The Conservative Financial Press

      The news items in this file come from our most prestigious conservative financial publications: The Wall Street Journal, Forbes, Fortune, Barron's and Business Week.

Note: Because of other priorities, this file has not been updated for the past two years, and you’ll note a gap in coverage between July, 2005 and September, 2006, when the author went through an extensive chemotherapy treatment.

     However, you’ll find that the regularity and number of similar news items, during the periods covered, demonstrate beyond any doubt that conservative business persons and politicans have to know that:

  1. Conservative politicians deliberately enact legislation that is designed to benefit corporations and the established wealthy, even though

  2. They also know how their policies hurt workers, the disadvantaged and society-at-large, and they even

  3. Proclaim to the public how virtuous and deserving they are for being so "successful."

     In addition, bear in mind that articles just like these have been appearing in our most prestigious conservative financial publications over the past 25 years (as documented in the Class War in America book).

     Note #2: 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.

Economic absurdities that
Democrats must expose:

...because it's wrong to penalize success and hard work.

...therefore, we should eliminate the capital gains tax.

...After all, they came from, and understand business.

...even though it is based on pitting the worlds' workers against each other.

...union bosses are only out for themselves.

...and the more the rich have, the more will trickle down to everyone else.

...Democrats are communists, or at least, socialists at heart. when we tax wealthy investors, we lose jobs. investors, not workers, create wealth. we should give them all the tax breaks possible.

...Democrats just want to tax and spend today.

General Issues:

...check out this 2-minute video.

...It's a mountain, and a terrible defense of globalization.

...for those of Indonesia, Mexico, China and India.

...and how not to do it again.

...and the "crisis" is just a ploy by those who want to destroy it.

...Republicans' most important propaganda technique.

...and get the media on your side

This site:

    While increasing numbers of Americans can no longer afford health insurance, and must work two or three jobs per family to have a decent standard of living, America’s new aristocracy continue to make absurd amounts of money.

From The Wall Street Journal, March 20, 2007.

Bank of America CEO
Is Paid $27.9 Million

Bank of America Corp. Chairman and Chief Executive Kenneth D. Lewis received a pay package valued at $27.9 million in 2006 and realized a gain of $77 million by exercising stock options in a year when the company's shares surged more than 13%….

In determining Mr. Lewis's compensation, the Bank of America board's four-person compensation committee said Mr. Lewis led the bank to higher-than-expected revenue of $74.25 billion and net income of $21.64 billion, surpassing internal goals.

Bank of America integrated its acquisition of credit-card issuer MBNA Corp. last year, lifting net income and revenue.

    Bear in mind that Mr. Lewis’s income is merely an index of the amount of money that the Bank of America is making from gouging its customers. The higher its interests on its credit cards, the greater the return to shareholders and the bigger the CEO’s take.

    As historians Will and Auriel Durant point out in their book, The Lessons of History, bankers always rise to the top of any society. People who control money and its flow will always be richer and more powerful than people who simply work for a living.

    Here’s another of Wall Street’s justifications for unrestrained greed, and a defense of the rich and powerful who get rich at the direct expense of those who actually work for a living.

From The Wall Street Journal, March 19, 2007.


What's Wrong With Billionaires?


The world's super-rich are getting increased attention of late, courtesy of a new report in Forbes Magazine listing the world's 946 billionaires. The list starts with Bill Gates (worth $56 billion), and reaches down to those with "just" one billion, such as Arkansas chicken magnate Donald Tyson.

The wealth of these people is so vast that it is difficult to comprehend. The New York Times helps out by noting that Larry Ellison, founder of Oracle and the eleventh-richest man on the list, would need to spend $30 million per week, or $183,000 per hour, just to avoid increasing his wealth….

What people hunger for is not money per se, but success at creating value. Money just tends to come along for the ride….

But there are good reasons to hope they don't wake up anytime soon to the reality that earning another billion is less satisfying than enjoying the morning sun.

First, the super-rich have the ability -- and increasingly the willingness -- to be super-givers as well. Bill Gates is an obvious example: Through philanthropy, he has turned his attention to giving away the vast wealth he has accumulated, proving that giving money can signify as much success to a person as accumulating it can.

Second, as long as a fortune is earned (as opposed to stolen, squeezed from governments or otherwise extorted from citizens), pecuniary acquisitiveness is directly related to the comfort of others. Larry Ellison's company has created tens of thousands of jobs, introduced technology that has benefited all parts of the economy and paid billions in taxes. When Mr. Ellison measures his success with money, he spills opportunity and economic abundance onto all of us, directly or indirectly.

Better than convincing today's 946 billionaires (and the rest of us) to stop chasing filthy lucre, or looking for creative ways to confiscate it, we should understand this wealth as an enabler of everyone's success, and through increasing philanthropy, as the fuel for social good.

    Key absurdity above: “as long as a fortune is earned (as opposed to stolen, squeezed from governments or otherwise extorted from citizens), pecuniary acquisitiveness is directly related to the comfort of others.” As you’ll read throughout this web site, you’ll see the extent to which the rich and powerful get laws enacted that allow them, in effect, to squeeze governments, extort, and steal (through intimidation and raw power) from working-class citizens of the world.

    And when they “give away their wealth,” they replace society’s needs with their own priorities. Instead of a democratically elected government using taxes to address its most urgent needs, the wealthy pander to their pet projects (opera, art projects, obscure foreign charities, etc.).

    If you want to know what’s happening in the world economy—and why the income and wealth gap between the rich and middle-class is exploding—all you have to do is connect the dots from these four excerpts from this week's conservative financial publications.

    The two Forbes articles describe the class of people who are actually benefiting from globalization: the world’s billionaires (and multi-millionaires, who are not described in the articles). So, while the peasants in China, India, Russia, Indonesia, etc., are rioting because of their deplorable conditions, those at the top are becoming a new class of royalty.

    The Business Week article actually describes how the billionaires became billionaires: by refusing to share increases in worker productivity with them. These greedy barbarians want it all, and don’t want to share any of it, even though they aren’t doing the actual work of providing the products and services that the world consumes.

    The Barron’s article is simply another in the endless series of articles that describe our federal government’s official policy of keeping working-class wages from going up, even when corporate profits and investor incomes are skyrocketing.

The following two excerpts are from Forbes, March 26, 2007.

The World's Richest People

Two Decades of Wealth

… More than a catalog of individual wealth, the global rich list reflects the changing nature of the world economy. Since it began, old world power players like Japan and Germany-- along with the billionaires who dominate their businesses--have given way to the latest global hotshots such as booming China, India and Russia.

New fortunes are also emerging in developing markets like Kazakhstan, Ukraine and Romania.


The World's Billionaires

… Forbes pinned down 946 billionaires, including 178 newcomers and 17 people who climbed back into the ranks after being absent for a year or more. Two-thirds of last year's billionaires are richer. Only 17% are poorer, including 32 who fell below the billion-dollar mark.

The billionaires' combined net worth climbed by $900 billion to $3.5 trillion. That equates to $3.6 billion apiece.


From Business Week, March 19, 2007.

The Real Threat Isn't Housing

If productivity growth keeps sliding, a widespread crisis could be next

…the biggest danger is not the housing decline, however painful it might be. Instead, an 18-wheeler that threatens to flatten the economy and the financial markets is barreling at us from another direction altogether: weak productivity growth.

On Mar. 6, the Bureau of Labor Statistics announced that nonfarm business productivity rose by only 1.6% in 2006, its smallest gain since 1997. And more bad news was buried deep in the report: Productivity gains for 2005 and 2004 were revised down as well….

Consider the facts. Since 1995, when the New Economy and the information revolution really took hold, gains in productivity (output per hour) have averaged about 2.7% per year. That's a full percentage point higher than the preceding two decades….

In short, the productivity acceleration of the past 10 years has created a total of $6.4 trillion in extra output since 1995, measured in 2006 dollars. That helps explain why American households, taken together, are so much richer than they were: Household nonhousing net worth, adjusted for inflation and federal debt, has soared by almost $14 trillion over the same period, despite the dot-com debacle that crashed the market….

Another disturbing indicator would be an unexpectedly high increase in jobs over the next few months. If companies run into productivity problems, their first response will be to hire more workers to meet demand. Finally, the biggest red flag would be a shortfall in corporate profits that lasts more than one quarter, just as a precursor to the New Economy was a sharp rise in profits.


From Barron’s, March 12, 2007.


Bernanke's Treatment Seems to Be Working

YOU CAN HURT IT, BUT YOU CAN'T KILL IT. Based on February's employment numbers, released Friday, the hurt that has been inflicted on the economy so far is just what Dr. Bernanke had ordered.

The Federal Reserve Chairman noted with some satisfaction last month that "the U.S. economy appears to be making a transition from the rapid rate of expansion experienced over the preceding several years to a more sustainable... pace of growth."… Based on the unemployment rate's February reading, in fact, the Fed chairman would probably rest easier if it ticked up a bit from here. Not only did the rate of joblessness print at 4.5% in February -- the low end of Bernanke's projected range -- the far less volatile six-month moving average also ran at 4.5%, a 6½-year low.

By almost any measure, then, the unemployment rate has not stopped falling….

The Fed chairman would like to see a stable-to-higher unemployment rate, out of concern over inflation -- the central worry of any central banker….

Growth will be "more sustainable," in the Fed chairman's words, if it remains moderate enough to keep wage and price inflation at levels that do not require him to break the back of the expansion by hiking the short-term interest rate….

    Key statement above: “New fortunes are also emerging in developing markets like Kazakhstan, Ukraine and Romania.” Meaning: the U.S. is giving other countries our industries to supposedly benefit the world economy—but most of the benefits are going to those countries’ wealthy and powerful, and their workers are still leading miserable lives.

    Key statement #2: “the productivity acceleration of the past 10 years has created a total of $6.4 trillion in extra output since 1995.” Meaning: while worker productivity was exploding, workers’ wages stagnated—and the world wealthy and powerful became incredibly more wealthy and powerful. It’s all about political power, folks, and the world’s wealthy have it all today.

    Key statement #3: “Growth will be ‘more sustainable,’ in the Fed chairman's words, if it remains moderate enough to keep wage and price inflation at levels that do not require him to break the back of the expansion by hiking the short-term interest rate….” Meaning: if workers’ wages start going up, it will be time for the Fed to raise the prime interest rate to stop such nonsense. According to today’s values, capitalism is supposed to only benefit investors and the wealthy, not working-class citizens.

    If I were to say that our federal government should enact policies that would keep the incomes of doctors, or chief executive officers, or lawyers from going up—most people would call me a communist, or at least, a socialist.

    So what do you call those in our federal government who actually now pursue a policy that keeps working-class incomes from going up? (“Barbarians” might apply.)

    Well, that’s exactly what we have now, even at a time when the wealth and income disparity between the wealthy and the working-class is continuing to explode. The Fed’s commitment to manage the prime interest rate—to keep working-class wages from going up—is the basis for the following investment advisory column by Barron’s Randall Forsyth.

From Barron’s, March 5, 2007.

T-Notes Gain on Marts' Pain


…This week's focus will remain on the volatile markets, perhaps even overshadowing the monthly employment report, which usually is the object of traders' obsession. Economists' consensus forecast is for another modest rise in payrolls of about 100,000 for January after the 111,000 reported for December.

The unemployment rate is expected to hold steady at 4.6%, a low level of joblessness that is likely to keep the Fed on hold, regardless of how the markets gyrate.

    Key statement: “…4.6%, a low level of joblessness that is likely to keep the Fed on hold.” Meaning: If there are enough jobless applicants out there keeping wages down, the Fed won’t have to raise the prime interest rate and slow down the economy—to stop wages from going up (and enhancing corporate profits).

    For more explanation about how the Fed and our government pursue economic policies that keep working-class wages from going up, check out the file The income gap is no accident.

    The following excerpt is just another example of the zero-sum nature of wealth. We live in a world of auction markets, and the more the wealthy have, in effect, the less the poor have.

From The Wall Street Journal, March 5, 2007.

New Exotic Focus
For Hedge Funds:
Uranium Market

Speculators Drive Up
Price, Irking Utilities;
Adit Capital's Big Bet

In a new type of nuclear-arms race, hedge funds and other institutional investors in search of higher returns are competing with energy companies to amass scarce fuel-grade uranium, hoping to profit from revived interest in nuclear power.

The intense quest for uranium by speculators has sparked a debate over private investors driving up the price and increasing the scarcity of the world's most sensitive natural resource.

Since investors first delved into the market two years ago, the price of processed uranium yellowcake powder -- the most commonly traded form of processed uranium -- has skyrocketed more than fourfold, from about $21 a pound, traders say. They say uranium prices climbed to $85 from $75 in February due to bidding for supplies offered by a tiny mining company in Corpus Christi, Texas, Mesteña Uranium LLC. The privately held company regularly includes hedge funds and other speculators in sales.

Uranium isn't traded on any exchanges. The somewhat infrequent sales of the commodity in the open market are private, so the price depends on the terms of any given transaction.

…The market represents the latest corner in which hedge funds -- private partnerships that cater to wealthy investors and large institutions -- are seeking outsize returns, an increasingly challenging task as the number of funds multiplies.

Many funds say they are holding their uranium off the market because they expect the price to climb.

"They sweep the market clean. Every pound they can find," said nuclear-fuel broker Kevin Smith, who connects buyers and sellers of uranium for White Plains, N.Y., commodities-brokerage Evolution Markets….

    In this case, the wealthy are the hedge funds and other institutional investors, and the “poor” are actually quite well-to-do, the utilities and other buyers of uranium.

    For more discussion about this issue of wealth and auction markets, check out Wealth is a zero-sum game.

    As you read the following excerpt, remember that this is the country that our American investors have given our industries and even our research and development secrets and facilities.

    And all because they could become fabulously rich in the process—while destroying the living standards of working-class Americans.

From The Wall Street Journal, March 5, 2007.

China's Military Buildup Spurs Concerns

China says it plans to boost military spending by nearly 18% this year -- the largest increase in a decade -- in a move that could raise tensions with the U.S.

A spokesman for the National People's Congress, which is set to approve China's annual government budget this week, said China is trying to strengthen its armed forces in step with its rapid economic growth. He added that the increase would fund improvements in military technology as well as raise soldiers' pay.

The growth in China's publicly disclosed defense spending -- which many analysts believe understates the total actually devoted to military programs -- has drawn criticism from top U.S. officials, who question China's intentions.

The following excerpt is a classic example of three things:

  1. The cold-blooded nature of our government’s attitudes toward the living standards of working-class Americans,

  2. How our federal government deliberately keeps wages of working-class Americans from going up, and

  3. How globalization and other economic weapons have been effective in destroying working-class wages.

From The Wall Street Journal, February 26, 2007.

Policy Makers
At Fed Rethink
Inflation's Roots

Low Unemployment
Now Is Believed to Play
A Less Important Role

For decades, a simple rule has governed how the Federal Reserve views the nation's economy: When unemployment falls too low, inflation goes up, and vice versa. But Fed officials have rethought that notion.

They believe it takes a far bigger change in unemployment to affect inflation today than it did 25 years ago. Now, when inflation fluctuates, they are far more likely to blame temporary factors, such as changes in oil prices or rents, than a change in the jobless rate….

This new view of the economy, formed in recent years, helps explain why the Fed stopped raising interest rates last summer while core inflation, which excludes food and energy prices, was rising. And it helps explain why the Fed is reluctant to cut rates now even though it sees inflation edging lower over the next two years….

In the late 1950s, economists discovered a tendency for inflation to rise when unemployment was low and to fall when unemployment was high. At lower unemployment rates, they concluded, companies paid more to attract scarce workers and recouped the higher wage costs by raising prices….

While a given drop in unemployment is less likely to spark inflation, the potential is still there. The Fed's staff estimates it takes up to twice as much additional unemployment to achieve a percentage drop in inflation as it did before 1984. "Imbalances between demand and potential supply [may] be slow to show through convincingly to inflation, but when they do, they may be costly to correct," Fed Vice Chairman Donald Kohn said in late 2005.

That's one reason the Fed, though it expects core inflation to ease this year, isn't relaxing. With unemployment currently 4.6%, at or below the Fed's view of its natural rate, inflation may edge up after the temporary impacts of energy and rent subside. That could require the Fed to raise interest rates enough to push unemployment up sharply and bring inflation down.

