stock option grants. And he has another $23,638,050 in unexercised stock options from previous years.

     Charles Gifford, Chairman and CEO of Fleet Boston Financial Group is a relative piker in the game. In 2002, he raked in $2,459,488 in total compensation including stock option grants from Fleet Boston Financial Group, and has another $915,000 in unexercised stock options from previous years.

     What everyone seems to be missing in the globalization debate is that the welfare of most of a nation’s citizens depends on the values and moral standards of its leaders.

     Better education of its citizens is, of course, important for a nation’s success. But that doesn’t mean that people will be rewarded fairly for their contribution to the nation’s economy.

     As long as corporations are able to ruthlessly pit the workers of the world against each other—only the rich will prosper in the world economy of the future. The following excerpt again demonstrates the deliberate lie of conservatives who claim that education will enable middle and low income Americans have better lives in the future.

From The Wall Street Journal, March 17.

Competitive Edge
Of U.S. Is at Stake
In the R&D Arena

SINGAPORE—American workers needn't worry their jobs will be outsourced to this Pacific island nation. With living standards higher than Germany's, Singapore is costly enough that companies here send jobs to China, too.

But Singapore is one small part of a bigger threat to America's long-term prosperity. You can find it here in primary schools, where students outperform their American counterparts in mathematics and science. In a recent math assessment of eighth-graders internationally, Singapore scored best in the world—and joined five Asian neighbors in beating the U.S.

It is this, not call centers in Bangalore, that most frightens American experts in the flow of goods and services across international borders. The one thing America can't afford to outsource in the global economy is superiority in innovation. That hasn't happened yet. But if U.S. politicians don't do more to bolster education, it could.

"We absolutely must strengthen our talent pool," says Charlene Barshefsky, an Asia expert who served as U.S. trade representative under President Clinton. Otherwise, she warns, "We will lose our competitive edge within a generation."…

     Again, we’re seeing that the race to the bottom for wages is going up the education ladder. Investors of the world can pit the workers in almost any classification against each other.

     Education level is not the key to the welfare of any economic class. Government protections of the rights of people who work for a living is the key. And right now, wealthy conservatives have all the power in government.

     It’s time for a change.

Week of March 8

     The following editorial by right-wing crackpot Alan Murray clearly demonstrates the disconnect between The Wall Street Journal’s editorial policies and its own news stories.

     It’s so full of distortions of reality that it’s hard to imagine that anyone would be shameless enough to publish such nonsense.

From The Wall Street Journal, March 9.


By Alan Murray

Bush Needs to Show
Clear, Firm Support
For Outsourcing

George W. Bush and his men are on the right side of the "outsourcing" debate. Still, they are losing it. If they don't find a better way to make their case on this hot topic, it could cost them the election….

America has a genius for reinventing itself. We have the most flexible economy in the history of the world. Yes, we allow companies to freely "outsource" their payroll departments and software operations to Bangalore, India. But that frees American workers to concentrate on new, cutting-edge activities. (As a side benefit, it also keeps consumer prices down.)

Sure, it's easier to get laid off in America than it is in, say, Denmark. But it's also easier to find a new job. The result is a constantly rejuvenating economy. "Outsourcing" isn't a symptom of America's decline; it's part of a process that prevents decline.

That's cold comfort, of course, to the poor fellow in Cincinnati who suddenly finds himself out of work. But let's give Americans a choice. Would they prefer a European-style society, which puts roadblocks in the way of companies that wish to fire workers, and as a result, has fewer new companies wanting to hire? Some Americans might be willing to accept less prosperity and opportunity in return for more stability and security. The majority, I'd wager, wouldn't.

By the way, this isn't—or at least shouldn't be—a partisan argument. Martin Baily, who headed President Clinton's Council of Economic advisers, largely agrees. He points out that the white-collar outsourcing trend started in the 1990s—and did nothing to damp a period of extraordinary growth, low unemployment and rapid wage gains.

The bad news last week was that the economy added only 21,000 jobs in February—a disappointment, to be sure. But like all past job slumps, this one, too, will pass. The good news in these numbers is that the productivity of Americans who are working still is rising at record, 1990s-style rates. That's critical, because as long as Americans are the most productive in the world, they'll remain the best paid in the world. And the faster American productivity rises, the faster American living standards will rise.

The goal of policy makers should be to get the economy back to full employment as soon as possible. It also should be to protect the flexibility and productivity that have made the U.S. economy the envy of the world, and American workers the most prosperous in history….

     The Wall Street Journal’s own news stories about what’s happening American communities and workers demonstrate absurdity of the above statements:

  • Outsourcing “frees American workers to concentrate on new, cutting-edge activities. (As a side benefit, it also keeps consumer prices down.)” The reality: it forces a huge number of working American workers into lower paying jobs, while a few may be fortunate enough to go into higher paying jobs. And the lower prices that result are no compensation for those who have less money to pay for what they need.

  • "‘Outsourcing’ isn't a symptom of America's decline; it's part of a process that prevents decline.” That’s true only for wealthy investors and their corporate executives. For communities and workers throughout our country, it’s been a disaster.

  • “Americans might be willing to accept less prosperity and opportunity in return for more stability and security. The majority, I'd wager, wouldn't.” That’s a bet that Murray would lose—except for investors and corporate executives. Community instability and massive job losses and job rotations are destroying this country.

  • “Martin Baily, who headed President Clinton's Council of Economic advisers… points out that the white-collar outsourcing trend started in the 1990s—and did nothing to damp a period of extraordinary growth, low unemployment and rapid wage gains.” As far as the bottom half of Americans is concerned, this statement is a deliberate lie. Wages for most workers didn’t even keep up with inflation during the ’90s. This is a major reason Democrats must repudiate the economic policies of the Clinton administration.

  • “ long as Americans are the most productive in the world, they'll remain the best paid in the world. And the faster American productivity rises, the faster American living standards will rise.” That’s not true and never has been. Unless the federal government sets minimum wage standards, protects rights of workers to unionize, and protects American industry from unfair trade practices—only investors and senior corporate executives benefit from productivity growth. (Just look at the past three years of exploding productivity growth and the loss of worker incomes, and deteriorating working conditions.)

  • “The goal of policy makers should be to get the economy back to full employment as soon as possible.” An absurd statement. Slaves were fully employed, and that’s no big deal. The goal should be to provide good jobs that pay decent wages. The focus of the conservative financial press is a deliberate distraction from what is truly important.

  • (The goal of policy makers) should be to protect the flexibility and productivity that have made the U.S. economy the envy of the world, and American workers the most prosperous in history.” Not true. It was the leadership of progressive politicians who made workers the most prosperous in history. It was the Fair Labor Standards Act that got us the 40-hour workweek and eliminated child labor. And other progressive legislation gave us Social Security, workplace protections, and a whole host of provisions that really made working Americans prosperous.

     It’s notable that the above editorial appeared in the very same issue of the Journal in which the following two news stories appeared.

From The Wall Street Journal, March 9.

Kentucky Answered
Call of the Future --
But Got Bad News

Outsourcer Set Up in Hazard,
Then Headed Overseas;
'We Were Blindsided'

HAZARD, Ky.—The news was so big that people first heard it from the president.

"I came here to show America who you are," Bill Clinton told several thousand listeners squeezed along a sweltering downtown street in the heart of Appalachia 4½ years ago. "I want people to know a lot of good things are going on here."

The president introduced John Sykes to the crowd and talked about his company: "Sykes Enterprises is making a major commitment—listen to this—to construct two information technology centers in eastern Kentucky that will bring hundreds of new jobs in Pike and Perry counties. Thank you, Mr. Sykes."

Mr. Sykes didn't come cheap. Kentucky had ponied up $7.6 million in cash and incentives to land his company. Officials were betting that computer help-desk call centers would instantly link Appalachia to the New Economy. And for a while, the plan worked. Sykes eventually trained more than 3,000 workers to help frustrated personal-computer callers from coast to coast.

No longer. As Hazard and other small U.S. towns have learned, the phone links on which they had banked their hopes have quickly zipped to even more remote places such as India, China and Central America….

In his closing months at Sykes, Mr. Napier and colleagues searched the Internet for information on federal trade-assistance programs. Those programs, dating back to 1974, offer benefits to workers hurt by imports who enter retraining programs. Mr. Napier and his colleagues discovered that the laws were designed more for manufacturing jobs and that the Labor Department had denied requests for Sykes workers in Eveleth.

"We didn't make widgets," Mr. Napier says. "That law was fine, before the Internet, before you could talk to someone in India for free."

     Whereas this news item explains the wholesale community disruption globalization is causing—and the disastrous effects on workers—the following describes the special interests who support outsourcing jobs, vs. those who want to protect American industry (and jobs).

From The Wall Street Journal, March 9.

Outsourcing Splits NAM Members

Small Manufacturers Seek
To Fight Migration of Jobs
As Larger Firms Join Trend

Tension is mounting within the National Association of Manufacturers, with many smaller members urging the big lobbying group to do more to fight the migration of jobs overseas even as many of its larger members embrace the trend.

Such friction reflects a broader conflict in the U.S. economy as a whole. Smaller companies often feel squeezed by rising foreign competition and by the bigger manufacturers that the smaller companies supply, pushing them to cut costs. Many bigger companies outsource work to China or other low-cost nations to achieve those savings.

"This is probably the most difficult case of diverging interests that NAM has ever had to face," says Gerry Letendre, a member of NAM's board and president of Diamond Casting & Machine Co. a small Hollis, N.H., maker of aluminum parts for the electronics industry.

Some smaller members have grown disenchanted and even are quitting the lobbying group….

     The reason for split between small and large manufacturers is that the large manufacturers have massive investment funds and the small ones don’t.

     In effect, the large manufacturers have become investment bankers. They are shutting down their operations in this country and using their money to pit workers across the world against each other.

     The small manufacturers, on the other hand, are trying to make it in this country, and are finding that it is impossible to compete with the investment bankers (large corporations) who utilize brutalized workers throughout the world.

     Conservative economists have been puzzled, PUZZLED, by the present jobless recovery.

     And now they are getting worried.

From The Wall Street Journal, March 8.

Job Growth Falls Short of Estimates

February Data on Payrolls
Fuel Worries Consumers
May Slow Their Spending

Until recently, economists were merely puzzled that the expanding U.S. economy was failing to produce many new jobs. Now they are starting to get worried about it.

In a report described by one government economist as a "limp handshake," the Labor Department said Friday that just 21,000 payroll jobs were created in February; economists had expected about 125,000. The unemployment rate remained at 5.6%, but that was because more Americans dropped out of the labor market, many deciding that job hunting was a waste of time….

The positive news in Friday's report was that it underlined continued improvements in productivity as companies find ways to raise output without expanding their work forces. While painful for many workers, these productivity gains have helped boost corporate profits and held down interest rates….

One major reason for the puny job-creation numbers is that companies have been squeezing more output from their existing workers. Macroeconomic Advisers, a research firm in St. Louis, estimates that the productivity of the U.S. nonfarm work force is growing at a 4% rate in the first quarter, up from the fourth-quarter rate of 2.6% and the 2.3% average during the past 55 years.

     How can these economists be puzzled about a jobless recovery, when articles like the following two have been published regularly for the past ten years, by our most prestigious conservative financial publications.

From The Wall Street Journal, March 8.

New IBM Jobs
Can Mean Fewer
Jobs Elsewhere

Last month, International Business Machines Corp. said it would add 5,000 workers in the U.S. this year, an announcement partly aimed at blunting criticism of its plans to move thousands of jobs abroad in 2004.

But a closer look at IBM's hiring and layoff practices shows it may actually wind up extinguishing more U.S. jobs in the economy at large than it creates this year—even while adding a little to its own payroll.

To explain that anomaly it helps to understand the company's big business in "outsourcing." Although the term has come to mean shipping U.S. jobs abroad, it also describes the practice of companies hiring IBM and others to take over their computer rooms, payroll departments or other work….

Only a small part of this kind of outsourcing typically results in jobs being exported to other countries—a trend known as "offshoring." But it does result in another kind of job loss: Often, IBM ends up laying off some of the workers it hires from outsourcing clients as it makes the acquired operations more efficient. Meanwhile, the workers from the client companies who remain on the IBM payroll often suffer cuts in pay and benefits….

"What's pushed the outsourcing to offshoring is the growth of [technical skills] in India" and cheap, fast communications, Mr. Roach says. The result is "a significant shortfall of jobs creation" in the U.S….

"I laugh every time IBM says it's going to add 15,000 jobs," says David A. Anthony, an Alpharetta, Ga., Web programmer laid off by the company last June. "I scream at the TV: 'How many are you going to fire?' "…

From Barron’s, March 8.

No Jobs, No Rate Hike—Perhaps for All of '04

NEWS OF CONTINUED TEPID employment growth further deferred expectations of any eventual rise in interest rates, sending bond yields tumbling….

David Greenlaw, chief U.S. fixed-income economist at Morgan Stanley, had thought the Fed would have "the tightening trigger" by the time of the September Federal Open Market Committee meeting, based on three-month average payroll gains in excess of 200,000. But given the current trend, says Greenlaw, "this time frame seems increasingly unrealistic." He is pushing back his expectation for the first rate increase to the December meeting.

"This remains a jobless recovery—pure and simple. We are in uncharted territory given that the expansion is into its 28th month already, and meaningful job creation remains alarmingly elusive," adds Rosenberg. "Offshoring" and productivity growth largely explain why employment has failed to grow meaningfully.

All of which will permit the Fed to remain "patient," to use Greenspan & Co.'s latest buzzword, and hold the funds rate at the current 1% for all of 2004, Rosenberg concludes….

     In November, voters should remember that the “offshoring” of jobs, and productivity improvements (making workers work harder, under more stressful conditions, for less pay) are the direct result of national economic policies.

     And those policies were the result of the economic philosophies of Republicans and conservative Democrats who are closet aristocrats and who don’t give a damn about working Americans. Their sole criteria for a healthy economy are increasing corporate profits and a soaring stock market.

     (A side issue: The Barron’s article again demonstrates how rigorously conservative economists monitor any hint that working-class wages may be about to go up, and how alert they are about whether or not the Fed should raise interest rates to stop wages from going up.)

     The two excerpts below describe the schizophrenic, and self-destructive, nature of American society today.

     On the one hand, we’re a gang-busters economy, with millionaires and billionaires being created daily and cheaper prices for most products. It’s a libertarian’s dream come true: everyone for him or herself, with no government involvement.

     On the other hand, we’re seeing the destruction of our middle-class, worsening conditions for the poor and disadvantaged, and the degeneration of communities.

     And, guess what. The two are connected, and the first is the direct cause of the second.

From Fortune, March 8.

America’s Most Admired Companies

Recent bad press hasn’t dimmed the business world’s affection for Wal-Mart

Those of you who have read about Wal-Mart locking in it’s employees overnight or being raided by the feds may be scratching your heads…. But the 10,000 executives, directors, and analysts whom Fortune polled in late 2003 weren’t deterred: They have named the retailing juggernaut America’s Most Admired Company for the second year in a row….

Wal-Mart wins the business world’s esteem because it is the most dominant force in commerce, renowned for its superb efficiencies, unprecedented clout with suppliers, and pervasive influence on everything from pop culture to the consumer price index. …

From Business Week, March 8.


By Jeffrey E. Garten

Wal-Mart Gives Globalism A Bad Name

The current election-year debate makes it clear that Americans are deeply aware that trade, technology transfer, and outsourcing have a huge impact on their jobs and indeed their lives. Not long ago, some of the most powerful corporate symbols of this intensifying globalization were McDonald's, Coca-Cola, and CNN. But now American-style global capitalism could have a new face—Wal-Mart Stores Inc. That would be bad news….

It is noted for highly sophisticated global inventory management as it brings to foreign markets quintessential American values—Darwinian competition, ever-widening consumer choice, and increasing shareholder value.

But the essence of Wal-Mart is that it is propelled by one thing: offering products at the lowest possible price. The big question, which Stephen J. Kobrin of the Wharton School recently posed to me in an interview, is: What does society pay for that benefit? Yes, Wal-Mart provides critical savings for low- and middle-income families. Yes, we can thank the company for contributing to today's low inflation and growing productivity. But the darker side of the story is how Wal-Mart achieves its fabled low prices in part by taking unfair advantage of employees and communities.

A FEDERAL GRAND JURY IS examining whether the company has knowingly hired contractors who employ undocumented immigrants to drive down costs. Some 40 lawsuits in 25 states accuse Wal-Mart of denying overtime pay to those who have earned it. Many workers complain about unreasonable eligibility criteria and prohibitive costs for company-sponsored health-care plans. Charges of sexual discrimination in employment could soon precipitate the biggest civil-rights class action in U.S. history.

On a recent PBS program, NOW With Bill Moyers, former Wal-Mart employees said their wages forced them to resort to taxpayer-funded public assistance for emergency medical care and even food stamps. The program also documented instances—for example, in Cathedral City, Calif.—of the company establishing stores to take advantage of temporary tax breaks and then abandoning them when the fiscal incentives expired. In so doing, it left the local community with empty structures and huge shortfalls in public revenues.

The company vigorously denies all these allegations, but for me there is too much smoke for there not to be a fire. And of course, what Wal-Mart does, every other competing retailer must try to emulate if it wants to survive. Exhibit A is the 70,000 worker strike at supermarkets such as Safeway where employees are protesting reduced health-care benefits that the grocery chains say are needed to compete with Wal-Mart….

Still, in the contest between ruthlessly competitive forces and decent employment in cohesive communities, we should be rooting for the latter. If Wal-Mart succeeds with its low-price-at-any-cost strategy, what kind of message does this send about the ability of U.S. companies to be good corporate citizens? What kind of backlash against international trade and investment would it eventually provoke?…

     It’s hard to believe that the above two excerpts relate to the same corporation.

     By ranking Wal-Mart as the most admired corporation, America’s executives, directors, and analysts have perfectly described the moral standards of today’s business leaders: All executive behavior should be judged by the effects on the bottom line. It’s all about profit and an increasing stock price. The impact of corporate actions on the environment, employees, suppliers, and local communities is irrelevant.

     Jeffrey Garten’s op-ed piece acknowledges the obvious fact that the quality of life is more important than an individual corporation’s success.

     Given the news items relating to Wal-Mart over the past several years—Garten is right on target, and we ignore his conclusions at our peril.

     The following excerpt is a sad description of the extent to which the aristocrats of the world have won their class war with the world’s workers.

     In celebration of this good news, The Wall Street Journal made it a front page article.

From The Wall Street Journal, March 11.

As Jobs Head East in Europe,
Power Shifts Away From Unions

Labor Offers Big Concessions
To Get Companies to Keep
Production Close to Home

…Since the late 1990s, when the European Union began laying plans to admit new members from Central and Eastern Europe, manufacturers of tires, furniture, glass, consumer electronics and other goods have been building plants and moving production east to take advantage of lower wages, more accommodating unions—and the prospect of relaxed trade barriers. With them have gone tens of thousands of union jobs. Unions fear more will follow as nine Eastern European nations plus Malta join the EU in May, cementing ties between the low-cost East and expensive West—and creating the world's largest economic entity.

Now some labor leaders in the West are starting to give ground in hopes of preserving jobs. The change could revolutionize labor relations in Europe, hastening a trend toward more flexible labor rules and weaker unions. That would boost Europe's competitiveness, which has suffered under high labor costs and a resistance to reforms, but could also raise social tension as workers face the prospect of losing jobs, taking lower pay and working longer hours.

Car makers have led the way in the eastward migration. Ford Motor Co. recently moved delivery-van production to Turkey, which contributed to a loss of 3,000 jobs in a Belgian plant. France's PSA Peugeot Citroën is building new plants in Slovakia and the Czech Republic. General Motors Corp. now builds small trucks in Poland. And suppliers are hard on their heels: When VW moved production of a small delivery truck from Spain to Poland last year, Spanish firms such as interior maker Grupo Antolin and metal-parts supplier Gestamp Automoción moved production to Central Europe, too.

But union concessions are stanching the losses. For the past few months, Stuttgart auto giant DaimlerChrysler AG has been ramping up production at a new engine plant in Kölleda, in Germany. The factory probably would have been built in Central Europe, if the traditionally hard-line IG Metall union hadn't agreed to new flexible rules, including the use of temporary workers who could be let go after a few years, something the union has long opposed….

Western Europe still has some of the most generous labor laws in the world. France legally limits all workers to a 35-hour work week. In Sweden, married couples are entitled to a total of 480 paid days off when children are born. German unions still negotiate nationwide contracts that set one-size-fits-all wages on companies across whole sectors.

But unions have to realize the landscape has changed, says Klaus Volkert, the top labor representative on VW's supervisory board, the equivalent of a U.S. board of directors. By sticking to the old, hard-line approach, he says, "you only hurt yourself."…

     Instead of governments of the world mandating that the working week be reduced to 32 hours, and that workers made decent incomes—as was predicted by economists 40 years ago—they are supporting the ability of corporations to totally dictate working hours and conditions. The only organizations that now support worker rights and incomes—unions—have lost any influence they ever had over the governments that rule them.

     Voters who actually work for a living should regularly read The Wall Street Journal. When this conservative publication reports in its news stories how the Bush Administration always fights against giving benefits to workers—even the ones who are victims of its own economic policies—you’ve got to believe it.

From The Wall Street Journal, March 11.

Bid to Expand Job Aid Gains Steam

Displaced Service Workers
May Get Retraining Dollars
Amid Election-Year Politics

WASHINGTON—The election-year uproar over the outsourcing of U.S. jobs overseas is increasing pressure on the Bush administration to extend retraining aid to displaced service industry workers as well as those in manufacturing.

