Thus said Marie Antoinette (or the words are accredited to her) during the French Revolution. It is the cited as the height of insensitivity. While Paris was burning around her she assumed that the ordinary citizen had access to the delicacies that were afforded only to the rich. Completely out of touch. She paid with her head. Why these thoughts at the time that we are ushering in a New Year?
I saw a very moving piece of the plight of the impoverished middle class in America. You can see the segment at: http://www.pbs.org/newshour/bb/business/july-dec11/poverty_12-30.html. The piece does not examine the plight of street people but focuses on ordinary people (and some extraordinary people) who have fallen on hard times due to the recent economic implosions in the United States. We meet a mother with two master degrees who had to go to the food bank to feed her children. We meet people who have given up trying to find a job and who will probably never work again. These are middle class folk who have been caught up in an economic storm that is as cataclysmic today as the French Revolution was for its time. The selling point for the American way of life was the American Dream. This was supposed to mean that everyone had a fair chance at an eduction, could find a job for life, could have and support a family and could look forward to a reasonable retirement. All gone. They say that the American economy is coming back. Don't believe it.
In Canada we know the meaning of "two solitudes". They are called solitudes, I suppose, because we have two groups who operate within their own spheres of influence that don't interact. It works for awhile but when meaningful interaction is required there is little or no means by which it can occur. When reasonable people can't speak they often resort to violence to make their point. The FLQ in Quebec is a good example. When the French aristocracy could not empathize with the common folk the matter was resolved by revolution. In countries where there was a reasonable chain of communication between classes (such as England) change was gradual but peaceful. What does this have to do with the poor in America? Or Canada for that matter?
Being a citizen in a country implies a social contract. This is a mutually exchanged set of promises between the state and the citizen that assures a reasonable existence for the individual. In Canada the social contract includes a social safety net that everyone takes for granted--as they should. This is what they bought into when they agreed to be citizens--by birth or otherwise. In the United States the social contract always included the American Dream. Take away that aspect and you have a significant default of the social contract. In Canada, no matter who is to blame, there is a significant default in our social contract with our aboriginal people. In both cases we have groups of people shouting to other groups of people, neither of which hear each other. In the Middle East you have a similar phenomenon. Where this lapse of communication persists long enough one group decides that no amount of shouting will get them heard. So the shouting escalates to violence. We have seen it among our aboriginal people and we have seen it in the Arab Spring. And we will see it in America.
The 99% Occupy (fill in the blank) movement was a poor beginning at trying to create a meaningful dialogue between the aristocrats and politicians on the one hand and the middle class. Seen as latter day hippies no one took that movement seriously. However, the Arab Spring movement has not gone unnoticed in the United States. Recently a 100,000 name petition (on Facebook) was presented to Verizon over a $2 charge. The charge was removed. The wake up call has been made. Is anyone listening.
The rupture in the American social contract is fundamental. There is an almost complete disconnect between the people that govern the nation and those who would be governed. Within that disconnect there is a level of ingenuousness by the governing class that would make Marie Antoinette proud. Within the disconnect on the electorate is a disquieting feeling that the only thing that politicians do is feather their own nest. If the disconnect continues history has shown us that violence soon follows.
In the case of the Canadian aboriginal people there are those that argue that no amount of money can rescue aboriginals from themselves. However, Canada entered into a social contract with aboriginals and has consistently failed to live up to its promises. The result has been inaction by successive governments, wholesale fraud by some aboriginal leaders and, for the rank and file poverty that would make Palestinian refugee camp look like paradise. The aboriginals can, and will, raise hell. But will the politicians respond? Is there a fundamental disconnect between these two groups that can only be resolved by violence. In the US there has been better resolution of aboriginal problems. We could learn from them.
So, as the New Year comes upon us it is a time to reflect on what our role will be in upholding our social contract. Will be be part of the population that never votes? Will we be part of the population that does not urge his or her political representative to "do the right thing?". Will we be the part of the population that turns his or her back on the less fortunate? Will we say, in modern terms, "let them eat cake".
I wish you a healthy and serene happy New Year.
Bernie.
Saturday 31 December 2011
Thursday 29 December 2011
A Ship of Fools--The Republican Presidential Wannabes.
I have watched, with some morbid fascination, many presidential run ups in the United States. Never, have I seen such an unqualified bunch of fools that pretend to present themselves as qualified to govern the United States of America. An admission: I am probably to the left of the most left US Democrat. That being said I can't imagine that the designation of a candidate from the current bunch could present a "close vote" for the incumbent. From candidates that want Congress to be a part time job, to those who would ship more than 10 million undocumented residents home--or put them into an interment camp, to those who would have the Supreme Court Justices justify a decision in a public forum, to those who would bleed the country dry before they would agree to any tax increase, the current range of candidates go from deranged to ingenious to outright stupid. It might be comical but it is at least likely that one of these jokers could become President of the United States. I have, for the life to me, tried to understand how such a crew could be considered a candidate for such a pivotal job. Here are some thoughts.
From the beginnings of the Obama presidency the Republicans have tried to isolate him. With great success. He had campaigned on the idea of inclusiveness and bipartisanship politics. It was never to be. I would like to think that the Republican response to him had little to do with colour but I am not so sure of that. Obama reached out during the healthcare legislative process and gave up his most prized provision--on the public option where an insured could go to a government agency when all else failed him--and was slapped in the face. The legislation passed without a single Republican vote. Because he believed in inclusiveness President Obama left the business of Congress to Congress. He was not an overly proactive President. In return Congress--even those in his own party--marginalized him. He is seen by the right as a socialist and by the left as having moved too far to the right. So, he is again marginalized. His strength with the uncommitted voter has eroded so much that barely half the electorate see him as having done a good job as President. That is not to say that the uncommitted voter will vote Republican with the current bunch of crazies but it will be an uphill battle for the Obama constituency to win them over. Fool me once, shame on you; fool me twice shame on me. The marginalization of the President has had the effect of making him fair game with even the most outlandish of candidates.
The American electorate is thoroughly confused. The President, while giving billions to the banks, is seen as not having helped the man on main street. True, President Obama inherited much of the economic mess he's in but he wanted the job and, as second prize, got it. The job creation part of the job was put on the burner and should have been addressed when he had a majority in both houses. Now the job creation legislation is bound to fail: any job creation legislation will be seen as a "victory" for President Obama. The plight of those who have lost their homes has not been helped by a government that would not let the market decide the value of mortgage investments being held by the bank. Accordingly the banks would not write down their mortgage investments in hope that a government rescue was on their way. Not writing down their investments directly affected the homeowner who could not restructure or write down his loan. It is generally acknowledged that small business creates jobs faster than large business. Small business needs credit for inventory, financing of accounts receivable, etc. The local banks were not lending. Whatever the bailout money did for the banks it did not increase local lending. Therefore local business was not hiring. What should have been apparent was that job creation--not healthcare-was job one. Any government help to create jobs has an immediate return on payroll deductions; the unemployed to not pay taxes. The seemingly abandonment of the man on main street has worked to the benefit of the Republicans. Small government, states rights, low taxes fall on fertile ears when the man on the street is under fire from all sides.
Extremism and stupidity begets more extremism and stupidity. Rather than stand "above the crowd", each candidate is in a race to the bottom. Take the issue of healthcare reform. Mitt Romney instituted healthcare reform in Massachusetts some years ago. The program is still in force and echoes, in many respects, the federal legislation that was to follow. Romney is being tarred with this today. He had to admit that his support of healthcare was a "mistake". The candidates position on foreign policy is laughable. Ron Paul could not identify many of the countries under siege today let alone formulate a policy with respect to them. Given that government is one of the largest employers in the land severe reduction of government will create massive unemployment. No one has attacked the dismal state of education in the US. If Republicans are pro business explain their position on free trade? In short, if the stakes were not so high, the present bunch would be comedic. I could go on.
What we are seeing is an entire failure of government--at least at the federal level. The President has been rendered fairly ineffectual. He squandered his political capital on non essential legislation (when compared to job creation). Congress can't get beyond sound bites. Entrench positions are so deep so that essential legislation is frustrated. The electorate does not know where to turn. So they turn to a bunch of clowns with easy answers. It will be interesting to see who can sound a wake up call to the American electorate. For wake up they will. What they do, as awake, may have some disturbing results. Let's see.
Bernie.
From the beginnings of the Obama presidency the Republicans have tried to isolate him. With great success. He had campaigned on the idea of inclusiveness and bipartisanship politics. It was never to be. I would like to think that the Republican response to him had little to do with colour but I am not so sure of that. Obama reached out during the healthcare legislative process and gave up his most prized provision--on the public option where an insured could go to a government agency when all else failed him--and was slapped in the face. The legislation passed without a single Republican vote. Because he believed in inclusiveness President Obama left the business of Congress to Congress. He was not an overly proactive President. In return Congress--even those in his own party--marginalized him. He is seen by the right as a socialist and by the left as having moved too far to the right. So, he is again marginalized. His strength with the uncommitted voter has eroded so much that barely half the electorate see him as having done a good job as President. That is not to say that the uncommitted voter will vote Republican with the current bunch of crazies but it will be an uphill battle for the Obama constituency to win them over. Fool me once, shame on you; fool me twice shame on me. The marginalization of the President has had the effect of making him fair game with even the most outlandish of candidates.
The American electorate is thoroughly confused. The President, while giving billions to the banks, is seen as not having helped the man on main street. True, President Obama inherited much of the economic mess he's in but he wanted the job and, as second prize, got it. The job creation part of the job was put on the burner and should have been addressed when he had a majority in both houses. Now the job creation legislation is bound to fail: any job creation legislation will be seen as a "victory" for President Obama. The plight of those who have lost their homes has not been helped by a government that would not let the market decide the value of mortgage investments being held by the bank. Accordingly the banks would not write down their mortgage investments in hope that a government rescue was on their way. Not writing down their investments directly affected the homeowner who could not restructure or write down his loan. It is generally acknowledged that small business creates jobs faster than large business. Small business needs credit for inventory, financing of accounts receivable, etc. The local banks were not lending. Whatever the bailout money did for the banks it did not increase local lending. Therefore local business was not hiring. What should have been apparent was that job creation--not healthcare-was job one. Any government help to create jobs has an immediate return on payroll deductions; the unemployed to not pay taxes. The seemingly abandonment of the man on main street has worked to the benefit of the Republicans. Small government, states rights, low taxes fall on fertile ears when the man on the street is under fire from all sides.