    For more discussion about how the Fed deliberately keeps wages from going up, check out the file The income gap is no accident. An entire chapter of the Class War in America book is also devoted to the subject.

    A depressing statement from the above excerpt: “The Fed's staff estimates it takes up to twice as much additional unemployment to achieve a percentage drop in inflation as it did before 1984.” In other words, American workers are in much worse shape than before 1984 and globalization. They’re so powerless to negotiate for higher wages that they won’t cause “wage inflation” unless unemployment gets much worse.

    And, then, if wage inflation should occur, the Fed might have to “push unemployment up sharply [to] bring inflation down.”

    How’s that for family values?

    The following two excerpts are just more in the endless series of articles that speculate about the best ways the Fed can maintain a “goldilocks” economy. That’s an economy that is growing fast enough for continued high corporate profits, but not so fast that working-class wages start to go up.

    Again, most readers of our conservative financial press seem oblivious to the cold-hearted nature of this kind of discussion.

From The Wall Street Journal, February 2, 2007.

Fed's Inflation Dilemma

WASHINGTON -- Federal Reserve officials, in debating whether to adopt an explicit target for inflation, have discussed whether an implicit, or "soft" target, might be preferable….

The Federal Reserve Act defines the Fed's goals as both price stability and maximum employment…..

"There is a little bit of concern that the mandate doesn't extend to picking any particular number," said Ken Kuttner, an economist at Oberlin College in Ohio who wrote about inflation targets while on the staff of the Federal Reserve Bank of New York. "There would naturally be people saying, 'Hey, I'm reading your mandate here guys, give us your [target] number for full employment.' And nobody wants to do that. A lot of the gains from ambiguity have to do with finessing that kind of situation."…

[I]f a big shock, such as a jump in energy prices, drove inflation up sharply, it could take more than four years to get it back to the target, unless the Fed was willing to drive unemployment sharply higher. Another is that the forecast would include unemployment, and Congress might see that as an implicit target for which the Fed should be held accountable….


From Business Week, February 12, 2007.

Bernanke's New Burden: Tight Labor Markets

…THE LABOR MARKETS are fast becoming the Fed's central focus, and they are at the heart of both the economic and the political stories. Last year the Fed forecasted the economy would slow enough to allow inflation to ebb. It got that part right. Indeed, the Fed delivered a much more upbeat appraisal of both economic growth and inflation in its statement following the Jan. 31 rate decision. However, last year the policymakers also expected slower growth to unwind some of the tightness in the labor markets and foster confidence that rising labor costs would not reignite inflation. That part, they missed.

Last July the Fed projected the unemployment rate, which began the year at 4.7%, would end the year in the 4.75% to 5% range. However, the rate fell further, hitting 4.5% in December, a sign that job markets were getting tighter not looser….

The Fed's potential problem in 2007 lies on the flip side of strong labor income: higher labor costs for businesses. The Fed's concern is that the economy will be strong enough to allow companies to pass their rising costs on to consumers in the form of higher prices. The minutes from the Fed's Dec. 12 meeting made a special note of rising labor costs as an inflation risk….

THE FED WILL come under greater political scrutiny in Bernanke's second year, especially if the policymakers feel compelled to lift interest rates due to tight labor markets….

    Key statement: “The Federal Reserve Act defines the Fed's goals as both price stability and maximum employment.” Meaning: let the economy create as many jobs as possible, but not so many that wages start to go up (which conservatives call “wage inflation.”).

    And if wages start to go up, the Fed may have to “drive unemployment sharply higher.”

    Notice that the Fed is never concerned about CEO wage inflation, real estate inflation, or stock market inflation. It is only concerned about WAGE inflation, which primarily benefits America’s actual workers.

    For more discussion about how our government maintains the income gap between the rich and the working poor and middle-class, check our the file: The income gap is no accident.

    Steve Forbes, editor-in-chief of the magazine his grandfather started, is one of the most vocal critics of “big government.” Of course, to him, big government is the federal government, and his main objection to it is that it sometimes keeps America's new aristocracy from running roughshod over the middle- and working-classes. They do this by pitting states against each other in providing the worst protections of workers.

    He should occasionally read the news stories in his own magazine.

From Forbes, February 12, 2007.

Shell Games

With no federal oversight, the states are helping to shelter crooks, money launderers and, possibly, terrorists.

…Once ideal vehicles for tax evasion, shell companies—that is, corporations with no operations, no employees and no physical assets—have lately become shelters for far more nefarious criminal activities, says Stuart Nash, an associate deputy attorney general at the Justice Department.

Crooks benefit in several ways. A U.S. company address lends credibility in global trade and painless access to American bank accounts. And thanks to loose laws of incorporation in many states, it's easy for offenders to remain anonymous—and to elude the authorities. Unlike publicly held companies, private entities are not obliged to reveal ownership. And without such information the police come to a dead end, unless they can tease the information they need out of bank records….

The Financial Crimes Enforcement Network, the U.S. Treasury bureau investigating money laundering, says roughly $14 billion worth of suspicious transactions involving private U.S. shells and overseas bank accounts came in from banks from 2004 to 2005, the latest Treasury data available….

State governments provide plenty of cover for bad guys. Every year they incorporate 1.9 million or so private companies, but no state verifies or records the identities of owners, much less screens ownership information against criminal watch lists, according to a study by the Government Accountability Office. "You have to supply more information to get a driver's license than you do to form one of these nonpublicly traded corporations," says Senator Levin….

Why doesn't Delaware crack down on anonymous incorporation? It would be a futile gesture; the crooks would just take their business to Nevada. Also note that chartering out-of-state corporations is a big industry in an itty-bitty state, which brought in $4.6 million a year in franchise fees in 2005 and kept many a lawyer occupied in Wilmington….

Sometimes these schemes imperil strategic interests. Uncle Sam has charged Evgeniy O. Adamov, Russia's former atomic energy minister, and Mark Kaushansky, a onetime Westinghouse engineer, of using a couple of U.S. shells to divert $15 million that was supposed to upgrade nuclear safety at power plants in Russia and eastern Europe. In September Kaushansky pleaded guilty in federal court to conspiracy and tax evasion. Adamov is being tried in Russia….

What's to be done? "The systemic vulnerability we face in the United States from shell companies can only be addressed by Congress through legislation to specifically regulate shell companies," says Dennis M. Lormel, senior vice president of Corporate Risk International in Reston, Va., the former chief of the financial crimes section in the FBI….

    The reality of human behavior demonstrates the need for government, even for our federal government. As this article acknowledges, if the Fed doesn’t do its job, the individual states will compete with each other in attracting business and fees—by lowering standards of the full disclosure that is necessary for law enforcement, and even for our national security.

    Of course, the same principles apply to the ways the states compete for industry by having the worst standards for working conditions, wages, the environment, and so on. Federal minimum standards that apply to our entire country at least minimize this kind of destructive interstate competition.

    For more discussion of the role of government, check out: Why we have government.

    It’s only a matter of time before our three major automakers complete the full cycle of abandoning manufacturing and becoming investment bankers. Conservative economists have long advised the major American automakers to get out of the business of manufacturing, and even assembling, cars.

    The only way they can survive in the global market place is to use their massive financial resources to outsource all aspects of car manufacture and assembly to low cost operators who are either outside the country or who pay their U.S. workers miserably low wages—and without decent working conditions, or decent medical and retirement benefits.

From The Wall Street Journal, January 26, 2007.

Big Three Face New Obstacles
In Restructuring

Ford's Massive '06 Loss,
GM's Accounting Woes
Underscore Challenges

Detroit's big three auto makers spent last year shedding tens of thousands of workers, overhauling their marketing and shaking up their managements. Now, it's becoming clear that even more-drastic action may be needed to turn them around.

Yesterday, Ford Motor Co. announced losses of $5.8 billion for the fourth quarter and $12.7 billion for all of 2006, the deepest deficit in the 103-year history of the nation's No. 2 auto maker. Also expected to report losses for the year are General Motors Corp., which yesterday said it will delay announcing its fourth-quarter financial results, originally scheduled for release Tuesday, and DaimlerChrysler AG's Chrysler Group. That would make 2006 the first year since 1991 that all three companies were in the red.

For all their efforts last year, the three U.S. auto makers continue to labor under heavy cost burdens, including hefty obligations to their union workers. But their real challenge is how to stop burning cash in futile efforts to manage decline. They can no longer rely on the cost-cutting and sales-boosting strategies of the past, such as squeezing parts suppliers for discounts, pressuring dealers to accept excess inventory and demanding higher prices from consumers….

Ford Chief Executive Alan Mulally's efforts to nurse his company back to health are only made tougher by the fact that GM, whose vehicles compete most directly with Ford's, is further along in its turnaround effort. Moreover, in confronting one problem, Mr. Mulally, who has held his job just shy of four months, often risks creating another.

Mr. Mulally [Ford Chief Executive Alan Mulally] is trying, for example, to stem an exodus of management talent at Ford, whose 37,000 salaried workers include about 300 senior officers and about 2,000 director-level executives. He confirmed yesterday that Ford is considering paying bonuses to its salaried workers, something it has done just twice in the past five years.

However, the possibility of bonuses for salaried workers has caused turmoil within Ford's union work force, which has agreed to billions of dollars in givebacks in retiree health-care benefits and substantial changes in work rules to ease the company's cost burden. Those rule changes are expected to save Ford at least $750 million a year.

Mr. Mulally said he "absolutely thinks" he can get the UAW to understand the need for salaried bonuses at the same time he is asking union members to make concessions now and probably later this year when national contract talks begin.

"We are in a turnaround situation and we need the absolute best, skilled and motivated team in all of the positions, and so that is the way we are looking at it," he said….

    Of course, on their way to becoming investment bankers, the top executives make sure that their working-class workers make all the sacrifices, and that they and their immediate subordinates keep getting bonuses.

    After all, we live in an aristocracy, and those are the values of the rich and powerful. Or didn’t you know?

    The intent of this massive article was to advise investors as to how to profit from today’s global economy. The following excerpt is presented for its accurate facts about the huge disparity in wealth and income between the ultra-rich and the middle-class and poor.

    Those who are interested in the investment implications of the article should read the original.

    As you read the following, look for the implicit admission that our economic system is unfair, and even detrimental for our long-term social well-being.

From Barron’s, January 22, 2007.

Rich America, Poor America

TWENTY-FIVE APARTMENTS IN MANHATTAN sold for more than $20 million in 2005, up from five in 2004, with a few fetching $40 million-plus. NetJets couldn't meet the enormous demand for its private-jet flights over the Thanksgiving holiday. Imports of French cognac into China surged 24% in 2006. And, last May, an unidentified Russian bought Dora Maar with Cat for $95 million, the second-highest price ever for a Picasso.

Never in history have the haves had so much. Burgeoning wealth and incomes from globalizing industries, swelling asset markets, media ubiquity and fast-developing emerging economies are accruing disproportionately to the entrepreneur class and the already rich. This is giving the world's affluent a greater capacity to splurge, build, invest and gamble than ever before.

Those of lesser means in the developed economies are suffering or stagnating financially by comparison, though in absolute terms standards of living are holding up or advancing modestly. Thus do we see the expanding "wealth gap" that populist politicians bemoan, capitalists celebrate and editorialists puzzle over.

While there are some aspects of the income-and-wealth divergence that can be explained by cyclical forces, the long-term pattern in which the rich get rapidly richer seems durable. And there remain exploitable investment opportunities tied to this trend.

The numerical evidence is plentiful, thanks to data collectors who want to reverse the trend or take advantage of it. For years, both the number of wealthy households and their aggregate resources have been growing much faster then world gross domestic product. The latest Merrill Lynch-CapGemini World Wealth Report estimates that the number of people globally with financial assets exceeding $1 million climbed 6.5% in 2005, and their combined financial wealth rose 8.5%, to $33.3 trillion, for an average of $3.8 million each. It's getting to the point where "millionaire" will no longer serve as useful shorthand for defining who's rich.

THE FINANCIAL NET WORTH of this segment grew 20% in North America, 23% in Latin America, 50% in the Middle East, 15% in Asia and 9% in Europe.

In the U.S., according to the liberal think tank Economic Policy Institute, the richest 1% of Americans had net wealth 190 times that of the median household, up from a ratio of 168 in 1998 and 131 in 1983. The top 1% owned 37% of all domestic stocks held by individuals in 2004, and the top 10% owned 79% of all stock. The real income of the richest 5% of U.S. residents climbed an aggregate 31% from 1985 through 2004, versus 14% for the middle 20% and 12% for the bottom 20%.

Though academics continue to seek definitive causes for this widening of the wealth divide (see "Wealth Inequality: Data and Models," w12550) several forces clearly seem to contribute to it.

The income premium on higher education has grown in recent years, as the economy became more service-based and rewarded those with better communication, organizational and creative skills. And educated folks have gotten better at passing on educational and economic advantages to their children, while those lacking education have fewer reliable, good-paying manufacturing jobs available to them. This contributes to a winner-take-most economy, with slight inflation-adjusted declines in the median household income in recent years.

The opening of world economies to competitive forces and capitalist incentives has allowed innovative people to access deep global financial markets. Lower tax rates on capital in the U.S. and elsewhere obviously have played a role, as well.

With technology allowing cheap global communication, information and entertainment products can easily reach a vastly larger audience than ever before. Economists have long theorized that technology would help create a class of super-rich celebrities.

Tom Cruise is worth what he is because his movies can address markets numbering billions. Satellite TV has meant that English soccer star David Beckham could go from a team in Manchester to one in Madrid to, this month, one in Los Angeles, where he was given a $250 million, five-year contract and will be watched by sports fans in Europe, Africa, Latin America and Fresno.

FROM A CYCLICAL ANGLE, THE PERCENTAGE of U.S. GDP now attributable to corporate profits is near a multi-decade high. These profits are driven by global demand and fast productivity gains. They drive strong dividend and capital-gains income toward the affluent, while restraining wage growth. UBS points out that prior profit cycles also have seen the median wage stagnate until the middle of an economic expansion, after which it gains some ground.

Finally, this wealth buildup has created plenty of well-paying jobs in the asset-churning professions. The American service economy is commonly thought of as relying on fast-food soda jerks and hair stylists. But among America's key exports is that investment banker in the Upper Class section of a Virgin Atlantic flight to London, preparing to cut a billion-dollar deal.

Ajay Kapur, global strategist at Citigroup, has been bundling these economic trends into a theme that he calls Plutonomy -- a global economy disproportionately propelled by the rich. To Kapur, the pattern of rapid and lopsided wealth buildup around the world is a durable one.

"The spread of free financial markets, patent protection and the rule of law," he says, means that more smart, ambitious people than ever are able to turn a good idea into capital, and capital into liquid wealth….

And, as anyone who watches cable news or reads the papers can affirm, the conspicuous divide between the often overindulgent rich and the struggling average worker has become a potent -- and potentially explosive -- political and social issue….

History has shown that Americans, more than most of their counterparts around the world, favor equality of opportunity but shun measures to actively redistribute income. They choose to preserve the possibility of outsized rewards, so long as they believe a decent proportion of society has a legitimate shot at winning them.

Still, when the pie is being cut as unevenly as it is now, support grows for bolstering labor's slice of economic rewards. This may lead to more egalitarian measures and perhaps have a shaming effect on, say, corporate board members determining how much to pay a new chief executive.

Overseas, authoritarian or socialist governments might well be moved to target the hyper-rich of their countries or foreign interests who have hit the globalization jackpot. Who knows what a Hugo Chavez is contemplating?

There's little evidence to suggest that any likely measures will derail the long-lived emergence of an ever-richer tier of achievers, entertainers, asset-mediators and inheritors. But it's clear that the world of Plutonomy is creating dangers as well as opportunities as it evolves.

    As usual, Barron’s, one of our most prestigious financial publications, makes the claim that the disparity in income between rich and poor is some sort of unexplainable phenomenon. It notes that “…editorialists puzzle over” the wealth gap. And, before listing several causes of the divide, it suggests that “…academics continue to seek definitive causes for this widening of the wealth divide.”