The White House beat back such an effort two years ago to expand the so-called trade adjustment assistance program. But in testimony before the Senate Finance Committee, U.S. Trade Representative Robert Zoellick signaled greater openness to the idea and praised one of the chief proponents, Montana Sen. Max Baucus, the panel's ranking Democrat, for his "important leadership" on the issue.

The Information Technology Industry Council, representing such high-tech giants as International Business Machines Corp. and Microsoft Corp., threw its weight behind the proposal Wednesday, and the full Senate will take up the issue this spring as part of a debate on a pending corporate tax bill with trade implications of its own….

But high-tech industry representatives have already begun meeting with House Republicans to build support, and one lobbyist warned that the administration needs to get in front of the issue or risk being run over given the election-year politics.

     And guess what. When legislation favoring workers is finally passed, the Bush Administration will claim credit for it.

Week of March 1

     Globalization was supposed to benefit American workers because, as low-skill jobs left this country, they could then take the higher-skill, higher-paid jobs of the world.

     It’s becoming increasingly obvious that this has been a deliberate lie—perpetrated by America’s new aristocrats—from the very beginning. Globalization’s purpose has always been to destroy the ability of those who work for a living to negotiate for higher wages and better working conditions.

From The Wall Street Journal, March 5.

As Jobs Move East,
Plants in Mexico
Retool to Compete

China Takes Low-Wage Work;
So Guadalajara Targets
Products Still Made in U.S.
Beating Boise's Router Maker

So Mr. Sanchez and other managers (in Mexico) are moving their factories up the manufacturing food chain, retooling to make more advanced products. Now they are competing against factories in developed economies such as the U.S. that earlier thought they were safe from foreign competition….

What's happening in Mexico illustrates how globalization is a double threat to blue-collar workers in wealthy countries such as the U.S as low-skill factory jobs migrate directly to China and countries such as Mexico accelerate their competitiveness for their own survival. By playing the role of upstart global entrepreneur, China isn't just drawing in jobs but forcing factories throughout the rest of the world to become more efficient. "It's Economics 101 in action," says Claudio Bertoluz, head of Mexico's electronics manufacturing association.

While the loss of jobs to China has become a hot political issue in the U.S., nowhere has China's economic emergence been felt more sharply than in Mexico. In the past three years, Mexico lost an estimated 400,000 jobs to China and was replaced by China as the No. 2 exporter to the U.S. market, behind Canada. The lost exports cost Mexico at least $5.8 billion in 2002, Credit Suisse First Boston estimated recently….

     Since globalization is destroying the wages of those higher on the skill and income scales—in the “factories in developed economies such as the U.S. that earlier thought they were safe from foreign competition”—maybe the voting public will bring about a change in government.

     The following excerpt describes the major contestants in today’s class war as precisely as you’ll find. Of course, it also clearly describes who is benefiting the most from globalization, and who is making all the sacrifices.

From The Wall Street Journal, March 1.

Business Coalition Battles
Outsourcing Backlash

Big Lobbyists, Companies
Aim at a Blizzard of Bills
Meant to Keep Jobs at Home

…Some of the best-financed trade groups in the U.S. have formed a coalition to beat back federal legislation that would restrict foreign outsourcing by government contractors and limit visas for non-American workers with technology skills.

Calling itself the Coalition for Economic Growth and American Jobs, the new entity comprises about 200 trade groups—including the U.S. Chamber of Commerce, the Business Roundtable, the American Bankers Association, the National Association of Manufacturers and the Information Technology Association of America—as well as individual companies.,,,

"Money and energy could be better spent to keep jobs at home rather than to try to convince people that there isn't a problem," said Thea Lee, assistant director of the AFL-CIO's international economics department….

One target of the coalition's lobbying is a bill that would require workers at telephone call centers to disclose their physical locations at the beginning of each call….

The coalition also is working against a half-dozen bills that would restrict companies from bringing foreign workers to the U.S. on guest visas to do jobs previously done by Americans. With layoffs among tech workers rising, some U.S. workers and labor unions say the widespread use of so-called H1-B visas for skilled workers is exacerbating U.S. job woes and undermining wages….

In addition, the group says blocking non-U.S. operations from working on state contracts violates World Trade Organization agreements….

     Naturally, it’s the usual cast of characters: “the U.S. Chamber of Commerce, the Business Roundtable, the American Bankers Association, the National Association of Manufacturers and the Information Technology Association of America.” It’s the same crowd that has always done everything they could to destroy workers’ wages and increase corporate profits.

     And, as usual, it’s the unions who fight for the right of workers to have a decent incomes—even for those workers who aren’t members of unions.

     It also shows how these groups are really behind our government’s backing of the WTO—which forces our government to abandon protections of our own workers against world-wide corporations.

     Excuse me, Wall Street Journal, but your Freudian slip is showing. In a desperate attempt to show how globalization creates jobs, the Journal unwittingly proves the true—and huge—economic inefficiencies that globalization actually creates.

From The Wall Street Journal, March 1.

Globalization Creates
Logistics Jobs in U.S.

…The frenetic pace of global trade, coupled with outsourcing of manufacturing around the world, has transformed delivery into a complex engineering task. Companies enlist logistics consultants to untangle supply chains and to monitor shipping lanes and weather patterns.

In one small indicator of how intricate the task has become, the Massachusetts Institute of Technology has expanded its logistics program and started a new master's degree dedicated to logistics in the school of engineering….

To meet the demand and to cut costs, companies are outsourcing, which adds more players to the supply and distribution channels, making them complicated and longer….

These are precisely the types of value-added jobs the U.S. economy is supposed to create to replace some of the manufacturing jobs that are leaving. They won't offset the number of factory jobs that are moving abroad. Still, they represent a promising area of growth….

Demand for such services is compounded by increasing international uncertainty. The best way to deal with increased uncertainty is to have flexible supply chains and delivery channels. That way, companies can better respond to changing demand, not to mention disruptions caused by political unrest, natural disasters and shortages of raw materials….

Even if supplies are secure, the process of getting them might not be. In China, for instance, where goods flow in and out of ports at increasing rates, shipping lanes often are congested, forcing vessels to wait at sea until ports open up. That is where logistics gurus come in….

     Even the Journal admits that these logistics jobs “won't offset the number of factory jobs that are moving abroad.” When you’re a deliberate liar—trying to show that globalization creates more American jobs than it loses—you’ve got to grasp at whatever straws are available.

     Also, consider the huge inefficiencies that are incurred when you have to train new people to do the logistics jobs, the ones that were unnecessary before globalilzation.

     In addition, the engineers going into the new jobs will be making reduced incomes because of the increased competition with other unemployed engineers.

     For a detailed explanation of how globalization is a horribly inefficient way to do business, see International Free Trade: IT'S NOT "GLOBALIZATION".

     Republicans and conservative Democrats stubbornly resist a commonsense solution to saving corporations who want to treat their workers decently.

     A simple way to stop predatory corporations like Wal-Mart from destroying its competitors who have some semblance of moral standards—is to maintain acceptable minimum standards of wages and working conditions.

From The Wall Street Journal, March 1.

Supermarkets Get Concessions;
Wal-Mart Wage Gap Remains

Even after winning significant wage and benefit concessions in a months-long labor dispute in Southern California, the nation's three largest traditional supermarket chains will carry higher employee costs than does their nemesis: Wal-Mart Stores Inc.

The contract that leaders of the United Food and Commercial Workers union agreed to put to a vote this weekend would give Kroger Co., Albertsons Inc. and

Safeway Inc. the right to lower pay for new workers and limit the amount the grocers must put toward employee health insurance, according to people on both sides of the dispute who are familiar with the contract. After a two-day vote, 86% of grocery workers who cast ballots approved the contract, the union said Sunday….

"The costs are still too high," said Burt P. Flickinger III, managing director of Strategic Resource Group in New York, a business-strategy consulting firm that followed the dispute.

Under the contract, a veteran food clerk could continue earning as much as $17.90 an hour, and a new hire could top out at $15.10 an hour, still higher than the $13.75 Wal-Mart is paying its food clerks in Las Vegas. …

     As long as the minimum wage is so unrealistically low, and protections of workers almost nonexistent—immoral predators like Wal-Mart will continue to destroy its moral competitors.

     Again, from across the world, we have another example of the race to the bottom for wages and working conditions.

From The Wall Street Journal, March 1.

Volkswagen Seeks
To Prop Up Profit
By Cutting Costs

FRANKFURT—Volkswagen AG is preparing a crash cost-cutting program to prop up falling profit caused by disappointing sales of its flagship Golf hatchback and increasing price competition in important markets….

VW will cut from across its budget—development and capital spending, labor and production costs, and parts and component purchasing, these people said. Workers also may be asked to put in longer hours, and production could be cut at some plants….

VW also has been hurt by high production costs. Auto workers in Germany earn more money per hour than anywhere else in Europe. At VW, costs are even steeper because its union employees sometimes work only four days a week.

VW is likely to seek help from its work force in reducing costs, perhaps through slightly longer hours or more flexible work schedules, a person familiar with the matter said. The four-day workweek dates from 1994, when VW was in its last financial crisis and unions agreed to cut hours.

The company also could reduce costs by increasing production at some of its plants in central Europe, where wages are about one-fifth of those in Germany.

     So, who’s making all the sacrifices in corporations’ drive to reduce costs? Those who are doing all the work. A corporation must cut its labor costs—any way it can—or go out of business. Of course, the top execs and the investors are the last ones to feel any pain.

     Want a brief demonstration of how our government deliberately stimulates corporate profits and, at the same time, keeps wages from going up? This excerpt is all you need.

From The Wall Street Journal, March 1.

Getting the Read on Greenspan

Fed Chief Dominates Headlines
On Surprise Topics, but Investors
Focus on His Core Job: Rate Cop

Federal Reserve Chairman Alan Greenspan grabbed headlines last week for his opinions on a variety of big-picture issues, from Social Security and tax cuts to budget deficits and the regulation of housing giants Fannie Mae and Freddie Mac.

But many investors are more concerned with the central bank's bread-and-butter issue—setting the path for short-term interest rates….

Interest rates influence stock prices because they affect the cost of corporate borrowing—and therefore corporate profits. If rates go up, the cost of borrowing from both banks and bond investors rises….

Analysts say the Fed won't raise rates until job growth picks up more. Bond traders agree and have sent Treasury yields lower after a bout of indigestion last summer….

Stock-market bulls may have some reasons to hope for continued slow job growth. After all, the Dow has gained 34% over the past 12 months despite a job market that is limping along. That's because corporate restraint in hiring has boosted profits. But experts say job growth is needed to keep revenue and profits rising over the long haul….

Mr. Lonski doesn't expect interest rates to move higher until payrolls grow by 150,000 a month for three consecutive months. The past three months mustered average growth in payrolls of only 70,000, he adds. The presidential election this fall also "will encourage the Fed to proceed all the more cautiously" in raising rates….

To be sure, inflation could continue to stay under control as it has been for years, thanks to global influences such as outsourcing and technology-led productivity gains. But "the Fed may have a dilemma," if inflation and long-term interest rates pick up without stronger job growth, Mr. Paulsen says. Fed officials don't want to raise rates before jobs take off, but they also don't want be "accused of thwarting the free market" and ignoring long-term bond yields….

     This, folks, is what has been called the goldilocks strategy. The Fed manipulates the prime interest rate just enough to encourage growth (hot)—and maximize corporate profits—but not so much growth (too hot) that wages actually start to go up.

     The following excerpt demonstrates the dilemma the Fed faces in fine-tuning the economy. When it is overly successful in keeping wages from going up, it can negatively affect consumption, and might possibly cause a recession. Or, as happened in 1929, a depression.

From The Wall Street Journal, March 1.


Consumers keep spending but if the labor market doesn't pick up, they can't keep the pace up for long….

Monday, the government puts out consumer spending and personal income data for January. Wages and salaries have slowed, even though employment is off the bottom, a worrisome sign for spending….

     Only deliberate liars and hypocrites can claim that our Republican and conservative Democrat controlled government gives equal consideration to workers, as compared to investors and the established wealthy.

     Conservatives continue the struggle to fight the inevitable wising-up of the American public about the disaster of globalization.

From Business Week, March 1.


Now More Than Ever, Innovation Is The Answer

Jobs will arise from the creation of new products, processes, and markets

By Robert D. Hof

As technology jobs boom in Asia and employment languishes here, it's easy to forgive American tech workers for casting an angry gaze across the Pacific. To find the real job thieves, though, they needn't look so far—a mirror will do. Without the technologies that U.S. techies produced during the 1990s boom, offshore outsourcing never would have happened.

Global high-speed networks, ever-cheaper computers, and ubiquitous run-your-business software made it possible to have operations anywhere from Bangor to Bangalore. Pity the poor tech workers: Who else in business must keep creating the very innovations that may someday obliterate their own jobs?

Yet now more than ever, they have no choice. Continuing to innovate is the one way tech workers and their companies can survive the latest disruption. They must keep creating leading-edge technologies that make their companies more productive—and especially, innovations that spark entirely new markets….

It's not just a matter of creating the next hot product or service, though that certainly will help. Companies need to keep innovating in all of their operations—seeking out and creating cutting-edge technologies and then applying them to transform outdated, inefficient business processes. Says independent business consultant John Hagel III: "At the end of the day, this puts a big innovation challenge on the table."…

     What Mr. Hof neglects to mention, of course, is that one of the things that other countries can do cheaper than the U.S. is to seek out and create “cutting-edge technologies and then apply them to transform outdated, inefficient business processes.”

     After all, as previous entries on this web site have noted, other countries are not only demanding that investors give them our manufacturing facilities—they also demand that we give them our cutting-edge technology and the processes to develop it. And their Ph.D. scientists make one-tenth to one-third what U.S. scientists make.

     The disaster of globalization is not just that working Americans are losing their jobs—it’s the fact that investors are reaping almost all the benefits and workers are making all the sacrifices—and the promises of a better tomorrow for workers are deliberate lies.

     Given the news items like the following, it’s hard to see how conservatives can keep a straight face when recommending that Social Security should be privatized, and put into the hands of Wall Street executives.

From Forbes, March 1.

A Bargain at Half the Price

Two academics assert that mutual funds tend to gouge retail customers. The profs seem to have hit a sore point.

How could a couple of obscure business professors get the mighty Investment Company Institute into such a lather? By documenting the fund industry's habit of levying exorbitant fees, thus providing ammunition to fundbuster Eliot Spitzer, attorney general of New York.

John Freeman from the University of South Carolina and Stewart Brown of Florida State had the temerity to do a study showing that fund investors are getting ripped off to the tune of $9 billion a year. In a 2001 article in the University of Iowa Journal of Corporation Law, the academics simply compared what fund company managers charge to run their in-house funds for the gullible masses with what they charge for the same kind of work done for pension sponsors, headed by sophisticated folk….

     Mutual funds are supposed to be the ultimate investment for unsophisticated investors who want to participate in the stock market.

     With the gouging, outright fraud and legally-permitted greed exhibited by investment professionals over the past several years—even in the mutual fund industry—it’s obvious that the bare-bones retirements of most workers are better ensured by our present Social Security system.

     Those who want to privatize it are those who have most to gain from it: the investment industry itself—not their unsophisticated customers.

     The following two excerpts from Barron’s, March 1, demonstrates the chronic preoccupation the “good-ol-boys” club on Wall Street to fight any attempt to disrupt its ability to take ruthless advantage of the public—behind closed doors.

Proxy Power

SEC may help dissidents get on the ballot

THE BATTLE FOR VOTES at Wednesday's annual meeting of Walt Disney shareholders is starting the 2004 proxy season with a bang. Such proxy contests are rare. But come May, the Securities and Exchange Commission hopes to adopt a new rule that would make corporate election contests more frequent….

The shareholder access proposal is opposed by celebrity managers like Intel chairman Andrew Grove and General Electric chief executive Jeffrey Immelt, who urge the Commission to first wait for the effects of other reforms like the Sarbanes-Oxley Act or NASD and NYSE rules that fortify outside directors. Management groups like the Business Roundtable have even threatened a court fight if the SEC enacts the rule.

Those critics in management warn that proxy access would allow union pension funds to impose labor agendas on directors, and make it harder for companies to recruit outside directors willing to endure an election contest….

Large institutions like TIAA-CREF look forward to proxy access as a way to pressure managers who've ignored shareholder resolutions urging disarmament of takeover defenses, such as poison-pills and staggered election cycles for directors. The mere prospect of a contested election may be enough to move management, says Peter C. Clapman, TIAA-CREF's lawyer in charge of corporate governance. "It will change considerably the dynamics of discussion between shareholders like ourselves and a company," he says….

The Looming "R" Word

How much more daylight will regulators require of hedge funds?

TALK TO PEOPLE IN THE HEDGE-fund industry, and chances are, you'll get a bullish take on things. That's because assets are amassing, thanks in no small part to strong institutional flows from the likes of endowments, foundations and, more recently, pension funds….

The Securities and Exchange Commission, aware that hedge-fund assets account for a growing piece of the U.S. financial system, is inching toward more involvement. "Too much money is now being managed in the shadows," SEC Commissioner Harvey J. Goldschmid asserted in a speech late last year.

Last week, Robert Plaze, associate director of the SEC's Division of Investment Management, told Barron's: "We're not talking about regulation so much as oversight and deterrence of fraud. Over the past few years, we've seen growth in the number of frauds involving hedge funds in one way or another. Our experience is that we get to clean up at the end in an enforcement case, [when] the assets are gone."….

But in the current climate, with corporate and mutual-fund scandals very much in the news, some in the industry fear that the timing is right for the SEC to move forward on the hedge-fund front.

     It’s government, folks—not moral or ethical standards—that keeps corporate America honest.

     Democrats are missing the main point of the negative effects of globalization on American workers. The total number of jobs lost, although significant to those who lose them, is not the issue.

     It’s the disastrous effect on wages for everyone that is important. Even new manufacturing jobs that are created in this economy don’t pay as well as the jobs lost. The threat of outsourcing effectively keeps the lid on any temptation for workers to demand a fairer share of the wealth that they are producing.

From The Wall Street Journal, March 2.

Manufacturers Say They're Hiring,
But Jobs Picture Remains Murky

After more than three years of declines in factory jobs, U.S. manufacturers say they are finally starting to hire again as orders rebound, exports perk up and inventories shrink.

Economists … note that gains—if they continue to spread—would offset at best only a small portion of the three million manufacturing jobs lost since August 2000, at least in the near-term….

But even a small reversal in hiring could help the Bush administration make a case that the recovery is finally benefiting ordinary Americans, not just corporate profits. The net loss of 2.4 million jobs under President Bush, many of them outsourced to cheaper overseas locations, has become a major issue in the election, with Democratic candidates, labor unions and other groups attacking the administration's economic record….

Productivity gains and competition from China also are tempering job growth at Technical Materials Inc., a Lincoln, R.I., maker of coils of metal used in computers, medical equipment and other industries. The work force has expanded about 5% in the past four months to 215 but is still down from nearly 350 four years ago, said Al Lubrano, president of the company, a unit of Brush Engineered Materials. The decline reflects work lost to rivals in China. Mr. Lubrano said the company eventually will have to shift some of its production to China to stay close to customers that have moved there….

     The Journal’s statement that “even a small reversal in hiring could help the Bush administration make a case that the recovery is finally benefiting ordinary Americans, not just corporate profit”—is sheer hypocrisy.

     Even if the number of jobs exceeded those lost—it’s still a net loss for workers whose incomes haven’t kept up with inflation for the past 25 years. And in the same time period, corporate profits and the stock market have been exploding.

     I know these kinds of excerpts are getting boring and repetitious, but the voting public can’t be reminded enough about how our federal government deliberately keeps wages of working-class Americans from going up.

From The Wall Street Journal, March 3.

Greenspan Says
Rates Must Rise
'At Some Point'

Interest rates are too low for long-term economic stability and will have to rise at some point, Federal Reserve chairman Alan Greenspan said, without giving an indication when that would be….

But Mr. Greenspan added, "This is a very special case that we are dealing with ... clearly, we have kept the federal-funds rate where it is because we have very good reasons." In past remarks, Fed officials have pointed to low inflation, ample unemployment and unused business capacity as reasons for not raising rates….

     What good news. The “ample unemployment” of American workers has enabled Greenspan and the Fed to not have to raise the prime interest rate (to slow down an economy in which employment and wages might go up).

     Just a bit of reassurance. It’s good to know that our corporate CEOs are still making decent incomes.

From The Wall Street Journal, March 3.

General Electric Chief Immelt
Was Paid $7.4 Million in 2003

Jeffrey R. Immelt, General Electric Co.'s chairman and chief executive, received $7.4 million in salary and bonus for 2003, a year in which the Fairfield, Conn., conglomerate announced two of its biggest acquisitions in the company's history and earnings increased less than 10% for a second year in a row….

     A few years ago, some financial experts on a TV investment program advised viewers that a relatively safe investment would be in local concrete companies, because it was uneconomical for non-local companies to compete. Obviously, with globalization, times have changed.

From The Wall Street Journal, March 3.

Blueprint for Outsourcing

Salt Lake City's New Library
Shows U.S. Construction Jobs
Are Also Shifting Abroad

For a concrete example of how U.S. jobs are being outsourced abroad, check out Salt Lake City's new public library.