Extremism and stupidity begets more extremism and stupidity. Rather than stand "above the crowd", each candidate is in a race to the bottom. Take the issue of healthcare reform. Mitt Romney instituted healthcare reform in Massachusetts some years ago. The program is still in force and echoes, in many respects, the federal legislation that was to follow. Romney is being tarred with this today. He had to admit that his support of healthcare was a "mistake". The candidates position on foreign policy is laughable. Ron Paul could not identify many of the countries under siege today let alone formulate a policy with respect to them. Given that government is one of the largest employers in the land severe reduction of government will create massive unemployment. No one has attacked the dismal state of education in the US. If Republicans are pro business explain their position on free trade? In short, if the stakes were not so high, the present bunch would be comedic. I could go on.
What we are seeing is an entire failure of government--at least at the federal level. The President has been rendered fairly ineffectual. He squandered his political capital on non essential legislation (when compared to job creation). Congress can't get beyond sound bites. Entrench positions are so deep so that essential legislation is frustrated. The electorate does not know where to turn. So they turn to a bunch of clowns with easy answers. It will be interesting to see who can sound a wake up call to the American electorate. For wake up they will. What they do, as awake, may have some disturbing results. Let's see.
Bernie.
Saturday 24 December 2011
'Tis the Season
For most of my life I have been confronted by the Chanukah vs Christmas paradox. When I was young, Chanukah was a lesser holiday celebrated by eating latkes (potato pancakes fried in oil) and lighting the candles each night. The fact that this was the "festival of lights" or the "festival of freedom" was lost on me. We received Chanukah "gelt" (money) with the stipulation that half was to be given to the poor--in our house a blue box given to us by the Jewish National Fund. Proceeds went to Israel--then another nebulous concept (until 1948 that is). The "gelt" was never more than 50 cents--a princely sum when you could buy a chocolate bar for 10 cents. Of course, only 25 cents got to stick in my hands. No one gave opulent gifts and no one expected them. First, my family was not in the financial position to give opulent gifts and, second, that was not the style of the day. Christmas, on the other hand, was important to our family business. Much of our retail business was conducted in the Christmas season. Gifts were purchased and the hyper commercialization of Christmas was yet to come. However, we were culturally exposed: we all sang carols at school (and recited the Lord's prayer every morning) without complaint. Religious (or non-religous) pluralism was yet to come. As Jews my parents had always been the lesser part of a dominant culture and Canada was not much different from Russia in that regard. For our family (and many other Jews) Easter was the dangerous holiday: the crucifixion of Christ was then firmly fixed on the heads of Jews and the Catholic church made no effort to stem the anti-semitism that was already adrift in the community. But Christmas was always relatively benign for the security of the Jews in Ottawa. Everyone that worked for our family was Catholic and my parents made sure that there was a little extra in the pay envelope (everyone was paid in cash) for the Christmas season. There were no Christmas parties and, for the most part, employees were happy to be employed and my family was happy that there was enough business to pay their salaries and have a bit left over for profit.
Even as a youngster I was aware that the inter-religious problems that Jews faced were rarely generated by non-Jews. They were generated by the Church--mostly the Catholic church. Most of the non-Jews that I knew were, if not tolerant toward Jews, living in a symbiotic relationship with the Jews of our community. Everyone knew the boundaries. There many stores to which Jews did not apply for work. The banks did not generally employ Jews. Nor did the insurance companies. There were quotas in the universities for the enrolment of Jews. Nonetheless Jews excelled. For the children of Jewish immigrant families to get ahead it was necessary to get better grades just to be on a level educational playing field with our non-Jewish neighbours. Thankfully many of these walls came down and the educational and business relationships became more ecumenical. But for many non Jews, Jews were, at best a mysterious cult and at worst were Christ killers. I have American friends who attended university in the 1950s only to be asked by Christian "friends" where their horns were.
Chanukah and Christmas and Kwanza are now more ecumenical. Not to say that there is religious harmony but Christmas trees and Chanukah lamps stand side by side in your favourite mall. Chanukah has become a sort of Jewish Christmas in that children expect gifts on each of the 8 days while Christian kids are envious of the stretched out Jewish holiday. What has happened, for good or for ill, is that much of the religious content of these holidays has been largely striped away. I do not want to go back to my youth because Chanukah was not as major a holiday as it has become. I do not want to go back to my youth when Christmas was more divisive than it is today. It seems that time has somewhat healed over these differences.
To my Jewish friends and family, a happy Chanukah. To my non Jewish friends, a Merry Christmas. I do not subscribed to the generic "happy holiday" generic greeting. To all, a Happy New Year.
Bernie.
Even as a youngster I was aware that the inter-religious problems that Jews faced were rarely generated by non-Jews. They were generated by the Church--mostly the Catholic church. Most of the non-Jews that I knew were, if not tolerant toward Jews, living in a symbiotic relationship with the Jews of our community. Everyone knew the boundaries. There many stores to which Jews did not apply for work. The banks did not generally employ Jews. Nor did the insurance companies. There were quotas in the universities for the enrolment of Jews. Nonetheless Jews excelled. For the children of Jewish immigrant families to get ahead it was necessary to get better grades just to be on a level educational playing field with our non-Jewish neighbours. Thankfully many of these walls came down and the educational and business relationships became more ecumenical. But for many non Jews, Jews were, at best a mysterious cult and at worst were Christ killers. I have American friends who attended university in the 1950s only to be asked by Christian "friends" where their horns were.
Chanukah and Christmas and Kwanza are now more ecumenical. Not to say that there is religious harmony but Christmas trees and Chanukah lamps stand side by side in your favourite mall. Chanukah has become a sort of Jewish Christmas in that children expect gifts on each of the 8 days while Christian kids are envious of the stretched out Jewish holiday. What has happened, for good or for ill, is that much of the religious content of these holidays has been largely striped away. I do not want to go back to my youth because Chanukah was not as major a holiday as it has become. I do not want to go back to my youth when Christmas was more divisive than it is today. It seems that time has somewhat healed over these differences.
To my Jewish friends and family, a happy Chanukah. To my non Jewish friends, a Merry Christmas. I do not subscribed to the generic "happy holiday" generic greeting. To all, a Happy New Year.
Bernie.
Saturday 17 December 2011
With A Pinch of Salt
I am an unabashed economic history freak. I recently heard two lectures that brought back fond memories of my university days. If you are interested, you can hear the lectures by going to www.cbc.ca/ideas. You can scroll down to the salt lectures and hear the nitty gritty for yourself. But what about salt that's so intriguing?
Until the industrial revolution and beyond, salt was the common currency of commerce. Cities were founded near salt supplies (the "wich" in Norwich or Sandwich stands for salt). Armies were paid in salt. City states killed and went to war over salt. At one time salt, weight for weight, was more expensive than gold. This was because salt had many uses that went well beyond cooking. Before refrigeration, salt was the only means by which food could be preserved. Therefore, cod caught outside Britain could be preserved for sale in, for example, Venice. Salt was the main curative for battle injuries. Armies without salt soon had soldiers whose wounds quickly turned gangrenous.
We forget that in each era there is a key element that drives economies. Over time the key element becomes less important. Salt became less essential with the discovery of antiseptics and ice retention (well before refrigeration). But during its highest currency salt was an essential element of commerce. The lack of salt meant that you had to trade for it. And because of it, for the most part, trade became the foundation for wealth--instead of landholdings. When trade overcame landholdings as a wealth creator landholding were soon traded to create wealth. Adam Smith knew this only too well.
One of the interesting side notes of salt crunch (pun intended) was that Queen Elizabeth I declared that her nation had become too dependent on salt and had to find other means to achieve the ends that salt served. Sound familiar? Think of oil. The discovery of oil as a commercial driver is one of the prime drivers of economies in the 20th century and beyond. But history tells us that when a resource becomes overly scarce or when the dependance on a resource creates vulnerability for some countries, this resource will be replaced by something that levels the playing field. This is happening before our eyes. Most western nations recognize that their dependence on oil makes them vulnerable to unstable countries like Saudi Arabia and Venezuela. So we are going to solar power, nuclear power, wind power most of which do not require oil. In the 22nd century many will regard oil as we now regard salt. As a curiosity.
Bernie.
Until the industrial revolution and beyond, salt was the common currency of commerce. Cities were founded near salt supplies (the "wich" in Norwich or Sandwich stands for salt). Armies were paid in salt. City states killed and went to war over salt. At one time salt, weight for weight, was more expensive than gold. This was because salt had many uses that went well beyond cooking. Before refrigeration, salt was the only means by which food could be preserved. Therefore, cod caught outside Britain could be preserved for sale in, for example, Venice. Salt was the main curative for battle injuries. Armies without salt soon had soldiers whose wounds quickly turned gangrenous.
We forget that in each era there is a key element that drives economies. Over time the key element becomes less important. Salt became less essential with the discovery of antiseptics and ice retention (well before refrigeration). But during its highest currency salt was an essential element of commerce. The lack of salt meant that you had to trade for it. And because of it, for the most part, trade became the foundation for wealth--instead of landholdings. When trade overcame landholdings as a wealth creator landholding were soon traded to create wealth. Adam Smith knew this only too well.
One of the interesting side notes of salt crunch (pun intended) was that Queen Elizabeth I declared that her nation had become too dependent on salt and had to find other means to achieve the ends that salt served. Sound familiar? Think of oil. The discovery of oil as a commercial driver is one of the prime drivers of economies in the 20th century and beyond. But history tells us that when a resource becomes overly scarce or when the dependance on a resource creates vulnerability for some countries, this resource will be replaced by something that levels the playing field. This is happening before our eyes. Most western nations recognize that their dependence on oil makes them vulnerable to unstable countries like Saudi Arabia and Venezuela. So we are going to solar power, nuclear power, wind power most of which do not require oil. In the 22nd century many will regard oil as we now regard salt. As a curiosity.
Bernie.
Friday 9 December 2011
The New Bourgoise
I admit to being a junkie of historical economics. I believe that there is nothing new under the sun when it comes to economic activity. There are new processes and new innovations but there is much to be learned from the South Sea Bubble as it relates to the great mortgage meltdown. Enter Deirdre McClosky a much venerated economist that held sway for may years at the University of Chicago in the United States. To make it a bit more interesting (if not relevant) is that Deirdre started life as Donald and underwent a sex change. Her recent interview on the CBC program Ideas (you can download it free of charge from either iTunes or the CBC) is a must-hear for those who are even remotely interested in how the world is changing (in economic terms) but is much the same as it was in the 1700s and 1800s.
