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July 21, 2010

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"In a functioning democracy, Mr. Immelt and his compadres would need to scramble to be pro-American."

Precisely! Thank you.

When I consider such craven characters as Jack Welch, Carly Fiorina, or Michael Dell, I wonder not so much at their own personal failings, nor at the failings of the culture that sustains them today. I wonder most at the failings of the culture that raised these beasts those decades ago.

What culture produced the older manager that gazed at a young Jack Welch and saw something in him to foster? Did some cabal develop to further this career? Or, was the culture so incompetent that a Jack Welch could navigate his career unhindered by any better, more honest vision?

A few years later, was it that same culture that applauded Michael Dell as he injured and insulted the heart of this nation by championing the notion of ‘off-shoring’ while pretending that his behavior was the result of historical inevitability?

Where did all of this begin? When was the heart of America first traded for gold?

Rate, I think it began when God created Adam and Eve.

I will explain.

As I worked my way up the corporate ladder in a billion dollar company, I noticed an interesting trend. Each step of the way, up the ladder, I saw that my equals were developing an "us versus them" attitude. As we moved upward, others in management saw new qualities in themselves and shortcomings in the co-workers they left behind at a lower level. I was perplexed. I still saw the shortcomings they had at the lower levels, yet they felt they were now superior to the lower level workers and DESERVED special treatment and perks. As the climb continued, the perceived divide became huge. I'm sure there is some psychology behind this process, but suffice it to say, by the time we reached the executive managemtent level, these people at the same level as me thought they were gods who felt the little people were put on this earth to serve them and provide them with unlimited perks. Observing this behavior over a period of years allows me to understand how our current crop of CEO's are able to accept gigantic salaries, gigantic bonuses, unlimited perks and they do so with the following attitude " I DESERVE IT, without me, the little people would be lost". These transformations from commoner to god amazes me, because I know them for who they really are: the same schmucks who happened to have caught a lucky break.

Human nature, Rate, human nature.

There's actually an Arizona connection here, however tangential. Engine Charlie's widow, Suzanne lived in Tucson back during my college days. Their son, Robert, was a professor of anthropology at the University of Arizona and a trustee and benefactor of the Museum of Northern Arizona. I got to know to them fairly well, particularly their politics as mainstream Republicans. Suzanne, as I recall, was scandalized by South Africa's apartheid regime. There wasn't a shred of meanness in her or sentimentality for that matter. Decent people behaved well, after all.

As they say, compare and contrast. It's not that America's wealthy are heartless. Buffett and Gates show quite the opposite inclination. Rather it's a gradual distancing from core aspects of our civic life. There are still a few grandiose monuments, needless to say. Jean Paul Getty shows that. There will even be foundations and trusts that benefit our community. Maybe Arizona's name will someday be auctioned off so there will be little confusion why Virginia Piper's name is on virtually every public building here (except for those named for the liquor capo Kemper Marley).

Once capitalism disconnected from places, manufacturing, and legacies, there was no looking back. I remember my dizziness way back when trying to understand why Wonder Bread was a subsidiary of communications giant ITT. Today, the tangled lines of ownership defy not only usual congruence, but national interest and ordinary logic.

Last year, I was in the alleyway behind my house when I overheard my Archie Bunker neighbor lecturing the cable guy on free-market economics. I asked myself how a crew foreman had become a financial titan. Maybe there is no explanation for a country as madly in love with wealth as ours. Maybe E-bay will turn us all into captains of industry. But the pathos is overwhelming anyway. Most people are not going to be rich and they console themselves with wackadoodle politics and lynch-mob projection. The last thing they want is to win the lottery only to see half of it go to a government that lifted their parents from poverty.