The 87,000 square-foot structure's facade was assembled entirely from concrete panels cast in Mexico. That's right, a construction site where much of the construction was done offshore.

"The idea of manufacturing a building a couple of thousand miles away and then exporting it, well it was considered crazy," says Alejandro Fastag, director of Prefabricados Técnicos de la Construcción SA, or Pretecsa, the company hired for the task.

Instead of pouring concrete forms on site, Mr. Fastag's firm cast more than 2,000 individual panels at its plant in the Mexico City suburb of Atizapán de Zaragoza, then shipped them 2,350 miles north….

Making components for U.S. projects outside the U.S., using non-U.S. labor, is an evolutionary step for the building industry, and one that's expected to continue, particularly when foreign suppliers offer more competitive prices….

"Pretecsa's low-cost labor made up for the higher shipping costs, and they came in the cheapest," Mr. Crane says….

The economics of building offshore have to do mainly with the high cost of skilled labor in the U.S., where workers who pour concrete "slip forms" rarely make less than $20 an hour, and where some builders say it's getting harder to find U.S. workers willing to move for jobs that can take months to finish. Migrant work gangs comprised of green-card holding Mexican immigrants have become increasingly common on large construction sites, especially in right-to-work states where unions are weak.

With the signing of the North American Free Trade Agreement in 1993, Pretecsa began thinking about plying its technique beyond national borders. "Traveling and shipping have become so much cheaper with free trade. Globalization has hit every other industry, we are convinced it will happen with construction," Mr. Fastag says….

     This kind of news just keeps getting worse, with no end in sight. Every paragraph in the above excerpt explains pervasive and disastrous course our nation is taking.

     Brutalizing workers and suppliers, both in this country and in third world countries, evidently pays off big time in this economy that was created by Republicans and conservative Democrats.

From The Wall Street Journal, March 4.

Wal-Mart Boosts
Dividend by 44%,
Cites 'Good Year'

Wal-Mart Stores Inc. said its board increased its annual dividend by 44%, joining a number of companies that are putting more cash in investors' hands at a time when dividend tax rates have been cut….

The world's largest retailer said the dividend increase—far greater than its most recent yearly dividend boosts of 7% to 20%—reflects the company's results and isn't a response to a recent sharp cut in the dividend tax rate. "We had a good year and were able to share that with our shareholders," said a Wal-Mart spokeswoman….

The largest beneficiaries of the dividend increase will be the founding Walton family, which collectively owns 1.68 billion shares in the company through Walton Enterprises LP. The partnership's annual payout will increase by $268.9 million to $873.9 million, according to company filings….

     If you want to read about some of Wal-Mart’s unscrupulous exploits, and how it achieved its successes, scan previous Conservative Press files on this site with the “find” (Ctrl+F) feature on your computer.

     Below is just another example of the values of the industry that Republicans and conservative Democrats want to put in charge of Social Security.

From The Wall Street Journal, March 5.

Increasingly, Stock Research
Serves the Pros, Not 'Little Guy'

In the Wake of Spitzer Pact,
Wall Street and Upstarts
Are Catering to Elite Few

…When New York Attorney General Eliot Spitzer succeeded last year in separating investment-banking divisions from stock analysts to eliminate conflicts of interest, the historic settlement was supposed to herald a new era of securities analysis—one benefiting little-guy stock pickers. But now more than ever, the most pioneering, market-moving research is going exclusively to big mutual funds and the private investment pools known as hedge funds, not to the small investor for whom regulators waged their campaign.

At the same time, Wall Street research available to individual investors is being produced under sharply curtailed budgets….

Wall Street analysts have no doubt who it is they need to please: the firms' largest trading clients….

     Of course, if Social Security were privatized, I’m sure the values of investment professionals would magically improve, and they would do their best to give the small investors a fair shake.

Week of February 23

     The Republicans and conservative Democrats who gave us globalization are finally running out of justifications for their betrayal of working-class Americans.

     Their hollow promise (or deliberate lie?) that Americans can be trained to move from good-paying low-skilled jobs to higher-paying high-skill jobs is being exposed daily.

From The Wall Street Journal, February 26.

China's Price for Market Entry:
Give Us Your Technology, Too

GE Shares Generator Plans
To Win $900 Million Deal;
Gray Area in WTO Rules

…Mr. (Delbert) Williamson, then GE's president of global sales, was reluctant to open his company's technology vault. But GE had little choice. To be considered in the bidding for equipment contracts totaling several billion dollars, GE and its competitors were required to form joint ventures with the state-owned Chinese power companies. GE was also required to transfer to their new partners technology and advanced manufacturing guidelines for its "9F" turbine, which GE had spent more than a half billion dollars to develop…..

Chinese scientists call it "technology for market." Instead of selling toys, textiles and television sets, China wants to compete in telecommunications, health care, power generation and a range of other advanced manufacturing sectors. So it's pushing for crown jewels of technology from companies that want access to China's exploding marketplace….

Trade experts say China isn't alone among developing countries in pushing for foreign technology, but the size of its new markets give Chinese negotiators enormous leverage. Japan demanded similar transfers in the 1960s and 1970s when it was rebuilding industries after World War II. The exchanges helped forge the economic and political alliance between the U.S. and Japan, but later haunted some U.S. companies when Japanese rivals went on to outpace their American partners in electronics and other industries….

     There you have it. Why should American investors ever invest in training working-class Americans for high-skill jobs—when China, with our technology and manufacturing secrets having been given to them, can do it far more cheaply?

     It’s a race to the bottom for everyone who works for a living, while it’s a race to the top for the world’s new aristocracy.

     The excerpt below is from a regular feature in Business Week that analyzes the state of the economy. Note the callous, utterly heartless way it describes American workers. It’s as though they are machines or raw materials—not human beings with husbands, wives, and children to support.

     It’s indicative of today’s corporate and investor morality: All economic policy should be designed to make investors and corporate executives as wealthy as possible. Absolutely no consideration should be given to the needs of workers—and the ethical standard of utility has no role whatsoever.

From Business Week, February 23.

U.S.: The Fed Isn't About To Ease Up On The Throttle

Until the job market rebounds sharply, inflation won't become a worry

…Although Greenspan did not single out the labor markets, the key to any decision on interest rates this year will come down to jobs, jobs, jobs. Ignore all the hand-wringing over strong growth in real gross domestic product, the resurgence in demand, the declining dollar, and soaring commodity prices. In the end, the economy's inflation potential lies almost solely in the job markets. Labor conditions must tighten enough to push up wage growth sufficiently to feed into bigger price increases. Without that engine in gear, inflation can't get moving….

IN THIS NEW ERA of global economics, the labor markets will need more time than ever before to gain traction, let alone tighten up to the point where wages and prices begin to spiral upward. Global competition has forced a new cost-cutting mind-set on Corporate America. Combined with technological advances and the threat of outsourcing, this triple-threat means many U.S. workers will still feel job jitters even when the jobless rate falls below 5%. Unless workers feel secure enough to seek higher pay, inflation will remain absent.

In addition, the growing investor class will keep the squeeze on labor, as investors demand ever-increasing earnings from U.S. corporations, which are also under siege here at home from the soaring cost of health-care and pension benefits….

MOREOVER, IN THIS RECOVERY, the combination of good productivity growth and the trend toward job outsourcing means that the unemployment rate has considerable room to fall before it generates excessive upward pressure on wages and prices…. .

     If you ever wondered about the true goals of globalization and outsourcing of jobs, there’s no doubt now. It’s all about creating insecurity among America’s workers.

     “Unless workers feel secure enough to seek higher pay, inflation will remain absent.” Unbelievable. The conservative goal of making our lowest paid workers feel insecure about their lives is a major goal of American investors. As though they aren’t feeling insecure enough already.

     And all the while, corporate profits and the booming stock market are making new records.

     The globalization insanity continues.

From Fortune, February 23.

China Sets the Standards

Last century, America ruled the technology world. This century, will the crown be Shanghaied?

Just try to find an area of science and technology that isn't already feeling the huge shadow of China. It is now the world's technology manufacturer of choice, siphoning jobs not just from the United States but also from Mexico, Thailand, Singapore, and other low-cost labor centers.

Each year China produces as many engineers and scientists as the United States does—and while its numbers are going up, America's are going down. The Chinese government is pouring the equivalent of tens of billions of dollars into education and R&D facilities for science and medicine, while R&D spending in the U.S. has been stagnant.

For the tech industry, it's China—not Europe, or Japan, or other Asian countries—that will soon be its main rival. The implications are profound. No longer content to cheaply make other people's products, a task it has clearly mastered, China wants to be a global standards setter….

Of course, it could also potentially save the billions of dollars a year in licensing fees that it now shells out. Tech giants are bowing to its demands despite China's blithe attitude toward intellectual-property rights. The country recently insisted on, and won, permission to inspect Microsoft's Windows source code….

Just as the U.S set tech standards in the 20th century on everything from the phonograph to the PC, China could set the agenda in the 21st. But hey, that's capitalism.

     “Science and technology.” Those were supposed to be the future saviors of America’s workers. Now Fortune is telling us that China “is pouring the equivalent of tens of billions of dollars into education and R&D facilities for science and medicine, while R&D spending in the U.S. has been stagnant.”

     And why is spending for advanced education in the U.S. stagnant? Simple. Investors don’t need educated U.S. workers any more. We can get them from China, at China’s expense, for 10 cents on the dollar.

     In addition, China’s “blithe attitude toward intellectual-property rights” means they can steal (have stolen?) all our latest technology at will. So, investors will simply let them do it, manufacture everything there, and ship it to the U.S.

     And all the while, investors in both countries become a new class of aristocracy, simply by pitting the brutalized serfs of the world against each other.

     The “fait accompli” of globalization is a transparent propaganda ploy. When those who profit from globalization don’t want it to be reversed, they always speak of it as an irreversible fact. If they’re successful in their scam, the gullible public stops any serious discussion to correct the situation.

     It’s time to bring some reality back into the discussion.

From Fortune, February 23.

Rage Against Off-Shoring Is Off Target

Sending jobs overseas is inevitable—and might even be beneficial.

By David Kirkpatrick

… The fact is, we can't stop offshoring—and we shouldn't try. For all the handwringing, offshoring is inevitable, frequently makes business sense, and might even be beneficial. A recent study by the McKinsey Global Institute, an economics think tank, calculated that for every dollar spent on a business process that is outsourced to India, the U.S. economy gains at least $1.12. The largest chunk—58 cents—goes back to the original employer.

But there are many other benefits. For instance, 30% of Indian offshoring is performed by U.S. companies, so money returns home as earnings. Additional benefits accrue from freeing U.S. workers to do other tasks….

We need to rethink our views on the global workforce. First, we should realize that the boom in part proves how much the U.S. economy achieved in the roaring '90s….

The U.S. is helping the rest of the world work its way into wealth. That is in all of our interests. And it isn't a zero-sum game. American productivity, again fostered largely by intelligent use of technology, remains the highest in the world. That's likely to ensure we stay wealthy.

Nonetheless, displaced workers have legitimate gripes. What they ought to be demanding is not an end to offshoring but better education and retraining to compete in a global marketplace, as well as social programs to cushion the blow of inevitable job losses. Increasingly in the Internet Age, we will all rise, or fall, together.

     “The fact is, we can't stop offshoring.” Why? All we have to do is do it. Just tax the hell out of those products made by slave labor and use the money to build new manufacturing facilities in this country.

     “… for every dollar spent on a business process that is outsourced to India, the U.S. economy gains at least $1.12.” and “so money returns home as earnings.” Sure. But who gets that $1.12? Not the displaced workers. It’s the greedy investors and the CEOs who get it.

     “Additional benefits accrue from freeing U.S. workers to do other tasks.” Yeah. Like working in fast-food restaurants, emptying bedpans and cutting up chickens—for minimum wage.

     “And it isn't a zero-sum game.” Sure it is. (See Wealth is a zero-sum game.) The more the greedy bastards at the top take of the benefits—the less is left for everyone else. Not only that, they use their wealth to buy up everything of value in the U.S., like land and buildings, education, and medical care—and drive up the prices of those things for everyone else.

     “Nonetheless, displaced workers have legitimate gripes.” No kidding. Of course, when you’re screwing someone, it’s a good idea to let them know you care. The fact that “better education and retraining” aren’t going to do a damn thing—when China is doing even that cheaper—is irrelevant.

     And holding out the possibility of “social programs to cushion the blow of inevitable job losses,” is an easy out, since you know that the Republicans will never finance such nonsense.

     What a great new world right-wing hypocrites like David Kirkpatrick have given us.

     The long-term disastrous effects of globalization on America’s workers is beginning to dawn—even on the readers of Business Week.

From Business Week, February 23.


By Laura D'Andrea Tyson

Outsourcing: Who's Safe Anymore?

The American economic recovery is more than two years old. But jobs and worker incomes have yet to rebound. If this recovery had followed the typical pattern of past recoveries, by now the economy would have created more than 8 million additional private-sector payroll jobs….

What’s going on?

NO ONE KNOWS FOR SURE, but a growing number of observers point to American companies' outsourcing and offshoring strategies as the force altering the usual links between economic recovery and employment growth….

So far the debate about the benefits and costs of outsourcing has focused on jobs, not wages. Yet the risks to the latter may be more important. Over the past 30 years, the wages of low-skilled American workers, those with a high school education or less, declined both in real terms and relative to the wages of skilled workers, especially those with a college education or higher. Technological change and outsourcing decreased the demand for low-skilled U.S. workers….

     The key statement in the above excerpt: “So far the debate about the benefits and costs of outsourcing has focused on jobs, not wages. Yet the risks to the latter may be more important.” Not may be more important, but are more important.

     The hollow claims of Republicans and conservative Democrats about the glories of globalization are revealed in the obvious fact that we’re losing high paying jobs and exchanging them for low paying jobs. It’s the level of wages that counts, not the number of jobs created.

     Investors and corporate executives are the grand winners in this scheme, and workers are making all the sacrifices—working for minimum wages in dead-end jobs, and with no power to negotiate for better wages or working conditions..

     Almost daily, conservative financial publications warn their readers about the dangers of investing on Wall Street.

     What makes investing especially difficult today is the lack of commitment among corporations to level with the public about their products and other factors that affect financial reports.

From The Wall Street Journal, February 24.

If Drug Firm's Star Falls,
Does Anyone Hear It?

Companies Can Be Tight-Lipped
When Hot Prospects Fail, Leaving
Investors to Deduce Their Fate

When it comes to their research, drug companies tend to accentuate the positive and eliminate the negative….

It is common practice among large pharmaceutical companies to keep silent when hot prospects in midstage testing stumble—a frequent occurrence. Like Cold War-era Kremlin watchers, investors are left to divine the fate of these fallen stars by noting how they are quietly rubbed out of official lists and public statements. Last year, CP-122,721 dropped off Pfizer's most-recent list of drugs in development and stopped getting mentioned in presentations to investors.

Information about a company's "pipeline" of new drugs matters to investors because that's where much of the value lies. Products that appear close to market are especially important, but because new products are so scarce nowadays many investors also want to know about earlier-stage drugs. Companies recognize that, and at investor meetings they often try to impress their audiences with visions of future blockbusters….

     If even the sophisticated readers of the Journal need to be warned about investing pitfalls, how about all the unsophisticated people that Republicans and conservative Democrats want to turn over to Wall Street?

     If Social Security is privatized, it’ll certainly be a boon to Wall Street—and a disaster for those who don’t read about, or don’t understand, the intricacies of investment.

     America’s #1 class warfarer is at it again.

From The Wall Street Journal, February 25.

Greenspan Supports Cuts
To Social Security Benefits

WASHINGTON—Federal Reserve Chairman Alan Greenspan urged Congress on Wednesday to deal with the country's escalating budget deficit by cutting benefits for future Social Security retirees rather than raising taxes….

Mr. Greenspan said that the benefits now received by current retirees should not be touched but he suggested trimming benefits for future retirees and doing it soon enough so that they could begin making adjustments to their own finances to better prepare for retirement….

     Instead of raising taxes on the wealthy investors and corporate executives who are outsourcing jobs, destroying unions, and, in general, causing the destruction of working-class incomes—Greenspan wants to make it harder on their victims.

     Greenspan’s solutions for Social Security are painfully obvious. He wants to cut benefits on those who need them most—and who are most deserving—in order to save money for those who need it, and deserve it, least.

     No wonder Greenspan is the darling of Wall Street.

     What a deal the conservatives want to give American workers. To compensate the government for the massive tax cuts for the rich, Bush and the Fed Chairman want to cut Social Security benefits for those who most need them.

From The Wall Street Journal, February 27.

Greenspan's Remarks
Put Pressure on Bush

WASHINGTON—Federal Reserve Chairman Alan Greenspan's call to wring savings from Social Security increases pressure on President Bush to advance his own solution to the system's financial woes: partial privatization.

After Mr. Greenspan turned the spotlight on the need to restrain the growth of Social Security and Medicare, Mr. Bush probably can't avoid a campaign debate over the difficult choices that need to be made to close Social Security's financial gap, especially given the deepening public concern with the budget deficit that is pervading the election.

In his well-publicized comments in congressional testimony Wednesday, Mr. Greenspan said yawning, long-term federal deficits ought to prompt national leaders to slow the growth in Social Security benefits or raise the legal retirement age….

Mr. Bush has offered his own solution for the long-term Social Security problem, suggesting in the 2000 campaign a partial privatization of the system….

Appearing in Louisville, Ky., Mr. Bush called for making his 2001 and 2003 tax cuts permanent—an issue also endorsed by Mr. Greenspan this week….

     Sure, let’s raise the retirement age—especially for those whose bodies wear out before they are 60: garbage handlers, chicken processing plant workers, nursing home attendants, and so on.

     Actually, raising the retirement age for lawyers, bankers, management consultants, congresspersons, senior corporate executives, and so on—makes a great deal of sense. Actually, most of these are financially able to retire on their own well before they reach the age of 55. No wonder they want to cut Social Security benefits, and turn the retirements of working-class citizens over to their totally corrupted buddies in the securities business.

     My experiences with corporate executives suggests that the senior management of Halliburton knew very well that their accounting procedures would give them deniability when it came to overcharging taxpayers for their “services” for waging war. See a more thorough analysis of the corporate Destructive Achiever.

From The Wall Street Journal, February 27.

Halliburton Unit Faults
Its Cost Controls in Iraq

A Halliburton Co. unit, under fire for possible overcharges relating to work in Iraq, said a team of company managers and auditors found deficiencies in its cost-control system.

The unit, Kellogg Brown & Root, which has a contract for billions of dollars of Iraq-related work for the U.S. government, acknowledged that its cost controls are "antiquated" and inadequate, according to an internal report on its auditing procedures….

The memo amounts to a frank admission that Kellogg Brown & Root's critics are voicing valid concerns about the possibility of overcharges under the company's massive contract to supply U.S. troops. It also challenges KBR President and Chief Executive Randy Harl's claim, made last month, that the company had a "rigorous system of internal controls" for government contracts. The memo acknowledges that KBR's "paper-based, labor-intensive and bureaucratic'' procurement system isn't suitable for a fast-response situation like Iraq….

In the past, KBR has alleged that the criticism of its work was politically motivated. KBR's parent, Halliburton, was led by Vice President Dick Cheney until summer 2000…..

     Senior corporate executives always claim they have a "rigorous system of internal controls." Just as they always claim that they demand the highest ethical standards of their subordinates—whom they also pressure to play the moral margins in pursuing profits.

     Good news. Wall Street profits are back. And the “East Coast financiers and West Coast entertainment executives” can again afford to rent vacation places for $20,000 for five weeks.

From The Wall Street Journal, February 27.

Summer Rentals:
The Chill Is Off

Prime Houses Book Earlier
From Hamptons to Tahoe

Last year, Ron Ezring waited until June to book his summer rental house in New York's Hamptons. But this year, the Manhattan computer consultant, worried that renters flush from a rising stock market would snap up the better homes, signed a nearly $20,000 contract in early February for a five-week rental in August. "I didn't want to take a chance at what was left at the last minute," he says….

With the economy picking up, the tax cut kicking in and the strong euro luring vacationers from across the Atlantic, there are signs rental homes for this summer season are booking up earlier than they did last year. Brokers and landlords from Malibu to Nantucket say the number of summer weeks already rented is as much as 15% higher than at the same time a year ago. At, a real-estate Web site, rental requests were up 23% this January from the year before….

This hangout for East Coast financiers and West Coast entertainment executives was hard-hit by investment-banking layoffs and the faltering stock market last year. (With houses typically renting for $60,000 to $85,000 for a summer, it's easy to see why.) But with the stock market up and bonuses back, the core group of renters is feeling flush again. And that's made for a promising start to the season. "We're way ahead of last year at this time," says Dayton-Halstead's Ms. Saatchi, who estimates the number of leases is up 25%….

     In the meantime, the workers who are making all the sacrifices in this economy are balancing their need to feed their families against the pressures of rent increases and reduced governmental services of all kinds.

Week of February 16

     You don’t have to read just “the biased liberal news media” to understand the difference between the tax policies of Republicans and Democrats—the conservative press, when it is advising its investor readers, tells it like it is.

From Barron’s, February 16.

Another Whack

Undaunted by deficit hawks, Bush plans
to keep chopping taxes. Can he succeed?

…You might think the president's relentless tax cutting is aimed at generating bigger refund checks and goosing the recovery—because that's what Bush says it is about. Certainly the cuts haven't hurt the economy. But if you look at the bigger picture, there is strong evidence that Bush also is engineering a fundamental change in the tax system. By gradually taking capital out of the tax base through reductions in levies on dividends, capital gains and inheritances, Bush is transforming the income tax into a pure tax on wages.