    The implication is that conservative (primarily Republican) economic strategies should benefit the total society, and not just the rich and powerful, and it’s a mystery why that’s not happening.

    Nonsense! The wealth gap has been deliberately created for the very reasons Barron’s lists above. It’s all a matter of political power, folks, and the rich and powerful have just about all of it. And these short-sighted, greedy materialists—who are living for today—refuse to acknowledge the ultimate disaster that a “Plutonomy” ensures.

    An entire book could be written based on this one article. It is a classic description of the two economic philosophies that have prevailed since the beginning of time:

  • An economy should be managed so that the elite (who provide jobs for others and who control the society) should live lives of luxury, and, in exchange for the leadership of the elite, the lowest rungs of society should accept the bare minimum required for survival.

  • An economy should be managed so that the elite are rewarded for their skills and efforts, but not so much that the lowest rungs of society cannot have a decent standard of living.
Consider the implications of these passages:

“Never in history have the haves had so much. Burgeoning wealth and incomes from globalizing industries, swelling asset markets, media ubiquity and fast-developing emerging economies are accruing disproportionately to the entrepreneur class and the already rich. This is giving the world's affluent a greater capacity to splurge, build, invest and gamble than ever before.”

    Result: Since we live in a world of auction markets, this means that the rich increasingly are pricing lower income persons out of the ability to afford things like real estate, adequate education, and so on. For more discussion about this issue, check out Wealth is a zero-sum game.

While there are some aspects of the income-and-wealth divergence that can be explained by cyclical forces, the long-term pattern in which the rich get rapidly richer seems durable.

    Meaning: There is no worldwide government that will set minimum moral standards for the treatment of those who work for a living (and this is also true for the treatment of the environment—an issue that may eventually destroy our physical world). When the U.S. adopted the strategy of globalization, it effectively ended governmental protections of its working-class citizens. For more discussion about this issue, check out International free trade; it’s not globalization.

THE FINANCIAL NET WORTH of this [wealthy] segment grew 20% in North America, 23% in Latin America, 50% in the Middle East, 15% in Asia and 9% in Europe.

    Meaning: The massive benefits of globalization are not being realized by the world’s workers. The main beneficiaries—at the expense of workers—are the world’s present and emerging wealthy. For more discussion about this issue, check out Friedman’s globalized world isn’t flat, it’s a gigantic mountain.

In the U.S. … the top 1% owned 37% of all domestic stocks held by individuals in 2004, and the top 10% owned 79% of all stock.

    Reality: When Republicans say their tax cuts on capital gains will benefit everyone, they’re really talking about the top 10% of Americans, especially the top 1%, and even more especially, the top ½ of 1%. For more discussion about this issue, check out Why capital gains tax cuts are bad for workers. In Republican terms, “workers” are inheritors of wealth, investment bankers, and the established and emerging wealthy.

The income premium on higher education has grown in recent years, as the economy became more service-based and rewarded those with better communication, organizational and creative skills. And educated folks have gotten better at passing on educational and economic advantages to their children, while those lacking education have fewer reliable, good-paying manufacturing jobs available to them.

    Reality: In our best years—from, roughly 1938 to 1980—a lack of education was never a cause of poverty in our country. As Barron’s points out, workers in manufacturing industries belonged to unions and had the power to negotiate for higher wages. Those high wages raised the wage levels even in non-unionized jobs throughout the society. For more discussion about this issue, check out What conservatives say about unions, versus what they know about unions.

The opening of world economies to competitive forces and capitalist incentives has allowed innovative people to access deep global financial markets. Lower tax rates on capital in the U.S. and elsewhere obviously have played a role, as well.

    Reality: “Competitive forces and capitalist incentives” are what the world’s governments have created. They not only allow the rich and powerful to take ruthless advantage of the world’s workers, but also to give them tax breaks for doing so. Think of it, our U.S. government has abdicated its power to protect its own working-class citizens—by adopting the third-world standards that favor investors over workers. For more discussion about this issue, check out We’ve abandoned traditional U.S. values for those of Mexico, China and India.

FROM A CYCLICAL ANGLE, THE PERCENTAGE of U.S. GDP now attributable to corporate profits is near a multi-decade high. These profits are driven by global demand and fast productivity gains. They drive strong dividend and capital-gains income toward the affluent, while restraining wage growth. UBS points out that prior profit cycles also have seen the median wage stagnate until the middle of an economic expansion, after which it gains some ground.

Historical precedent: Previously, in the U.S., the economic cycle was:

  • Recession and low wages and low corporate profits

  • Greater investment and recovery, with low wages and high corporate profits

  • Further recovery, with higher wages and lower corporate profits

  • Lower investment, with stagnant wages and stagnant corporate profits

  • Recession.

    Although investors and the established wealthy made out best in these cycles, workers benefited in the last stages of a booming economy. The normal forces of a free market were allowed to work somewhat to workers’ benefit. That’s all changed now. Workers’ incomes—because they have lost all political power—don’t go up to any significant degree even in a booming economy. For more discussion about this issue, check out Republican conservatives are attacking the freedoms that count.

Ajay Kapur, global strategist at Citigroup, has been bundling these economic trends into a theme that he calls Plutonomy -- a global economy disproportionately propelled by the rich. To Kapur, the pattern of rapid and lopsided wealth buildup around the world is a durable one.

    Repeat: Again, this economy that is a disaster for workers will continue, because there are no national or worldwide governmental forces to change our economic groundrules.

And, as anyone who watches cable news or reads the papers can affirm, the conspicuous divide between the often overindulgent rich and the struggling average worker has become a potent—and potentially explosive—political and social issue….

    Implications for Democrats: Openly use the words “class warfare,” and challenge the Republicans to debate the issue about which political party is actually engaging in it. Check out the file: It’s the Republicans who are waging class war.

History has shown that Americans, more than most of their counterparts around the world, favor equality of opportunity but shun measures to actively redistribute income. They choose to preserve the possibility of outsized rewards, so long as they believe a decent proportion of society has a legitimate shot at winning them.

    The Democratic challenge: To educate the American public about the fact that governments ALWAYS determine how well classes of its citizens share in the productivity of their societies. Right now, our government has enacted policies that ensure that the established and emerging wealthy receive a huge, disproportionate share of our society’s productivity—and at the direct expense of its middle and low-income citizens.

Still, when the pie is being cut as unevenly as it is now, support grows for bolstering labor's slice of economic rewards…. There's little evidence to suggest that any likely measures will derail the long-lived emergence of an ever-richer tier of achievers, entertainers, asset-mediators and inheritors. But it's clear that the world of Plutonomy is creating dangers as well as opportunities as it evolves.

    Again, it’s time for a true Roosevelt or Truman to speak out for the traditional values of Democrats. If enough of them have the guts to do it, the public will recognize the truth and react accordingly.

    The following dull excerpt is presented just as a reminder of the extent to which investors—the ones who say workers shouldn’t be “envious of the rich”—watch the incomes of workers like predatory hawks.

From Barron’s, Monday, January 8, 2007.

Current yield

Hopes for Fed Cut Ebb, Asia Tightens Credit

By Randall W. Forsyth

…Expectations of a cut in interest rates by the Federal Reserve diminished following news of a larger-than-expected increase in U.S. employment in December….

Nonfarm payrolls jumped by 167,000 in December, far higher than economists' forecasts, which had been ratcheted down after the ADP Employment Report showed a drop of 40,000 private-sector jobs. This made for the second big miss in the past year in the paycheck-cutter's monthly tally of payrolls versus the Labor Department's count.

Earlier in the week, release of the minutes of the Dec. 12 meeting of the Federal Open Market Committee underscored the policy-setting panel's resolve not to cut short-term interest rates owing to concern about the inflation outlook. In particular, the FOMC noted "the possibility that the tightness in the labor market could lead to sustained upward pressure on nominal labor costs was viewed as an upside risk to the expected moderation in inflation."

Those concerns that working stiffs might be doing better were exacerbated by the December jobs data, which showed nonfarm wages rose 0.5% in the month, about twice what was expected. With that latest increase, wages were up better than 4%, back to the peak pace of Roaring 'Nineties….

    Key statement: “Those concerns that working stiffs might be doing better were exacerbated by the December jobs data, which showed nonfarm wages rose 0.5% in the month.”

    Think of it. Wages of “Working stiffs’” went up .5%. Outrageous, especially when you consider the skyrocketing incomes of corporate executives, and the out-of-sight stock market.

    For a more thorough understanding of how the Fed manipulates the interest rate to stop “wage inflation,” check out the file: The Income Gap Is No Accident.

    How come the Fed never tries to stop CEO or stock market income inflation? Could it possibly be that the rich and powerful are in control of our economy?

    This is what globalization is coming to. We’ll now be getting “American” cars made in China and exported to the U.S.

    Eventually, this means that Mexico will have to kiss its auto industry goodby, as it moves to a country that has even fewer protections of workers.

From The Wall Street Journal, January 2, 2007.

China Auto Exports
Doubled During '06

Numbers Indicate
Rising Challenge
To the Competition

China's auto exports doubled in 2006 from the previous year to a record 340,000 units, state media reported, a sign of China's potential to supply car markets other than its own and pressure the world's auto makers….

As an exporter, China makes automobiles mainly sold in emerging markets such as the Middle East, Latin America and Russia.

The nation's auto makers have bigger ambitions. Last week, DaimlerChrysler AG's Chrysler Group signed a letter of intent with Chery Automobile Co. that calls for the Chinese auto maker to build subcompact cars to be sold by Chrysler in the U.S., Western Europe and other markets around the world. The first model would probably arrive in the U.S. in 2008….

    Who’s going to benefit from this shift of industry? Investors in Chrysler and other "American" auto companies (which are actually becoming investment bankers}, and the rich and powerful in China.

    American consumers may benefit for awhile, but only until China gets big enough to control the market.

    And the losers? Workers worldwide, even the Chinese who will end up competing with each other in a land with no worker protections.

    Some may read the following and cite it as proof that American workers can compete in the world market. It’s also an example of the benevolence of a capitalism that is controlled by the rich and powerful. After all, as they say, “quite frankly, we were saving their (workrs) jobs.”

    As you read it, can you think of another analysis?

From The Wall Street Journal, December 21, 2006.

Factory Job

How Financiers Pursue Profit
At Skidding Auto-Parts Maker

Private Equity Faces Union
At Jernberg Industries;
Tough Talks With Detroit
'From Irrational to Rational'

CHICAGO -- In a South Side neighborhood dotted with junked cars, crumbling houses and shuttered factories, a New York private-equity firm is betting it can make big money in a battered business: manufacturing wheel hubs and engine parts for cars and trucks using union labor.

KPS Special Situations Funds has put more than $23 million into Jernberg Industries since 2005. It aims to at least double its money in three years or so. Jernberg, which supplies parts to Detroit's Big Three auto makers, tumbled into bankruptcy court in 2005, joining a raft of other auto-parts makers there.

For KPS and other private-equity firms circling the auto-parts industry, these are some of the most daunting turnarounds in all of business. For starters, the new owners often have to hammer out agreements with unions to rein in labor costs….

But these turnaround experts think the payday could be big. Some auto-parts plants are antiquated and inefficient. Many existing contracts with labor and with big customers are unfavorable. In bankruptcy court, these investors figure, they can jettison the bad deals, close unneeded plants and start more or less from scratch. And beleaguered workers, fearful of losing their jobs, are likely to play ball….

Tom "Smoke" Robinson, a 45-year-old factory worker with three teenage daughters, including one in college, says Jernberg's workers faced a stark choice: "fight about not getting paid more" or risk having no job at all….

Even before the purchase was complete, Messrs. Psaros and Thanopoulos began negotiating a new collective-bargaining agreement with 650 members of the United Steelworkers. They made it clear up front that KPS would walk away from the purchase plan without a new labor pact.

Negotiations took just one week. The new five-year contract gave Jernberg the right to eliminate about 125 of 700 jobs, to shorten work weeks during slow periods and to shift workers from job to job. It eliminated pensions in favor of 401(k) plans and required workers to pay far more for health care. Workers agreed to build more parts per hour in exchange for bonuses if they meet certain targets. Wages were frozen for two years.

"Plenty of people didn't like it," recalls Dennis Woodard, a union steward and 22-year veteran of Jernberg. "There was lots of grumbling. But what are you going to do? It's about trying to keep a job."

Mr. Thanopoulos says the agreement will "just about" produce the 20% labor savings that KPS was seeking. "I think the union thought we were going to push for worse cuts," he says. "And, quite frankly, we were saving their jobs."

The concessions will cost Mr. Robinson thousands of dollars a year in overtime pay. And after 22 years of paying little or nothing for health care, he will have to pay an extra $100 to $150 a month. "No one is happy you have to give up money," he says. "But I'd rather have a job than fight about not getting paid more."

    How utterly obscene! An investor group expects “…to at least double its money in three years or so.” And all by forcing huge sacrifices on those at the bottom who have lost all power to negotiate for a decent share of their own productivity.

    That’s the Republican version of justice: those actually doing the work agree to get crumbs—or lose their jobs—while the rich and powerful grab up all they can. And, because of globalization, among other brutal economic strategies, they can grab an awful lot.

    Chalk up another proof that capitalism, free markets, and democratic elections don’t automatically give a society a good economy. If its central government doesn’t hold the values that are necessary to make sure they work as they are supposed to, the most ruthless and unprincipled take control and chaos reigns.

    When Americans went to Russia teach capitalism, and Russian leaders came to the U.S. to study capitalism, the necessary role of government was left out of the discussions. It was all about privatization, free markets and no government “interference.”

    This is the result: “fortunes were made overnight,” and “best and brightest reacted by becoming opportunists, not democrats.” In other words, the communist rich and powerful simply became the capitalist rich and powerful—and the average Russian now lives in quiet desperation.

From The Wall Street Journal,, December 19, 2006.

Putin's Pitchman

Inside Kremlin as It
Tightens Its Grip:
Ex-Aide to Tycoons

…As the Russian president's domestic-policy chief and a deputy chief of staff, Mr. Surkov is the architect of an ideology the Kremlin is using to justify its reassertion of control over the state and the economy. Mr. Surkov calls this "sovereign democracy," with the emphasis, he has said, on "sovereign."

He has penned manifestoes defending the Kremlin's muzzling of critics, monopolization of politics and crackdown on politically ambitious billionaires. He has helped set up pro-Putin youth groups that push the Kremlin's agenda in Russia and abroad. He denounces Mr. Putin's remaining opponents as Western stooges or neo-Nazis, and accuses Western nations of plotting to steal Russia's oil and minerals. "When they talk to us about democracy, they're thinking about our hydrocarbon resources," he told a rare briefing for foreign reporters in June….

Mr. Surkov's trajectory from corporate cheerleader to Kremlin ideologue captures Russia's larger pendulum swing away from the liberal ferment of the early 1990s. After the Soviet collapse in 1991, many in the West hoped the emergence of market economics and parliamentary democracy would create a middle class and propel the country away from its Soviet past.

But the 1990s didn't give birth to the new Russia that Washington and London had hoped for. The West embraced President Boris Yeltsin, an erratic and sometimes drunken former Communist official who broke the grip of the totalitarian system by introducing free elections. Behind the rhetoric of democracy and free markets, Russia descended into a no-holds-barred fight for wealth and power that left millions impoverished and disillusioned by the end of the '90s.

In an era when fortunes were made and lost overnight and some of the most promising wound up dead, many of Russia's best and brightest reacted by becoming opportunists, not democrats. In Mr. Surkov's telling, the 1990s were a period of collapse. Fragile institutions like the press, parliament and judiciary, he says, became tools of tycoons grabbing for the country's prime assets….

    When Republicans say they want to get government out of your life, they really mean that they want to get government out of their lives (the rich and powerful), so they will have free reign to take advantage of the working- and middle-classes.

    For more insight into the necessary role of a government that truly respects human rights—and that protects the poor and powerless from the rich and powerful—check out the file Why we have government.

    Evidence of the disastrous effects of globalization on our society and economy continues to mount.

From The Wall Street Journal,, December 19, 2006.

Broadest Measure
Of U.S. Trade Gap
Shows Widening

WASHINGTON -- The broadest measure of the nation's trade deficit widened in the third quarter, with the shortfall in payments on foreign debt and investments increasing to a potentially worrisome high.