I have often subscribed to the view that the cataclysmic events of the British industrial revolution fundamentally changed the world as they new it at the time. According to McClosky this is because innovation became a generality accepted reality rather than what it was previously: any change was bad. According to McClosky this acceptance was an "accident". My position was that it was no accident. In Britain, second sons (who would not inherit the family fortune) went into business. Also, the rise of Protestantism freed workers from the burdens of the church and advanced the notion that each man was his own person (rather than a person owned by the local gentry or the church). The rise of real property concepts in Britain was key to economic development as was the rise of personal property such as intellectual property. Wealth was not longer measured in land but in money capital.
Whatever it was, the changes that were brought about were, as I said, cataclysmic. Wealth was created by innovation, manufacture and trade. Factories brought workers in from the farm. The farm had to become more efficient to feed all of the mouths that were now in factories and hence agricultural innovation. Yes, people worked at starvation wages in factories but innovation came through organized labor and unions. Innovation moved workers from horse and buggy to the automobile. Space exploration led directly to semi conductors which, in turn, revolutionized everyday life with consumer goods and computers. Economies have gone through cataclysmic changes before and they will do so again. In fact, they are going through a fundamental changes today. And change, as we know, is painful.
What does this have to do with economic circumstances today? McClosky posits that innovation in the past innovation was found in northwestern Europe. Because of fundamental sociological changes in Britain, the revolution in France, the revolution in the United States, the ability of the common man to innovate became a prime mover in both economic, political and social terms. Where it has effected society most is in labor terms. Each cataclysmic event has had a negative effect on labor. Because each innovative change has brought with it labor efficiency. Therefore fewer labor units were needed to sustain economic activity. As agribusiness took hold it took less people to work the farm and workers were displaced into the cities. These displaced workers had to be retained to work in higher value jobs. Many found work as auto workers. The semi conductor revolution let to a high level of automation: many auto workers were displaced by robots that did the welding and other tasks more accurately than humans and without the burdens of labor unions. Those displaced workers took jobs in other industries where labor had not yet been dealt an efficiency blow.
This economic phenominon can be seen in its stark reality in China and India. Politics aside, both those economies have embraced innovation to the extent that they threaten the "more advanced" economies such as the US, Japan and Europe. The world, in the words of Thomas Friedman, has gotten a lot flatter.
The key spoke in the wheel is education and training. If there are going to be periodic wholesale dislocations of labor then labor will have to be constantly retained to meet the new reality. Because there is a surplus of labor that will work menial jobs for low wages (Africa is the next India) the developed world will have to create workers who do higher value jobs. While the US has been innovator-in-chief for more than 200 years its world position is being threatened by its seemingly inability to educate its masses so as to get them ready for new jobs that will be recreated by the most recent dislocation. Unlike McClosky who is a diehard free marketeer, I believe that this is where government can and should play a role. Previous dislocations of labor have sometimes meant lost generations who never found work. Western economies can no longer support unemployable workers. They just don't have enough tax strength.
We live in interesting times. We will survive the present cataclysm. But only if our politicians are far sighted and understand the forces that they are dealing with. Fat chance.
Bernie.
I have often subscribed to the view that the cataclysmic events of the British industrial revolution fundamentally changed the world as they new it at the time. According to McClosky this is because innovation became a generality accepted reality rather than what it was previously: any change was bad. According to McClosky this acceptance was an "accident". My position was that it was no accident. In Britain, second sons (who would not inherit the family fortune) went into business. Also, the rise of Protestantism freed workers from the burdens of the church and advanced the notion that each man was his own person (rather than a person owned by the local gentry or the church). The rise of real property concepts in Britain was key to economic development as was the rise of personal property such as intellectual property. Wealth was not longer measured in land but in money capital.
Whatever it was, the changes that were brought about were, as I said, cataclysmic. Wealth was created by innovation, manufacture and trade. Factories brought workers in from the farm. The farm had to become more efficient to feed all of the mouths that were now in factories and hence agricultural innovation. Yes, people worked at starvation wages in factories but innovation came through organized labor and unions. Innovation moved workers from horse and buggy to the automobile. Space exploration led directly to semi conductors which, in turn, revolutionized everyday life with consumer goods and computers. Economies have gone through cataclysmic changes before and they will do so again. In fact, they are going through a fundamental changes today. And change, as we know, is painful.
What does this have to do with economic circumstances today? McClosky posits that innovation in the past innovation was found in northwestern Europe. Because of fundamental sociological changes in Britain, the revolution in France, the revolution in the United States, the ability of the common man to innovate became a prime mover in both economic, political and social terms. Where it has effected society most is in labor terms. Each cataclysmic event has had a negative effect on labor. Because each innovative change has brought with it labor efficiency. Therefore fewer labor units were needed to sustain economic activity. As agribusiness took hold it took less people to work the farm and workers were displaced into the cities. These displaced workers had to be retained to work in higher value jobs. Many found work as auto workers. The semi conductor revolution let to a high level of automation: many auto workers were displaced by robots that did the welding and other tasks more accurately than humans and without the burdens of labor unions. Those displaced workers took jobs in other industries where labor had not yet been dealt an efficiency blow.
This economic phenominon can be seen in its stark reality in China and India. Politics aside, both those economies have embraced innovation to the extent that they threaten the "more advanced" economies such as the US, Japan and Europe. The world, in the words of Thomas Friedman, has gotten a lot flatter.
The key spoke in the wheel is education and training. If there are going to be periodic wholesale dislocations of labor then labor will have to be constantly retained to meet the new reality. Because there is a surplus of labor that will work menial jobs for low wages (Africa is the next India) the developed world will have to create workers who do higher value jobs. While the US has been innovator-in-chief for more than 200 years its world position is being threatened by its seemingly inability to educate its masses so as to get them ready for new jobs that will be recreated by the most recent dislocation. Unlike McClosky who is a diehard free marketeer, I believe that this is where government can and should play a role. Previous dislocations of labor have sometimes meant lost generations who never found work. Western economies can no longer support unemployable workers. They just don't have enough tax strength.
We live in interesting times. We will survive the present cataclysm. But only if our politicians are far sighted and understand the forces that they are dealing with. Fat chance.
Bernie.
Wednesday 30 November 2011
Constructive Dissent
There is a controversy in my synagogue that bears some analysis. The synagogue's bylaws confer on the board of directors the right to deal with the hiring (and dehiring) of clergy. The board, in its wisdom, decided that both clergy's contracts would not be renewed. Of course, when it comes to clergy, there are some who side with the clergy and some who do not. Those who sided with the clergy petitioned that a general meeting of the congregation be called to examine the criteria by which the board decided to allow the clergy's contracts to expire. It was their right under the bylaws of the synagogue.
The ensuing result can only be viewed with deep regret. The general meeting is now seen, by some, as a referendum on the de-hiring of the clergy. Congregants are taking sides. Articles in the Jewish community press take the discussion public. Telephone campaigns are being mounted to "support the board". In other words, the actions taken by the board have become deeply divisive.
The board of many communal organizations are given an absolute right to hire and, at times, fire employees. When the merits and detriments of the clergy's job are openly discussed and, employment law being what it is, the result is often expensive litigation. In many communal organizations the salaries of clergy are private and are shown as a global amount. This is why serving on a board of any communal organization is so difficult.
The dissenters feel marginalized. They have no way of expressing their views and often feel that the board's actions are arbitrary. Boards do not call public forums to decide whether clergy should be kept on and are advised to act together in solidarity. This position is taken by dissenters as outright stonewalling.
The clergy are often in a difficult situation. Any public negative assessment of their work will have an equally negative effect on getting the next job. Congregations are not anxious to hire people who are perceived as troublemakers. The dissenters are often not doing those they support a favour.
Short of criminal behaviour it is unlikely that a board can be made to reverse its position. There is no provision in the bylaws for recall of elected board members. True, the board can reverse its position but that would be disastrous for the congregation. The proper procedure at the board level was for dissenting board members (if there were any) to move for reconsideration. This would have put the matter over to the next meeting. In the interim, dissenting board members could ask for support in lobbying for the dissenting position. However, that was not done.
Whether its a condo board or a board of a communal organization such as a synagogue or church, the lot of board members is not a happy one I have always said that, given any action by a board a third will like it, a third will hate it and a third won't care. That said, those who hate it have to understand that the board was elected to act on behalf of the members. They must do so honestly but having taken an action, no matter how poorly that action is seen by others, the matter should be over. If the membership can repeatedly second guess the board then no one will serve.
It is hoped that cooler heads will prevail. A meeting that turns out to be a pep rally for the clergy will neither help those who organized it or the clergy. Part of corporate governance is that members delegate certain matters to their board. If the dissenters are unhappy with the board's actions they can always run their own slate and defeat the incumbents (if they can) at the next general meeting. Otherwise, and as difficult as it may seem, the dissenters should keep their own counsel. Easier said than done.
Bernie.
The ensuing result can only be viewed with deep regret. The general meeting is now seen, by some, as a referendum on the de-hiring of the clergy. Congregants are taking sides. Articles in the Jewish community press take the discussion public. Telephone campaigns are being mounted to "support the board". In other words, the actions taken by the board have become deeply divisive.
The board of many communal organizations are given an absolute right to hire and, at times, fire employees. When the merits and detriments of the clergy's job are openly discussed and, employment law being what it is, the result is often expensive litigation. In many communal organizations the salaries of clergy are private and are shown as a global amount. This is why serving on a board of any communal organization is so difficult.
The dissenters feel marginalized. They have no way of expressing their views and often feel that the board's actions are arbitrary. Boards do not call public forums to decide whether clergy should be kept on and are advised to act together in solidarity. This position is taken by dissenters as outright stonewalling.
The clergy are often in a difficult situation. Any public negative assessment of their work will have an equally negative effect on getting the next job. Congregations are not anxious to hire people who are perceived as troublemakers. The dissenters are often not doing those they support a favour.
Short of criminal behaviour it is unlikely that a board can be made to reverse its position. There is no provision in the bylaws for recall of elected board members. True, the board can reverse its position but that would be disastrous for the congregation. The proper procedure at the board level was for dissenting board members (if there were any) to move for reconsideration. This would have put the matter over to the next meeting. In the interim, dissenting board members could ask for support in lobbying for the dissenting position. However, that was not done.