If Bush can finish his work, the capital gains, dividend and estate taxes may disappear entirely. He will be hard-pressed to get many new tax initiatives through Congress this year, because of concerns about the burgeoning budget deficit. But an estate-tax overhaul, for one, could well be enacted in 2004 if Bush will compromise, a key senator tells Barron's. Bush will almost certainly require a second term to bring his tax plans to fruition, but only a few more big changes are needed to pull off this policy coup….

"It's the most serious attack on the progressive tax since it was introduced" in 1916, claims Joseph Thorndike, a historian who works for Tax Analysts, publisher of the Tax Notes newsletter….

MASSACHUSETTS SEN. JOHN KERRY …, has been vocal in promoting some targeted changes in the code that would give breaks to the middle class at the expense of multinational corporations and affluent individuals.

His most ambitious proposal would change the Constitution to give the president line-item veto authority. Kerry would use this sweeping budget power to "reduce corporate welfare and excessive spending." He'd ask a commission to determine just which budget items constitute corporate welfare.

Kerry says he would "repeal Bush's special tax breaks for Americans who make more than $200,000."… Kerry says he would preserve the child tax credit and reductions in the marriage penalty and marginal rates that were part of the Bush tax plans -- but only for the middle class, which he has yet to define. He would eliminate last year's reduction in capital gains taxes to 15%, but would institute a lower rate in both the capital gains and dividend levy for the middle class.

He would propose a new tax credit to encourage U.S. manufacturers to keep jobs here. Companies that created new jobs in excess of a 12-month average would receive a refund of payroll taxes for the new employees for two years.

Kerry also is pitching a "College Opportunity Tax Credit," which assumes that the typical college tuition and fees at a public university is just $4,000 a year. Students annually would get a 100% tax credit on the first $1,000 of tuition and a 50% credit for the next $3,000, or $2,500 a year.

     This is as clear a description of the difference between those who believe in aristocracy (Republicans) and those who believe in a true meritocracy (Democrats)—as you’ll find.

     Republicans obviously believe that wealth should be inherited, and that non-work (investing) should be more financially rewarding than work. To Republicans, the economic system is designed entirely to be beneficial to the established wealthy—and the only wealth to be shared with workers is that which “trickles down.”

     This excerpt was presented for purposes of criticism only. Those who are interested in the investment implications should read the entire—very extensive—article.

     The total corruption of the industry that Republicans want to put in charge of our Social Security system has previously been well documented on these pages. The following excerpt is presented for purposes of entertainment only.

From The Wall Street Journal, February 16.

FleetBoston Unit Allowed
Market-Timing Trades
In Fund Targeted at Kids

Mutual-fund employees at a unit of FleetBoston Financial Corp. improperly allowed "market-timers" to conduct rapid-fire trades in three funds—including one targeted at children—according to the company and people familiar with the trading.

Rapid trading in the $855 million Columbia Young Investor Fund could prove especially embarrassing for Fleet because the revelation means employees in its sales arm allowed the fast-moving investors to skim profits from kids. The fund, founded by Fleet's Stein Roe unit and formerly sold under that name, focuses on stocks that "meet the needs of young consumers" and has its own child-centered Web site,, to help teach kids the value of starting to invest at a young age….

     At least, if the “kids” read this entire article, they’ll have a much better understanding of the dangers of trusting Wall Street—and the importance of electing Democrats who will enforce sensible regulations on the securities industry.

     If you read its reports carefully, you’ll find that Business Week is remarkably candid in describing how today’s corporations become so profitable—for their investors and top executives.

From Business Week, February 16.

U.S.: How Surging Profits Will Fuel The Recovery

Better balance sheets mean capital projects, new inventory, and new hires

Once again, the quarterly profit performance of U.S. corporations has exceeded investors' expectations. Current estimates of earnings growth, measured from a year ago, for businesses in the Standard & Poor's 500-stock index are running in the 25% to 30% range. Economists are projecting a similar advance in the Commerce Dept.'s economywide totals, to be reported in March….

That's because the economy is in the second leg of a recovery in profits that is like no other before in terms of its size, speed, and the factors driving it. The first leg, which began after the earnings recession bottomed out in the third quarter of 2001, was fueled by a widening in profit margins, even in the absence of pricing power and little in the way of sales growth. The mix of productivity gains and layoffs was a key driver….

PROFITS HAVE SOARED an estimated 63% from the third quarter of 2001 to the end of last year, based on Commerce's measure. The gain is extremely impressive given that it has occurred in a period of falling inflation. The last time profits performed so well over the course of nine quarters was back in the high-inflation 1970s. A key reason this time around: Although prices charged by nonfinancial companies have fallen at an annual rate of 0.4%, the labor cost of producing each unit of output has dropped even faster, at a 2.7% clip….

The bottom line about the bottom line is this: U.S. companies will improve their finances further in the first half because demand domestically and overseas will keep growing. Productivity gains will slow, but they'll remain sufficient to hold the line on unit labor costs, keeping profit margins high. And later on, pricing power will begin to firm up, if only by a little bit, widening margins further. All in all, don't count out some further positive surprises on earnings in 2004.

     Note how “The mix of productivity gains and layoffs was a key driver” of recent huge corporate profits, and “hold(ing) the line on unit labor costs” will improve corporate finances further. It also helps that "the labor cost of producing each unit of output has dropped even faster" than prices.

     It’s all about greed and profit—and the way to satisfy both is to take ruthless advantage of middle- and low-income employees. In today’s corporate ethic, employees have no more rights than raw materials or machines. They certainly are not allowed to share in the increased wealth they have created for their bosses.

     Question: If pouring huge amounts of investment funds into India will make it “the most dynamic big developing country” of the future—what is the effect of draining investment funds from the U.S.?

     Especially, what will be the effects on working-class Americans who have no appreciable investment funds to profit from India’s prosperity (as do America’s established wealthy)?

From Business Week, February 16.


By Gary S. Becker

What India Can Do To Catch Up With China

Many are predicting that China will be the dominant economic force in the 21st century, at least in Asia, but I would not sell India short. That giant nation began to turn around its economy a little more than a decade ago—and with further free-market reforms, it can give China a run for being the most dynamic big developing country….

Taking advantage of India's excellent system of engineering and scientific schools and its tradition of using English in business and in much of higher education, U.S. companies began outsourcing jobs to the country, including software, back-office clerical tasks, pharmaceutical testing, and other white-collar jobs. This is making India into a global high-tech powerhouse.

     America’s self-destructive madness continues.

     This brief excerpt from an extensive article painfully describes the heroic efforts of a few American manufacturers who are still trying to keep at least some industry, and a few jobs, in this country.

     The one paragraph below summarizes the futility of it all. Republicans and conservative Democrats have passed legislation that has made it virtually impossible for American workers to compete with brutalized workers in other countries.

From The Wall Street Journal, February 20.

In North Carolina,
Furniture Makers
Try to Stay Alive

...Fueled by cheap labor and newer factories, China is cranking out higher-quality and more-competitive goods. As many as 30 Chinese workers can be hired for the cost of one cabinetmaker in North Carolina. Just last month, production started at a state-of-the-art factory complex outside Shanghai, owned by Lacquer Craft Manufacturing Co. of Dongguan, China, that will eventually occupy an area larger than 80 football fields. The facility, boasting robotically controlled lacquer sprayers, will house more than 5,000 workers in dormitories….

     So, American workers—living in this country, with this country’s standard of living—must compete with workers treated as human machines, housed in factory dormitories.

     Even The Wall Street Journal can’t keep the bad news out of its reporting. Bush’s jobless recovery is even worse than the official numbers indicate.

From The Wall Street Journal, February 17.

More Americans
Are Leaving
The Work Force

…Of course, there have always been large numbers of working-age Americans who don't work for a paycheck, for a wide variety of reasons. But their numbers have risen to 75 million from 70 million during the past three years, and they include many who don't fit into the traditional categories. And the percentage of working-age Americans between 25 and 54 who are either working or looking for work has fallen during the past year below 83%, to levels last seen in the late 1980s. Among college graduates, the labor-force-participation rate was 78.4% in January, down from 79.7% in 2001. For the population as whole—including teens and adults older than 54—the participation rate had fallen to 66.1% in January from 67.3% at the height of the economic boom, marking the largest and most persistent decline in labor-force participation since the early 1960s.

Some economists believe such numbers are helping to hold down the unemployment rate by taking people who would otherwise be classified as unemployed out of the labor force. The jobless rate fell to 5.6% in January from 6.3% last June….

Jobs with low wages, late hours and scant benefits don't entice people to work the way better ones would. In many cases, the work for which people had trained disappeared or moved overseas. "Had there not been a shakeout in their industry, these people would probably still be employed," says Andrew Sharpe, director of the Center for Study of Living Standards in Ottawa….

     This brief excerpt just presents the essence of the article. Those who are interested in all the gory details should read the original article.

Week of February 9

     Middle and low income Americans who have swallowed the conservative warning that they should be on guard against liberals who want them to be “envious of the rich” should read the following three excerpts from articles in Barron’s.

     They clearly demonstrate how conservative investors watch the incomes of working-class Americans like predatory hawks. They take great pleasure in any indications that the supply of low-cost labor will continue—and thus keep providing corporations with outrageous profits.

     The first two excerpts are advice to investors and those who are interested in the investment implications should read the entire articles. The excerpts are sufficient, however, to point out how conservative investors scrutinize employment data to discover any hints that the Fed may have to raise interest rates to slow down the economy—to keep wages from going up.

     The third excerpt is from Barron’s most astute and entertaining financial analyst, Alan Abelson, who describes the same phenomenon (unemployment, Fed interest rates, and their effects on the stock market), and who warns us of the economic disaster that is probably in the making.

All three of the following excerpts are from Barron’s, February 9.

The Trader

By Michael Santoli

FOR THE MOMENT, AT LEAST, WALL STREET can live with the ongoing pattern of capital getting the best of labor in the American economy.

Brokerage-house strategists and mutual-fund investment officers probably wouldn't diagnose the market's mindset in such Marxian terms. But it's a fair rendering of the attitude that allowed stocks to rally briskly Friday, following a report showing that payroll growth in January came to 112,000 jobs, well below the published forecasts of 160,000 and half the level of the most sanguine projections….

The other handy explanation for stock traders' insouciant reaction Friday—when the Dow Industrials climbed 97 points to finish the week in positive territory—is the middling job report's salving effect on interest-rate fears. ….

Tepid Jobs Report Defers Eventual Fed Rate Hike

By Jennifer Ablan

…Treasury prices, which move inversely to yields, also rallied after the Labor Department said the economy added 112,000 jobs in January, well short of the consensus forecast of a 175,000-200,000 gain and "whisper numbers" of about 300,000….

"We thought we needed a pretty strong number today to retain our expectation" that central bankers will start raising short-term rates at the beginning of the second half, says David Greenlaw, chief U.S. fixed-income economist at Morgan Stanley in New York. "But there's a scenario that's going to have to play out before you get to the point where the Fed is going to pull the trigger. They're watching the payroll data intently, so you're going to have to get some indication of a turnaround and confirmation of a turnaround."…

After revisions, job growth has averaged only 73,000 a month over the past five months, well below the 150,000-175,000 needed to absorb the natural expansion of the labor force. The January report included annual benchmark revisions but these didn't lead to a significant change, as previously thought by some economists, in the overall climate in the labor market….

Retail accounted for almost three-quarters of the headline gain, with 76,000 jobs added, while construction added 24,000. In other sectors, accommodations and food services were up 16,000, while health care was up 14,000 and wholesale trade up 11,000. Manufacturing, however, posted its 42nd consecutive month of job loss, shrinking by 11,000, despite the positive readings in the Institute for Supply Management survey released earlier in the week….

Up and Down Wall Street

By Alan Abelson

…arguably the group that has suffered the most from the brutish tendency abroad in the land to put a nasty spin on virtually everything of honorable of intent are economists. And we must confess here to joining in the merciless razzing of those poor souls. We've been especially rough on their mindless insistence that a surge in jobs is in the offing….

But we shouldn't be too hard on them; an earnest wish that more people have jobs shows economists, whatever their deficiencies, do have hearts. This is not to say that investors, who reacted to the downbeat numbers—112,000 payroll additions versus broad expectations of between 150,000 and 200,000—by bidding up share prices, lack compassion. Rather, they consoled themselves with the knowledge that January's disappointing employment numbers meant any Fed tightening was that much longer in coming.

The incredible shrinking manufacturing sector continued to shrink in January, extending its losing streak to 42 months in a row, once again throwing into doubt the Institute of Supply Management's more cheerful soundings. Temporary employment, which had been posting gains that were heralded as a harbinger of improvement for permanent jobs, turned tail last month and fell by 21,000.

Anyway you slice it, this remains, mournfully, a jobless recovery….

We're in a post-bubble economy—not just any bubble, but the biggest one ever. And the deep dislocations and disjointments it caused never got a chance to right themselves with a bit of judicious fiscal and monetary help. Instead, the economy was dosed with massive amounts of stimulants and the result has been an artificial recovery in the grip of a high.

Not the least troublesome side effects of the voodoo medicine so promiscuously administered is the revival of the bubble mentality that set us up for the bear market and the recession and so exacerbated the doleful loss of jobs….

     Think of these three articles the next time someone tells you shouldn’t be envious—or be concerned about—the incomes of the rich. Remember: The rich are watching your incomes like the predators they are.

     And if there is any way they can get their paid politicians to keep your income from going up, count on it, they will.

     The good news: Even the right-wing conservative press is beginning to admit that our spewing of carbon dioxide into the atmosphere is causing global warming and climactic disasters.

     The bad news: Unless we do something to correct the horrible environmental record of the Bush Administration—and its chronic dismissal of scientific evidence—we may not be able to take corrective actions before “the canoe tips over.”

From Fortune, February 9.

The Pentagon's Weather Nightmare

The climate could change radically, and fast. That would be the mother of all national security issues.

By David Stipp

Global warming may be bad news for future generations, but let's face it, most of us spend as little time worrying about it as we did about al Qaeda before 9/11. Like the terrorists, though, the seemingly remote climate risk may hit home sooner and harder than we ever imagined. In fact, the prospect has become so real that the Pentagon's strategic planners are grappling with it.

The threat that has riveted their attention is this: Global warming, rather than causing gradual, centuries-spanning change, may be pushing the climate to a tipping point. Growing evidence suggests the ocean-atmosphere system that controls the world's climate can lurch from one state to another in less than a decade—like a canoe that's gradually tilted until suddenly it flips over.

Scientists don't know how close the system is to a critical threshold. But abrupt climate change may well occur in the not-too-distant future. If it does, the need to rapidly adapt may overwhelm many societies—thereby upsetting the geopolitical balance of power.

Though triggered by warming, such change would probably cause cooling in the Northern Hemisphere, leading to longer, harsher winters in much of the U.S. and Europe. Worse, it would cause massive droughts, turning farmland to dust bowls and forests to ashes. Picture last fall's California wildfires as a regular thing. Or imagine similar disasters destabilizing nuclear powers such as Pakistan or Russia—it's easy to see why the Pentagon has become interested in abrupt climate change….

Though Mother Nature caused past abrupt climate changes, the one that may be shaping up today probably has more to do with us. In 2001 an international panel of climate experts concluded that there is increasingly strong evidence that most of the global warming observed over the past 50 years is attributable to human activities—mainly the burning of fossil fuels such as oil and coal, which release heat-trapping carbon dioxide.

Indicators of the warming include shrinking Arctic ice, melting alpine glaciers, and markedly earlier springs at northerly latitudes. A few years ago such changes seemed signs of possible trouble for our kids or grandkids. Today they seem portents of a cataclysm that may not conveniently wait until we're history.

Accordingly, the spotlight in climate research is shifting from gradual to rapid change. In 2002 the National Academy of Sciences issued a report concluding that human activities could trigger abrupt change. Last year the World Economic Forum in Davos, Switzerland, included a session at which Robert Gagosian, director of the Woods Hole Oceanographic Institution in Massachusetts, urged policymakers to consider the implications of possible abrupt climate change within two decades….

     One of today’s great mysteries: How could our right-wing Republicans with I.Q.s over 80—and who have children—willingly con themselves into believing the propaganda of their financial supporters from the energy and automotive corporations?

     For that matter, how could the executives of these corporations, at least the ones who have children, deliberately close their eyes to the overwhelming contradictory scientific data, even in the interests of personal wealth.

     Congratulations to Business Week for occasionally allowing a liberal economist to educate its more open-minded conservative readers about the true intentions of Bush’s economic policies.

From Business Week, February 9.


Bush's Cynical Immigration Gambit

By Robert Kuttner

President George W. Bush's immigration plan would allow some workers currently in the U.S. illegally to qualify for guest-worker status, and to retain their Social Security credits when they return home. In theory, everyone would gain. Undocumented workers could come, as Bush put it, "out from the shadows of American life."

With fewer people entering the U.S. illegally, this approach "will help protect our homeland," Bush declared in his State of the Union address, "allowing Border Patrol and law enforcement to focus on true threats to our national security." And, of course, businesses would benefit greatly.

It sounds great. But every premise of the plan falls apart upon close examination. According to Bush, his scheme would "match willing foreign workers with willing employers when no American can be found to fill the job." But what does that really mean? Supposedly, there are millions of jobs that Americans won't perform. But—funny funny thing—when employers pay decently, American workers wait in line all night to apply….

Having an army of legal foreign workers will mainly batter down wages in the service sector. Wal-Mart Stores Inc. will enjoy even lower labor costs—at U.S. workers' expense….

Employers already enjoy great leverage over low-wage workers—witness how Wal-Mart has no trouble attracting workers despite dismal pay—but this plan would make immigrant workers something close to indentured servants. Unlike workers with green cards, they would lose their guest-worker status if they lost their jobs. And Bush's plan denies these guest workers the ability to apply for permanent resident status, much less citizenship….

     Again, the Bush plan is all about wages—and how to drive them down in order to protect and increase corporate profits.

     The Bush policies, like the above, have undoubtedly had much to do with our great economy—on Wall Street’s terms.

From Business Week, February 9.

Corporate Profits Roar

…If corporate profits are any indication, the economy is on a tear. Thanks to a happy collision of low interest rates, tax cuts, and an export-boosting weak dollar, U.S. companies posted the strongest quarterly profit growth since 1993.

BusinessWeek's flash profit survey of 78 early-filing companies shows that fourth-quarter income from continuing operations before extraordinary items rose a robust 47% on an 11% sales increase. Tech was the big winner: Profits soared 225%, thanks partly to consumers' appetite for laptops and cell phones. Financial services also shined—profits grew 67% on continued strength in mortgages and other consumer lending….

One reason for the big gains: Even as sales growth gained momentum, companies were conserving cash and cutting costs….

     And how are companies conserving cash and cutting costs? By making this the “jobless recovery” that everyone is talking about today. In other words, work fewer people harder, ship the most costly jobs overseas, and bring in cheap immigrant workers—and watch the profits roll in.

     Anyone who wants to understand the realities of recent tax cuts should read the investment advice in Forbes. When it’s giving investment advice, it tells it like it really is—and not like the politicians and pundits claim.

From Forbes, February 16.

Money & Investing

Filing Follies

By Janet Novack

The new tax breaks are great but made tax prep even trickier. Complex holding periods. Margin-account traps. AMT woes. What has Congress wrought?

It may seem perverse to look a gift horse in the smacker. After all, last May's federal tax cut, which sliced the top rates on both long-term capital gains and most dividends to 15%, helped an awful lot of Americans: two-thirds of folks with incomes of $100,000 to $200,000 receive dividends; 36% of people in the same bracket reported long-term capital gains in 2000….

To help you through the welter of changes, here are some pointers….

     So, the “awful lot of Americans” who benefited from recent tax legislation were those making from $100,000 to $200,000. Even among those, only two-thirds received dividends, and only 36% realized capital gains.

     As you go up the income scale, above $200,000, the percentages go much higher. And as you go below $100,000, the percentages gradually drop to zero. In other words, the higher the income, the greater the tax benefits from dividends and investment profits. The range goes from huge—for the very wealthy—to zero or incidental for middle and low-income citizens.

     Of course, that’s the whole purpose of Bush’s tax policies: benefit the aristocracy, and shift their tax burdens to those who actually work for a living.

     Bear in mind that this is a brief excerpt of a very long article. It’s intent is criticism, and those who are interested in the tax implications should read the original article (which advises investors about how to make maximum use of the new tax breaks).

     Apologies, again, for probably wasting your time.

     The amount of skullduggery on Wall Street has been so well documented on these pages for the past year that it hardly seems necessary to add another excerpt that proves the obvious: our government has no business considering privatizing Social Security and placing the basic, bare-bones retirements of most Americans in the hands of Wall Street.

From The Wall Street Journal, February 9.

Financial Plans: Selling
For In-House Gains?

…Financial plans have exploded in popularity in recent years as brokers, insurance agents and other financial advisers have touted their benefits. Roughly 9.5 million households obtained a financial plan from mid-2000 to mid-2002, up from 6.6 million in a 1998 survey, according to SRI Consulting Business Intelligence, a research and consulting firm based in Menlo Park, Calif. Another 6.6 million received a retirement plan, the survey found.

Investors who sign up for financial plans believe they are getting independent advice tailored to their own needs. But in one of several "open secrets" that have been hazards for investors in this era, these plans often are little more than sales tools that stand a better chance of making money for advisers and their firm than their clients.