The Commerce Department said the current-account deficit for the quarter was $225.55 billion -- or 6.8% of gross domestic product -- up from a revised second-quarter deficit of $217.13 billion, or 6.6% of GDP….

The biggest component of the current-account deficit, the merchandise-trade gap, increased a little more than $8 billion to $218.61 billion in the third quarter from $210.59 billion the previous period.

The U.S., for the fourth consecutive quarter, also paid out more to foreign creditors and investors than it received from its own investments abroad. The investment deficit rose to a record $3.78 billion in the third quarter, up $1.63 billion from the second quarter, the Commerce Department said….

Ian Shepherdson, chief U.S. economist at forecasting firm High Frequency Economics Ltd., said the investment deficit is still "very small" but is an "ominous sign" for the nation's economy, underscoring the dangers of running large imbalances over the long term. "The U.S. is now a hefty net external debtor, and the income flows will continue to deteriorate," he said.

    What great news: “the income flows will continue to deteriorate”! And America's richest will get richer from selling out America's industries, research facilities, and those who used to work in them -- and workers' lives will continue to degenerate.

    Evidence continues to build—that investors and the established wealthy are winning the class war against middle- and low-income Americans.

    Their #1 strategy is to increase the labor supply, even for highly skilled professionals and small business entrepreneurs.

    It is becoming increasingly clear that the major beneficiaries of globalization and immigration to the U.S. are the rich and powerful, and the ones making all the sacrifices are the working- and middle-class.

    If you want to inform the public about what’s happening to the future of our country, have your friends and relatives read the following two items from our conservative financial press.

From The Wall Street Journal, December 13, 2006.

Trading Places

How Immigration
Upended Dreams
Of an Entrepreneur

Mr. Hairston's Stucco Workers
Quit to Become His Rivals;
Illegals Drive Prices Down

HILTON HEAD ISLAND, S.C. -- About five years ago, the journey of Starletta and William Hairston from the underclass to the upper class hit a roadblock.

Both were born to poor black Southern families. William, a stucco subcontractor, built a thriving business beautifying houses in the gated communities on this resort island, a magnet for wealthy retirees seeking a laid-back lifestyle by the sea. Starletta, a former flight attendant, won accolades for her community activism.

Then Hilton Head suddenly saw a wave of illegal immigrant workers from Mexico. Mr. Hairston, 54 years old, initially hired the Hispanic newcomers for his stucco business, helping it flourish. But soon, some of those same workers splintered off to form their own businesses, undercutting Mr. Hairston with lower bids to capture jobs. The Hairstons' net income plunged from roughly $500,000 in 1997 to about $70,000 in 2005, according to the couple.

To stay afloat, the Hairstons remortgaged their house twice and sold a condominium and a plot of land. Mr. Hairston now hustles for jobs in Charlotte, N.C., and beyond, looking for better opportunities. Meanwhile, Starletta Hairston, 53, won election to the Beaufort County Council, where she has joined a wave of local officials around the country trying to pass new laws cracking down on illegal immigrants….

The Hairstons' saga shows that the issue is not just about low-paid workers, but also entrepreneurs who set out to make their own fortune. As an ambitious small-business man, Mr. Hairston helped himself to undocumented immigrant labor and thrived with it. But as more immigrants flocked to the area and acquired skills, some of them harnessed their own entrepreneurial drive and became competitors….


From The Wall Street Journal, December 14, 2006.

Patent Remedy

Indian Scientists Return Home
As Economy Moves a Step Up

Original Research Replaces Rote Work,
Allowing Firms To Lure Talent From U.S.

PUNE, India -- For more than 20 years, Rashmi Barbhaiya lived a comfortable life in New Jersey as a researcher for drug maker Bristol-Myers Squibb Co., commuting from his five-acre suburban estate in a blue Mercedes.

Now, in a move that hints at a big shift in the global pharmaceutical business, Dr. Barbhaiya is back home in India. He's still trying to discover new drugs, but he's doing so with an all-Indian-born research team at a company he founded in this center of Indian high technology.

As big drug companies shut down some research facilities in the U.S. and other rich countries, labs in India and China are increasingly picking up the slack. Eli Lilly & Co., Wyeth and GlaxoSmithKline PLC all have outsourced chemistry work to Indian firms, and Novartis AG announced last month that it is building a research center in China with at least 400 scientists. Meanwhile, Bayer AG said last month it is closing a major research facility in the U.S.

Merck & Co., which shuttered research labs in England and Japan at the end of last year, has a new outsourcing partner: Dr. Barbhaiya. His company, Advinus Therapeutics Ltd., agreed with Merck last month on a deal under which the Indian researchers will help Merck discover new drugs for metabolic disorders such as diabetes.

India was long a virtual pariah state among Western pharmaceutical companies because it let domestic companies sell copies of foreign drugs so long as they tweaked the manufacturing process. But in early 2005 the Indian government promised to heed the World Trade Organization's patent principles. The new Indian laws have encouraged U.S. and European companies both to sell their products in India and form research tie-ups.

The return of people such as Dr. Barbhaiya is an important indicator of progress in the Indian economy, which has averaged growth of 8% over the past three years. The country is beginning to lure back top-notch scientists and engineers who once saw opportunity only in the U.S. or Europe. A growing number of Indian companies are putting emphasis on original research and innovation, rather than performing rote tasks for companies in the West….

Pawan Goenka, a former research engineer at General Motors Corp., came back to India in the early 1990s and now is president of the automotive group at local vehicle maker Mahindra & Mahindra. He estimates the company spent $120 million designing a sport-utility vehicle, or one-fourth the budget for a similar vehicle in the U.S. Recently, Dr. Goenka brought in a new research chief from Ford Motor Co. to work on hybrid vehicles….

…"Sometimes I'm sitting in a meeting and for a moment I think I'm at Pfizer," says Koushik Das Sarma, 36, who worked at the New York-based drug maker after research stints at Purdue and Duke universities. Dr. Sarma and several other returnee scientists at Advinus say they long hoped to come back to India but didn't want to leave the front lines of research….

    If these items don’t anger you to action, nothing will. In order to increase their own wealth even further, our American rich and powerful have not only sold our industries, but they have sold out our technologies and research facilities. The “front lines of research” have now gone to India.

    Incidentally, they’ve also sold out our future as the world’s economic leader, and, eventually, our future as the world’s most powerful military leader.

    Here’s another in the endless series of articles that describe the horrible, intended effects of globalization on working-class citizens of the world.

    Think of the absurdity of the situation: Indonesia took industry away from the U.S. because its government promised rock-bottom wage rates and virtually no protections of workers’ rights.

    Now, when the government tries to raise its standards, international corporations abandon Indonesia like it has the plague.

From The Wall Street Journal, December 6, 2006.

Indonesian Labor Rules Take Toll on Investment

…Business people, government officials, economists and even some labor activists say Indonesia's 2003 labor law is discouraging new investment at a time the country urgently needs to create jobs. The law may be costing Southeast Asia's largest economy a chance to lure foreign shoe, garment and other manufacturers looking for alternative production sites to China, where wage costs are on the rise.

Employers say Vietnam—where wages are lower and productivity higher than in Indonesia—is well placed to woo manufacturers looking for new bases outside China. Indonesia should also benefit from this move away from China, they add, but the labor law is proving a major deterrent to investors….

The law allows local governments to set minimum wage increases for private-sector workers, rather than letting employers link the annual raises to productivity.

Meanwhile, quotas imposed this year by the European Union on shoe imports from Vietnam and China created a surge in interest in Indonesia. But "when companies come to see us, and see this labor law, they postpone" investment, says Eddy Wijanarko, chairman of the Indonesian Shoe Manufacturers' Association, and whose company makes goods for British retailer Marks & Spencer Group PLC….

The timing could hardly be worse for Indonesia. The country needs investment in labor-intensive industries to stop a surge in unemployment in recent years that risks causing social instability. Unlike China, India, Malaysia and Singapore, which have developed high-tech industries, Indonesia still relies mainly on agriculture and low-tech manufacturing of shoes, textiles and garments to create jobs….

    Barbarians of old used to ride horses through the rain, sleet and snow, and used spears, bows-and-arrows, and swords to rape, pillage, and destroy whole villages.

    Today’s barbarians wear suits, sit comfortably in boardrooms, and use their money to destroy the living standards of workers in the cities and villages throughout the world. These throwbacks to Attila the Hun deliberately locate their factories and businesses in those countries with the very worst standards for workers.

    And all because they want to become incredibly rich.

    Also note that China, India, Malaysia and Singapore are developing high-tech industries, which will further make our U.S. economy decline even further, and will eventually destroy the living standards of our more high-skilled workers—just as it has destroyed the living standards of our working-class citizens.

    Finally, a major conservative financial news publication recognizes the beneficial effects of raising the minimum wage, not only for our lowest paid workers, but for higher-paid workers as well (the upward ripple effect on wages.)

From BusinessWeek, November 27, 2006.

More Ammo For A Higher Minimum

New research says a ripple effect would hike the pay of a lot of family bread winners

… Since the early 1990s an influential group of economists has poked holes in the once strongly held belief that the minimum wage is a major job killer. And now there's economic research disputing the rest of the conventional wisdom. Some economists are saying that minimum-wage increases have a ripple effect, bumping up the pay of a large portion of the working poor. If they are right, that would strengthen the political appeal of a minimum wage hike by increasing the number of potential voters who are helped.

If the minimum wage is raised to $7.25 an hour over the next two years, 6.6 million workers, or 5% of the workforce, would be directly affected. By itself that's not a very big number. But an additional 8.3 million will get "ripple effect raises," according to the Economic Policy Institute, a labor-supported Washington think tank. The ripple effect means employers tend to raise wages for workers who make above the new minimum, even though they have no legal obligation to do so.

As a result, the Economic Policy Institute estimates that such a minimum wage increase would raise pay for 11% of the workforce. The impact might be even broader: Jeannette Wicks-Lim, a research fellow at the Political Economy Research Institute at the University of Massachusetts calculates that 16% of workers could get raises if the hike is passed and goes into effect immediately.

The ripple effect tends to make a minimum wage boost a better deal for the working poor. That's because the workers who are likely to get those ripple effect raises, many of whom now earn $8 or $9 an hour, are often the primary breadwinners in their families. The Economic Policy Institute estimates that while teenagers account for 29% of those who would directly benefit from a substantial increase in the minimum wage, teens account for only 14% of the higher-paid workers who would get ripple effect raises….

    As you read the excerpt below, remind yourself that the horrific problems it describes never had to happen. They are the result of America’s aristocracy and its chronic, never-ending effort to destroy working-class wages.

    The aristocracy’s class war against workers reached its peak when President Clinton stole the Republican strategy of expanding the labor supply—which is the most effective way put a lid on wages. Through NAFTA and the WTO, Clinton and the Republicans created an unlimited supply of workers who work under terrible conditions for pitiful wages.

    If you want to understand how the loss of a relatively few jobs overseas affects virtually all American workers, check out the file: International Free Trade: It’s not “Globalization.”

    (Note: this is a large excerpt of a huge article. If you want to get a fuller appreciation of the extent of this impending disaster, you should read the whole article.)

From BusinessWeek, November 20, 2006.

Can Anyone Steer This Economy?

Global forces have taken control of the economy. And government, regardless of party, will have less influence than ever

Sometime next year--perhaps around Christmas 2007, if current trends continue--the U.S. will hit a milestone. For the first time in recent memory, the cost of imported goods and services will exceed federal revenues. In other words, Americans will soon pay more to foreigners than they do to their national government.

We're almost there now. Imports cost us about $2.2 trillion a year; the federal government collects $2.4 trillion in revenues. Why is that important? Because for the past 70 years, Washington has been the 800-pound gorilla, more powerful by far than any other force in the U.S. economy. That's not true anymore. The federal government remains plenty influential, but the global economy is more so.

This will come as a rude shock to Representative Nancy Pelosi (D-Calif.), the presumptive Speaker of the House, Charles B. Rangel (D-N.Y.), the likely chairman of the House Ways & Means Committee, and other newly enfranchised leaders in the Democratic Party. Sure, they're likely to have the power to pass legislation, including boosting the minimum wage.

But such a measure, even if President George W. Bush signed it, would help only a small fraction of the workforce. It would do almost nothing to ameliorate the weak wage growth that has plagued most Americans, including college graduates, in recent years. The broad-based drop in incomes is being driven more by the rise of China and India and the intensification of global competition. And there is little Democrats can do to reverse these trends.

No matter which party you belong to, or which Big Idea or school of economic policy you subscribe to, one thing is clear: Globalization has overwhelmed Washington's ability to control the economy. Whether you're a Republican supply-side tax-cutter, a Wall Street deficit hawk of either party, or a Silicon Valley techie type, your preferred levers of economic policy just don't work as well as they once did.

As recently as 10 years ago, the U.S. economy was still relatively self-contained. Then-Federal Reserve Chairman Alan Greenspan--often called the most powerful man in the world--could be sure that the U.S. economic machine would eventually respond when he called for higher or lower rates. Tax and spending decisions made in Washington could set the course for growth, while economic events in the rest of the world, such as the Asian financial crisis of the mid-1990s, were felt as minor bumps….

…in the brave new world of the global economy, where companies move factories and facilities around the world like game pieces, it's no longer a given that U.S. workers benefit directly from U.S.-funded research. One worrisome example: Despite federal outlays of over $125 billion for medical research over the past five years, the U.S. has a large and growing trade deficit in advanced biotech and medical goods. "The era in which we could assume that increased U.S. public investment in r&d automatically generates domestic growth is over," says Jeff Faux of the liberal Economic Policy Institute….

Finally, a Big Big Idea--probably too big to even consider right now--would be the creation of global institutions for governing the world economy. History tells us that market economies are prone to financial crises, to which the only solution is a strong central bank. During the Asian financial crisis of the 1990s, for example, the Fed played that role….

THE TRUTH IS, CHINA and India are increasingly attractive places for companies to do research and development (using ideas, perhaps, that were originally developed using U.S. tax dollars). Money is following as well, with U.S. venture capitalists investing more than $400 million in Chinese and Indian companies in the third quarter alone, according to the National Venture Capital Assn….

… the idea of a national economic policy may be fundamentally out of date in a world of global markets. Washington is no longer the center of the economic universe. That's a basic fact that Democrats and Republicans alike will need to get their heads around.

    There are so many things to comment about on this, it’s almost pointless to begin. Just read past files from “the conservative press” on this site, as well as many other files on the site.

    You’ll also see a number of themes in the above abstract discussed in the file, We’ve abandoned traditional U.S. values for those of Mexico, China and India. It can help clarify why the statement, “the idea of a national economic policy may be fundamentally out of date in a world of global markets” is true. But, it’s true, not because it has to be, but because our aristocrats want it to be—and they’re in control of our economy.

(Because of its significance prior to the coming election, this news item will lead this section until the election is over. More recent items from the conservative press are below it.)

    This was a page 1 “news item” in The Wall Street Journal. Since when has the ultra-conservative Journal started trying to help Democrats come up with an effective campaign strategy by giving them good advice?

From The Wall Street Journal, October 2, 2006.

Political Divide

Democrats' Risky Strategy:
Trumpeting the Wealth Gap

Candidates Blame Republicans
For Economic Inequality,
Woes of the Middle Class

Tactic Could Alienate Voters

WENTWORTH, N.C.—Many Democratic politicians, shrugging off lessons of recent political history, see this as the year when the widening gap between the rich and the rest of America will help win them votes.

As a group of his constituents munched on pot roast and buttered green beans in a school cafeteria here, Rep. Brad Miller—a two-term Democrat seeking re-election in a district spanning rural, suburban and urban communities—launched into what he believes is a winning pitch.

"People who are doing well are doing very well," he said into a handheld microphone, his tie loosened as he walked among the tables. "The rich are doing just fine. But wages aren't budging for the majority of Americans."…

It's a risky bet. Government data do show an unambiguous trend toward a widening gap between the rich and everyone else, a trend that pre-dates Mr. Bush's election in 2000. And yet U.S. electoral history is littered with Democrats who tried to use the inequality issue only to find voters unswayed and Republicans accusing them of "class warfare" or business-bashing….