Whether its a condo board or a board of a communal organization such as a synagogue or church, the lot of board members is not a happy one I have always said that, given any action by a board a third will like it, a third will hate it and a third won't care. That said, those who hate it have to understand that the board was elected to act on behalf of the members. They must do so honestly but having taken an action, no matter how poorly that action is seen by others, the matter should be over. If the membership can repeatedly second guess the board then no one will serve.
It is hoped that cooler heads will prevail. A meeting that turns out to be a pep rally for the clergy will neither help those who organized it or the clergy. Part of corporate governance is that members delegate certain matters to their board. If the dissenters are unhappy with the board's actions they can always run their own slate and defeat the incumbents (if they can) at the next general meeting. Otherwise, and as difficult as it may seem, the dissenters should keep their own counsel. Easier said than done.
Bernie.
Saturday 26 November 2011
Schools versus Parents
I saw an interesting news item on PBS news. It was an inner city school that was highly interventionist with homework, life skills, educational goals and other issues that might normally be the province of parents. In the United States parents rights are highly guarded. For example, sex education has been highly curtailed because it is deemed to be the right of the parents and should not be taught at schools. This has done very little for teen pregnancies. However, the educational interventionism at inner city schools starts with the premise that there is little if any parental supervision or guidance at home. In many cases the father and sometimes the mother are absent. Kids are being parented by grandparents who have neither the patience or the ability to deal with passing on life skills. So, the schools have taken over. They are, for the most part, dealing with homework by creating after school study halls. They are motivating kids to get better grades by surrounding them with other kids who are striving to do more with their lives then get a go to jail pass. They are helping kids get summer jobs that are an alternative to running drugs. They are tapping into scholarship programgs that enable kids to go to college. In these schools the drop out rate has plummeted and it is now smart to be smart.
As most of you know I am a member of Kiwanis. The Ottawa club is pledged to help at-risk kids. It was heartwarming to know that one of the key factors in turning inner city kids around was Key clubs, youth clubs that are sponsored by Kiwanis. These clubs teach responsibility through community service. By serving others, kids serve themselves. The schools maintain that membership in Key (and other community service) clubs allows kids to interact with one another for a common positive goal. I have always felt that parents can pass off life values to kids--but only up to a point. At some point kid's friends will have as much say (and possibily more say) than anything that the parents can impart. This is where Key clubs and clubs like them have a significant impact. These are normally kids who see study as a positive step in getting better grades. They see getting better grades as a step to enhancing their educational goals and they see getting a better, higher level, education as a step to getting out of the ghetto. While these should be values that are imparted by parents, in many inner city schools parents are either unable or unwilling to do so. There is no study environment at home. There is no goal setting that goes beyond food stamps. In fact, schools have stepped in to provide the child with the kinds of support that would be expected of any middle class family in the suburbs.
I have a granddaughter who is well on her way to becoming a teacher. She will be in the workforce next year. There are very few jobs for teachers in the US because of budget constraints and union rules that require the rehiring of laid off teachers before new teachers can be hired. My granddaughter does practice teaching in inner city schools. The amazing fact is that she finds that kids in inner city schools are better behaved in class than in schools where the students come from middle class families. Why? She says that in schools with students from mddile class families kids attend because they have to do so. In inner city schools kids attend, largely, because they want to. So many kids drop out that those who remain are motivated to be there by the prospect of bettering their lives. Many look to teachers are roll models who can help them get out of the ghetto.
There is a curious statistic involving teen pregnancies and teen smoking. While these have been holding steady or increasing with middle class kids, they are sharply reduced with inner city kids. Why? In the case of teen pregnances the new welfare laws that cut off benefits after 2 years have taken the economic incentive out of teens having kids. Formerly, inner city kid believed that having kids was an ecnomic ticket to leaving home. No more. In the case of smoking the adverse health effects of smoking seems to have had more traction in inner cities.
Most government social services have failed miserably in helping inner city kids with either their education or their life skills. Church groups have faired better but still depend on church attendace to make an impact. The schools is where every kid goes--or is supposed to go. It can have the greatest impact on kids if extra cirricular help starts early enough.
Like everything else, scaling up these services cost money. The schools system is largely bankrupt in the US. No child left behind legislation has done little to keep kids in school or improve the skills of those who stay there. America is 17th in a list of 25 when it comes to basic skills like reading comprehension or math skills. Canada is 7th. Most Asian countries are much better. This is because the first priority of most of these countries is education. Kids go 6 days a week and spend from 9 to 6 at school each day. Parents not only take an active role in education but are sometimes over reaching in wanting better for their kids. In the US and now in some parts of Canada, these values are falling away. In an advanced techology society kids with math, science and reading skills will succeed. The first world, so called, will fall behind.
All of this seems straightforward. In the US politicians are so deadlocked that any positve solution seems far distant. In Canada where the eduction system is financially stressed but still working reasonably well, we still have a long way to go before our kids have the same math and reading skills as in Korea. Our kids should be our first priority.
Bernie.
As most of you know I am a member of Kiwanis. The Ottawa club is pledged to help at-risk kids. It was heartwarming to know that one of the key factors in turning inner city kids around was Key clubs, youth clubs that are sponsored by Kiwanis. These clubs teach responsibility through community service. By serving others, kids serve themselves. The schools maintain that membership in Key (and other community service) clubs allows kids to interact with one another for a common positive goal. I have always felt that parents can pass off life values to kids--but only up to a point. At some point kid's friends will have as much say (and possibily more say) than anything that the parents can impart. This is where Key clubs and clubs like them have a significant impact. These are normally kids who see study as a positive step in getting better grades. They see getting better grades as a step to enhancing their educational goals and they see getting a better, higher level, education as a step to getting out of the ghetto. While these should be values that are imparted by parents, in many inner city schools parents are either unable or unwilling to do so. There is no study environment at home. There is no goal setting that goes beyond food stamps. In fact, schools have stepped in to provide the child with the kinds of support that would be expected of any middle class family in the suburbs.
I have a granddaughter who is well on her way to becoming a teacher. She will be in the workforce next year. There are very few jobs for teachers in the US because of budget constraints and union rules that require the rehiring of laid off teachers before new teachers can be hired. My granddaughter does practice teaching in inner city schools. The amazing fact is that she finds that kids in inner city schools are better behaved in class than in schools where the students come from middle class families. Why? She says that in schools with students from mddile class families kids attend because they have to do so. In inner city schools kids attend, largely, because they want to. So many kids drop out that those who remain are motivated to be there by the prospect of bettering their lives. Many look to teachers are roll models who can help them get out of the ghetto.
There is a curious statistic involving teen pregnancies and teen smoking. While these have been holding steady or increasing with middle class kids, they are sharply reduced with inner city kids. Why? In the case of teen pregnances the new welfare laws that cut off benefits after 2 years have taken the economic incentive out of teens having kids. Formerly, inner city kid believed that having kids was an ecnomic ticket to leaving home. No more. In the case of smoking the adverse health effects of smoking seems to have had more traction in inner cities.
Most government social services have failed miserably in helping inner city kids with either their education or their life skills. Church groups have faired better but still depend on church attendace to make an impact. The schools is where every kid goes--or is supposed to go. It can have the greatest impact on kids if extra cirricular help starts early enough.
Like everything else, scaling up these services cost money. The schools system is largely bankrupt in the US. No child left behind legislation has done little to keep kids in school or improve the skills of those who stay there. America is 17th in a list of 25 when it comes to basic skills like reading comprehension or math skills. Canada is 7th. Most Asian countries are much better. This is because the first priority of most of these countries is education. Kids go 6 days a week and spend from 9 to 6 at school each day. Parents not only take an active role in education but are sometimes over reaching in wanting better for their kids. In the US and now in some parts of Canada, these values are falling away. In an advanced techology society kids with math, science and reading skills will succeed. The first world, so called, will fall behind.
All of this seems straightforward. In the US politicians are so deadlocked that any positve solution seems far distant. In Canada where the eduction system is financially stressed but still working reasonably well, we still have a long way to go before our kids have the same math and reading skills as in Korea. Our kids should be our first priority.
Bernie.
Thursday 24 November 2011
On American Thanksgiving
We tend to believe that Americans are too sappy when it comes to patriotic events. They are too apt to give in to jingoistic slogans like Black Friday and Tripple Witching (see stock market). Howevewr, when it come to Thanksgiving the American's can't hold a candle to anyone.
In Canada, Thanksgiving is mainly a civil service holdiay on which the only thanks that is given is for the day off. We approach the day phelgmatically. We either have nothing to be thankful for or thankfulness is something best kept to onself. If we are cynical we believe that the only reaon the US date is later than the one in Canada is that it is closer to Christmas and that the holiday can be leveraged into a frenzy of holiday shopping. While that may be true, in part, for most Americans Thanksgiving is a special holiday that transcends the commercialism that has been grafted onto the holiday.
If we think about family and holidays, there is nothing quite like Thanksgiving. Celegrating Christmas may not go over with the non Christians. Channuka is only for Jews. Kwanza for African Americans. And so on. Thanksgiving is the only non sectarian holiday that is as laced with tradition as it is with turkey. We are fortunate that we have kids and grandkids on the US side of the border. We therefore get the benefit of both kinds of Thanksgiving, ours and theirs and there is no comparison.
Like salmon returning to the place of their birth, most everyone that can goes "home". It is a great ingathering that tops family disagreements. It is a time when inlaws are welcomed as warmly as parents. Brothers and sisters visit freely even if they talk infreqyently during the year. Best of all it is non sectarisn (notwithstanding that the holiday was said to have been created by the Pilgrims, a religious sect). It has remained relatively commercial free because the shopping bingers are largly limited to Black Friday and the ensuing Christmas crush. The propriety of stores that open late on Tbursday is roundly debated in an otherwise relentlessly commerical culture.
Given the latest commercial and economic upheavals the Americans have a lot to learn from Canada. But on the matter of Thanksgiving we have a lot to learn from our American cousins. So, turkeyday, here I come--pumpkin pie and all.
Bernie,
In Canada, Thanksgiving is mainly a civil service holdiay on which the only thanks that is given is for the day off. We approach the day phelgmatically. We either have nothing to be thankful for or thankfulness is something best kept to onself. If we are cynical we believe that the only reaon the US date is later than the one in Canada is that it is closer to Christmas and that the holiday can be leveraged into a frenzy of holiday shopping. While that may be true, in part, for most Americans Thanksgiving is a special holiday that transcends the commercialism that has been grafted onto the holiday.