Critics say advisers rarely disclose that they get big bucks for directing investors to insurance products and mutual funds that provide the highest payouts, rather than offering investments that may pay the adviser less but are better-suited to the client's needs. Any information about potential conflicts is often vague at best and tucked into documents provided to investors when they are already well into the planning process….

     This is an excerpt of an extensive article, and those who are interested in the investment hazards of trusting Wall Street should read the entire article.

Week of February 2

     “Class Warfare” is a term frequently heard today. Usually, commentators apply it to liberals who are “trying to make voters envious of the rich.”

     The two excerpts below from one of our most prestigious conservative financial publications illustrate who the real class war farers are. The general voting public has no appreciation of the extent to which our government and corporations cooperate to make investors richer—and at the direct expense of working-class Americans.

From Barron’s, February 2.


The Old Switcheroo

Congress says it's strengthening private pensions by taking money away from them

By THOMAS G. DONLAN (Barron’s Editorial Page Editor)

OLD HOBSON'S CHOICE HAS nothing on this contemporary dilemma: Your job or your pension. Older workers, especially those in shrinking industries, are facing it, and the decision is made for them by people who don't have the workers' best interests at heart. Neither employers nor unions nor fund fiduciaries nor responsible government officials have protected workers' pensions as they should. They have succeeded only in postponing the day of reckoning and putting 34 million workers' jobs and pensions in greater peril….

Unfortunately … pensioners, lawmakers in the recent downturn have been favoring employers who don't want to pay more taxes at the expense of fiscal responsibility for pension funds. Congress has softened the requirements for companies to contribute to pension plans, intending to give the companies time to recover from their economic ailments….

The real problem is that no amount of thought can devise a solution to the American defined-benefit pension system without destroying it. There is a fundamental conflict of interest between the employer-sponsors of any pension plan and its employee-beneficiaries.

The employers put up all the money and the employees take all the benefits. Naturally the employers want to seem generous while minimizing their real contributions….

     Rarely do you see such a clear description of the real relationship between corporations and their workers: “There is a fundamental conflict of interest between the employer-sponsors of any pension plan and its employee-beneficiaries. The employers put up all the money and the employees take all the benefits.”

     The same could be said of pay: the corporation pays and the employees receive. And that’s the same kind of “conflict of interest.”

     So, let’s forget the pretension that workers don’t need unions or protections from the federal government. Corporations will screw employees any way they can get away with—if it will decrease labor costs and increase profits.

     Even after over two decades of stagnant wages, investors and the Fed are concerned that workers may start making too much money in a growing economy.

From Barron’s, February 2.

Markets Mull the Fed's "Considerable" Change

WHAT DID ALAN GREENSPAN SEE in his crystal ball that impelled the Federal Reserve to shock the markets last week, eliminating its pledge to keep interest rates low for "a considerable period?"…

"Should the data prove that the economy continues to expand at a healthy pace, then the Fed now has the flexibility to adjust rates accordingly," Sowanick adds.

On that score, the January employment report, to be released Friday and days before Greenspan's congressional testimony, could have "a very significant impact on the market" if the data were to show a stronger than- expected increase in nonfarm payrolls, currently forecast at about 200,000, he adds.

Interestingly, the Fed "implicitly dismissed" the recent softness of the payroll data news that payrolls rose only by 1,000 jobs in December noting instead that "other indicators suggest improvement in the labor market." ….

     Barron’s is telling its readers that the economy may be growing faster than investors would like, and it may be growing so fast that labor costs may start to go up. Hence, Greenspan (the Fed) may have to raise the prime interest rate—which would be bad news for corporate profits and investors.

     Also notice the language in the above excerpt; it’s as important as the substance. The Fed “implicitly dismissed" what was seen as a softening in the labor market, and, instead, found that "other indicators suggest improvement in the labor market." In other words, workers may not be as bad off as recent statistics may indicate, and thus, the Fed may have to act to make sure unemployment stays high enough that wages don’t create “wage inflation.”

     How many voters have no idea that our Federal government has such a barbaric view of working-class incomes? And, isn’t that “class warfare”?

     Don’t get your hopes up that the recent corporate scandals will inspire a more responsible attitude among America’s CEOs.

     The following three excerpts—one from The Wall Street Journal and two from Business Week demonstrate that corporate executives and their investors haven’t learned a thing, and it’s still business as usual.

     And, as usual, the only thing that stands in the way of the corporate rape of American citizens is Federal and State governments run by Democrats who believe that regulations and adequate enforcement are necessary roles of government.

From The Wall Street Journal, February 2.

Bankers Swear They've Repented

Pledge Enron-Like Covenants
That Fooled Investors Are Gone

Thou shalt not concoct deals that enable clients to hoodwink investors.

That is the commandment being preached by the nation's major banks. After enduring a punishing fire-and-brimstone treatment from prosecutors, regulators, politicians and investors alike, top bankers have sworn that they never will repeat the kind of contentious structured-finance transactions they arranged for Enron Corp. and others.

But do they really have religion?

Banks such as Citigroup Inc. and J.P. Morgan Chase & Co. say they do and can point to internal policies they say are designed to weed out proposed deals that carry legal or reputational risk. In a letter during July to Manhattan District Attorney Robert Morgenthau, Citigroup Chief Executive Officer Charles Prince wrote that "the Enron transactions do not reflect our current standards and they would not happen now—and will not happen in the future—at Citigroup."…

But in the case of Enron and other corporate scandals, regulators say, bankers helped clients design transactions that enabled companies to manipulate their balance sheets. Citigroup, J.P. Morgan and Merrill Lynch & Co., among others, were accused by regulators of impropriety in connection with Enron deals and eventually reached settlements related to the transactions, without admitting or denying wrongdoing.

     Well, hockey poo, “Banks such as Citigroup Inc. and J.P. Morgan Chase & Co. say they do and can point to internal policies they say are designed to weed out proposed deals that carry legal or reputational risk.” Count on it; they had similar statements before they decided to hoodwink investors and the general public.

     They simply got caught. All their new policies do is reinforce among their subordinates that they better not get caught in violating ethical or legal requirements that increase corporate profits. Face it. All that counts in today’s corporate environment are profits; everything else is secondary.

     If you don’t believe it, just check out what the real corporate attitudes are in the following two excerpts.

     While making protestations that they are now as pure as the driven snow, note how corporations still resist anything that smacks of true reform.

From Business Week, February 2.

SEC Reforms: Big Biz Says Enough Already

Ever since Enron Corp. imploded in scandal, Corporate America has been in a defensive crouch. But even with Enron Chief Financial Officer Andrew Fastow's plea bargain and the ongoing trials of former Tyco International (TYC ) Chief Executive Dennis Kozlowski and lifestyle guru Martha Stewart, CEOs are now coming out of their foxholes to fight back a fresh wave of reform….

After two years of sweeping reforms ushered in by the 2002 Sarbanes-Oxley Act and last year's overhaul of New York Stock Exchange and NASDAQ listing standards, CEOs argue that it's time to give business a break….

The Roundtable, a group of 150 big-company CEOs, is spearheading a counterattack and hinting that it may sue to stop the rule….

The suits have also enlisted free-market conservative groups, including GOP activist Grover Norquist's Americans for Tax Reform….

     How obvious can it be? American corporations want just enough “reform” to stop the demands of American voters for political change, but not enough to offer any real protections of the public.

     And, as usual, America’s right-wing Republican groups—like the Americans for Tax Reform—will support corporations in their rights to take ruthless advantage of the public and their own employees.

     What a perfect prescription for encouraging illegal corporate behavior: Let CEOs blame their lawyers when they violate the law; and protect the lawyers when they advise CEOs about illegal ways to get around the law.

     That way, everybody wins, except the public.

An editorial from Business Week, February 2.

Commentary: Close The Lawyer Loophole

Their ability to reduce legal liability for executives is fueling white-collar crime

Believe it or not, attorneys have to pass a "moral character" test before they are allowed to practice law. Because state bar associations purport to be concerned about protecting the innocent public from dishonest lawyers, they force applicants to provide character references and to undergo background investigations. Then candidates must raise their hands and make a solemn vow to abide by a detailed set of ethical rules that, among other things, forbid attorneys from assisting "a client in conduct that the lawyer knows is criminal or fraudulent."

In exchange for taking this little pledge of allegiance—and passing the minimal character-screening test—lawyers get quite a bit of power….

There's increasing evidence that corporate lawyers are abusing this privilege. One good example is, in fact, tax shelters—an area in which the IRS has recently unearthed several dubious schemes that got green lights from respected tax attorneys. But that's hardly the only instance. Critical elements of many of Enron Corp.'s most deceptive balance-sheet maneuvers were approved by big law firms, as were some of the trading strategies used to rip off mutual-fund investors.

This plague of dubious legal advice is giving prosecutors a big headache. To send a CEO to jail, they have to prove that the executive intended to break the law. But this becomes nearly impossible to do when attorneys write a gilded, watermarked, cotton-fiber letter saying that a particular gimmick is legal. The expensive piece of paper directly undercuts prosecutors' arguments that a manager has the necessary mens rea, or state of mind, to commit a crime. That's a big reason why the first excuse that has come out of the mouths of many of the most prominent white-collar wrongdoers, from Enron's Kenneth L. Lay and Jeffrey K. Skilling on down, is that their attorneys rubber-stamped their deeds.

That some of the Lays and Skillings of the world have had their legal exposure reduced might be tolerable if their attorneys had a corresponding increase in liability. But this isn't the case. Corporate lawyers are almost never sent to jail for helping out white-collar criminals. The civil liability of business attorneys was dramatically reduced by the Supreme Court's 1994 Central Bank of Denver ruling, which shielded lawyers and others who "aid" or "abet" securities fraud. And most state bar associations, notwithstanding their ostensible concern for the public, almost never impose discipline on lawyers in blue-chip firms. They would much rather hound paralegals selling cheap wills in strip malls….

     If there were ever any doubt that our political, corporate and legal environments are totally corrupt—the above excerpt from a prestigious financial publication, is the clincher. It’ll be interesting to see if our present political leaders have the will to change the laws and practices described.

     As usual, the Bush Administration’s budget betrays its belief in aristocracy, and its accompanying requirement that an economic system should favor the wealthy at the expense of working-class Americans.

From The Wall Street Journal, February 3.

Bush's Budget:
What It Means
For Your Wallet

President Bush unveiled a record $2.4 trillion budget Monday. Some of it might even trickle down to you.

Among the major proposals: the president wants to create two new savings accounts—each with a $5,000 annual contribution limit. That's designed to encourage millions more Americans to put aside additional savings in tax-advantaged accounts….

…while the plan would increase the amount people can contribute to savings accounts, "over 90% of Americans do not currently reach their contribution limits."

The estate tax is a different case. Current law calls for it to phase out gradually and disappear entirely in 2010—only to return to life in 2011. The Bush administration would like to kill the tax permanently, but that would be a budget buster.

     While extolling the virtues of savings, and saying that their plan benefits workers—an analysis of the details clearly shows how Bush’s economic policies benefit the wealthy. "Over 90% of Americans do not currently reach their contribution limits."

     In other words, those 90% of Americans who don’t shelter from taxes that they already qualify for—are those in the bottom 90% who don’t even have the money to shelter in the first place. So, who benefits from raising the contribution limits even more? The wealthiest 10% of Americans, of course.

     And, the very definition of aristocracy is that wealth should be inherited, rather than earned through work. And that’s why “The Bush administration would like to kill the (estate) tax permanently.”

     Finally, a great editorial from Business Week.

     Of course, the mystery now is—with such a great understanding of the “cockroach theory”—how come BW still supports the Republicans who allowed, and even encouraged, the theory to come to fruition?

From Business Week, February 2.

When Scandals Go Global

The cockroach theory of financial scandals says that, for every one you see, hundreds more are hiding in the woodwork. So it was in the U.S., when the scandal at Enron was followed by blowups at WorldCom, HealthSouth, and elsewhere. And so it is now abroad: first Dutch grocer Ahold, then Italian dairy-products company Parmalat, and now Hollinger International Inc., the newspaper company controlled by Conrad M. Black, a Canadian-born British lord.

Scandals break out in bunches because they have common causes. They occur when insiders take advantage of weak corporate governance, feeble government oversight, and a financial system that too often looks the other way.

Indeed, Parmalat's failure reflects badly on what were some of the biggest names in international finance in the '90s. Bank of America, Chase Manhattan, Bank of Boston, Deutsche Bank, Barclays, and Merrill Lynch sold billions of dollars in Parmalat debt over the years. While there's no evidence that the financial giants broke rules, a little skeptical probing would have revealed the rot at the heart of Parmalat years ago….

Overseas, as in the U.S., the solutions are clear: Transparency. Accountability. Tough audits. And criminal penalties for those who cheat. Halfway measures are an invitation to more cheating.

     Of special note in the above excerpt is the mention of some of our most prestigious financial corporations that were at the center of the meltdown of corporate ethics (and possibly even illegal behavior).

     And the obvious solutions to the problem: more government regulations, with adequate funding for enforcement and punishment. And who will deliver on these solutions? Certainly, not Republicans. Not even most conservative Democrats.

     We need true liberal Democrats in Congress and the executive office.

     As you read the following excerpt, note that this is just a small sampling of the wretched excesses of Wall Street that the Journal reported in an extensive article.

From The Wall Street Journal, February 4.

With the Market Up,
Wall Street High Life
Bounces Back, Too

Chartered Jets, a Wedding
At Versailles and Fast Cars
To Help Forget Bad Times

…As financial companies start to pay out big bonuses for 2003, lavish spending by Wall Streeters is showing signs of a comeback. Behind the exuberance: a 40% jump in the Dow Jones Industrial Average in roughly 15 months and a return of big profits on Wall Street—$15 billion or so last year, more than double 2002's profits, according to estimates by the Securities Industry Association. When the results are all tabulated, 2003 likely will be the third-best year on record for the securities industry….

Wayne Duris, general manager of New Country Porsche of Greenwich, Conn., says that on one day late last month, he shipped new Porsches that sell for up to $120,000, to two Wall Street professionals. They paid cash. Sales doubled at the dealer this January compared with the year before, he says, thanks to interest from traders….

For those with more miles to go, the bull market is ushering in a renewed appetite for chartered jets. Todd Rome, president of Blue Star Jets in Manhattan, says that several groups of Wall Street traders chartered fully catered 737s and 727s, each with several bedrooms, to fly to warmer climes such as Florida for their Super Bowl parties….

In recent weeks, Wall Street firms have begun paying what's expected to total $10.7 billion in bonuses—the bulk of the compensation for most on Wall Street—for 2003. That's almost a 25% increase from 2002, though still less than the $19.5 billion bonanza of 2000. Also fattening wallets: Stock prices of most securities firms are at their highest levels in three years….

     The important parts of the above story aren’t even in the story:

  • To today’s Republicans and conservative Democrats, an “economic boom” means that Wall Street is extremely profitable for the established wealthy, and for the financial firms and their investors. It has nothing with the rate of unemployment or the status of working-class wages.

  • Wealth is a zero sum game, and the more these clowns take off the top in their investment deals—the less the corporations have left to pay wages, invest in research, provide for good and safe working conditions, and all those things that benefit workers and their paying customers.

  • In fact, the major reason these people can cut deals that are so profitable in the first place is that stagnant wages for the past 25 years have allowed corporate profits and the stock market to skyrocket.

  • The “prosperity” of this entire economy has been built on the backs of America’s workers, who—because of political power of Republicans and conservative Democrats—have not been allowed to get a fair share of the fruits of their own labors.

     It’s time for a change.

Week of January 26

     Regular readers of the conservative financial press should be amused by the following editorial. The absolutely blind and brain-dead bias of conservative economists—favoring business at the expense of workers—becomes obvious when they describe the role of Alan Greenspan and the Fed.

From The Wall Street Journal, January 30.

Hands on the Wheel

...The pertinent question isn't whether the Fed might tighten too early but whether it may already be too late to head off inflation that leads to even higher interest rates in 2005 and 2006….

Yes, the Fed is always wary of raising rates in an election year. And yes, job creation isn't yet as rapid as anyone would like. The Fed's Wednesday statement did say, however, that "although new hiring remains subdued, other indicators suggest an improvement in the labor market."…

In any event, the Fed's job is not to get the jobless rate down. The Bush tax cuts in marginal income rates and on dividends have turned out to be extremely well timed and have improved incentives to invest and take risk. New business investment and profits will eventually produce new job growth. The Fed's job is to maintain price stability, and that means preventing future inflation even if it requires tightening money in an election year.


     The key statement in the above editorial is “the Fed's job is not to get the jobless rate down.” In other words, the Fed should never stimulate the economy just to create jobs or increase wage levels. It’s only job is to make sure that businesses can borrow as cheaply as possible, while, at the same time, being alert to any signs of “wage inflation” in the labor market.

     This requires a balancing act in which the Fed makes sure the economy grows fast enough to increase corporate profits, but not so fast that workers start benefiting via higher wages. (For an extensive discussion of this issue, see The Wage Inflation Con.)

     The following op-ed piece demonstrates that economics is more about values than science. If an economist believes that aristocracy is the best form of economy—then he writes such drivel as below.

From The Wall Street Journal, January 28.

'Outsourcing' Is Good for America


… High-tech firms such as IBM are now outsourcing software programming to India, and medical centers are relying on Indian doctors to process data, to say nothing of the loss of America's call centers.

What will the service sector look like as a result of these developments? Some clues come from manufacturing, which already has been vastly reshaped. Outsourcing has transformed manufacturing from vertically integrated production structures to highly fragmented ones. Fifty years ago, Detroit's River Rouge plant sucked in iron and coal at one end and spat out an automobile at the other. Now, auto firms source component parts from a vast array of domestic and foreign suppliers.

Has U.S. manufacturing been vaporized in the process? No—manufacturing production has risen about 40% over the past decade. Despite lower wages abroad, foreign firms have chosen to produce cars made by high-wage workers here, including Honda in Ohio, Mercedes-Benz in Alabama, BMW in South Carolina and Toyota in California.

Of course, the share of the American workforce in manufacturing has fallen steadily over the postwar period due to vast increases in productivity, but this is a world-wide phenomenon. Between 1995 and 2002, China, Japan, Brazil and other countries lost more manufacturing jobs than did the U.S., according to an Alliance Capital Management study….

     First, consider Doug’s statement that “manufacturing production has risen about 40% over the past decade. Despite lower wages abroad, foreign firms have chosen to produce cars made by high-wage workers here, including Honda in Ohio, Mercedes-Benz in Alabama, BMW in South Carolina and Toyota in California.”

     Even if the 40% is true, the jobs at Honda, Mercedes-Benz, BMW and Toyota are nonunion, and, although the wages are higher than burger-flippers make at McDonalds, are not nearly as good as unionized workers in traditional U.S. manufacturing. Also, wages in unionized factories haven’t gone up as much as they would have without the effects of globalization.

     In addition, being nonunion, these foreign manufacturers in the U.S. have higher accident rates and much worse working conditions than traditional unionized factories.

     The comment that “Between 1995 and 2002, China, Japan, Brazil and other countries lost more manufacturing jobs than did the U.S.” is probably true, but for terrible reasons. When American corporations relocate to, say, China, they replace many small, outdated factories and install state-of-the-art giants. As a matter of fact, they are more state-of-the-art than the factories left in the U.S.

     Of course, what Doug ignores altogether, is the incredible pain caused to massive numbers of working-class Americans who are making all the sacrifices for globalization—while the established rich, and Doug and his supporters—get incredibly richer.

     And that’s what globalization is really all about.

     It’s hard to tell, sometimes, if someone is a deliberate liar and hypocrite, or whether he’s just plain stupid.

     America’s foremost class wayfarer, Alan Greenspan, again shows his utter callousness toward working-class Americans.

From The Wall Street Journal, January 27.

Greenspan Sees
A Jobs Benefit
In Globalization

WASHINGTON—Federal Reserve Chairman Alan Greenspan said that while globalization and continual layoffs have made it harder for low-skilled workers to find jobs, those factors have actually kept down overall unemployment and made recessions milder.

"In recent years, competition from abroad has risen to a point at which developed countries' lowest-skilled workers are being priced out of the global labor market," Mr. Greenspan said in remarks via satellite to a London conference sponsored by the British Treasury. He said new jobs in expanding industries will inevitably replace those in declining industries, "but not without a high degree of pain for those caught in the job-losing segment of America's massive job-turnover process."…

While continual job cutting contributes to job insecurity, it also makes employers more willing to hire, keeping unemployment lower than it otherwise would be, Mr. Greenspan said. He noted that about a million workers quit or are fired each week while another million are hired….

Wages of workers just inside the 10% lowest-paid rose only 0.2% a year after inflation in the past three years, compared with 1.5% for those just inside the top 10%, recent Labor Department data show. (In the late 1990s, wages of both grew about 2% a year.) Even the job turnover Mr. Greenspan praised is down 15% in the past two years as new opportunities have dried up.

     About the best spin Greenspan could put on this disastrous situation is to note “that about a million workers quit or are fired each week while another million are hired.” Of course, he pointedly ignores the fact that industries that are gaining jobs pay 21% less annually than industries that are losing jobs.

     Greenspan can’t avoid admitting that our country’s globalization policies have created “a high degree of pain for those caught in the job-losing segment of America's massive job-turnover process."

     It’s massive and it’s painful. So, what does he recommend to compensate those who are making all the sacrifices for this great economy? Absolutely nothing. They’re just going to have to suck-it-up and carry on—as America’s new class of aristocrats clean up from the process of destroying working-class wages.