Having seen and worked (albeit many levels of supervision below) Welch's protege, John Bossidy, these captains of industry are a scourge. Honeywell (nee AiResearch, Garrett, Signal, AlliedSignal) still lumbers under Bossidy's demand to offshore, so much so that a building that is nearly a 1/4-mile long is now empty -- the machines on the first floor sent to Mexico (you've never seen so many trailers parked double deep) and the engineering staff on the top sent to fill up an emptying building elsewhere at the 36th St. plant. It's so bad that even the tax breaks for jobs sent to Puerto Rico aren't good enough -- send the work to Bangalore!

I remember when Bossidy came to speak and someone asked why he deserved such an outsized salary -- He replied, that if you were me you'd do it too. Maybe he was right, but then maybe he would whore his mother too.

Correction: It's Larry Bossidy, not John (long-term memory being affected by age).

Why would Immelt, head of GE (which owns NBC), say anything discouraging about Obama? Doesn't he know that as a liberal elite with influence in the liberal media, he's only allowed to make pro-liberal statements? I'm sure he'll get a stern talking-to with Markos Moulitsas, Arianna Huffington, and the rest of the liberal media cabal in their weekly, super-secret underground meeting.

Liberals are always surprised, first, when power makes concessions due to intense systemic pressures, even though those concessions are made in self-defense, and later when the removal of pressure allows the organic consolidation of power to continue along natural lines.

Don't forget that the modern "welfare state" was introduced by none other than Otto Von Bismarck, "The Iron Chancellor", in response to socialists agitating for revolution. The Health Insurance Bill of 1883, the Accident Insurance Bill of 1884, and the Old Age and Disability Insurance Bill of 1889, were the direct progenitors of our Medicaid, Workplace Disability, and Social Security / Medicare programs.

Many socialists castigated these programs as attempts to co-opt their movement, to buy off the population for pennies on the dollar with weak programs which would lack permanence and which would see erosion and reversals as soon as the ownership class felt safe. They were right, but the timing and dynamic was more complex than they envisioned: there would be two world wars and a Cold War to intercede.

During the 1930s, the Great Depression created new threats, especially in light of well-funded, well-organized extremist groups and parties on both the Right and the Left. The threat of both lasting economic collapse, and population revolution, was in the air. FDR was able to press through a number of reforms which ameliorated popular suffering and reduced the concentration of income and wealth through taxation and (indirect) redistribution via government programs. These programs continued, and were even expanded, as the Cold War progressed, and the U.S. and U.S.S.R. competed for the hearts and minds of both the Third World and western intellectuals, allowing the rise of bread-and-butter unions even while ruthlessly divesting them of their radical political components and leadership.

Later, as the Cold War drew to a close and Ronald Reagan made changes, by executive fiat, legislation, or de-funding of oversight bodies, as well as by changes in trade law and laws governing the movement and taxation of capital, both domestically and by international corporations, unions entered their long decline, continued or accelerated by subsequent administrations both Republican and Democratic. The decline of collective bargaining, along with the outsourcing of good-paying manufacturing jobs and their replacement with comparatively low-paying service jobs (often unionized) resulted in the stagnation and decline of real median income and the concentration of both wealth and income which we see today.

It's important to understand that these trends are inherent to capitalism. Mr. Talton gives example of an early Ford Motor Company in its progressive wage structure (despite its severely anti-union stance). But Ford was family-owned, and did not have to satisfy the ever more grasping greed of public shareholders determined to maximize short-term profits at all costs. Corporatism is a predictable and intrinsic aspect of capitalism itself; and just as the progression from private ownership to ownership by public shareholders is predictable, as capital seeks to concentrate and maximize itself and its returns, so is internationalism in corporatism, as domestic companies exceed their boundaries, seeking both labor and markets elsewhere.

Both trends -- public ownership and internationalism in corporate affairs -- act to accelerate the concentration of income and wealth. Unions involved in economic sectors, such as manufacturing, which can be conducted outside the country, by foreign workers with considerably lower standards of living, face erosion regardless of the vigor or weakness of domestic labor law and its enforcement. Companies that can pack up and move production to China can intimidate workers regardless of the ease of unionization, and finally discard those workers, as no longer necessary. (Unions still have a potentially strong role in many domestic service sectors, performing tasks for local residents which cannot be outsourced.)