Economists cite a variety of factors for widening inequality. Technology has favored the most skilled and most educated, and hurt the less qualified.

Globalization has brought competition from millions of new workers around the globe, crimping wages for some workers while boosting demand for others. American unions have grown steadily weaker. And social mores have changed, tolerating much wider pay disparities within the same workplace, be it a manufacturer or a law firm….

The last two paragraphs need a reality test:

  • Technology has nothing to do with the wealth gap. Throughout our entire history we have had technological breakthroughs. When Democrats were in charge of the economy, however, working-class Americans shared in the benefits of that technology.

  • Globalization HAS contributed to the stagnation of working-class wages, and it’s good that the Journal recognizes that. The Journal should also acknowledge, however, that although globalization is “boosting demand for others (jobs),” those other jobs don’t pay nearly as well as the ones we lost.

  • “unions have grown steadily weaker.” Sure, and that’s because of the economic and political policies of Republicans and conservative Democrats.

  • “And social mores have changed, tolerating much wider pay disparities within the same workplace.” Of course, but why doesn’t that outrage working-class voters? It means that Republicans have turned us into an aristocracy, and voters are letting them get away with it.

    There’s too much to comment more about this item. Just check out these files:

  • Democrats must confront the dirty words: “class warfare,” and “politics of envy.”.

  • Roosevelt and Truman: winning models for true democrats, and

  • It’s the Republicans who are waging class war.

        All pretenses about the real goals of globalization are now gone. Forget the promise that we would exchange lower-paying, low-skill jobs for higher-paying, high-skill jobs for American citizens.

        China and India will become the world’s economic and military leaders—not because they have billions of citizens, which they always have had—but because greedy American investors wanted to enrich themselves by destroying American workers’ incomes.

    From BusinessWeek, November 6, 2006.

    A Dragon In R&D

    China's labs may soon rival its powerhouse factories—and multinationals are flocking in for tech innovation

    It's the year of innovation in China. Led by President Hu Jintao, the government is exhorting companies to transform China by focusing on the lab as well as the factory. To make that happen, Beijing has pledged to boost funding….

    From chipmaker Intel (INTC ) and search giant Google (GOOG ) to AstraZeneca and Dow Chemical (DOW ), multinationals are stepping up investment in R&D on the mainland. Chinese computer maker Lenovo Group (LNVGY ) and telecom equipment giant Huawei Technologies are pouring resources into cutting-edge technology. Manufacturers such as Chery Automobile are hiring top engineers to design cool new models….

    China boosters are betting that the country can fast-track the makeover of its economy. "It's inevitable that [the mainland] will become an innovation center," says Vince Feng, Hong Kong-based managing director for General Atlantic Partners, a U.S. private-equity fund that has invested $48 million in Beijing Internet company Oak Pacific Interactive. China has history on its side, Feng argues. "Whenever manufacturing is located in a country, innovation always follows," he says, pointing to the British, Americans, and Japanese as examples. "Manufacturing has migrated to China and is there to stay."…

    Tal Apparel Ltd. highlights the link between manufacturing and innovation. The Hong Kong clothing maker, with production and R&D operations on the mainland, has prospered in the past 50 years. But today, the $720 million company is trying to survive in a fiercely competitive industry by pioneering new fabrics such as cotton cashmere and washable wool, and it is working with a mainland partner to develop the textiles necessary for new products. "There's a lot more science than you think in making clothes," says Managing Director Harry N.S. Lee….

    John Deng, 38, founder of chip designer Vimicro Corp., has a PhD from the University of California at Berkeley and worked for IBM (IBM ) before returning to China in 1999 and launching Vimicro, a successful designer of chips for PC cameras. Other Vimicro executives have PhDs from the U.S. or have worked there, and today the company has partnerships with Intel (INTC ), Microsoft (MSFT ), and Texas Instruments (TXN ). "You really need to be interacting with the Sony (SNE )s, the Hewlett-Packard (HPQ )s, and the IBMs to make sure your innovation is state-of-the-art," Deng says….

        Key statements above: China has history on its side, Feng argues. "Whenever manufacturing is located in a country, innovation always follows," he says, pointing to the British, Americans, and Japanese as examples. "Manufacturing has migrated to China and is there to stay."—and, “multinationals are flocking in for tech innovation.”

        Translation: American, British, and Japanese investors are flocking to China for tech innovation because that’s where you can buy ten scientists for the price of one.

        And it all started when investors from the U.S. and other countries gave Third World countries our manufacturing—simply because the process of globalization allowed them to destroy workers’ incomes (workers now include scientists, engineers, architects, etc.)

        For more on this issue, read the file: It's Investors vs. Everyone Who Works for a Living.


        As if any more proof is necessary that our capitalist system has become totally corrupt, BusinessWeek gives us more.

    From BusinessWeek, November 6, 2006.

    Cap One's Credit Trap

    By offering multiple cards, the lender helps land some subprime borrowers in a deep hole and boosts its earnings with fee income.

    When Brad Kehn received his first credit card from Capital One Financial Corp. (COF ) in 2004, it took him only three months to exceed its $300 credit limit and get socked with a $35 over-limit fee. But what surprised the Plankinton (S.D.) resident more was that Cap One then offered him another card even though he was over the limit -- and another and another. By early 2006, he and his wife had six Cap One Visa and MasterCards. They were in over their heads.

    The couple was late and over the limit on all six cards, despite occasionally borrowing from one to pay the other. Every month they chalked up $70 in late and over-limit fees on each card, for a total of $420, in addition to paying penalty interest rates. The couple fell further behind as their Cap One balances soared. Even so, they still received mail offers for more Cap One cards until they sought relief at a credit counseling agency this May. "I didn't open them," says Kehn, 33, who manages a truck stop and runs a carpet-cleaning business on the side. "I owe these people that much damn money and they are willing to give me another credit card? This is nuts."

    Credit card experts and counselors who help overextended debtors say there's nothing crazy about it. Cap One, they contend, is simply aiming to maximize fee income from debtors who may be less sophisticated and who may not have many options because of their credit history. By offering several cards with low limits, instead of one with a larger limit, the odds are increased that cardholders will exceed their limits, garnering over-limit fees. Juggling several cards also increases the chance consumers may be late on a payment, incurring an additional fee. And if cardholders fall behind, they pile up over-limit and late fees on several cards instead of just one. "How many more ways can I fool you?" says Elizabeth Warren, a Harvard Law School professor who has written extensively on the card industry. "That is all this is about."

    Consumers may not be the only ones who are unaware of Cap One's ways. Its practice of issuing multiple cards to some borrowers with low credit ratings doesn't appear well-known in the investment community. And just how much Cap One relies on fee income, vs. interest, is a mystery, since, like most lenders, it doesn't disclose that. All credit card companies have become more reliant on fee income in recent years, but in a report issued in 2002, William Ryan, an investment analyst at Portales Partners, warned that Cap One's earnings could be "devastated" if regulators cracked down on multiple cards or fees,,,,

        There seem to be no limits to the ways that our paragons of virtue—the rich and powerful—can take ruthless advantage of the poor and powerless. Their unbounded greed is truly astounding.

        And remember: their main supporters are the aristocrats in the Republican party.


        Every three months or so, one of our conservative financial press barbarians trots out another bashing of countries like Germany and France, simply because those countries still think that workers should have decent living standards.

        As Epstein happily notes in the excerpt below, “The risks that the U.S. labor market would ever emulate Europe's have happily faded.” In other words, America’s aristocrats have won the class war against workers, and investors can feel confident that conditions will stay that way.

        Of course, the reason for Germany’s and France’s high unemployment rates is that they have resisted the globalization movement that has devastated workers across the globe.

    From Barron’s, October 23, 2006.

    Economic Beat

    Working the Numbers

    By Gene Epstein

    …The economies of the European Union (EU) have often been touted as "capitalism with a human face." But over the past decade, the unemployment rate has given much of Europe a most inhuman face, indeed.

    Take the EU's two largest economies, those of Germany and France. In Germany, unemployment has been running at more than 10% since 2003. In France, it only recently fell below 9% for the first time in six years. In the U.S., by contrast, the unemployment rate is now less than 5%, down from 2003 highs of a little over 6%….

    The risks that the U.S. labor market would ever emulate Europe's have happily faded. The hope is that Europe will emulate ours. ….

        "Capitalism with a human face" is the kind of capitalism we had under Roosevelt and Truman, when workers were treated decently and had at least minimal protections. Of course, that was before globalization, and our almost total abandonment of fair treatment of those who work hardest for a living.

        For a more detailed explanation of this issue, check out the file: We've abandoned traditional U.S. values for those of Mexico, China and India.


        Below is another classic example of why you should never rely on what Republicans say to voters in their public pronouncements. Instead, read what they say to their investors. That’s where they actually tell the truth about their motives.

        This time, they’re telling why they really want to privatize your local water utility. And guess what—it’s not really to benefit the public; it’s to line the pockets of our new aristocracy.

    From Barron’s, October 16, 2006.

    The Lure of Liquid Assets

    WALL STREET IS PUMPED ABOUT WATER, and for good reason. Globally, the $365 billion business is burgeoning as countries spend billions to repair and build infrastructure to funnel clean water to people and industry. Some experts think $1.5 trillion in capital spending could flow into the sector in the next five years, promising a steady stream of business for a host of companies, from pump makers to water utilities.

    The market, which encompasses residential and industrial water and wastewater treatment and services, is growing by 4% to 6% a year in developed countries, and as much as 15% in emerging markets, estimates Goldman Sachs.

    Less than 1% of the planet's water is drinkable. Yet, demand has been rising steadily. A Unesco study estimates world consumption could reach 2,764 billion cubic kilometers by 2025, up from 2,182 billion in 2000.

    To some degree, water stocks reflect the industry's bright prospects. The Stanford Washington Research Group Water Index of 20 U.S. and international stocks has returned 131% in the past five years, versus a puny 4% gain in the Standand & Poor's 500 stock index. Much of the easy money has been made, but investors willing to cast their nets a bit wider can find compelling bargains.

        Just think of it! If the Republicans can privatize our water utilities, they’ll get a 131% return on their money over a five-year period, instead of a paltry 4%. And guess whose water bills will skyrocket after they’ve purchased their monopoly?


        This kind of news item about our modern corporate culture is getting so routine, I probably should stop citing it.

    From The Wall Street Journal, October 16, 2006.

    Embattled CEO
    To Step Down
    At UnitedHealth

    The scandal over backdated stock options claimed one of corporate America's most successful chief executives, William McGuire of UnitedHealth Group Inc., who agreed to leave the giant health insurer after an internal probe concluded that the stock-option grants that have brought him a huge fortune were likely manipulated.

    The probe's findings, released yesterday, provided a detailed picture of how stock-option backdating worked at the company, offering glimpses of cronyism and a culture in which vast sums of compensation were handed out with few controls or written records. Among the troublesome option grants detailed in the report was a massive 1999 award to Dr. McGuire that ranks among the most lucrative ever….

    At the end of last year, Dr. McGuire's cache of unexercised options was valued at $1.78 billion…

        And you wonder why so many people can’t afford health insurance any more. Remember: that $1.78 billion merely represents a miniscule index of the amount of profit McGuire delivered to United Health investors. The more he and his executive lieutenants can screw the American public out of decent health care coverage, the more they get paid by their shareholders.

        It’s a great system, isn’t it?


        Greed has been considered a vice by virtually every major religion. Republicans, however, have turned it into a virtue. Look at what the effect has been on corporate America.

        The following two articles came from the same issue of The Wall Street Journal. These are just excerpts of very long articles. To get the full impact—and outrage—you should read the originals.

    From The Wall Street Journal, October 12, 2006.

    Money Rules

    Behind Soaring Executive Pay,
    Decades of Failed Restraints

    In 1993, activist investor Ralph Whitworth shuttered United Shareholders Association, a group that was trying to tackle the contentious issue of executive pay. It looked as if his work was done.

    Federal securities regulators had just forced companies to reveal details about pay and perks for top officials, in some cases for the first time. The changes would "make boards think twice" before approving compensation plans that couldn't be justified, Mr. Whitworth recalls thinking. Around the same time, Congress attacked executive pay for the second time in a decade by removing tax breaks on compensation above one million dollars.

    Since then, the average pay for chief executives of large companies has quadrupled, according to Kevin Murphy, a professor at the University of Southern California's Marshall School of Business. The average last year was $10.5 million, a figure that includes salary, bonus and the value of stock and stock-option grants.

    There are many reasons why Mr. Whitworth was mistaken in his prediction, including the bull market of the 1990s, cozy corporate boards and CEOs striving to keep pace with highly paid athletes and entertainers. What's often overlooked is the role of all the efforts -- by Mr. Whitworth and many others -- to limit CEO compensation. For more than two decades, critics tried to slow skyrocketing pay through regulations, legislation and shareholder pressure. Few of their tactics worked. Many backfired.

    As it turns out, disclosure requirements can push pay higher by revealing to CEOs what their peers receive. Limiting one type of compensation often encourages new types of pay, such as stock options, which were pushed as a solution only to become tainted by scandal…

    In recent years, CEOs have raced ahead of other Americans, including their own lieutenants. Mr. Murphy calculates that average CEO pay was 369 times as much as the average earned by a worker last year, compared with 131 times in 1993 and 36 times in 1976. Meanwhile, the average U.S. paycheck has barely kept ahead of inflation in recent years….

    Golden parachutes are back, too. James Kilts, CEO of Gillette Co., received about $164.5 million in severance and other benefits after the razor maker was acquired by consumer-products giant Procter & Gamble Co. last year. North Fork Bancorp CEO John Kanas received $185 million for selling his Melville, N.Y.-based bank to a rival.

    "By the time the payments are disclosed, the CEO is gone," notes Sarah Teslik, a longtime corporate-governance watchdog. "The worst that happens is a day's trashing in the press."


    As Companies Probe Backdating,
    More Top Officials Take a Fall

    Five senior officers at two well-known Silicon Valley companies became the latest corporate casualties of the stock-options backdating scandal, adding to a toll that is likely to continue to rise as companies wrap up probes of their internal practices….

    More than 100 companies are under investigation for options backdating, and scores of them are still conducting internal probes. Many would like to finish them in time to make disclosures during quarterly earnings reporting, which will be heavy in the next several weeks. The companies face pressure to finish because they may not be able to tally their earnings without knowing whether they will need to record charges for any improper options discovered by the probes….

    At a minimum, backdating generally involves accounting and disclosure violations. It can also constitute fraud….

        So, apparently we can’t even pass laws and regulations to cap the unrestrained greed of today’s rich and powerful.

        But, at least, if we can get Democrats back into power, we can raise their top tax bracket to 88% as we did between 1941 and 1962, or to 70% as we did between 1962 and 1982. Incidentally, these were the best years in history for working-class citizens.

        To read more about this issue, check out the Best argument for taxing the rich.


        If you still believe that our “free market” isn’t ruthlessly controlled by corporations, and that a nationalized health care system isn’t a good idea, read the following.

    From The Wall Street Journal, October 6, 2002.

    Book Value

    How Quiet Moves by a Publisher
    Sway Billions in Drug Spending

    For years, a little-known unit of publishing giant Hearst Corp. called First DataBank has played a powerful role in determining what Americans pay for prescription drugs. First DataBank doesn't buy or sell drugs—it publishes lists of drug prices. Health plans and state Medicaid programs use those prices as a benchmark in determining what they pay pharmacies.

    If the benchmark goes up, so do costs for these payers. That's what happened in 2002, when First DataBank suddenly made broad revisions to its key published list. The new prices had the effect of fattening the profits of pharmacies, out of the view of patients and companies who pay for the soaring cost of health care.

    A 2002 email by a manager at one of the nation's largest drug wholesalers, San Francisco-based McKesson Corp., describes how pharmacies would be able to more than double their profit for dispensing the cholesterol drug Lipitor and adds, "that is awesome!!"…

        "that is awesome!!" Kind of reminds you of the Enron trader who cheered “burn baby, burn,” when California had its fires, and Enron was cleaning up by manipulating the energy industry.

        Here’s yet another email that betrays what happens behind the scenes in a corporate America that controls Congress. Republicans don’t really believe in government and its oversight of industry. To them, unrestrained greed is a virtue, and anything corporations do is ok as long as they make a profit.