     The utter disaster of globalization is beginning to dawn—even on its former advocates.

From The Wall Street Journal, January 26.

Migration of Skilled Jobs Abroad
Unsettles Global-Economy Fans

DAVOS, Switzerland—Many of the business, government and academic leaders who came here for the annual meeting of the World Economic Forum, traditionally a gathering of advocates of globalization, have voiced doubts over the past few days about one of the central tenets of global economic integration.

They question whether the increasingly global economy will produce as many high-wage jobs in rich countries as once was expected.

Their concern stems from the free-trade axiom that when a rich country sends blue-collar jobs overseas, it creates opportunities back home for workers to move up the skill ladder. The more recent corollary was that sending service jobs overseas would do the same for white-collar workers back home.

But the rising number of skilled, white-collar jobs migrating from rich nations to developing countries is raising fears that, in fact, well-paid workers in developed countries will have trouble finding equally well-paid computer, design and medical jobs at home….

So long as manufacturing jobs were at stake, opinion leaders didn't take much note, said Dani Rodrik, a Harvard University economist. The alarm is being sounded now, he said, because "the opinion leaders are seeing their neighbors being displaced."…

"We cannot protect the American people from reality," said Hewlett-Packard Co. Chief Executive Carly Fiorina, speaking at Davos. "There are many, many qualified engineers around the world who want to participate" in advanced research….

     A key statement in the above article: “So long as manufacturing jobs were at stake, opinion leaders didn't take much note.” No kidding. As long as it was “those people (working-class)” making all the sacrifices—globalization seemed like a fine idea.

     Now that it is creeping up the income and high-skill ladders, it’s a different story. That’s where “we” live.

     And, of course, that issue doesn’t even touch the broader problem: the total destruction of our economy, as more and more people can’t make a decent living—amid extreme wealth and conspicuous consumption by those who caused it all.

     The statement, "We cannot protect the American people from reality," is disingenuous at best. The reality is that, through legislation, Republicans and conservative Democrats deliberately created the job loss in manufacturing and, now, even high-tech.

     Can you say “1929”? Or, how about “French Revolution”?

     In the years between, roughly, 1993 and 1998, Business Week analyzed the unemployment reports in almost every issue. The reason: as unemployment drops, wages tend to rise, and the Fed is tempted to raise the prime interest rate—so as to cool off the economy and stop the wage increases (which conservatives always call “wage inflation”).

     Since Clinton’s 1993 tax increase on America’s wealthiest 1.2% was reducing the deficit and creating an economic boom—unemployment was going down and wages were going up, if only slightly.

     So, naturally, Business Week, as well as other conservative financial publications, kept an eagle's eye on even a hint that workers may be beginning to share in the booming prosperity.

     Since then, it has slowly dawned on Republicans and conservative Democrats that rising wages are no longer a realistic fear. Thus, the following excerpt:

From Business Week, January 26.

U.S.: Why The Fed Has Time On Its Side

The global economy gives Greenspan & Co. room to keep rates unchanged

When policymakers meet at the end of this month, the Federal Reserve will have gone a year without moving interest rates. The longest the Fed under Chairman Alan Greenspan has gone without a shift in rates, either up or down, is 18 months. And after the extremely disappointing jobs report, along with no signs of inflation, economists are wondering if the Fed will break its record. Indeed, a strong case can be made that the Fed might not raise rates until 2005….

In the globalized economy, capacity and labor can be found almost as easily in Mexico as in Michigan. And in the U.S., people available for work aren't necessarily counted among the official tally of the unemployed. As a result, the American economy has more resources it can tap before production constraints appear. That's why the Fed will relax about inflation for far longer in this recovery than it ever could in the past. Equally important, the Fed can no longer operate U.S. monetary policy in the vacuum of the U.S. economy.,,,

Imports are now so massive that even the ongoing turnaround in exports is being overwhelmed by the inflow of foreign goods….

Favorable trends like declining unit labor costs are why inflation won't be on anyone's radar this year. That, plus the excess capacity among global goods producers and the slack still hidden in the U.S. labor markets, makes a strong argument that policymakers might be able to sit out the entire year.

     The key statement in the above excerpt: “In the globalized economy, capacity and labor can be found almost as easily in Mexico as in Michigan. And in the U.S., people available for work aren't necessarily counted among the official tally of the unemployed. As a result, the American economy has more resources it can tap before production constraints appear.”

     In other words, Republicans and conservative Democrats have finally broken the back of American labor. Any time there is even the remotest possibility that wages for American workers will go up—politicians will find new ways to tap the world market for additional workers. The Fed no longer has to resort to raising the prime interest rate to keep wages from going up.

     Until there is a regime change in Washington, working-class Americans have a bleak future indeed.

     The news about the disastrous effects of globalization on even high-tech American professionals continues to get worse.

From Business Week, January 26.

Scrambling To Stem India's Onslaught

Now big Western service outfits have to fight back on both the high and low ends

…Until recently, Indian service outfits barely registered in the West. Now, Infosys, Tata, Wipro, and others are emerging as real competition for the industry's behemoths. Their ability to offer prices that undercut Western adversaries by as much as 70% is just the start. They're also amassing the skills to handle complex consulting projects and rapidly opening sales offices in the West to get face time with potential clients.

Their efforts are paying off: Three years ago, just 125 of the top 500 U.S. companies placed work with Indian companies, according to Nasscom, India's software-services trade association. Last year, that number hit 285, including Boeing, Cisco Systems , and Lehman Brothers.

JIGSAW PUZZLE. This cross-border competition is roiling the $578 billion tech-services industry like never before. Confronted with pesky new rivals, giants such as IBM and EDS are overhauling their operations. To protect their flanks and remain competitive on the low end, they're slashing costs by moving jobs to India, China, the Philippines, and Eastern Europe….

Not all the players will survive. "There is bound to be a shakeout," says Jayant Sinha, a McKinsey & Co. partner who advises service companies….

     Republicans and conservative Democrats have succeeded in creating an economic environment were only those who are most willing to take ruthless advantage of their lower-level employees will survive—even in the high-tech industries.

     Conscientious corporations who actually want to pay their American employees a fair wage can no longer stay in business.

     Amazing. How clueless can supposedly educated people be? The Business Week editorial excerpted below is hard to believe, given the other articles in the same issue that describe globalization, and the destruction of wages in the U.S. so clearly.

From Business Week, January 26.

Waiting For The Job Fog To Clear

The economy expanded at a sizzling 6% rate in the second half of 2003 but didn't generate any job growth. The December payroll number was a particular shocker—just 1,000 net new jobs nationwide, with gains in October and November revised down. What's going on? Should we be worried?

Corporate profits are soaring, the stock market is strong, exports are picking up, capital spending is rising, and low interest rates and huge tax cuts—$60 billion in tax refunds alone over the next few months—should keep the economy growing at a healthy pace for much of 2004. So strong has the recovery been recently that pressure has been rising for the Federal Reserve to change policy and increase rates soon to head off inflation. Given the recent job numbers, though, it may be prudent for the Fed to wait and see….

The labor market's performance in the second year of this recovery has been the weakest of any postwar rebound. Since the recession ended, the U.S. has gone 11 consecutive months with monthly payroll jumps failing to breach 100,000. That hasn't happened in 50 years. In the 25th month of most expansions, the economy usually generates 145,000 jobs—not the 1,000 the Labor Dept.'s report says were created in December….

A deeper worry is that the jobs recovery is not just delayed but more difficult to achieve. The forces of higher productivity and globalization may now require the economy to grow faster, say, 5%, to generate the kind of job growth that in the past came from a 3% to 4% growth rate.

The truth is, no one knows….

     “The truth is, no one knows”? Why not? Conservative politicians, investors and corporate executives are in the process of destroying the best economy (and society?) the world has ever known. And how they’re doing it is vividly described in their own financial publications—as reported throughout this website.

     Excuse the redundancy below. There have been so many articles in our conservative financial press that describe the skullduggery on Wall Street—another seems hardly necessary.

     However, since Wall Street is still conducting a propaganda war to privatize Social Security, a little redundancy may be helpful.

From Business Week, January 26.

Commentary: Will This New Broom Sweep Clean?

In his past jobs, NYSE regulatory cop Rick Ketchum has resisted regulators

By Gary Weiss

Whatever strengths Richard A. Grasso might have had in fending off competitors to the New York Stock Exchange, his record as a regulator was lackluster. For years, the exchange has been dogged by allegations of lax supervision and profiteering by floor traders -- the subject of a Securities & Exchange Commission investigation. A tough new securities cop is clearly needed….

On Jan. 8, the NYSE board of directors announced its pick for the new post of chief regulatory officer: Richard G. Ketchum, the 53-year-old former president of the National Association of Securities Dealers and NASDAQ….

Ketchum's years of faithful soldiering during some of the NASD's least stellar years, and his tenacious defense of questionable brokerage practices, raise a troubling question: Is the Big Board really committed to a thorough housecleaning? Ketchum's hiring "looks like business as usual to us," says one skeptic, Lawrence Leibowitz, head of equities at Charles Schwab Capital Markets. The NYSE defends its appointment of Ketchum, with a spokesman calling him a person of the "utmost integrity" who was highly regarded by NYSE officials….

Ketchum also proved to be a loyal—if not terribly vigilant—company man at the SEC. In 1991 his market regulation division was chided by the General Accounting Office for deficiencies in its supervision of the stock exchanges in their oversight of brokerage firms' sales practices. (Ketchum says he doesn't recall the GAO probe.) As was later borne out by events -- including micro-cap scandals that began on his watch -- the GAO was right on the mark.

At the time, Ketchum vigorously defended his oversight of the stock markets. And now, for better or worse, he's back at one of them. Perhaps the NYSE board, in filling its next big job -- chairman -- might want to pick someone with an unblemished record of achievement outside the securities industry, rather than yet another Wall Street apparatchik.

     You’d think that, with all the recent scandals, the good-ol’-boys on Wall Street would at least pretend that they wanted to clean up their act. Judging from the above, apparently not.

     As a long-time reader of investment advice, I’ve always had a very favorable impression of the Strong family of mutual funds. It just goes to show how difficult it is—especially for those who don’t subscribe to our premier financial publications—to make wise decisions in investing their retirement funds.

From Barron’s, January 26.

Mercurial Man

Dick Strong's story is the stuff of legend; some of its chapters don't look pretty

THE SAGA OF DICK STRONG'S RISE to the top of the mutual-fund industry has been chronicled many times in the financial press. …

… he built Strong Financial into a giant that, at its peak in early 2001, oversaw $40 billion in assets in more than 60 stock and bond funds, plus billions more in pension-fund and private accounts. The self-styled poor boy from rural North Dakota vaulted onto the Forbes 400 list of the richest Americans; in its most recent estimate, the magazine valued his assets at $800 million. Dick Strong had written, as he liked to put it, an "Only in America" story.

But in recent months, the once Frank-Capra-like drama has turned film noir. Beginning last fall, Strong has been enmeshed in the mushrooming mutual-fund industry scandal. Under investigation by state and federal agencies, he stepped down late last year as chairman of both the Strong Funds and Strong Financial, in part to try to staunch the flow of assets pulled from his company by concerned investors. The firm also quickly went on the block, though there have been no takers so far. Today, Strong would be lucky to get half of the $1.2 billion he spurned in 1997 from British insurer Prudential PLC….

Then, on Oct. 30, the hammer fell. Strong Fund directors said that an internal investigation had found evidence that Dick Strong had "market-timed" Strong funds and for far longer than Canary had. And in the preceding six years or so, he had raked in some $600,000 from this trading….

Dick Strong's seeming fondness for risk has been reflected in the investment performance of Strong Capital Management. Over the short term, Strong funds frequently shoot the lights out. But extend the performance record over five to 10 years and often they start to suck wind. Typically, they've been at the scene of every accident, whether it's the smashup in tech stocks, the bursting of the Internet bubble or the telecom-debt implosion. As a result, the average member of Strong's 61-fund family finished in just the 49th percentile of its style category for the five years through 2003 and in the 56th percentile over the past 10 years, according to Morningstar….

     The jury is still out about the extent to which Dick Strong is guilty of misbehavior. Not in doubt, however, is the almost total meltdown of ethical standards in the securities industry.

     It’s all about money and greed, with little concern for fairness and justice for, especially, the small investor. And despite all the evidence such as the above, Republicans want to privatize Social Security, and force unsophisticated workers to rely on Wall Street—with their high commissions, high profit margins, and total lack of moral standards—to be in charge of their retirement futures.

     Yet another in an endless series of articles about the corruption on Wall Street.

From The Wall Street Journal, January 26.

Trading Firms
At the NYSE
May Be Charged

SEC Indicates That a Civil Case
Is Near for Five Specialist Firms;
Probe Reaches Critical Juncture

Upping the ante in the probe of alleged trading abuses on the floor of the New York Stock Exchange, the Securities and Exchange Commission notified the Big Board's five biggest floor-trading "specialist" firms that they could face civil charges of securities fraud, among other things….

The notices suggest that the yearlong probe of allegedly improper trading by the specialist firms, which previously was reported by The Wall Street Journal, is reaching a critical juncture. In October, the SEC stated in a confidential report, reviewed by The Wall Street Journal, that investors could have been shortchanged by at least $155 million over three years by specialists improperly trading for their own accounts….

The allegations cut to the heart of the open-outcry system the 211-year-old Big Board uses for most trading. The SEC staff, in the confidential report, also was critical of the NYSE for failing in its role as self-regulator to stop allegedly improper trading….

     Let’s face it. Those who run Wall Street will never willingly give up their advantages of being insiders and in total control. And they have zero interest in protecting the interests of the small investor.

Week of January 19

     Check out the item below for a quick lesson on how propagandists turn bad economic news to their advantage. (By lying.)

From The Wall Street Journal, January 23.

The Gap in Wages
Is Growing Again
For U.S. Workers

Inequality Is Seen as Result
Of the Jobless Recovery;
Potential Election Theme

WASHINGTON—Wage inequality—the gap between America's highest and lowest earners—has started widening again, a situation with election-year ramifications.

The trend is a reflection of the job market's exceptionally weak response to the current economic recovery, as well as long-term technological and economic changes that have eroded the bargaining power of America's lowest-paid workers. The data show that young workers—who currently have fewer job prospects than a few years ago—and men, in particular, are bearing the brunt.

New data from the Labor Department show that after adjustment for inflation, salaries of the country's lowest-paid workers—those who fall just inside the bottom 10% of the pay range—fell 3% last year, from 2002. Meanwhile, the salaries of the highest paid workers—those who are just inside the top 10%—were unchanged. The divergence appeared to grow in the fourth quarter as higher-paid workers gained ground and lower-paid workers slipped further, based on comparisons with original year-earlier data that are subject to revision….

The new turn may merely represent a return to a longer-term trend that was only temporarily stalled. Sheldon Danziger, an economist at the University of Michigan, said inequality began to increase in the 1970s, and now appears to have resumed after an interruption in the late 1990s. Prof. Danziger, who has studied inequality extensively, attributes the trend to technological change and increased trade, which have placed a premium on higher-paid workers' skills while displacing many lesser-skilled workers from well-paying jobs. Other factors at play are the decline in unionization and the stagnant minimum wage….

Kevin Hassett, a scholar at the American Enterprise Institute, said the lesson of the late 1990s is that the best way to lift lower-paid workers' wages is through strong economic growth, which is what Mr. Bush's tax cuts are delivering.

     After describing the real reasons for the income gap between rich and poor—globalization, decline of unions, stagnant minimum wage, increases in the labor supply, etc.—the Journal quotes right-wing crackpot Kevin Hassett, who uses the occasion to praise Bush’s tax cuts.

     The deliberate lie: economic growth doesn’t raise wages. If workers have no power, it only increases profits and the wealth of investors and senior corporate executives. What makes this lie more infuriating is that right wing think tanks like the American Enterprise Institute support the causes of workers' loss of negotiating power: globalization, declining unions, outsourcing, etc.

     It’s all about power, folks. That’s why Washington is awash in lobbyists. With Republicans in control of government, the established wealthy and investors have it all, and workers have none.

     Here’s another example, as if any were needed, of the pervasive corruption of corporate America.

From The Wall Street Journal, January 23.

Halliburton Tells Pentagon
Workers Took Kickbacks
To Award Projects in Iraq

WASHINGTON—Halliburton Co. has told the Pentagon that two employees took kickbacks valued at up to $6 million in return for awarding a Kuwaiti-based company with lucrative work supplying U.S. troops in Iraq.

The disclosure is the first firm indication of corruption involving U.S.-funded projects in Iraq and raises new questions about Halliburton's dealings there. The company's work already is being scrutinized because of accusations that the U.S. government was overcharged for gasoline under another controversial contract….

The company has fired the two employees, who were based in Kuwait and whose names were not disclosed. Halliburton said it could not discuss specifics of the matter because of a Pentagon review….

A number of anonymous whistleblowers have come forward in recent weeks with often-detailed allegations of KBR wrongdoing in Kuwait, including accusations of paybacks from companies that received lucrative subcontracting work from KBR, according to U.S. officials and congressional sources. These reports in turn have been taken up by the Pentagon's IG office….

     These unidentified “employees” must have been at quite a high level to have taken $6 million.

     Apparently, Halliburton did the right thing and caught the scoundrels on its own. One has to wonder, though, were they forced to before the whistleblowers went public.

     And even if Halliburton is conscientiously monitoring the behaviors of their executives, this event demonstrates the huge numbers—and massive amounts of money—that are floating around the war-profiteering industries.

     The following excerpt is a small lesson on sound economics—but a huge lesson on the horrible values of American corporations, and a terrible portent of the future.

From The Wall Street Journal, January 22.

Kodak to Cut
Staff up to 21%,
Amid Digital Push

As Film Business Shrinks,
Company Retools for Future;
New Blow to Rochester, N.Y.

Eastman Kodak Co. plans to cut its work force by as much as 21% by the end of 2006 and take charges of $1.3 billion to $1.7 billion, in a blueprint the company regards as a painful necessity for its transition to filmless digital imaging.

The plan, which Kodak announced early Thursday, will eliminate from 12,000 to 15,000 jobs and result in annual operating-cost savings of $800 million to $1 billion by 2007, according to Kodak estimates….

When it announced the contours of its digital-transition plan last September, Kodak forecast job cuts, but it wasn't specific (see the Page One article). It still declines to say how many of the job cuts will be in its hometown of Rochester, N.Y. But that city, where much of its domestic film and photographic-paper production is located and where previous layoffs have hurt the local economy, is sure to feel another shock. Last year, Kodak closed operations for disposable, single-use cameras in Rochester.

Kodak remains the largest employer in the Rochester area, with about 21,000 workers, many of whom are directly tied to the making, packaging and distribution of film and paper. Two decades ago, Kodak employed around 60,000 people in the area….

The downsizing is another step by Mr. (Daniel) Carp, the CEO, in his campaign to make Kodak conform to the realities of a digital world. A career-long Kodak veteran, Mr. Carp has moved aside other veterans and surrounded himself with top executives hired from H-P, printer-maker Lexmark International Inc. and other companies with more digital expertise….

     The sound economics: As corporations adapt to the future needs of the country, they must abandon old technologies and adopt new ones. That’s a given, and if done responsibly, it ends up benefiting everyone.

     As a description of today’s deplorable corporate values, this excerpt demonstrates:

  • The devastating effects of the shutdown or severe reduction of employees within a single community. Rochester, N.Y. will undoubtedly see its problems compounded severely as it loses much of its tax base—along with an increasing need for social services. But that’s an old story and is happening across the U.S.

  • Why outsourcing industries that still make today’s products to other countries was such a disaster. Our loss of those millions of jobs makes the loss of jobs here in the U.S.—due to technology and productivity improvements—so much worse than it would have been. Globalization has created too much stress for our economy to absorb in so short a time period.

  • How senior corporate executives protect themselves and betray those lower in the organization. Our hero in this scenario is CEO Daniel Carp, who is an old-line film-camera manager. Since he holds all the power, he can protect his own ass as he terminates others like him who built the Kodak Corporation. Undoubtedly, he’ll receive an increase in salary and bonuses because of his business acumen.

     What a great economy Republicans and conservative Democrats have given us.

     Paul Allen: a certified member of America’s new aristocracy. And if Republicans have their way, his descendants won’t have to pay any tax on the wealth they inherit from him.

From The Wall Street Journal, January 22.

Playful on Outside,
Paul Allen Tightens
Grip on His Fortune

His Investment Firm, Burned
By Tech Bubble, Diversifies;
His Sister Takes Charge
'Business Isn't Always Fun'

SEATTLE—When Paul Allen attracts public attention, it's usually for activities that involve a mere sliver of his wealth. He owns big-league sports teams and a music museum. He bankrolls brain research and collects World War II aircraft. Some think of him as a low-key engineer who grew so rich from co-founding Microsoft Corp. that he can indulge his hobbies on a grand scale.

Away from the spotlight, however, the 51-year-old Mr. Allen has embarked on a massive restructuring of the $20 billion portfolio that makes him one of the world's richest people….

Now, Mr. Allen has retooled the mission of Vulcan Inc., his main investment vehicle, so that it is less exposed to the zigzags of the technology sector. He has handed over a lot of day-to-day authority at Vulcan to his 45-year-old sister, Jody Patton, who previously worked as a film producer and a development officer at the Pacific Northwest Ballet.