If we think about family and holidays, there is nothing quite like Thanksgiving. Celegrating Christmas may not go over with the non Christians. Channuka is only for Jews. Kwanza for African Americans. And so on. Thanksgiving is the only non sectarian holiday that is as laced with tradition as it is with turkey. We are fortunate that we have kids and grandkids on the US side of the border. We therefore get the benefit of both kinds of Thanksgiving, ours and theirs and there is no comparison.
Like salmon returning to the place of their birth, most everyone that can goes "home". It is a great ingathering that tops family disagreements. It is a time when inlaws are welcomed as warmly as parents. Brothers and sisters visit freely even if they talk infreqyently during the year. Best of all it is non sectarisn (notwithstanding that the holiday was said to have been created by the Pilgrims, a religious sect). It has remained relatively commercial free because the shopping bingers are largly limited to Black Friday and the ensuing Christmas crush. The propriety of stores that open late on Tbursday is roundly debated in an otherwise relentlessly commerical culture.
Given the latest commercial and economic upheavals the Americans have a lot to learn from Canada. But on the matter of Thanksgiving we have a lot to learn from our American cousins. So, turkeyday, here I come--pumpkin pie and all.
Bernie,
Monday 14 November 2011
On Original Sin
The recent events at the University of Pennsylvania bring up some interesting thoughts. Clearly the acts involved were heinous. Clearly there is a good old boys network that protects, or at least shelters, members of the "team". Clearly football is such a money maker that if you touch it you die. Clearly Paterno and the President of the University had to go.
That said there was a debate on Meet the Nation this past Sunday that merits discussion. I am not familiar with one of the commentators but I am familiar with David Brooks, the much celebrated columnist of the New York Times. While all agreed that the actions taken by the University were justified, one commentator said that crimes of this nature are part of the fabric of society. While regrettable, the only recourse was to make sure that the laws had stiff penalties for those who did not report either the crimes or reports of the crimes. In other words lock the barn, fully, after the horse has escaped.
Brooks, who I had always known as the lone conservative commentator at the Times had a different view. He believed that society has lost its "yardstick" that differentiates between good and evil. Evil acts were the subject of legislation. In effect, moral instruction of the young and old alike had been forsaken. People no longer knew what was morally right and were without a moral compass.
From my perspective it looks like Brooks is "right on". You can look at garbage television where risqué language is now the norm in prime time. You can look at a raft of movies that sell potty humour very well. You can look at people who are attacked in the streets while onlookers move on. On a more human level you can see the devaluation of the sexual act to almost zero among teens and even pre teens. However, this kind of reaction is normal for any person of advanced years who always claimed that the youth were going down the drain. I can remember a time when Jack Benny was banished from the airwaves for a risqué remark that would not raise an eyebrow today. So, what's happened.
In the United States the slippery slope was founded in first amendment rights. Much of what we would have called pornography in my youth was permitted as an exercise in free speech. Books that were formerly banned were given a reprieve under the same rights. Movies that had formerly only shown a bedroom occupied by husband and wife as one with twin beds were replaced with movies that open showed gay sex. Hee Haw was the first of a string of television shows that featured (albeit funny) sexual innuendos. These shows, while mildly in bad taste, bear little resemblance to current television shows where specific sexual references are common. These shows are said to reflect the current ethos among the 18-24 year old viewers.
That being said, sexual predators are hardly new. The Catholic Church bears witness to sexual crimes that go back well over 50 years. Nor are sexual deviants a new phenomenon. Better reporting and better detection have shone a better light on these unfortunate crimes.
And then there is the "pill". The pill was introduced just after we were married. No one, at that time, could foretell the sexual revolution was was to follow. The hippie mantra of "make love not war" was followed literally. These hippies grew up to be fairly normal parents but they were parents who had smoked pot and had a liberal attitude toward sex. They were hardly the ones to come down on casual sex.
Add to that the societal acceptance of what was once known as sexual deviance. I am referring to gay and lesbian relationships. During my youth I am sure that there were as many gays and lesbians as there are now--not in number but in proportion to the population at large. However, this kind of behaviour was not talked about and rarely accepted as any kind of norm. If course all that has changed, and for the better.
So where are we on the subject of "original sin". Clearly moral values have changed dramatically in the 75 years of my life. For the better? Not always. For the worse? Sometimes. I do want to point out two things that I think are the hallmark of this kind of discussion. The first is casual sex. If sex is a fundamental act of procreation, if sex is the ultimate act of selflessness between partners, then I believe that casual sex is a devaluation of that "sacredness". The second point is one of taste. If the only humour that is current is based on four letter words and bathroom references then I think that there has been a devaluation of this art form. If bystanders see a crime being perpetrated and say and do nothing or laugh at racist jokes then humanity has been devalued. The roll of organized religions are not very helpful in that regard. The task must be taken over by responsible parents and educators who can point out that certain thing are, plain wrong. Unless this is done we will all revel in the garbage can of human relations.
Bernie.
That said there was a debate on Meet the Nation this past Sunday that merits discussion. I am not familiar with one of the commentators but I am familiar with David Brooks, the much celebrated columnist of the New York Times. While all agreed that the actions taken by the University were justified, one commentator said that crimes of this nature are part of the fabric of society. While regrettable, the only recourse was to make sure that the laws had stiff penalties for those who did not report either the crimes or reports of the crimes. In other words lock the barn, fully, after the horse has escaped.
Brooks, who I had always known as the lone conservative commentator at the Times had a different view. He believed that society has lost its "yardstick" that differentiates between good and evil. Evil acts were the subject of legislation. In effect, moral instruction of the young and old alike had been forsaken. People no longer knew what was morally right and were without a moral compass.
From my perspective it looks like Brooks is "right on". You can look at garbage television where risqué language is now the norm in prime time. You can look at a raft of movies that sell potty humour very well. You can look at people who are attacked in the streets while onlookers move on. On a more human level you can see the devaluation of the sexual act to almost zero among teens and even pre teens. However, this kind of reaction is normal for any person of advanced years who always claimed that the youth were going down the drain. I can remember a time when Jack Benny was banished from the airwaves for a risqué remark that would not raise an eyebrow today. So, what's happened.
In the United States the slippery slope was founded in first amendment rights. Much of what we would have called pornography in my youth was permitted as an exercise in free speech. Books that were formerly banned were given a reprieve under the same rights. Movies that had formerly only shown a bedroom occupied by husband and wife as one with twin beds were replaced with movies that open showed gay sex. Hee Haw was the first of a string of television shows that featured (albeit funny) sexual innuendos. These shows, while mildly in bad taste, bear little resemblance to current television shows where specific sexual references are common. These shows are said to reflect the current ethos among the 18-24 year old viewers.
That being said, sexual predators are hardly new. The Catholic Church bears witness to sexual crimes that go back well over 50 years. Nor are sexual deviants a new phenomenon. Better reporting and better detection have shone a better light on these unfortunate crimes.
And then there is the "pill". The pill was introduced just after we were married. No one, at that time, could foretell the sexual revolution was was to follow. The hippie mantra of "make love not war" was followed literally. These hippies grew up to be fairly normal parents but they were parents who had smoked pot and had a liberal attitude toward sex. They were hardly the ones to come down on casual sex.
Add to that the societal acceptance of what was once known as sexual deviance. I am referring to gay and lesbian relationships. During my youth I am sure that there were as many gays and lesbians as there are now--not in number but in proportion to the population at large. However, this kind of behaviour was not talked about and rarely accepted as any kind of norm. If course all that has changed, and for the better.
So where are we on the subject of "original sin". Clearly moral values have changed dramatically in the 75 years of my life. For the better? Not always. For the worse? Sometimes. I do want to point out two things that I think are the hallmark of this kind of discussion. The first is casual sex. If sex is a fundamental act of procreation, if sex is the ultimate act of selflessness between partners, then I believe that casual sex is a devaluation of that "sacredness". The second point is one of taste. If the only humour that is current is based on four letter words and bathroom references then I think that there has been a devaluation of this art form. If bystanders see a crime being perpetrated and say and do nothing or laugh at racist jokes then humanity has been devalued. The roll of organized religions are not very helpful in that regard. The task must be taken over by responsible parents and educators who can point out that certain thing are, plain wrong. Unless this is done we will all revel in the garbage can of human relations.
Bernie.
Thursday 10 November 2011
Tax Lessons For Greece and Italy
The underlying problem in Greece and Italy is their tax systems. Both leak like a sieve. By admission almost one in three people in Italy works outside the tax system. Some say that the situation in Greece is worse. In recent interviews the "haves" in Italy are not prepared to subsidize the "have nots". This is not so much because of fairness but because so many do not pay any taxes at all. In Greece the problem is worse because of padded social programs that have to be funded out of general revenues. Soon the money runs out.
Israel faced that problem in the 1970s where the largest marginal tax rate rose to 80%. However, one in two Israelis had a second job that was "off the books". This was so endemic that the government allowed businesses to take deductions for expenses where the recipient was not on the tax roll. The problem was exacerbated by the Israeli government printing money when it ran out. This resulted in inflation at over 40% per month! The Israelis solved the problem in a characteristically innovative way. First, they changed the money. On a given day the "old" money would not purchase value. Old money exchanged for new money at a bank had to be reported and many taxpayers, formerly off the rolls, were reluctantly reinstated. Secondly, they reformed the system by lowering tax rates so that beating the system was less cost effective. Thirdly, and most important, they instituted a value added tax, or VAT. that levied tax at point of purchase. The underground economy, while never completely eradicated, was seriously reduced.
Which leads me to Greece and Italy. The VAT tax in Italy is 20% with some items being taxed at a reduced rate of between 4-10%. In Greece the proposed VAT is 23% up from 13%. The rate rise has yet to be approved by Parliament. Income tax rates range from 18% to 45% for incomes over 100,000 Euros. The problem is that very few people pay income tax. Those with government jobs are punished because their income taxes are deducted at source. Small business and small craft business pay little or no income tax. The tax situation in Italy is only marginally better.
I have posed, on many occasions, that the most efficient tax is a point of purchase tax that allows everyone below the ultimate purchaser to recover tax paid against taxes owing. For example if you charged $100 in HST and paid $50 in HST your tax liability would be only $50. The ultimate purchaser would not deduct for taxes paid. Therefore the HST (really a VAT) is paid on the highest price. Low income taxpayers can be granted rebates depending on level of income. This also causes all taxpayer to register within the system in order to reap the benefits. There is ease of collection and hiding is very difficult. Those who are more wealthy usually consume more and therefore the tax is somewhat progressive. The tax also catches foreign visitors who, in theory, can get a refund of the tax but experience has shown that these refunds are rarely claimed.
