Archive for the ‘economics and finance’ Category

The truth about economic austerity

Thursday, April 19th, 2012

I get really steamed when I hear Herr Harper and his cronies spouting the neo-con line about deficit reduction and making government more efficient. If he really wanted to reduce the deficit, he’d kill the F-35 purchase and start slashing MP’s gold-plated pensions. This article from the Daily Kos tells it like it is.

When right wing politicians talk about deficits you can be certain that they’re waging class warfare. When right wing politicians pursue economic austerity you can be certain that they’rewaging class warfare. If right wing politicians truly cared about fiscal responsibility, they would raise taxes on those who can most afford to pay more taxes and they would end corporate handouts, whether they be direct subsidies or the indirect enabling that is having the public foot the bill for environmental and other public harms incurred as part of corporate profit making. If politicians cared about balanced books they would do what’s best to grow the economy and rectify social and economic imbalances. Prosperity does not trickle down. If given the chance, it can blossom up.In the United States, the only honest fiscal solution is to end the Bush tax cuts, end foreign military adventurism, stop pretending that it’s necessary to spend more on military and ostensible national security hardware than the rest of the world combined, and end all forms of corporate subsidies. If a corporation cannot survive on its own it deserves to die. If a corporation’s survival serves some vital social or security need and it cannot survive on its own, then it should be socialized rather than publicly subsidized. After all, public subsidies to privately held corporations already are a form of socialism, it’s just that much of the money goes into private pockets rather than serving the public good.

Three principles for a new Wall Street

Friday, October 21st, 2011

Don Tapscott is probably known to many readers of this blog as an author of seminal books such as Wikinomics and for his regular appearances in the media (Globe and Mail and NPR to name just two). His latest article in the Globe and Mail looks at the Occupy Wall Street movement and suggests some principles that Wall Street should be following.

The American financial services industry is in desperate need of reform. Many bankers have behaved as secretive corporate titans serving only their own interests, and insist the devastating consequences are not their fault. They are failing to fulfill their obligations to society – in some cases, even to shareholders – and a growing number of critics view the day-to-day behaviour of the financial services industry as unacceptable. If the industry doesn’t initiate reform from within, it will eventually have more extreme reform imposed from outside.

In 2008, the routine gambles of Wall Street almost brought down global capitalism and yet, so far, nothing fundamentally has changed. Restoring long-term confidence in the financial services industry requires more than individual banks changing their behaviour or even governments intervening with new rules. The industry needs a new modus operandi, where all of the key players (banks, insurers, investment brokers, rating agencies and regulators) adopt the three facets of collaboration: integrity, transparency and embracing the commons.

How to kill your manufacturing base

Monday, September 5th, 2011

If you read the right-wing blogs and newspapers, you’ll hear a lot of griping about unions and how uncompetitive American labour is. You won’t hear much about bad management. So here’s a case study in how mismanagement and greed managed to kill a paper mill that could still be competitive in today’s global market. The mill is in Escanaba, Michigan, in Michigan’s Upper Peninsula, not too far from my home town of Sault Ste. Marie. I suspect you could write a similar story about the decline of the Sault’s paper mill.

The Escanaba mill makes coated paper. Coated paper is shiny paper, the sort you find in most magazines, catalogues, and art books. Coated paper is fussy to manufacture, which makes it daunting in a continuous process setting like a mill. In a highly-capital intensive continuous process business, downtime is hugely expensive.

In 1969, Mead added a #3 machine in Escanaba. Paper machines are very long-lived; you’ll find machines over 100 years old in use, since older, well maintained, well-located machines (as in with access to comparatively cheap power and pulp) can be competitive on grades of paper which are made in small runs (as in the slow speed of the machine is not a negative). The #3 machine was world class at the time of its installation. There was no reason to think it could not be highly competitive through 2020 or 2030 if properly maintained.