The shakeups at Vulcan, which employs about 450 people, were necessary and productive, says a spokesman for Mr. Allen. "We've become more focused and more businesslike," says Vulcan Vice President Stephen Crosby. "We've beefed up in real estate. We've expanded our investment group from five people to 22, with more than 200 years of Wall Street experience among them."…

     America’s aristocrats put those of historic note to shame. Of course, governments that believed in aristocracy have always made provisions for their privileges and wealth to be inherited—but it’s today’s corporate environment and the U.S. economy that has made it so incredibly profitable.

     And should you care how are they investing their billions? A definite yes! As they pour billions into real estate, they take land, homes and buildings off the market, thus driving up their cost for everyone else who doesn’t have 22 investment advisors (with 200 years of investment experience).

     If you’re still one of the dreamers who believes that Social Security should be privatized, read the following excerpt.

From The Wall Street Journal, January 22.

In Past, SEC Defended
Fund-Broker Compacts

When it comes to telling investors about selling arrangements between mutual-fund companies and brokerage firms, the Securities and Exchange Commission for years has taken the position that a little disclosure goes a long way.

Until last week. SEC officials then announced they had found evidence that many brokerage firms had been pushing sales of certain mutual funds that had made extra payments to the brokerage firms. These special arrangements had been disclosed to investors in only vague terms, or, in some cases, not disclosed at all, so the agency has launched a series of investigations to find out if fund customers have been misled….

But for years before sounding the alarm bell about inadequate disclosure of broker sales incentives, the SEC has allowed fund companies and brokerage firms to disclose only general information about the deals….

Before last week, "just about everyone except the SEC recognized this was a problem," says Mercer Bullard, a University of Mississippi law professor and a former SEC attorney….

     The above excerpt is just another example of how the inbred securities industry looks out for all its insiders—and to hell with the small investors. Our government-run Social Security system must surely deliver better results for retiring working-class Americans than any privatized system ever could.

     Again, another article from the conservative press itself that demonstrates that it is good for a country to have manufacturing and its higher paying jobs.

From The Wall Street Journal, January 21.

China's GDP Grew at 9.1% Rate,
But Inflation Concerns Remain

BEIJING—China economy grew at a blistering pace last year, though signs of inflation and overheating in certain sectors are heightening concerns about whether the trend could be maintained this year.

Hefty investments in factories, real estate and other fixed assets sent gross domestic product—the total output of goods and services—soaring at an annual rate of 9.9% during the fourth quarter, compared with a year earlier….

One spur to further growth is the increasing purchasing power of ordinary Chinese, said Mr. Li, the government statistician. Last year's gross domestic product reached $1.4 trillion, pushing the per capita GDP above $1,000 for the first time. Incomes also rose, even in recently stagnant rural areas, Mr. Li said. The result, he said, has been a huge demand among consumers for automobiles, computers, appliances and new housing.

New telephone subscribers, for example, totaled 112 million last year, more than the combined populations of the U.K. and France. "This kind of demand is irresistible," Mr. Li said.

     What? Better paid workers contribute to a growing and healthy economy? One in which the major concern is inflation?

     Maybe the U.S. should try it.      …Naaah.

     The following excerpt from our premier conservative financial news publication almost tells the whole story about the real purpose of globalization—and the deliberate lies that were told to the American public that allowed it to happen.

From The Wall Street Journal, January 19.

IBM Documents Give Rare Look
At Sensitive Plans on 'Offshoring'

When Shifting Jobs Abroad,
It's $12.50 vs. $56 in Pay,
And 'Sanitize' the Memos

In a rare look at the numbers and verbal nuances a big U.S. company chews over when moving jobs abroad, internal documents from International Business Machines Corp. show that it expects to save $168 million annually starting in 2006 by shifting several thousand high-paying programming jobs overseas.

Among other things, the documents indicate that for internal IBM accounting purposes, a programmer in China with three to five years experience would cost about $12.50 an hour, including salary and benefits. A person familiar with IBM's internal billing rates says that's less than one-fourth of the $56-an-hour cost of a comparable U.S. employee, which also includes salary and benefits.

According to the documents, which also provide managers with detailed advice on how to talk about the moves and their effect, IBM plans to shift the jobs from various U.S. locations to China, India and Brazil, where wages for skilled programmers are substantially lower….

Like other high-tech companies, IBM is moving knowledge work to cheap-labor sites outside the U.S. This "offshoring" process has raised fears that even high-skill jobs that were supposed to represent the U.S.'s future are being lost to countries that have already taken over low-skill factory work….

IBM's human-resources department has prepared a draft "suggested script" for managers to use in telling employees that their jobs are being moved. The managers will tell the employees that "this is not a resource action"—IBM language for layoff—and that they will help the employees try to find a job elsewhere in IBM, although they can't promise to pay for any needed relocation….

Some of the foreign programmers will come to the U.S. for several weeks of on-the-job training by the people whose jobs they will take over. That's an aspect of offshoring that many high-tech workers regard as particularly humiliating….

In the draft script prepared for managers, IBM suggests the workers be told: "This action is a statement about the rate and pace of change in this demanding industry. ... It is in no way a comment on the excellent work you have done over the years." The script also suggests saying: "For the people whose jobs are affected by this consolidation, I understand this is difficult news."

     Could it be clearer? This one front page article demonstrates what should have been clear to American voters for the past 25 years.

  • The #1 motivation for those who advocate globalization is to cut wages in the U.S., and thus increase financial returns for top corporate executives and wealthy investors.

  • It’s now obvious that those who say that corporations must go overseas to get enough qualified personnel to allow our corporations to grow—are deliberate liars and hypocrites. Many of them have to come to the U.S. to be trained, in order to take the jobs of those they will be replacing.

  • Workers who made IBM successful to begin with will now be summarily dismissed—and the shareholders will get richer, and the top IBM executives will get huge bonuses for being “courageous” enough to fire long-term, loyal employees.

  • The high-skilled workers in other countries who take American jobs won’t even make wages ($12.50/hour) equivalent to what a unionized manufacturing worker makes in the U.S.

  • As usual, the realities of what’s happening to IBM workers won’t be reflected in what they are told by management: “IBM's human-resources department has prepared a draft ‘suggested script’ for managers to use in telling employees that their jobs are being moved. The managers will tell the employees that "this is not a resource action"—IBM language for layoff…”

     What a sad day for a corporation that was once America’s model for good management and sterling values.

     And, oh yes, forget any of the promises that developing countries would get the low paying jobs of the future, and U.S. workers would get the high pay associated with high skill jobs.

     Articles like the one excerpted below are periodically published, even in our conservative press.

     In business after business, occupation after occupation, people are finding that the corporate downsizing brought about by globalization is depressing wages in areas not even remotely associated with international trade.

From The Wall Street Journal, January 20.

As Home Sales Cool, Ranks
Of Realtors Grow Crowded

Waves of Laid-Off Workers
Enter Field, Threatening
To Damp Commissions

…Thousands of refugees from corporate downsizings and outsourced technology departments have begun jumping into real-estate sales—and are finding it a much tougher field than they expected. The housing market is starting to cool off, meaning all those new agents are competing for a dwindling number of clients….

Elyse Eskanos of Denver says she used to make as much as $150,000 in annual commissions. That fell to $40,000 or less in recent years as more and more people became agents. "Everybody has a friend or a relative who's a realtor," Ms. Eskanos says. She found that some people planning to sell houses were interviewing five or six agents, then choosing the one who offered to work for the smallest commission….

     It’s about time American voters began to realize that downsized workers and executives must find some other kind of work, or even start up their own businesses—from photography, to real estate sales, and to every kind of business and occupation you can name.

     As they enter those endeavors, they drive down the profits or salaries of the people who are already there. Supposedly, everybody benefits from the lower prices that such competition generates. But as the general level of income declines across the entire economy, so does the amount of money that makes up the purchasing power of consumers.

     Who benefits from all this? The investors and established wealthy who started it all, and got in on the ground floor.

     Republicans don’t want you to be able to buy drugs from Canada, but it’s just fine with them if pharmaceutical corporations outsource their operations to India to save labor costs and increase profits.

From Business Week, January 19.

India's Next Outsourcing Coup: Drugs

For years, software companies have slashed costs by hiring inexpensive programmers and engineers in India. Now Big Pharma is discovering the same benefits. Pfizer, GlaxoSmith-Kline, and Novartis are tapping into India's research and manufacturing prowess to cut costs and speed development of new drugs.

That's a big change for India. Foreign drugmakers have long shunned the country because of its lack of patent protection. But on Dec. 22, the Indian government introduced a bill that would toughen intellectual-property rules. If passed, it could help double the drug-outsourcing business, to $800 million, by 2005, says Bombay brokerage Kotak Institutional Equities….

     Interesting, isn’t it? Corporations get patent protection to protect the results of current research, but workers get no guarantees of future income—no matter how much of their lives they devote to the corporation.

     How blind can we be? The economies of countries that get the world’s industries and jobs “sizzle.”

     So how come the U.S. is exporting its industries and jobs?

From Business Week, January 19.

India: Third-Quarter Sizzle Bodes Well For 2004

… India is set to be one of the fastest-growing economies this year, perhaps eclipsed only by China. The Jan. 4 signing of the South Asian Free Trade Area pact is another plus for the region, as are peace talks between India and Pakistan set for February. Already investors have pushed up the Bombay Sensex stock index by 72% over the past year.

The upbeat outlook also reflects India's structural shift from a mainly agricultural economy to a more diversified and advanced technology center. Manufacturing production was up 6.2% in the year ended in October. And rating agency ICRA projects that India could capture 56% of the new outsourcing business over the next three years….

     The answer to the question posed above is simple: We’re exporting industries and jobs—even at the expense of our overall economy—because it benefits investors and the established wealthy in our country, and in the countries that receive them.

     How about a warning from the conservative press itself—about the dangers of rampant globalization, and the exporting of industries and jobs to China.

From Business Week, January 19.

Worrying About China

Is it growing too fast? Can Beijing hold the financial system together? Will economic reform materialize?

…The second reason outsiders should worry about a Chinese slowdown is that China is the world's biggest manufacturer of just about everything. So if domestic demand dries up, China might try to export its way out of a crisis.

While mainland steel is mostly low quality, and China obviously can't uproot unoccupied apartment buildings, the world could still see a glut in many goods. China's production of steel, aluminum, autos, textiles, ships, and machinery are all expected to double by 2007, according to investment bank Credit Suisse First Boston.

"China is on a wild [capital expenditure] spree," says Dong Tao, the bank's chief economist for non-Japan Asia. "Two or three years down the road, this will bring a major supply shock to global industry."…

     This is a brief excerpt of a very long article and only one section is presented in order to illustrate how the depression of the 1930s occurred:

  • We exported some of our best paying jobs to other countries, thus lowering wages in the U.S. (It’s much worse now than it was in the 1920s.)

  • Wages in other countries were also reduced because of pressures from corporate buyers.

  • Underpaid workers throughout the world didn’t have enough money to buy the products that were produced.

  • Overproduction occurred throughout the world.

  • Countries began to dump their products at below cost.

  • Countries then enacted tariffs.

  • Economies tanked, and the people who caused it all blamed the tariffs for the world’s depression.

     Look forward to a happy new year.

Week of January 12

     The following is what passes for good news for our conservative financial press. Today’s wealthy have restored their wealth to the level it was in 2000, before the stock market bust.

From The Wall Street Journal, January 16.

Rising Stocks, Home Values
Are Restoring Wealth

U.S. Households Are Aided
By Recovery, but Could Fall
Victim to Sudden Declines

WASHINGTON—Recovering stock prices and steadily rising home values have almost restored the wealth of American families to levels last seen when the stock market peaked in 2000, new Federal Reserve data show.

The remarkable turnaround underscores a little-noticed factor in the economy's recovery, as well as a risk to it. The rebound in stocks that began last March plus continued gains in real estate have reversed the damage done to household wealth and spending when the stock-market bubble burst. That has helped fuel consumer spending despite anemic job growth in the past year. But by most measures, stocks and houses are richly valued today; a sharp drop in either could set back the economy….

In the third quarter, total wealth averaged $385,000 per U.S. family, but that significantly overstates the typical family's net worth. Wealth is heavily concentrated among the richest households. The new Fed data don't include any information on the distribution of wealth, although real-estate wealth is more evenly distributed than stock-market wealth….

     The last paragraph of the above excerpt was buried in the middle of this article. After conveying the impression that the improvement in household wealth was generally shared, they note that “Wealth is heavily concentrated among the richest households,” and that “The new Fed data don't include any information on the distribution of wealth.”

     Previous analyses of the distribution of wealth in the U.S. strongly suggest that the wealthiest Americans “restored” their wealth by taking ruthless advantage of working-class Americans. (Through globalization, outsourcing, lower wages and longer working hours, etc.)

     The economic health of the bottom 50% of Americans (or even the bottom 80%?) has undoubtedly gotten worse during this time period.

     The excerpt below has several lessons for those who want to understand the economic issues that really count—rather than just the spin the Republicans and conservative Democrats put on economic issues.

From The Wall Street Journal, January 14.

Why Your Broker
Is Pushing That Fund

SEC Probes Practice of Firms
Getting Paid to Tout Investments;
A Look at Who Does What

Most people don't care about the relationship between their broker and their mutual-fund company. But they should….

Among the issues under scrutiny: the payments that fund companies make in exchange for a spot on the "preferred lists" of brokerage firms or access to the firms' brokers.

The industry calls this paying for shelf space, just as cereal makers or soap companies frequently pay to get on grocery store shelves. The problem: Few mutual-fund investors realize their brokerage firm may have a financial incentive to recommend certain funds over others with similar, or even better, performance.

Tuesday, the Securities and Exchange Commission provided an indication of just how widespread such arrangements are. It said federal regulators had examined 15 broker-dealers—though it didn't name the firms—and found that 14 of them received cash payments from particular mutual-fund groups….

"A customer has a right to know what the incentives are for the selling broker when the selling broker recommends a particular fund family," says Stephen Cutler, director of the SEC's enforcement division.

While the specifics vary, fund companies typically pay brokers for shelf space in two main ways. Some give the brokerage firm a percentage of the annual sales of the fund or a percentage of the fund assets held by the brokerage, or some combination of the two. Others compensate brokers by directing trading business to firms that sell more of their funds.

The money involved can be substantial. The nation's 50 largest fund companies make roughly $1.5 billion in revenue-sharing payments a year, according to Financial Research Corp., a Boston-based fund-tracking firm. Even small banks and broker-dealers charge fund companies $40,000 to $50,000 a year for shelf space, according to FRC….

     Lessons from this one brief article in America’s premier conservative financial paper:

  • One of the best ways to get rich in the U.S. is not by working harder, but by being a member of the good-ol’-boys club. Insider deals, favoritism and and an uninformed public are more important than providing a genuine service to the public.

  • Consumers and investors must become informed about actual business practices, rather than rely on corporate public pronouncements about their integrity, their concern for the welfare of their clients and customers, their high standards of performance, etc. All such pronouncements are designed by advertising firms and have no relationship whatsoever to the companies they represent.

  • Government regulations are absolutely necessary to protect the interests of consumers and small investors. Even with sensible regulations in place, the small investor is routinely sacrificed for the benefit of insiders.

  • There is no way on God’s green earth that privately controlled investment firms will do a better job than our present Social Security system in providing a reliable retirement for working-class Americans. Their demonstrated greed and lack of moral standards have been amply demonstrated during the past year.

     If you were suspicious of Republican and conservative Democrat reassurances that the future for the American worker was the high-tech industry—your suspicions were right on target.

From The Wall Street Journal, January 13.

Flat-Panel, Plasma TV Sets
Bring a Flood of New Brands

… At the Consumer Electronics Show in Las Vegas last week more than 50 companies displayed the latest flat-screen models with sleek designs. Some of the new entrants are big players such as Dell Inc. and Hewlett-Packard Co., which began production a few months ago. Others, such as Motorola Inc. are brands on TVs decades ago but are just re-entering the market now. Then, there are names such as Hyundai and Polaroid, licensed by entrepreneurs hoping to gain a foothold in the market, and Chinese makers, such as Shanghai Hongsheng Technologies….

Making the rush possible is the proliferation of factories in Asia that can take on outsourcing work for even high-tech products. Because both LCD and plasma flat-panel TVs are assembled from a small number of parts the way PCs are, low-wage contract manufacturers can produce them easily….

The sudden flood of new brands stands to have repercussions across the consumer-electronics world, as major retailers and distributors now have dozens of different names to choose from. That gives them more leverage in negotiating for price and more choice when trying to attract consumers with new styles….

     Anything manufactured can be outsourced, even the most high-tech products. All it takes is a little time and someone who understands the technology to train workers in other countries who are willing to work for less.

     One of the great con games of the century is the pretension that improvements for worker incomes and working conditions depend upon the unbridled functioning of the free market.

     It never has been true and it isn’t true today. Income of just about everyone is very much the result of the political power they exercise in the interests of their business, profession or occupation. That’s why the proliferation of Washington lobbyists has exploded in recent years.

     It’s all about political power, folks. And those who work for a living had better find out which politicians represent their interests, instead of the interests of investors and the established wealthy.

     If you want to know how legislation gets passed or overthrown in order to benefit investors and top corporate executives—at the expense of workers and the general public—just read the excerpt below.

From Forbes, January 12.

Predatory Lawmaking

The pols want to stop predatory lending by going after investors. Huh?

Just 42% of families in Oakland, Calif. own their own homes, far below the national average of 68%. So what have Oakland city councilors done to promote homeownership? Passed a law that will make it even tougher for families there to borrow to buy a house.

A couple dozen states and perhaps ten cities have legislated against "predatory lending"—defined generally as lending that's unfair to borrowers….

So why would the California pols pass such a massive expansion of liability? They want to force investors and their agents to act as policemen against predatory lenders and to provide plaintiff lawyers with deep-pocketed targets for predatory-lending suits. Otherwise, they say, shady lenders and brokers can disappear or declare bankruptcy, and their victims have no one to recover from. Argues Oakland Deputy City Attorney Daniel Rossi, "Without assignee liability of some kind, the regulations really have no teeth.'' He acknowledges, though, that the law will probably have to be narrowed.

What makes all this even scarier is that many advocates of the new laws use an expansive definition of predatory lending that classifies as evil a mortgage with high interest rates or fees, a prepayment penalty or even a provision requiring arbitration. A far-reaching law is a terrific idea, from the point of view of the borrower, except for one thing: If you try to reach too deep into investors' pockets, the pockets may disappear.

     Note the threat: if government tries to protect borrowers against fraudulent or predatory loan sharks, investors will withdraw their funds and the poor will have no access to loans.

     Of course, if our government would open a loan department itself, and charge reasonable and fair interest rates, Forbes would scream bloody murder about how government was socialist or possibly even communist.

     In Forbes view, capitalism is the equivalent of a license to steal from the poor and disadvantaged.

     Fortune’s interview with Peter Drucker gives us a bit of wisdom and a lot of antiquated nonsense.

From Fortune, January 12.

Peter Drucker Sets Us Straight

The 94-year-old guru says that most people are thinking all wrong about jobs, debt, globalization, and recession.

By Brent Schlender

(Schlender): You can always count on Peter Drucker to provide a new way of looking at things…. And we can thank him for coining the concepts of "privatization," "knowledge workers," and "management by objective."…


The structure of the U.S. economy is remarkably different from what everybody thinks. Nobody seems to realize that we import twice or three times as many jobs as we export. I'm talking about the jobs created by foreign companies coming into the U.S. The most obvious are the foreign automobile companies. Siemens alone has 60,000 employees in the U.S. We are exporting low-skill, low-paying jobs but are importing high-skill, high-paying jobs….

Wage cost is of primary importance today for very few industries, namely ones where labor costs account for more than 20% of the total cost of the product—like textiles. I don't know what proportion of the cost of a typical American product is attributable to labor, but it's a small and shrinking one….

Consequently, the industries that are moving jobs out of the U.S. are the more backward industries. The U.S. remains the cheapest place in the world to produce for many of the more advanced industries. I say that not because our wages and salaries are so low. They aren't. But employee benefits are much cheaper than in Europe, and American workers are more flexible. I don't just mean you can move people out of accounting and into engineering here; I mean physically moving people from Chicago to Los Angeles. Don't you dare try that in Germany. They won't go. That's one of the absurd byproducts of their huge and restrictive employee benefits: It's cheaper to allow someone to remain unemployed in the Ruhr than to move him to Stuttgart for a real job. The same thing is true in Japan….

Nobody seems to realize that we have the highest proportion of our population in the workforce by far than any other country in the industrialized world. We have the lowest long-term unemployment rate in the West. Most of the unemployment we do have is not the long-term kind, but the short-term kind when people are between jobs for at most a few months….

The dominance of the U.S. is already over. What is emerging is a world economy of blocs represented by NAFTA, the European Union, ASEAN. There's no one center in this world economy. India is becoming a powerhouse very fast. The medical school in New Delhi is now perhaps the best in the world. And the technical graduates of the Institute of Technology in Bangalore are as good as any in the world. Also, India has 150 million people for whom English is their main language. So India is indeed becoming a knowledge center….