Owners seek to justify these policies (which are determined by governments, since laws governing international taxation, trade, and capital movements constitute a political framework for all international commerce), by asserting that the price of products thus produced is lower for consumers, which is true, but scarcely the whole picture. After all, consumers should be concerned, not with the absolute price of goods, but with the percentage of their income needed to purchase these goods.

If cost-cutting, via outsourcing of factories and labor, was passed entirely on to consumers, then they would benefit as promised by owners. But most consumers are also workers, not owners. The purpose of cutting labor costs via outsourcing, from a business perspective, is to increase profit margins to satisfy major shareholders (owners). Profits cannot be increased by passing along all labor cost-savings from outsourcing to consumers; they can only be increased by passing along some labor-cost savings to consumers, with the difference (increased company profits) going to owners. But since most consumers are workers, this means that their income (wages) must decline more than their cost savings from lower prices. This means that their share of national income decreases, while the share of national income going to owners increases commensurately.

For a long time this was masked by easy consumer credit and borrowing, rising house prices, and loans or lines of credit continually refinanced by perpetually increasing household real-estate values. These things picked up the slack, camouflaging the loss of income by the working and middle class to the ownership class. No longer.

The other little secret, the obverse side of the coin, is that an increase in worker wages need not drive up prices as a percentage of worker income -- provided that production is non-profit and thus that increases in prices do not exceed increases in wages. It is only when the profiteering class seeks to recover more than this, that increases in the prices of goods and services exceed increases in the wages earned by the workers producing those goods and services; again, this is a mechanism by which the ownership class grabs a larger percentage of national income at the expense of the working and middle classes.

Mr. Talton wrote:

"In reality, the great American middle class is Atlas. It does the work and bears the burdens..."

Well, the fact is that each class tends to emphasize its own importance at the expense of others. The middle-class in America claims a pre-eminent position, even though it is the working-class that performs the bulk of the actual labor. Marxists claim an exaggerated place for "the proletariat", regarding the middle class as mere skimmers, taking a modest fraction of owner profits in exchange for their obedience as the gatekeepers of political, social and economic institutions, and failing to understand that any society presently conceivable, either capitalist or socialist, will need competent, motivated managers, technicians, and professionals. The fact is that both classes serve vital and indispensable functions in a modern economy, and are likely to continue to do so for the foreseeable future; and as a NON-Marxist socialist I am able and willing, not only to concede this dynamic, but to insist upon it.

This nexus of common interests between the working-class and the middle class is of importance for the future as well, because history shows a definite pattern in the democratization of power. First it was held by kings; then it was partially wrested from kings by a larger class of (still elite) noblemen -- for example, the Magna Carta. Then it was wrested from noblemen by upper-class plantation owners and merchants, as in the American Revolution, and in general by nouveau-riche capitalists as the Industrial Revolution replaced the feudal system; eventually political power was (nominally) shared by non-landed White males, then by racial minorities and women. Note that the U.S. Senate (a bulwark against popular "leveling" tendencies) was not elected by direct popular vote until the passage of the 17th Amendment in 1913; and that the President of the United States is still elected by the Electoral College rather than by direct popular vote.

Now we have reached a point where the middle-class is the next logical revolutionary vanguard, to take political (i.e., economic) power from the upper class. So, it is very important that solidarity between the middle-class and the working class be cemented; that the middle-class should become educated and class conscious, and that they should lead the working-class (absorbed as the latter are in the day to day minutiae of existence) toward political consciousness and political coalitions.