The main knock on the VAT is that it adversely effects pricing. It is true because a consumer has to pay the price out of current income. However, imagine ti increase to your take home pay if tax deductions at source were eliminated or seriously curtailed. You would have more disposable income to fund the tax at point of purchase.
In most western countries the tax legislation has gotten completely out of hand. Compliance is difficult without paid tax preparers. Simplifying the tax base is difficult because so many of the tax programs are interactive in that changing one provision affects many more provisions. Consequential changes are now tracked by computer but a reduction in complexity of one provision usually adds complexity to others. A single rate tax is no less complex because it's the tax base that is complicated not the rate. A consumption tax does not take into account the tax base because it's only the value of the goods purchased that determines the tax. There is some evidence that a comprehensive VAT at 20% could eliminate the personal (not corporate) tax in Canada.
Tax is a complicated tool. Paying tax is an implicit agreement with government that your payment will give you value. In Canada a higher personal tax rate was implicitly exchanged for a reduced cost of education and free medical services. This kind of reciprocity does not exist in Greece and barely exists in Italy. Greece has, until recently, bloated social programs that it could not fund on the existing tax base. Increasing taxes and eliminating social programs is bound to fail. Increasing taxes without some kind of social contract is like putting a bandaid on a gaping wound.
It is for this reason that outside pressure from EU countries to reform tax systems and collection is bound to fail. The pressure must come from within. This recently happened in Ireland with good results. What we need is a social reordering in Greece and Italy and that's hard to do.
Bernie.
Israel faced that problem in the 1970s where the largest marginal tax rate rose to 80%. However, one in two Israelis had a second job that was "off the books". This was so endemic that the government allowed businesses to take deductions for expenses where the recipient was not on the tax roll. The problem was exacerbated by the Israeli government printing money when it ran out. This resulted in inflation at over 40% per month! The Israelis solved the problem in a characteristically innovative way. First, they changed the money. On a given day the "old" money would not purchase value. Old money exchanged for new money at a bank had to be reported and many taxpayers, formerly off the rolls, were reluctantly reinstated. Secondly, they reformed the system by lowering tax rates so that beating the system was less cost effective. Thirdly, and most important, they instituted a value added tax, or VAT. that levied tax at point of purchase. The underground economy, while never completely eradicated, was seriously reduced.
Which leads me to Greece and Italy. The VAT tax in Italy is 20% with some items being taxed at a reduced rate of between 4-10%. In Greece the proposed VAT is 23% up from 13%. The rate rise has yet to be approved by Parliament. Income tax rates range from 18% to 45% for incomes over 100,000 Euros. The problem is that very few people pay income tax. Those with government jobs are punished because their income taxes are deducted at source. Small business and small craft business pay little or no income tax. The tax situation in Italy is only marginally better.
I have posed, on many occasions, that the most efficient tax is a point of purchase tax that allows everyone below the ultimate purchaser to recover tax paid against taxes owing. For example if you charged $100 in HST and paid $50 in HST your tax liability would be only $50. The ultimate purchaser would not deduct for taxes paid. Therefore the HST (really a VAT) is paid on the highest price. Low income taxpayers can be granted rebates depending on level of income. This also causes all taxpayer to register within the system in order to reap the benefits. There is ease of collection and hiding is very difficult. Those who are more wealthy usually consume more and therefore the tax is somewhat progressive. The tax also catches foreign visitors who, in theory, can get a refund of the tax but experience has shown that these refunds are rarely claimed.
The main knock on the VAT is that it adversely effects pricing. It is true because a consumer has to pay the price out of current income. However, imagine ti increase to your take home pay if tax deductions at source were eliminated or seriously curtailed. You would have more disposable income to fund the tax at point of purchase.
In most western countries the tax legislation has gotten completely out of hand. Compliance is difficult without paid tax preparers. Simplifying the tax base is difficult because so many of the tax programs are interactive in that changing one provision affects many more provisions. Consequential changes are now tracked by computer but a reduction in complexity of one provision usually adds complexity to others. A single rate tax is no less complex because it's the tax base that is complicated not the rate. A consumption tax does not take into account the tax base because it's only the value of the goods purchased that determines the tax. There is some evidence that a comprehensive VAT at 20% could eliminate the personal (not corporate) tax in Canada.
Tax is a complicated tool. Paying tax is an implicit agreement with government that your payment will give you value. In Canada a higher personal tax rate was implicitly exchanged for a reduced cost of education and free medical services. This kind of reciprocity does not exist in Greece and barely exists in Italy. Greece has, until recently, bloated social programs that it could not fund on the existing tax base. Increasing taxes and eliminating social programs is bound to fail. Increasing taxes without some kind of social contract is like putting a bandaid on a gaping wound.
It is for this reason that outside pressure from EU countries to reform tax systems and collection is bound to fail. The pressure must come from within. This recently happened in Ireland with good results. What we need is a social reordering in Greece and Italy and that's hard to do.
Bernie.
Wednesday 9 November 2011
The Gay Village
Lest you think that I am homophobic, I am far from that. I worked with the gay community years before they were accepted in polite and not so polite company. The sad truth is that every last one of them is dead, a victim of HIV-AIDS.
Having said that, my post today deals with the recent decision to designate a specific area on Bank Street, in Ottawa, as a gay community. If I were gay I would be offended. Until recently gays, lesbians and trans gendered folk were segregated--if not physically, then socially--by society. Most down trodden communities are sequestered into their own communities. Jewish ghettos come to mind. Segregated areas in San Francisco come to mine. While there was a great deal of interaction between Jews and the rest of the community on a work level there was little or no interaction on a social level. Jews who wanted to leave the ghetto were almost always converted to Christianity. This is not an option for a gay, lesbian or transgendered person. The idea was that a small area on one street in Ottawa reflects the acceptance--or maybe the lack of acceptance--of gays, lesbians and transgendered people. Most of the gays that I know lead normal lives and integrate into a community that has no business in anyone's bedroom. They do not march in parades and flaunt their sexuality. They are embarrassed by it as would be any straight person who saw straight people flaunting their sexuality. I am equally uncomfortable with religious fanatics who flaunt their religiosity. But that's another story.
You see, I think that segregating gays into their own part of Ottawa, be it for trade or for places where they can feel "comfortable", sends the wrong message. I can only imagine the stress that accompanies any teen in coming out not only to his or parents but to his or her friends. No one "comes out" to his or her parents when that person has a girl or boyfriend of the opposite gender. Does one "come out" to his or her parents because they left handed? Why put this pressure on gays? The answer is that we still see gays as people who are out of the mainstream. The dedication of a small block on Bank street perpetuates the notion that gays are freaks. I'm sorry but as a straight person I am offended. Take the bloody signs down as lets treat everyone with the respect that is their due.
Bernie.
Having said that, my post today deals with the recent decision to designate a specific area on Bank Street, in Ottawa, as a gay community. If I were gay I would be offended. Until recently gays, lesbians and trans gendered folk were segregated--if not physically, then socially--by society. Most down trodden communities are sequestered into their own communities. Jewish ghettos come to mind. Segregated areas in San Francisco come to mine. While there was a great deal of interaction between Jews and the rest of the community on a work level there was little or no interaction on a social level. Jews who wanted to leave the ghetto were almost always converted to Christianity. This is not an option for a gay, lesbian or transgendered person. The idea was that a small area on one street in Ottawa reflects the acceptance--or maybe the lack of acceptance--of gays, lesbians and transgendered people. Most of the gays that I know lead normal lives and integrate into a community that has no business in anyone's bedroom. They do not march in parades and flaunt their sexuality. They are embarrassed by it as would be any straight person who saw straight people flaunting their sexuality. I am equally uncomfortable with religious fanatics who flaunt their religiosity. But that's another story.
You see, I think that segregating gays into their own part of Ottawa, be it for trade or for places where they can feel "comfortable", sends the wrong message. I can only imagine the stress that accompanies any teen in coming out not only to his or parents but to his or her friends. No one "comes out" to his or her parents when that person has a girl or boyfriend of the opposite gender. Does one "come out" to his or her parents because they left handed? Why put this pressure on gays? The answer is that we still see gays as people who are out of the mainstream. The dedication of a small block on Bank street perpetuates the notion that gays are freaks. I'm sorry but as a straight person I am offended. Take the bloody signs down as lets treat everyone with the respect that is their due.
Bernie.
Wednesday 2 November 2011
On Pensions
I recently heard an interview by a CBC reporter with a worker who had recently gone back to work after a lengthy strike. The strike was largely about pensions and whether or not new hires would be entitled to pension benefits. The settlement approved by existing workers did not extend pension benefits to new workers.
In theory, a pension should be a zero sum contract. The company contributes, the worker contributes, benefits are insured with annuity contracts and the pensioner knows what he or she will get during retirement. The fund is usually augmented by workers who leave before pensionable age and forfeit the company’s contribution. However, this only works in theory. The employer rarely has the cash to make its portion of the contributions. They pay as they go and, largely, governments have allowed them to do this. With disastrous effect. When the company runs out of money pensioners are left high and dry. Nortel is a good example of how not to run pension programs.
Add to this the problem of longevity. 40 years back, the usual pensionable age was 65 and the average death age was about 72 to 75. Therefore, the pension account was burdened to pay the pensioner for, at best, 10 years. As people lived longer the pension accounts ran out and employers were put to augmenting the fund to pay pensioners who, in some cases, were retired longer than they had worked for the employer. The only agency that can get away with that is the government who funds retirement benefit out of current taxation. The charge on automobiles made by the “big three” that represented pension benefits was about $3,500 per auto. This made US and Canadian made autos largely either non-competitive or money losers. This problem got “solved” when GM went bankrupt (thereby cancelling all of its future pension obligations) or negotiated with the unions (Ford and Chrysler) to call off pension programs for new hires. What took its place in many contracts was a savings plan—that is the company would make payments to a savings plan and the employee would make payments to a savings plan but there was no guarantee or fixed benefit to the employee. This is what was being offered by Japanese and Korean automakers in the US and Canada and this has become the industry standard. In some other companies there is no pension benefit of whatever kind offered. Workers will have to rely on RRSPs in Canada and IRAs in the US as their main source of retirement income.