In every boom there is a tendency toward hero-worship of CEOs. The smart CEOs methodically build a management team around them. But many of those celebrity CEOs who are so highly regarded don't know what a team is. Moreover, the compensation inflation for CEOs has done very real damage to the concept of the management team. In an executive program I have at Claremont, the typical students are general managers of major divisions at very large companies, and they are very well paid. But it's fair to say they are contemptuous of the excessive pay that many of their CEOs receive. J.P. Morgan once said the top manager of a company should have a salary 20 times that of the rank-and-file worker. Today it is more like 400 times that. I'm not talking about the bitter feelings of the people on the plant floor. They're convinced that their bosses are crooks anyway. It's the midlevel management that is incredibly disillusioned. And so the present crisis of the CEO is a serious disaster. Let me again quote J.P. Morgan, who said, "The CEO is just a hired hand." That's what today's CEOs have forgotten….

     The wisdom: Drucker presents us with an accurate analysis of the absurdities of the incomes of today’s corporate CEOs.

     The antiquated nonsense:

  • It almost goes without saying these days that the privatization of many aspects of our economy has been a disaster, and “management-by-objectives” has undoubtedly done more harm than good to American corporations. Essentially, a fundamentally sound management principle, MBO, becomes a bureaucratic straightjacket when formally implemented, and it politicizes an otherwise good organization.

  • Although many foreign automobile factories are coming to this country to produce cars, the overall income level for workers had declined because the new companies are not unionized. And, of course, they use the threat of leaving the country if workers demand better incomes.

  • In criticizing Germany and Japan for having liberal employment practices—good pay, stable working conditions, stable communities—Drucker betrays America’s bias against fundamental worker rights. In his view, corporations should be free to do whatever they want with workers’ lives.

  • Drucker also equates a “good economy” with a low unemployment rate. That’s one criterion, but wage levels and working conditions are also important, and they have been seriously damaged in the past two decades because of the very globalization that Drucker champions.

  • Drucker himself cites the advances countries like India are making in technology. We are literally giving that country our high-tech technologies and the jobs that go with them—purely to cut high-skill labor costs and to increase corporate profits.

     Conclusion: Drucker, like most management theorists and consultants, views everything from the perspective of investors and top corporate executives. The incomes and living standards of the bottom half of America—and especially the bottom 20%—are irrelevant to him.

     And, increasingly, the category of “worker” that suffers from globalization is creeping up the income and status scales.

     Republicans and conservative Democrats tell us that the key to our success in a globalization environment is to prepare our citizens to take the high-skill jobs of the future, and to leave the low-skill jobs to those of developing countries.

     Then, after the wealthy have taken all the benefits for themselves, they cut funding to the schools that would give working-class Americans the skills they’d need to defend themselves.

From Business Week, January 12.

Education: The Bleak Writing On The Blackboard

State budget deficits will mean stingier spending on public schools

The nation's $800 billion education industry has never faced greater expectations. The 2002 No Child Left Behind (NCLB) law sets the wildly ambitious target of raising all elementary and secondary students to standards higher than ever before—even as the knowledge economy demands that higher education produce far more graduates. But the money needed to meet these goals has rarely been so tight. Record state budget deficits severely constricted growth in education in 2003, and 2004 doesn't look much better.

Even though education tops the priority list in most states, the need to close a record $80 billion combined budget gap will limit the growth of state spending on K-12 education to just 2% in fiscal 2004, down from 7.5% as recently as 2000, according to the National Conference of State Legislatures. That's forcing many states to cut back on initiatives to improve performance, from smaller classes to after-school programs. As a result, "many schools don't have the resources they need" to meet the lofty goals of NCLB, complains American Federation of Teachers President Sandra Feldman, who predicts the law will become a major issue in the 2004 Presidential campaign.

Public colleges and universities, which serve 80% of college students, are being hit even harder. Indeed, many states are actually cutting higher-ed appropriations. That has forced four-year public universities to hike tuition an average of 14.1% in the current academic year—the biggest real increase in at least 30 years….

     Who are the only ones who will be able to finance an advanced education in our country’s future? The sons and daughters of the established wealthy. Again, the working-class makes all the sacrifices, and get very few of the benefits.

     The absurdity of globalization continues.

From Business Week, January 12.

Heavy Manufacturing: Steeling Themselves For More Hardship

Except for metals, which benefited from tariffs, factory demand remains slack
While overall hiring is up slightly, thousands of jobs will be cut

… The tariffs on steel imports that were recently lifted to avoid reprisals from Europe apparently did their job over the past couple years. Steel producers got their shops in order and late last year hiked prices by 20%—their second major boost since mid-2003. Still they keep taking orders. Nucor Corp., for one, is booked solid into February….

All well and good, until you compare conditions with the late 1990s. U.S. output of most industrial goods has fallen so far since then that it could take years of 4% gains to soak up the surplus capacity. But there's slim chance of that happening. The outflow of manufacturing to low-cost countries continues unabated, putting pressure on stay-at-home outfits to pack up and move, too—or shut down. And with foreign competition keeping a lid on prices, U.S. factory profits are being squeezed dry by higher energy costs.

The same goes for manufacturing employment. While overall hiring began edging up in 2003, the sector had lost jobs every month for more than three years running—a cumulative loss of 2.8 million jobs since mid-2000. That's roughly 17% of manufacturing's total workforce at the start of the downturn. David M. Huether, chief economist at the National Association of Manufacturers, reckons half those factory jobs are gone forever. Indeed, some outfits, such as 3M, are still cutting. "Everyone is getting all excited about the economy," says 3M CEO W. James McNerney Jr. "I'm stopping a little short of being euphoric."

Even two years of rising gross domestic product have brought only marginal improvements, so far, to basic manufacturing. That 4% uptick predicted by will help brighten the outlook for this year. But the good times look like they're a thing of the past….

     As BW itself notes: tariffs work, just as they saved our steel industry.

     But, given the power of Republicans and conservative Democrats, “the good times look like they're a thing of the past.”

     Want to know why our medical system is broken? Check out the following for one of the biggest reasons.

From Business Week, January 12.

Health Care: The Patient Will Live, But...

Employers and consumers will continue to get hammered by rising premiums
But health-care costs will rise a bit more slowly, which is good news for insurers

…Yes, medical costs will continue to rise, and at a rate considerably faster than that of overall inflation. But a shift toward cheaper generic and over-the-counter drugs, coupled with lower hospital use, caused health-care inflation to slow in 2003, and the trend will continue this year. Total national spending on health care will increase by about 7% in 2003 and will do the same in 2004, according to the Centers for Medicare & Medicaid Services. Not insignificant, granted, but at least it's less than the roughly 9% gains logged in each of the prior two years. Health-care spending in just about every category is expected to rise at the slowest rate in the past five years.

That's good news for health insurers, since they will be able to push through premium increases that will more than compensate for the higher reimbursements they must shell out for drugs, hospital procedures, doctors fees, and the like. Hospitals, though, will have a tough time of it, just as they did the year before and the year before that. They are still caught between the high cost of serving the nation's 43 million uninsured and pressures from Medicare and other insurers looking to reduce payouts….

That's certain to accelerate the trend toward shifting costs to employees. Another company survey by Mercer Human Resource Consulting LLC found that 25% of employers plan to increase worker contributions for health plans in 2004, while 23% will reduce benefits. However, this cost shift will almost certainly force some employees to join the ranks of the uninsured because they can no longer afford coverage, predicts the nonprofit Center for Studying Health System Change in Washington. And that in turn will contribute to overall health-care inflation.

The insurers themselves are insulated from all this pain. When UBS Warburg analyst William McGeever issued a report on the managed-care industry in mid-2003, he titled it Vital Signs as Strong as Ever, and the diagnosis still stands. He expects medical costs for insurers to increase by some 11% in 2004, after 12.5% gains the prior two years. But premiums charged by health maintenance organizations should increase by 13% to 14% this year, after 15% hikes in 2003, more than offsetting higher costs. Also, the Medicare reform bill that went into effect on Jan. 1, 2004, gives private insurers the opportunity to compete with Medicare, opening a new market….

Negotiating Clout

This steady premium acceleration is due to quickly dwindling price competition in the industry. Consolidation has swept over insurers the past few years, capped by the October, 2003, announcement that Anthem Inc. will acquire WellPoint Health Networks Inc. in a $16.4 billion deal that will create the nation's largest health insurer. On the same day the current largest insurer, UnitedHealth Group Inc., said it would acquire Mid Atlantic Medical Services Inc. for $3 billion.

The wave of mergers and acquisitions will likely continue, with WellChoice Inc. and Cigna Corp. widely mentioned as the next potential targets. That gives the few remaining players unprecedented clout in negotiating with customers and hospitals. "This industry is basically an oligopoly, and that means health plans have the ability to pass along cost increases to employers and employers can't do much about it," says McGeever….

     If politicians read articles like this, and don’t see a need for a government-funded single-payer system—instead of greedy, unprincipled insurance corporations—they’re on the take and should serve jail time.

Week of January 5

     Check out the following excerpt for a case study in how entire industries in the U.S. become corrupt. It’s the classic description of how greed and dishonesty can organize itself to drive out principle and a commitment to ethics.

From The Wall Street Journal, January 7.

Bogle: The Man Who Told You So

Vanguard Founder Finds Support
For Criticism of Mutual Funds,
But Cold Shoulder From Industry

In the scandal-tossed mutual-fund industry, legal charges are flying and corporate heads are rolling. Regulators and legislators are scrambling to craft quick overhauls to stop improper trading practices and other problems. And John C. Bogle, a figure in the fund industry for more than five decades, is simply having a blast.

"Jack" Bogle, the founder and former chairman of Vanguard Group, the No. 2 fund company after Fidelity Investments, has spent decades razzing other fund executives about their overblown fees and shrunken sense of duty.

His tirades over the years earned him a cold shoulder from fund-industry colleagues, while his holier-than-thou attitude earned Mr. Bogle the derisive nickname St. Jack..

But now, at age 74, almost eight years into the "extra" time granted by a heart transplant, he is finding new support for his views as he flits from congressional hearings to speaking engagements to at-least-weekly television appearances….

One place where Mr. Bogle still stacks up as less of a hero is within the fund industry he helped create. Other fund executives long have grumbled that Mr. Bogle's lecturing is all a self-serving pitch for Vanguard's low-cost index funds, which simply match the performance of a market measure such as the Standard & Poor's 500-stock index. Former Securities and Exchange Commission Chairman Arthur Levitt, a Bogle fan, says the industry views him as "a traitor to his class."

The chill continues today. Despite Mr. Bogle's Mr. Clean status, fund-company leaders making up the Investment Company Institute trade group haven't sought out his insights or requested his participation in post-scandal task forces. Mr. Bogle, who served as the ICI's elected chairman decades ago, says he "can guarantee" the industry won't come calling: "They would rather die," he declares tartly.

Not only hasn't the ICI asked Mr. Bogle to speak at its annual gathering since 1990, but it turned aside his request to speak in 2001, his 50th anniversary in the fund business, he says….

     John Bogle is almost the definition of a true leader. He’s definitely the exception and not the rule. In today’s corporate America, it seems that anything goes, as long as it results in the enrichment of investors and senior executives.

     Bogle’s opposite—the “Destructive Achiever” (DA)—is in ascendancy everywhere. Throughout our country, DAs are becoming dominant, as top executives compete with each other in doing whatever it takes—even illegal activities—to increase profits. (For a detailed discussion of DAs, check out: Proactive vs. Reactive Management.)

     Remember: DAs always rise to the top if those in control (investors, boards of directors, etc.) don’t make a conscious decision to select only those with moral values for leadership. Since today's only criterion for promotion, or for the selection of a Chief Executive Officer, seems to be profit—moral standards always come out second.

     It’s especially important to remember that voters also must take care that the ones they elect to office also have moral standards, and truly work for the interests of the general public, and not just the interests of the wealthy and powerful. This automatically means that elected leaders in government must take seriously the need for sensible regulations of corporate executive behaviors.

     An editorial in The Wall Street Journal deals with the most important economic issue facing our country today: globalization.

     As usual, the Journal supports any economic policies that benefit investors, the established wealthy and the hyper-educated—at the direct expense of workers, the uneducated, and the disadvantaged.

From The Wall Street Journal, January 6.


Creative Jobs Destruction

Move over, China. The anti-globalization crowd is discovering a new threat: India. The transfer of U.S. information technology jobs to the Subcontinent has got even highly paid white-collar workers worried that their livelihood is under threat….

So at first glance this looks like a win-lose proposition, with India gaining jobs and the U.S. shedding them. Unemployment among U.S. software programmers is now above 7%, compared with 1.6% two years ago. Part of that is due to the aftermath of the dot-com bubble. But let's not shrink from the truth: Jobs are migrating to India….

What's important to understand, however, is that the labor market for programmers and software engineers is highly complex. You can't simply substitute one worker for another. At the bottom end, some coding has become comparable to semi-skilled labor; some training is required but not a lot of brain power. These are the jobs moving to India….

In economic principle, all of this is little different from the "hollowing out" of low-skilled manufacturing jobs during the 1980s. Now it is happening in services. The result is another inevitable round of creative destruction, in Joseph Schumpeter's famous phrase, that will see some current jobs vanish while increasing productivity in ways that will assist companies in creating new jobs we often can't yet imagine….

The alternative is to do what it takes for Americans to remain innovative and create the next wave of wealth-creating technology and ideas. Improve K-12 education, especially in the inner city, maintain an open immigration policy so the world's brains can live in the U.S., reform the tax code and fix the legal system. The goal isn't to steal jobs from one country or another but to help both the U.S. and the world get richer.

Note who the Journal itself cites as the losers in globalization:

  • “At the bottom end, some coding has become comparable to semi-skilled labor”

  • “In economic principle, all of this is little different from the ‘hollowing out’ of low-skilled manufacturing jobs during the 1980s. Now it is happening in services.”

     In other words, it’s perfectly ok for these at the bottom—or even the middle—of America’s economic distribution to lose their jobs and their livelihoods, if those at the top can enjoy huge incomes and aristocratic standards of living.

     Also note that the Journal’s comment that “The goal isn't to steal jobs from one country or another but to help both the U.S. and the world get richer” isn’t quite accurate. The way globalization is going, the real goal is for the rich in the U.S. and the developing countries get even richer—while the workers worldwide get screwed.

     And it’s all justified under the banner of “creative destruction.” Those who are enamored with this concept should read the book, Creative Destruction, by Foster & Kaplan. These brilliant experts noted that “Never again will American business be as it once was. The rules have changed forever. Some companies have made the crossing. …Enron made strong progress by transforming itself from a natural gas pipeline company to a trading company.” So much for creative destruction.

     It’s time for a political change folks. Republicans and conservative Democrats have done just about all the damage to our economy that we can stand.

     This Monday, one of our premier right-wing economic apologists for the wealthy and powerful gave us a typical justification for destroying the incomes of working-class Americans. Sometime in the distant and vague future, workers will not only be making good incomes, they will also be getting “psychic income.”

     Of course, investors, top corporate executives, and the new crop of those educated in the new technologies will become a new class of aristocracy—while those in established industries and professions who are in their 30s, 40s, 50s, and 60s will lose their livelihoods.

From Barron’s, January 5.

Tomorrow's Jobs

Despite the rise of offshore labor, Americans will have plenty of work


THE OLD, TIRED IDEA that America has only a finite number of jobs—and that we must guard them zealously against raids from cheap foreign labor—has been making a remarkable comeback. The only difference is that its upside-down view of the economy has plumbed new depths.

In addition to protecting factory jobs, now there's a move to circle the wagons around a new target—white-collar work performed by the folks with advanced degrees….

Over the next 10 to 20 years, in fact, skilled jobs will be on the rise as never before. They will proliferate in nursing, computer science, entertainment, financial services and entire fields that may now be just a gleam in the eyes of the innovative. The upshot: Today's toddlers and teens will be handed enormous opportunities for challenging and creative careers. There should be plenty of work for older folks, too….

This second revolution will be powerfully reinforced by our fifth and final trend: Spending on intangible capital, or IC—assets like patents, copyrights, brand names, trademarks and trade secrets—will continue to grow faster than outlays on tangibles like structures and equipment. That's because of both a boom in products developed by science and a proliferation of niches in the global marketplace….

…expect an increase in the average age of retirement, and a huge expansion in temporary and part-time work done by seniors. Firms may spring up that specialize in placing older people….

The main cause of past and future job declines is the unceasing growth of productivity driven by information technology….

Of course, other kinds of knowledge work—ranging from surgeon to teacher to computer programmer and financial planner, not to mention the many jobs yet to be created—can also be rich in psychic income. Contrary to the alarmism borne of old superstitions, jobs like these should be even more abundant in America's workplace of tomorrow.

     What’s not discussed in this article: Terminated factory workers can’t easily go into the jobs of the future—“nursing, computer science, entertainment, financial services,” and so on. They simply trickle down to lower-paying jobs, and work longer and retire later. As even Epstein notes: “expect an increase in the average age of retirement, and a huge expansion in temporary and part-time work done by seniors. Firms may spring up that specialize in placing older people.”

     Also not discussed: In the 1930s when we had high levels of unemployment and increasing productivity, we reduced the workweek—by legislation—to 40 hours. No one is even considering such a radical idea today. In fact, under current corporate moral standards, if productivity increases, workers are fired and those who remain work even harder.

     After all, Republicans and conservative Democrats don’t design economies to benefit workers. Workers are simply raw material to be used up and discarded for the enrichment of their betters.

     Corporate morality is an obvious oxymoron. Ethics have no place in corporate decision making. If an action is legal—and it is profitable—a corporation will take it, no matter what the effect is on its lower-level employees, the public or their customers.

     As the following excerpt demonstrates, some (most? all?) corporations today will even go beyond what would be considered legal to increase profits and incomes to top executives.

     And remember, Pricewaterhouse is not considered to be one of our fly-by-night out-of-the-mainstream corporations.

From The Wall Street Journal, January 5.

Court Files Offer Inside Look
At Pricewaterhouse Billing Clash

The Accounting Giant Kept
Rebates on Client Travel;
Rivals' Similar Practices

In early 2000, Neal A. Roberts discovered that his employer, PricewaterhouseCoopers LLP, was pocketing millions of dollars a year from what he considered to be a dubious billing gimmick: The accounting giant obtained large rebates on airline tickets used for client business, but didn't pass along the savings to its clients. Travel expenses had become an undisclosed source of profits at PricewaterhouseCoopers, and unknowing clients paid the tab.

After objecting within the firm with only partial success, Mr. Roberts helped spark private lawsuits and a federal civil investigation of the rebate gambit. One of those suits, which is pending in state court in Texarkana, Ark., has resulted in the public disclosure of thousands of pages of internal PricewaterhouseCoopers documents, as well as government transcripts of phone conversations Mr. Roberts had with co-workers.

This record provides a rare inside look at how one of the nation's biggest professional-services firms wrestled with allegations of financial impropriety, changed its policies for the future, but chose to keep past rebates—and keep clients in the dark….

     Again, The Wall Street Journal makes a front-page case for the need for governmental regulations and oversight of American corporations. We certainly can’t count on the corporations themselves to look out for the interests of society.

     Note: this is a brief excerpt of a very long article and is for the purpose of criticism only. Those who would like to read about the extensive rationalizations, mealy-mouthed justifications, and outright fraudulent reasoning behind today’s pursuit of greedy excess—should read the original.

     So much for “states’ rights.” Whenever state banking regulations (or any regulations) are more powerful than the Federal Government’s, banking corporations make sure their representatives in Washington clamp down on them.

     You just can’t have upstarts insisting on actually protecting consumers and threatening usurious profits of America’s financial institutions.

From The Wall Street Journal, January 8.

Critics Cry Foul
Over New Rules
On Bank Review

A federal agency issued new rules allowing it to override state authorities as the sole regulator of nationally chartered banks, prompting outrage among opponents who say the move will cause more consumers to suffer at the hands of their lenders….

The OCC, under Comptroller John D. Hawke, sought Wednesday to fend off criticism from consumer advocates that it favors banks over consumers. Mr. Hawke asserted that his office is far better positioned than individual states to fight abusive lending practices while assuring that loans are available not just to the relatively well off but also to borrowers from all walks of life….

That assertion was panned by consumer advocates as well as by state officials. These critics have long said federal regulators such as the OCC are far too lenient with large financial institutions, doing too little to stop practices that particularly take advantage of poor and often financially unsophisticated borrowers.

The move is an "attempt to shield national banks from important state consumer-protection laws, and to entice state-chartered banks to obtain a national charter and seek the immunity that the OCC is offering." said New York State Attorney General Eliot Spitzer. "By giving banks a safe harbor, the OCC has a chilling effect on state laws." Mr. Hawke dismissed Mr. Spitzer's criticism of the OCC's record on consumer protection. "We were working on behalf of consumers long before he came to office and will be doing so long after he leaves," Mr. Hawke said.

The development is the latest example of the growing tension between state and federal regulators over how to govern the ways in which large and growing financial institutions interact with consumers. Federal regulators have been at odds with their state counterparts over a number of recent issues such as the regulation of mutual funds and brokerage-firm research….

Consumer groups said the move by the OCC effectively takes away the power of states to regulate the local operations of the biggest banks with some of the most powerful consumer-lending businesses. Of most concern to consumer groups, the OCC said its new rules govern not only the local offices of bank-holding companies but also the operating subsidiaries owned by those banks.

Those subsidiaries include the mortgage providers that large banks have been acquiring in recent years. Some of these mortgage units have been criticized for abusive lending practices, such as targeting unsophisticated borrowers with high-interest loans backed by housing, and then foreclosing on the home when the borrower defaults….

     Notice the references to “mutual funds and brokerage-firm research”? The Republican national politicians don’t even want to allow the states’ stronger regulations to hamper the scandal-ridden mutual fund and brokerage industries in their pursuit of profits.



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