        And you wonder why so many Americans can’t afford to pay today’s health insurance premiums!


        Forbes latest special issue indicates that every one of our 400 richest Americans is worth at least one billion (that’s with a “b”) dollars. The whole issue is an obscene celebration of unbridled greed, but two items are especially illustrative.

    From Forbes, October 9, 2006, special edition.

    The 400 Richest Americans

    A NINE-FIGURE FORTUNE won’t get you much mention these days, at least not here. This year, for the first time, everyone in The Forbes 400 has at least $1 billion. The collective net worth of the nation’s wealthiest climbed $120 billion, to $1.25 trillion. Surging real estate, oil and other asset prices paved the way for 28 new members and 14 returnees.



    These [32 in number] tycoons own thousands of apartments, gobs of office space and acres of developable land….

        “Surging real estate, oil and other asset prices” explains how the rich and powerful can drive up prices for everyone else. Of course, the 32 mentioned in the second article are only those whose fortunes were primarily in real estate. You can count on it: the rest of the 400 billionaires also have extensive holdings in real estate and other hard assets that are becoming scarcer by the day.

        If you want to understand the implications of all this, check out Why Wealth is a Zero-sum Game. It also explains why real estate is one of the best routes to wealth, and, because of our laws favoring the rich and powerful, is one of the greatest causes of poverty.


        If you ever doubted why you should never vote for a Republican anywhere, read this. There can’t be a clearer description of the philosophical differences between Democrats and Republicans.

        Republicans are clearly anti-worker, even when the workers are nurses.

    From The Wall Street Journal, October 4, 2006.

    Labor Board Eases Supervisor Rule

    Decisions Could Give Firms
    Sway to Keep More Workers
    From Entering Union Ranks

    In three widely anticipated decisions, the National Labor Relations Board opened the door for some employers to classify more workers as supervisors and exclude them from union representation. The decisions outraged unions, but didn't go as far as business groups had hoped.

    In the main decision, by a 3-2 vote, the five-member board said nurses who independently assigned staff based on such things as patient conditions, and were involved in such decision-making more than 15% of their time regularly, should be considered supervisors and exempt from collective-bargaining protections….

    The decisions, which were expected to favor employers at a board controlled by Bush administration appointees, could at a minimum hinder labor's chances of organizing workers in the fast-growing health-care sector….

    Rose Ann DeMoro, executive director of the California Nurses Association, called the decisions "horrendous," and said it would cause nurses to turn down work as charge nurses and trigger protests by nurses across the country. "Ultimately what this has done is redefine a 'registered nurse,'" she said.

        Key sentence above: “The decisions, which were expected to favor employers at a board controlled by Bush administration appointees.” Let’s face it. When Republicans “favor employers” they do it at the direct expense of workers.

        Most Democrats believe that the balance of power between corporations and their workers has tilted much too far in favor of corporations.


        The following editorial is typical of the myopia of conservatives who feel that Republicans have given us a good economy.

    From Forbes, October 2, 2006.

    The World's Accelerating Prosperity

    Rich Karlgaard

    The U.S. economy grew 30% between Sept. 11, 2001 and Sept. 11, 2006. Our GDP today is $3 trillion higher than it was five years ago. That change alone surpasses the entire size of the world's hottest domestic economy, China.

    The global economy has done even better. It expanded 47% during the last five years and is now $15 trillion a year more bountiful than it was when the terrorists crashed jets into the World Trade Center, the Pentagon and a field near Shanksville, Pa.

    Sorry, naysayers, but this fact is indisputable: Humankind is growing richer at accelerating rates….

    As happy warriors for entrepreneurial capitalism, FORBES takes a backseat to no one. But let's be honest. The plight of the world's poor is appalling….

    Of course, wealth gaps in and of themselves are not immoral. Bill Gates is more than 10,000 times richer than I am, but I have no complaints (and neither do you). I am typing this column in Microsoft Word, a tool that's made every writer's life easier, not to say more productive and, thus, more wealth-producing. Thanks to Bill G., I am composing this column in a luxury hotel in Singapore….

        Of course, Rich Karlgaard, a member of America’s new aristocracy, is doing great in a luxury hotel in Singapore. Although he admits that “the plight of the world's poor is appalling,” he refuses to see any connection between the rich getting richer and the poor getting poorer.

        The statistics he presents in the first two paragraphs describe absolutely nothing about how well America’s middle class and its poor are faring in our society.

        Fact is, although individuals can rise from poverty to wealth in any kind of economy or political environment, government ALWAYS determines how well classes of people will do. From Louis XV prior to the French Revolution, to Herbert Hoover prior to the depression, to Franklin Roosevelt during the greatest economy in history—governments always set the rules about how wealth can be accumulated.

        Right now, Republicans have rigged our economy to benefit the wealthy and powerful, and at the direct expense of working-class Americans. (Cruise through the rest of this website and you’ll see that there are no doubts about this claim.)


        The following item demonstrates why Thomas Friedman’s solution of “education” will not be the American worker’s salvation in a globalized world.

    From The Wall Street Journal, September 29, 2006.

    China's Spending
    For Research
    Outpaces the U.S.

    An unprecedented surge in research and development spending is helping China catch up with the two longstanding leaders in the field, the U.S. and Japan, a new study found. R&D spending in China has been growing at an annual rate of about 17%, and is far higher than the 4% to 5% annual growth rates reported for the U.S., Japan and the European Union over the past dozen years.

    China's massive investments in education are also bearing fruit. In 2002, its industrial-research work force was 42% the size of the equivalent U.S. work force, up from 16% in 1991. China is increasingly making its mark with scientific discoveries and patents held by its scientists….

    "China's significant investment in R&D is predicated on the assumption that they want to be a player and competitor both economically and militarily," said Jules Duga, senior analyst at Battelle Memorial Institute, a nonprofit trust in Columbus, Ohio, that runs labs for the government and industry….

    Despite the shifting R&D landscape, "there's no need for the U.S. to panic," said Mr. Duga. Instead, he said, "the U.S. needs to be prepared for a change. We need to figure out how we can keep ourselves in a strong position" in crucial areas of science and technology. His prescription: Spend more on math and science education, and invest more in pure research, which U.S. industry increasingly has shunned.

        China and India are not becoming the economies of the future because they have huge populations, or that they work harder, or because they are inherently smarter today than they were 20 years ago.

        What’s changed in the last 20 years is our Republican government’s policy to destroy working-class wages in the U.S. They did this, first, by shipping our manufacturing industries to other countries, including China and India. Then, they found that they could also cut costs for engineers and scientists if the U.S. also gave China and India our research and development facilities, along with their proprietary secrets, and the skills to develop them.

        Result: The number of American billionaires and multi-millionaires has exploded, while working-class living standards have deteriorated. And now, the emerging world-class economies are in China and India.

        Mr. Duga's solution to the problem is absurd. The reason education won’t help our working-class citizens is that China, with it's low wages and low standard of living in every profession, can educate its citizens far more cheaply than we can do it in this country. And after their citizens are educated—because of their country’s labor policies—they will still drive down American wages by undercutting them.

        The U.S. developed a strong middle class, not because they were educated, but because of government policies that balanced their interests with the interests of investors and the rich and powerful. By globalizing our economy, we have, in effect, put or workers at the mercy of China and India—countries that place workers into the same category as raw material or machines.

         A worrisome note: China wants to "to be a player and competitor both economically and militarily. There are more downsides to this globalization debacle than meets the eye.


        As you read the following, note that in 2005 Michael B. McCallister raked in $5,383,515 in total compensation including stock option grants, and he has another $60,865,194 in unexercised stock options from previous years. Mike is the Chief Executive Officer of Humana, a major medical insurance company.

        Also, In 2005, John W. Rowe raked in $17,709,543 in total compensation including stock option grants. From previous years' stock option grants, he cashed out $27,367,351 in stock option exercises. Unbelievable as it may seem, he has another $265,503,766 in unexercised stock options from previous years. Quite understandably, he is CEO of Aetna insurance company.

    From The Wall Street Journal, September 27, 2006.

    Health-Care Premiums Rise 7.7%,
    Outpacing Wages and Inflation

    The health-care premiums of employers and their workers have climbed twice as fast as wages and inflation in 2006—to nearly double their cost in 2000—and they look to rise at a similar clip next year, two nationwide surveys show….

    The average family premium rose 7.7% in 2006. That compared with a 3.8% rise in wages and inflation of around 3.5%…. The cost for family coverage under an employer health plan is now $11,480, well over what a minimum-wage worker would earn in a year and beyond what many companies and their workers can afford….

    Even when employers do offer health insurance, not all workers get it or can afford it. On average, only 78% of employees are eligible at these companies, either because they don't work full-time or fail to meet other eligibility requirements. And given that employers require workers to pay an average 27% of the total premium—or $2,973 for family coverage—many employees can't afford to accept the coverage….

        The medical insurance industry is a classic example of how Republicans have totally skewed our economy in favor of the rich and powerful, and at the direct expense of working-class Americans.

        Remember that the millions of dollars these greedy modern barbarians are making merely represent a minor index of the huge amount of money that is going from the pockets of workers, and into the hands of investors.

        The reason investors are willing to give these barbarians such obscenely high incomes is that they are returning record profits—and high stock prices—to them. And how do CEOs achieve this? By screwing workers and denying them decent health care, of course.

        To look at another dimension of this issue, check out Why Wealth is a Zero-sum Game.


        Want to know why working-class wages have been stagnating since the early 1970s? And why the wealth and income gap between the wealthy and the working-class has exploded? Here’s a brief example that says a lot.

    From The Wall Street Journal, September 20, 2006.

    UPS, Teamsters Begin Negotiations

    DETROIT -- United Parcel Service Inc. and the Teamsters union opened negotiations yesterday amid investor worries over the package-delivery giant's labor costs and employees' concerns over their weakening pension plans….

    Some investors questioned whether the company's high labor costs may be hampering growth….

    In addition, rival FedEx Corp. of Memphis, Tenn., continues to gain market share in the ground-delivery segment. The company is doing so with nonunionized, independent contractors as drivers, keeping employee costs lower than those at UPS. Wages and benefits were 65% of operating expenses at UPS in fiscal 2005, which ended May 31. Compensation at FedEx accounted for 43% of operating expenses in its most recent fiscal year, ended May 31….

    "The company is going to say to the union that, 'If you want bigger pensions, you're going to have to give up something on health care.' Most unions have come to understand that," said labor professor Richard Block of Michigan State University.

        Only hypocrites and those with IQs under 80 can claim that unions aren’t good for working-class Americans. There is no way a corporation can pay decent wages to its employees today when their competitors undercut their wage costs. As Block noted: “Most unions have come to understand that.”

        Why have unions lost their power to negotiate for higher wages? Because anti-worker Republicans have loaded the courts with conservative judges, they have passed legislation that favors corporations over workers, and they have put right-wing crackpots in charge of government offices, like the Department of Labor.


        If you ever wondered why the Bush administration supports immigration and wants to extend amnesty to foreign workers, both legal and illegal, just read the following.

    From The Wall Street Journal, September 18, 2006

    Labor Movement

    As U.S. Debates
    Guest Workers,
    They Are Here Now

    In Construction, 'Subidos'
    Don't Tax Social Services
    But May Depress Wages

    …Union officials complain bitterly that competition from Mexico is driving down wages, and there is evidence to back them up. Roberto Cantú's Pueblo pay stub shows he earned $14 an hour for a 45-hour week, and $21 for every additional hour. Pete Mustacchio, business manager of Cement Masons Local 577 in Denver, says Colorado's union pourers earn twice that, including an hourly wage of $23.40, plus health-insurance and pension benefits valued at another $9 an hour. Overtime starts at $35.10 an hour.

    Figures compiled by the U.S. Bureau of Labor Statistics indicate wages in concrete work fell 16.5% in 2005 from 2000 -- to $508 a week from $604, adjusted for inflation -- despite a soaring demand for workers. Meanwhile, the proportion of cement workers described as "foreign-born Hispanic" has risen to almost 55% from around 35% in the late 1990s. Statistics suggest many are replacing African-Americans, whose employment in concrete work declined to 9,000 in 2005, from 18,000 six years ago.

    David Card, a University of California at Berkeley economist, says the decline in earnings is part of a long-term trend of nonunion construction workers replacing a unionized work force. Other factors are at play besides the subidos. Illegal-immigrant labor drives down wages even more than do legal subidos, and technology has reduced the need for some skilled workers.

    An expanded guest-worker program probably would deepen the wage squeeze, says Harvard University immigration economist George Borjas. "I find a 10% rise in worker supply results in a 3% decline in wages" locally.

        The Journal is here describing the #1 class warfare weapon: increasing the labor supply. Rampant immigration, coupled with globalization, has virtually destroyed any semblance of working-class power to negotiate for higher, decent, wages. There are many other things Republicans have done to destroy wages, but these probably are the biggest ones. Throughout this website, you’ll find others.

        Note: although some Republicans have recently come out against immigration, they have traditionally been its great supporters. But lately, the terrible economic impact on working-class Americans is becoming so obvious, that they must change their positions if they are to remain in office.


        If you thought Enron, Tyco, etc., were just aberrations and not characteristic of today’s modern corporation, check this out.

    From The Wall Street Journal, September 18, 2006

    Double Bypass

    Health-Care Consultants Reap
    Fees From Those They Evaluate

    As Insurance, Drug Costs Rise,
    Employers Seeking Advice
    Often Discover Conflicts

    When Kevin Grady took over as an employee-benefits consultant for the Columbus Public Schools District in 2001, he signed a contract promising to act "in the best interest" of the schools. The Ohio district agreed to pay him $35,000 a year to help it choose a health insurer. Officials thought that was all Mr. Grady was getting out of the deal.

    It wasn't. After the district switched its health insurance to UnitedHealth Group Inc. on what it says was Mr. Grady's recommendation, he started getting payments and other compensation from the big Minnetonka, Minn., insurer. "Thank you and United for the steaks," Mr. Grady wrote in a Dec. 20, 2001, email to a UnitedHealth employee. "We'll have those on Christmas eve."

    All told, UnitedHealth paid Mr. Grady $517,138 for helping it get the district's business….

    The episode spotlights a widespread and largely invisible practice that critics say boosts the cost of health care. Many consultants and brokers who are hired to help employers get the best deal on health insurance or prescription-drug coverage have significant financial ties with the health vendors they are supposed to be scrutinizing. The ties may take the form of bonuses for bringing in business, commissions or consulting fees. Often they are disclosed only partly or not at all.

        Note that the Journal described this "largely invisible" practice “widespread.” No wonder health care costs are skyrocketing.

        The only thing unique about Enron was that the main characters were unusually stupid, and their greed blinded them to common sense. Our modern corporate culture has transformed greed from a vice to a virtue, and today’s ethics standard is “anything goes,” as long as it makes you personally rich and won’t get you jail time. Even then, sometimes it seems worth taking the risk of jail.


        The September 18 issue of Barron’s is truly a jewel. It’s the perfect illustration of how totally clueless—and devious—our richest and most powerful citizens are. The cover story was about how great our economy is because some people are becoming obscenely rich.

        The following four items are from Barron’s, September 18, 2006.

    Glorious Times

    Life's Next Act

    AMERICANS ARE LIVING LONGER, healthier lives than ever before and, if you believe everything you read, this is terrible news. With the cost of health care out of control, a Social Security system in crisis and an uncertain economic future, millions of worried, hard-working folks now fear they face an old age beset by… hard work and worry.

    They may be right, but there's another side of the story: The number of prosperous Americans has never been greater. More than 2.6 million of us are bona fide millionaires, including 72,000 with net financial assets in excess of $15 million. As these people retire, they're investing their wealth and freedom in good works, adventure and self-expression, making their later years perhaps the richest of their lives….

        How fantastic! The vast majority of Americans are “beset by hard work and worry,” but, who cares, the top 2.6 million Americans have become members of our new aristocracy. 72,000 of them are even worth in excess of $15 million.