Consider the implications of this: in 2007, mean household income (all households, from single occupants to families) was $69,193. Mean income refers to a mathematical average: take the income of each household in America, add them together to get a grand total, then divide this by the total number of households in America, to get the mean household income. This figure is considerably higher than the median household income (the income which half of American households earn less than, and half earn more than), because whereas the lower half of American households earn somewhat less than the median, the upper half of American households include a small group at the upper portion of the income pyramid who earn VASTLY more than the median.

Now, it is a simple fact that the median can be made equivalent to the mean, by a simple redistribution: if the mean household income is $69,193 it is because total household income, divided by the number of households, yields this figure. If each household individually earned $69,193 then total household income divided by the number of households would also yield $69,193.

Now, that is what we might call a solidly middle-class income. It becomes clear, then, that by means of a redistribution of income from the upper class (especially from the tiny but incredibly high-earning top of the top) to the rest, that EVERY household in America could be made middle class. What a revolutionary notion! Would that really be so bad? Of course, one would not wish to perform absolute levelling, since that would not take into account differences in local cost of living, or of individual job difficulty (both in terms of the job itself and of education/training work required to qualify for the job), or of individual job performance, or of the size of the household (which ranges from a single individual to large families); but the point is to stimulate the imagination and suggest an idea that could modify common ways of thinking -- ways conditioned by a traditional of education and history inordinately influenced by the ownership class.

http://factfinder.census.gov/servlet/ADPTable?_bm=y&-qr_name=ACS_2007_1YR_G00_DP3&-geo_id=01000US&-ds_name=ACS_2007_1YR_G00_&-_lang=en

P.S. Please note that socialism is an economic system, it is not something to be rushed into, much less on the basis of vague but fine-sounding emotional rhetoric. It must be flexible, realizing that as economic systems develop (particularly the form of capitalism from which it might hope to develop) that it must change also. Dogma is not conducive to this.

So, while we might be understandably reluctant to turn the national economy on its head, by insisting on ownership of the means of production, whether via local committees, regional and national coalitions, centralized national bodies, or some combination of all of these, the question of redistribution of income (as opposed to alterations in ownership and management itself) is probably a good and comparatively safe place to start.

This is especially true today because 70 percent of the U.S. economy is demand driven, and demand is slack and likely to continue to be slack not only for years but perhaps for decades to come, due to long-lasting demographic and economic changes. Many of these changes are mutually reinforcing. They include:

(1) An aging (retiring) baby-boom generation leaving their peak-spending years behind.

(2) Rising healthcare costs.

(3) Rising energy costs over time (?)

(4) Globalization of the workforce, leading to...

(5) ...Stagnant or declining real incomes for most U.S. households; consequently...

(6) ...the largest inequity in income distribution since before the Great Depression.

(7) High-levels of household debt (something like 125 percent of GDP even after recent foreclosures and bankruptcies), thus requiring the diversion of a portion of household income to reducing debt.

(8) Lower spending to rebuild nest-eggs lost/damaged in the recent market crash.

(9) Housing bubble crash means mortgage borrowing no longer available to finance credit card debt, and new construction no longer the engine for growth it once was.

(10) The commercial real-estate market slump/crash.

(11) Higher-unemployment.

(12) Increased taxes to pay for Social Security costs as the baby-boomers retire; or else increased personal costs to working families to support their elders' basic needs if Social Security benefits are cut.

(13) Tight credit for most consumers and small businesses.

Now, the only thing that CAN change this dynamic, not merely on a temporary, one-time basis, but for the long-term, is redistribution of income from those hoarding cash for purposes of financial speculation, to those most likely to spend it on the consumption of goods and services.

P.S. Note that increased healthcare costs ARE contributing to the economy in a sense, since that money is spent on the healthcare sector; what is implied is that, after expenditures for necessary services like healthcare are subtracted from personal income, net disposable income for other sectors (i.e., for goods and services in the general economy at large) is less.

That does not bode well for consumerism in the general economy, particularly when combined with the other items listed.

P.P.S. Also note that the concentration of income in the top of the income pyramid does NOT imply that the rich can take up the slack of consumer demand created when their share of national income increases at the expense of the rest of the population.