This will have profound effect on the next generation of workers. The savings rate in North America is very low. Workers have not gotten a significant wage increase—beyond inflation—for many years. Workers are falling behind and there is good evidence that even modest savings can survive the financial impact of the expenses of a growing family. That means that, other than government workers, the future looks very bleak. Take that together with people living longer and the future looks even bleaker. Giving workers the opportunity to save larger sums of money in a tax-sheltered account makes the mistaken assumption that those workers have money to save. Paying workers more for the same work makes domestic goods less affordable and exported goods less competitive.
There are political forces both in Canada and the United States that call for governments to be less involved in the affairs of the nation. Both of these are conservative movements that have the blessing of the 2% of the population that don’t have to worry about retirement. The Scandinavian countries have solved this problem—to a large extent—through high taxation in return for significant benefits over the taxpayer’s life. These include healthcare, education and, yes, retirement. A Dane or Swede can retire comfortably because he paid into the system over his or her lifetime and is now reaping the benefit. Because 100% of the electorate is funding the pension obligation those who die early, leave the country or otherwise don’t make a claim on the fund provide a cushion for those who do. It works.
There are two camps of political and social theorists. One holds that the market is pure and impartial when it judges human economic behavior thereby optimizing the most efficient course of action. While, in theory, that may be true, the other camp holds that in practice the market is severely imperfect and government intervention is needed to hedge these imperfections. At the present time the free market theorists seem to be at the helm—at least in Canada—and knocking at the door in the US. What has resulted in the US is a serious disconnect between those who have sufficient funds for retirement and those who have no way to obtain them. Add to this the fact that, in the US, the home was the major store of value. Homes in the US have fallen in value and this will contribute to a lack of capital for retirement. So, the poor will get poorer at the expense of those who don’t pay their share. Social security in the United States is in serious trouble because no one wants to increase contributions and no one wants to die young. In Canada CPP and other assistance programs provide only subsistence support. There is a need, in both countries, to look at a long term solution to these problems and there appears to be few is any politicians who will lead the way.
Bernie.
Wednesday 26 October 2011
What Greece Really Means
It is clear from the events in Libya (where a declaration of freedom has just been proclaimed) and Tunisia (where free elections are being held--the first in living memory) that there is some kind of essntial change that is happening in the region. As stated in an earlier post there is little evidence that these fragile events will produce anything like a working democracy. But having said that, it has become apparent that the forces of the masses--peaceful in Egypt (well mostly peaceful) and Tunisia and bloody in Libya have given hope to the thousands in the region. Some, like Syria, are still a work in progress but I believe that is now a matter of time rather than of substance.
For any meaningful government to take hold there must be a social contract that is entered into between the electorate and those that represent them. There must be an open forum where policies are debated and actions taken that are consistent with the general ethos of the population. That process of trust between the population and their elected representatives may take years (in English democratic terms, almost 800 years) to develop. Too much say by a fragmented electorate leads to the kind of factionalism that is killing Israel. Too little say leads to a disconnect between the electorate and their elected leaders. New democracies don't much like transparency--the internal care and feeding of a democracy may be too much for an electorate to accept. So the fragility continues until either the electorate or their representatives win out. If the electorate gets too frisky their representatives declare that the population is ungovernable and a strongman--or woman--takes over.
And now on to Greece. For a long time there has been a disconnect between Greece's politicos and the population. It reminds me of the old Russian joke about workers who are standing around drinking vodka. When asked why they were not working they said, "They pretend that they are paying us and we pretend that we are working". In Greece the government paid for programs with money they didn't have. This gave rise to a level of expectations that kept rising until the money ran out. Now the population is left with their expectations and the politicians can only respond with harsh measures. No amount of money will fill the void. And to make matters worse, whatever money there is comes in the form of Euros given, largely by the Germans. At some point you have to admit that you are broke. Governments have defaulted on debt before and will do so in the future. Start with a new slate rather than piling up debt, the interest on which will leave Greece in penury for generations. Someone--and not the old guard--has to tell the king that he has no clothes. It might as well be now. Any course of action is likely to give rise to more civil unrest and, until the country comes to believe that it has to practice restraint and rebuild its future, no near term resolution of the problem can even begin.
The same problem exists for the United States. They are now borrowing more than 75% of GDP. For many years interest on the debt--and particularly if interest rates rise--will consume much of the working capital that the government needs to address any reasonable domestic agenda that it puts forward. Technically speaking, the US is broke. What is more, it went broke on the backs of largely middle class people. The banks were preserved. The auto companies were preserved. The people--ordinary people-- shouldered the brunt of the collapse. When citizens complain that the profits are made by business and the losses are sustained by the middle and lower classes, this is not far from the truth. The Occupy Wall Street is just the tip of the iceberg. Politicians are gridlocked--locked in their ivory tower with the inability to do anything meaningful to aid those most in need. It is shameful that 48 million Americans are on food stamps and 10 million homes--representing more than 20 million people--are in foreclosure. Those populations who were disadvantaged before the collapse are now mired in the mud. There is no social program money to be had. States and municipalities are broke. It's only a matter of time.
The OWS gang is misdirected. Banks are easy to blame. What appears more to have happened is that government is to blame. For not acting sooner. For not acting in a meaningful way when most of the economy was in distress. President Obama spent his political capital on healthcare--a worthy cause. But it should have been spent on job creation. He had a majority in both Houses of Congress and could not even get his Public Option through. The recent initiatives on mortgage financing is too little too late. The country needs a moratorium on mortgage foreclosures. An occupied house is worth more than a vacant and vandalized one. Banks should eat their losses and get help with liquidity. And let's get on with rebuilding the housing sector. These kinds of initiatives should be undertaken by a Democrat-Republican coalition where nobody takes the blame and nobody takes the credit. It won't happen. Until government is forced into some kind of action. The upcoming election makes it unlikely that such far sighted action with be undertaken. So the clock is ticking.
How it will come and from where it will come is unknown. Islam has already wrecked the American economy on 9-11. Islam could have a hand in fostering unrest in America. That was part of Bin Laden's plan. It could come from the inner cities where people without hope have little to lose. It could come from the middle classes many of whom are hopeless and living on benefits that are sure to run out. But it will come. Believe me.
Bernie.
For any meaningful government to take hold there must be a social contract that is entered into between the electorate and those that represent them. There must be an open forum where policies are debated and actions taken that are consistent with the general ethos of the population. That process of trust between the population and their elected representatives may take years (in English democratic terms, almost 800 years) to develop. Too much say by a fragmented electorate leads to the kind of factionalism that is killing Israel. Too little say leads to a disconnect between the electorate and their elected leaders. New democracies don't much like transparency--the internal care and feeding of a democracy may be too much for an electorate to accept. So the fragility continues until either the electorate or their representatives win out. If the electorate gets too frisky their representatives declare that the population is ungovernable and a strongman--or woman--takes over.
And now on to Greece. For a long time there has been a disconnect between Greece's politicos and the population. It reminds me of the old Russian joke about workers who are standing around drinking vodka. When asked why they were not working they said, "They pretend that they are paying us and we pretend that we are working". In Greece the government paid for programs with money they didn't have. This gave rise to a level of expectations that kept rising until the money ran out. Now the population is left with their expectations and the politicians can only respond with harsh measures. No amount of money will fill the void. And to make matters worse, whatever money there is comes in the form of Euros given, largely by the Germans. At some point you have to admit that you are broke. Governments have defaulted on debt before and will do so in the future. Start with a new slate rather than piling up debt, the interest on which will leave Greece in penury for generations. Someone--and not the old guard--has to tell the king that he has no clothes. It might as well be now. Any course of action is likely to give rise to more civil unrest and, until the country comes to believe that it has to practice restraint and rebuild its future, no near term resolution of the problem can even begin.
The same problem exists for the United States. They are now borrowing more than 75% of GDP. For many years interest on the debt--and particularly if interest rates rise--will consume much of the working capital that the government needs to address any reasonable domestic agenda that it puts forward. Technically speaking, the US is broke. What is more, it went broke on the backs of largely middle class people. The banks were preserved. The auto companies were preserved. The people--ordinary people-- shouldered the brunt of the collapse. When citizens complain that the profits are made by business and the losses are sustained by the middle and lower classes, this is not far from the truth. The Occupy Wall Street is just the tip of the iceberg. Politicians are gridlocked--locked in their ivory tower with the inability to do anything meaningful to aid those most in need. It is shameful that 48 million Americans are on food stamps and 10 million homes--representing more than 20 million people--are in foreclosure. Those populations who were disadvantaged before the collapse are now mired in the mud. There is no social program money to be had. States and municipalities are broke. It's only a matter of time.
The OWS gang is misdirected. Banks are easy to blame. What appears more to have happened is that government is to blame. For not acting sooner. For not acting in a meaningful way when most of the economy was in distress. President Obama spent his political capital on healthcare--a worthy cause. But it should have been spent on job creation. He had a majority in both Houses of Congress and could not even get his Public Option through. The recent initiatives on mortgage financing is too little too late. The country needs a moratorium on mortgage foreclosures. An occupied house is worth more than a vacant and vandalized one. Banks should eat their losses and get help with liquidity. And let's get on with rebuilding the housing sector. These kinds of initiatives should be undertaken by a Democrat-Republican coalition where nobody takes the blame and nobody takes the credit. It won't happen. Until government is forced into some kind of action. The upcoming election makes it unlikely that such far sighted action with be undertaken. So the clock is ticking.
How it will come and from where it will come is unknown. Islam has already wrecked the American economy on 9-11. Islam could have a hand in fostering unrest in America. That was part of Bin Laden's plan. It could come from the inner cities where people without hope have little to lose. It could come from the middle classes many of whom are hopeless and living on benefits that are sure to run out. But it will come. Believe me.
Bernie.
Friday 21 October 2011
The Death of a Tyrant
I guess you have to live long enough. In my lifetime I have seen the death of a myriad number of tyrants. From Hitler to Gadhaffi tyrants seem to come and go with little or no long term effect on the world. It seems that we have collective memory lapses when it comes to the grand injustices. Armenians seethe about the genocide inflicted by Turks, Jews seethe about the genocide inflicted by Hitler and so it goes. I distinctly remember the hope with which the death of Nasser was received by the world. Egypt was to emerge as an exemplary democracy that was going to galvanize the region. Never happened. Sadat took over. More wars were fought. The death of Hussain in Iraq resulted in years of bloodshed giving birth to a dysfunctional government. The death of Bin Laden has had little effect on the government of Afghanistan (even if you believe that Al Qaeda and Afghanistan were separate entities). Eventually the Taliban will prevail and the country will fall into the same kind of tyranny that was there before the Nato forces arrived History has an imperfect memory and history teachers blend into the past with little to show for their efforts. Why is that?