        They’re not living in a bed of roses, however because they must be concerned about:

    Charting a New Course

    THEY MAY HAVE SPENT DECADES BUILDING their wealth, but retiring executives often take just minutes on the big financial question of life's next phase: Will I have enough money to do what I want?…

    Even after taking precautions, retired executives may occasionally share the worry of all retirees—that their nest egg just isn't big enough to last. "They could have $25 million in investments and feel a slight discomfort," says Aulino of Glenmede.

        How sad. You’d think that $25 million would give someone peace of mind. The general public should learn to appreciate the burdens of those who have to maintain mansions in three different countries, a yacht, an expensive wife, several mistresses, a personal jet, and so on.

        Pity the poor rich people.


        But don’t pity them too much, because they have their propaganda experts who do everything they can to make sure that our political system is biased in favor of aristocrats. They do it by deliberately promoting economic absurdities and perpetuating deliberate lies.

        Consider this Barron’s op-ed by Fritz Meyer, who is a senior investment officer with AIM investments in Denver. Naturally, he and his clients are doing very well in this economy, as he vividly describes in the following:

    It Sure Beats Factory Work


    AT THE END OF WORLD WAR II, 38% of America's non-farm labor force was employed in manufacturing. By 1950, that portion had slipped to 30% and it was responsible for producing 26% of the nation's total output of goods and services. Today, just 11% of non-farm workers are engaged in manufacturing, producing 12% of the GDP. The numbers don't lie: For over half a century, manufacturing as a percent of total employment and total production has been in steady decline….

    But, there's a far more sanguine perspective: While manufacturing has been in decline as a percentage of total employment and total output measured in dollars, real manufacturing output has lately been growing at a year-over-year rate of 4.4%, and at a 10-year annualized rate of 3.7%-a bit above the long-term rate of real GDP growth.

    Also, declining manufacturing employment and output as a percent of the total is not unique to America. It's a pervasive global trend. Although China's slight growth in the value of manufacturing as a percent of total output is the exception to the global trend; it lost 15 million manufacturing jobs-a 15% decline-in 1995-2002. And measured by value-added, the U.S. is still the world's largest manufacturer, with a share of total global manufacturing value-added that has slipped only about one percentage point in more than two decades.

    U.S. manufacturing has not "hollowed out," as some have suggested. Rather, services have exploded, and that transformation has been hugely beneficial to our economy. Recessions are rarer and of shorter duration. From 1869 to the start of World War II, the U.S. was in recession more than 40% of the time. In the last 25 years that figure is less than 9%. The steady decline of manufacturing and agriculture in proportion to total economic output is largely responsible for steadier, more predictable growth.

    What does it mean to be a "service" economy? When I compare my family's possessions with what my parents had, as far as I can see there's not that much difference. But, we are far richer than their generation. Not because we have more stuff, but because we have both access to and the capacity to purchase a vast array of services the likes of which they could only dream of. This is the modern definition of wealth.

    My wife and I used daycare in raising our children; and the kids also had many more teachers, tutors and coaches along the way. Whereas our parents only occasionally ate out or saw a movie, we eat in restaurants-fast food and fine dining-as we please. We purchase entertainment in all sorts of ways.

    There's much more. We are among Starbucks' best customers. We exercise at a facility staffed with Pilates trainers and other professionals. Many in our generation travel by airplane and stay in hotels when time, not money, permits. We gamble in casinos. We buy legal and financial advice. We hire somebody to do our taxes. We are piped into the Internet for hours, saving much time and shoe leather, while relying on volumes of software code that, in many cases, kids are writing. We expect these kids to go to college and we assume an ample supply of professors to teach them.

    Our generation buys modern miracle drugs, CAT and MRI scans, implantable devices, new knees, hips, and laser eye surgery to prolong and enhance the quality of our lives. We're planning for cruises in retirement and, ultimately, some lively assisted living in our decrepit years….

    Most of these service jobs didn't exist in my dad's day. But, on average, they pay approximately the same hourly wage as today's average manufacturing job.

    Productivity gains are the reason we've been able to transform our economy. Continuously improving the efficiency of our manufacturing and service processes has led to more production of better goods with steadily fewer people, freeing them to provide an expanding array of valuable services. Americans' standard of living-real purchasing power-has risen decade upon decade as a result.

    Because Americans have allowed for and encouraged innovation and labor flexibility, only one nation in the 30-nation OECD group of developed countries has greater GDP per capita than the U.S. It's tiny Luxembourg, where many workers commute in from neighboring countries and aren't in the official head counts for per-capita GDP. Even the famously industrious Swiss produce just 85% of what Americans do….

        Basically, what Fritz is telling us here is that he and his clients are our new aristocrats and are able to afford just about anything they want to do—because those who are providing all those low cost services are making “the same hourly wage as today’s average manufacturing job.”

        Wouldn’t the more accurate statement be that “manufacturing workers are now making as little as service workers”? As stated elsewhere on this website, workers generally haven’t kept up with inflation since the early 1970s.

        And shouldn’t workers—if they are so productive—be making more money, working shorter hours and under better working conditions?

        Of course not. Technology and productivity improvements are to make the lives of aristocrats better—not the common working folk. They’re to be manipulated, just like machines or raw materials.

        Fritz wrote that “The decline of manufacturing's piece of the GDP pie has meant progress. Unless we are very foolish, the process will naturally keep marching on and we Americans will continue to benefit.” The reality is that the decline of manufacturing lowered wages—which equals “progress,” and if the trend continues RICH Americans will continue to benefit.


        For a more accurate description of what’s happening to our country and its workers, check out this analysis by an expert investment professional, in this same issue of Barron’s:

    Investing in a Shaky World

    Interview With Rudolph-Riad Younes, Co-manager, Julius Baer International Equity Fund


    TALK ABOUT WINNING WAYS. Since we started seeking his investment views in 2002, this head of international equity investing at Julius Baer has seen his stock picks in these pages appreciate 41.75% a year, on average, through the end of August, handily beating the benchmark MSCI EAFE index during the same period….

    Barron's: Give us the Big Picture….

    U.S. corporations have a lot of leverage on politicians and on government decisions. They finance both political parties, and they're not strictly U.S. companies anymore, but global companies, and people tend to forget that. U.S. companies care about what is good for the global economy, not necessarily what is good for the U.S. economy.

    The short electoral cycles in the U.S., in which every two years you have the full House up for re-election and one-third of the Senate being elected, exacerbates the problem. Everybody knows that monetary and fiscal policy takes about 12 to 18 months to have any affect on the economy and, while the opportunities are great for tactical decisions, they are terrible for strategic decisions.

    So give an example of how multinational companies, by embracing a more global outlook, have not served America well?

    Look at profits as a percent of GDP [gross domestic product]. Historically, it averaged about 5.4%, but today it has almost doubled to about 10.2%, way above its previous peak at 7%. That's exhibit A. That's happened as U.S. corporations have moved jobs offshore and Congress has let certain policies go on longer and longer than maybe they should.

    Yes, but what about the argument that companies are more efficient and more productive?

    We are so efficient that we don't do anything anymore, that's how efficient we are. We are so efficient we beg the Chinese to buy something from us. We are so efficient that debt to GDP is above 200%. We are so efficient that we have a trade deficit that is 7% of GDP. Even Turkey would be ashamed of that….

    OK, so what are the implications of this on how you invest?

    Inflation is something there should be no debate about and somehow there is. As the Bank of England observed recently, our core inflation number should include energy because energy is affected by demand from China. The same way China is exporting deflation to us by manufacturing goods more cheaply, it is importing inflation through its demand for commodities and energy.

    Core inflation should also include house prices and other asset prices, rather than just rental equivalents, as is done now. Again that would change the inflation picture dramatically. If you consider headline inflation and include asset prices instead of rental equivalents, the true inflation number would be between 7% and 10%. The question is: If real inflation is 7% to 10%, why don't we see it in wages?

    That's been a big mystery. What's your answer?

    The reason we don't see wage inflation is not just because of China, but more importantly, because people used their houses as ATM machines, basically refinancing their houses and withdrawing equity.

    If your wages are not enough to support your spending, your house bills or your education, but you manage to get an additional loan against your house and use that loan to refurbish your house or pay for your children's education, then you are not going to complain and you are not going to go on strike and you are not going to be militant because you are not being paid enough money.

    Wages, plus equity withdrawal from your house, was enough to support your living standard. Once that sort of financing dries up for the consumer, we will see significant wage pressure.

        Incidentally, this article demonstrates an important point: if you want to know what conservatives really think about our economy and society, don’t rely on their editorials. They feel perfectly free to lie in an editorial, as in the Fritz editorial above. However, when they’re giving investment advice, they feel they must tell their readers the truth.

    And the truth, as Mr. Younes sees it, is that:

    • American corporations have no loyalty to this country:

    • Their only loyalty is to the world economy insofar as it affects the corporate bottom line.

    • The “efficiency” argument that conservatives used to justify globalization was a sham (“we don’t do anything anymore”).

    • By giving away our industries and technologies—we’ve made China the new world economic powerhouse.

    • And all this was done just to destroy the wages of working-class Americans, although China isn't the only reason "wage inflation" isn't happening.

        Incidentally, there was much more to this article, and those interested in its investment implications should read the entire article.


        As you read the following, remember that, since the early 1970s, working-class wages have been stagnating, corporate profits have been rising, the stock market has been soaring, and the disparity in income and wealth between rich and poor has been exploding.

        This article is a classic for the study of class war in America.

    From Business Week, September 18, 2006.

    U.S.: Why The Labor Markets Could Ignite Inflation

    Overall compensation costs are soaring, and that could push prices higher

    Through the spring and summer, most of the news from the labor markets has been encouraging for the inflation outlook. Job growth has slowed, and the unemployment rate has stopped falling….

    Despite smaller increases in payrolls, the job market remains tight enough to keep pushing up labor costs….

    In fact, revised data from the Labor Dept. on Sept. 6 show that productivity growth, while very good, is nowhere near fast enough to offset the impact of rising labor costs on businesses….

    THE QUESTION for the inflation outlook is this: To what extent are cost pressures pushing companies to lift their prices in order to support their bottom lines?…

    The 3.9% rise over the past year in hourly earnings for production and nonsupervisory workers has been eaten up by inflation, a fact much commented on. But the more important gauge for spending is overall income. For this group, about 80% of payrolls, income was up in August by 6.2% from a year ago, based on the combined pattern of both hourly pay and hours worked….

    What matters most, though, for the inflation outlook -- and for Fed policy -- is the trend in prices outside of energy. On that verdict the jury is still out, but the recent evidence from the labor markets on business costs and household income raise a red flag. The Fed noted in the minutes of its Aug. 8 meeting its wish "to accumulate more information before judging whether additional firming [in interest-rate policy] would be necessary." The danger is: While the Fed waits, the labor markets may already be generating new inflation pressures.


    • ”…news from the labor markets has been encouraging.” Translation: As more people seek work (the unemployed), wages stay down and corporate profits soar. That’s the point, isn’t it, of the Republican version of capitalism.

    • Talk about a loaded question: “To what extent are cost pressures pushing companies to lift their prices in order to support their bottom lines?” It’s as though the multimillions paid to CEOs and top executives have no effect on bottom lines. It also ignores the fact that the bottom lines lately have been huge, and enriching investors as never before.

    • “The 3.9% rise over the past year in hourly earnings for production and nonsupervisory workers has been eaten up by inflation.” In other words, workers in one normal job can’t keep up with inflation. But when you add “hours worked” in overtime and second jobs, they might keep up with inflation.

    • "What matters most, though, for the inflation outlook -- and for Fed policy -- is the trend in prices outside of energy.” Translation: the most important determinant for Fed policy is whether or not working-class citizens are getting a larger share of the benefits of their own productivity.

    • Wow! Workers may be beginning to share in the prosperity of our country. Obviously, it’s time for the Fed to raise the prime interest rate to slow down the economy.

        This type of news item is the most common you’ll find on this website. That’s because Republicans watch the incomes of working-class Americans like predatory hawks, and if they see any signs that wages may be about to go up, they’ll call on the Fed to raise the prime interest rate.

        To read more about how Republicans keep wages down, go to The Income Gap is no Accident.


        A class war between shareholders and managers is described in the following article. Read it, and guess who’s not even mentioned as a class that has an interest in the outcome.

    From The Wall Street Journal, September 8, 2006

    In Some Deals,
    Executives Get
    A Double Payday

    Managers Profit When Companies
    Are Sold to Private-Equity Firms,
    Then Stay on With Big Options

    Private-equity firms have notched seven of the 10 largest leveraged buyouts of all time this year. For the top executives of the target companies, such deals could be the difference between being rich and being very rich.

    That is because in many cases the executives are both buying and selling the company. Consider a trio of massive deals: The bids for HCA Inc., Kinder Morgan Inc. and Aramark Corp., valued at more than $40 billion combined, all have involved top executives teaming up with private-equity firms to buy their own companies and to continue running them.

    As increasing numbers of executives heed the siren call of private-equity firms, the dynamic pitting shareholders against management is bound to intensify. (Private-equity firms buy companies or divisions using vast amounts of debt and later sell them or bring them public.)

    In such cases, management, with all its detailed knowledge of the company, goes from being a seller striving for a high price to being a buyer looking for an attractive price. Usually the sale of a public company involves an auction or a competitive-bidding process. But when management joins the private-equity buyers, there often isn't such an open procedure, and the process is especially fraught with potential conflicts of interest….

        Who’s interests are missing? The workers, of course. And it’s only a matter of time before they’ll be told that they must work harder for less pay—because the corporation has taken on so much debt, and it’s a matter of survival (of jobs, of course)!


        Connect the dots between the following editorial by Gene Epstein and the news item in the same issue of Barron’s.

    From Barron’s, September 4, 2006.

    Economic Beat

    It's Goldilocks Time


    THE AUGUST JOBS REPORT, RELEASED FRIDAY, lent added confirmation to the modified Goldilocks outlook for the U.S. economy: not too hot or too cold -- and if not just right, not so wrong, either.

    It will not be just right, because the correction in the housing market has already begun. And the price inflation that began early this year, which concerned Federal Reserve chairman Ben Bernanke, will probably continue, although without worsening.

    It won't be so wrong, however, because gains in payroll employment should keep the jobless rate at less than 5%, a happy situation by most standards….


    Widening Gap

    The median income of American households rose by 1.1% adjusted for inflation last year, after falling for five successive years, according to the Census Bureau.

    The survey showed the gap between the richest and poorest widened, as it has since the early 1970s.

        What is this “Goldilocks Time” that Epstein is so proud of? It’s an economy is hot enough to increase corporate profits and a soaring stock market, but not so hot that working-class wages start to go up. Conservative politicians keep a lid on wages in a growing economy by controlling the supply of labor. To read about how they do it, go to The Income Gap is no Accident.

        The news item just tells us what we already know: real wages have been going down for most of the past six years, and the disparity in income and wealth between rich and poor has been increasing since the early 1970s.

        And we thank our Republican friends for achieving all that for us.


        There was so much bad news in the following item, it was hard to cut it down to a manageable size. Note that this analysis is coming from The Wall Street Journal, hardly a member of the “biased liberal news media.”

        Despite the Journal’s headline, and a few of the optimistic paragraphs, it’s clear that we’re losing the war on terror, and all because of the Bush Administration: “Once you're cast as a foot soldier of Bush, it's a powerful symbol" for adversaries [of those who would support the goals of the U.S.].

    From The Wall Street Journal September 8, 2006.

    Five Years Later

    In Indonesia, War on Terror Shows
    Both Gains and Worrisome Trends

    Since 9/11, Big Islamic Nation
    Has Caught Bomb Suspects
    But Seen Militancy Grow

    Anger Over American Policies

    JAKARTA, Indonesia -- At the five-year mark in America's global struggle against Islamic terrorism, the world's largest Muslim nation offers hope, and a warning.

    Last November, Indonesian police trained by the U.S. tracked their region's most-wanted bomb-maker to a house in central Java. Bedecked in a suicide belt, Azahari Husin lobbed several bombs at his pursuers and invited them to enter the house and join him in "paradise." Police responded instead with a burst of bullets, some of which pierced Mr. Azahari's heart….