Starting up a new machine, however, is not an easy process, and the #3 machine was not operating at the expected efficiency level. Management nevertheless pressed forward with a further mill expansion in 1970-1971, of a kraft-recovery system. The best workers on the #1 machine were moved to the #3 machine which did not solve the problems on #3 and worsened the results of the #1 machine. It took an over two year turnaround effort to get the mill operations up to a good level of productivity.

Why Amazon can’t make a Kindle in the USA

Tuesday, August 23rd, 2011

When I bought an iPod for Nancy a couple of years ago, it was fun using UPS’ online tracking to follow it halfway across the world from China to Alaska to Toronto. My Kindle came directly from Amazon in the US, but I figured it probably wasn’t made there, and it turns out I’m right. Amazon couldn’t manufacture a Kindle in the US even if it wanted to. This Forbes article looks at how high-tech manufacturing in the US has fallen into decline and why.

The US has lost or is on the verge of losing its ability to develop and manufacture a slew of high-tech products. Amazon’s Kindle 2 couldn’t be made in the US, even if Amazon wanted to:

  • The flex circuit connectors are made in China because the US supplier base migrated to Asia.
  • The electrophoretic display is made in Taiwan because the expertise developed from producting flat-panel LCDs migrated to Asia with semiconductor manufacturing.
  • The highly polished injection-molded case is made in China because the US supplier base eroded as the manufacture of toys, consumer electronics and computers migrated to China.
  • The wireless card is made in South Korea because that country  became a center for making mobile phone components and handsets.
  • The controller board is made in China because US companies long ago transferred manufacture of printed circuit boards to Asia.
  • The Lithium polymer battery is made in China because battery development and manufacturing migrated to China along with the development and manufacture of consumer electronics and notebook computers.

The financial road to serfdom

Wednesday, June 15th, 2011

In this guest post on the Naked Capitalism blog, Michael Hudson makes the case that bankers and bondholders are using the financial crisis to roll back the social reforms of the last century. If you look at what’s going on with the Republican drive in the U.S. to fix the debt ceiling, it gives even more credence to his argument, which is well detailed in this post. It’s long, but worth the time to read.

Financial strategists do not intend to let today’s debt crisis go to waste. Foreclosure time has arrived. That means revolution – or more accurately, a counter-revolution to roll back the 20th century’s gains made by social democracy: pensions and social security, public health care and other infrastructure providing essential services at subsidized prices or for free. The basic model follows the former Soviet Union’s post-1991 neoliberal reforms: privatization of public enterprises, a high flat tax on labor but only nominal taxes on real estate and finance, and deregulation of the economy’s prices, working conditions and credit terms.

What is to be reversed is the “modern” agenda. The aim a century ago was to mobilize the Industrial Revolution’s soaring productivity and technology to raise living standards and use progressive taxation, public regulation, central banking and financial reform to distribute wealth fairly and make societies more equal. Today’s financial aim is the opposite: to concentrate wealth at the top of the economic pyramid and lower labor’s returns. High finance loves low wages.

Are we on the verge of a Great Depression?

Friday, June 3rd, 2011

According to economist Peter Yastrow, we’re on the verge of another Great Depression. The Naked Capitalist blog has a post that provides a lot of evidence pointing in that direction. I’m not an economist, so I can’t judge the validity of some of the numbers, but some of the other indicators, like unemployment are pretty scary.

As illustrated above, one can see that in today’s dollar, we have already committed to spending levels that surpass the cumulative cost of all of the major wars and government initiatives since the American Revolution.

Recently, the Congressional Research Service estimated the cost of all of the major wars our country has fought in 2008 dollars. The chart above shows that the entire cost of WWII over four to five years was less than half the current pledges made by Paulson and Bernanke in the last three months!

In spite of years of conflict, the Vietnam and the Iraq wars have each cost less than the bailout package that was approved by Congress in two weeks. The Civil War that devastated our country had a total price tag (for both the Union and Confederacy) of $60.4 billion, while the Revolutionary War was fought for a mere $1.8 billion.

In its fifty or so years of existence, NASA has only managed to spend $885 billion – a figure which got us to the moon and beyond.