The reason is that even the rich can only consume so much; after their wants (however more extravagant) are satisfied by consumption, their incomes are so large that much money remains available; that money is then used for financial speculation.

This also explains the rise of the financial sector in the U.S. economy in recent decades: as the manufacturing sector was outsouced and the rich increased their share of national income at the expense of the middle and lower classes, it gave rise to a vast increase in the pool of non-consumption income, which in turn was "invested" in attempts to increase paper wealth still more.

Thanks for your efforts to rehab the reputation Charles Erwin Wilson. It is the giant builders of this country that we should look to with respect and he was one of the giants.

Btw, there was a whole class analysis that grew up in the late 19th century in middle America that claimed the most interesting distinction was between the Makers, and the Takers. Wilson was obviously a Maker!

For a more updated version of this class analysis, try:
http://elegant-technology.com/ETthree.html

One important caveat: Note that the mean household income, as indicated by Census data, is likely understated; academic studies have long shown that Census surveys routinely understate the income of persons and households in the top 1 percent of the income pyramid, where so much income share is concentrated relative to the size of that class of earners.

Here's an interesting idea building off of the preceding: direct redistribution of income could eliminate (after redistribution) all personal income taxes (federal, state, and local) as well as other personal taxes (state and local sales taxes and personal property taxes), as well as Social Security, Medicare, Medicaid, and general "welfare" programs as we know them. Here's how:

First, incomes would be so equalized (not absolutely, but relative to today) that special programs for the poor, such as Medicaid and food stamps, etc., etc., would be unnecessary.

Second, instead of these taxes, everyone would be required to save a percentage of their income (after redistribution) in the new National Bank (publicly owned and non-profit). To the extent that incomes were equalized, the national saving rate could be a flat rate applicable to all households. The national saving rate would be set to budget for the following expenditures:

(1) Monthly payments to retirees (national pension).

(2) A single-payer health system, or a hybrid, would keep healthcare costs (including pharmaceuticals) affordable, whether as a budgeted portion of the national saving rate, and/or as personal income (hybrid).

(3) Capital investment in the national infrastructure (e.g., high-speed commuter and shipping rail, alternative energy generation), all run on a non-profit basis but as efficiently as possible. The electorate, after being educated on the issues (such as why infrastructure investment is necessary to maintain their personal (redistributed) incomes and why it can even increase those incomes by facilitating economic expansion, would be able to vote on the pace (and burden) of such investment.

(4) The disbursement of a portion of national savings funds to states, apportioned by population (perhaps with a regional cost of living index adjustment); states in turn would be required to disburse a portion of their funds to local governments (e.g., municipalities) apportioned by local population.

(5) Remaining federal expenditures (more about this below).

No more tax shelters, loopholes, or exceptions. No more underfunded school districts. No more race to the bottom as states compete with one another to cut taxes and create an unlevel playing field. Simple, straightforward, commonsense.

All of this would make it easy for households to see exactly what their total tax burden is: the amount is exactly equal to the national saving rate. The federal government could keep a website for the sake of civic transparency, showing exactly how much was spent in each of these categories, with additional detail available for each category. States would be required to keep their own databases, which in turn would be accessible from the federal website with a click on an Internet hyperlink.

It's tempting to suggest that business taxes could be eliminated this way, since owners must take a cut of company profits to realize their personal incomes, and the latter are subject both to redistribution and the nationals saving rate; but this would tempt the rich, at least initially, to use businesses as personal tax shelters, by allowing a greater portion of personal income to remain in business accounts as company property, rather than realizing it; this in turn would cause a calamitous drop in government revenues, thus undermining the program.

Far better to set the business tax rate equal to the national saving rate. This would insure no preference in either company cash accrual or of realization of personal income by means of taking a cut of company profits; it simply wouldn't matter either way. Similarly, by adding this revenue source to personal national savings, the national saving rate could be set much lower than if it was the sole source of government revenue.