    Elsewhere in Indonesia, however, Islamic militias this summer were openly recruiting men to go to Lebanon to fight alongside Hezbollah. A man the U.S. says is the spiritual leader of Southeast Asia's main terrorist group was freed from jail to resume his verbal attacks on the U.S. and Israel. And Islamic militias and fundamentalism are both growing forces inside Indonesia, say political analysts….

    Indonesia illustrates the conflicting results in the war on terrorism since 9/11. Indonesia has captured or killed more than 200 terrorists in five years, its officials say. It has cut deeply into the top ranks of Jemaah Islamiyah, the principal ally of al Qaeda in Southeast Asia. But alongside this progress are a creeping shift to a more conservative brand of Islam in Indonesia and the continuing growth of hard-line militias.

    Indonesian officials say anger about U.S. support for Israel and about wars in which Muslims die undercuts their ability to cooperate with the U.S. in fighting terrorism. "I've always appealed to my colleagues in the U.S.: If there are changes in U.S. policy in the Middle East, there would be a significant reduction in terrorist attacks here. This is not a theory," says Ansyaad Mbai, who oversees Indonesia's counterterrorism operations and is a close aide to President Susilo Bambang Yudhoyono.

    Indonesia has a secular constitution, and traditionally its nearly 200 million Muslims practiced a moderate form of the faith. But lately, some local jurisdictions have been unilaterally implementing elements of Islamic law, or Shariah, such as alcohol bans and limits on women's rights. At the national level, parliament is debating an "anti-pornography" bill that, as initially filed, would authorize a government agency to regulate skirt lengths and how long couples may kiss in public.

    More recently, radical Muslim leaders in Indonesia, furious over the recent combat in Lebanon, have urged supporters to strike out against American and Israeli targets. Militias such as the Islamic Defenders Front and Indonesian Mujahedeen Council openly recruited fighters to go to the Middle East to fight Israel in Lebanon, though the government says it prevented any from actually going.

    An Islamic radicalization of Indonesia is far from a sure thing. Presidential elections in 2004 gave 60% of the vote to Mr. Yudhoyono, a staunchly secular retired general. Purely Islamist parties won only around 15% of parliamentary seats that year, though recently, some secular parties have also backed legislation with an Islamic tint. Senior Indonesian and American officials say Jakarta is making significant strides in building one of the Islamic world's most vibrant democracies, after nearly 30 years of dictatorial rule under former President Suharto, who resigned in 1998.

    Women's and minority groups have increasingly taken to the streets in recent months to push back against attempts to implement forms of Shariah law. And Indonesia's two largest Islamic organizations, Nahdlatul Ulama and Muhammadiyah,have shown an increasing willingness to combat the radical preachers and boarding schools that bred the suicide bombers that struck Bali and Jakarta in recent years. "This is a Muslim-majority country but it's not an Islamic state," says Defense Minister Juwono Sudarsono, who has worked to strengthen military ties to Washington.

    Yet the Indonesian government's sway over what localities decide on matters such as Shariah is somewhat limited, officials here acknowledge. The central government is trying to wield a light hand, a reaction to the long years of Suharto's authoritarian rule.

    Before Sept. 11 and for a while afterward, the U.S. was frustrated that the Indonesians didn't seem to take terrorism very seriously. U.S. diplomats were deeply worried that al Qaeda or its Indonesian sympathizers were casing their embassy and planning to hit it. Indeed, in 2002, a captured al Qaeda operative, Omar al Farooq, provided detailed intelligence to Americans of a plot to strike inside Indonesia.

    Indonesian officials played down the threats and declined to receive U.S. intelligence briefings, say U.S. diplomats. Americans "couldn't get a dial tone" to discuss terrorism with the Indonesians, says one U.S. diplomat who was based in Jakarta. He says the police even failed to close off a road in front of the embassy that could be used for a truck bombing.

    Then came the nightclub bombings in Bali. The October 2002 attack killed 202 people. More than 80 were Australian tourists, and within hours, Australian police were at the resort island working with Indonesian police to provide forensic and other technical help. They used a serial number on an engine block to trace the attack to a mechanic in east Java. After that, software supplied by Australia let Indonesian police trace phone traffic to a wider web of plotters.

    The attack was a wake-up call to Indonesian authorities. Today they pursue terrorism more vigorously with a police unit called Detachment 88, a name inspired by the pronunciation of "ATA," the U.S. Anti-Terrorism Assistance program. The State Department has pumped more than $35 million into Detachment 88 since 2001, according to the U.S. Embassy in Jakarta.

    At a camp in the hills outside Jakarta, Detachment 88 operatives have been trained in counterterrorism tactics by the Federal Bureau of Investigation, Central Intelligence Agency and Secret Service. Indonesian forensic specialists have studied methods to identify the "signatures" of munitions. Others have received sniper training or been taught techniques such as how to preserve crime-scene evidence from water or other damage.

    A payoff came in the hunt for Mr. Azahari, a British-trained engineer and former university professor who, Indonesian authorities say, made the bombs that Jemaah Islamiyah has used in four major terrorism strikes since 2002, including the Bali bombing of that year.

    Last October, after a second lethal Bali attack, at outdoor gathering spots, Detachment 88 tracked plotters to just outside the Javanese city of Malang through phone calls and Internet traffic. Spies located Mr. Azahari and his men at a safe house, which police surrounded with snipers. They were able to kill him before he detonated his suicide belt, preventing a large explosion that would have obliterated documents and other evidence, say Indonesian officials.

    An especially important technology obtained from the U.S. and Australia, says Indonesia's Col. Golose, is software that enhances police ability to monitor Internet chat rooms. As the capture or killing of top Jemaah Islamiyah leaders gradually erodes its hierarchy, smaller cells have emerged, increasing the importance of such tracking technology, he says.

    Indonesia also needed legal upgrades to tackle terrorism. Its colonial-era legal code had to be amended to permit courtroom use of such modern evidence as emails and video clips revealing suspects at attack sites. The government instituted a new counterterrorism law after the first Bali attack that permitted detention of suspects for a week without charges and introduced new rules of evidence. Indonesia has sent police, judges and prosecutors on missions to the U.S. and Europe to learn how to implement the rules.

    American officials say these changes are impressive given the previous dictatorial rule in Indonesia, which marginalized the police and courts. "If you look at their system in 1998, everything depended on the army, as it was Suharto's instrument for control," says the U.S. ambassador to Indonesia, B. Lynn Pascoe. "They are now building new systems, including effective police operations."

    Authorities have won several death sentences for Jemaah Islamiyah operatives, three of whom could face a firing squad this fall. In a court in Jakarta last September, Judge Roki Panjaitan pronounced such a sentence for Iwan Dharmawan, also known as Rois, a plotter of a September 2004 suicide bombing of Australia's embassy. (It's believed Australia was targeted because of its support of the U.S.-led wars in Iraq and Afghanistan.) Judge Panjaitan says he faced a crush of men in white robes screaming that his sentence "was a decision from Satan." He says a beefed-up police presence provided a sense of security both for him and for witnesses.

    Despite the Indonesian police's sharpened skills, the threat posed by militants is palpable. Abu Bakar Baasyir, thought to be Jemaah Islamiyah's spiritual leader, is out of prison now after serving two years for conspiracy in the first Bali attack. During the recent fighting in Lebanon, he was on television calling for a global jihad against Israel and America.

    Still at large is the suspected mastermind of the 2005 Bali attack, Noordin Mohammed Top, who escaped the shootout that killed Mr. Azahari. Counterterrorism officials here believe Mr. Noordin has established a network separate from Jemaah Islamiyah. Particularly troubling, investigators say, were the arrests last month of two men who were communicating with one of the imprisoned plotters of the first Bali bombing via the Internet.

    Every year since 2002, terrorists have struck Western targets here in September or October, leading many Indonesians to call the period the "bombing season." Just last week, the U.S. Embassy issued a warning that terrorist groups "continue to plan attacks against Westerners and Western interests in Indonesia."

    Many Indonesians voice concern that fundamentalist, militant Islam is gaining ground. Government officials and analysts are convinced the wars in Iraq and Afghanistan have helped push some Indonesians down a militant path. Islamist political parties here openly say their opposition to U.S. foreign policy has helped grow their ranks. While militancy alone doesn't equal terrorism, it sets the stage.

    One organization that has fed off the U.S. wars is the Islamic Defenders Front, known as FPI. When the FPI emerged in the late 1990s after Mr. Suharto's fall, it focused on actions such as forcibly closing bars during the holy month of Ramadan. But after the U.S. invaded Afghanistan following 9/11 to rout the fundamentalist-Muslim protectors of al Qaeda, the FPI's ranks swelled and it became a loud voice against U.S. foreign policy.

    The group has often massed white-robed followers outside the U.S. embassy and parliament in Jakarta to denounce the invasions of Iraq and Afghanistan. After months of relative quiet this year, the group rekindled its rhetorical offensive when Israel struck back at Hezbollah. The FPI militia claimed it had trained 2,000 warriors for action in support of Hezbollah in Lebanon.

    At FPI headquarters in Jakarta, graffiti on a front walkway call the compound an "anti-Israeli zone" and label the U.S. "evil." Inside are photos of Osama bin Laden and various Palestinian clerics and Afghan mujahedeen. A 25-year-old administrator in the office, Soleh Mahmud, said the FPI must bear arms "to be prepared if George Bush will attack us." He claimed the FPI has 60,000 militiamen in Jakarta and operates in 23 of Indonesia's 32 provinces. Independent analysts acknowledge the FPI's swift growth but say its claims of 30 million supporters are vastly inflated.

    After the tsunami that devastated the Indonesian province of Aceh 20 months ago, and was followed by a major aid effort from the U.S. military, the FPI offered help as well. It said it was there partly to prevent Western aid groups from "Christianizing" the province.

    The FPI uses its growing ranks to target groups it regards as apostate or as agents of the West, say some Indonesian minorities and moderate Islamic groups. Last year, FPI militiamen helped shutter the offices of an Islamic sect called Ahmadiyah. Indonesia's powerful Muslim religious arbiter, known as the Ulamas Council, had issued a fatwa calling Ahmadiyah heretical.

    On an August morning in 2005, about 300 members of the FPI and another Islamist militia appeared outside the offices of a group called the Liberal Islam Network, a U.S.-funded organization that promotes interfaith dialogue. A large police force prevented an attack, which leaders of Liberal Islam Network say they feared. The FPI says it had merely come to find out why the group was espousing doctrines contrary to Islamic teaching. "We went there to get an answer," Mr. Mahmud says.

    Extremists "see us as a tool of the Americans" and sometimes telephone death threats, says the Liberal Islam Network's executive director, Hamid Basyaib. "The Islamists are riding the wave of democracy" to achieve their long-term goal of an Islamic state….

    Some of these critics say that when faced with a threat such as this they normally might seek political and financial support from the U.S. government and American aid organizations, such as the Ford Foundation or the Asia Foundation. But now, they're afraid that doing so would open them to being labeled as tools of the U.S. "Once you're cast as a foot soldier of Bush, it's a powerful symbol" for adversaries, says Kamala Chandrakirana, chairwoman of the National Commission on Violence Against Women, who says the conflicts in Iraq and Lebanon have made her job harder.

         Despite the horribly bad news, there is hope that the U.S. can turn things around. It’s may be true that “An Islamic radicalization of Indonesia is far from a sure thing. Presidential elections in 2004 gave 60% of the vote to Mr. Yudhoyono, a staunchly secular retired general.”

        But only a radical change in U.S. foreign policy is going to make it happen. In other words: out with the Republicans, and in with some progressive politicians who actually believe in a sensible foreign policy.


        How's this for the most optimistic statement in the following article? "Mr. Bush "prefers to have half an ally over not having one at all," says Husain Haqqani, director of Boston University's Center for International Relations."

        Again, we're seeing the utter disaster the Republicans have made of their "war on terror."

    From The Wall Street Journal September 8, 2006.

    Pakistan Prioritizes
    Its Battles at U.S. Expense

    Truce in Border Area Frees
    Army to Fight Separatists,
    But May Fuel Afghan War

    Pakistan's decision to end a military offensive against Islamic militants in the country's troubled northwest frontier reflects mounting pressure on President Pervez Musharraf to deal with an even bigger security problem: a growing rebellion in the resource-rich province of Baluchistan.

    Political analysts say Gen. Musharraf, boxed in by a pair of increasingly costly conflicts, has been forced to focus on the more important political threat to his government -- the Baluch separatist movement -- even if it means U.S.-led forces across a porous border in Afghanistan could pay a price for the Pakistani military's withdrawal from the northwest region of Waziristan.

    Under a cease-fire agreement struck this week between tribal chieftains and the military, a three-year government campaign against Islamic militants in Waziristan ended. The military released hundreds of prisoners taken in the rugged tribal area and granted amnesty to others, including some with known links to al Qaeda. Soldiers have vacated advance outposts in the region and relocated to a nearby army camp, according to a senior military official….

    Mr. Bush "prefers to have half an ally over not having one at all," says Husain Haqqani, director of Boston University's Center for International Relations….

        How many times does it have to be proven: instead of attacking our best counterbalance for militant Islam in the Middle East--Iraq--we should have solidified our gains in Afghanistan.


        Here's a short one to remind you that this is the industry that Republicans want to handle your Social Security retirement funds.

    From The Wall Street Journal, September 8, 2006.

    Mutual Funds Struggle
    With Scandal Payouts

    The next stage in the saga of the mutual-fund scandal of recent years is about to begin: reimbursing investors who were hurt.

    After several fund companies got in trouble three years ago -- they let a few preferred customers trade improperly, generating short-term profits but hurting long-term fund shareholders -- the companies paid more than $2 billion in fines.

    Now, investors are a step closer to getting a refund from the resulting pool of cash.

        "..hurting long-term fund shareholders"--that sounds like old codgers who would like to have some reliable retirement funds..


        The utter callousness of the Republican mind is illustrated in the following. Despite decades of wage stagnation and an exploding gap in wealth and income between rich and poor, they are now concerned that “…workers are benefiting unequally from the [current economic] expansion.

    From The Wall Street Journal, September 7, 2006.

    Sharp Jump in U.S. Labor Costs
    May Presage a Rise in Inflation

    The nation's labor costs in the second quarter rose at the fastest rate in nearly six years as employers passed on productivity gains to workers in the form of higher pay. But economists disagreed on whether the rise stemmed from one-time items like bonuses or a broad rise in paychecks or benefits that could signal rising inflationary pressures.

    The Labor Department reported yesterday that nonfarm business productivity rose at a seasonally adjusted annual rate of 1.6% in the second quarter, surpassing an earlier estimate of 1.1%. In the first quarter, productivity increased 4.3%.

    However, unit-labor costs -- a gauge of inflation -- rose an upwardly revised 4.9% in the latest quarter and 9% in the first quarter. Those increases -- which were revised from earlier estimates of 4.2% and 2.5%, respectively -- mean labor costs have jumped 5% in the second quarter compared with the year-earlier period, the fastest pace since the third quarter of 2000. Unit-labor costs reflect the cost of labor for each unit of output….

    Yesterday's report isn't likely to douse concerns workers are benefiting unequally from the expansion. For example, other recent reports have shown average hourly earnings of workers, excluding managers, have risen by an inflation-adjusted 0.5% in the 12 months through July. Wage and salary income for all workers, including managers, has risen an inflation-adjusted 4.5% in the same period when other forms of pay, such as bonuses, are included.

        So,average hourly earnings of workers, excluding managers, have risen by an inflation-adjusted 0.5%--and when you add managers and their bonuses, you get 4.5%. And conservatives (Republicans) are concerned about those whose incomes went up only .5%. Unbelievable--except, believe it.

        Also note that those who say we shouldn't be envius of the rich--are the same ones who watch the wages of working-class Americans like predatory hawks.

        To read about how Republicans destroy working-class wages, and standard of living, go to The Income Gap is no Accident.


Check out the "previous conservative press" files below. You'll find throughout these files the reasons why our country is facing a financial disaster, who's causing the disaster, and which kinds of politicians will be able to best lead us out of this mess -- that is, if it is still possible.

(Note: the one-year lapse in coverage was the result of the webmaster receiving chemotherapy for a Burkitt's type lymphoma and an extended peroid of recovery.)

Previous conservative press articles

For 2005:

For 2004:

For 2003:


Return Home, or go to The Two-Minute Video.