Business taxes could be consolidated, however, into a single tax, along similar lines. They would support unemployment insurance, workplace disability insurance, workplace and labor law compliance inspection and enforcement, and environmental management to control and offset industrial pollution of air and water; and would also join the residue of the national saving rate in the general fund for the purpose of other federal expenditures.

Entire departments and bureaucracies could be eliminated; but others would need to be created to manage some of these functions.

Remaining federal expenditures would in some places be cut, e.g., by elimination of all wars not in the national defense, and some "defense" expenditures not contributing to national readiness against potential military rivals (e.g., China). There's a lot of pork in the Defense Department.

A scenario that might play well in middle-America: summon the national press corps, for an announcement by a Patton-esque figure that turns out to last exactly fifteen seconds: "America cannot, and should not, attempt to sort out and decide every heathen conflict in every godforsaken corner of the globe. The President has ordered the immediate removal of all military personnel from Afghanistan and Iraq, with triple termination pay to be awarded upon their return home. God bless America."

No handwringing, no soul-searching, no self-serving attempts at justification, no apologies. Would troops and their families complain about peace AND a pocketful of dough? Warn the Taliban to stay out of the way during the stand-down, or face a gizzardful of cruise missiles at their next leadership conference after withdrawal.

For those who argue that use of the term "saving" is a misleading rhetorical finesse for what is in fact a mandatory, and therefore confiscatory government tax, point taken, though "saving" is here intended to suggest mutual saving for mutual gain, not personal saving. Just substitute "consolidated national tax" for "saving" and the idea functions the same.

P.S. Some may be puzzled by a reference to a national pension. Why would there be a need for a national pension AFTER redistribution of income?

In fact, I had in mind that only full-time (or full-time equivalent) workers would receive redistributed income. But a simplified alternative would be to include retirement households in redistribution and eliminate any sort of national pension. This could be justified on the grounds that retirees were collecting their "savings" previously deposited in the National Bank every month.

Obviously, retirement households with a high enough personal income so as to make a portion of that income elegible for redistribution, would not qualify for either a national pension or to receive (as opposed to contribute) redistributed income.

I'm going to have to challenge Mr. Talton's rehabilitation of Charles Erwin Wilson.

Mr. Talton is perfectly correct in his presentation of the corrected quote: but unfortunately, neither the rest of Wilson's statement nor the context in which it was made, supports Mr. Talton's charitable interpretation.

Here's the full quote:

"For years I thought what was good for our country was good for General Motors and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country."

The statement was made by Wilson at his Senate confirmation hearing after being nominated for Secretary of Defense.

More specifically, he made it after being asked during questioning about his persistent refusal to sell his personal $2.5 million stock in General Motors, and whether he could be trusted, given this potential conflict of interest to make a decision as Secretary of Defense that was adverse to the interests of General Motors. In other words, the statement was his justification for that refusal, an indication of why there could be no conflict of interest.

In fact, it's even more arrogant than the often misquoted version, because it reveals that whereas, previously, Wilson had identified the interests of the two, now he had concluded that GM was so big that there could be no difference of interests.

In the middle of the 1954 recession, he faced Detroit reporters and came up with an analogy about the nation's unemployed that was raised as a Democratic battle cry during the year's congressional election campaigning. Said Wilson: "I've always liked bird dogs better than kennel-fed dogs myself. You know, one that'll get out and hunt for food rather than sit on his fanny and yell."

Read more: http://www.time.com/time/magazine/article/0,9171,827790-2,00.html#ixzz0ue6dsKEh

"What's good for General Motors is good for America." The very epitome of the selfish, imperious chief executive. Except he didn't actually say it. His real words were, "for years I thought what was good for the country was good for General Motors and vice versa." In other words, the interests of big business couldn't be divorced from the well-being of the nation. This represented the best ethos of our business leadership when America stood at its zenith.

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