On the one hand you can say that mankind (with apologies to my women readers) is a fundamentally fractious bunch that is territorially and clan challenged. From the very first dawn of time clans had to be cohesive in order to survive and territories had to be defended lest game and later arable land be lost to raiders. But, you would have thought that the institution of agriculture and a relatively sedentary population would have seen that aggression was wasteful of both human and emotional resources. The Bible is redolent with acts of aggression by which the Children of Israel conquered Canaan. This in the name of God. In Biblical times the Israeli clan was quite open to integration with outsiders but in recent times outside integration through intermarriage is seen as lethal to the prospects of Judaism long term. History has taught us that relatively heterogenous populations survive better than inbred ones. Interbreeding results in strength. Darwinian theory applies as much to nations as to turtles. The strength of the United States is largely the product of the best that newcomers brought to the table. England is a polyglot of aboriginals, Saxons and French. Germany is a polyglot of northern tribes that eventually overtook the more gentrified southern Europe. Hitler was highly focused on the "purity" of race in a country whose very origins were very muddied with many clans and factions.
One theme that runs through the history of tyrants is greed. Whether greed of material things or greed of territory it seems that tyrants can't seem to get enough of them. However, history should have taught these tyrants that the shroud has no pockets and "you can't take it with you". Far flung territories was the undoing of the Romans. The Greeks (even today) could not keep it together. Smaller territorial units did better but tyrants believed that if they were doing better at home, new territories were even better. They weren't.
Another theme that runs through history is the dehumanizing of the victim before his or her undoing. Every object of genocide has been dehumanized so as to make annihilation palatable to the rank and file doing the killing. Tyrants have also been known as gentle family men. Religious too. And yet orders went out to slaughter millions of Jews or Ethiopians or whoever seemed to be the flavour of the day. For Muslims to say that Jews are the devil is to dehumanize Jews so that they be destroyed. Same for the Tutsis. Same for the driver that cuts you off to whom you give the "finger". I would bet that you would never do that in polite society. The very act of bullying is one that is preceded by dehumanizing the victim. It's never Johnny but a "fag"--a nameless dehumanized form that is worthy of ill treatment in the eyes of the bully.
I have very little confidence that the African spring offensive will produce any fundamentally positive results. We in the West believe that democracies and self determinations are the hallmark of advanced societies. So did the Greeks of old. But we seem to forget that our democracies are about 900 years old and we still don't get it right most of the times. Democracies depend on the ability of a person to trust an elected official to do his and his neighbour's will. That trust is eroding in the United States and is the subject of the 99% who say politicians don't represent their needs. In fragile countries like those in the middle east trust is hard to come by. Eventually these movements peter out and a strongman emerges to put the country back together again. Tribal or religious factions emerge. The Christians in Egypt are suffering at the hands of the Muslims. The various factions of Islam can't seem to get along.
And so we are back at the beginning. Is mankind genetically encoded with fractiousness and ill will? Probably.
Bernie
On the one hand you can say that mankind (with apologies to my women readers) is a fundamentally fractious bunch that is territorially and clan challenged. From the very first dawn of time clans had to be cohesive in order to survive and territories had to be defended lest game and later arable land be lost to raiders. But, you would have thought that the institution of agriculture and a relatively sedentary population would have seen that aggression was wasteful of both human and emotional resources. The Bible is redolent with acts of aggression by which the Children of Israel conquered Canaan. This in the name of God. In Biblical times the Israeli clan was quite open to integration with outsiders but in recent times outside integration through intermarriage is seen as lethal to the prospects of Judaism long term. History has taught us that relatively heterogenous populations survive better than inbred ones. Interbreeding results in strength. Darwinian theory applies as much to nations as to turtles. The strength of the United States is largely the product of the best that newcomers brought to the table. England is a polyglot of aboriginals, Saxons and French. Germany is a polyglot of northern tribes that eventually overtook the more gentrified southern Europe. Hitler was highly focused on the "purity" of race in a country whose very origins were very muddied with many clans and factions.
One theme that runs through the history of tyrants is greed. Whether greed of material things or greed of territory it seems that tyrants can't seem to get enough of them. However, history should have taught these tyrants that the shroud has no pockets and "you can't take it with you". Far flung territories was the undoing of the Romans. The Greeks (even today) could not keep it together. Smaller territorial units did better but tyrants believed that if they were doing better at home, new territories were even better. They weren't.
Another theme that runs through history is the dehumanizing of the victim before his or her undoing. Every object of genocide has been dehumanized so as to make annihilation palatable to the rank and file doing the killing. Tyrants have also been known as gentle family men. Religious too. And yet orders went out to slaughter millions of Jews or Ethiopians or whoever seemed to be the flavour of the day. For Muslims to say that Jews are the devil is to dehumanize Jews so that they be destroyed. Same for the Tutsis. Same for the driver that cuts you off to whom you give the "finger". I would bet that you would never do that in polite society. The very act of bullying is one that is preceded by dehumanizing the victim. It's never Johnny but a "fag"--a nameless dehumanized form that is worthy of ill treatment in the eyes of the bully.
I have very little confidence that the African spring offensive will produce any fundamentally positive results. We in the West believe that democracies and self determinations are the hallmark of advanced societies. So did the Greeks of old. But we seem to forget that our democracies are about 900 years old and we still don't get it right most of the times. Democracies depend on the ability of a person to trust an elected official to do his and his neighbour's will. That trust is eroding in the United States and is the subject of the 99% who say politicians don't represent their needs. In fragile countries like those in the middle east trust is hard to come by. Eventually these movements peter out and a strongman emerges to put the country back together again. Tribal or religious factions emerge. The Christians in Egypt are suffering at the hands of the Muslims. The various factions of Islam can't seem to get along.
And so we are back at the beginning. Is mankind genetically encoded with fractiousness and ill will? Probably.
Bernie
Thursday 13 October 2011
Something's Happening Here
In a recent column in the New York Times Thomas Friedman looks at many of the issues raised in my last post. Read his article at: http://www.nytimes.com/2011/10/12/opinion/theres-something-happening-here.html?_r=1&partner=rssnyt&emc=rss
Bernie
Bernie
Wednesday 12 October 2011
The 99 Percent
It is fitting that the recent marches in New York and Canadian Thanksgiving should coincide. One of the things for which you can be thankful is that you don't live in the United States or some of the other countries that are experiencing genuine social action. However, there is another side to this story. I firmly believe that the March of the 99 Percent--or the have nots--is closely linked to the Arab spring. Both are examples of entitlement-whether political or social-denied. Not since the hunger marches of the dirty 30s has there been such a display of solidarity against what has become a significant imbalance in the socio-economic composition in the Western world. How did this happen?
To put these events in context the marches and civil disobedience associated with the Vietnam war were of a different character. These marches were the provence of either the hippies of the 1960s or college students. They had come to the conclusion that the government had lied to them and the "nobody over the age of 30 can be trusted". They marched and some of them died for the cause of making government more transparent. In this regard nothing has changed. The United States and in some regard Canada are fighting wars that do not advance the interests of the people at home. Government is unresponsive to its constituents and has become largely dysfunctional. Lunatic fringe parties can become operative because nobody believes that anyone in Washington will make a difference. Voting in elections is at an all time low in Ontario. Indifference is the hallmark of lost rights.
Let's go back to Margret Thatcher and Ronald Reagan. This was the beginning of "trickle down" economics that assumed that deregulation and support for the rich was a sure fire way to make the whole economy fatter. The truth was that the only ones that got fatter were the rich and the multinational corporations that were granted large tax subsidies. These conditions prevail today. Reagan's reaction to a homeless person was, "Why doesn't he get a job". The Conservative doctrine of the day was to shrink government (which never happened), reduce taxes and deregulate industries (which did happen) including the banking industries. The argument was that deregulation lead to better competition and lower prices. What happened in fact is well known: deregulation lead to an obscene and predatory chapter in economic history. And the poor got poorer.
Fast forward to the current younger generation. They were adolescents through boom times. When family income could not come up with the cash to subsidize extravagant lifestyles parents could always borrow against the pent up value of the home. Values were always going up so why worry. Unlike the the folks in the dirty 30s who were working class poor some of the the current down-and-outers are coming down from a lifestyle that was subsidized by easy money and instant gratification. When all that ends there is complete breakdown in the social structure. The marchers want jobs that are "fulfilling" and "relevant". They want to live at home until age 30+ and put off becoming a tax paying and contributing member of society. They want what they had as kids and it is unlikely that they will every return to the lifestyles of the past. Of course that is not true of all the displaced persons. Job erosion has hit all socio-economic classes. There are the hardworking folk who worked in car factories that no longer exist, in construction that has largely gone silent, and the banking system that is saddled with a raft of bad loans. They have lost their jobs and many have lost their homes. More that 48 million Americans receive food stamps. That is ore than 10% of the population.
There is no political help. Once a staunch supporter of President Obama I now have the feeling (along with many others) that he is lost; overwhelmed by events that he cannot correct. He has largely become disengaged with the House and the Senate and he sits, isolated, hoping that the Republicans field presidential candidates that are bizarre enough to insure his re-election. President Roosevelt, in similar circumstances, took the people into his confidence and offered the Americans the "New Deal". President Obama has no "New Deal". He doesn't even have an Old Deal. Instead he speaks to like minded Americans in a style that is reminiscent of electioneering or lectures his constituents in a manner that is completely unconvincing. His solution to a deadlocked Congress is to encourage write in emails. He is seen as having subsidized the banks and under assisted the common man who was saddled with a mortgage and a house that was financially "under water". His advisors appear to be policy wonks who tinker with solutions but won't tackle the root cause of the problem: jobs. Tackling the hard problems should have been undertaken early in his presidency--not know when he is virtually electioneering for re-election. Instead he took on Medicare--a problem that certainly needed fixing but not in priority to a job package. When he had both the House and the Senate he squandered his political capital. He could have gotten his tax on the rich when he had a majority. Instead he abdicated to Congress and watched, largely from the sidelines. His bad.
So, what are the marchers marching about? There is no doubt that there is a socio-economic disparity in the US as there is in many other Western countries. Nothing new there. But, in prior years, there has always been the hope that the American Dream--or the Canadian Dream or the European Dream would pay off. That pay off seems remote indeed. It is very unlikely that the present generation in Western societies will be better off then their parents. It is also likely that transfers of wealth through inheritance will suffer as many savings plans have been savaged by the stock market. Like the Egyptians and the Tunisians they want to be stakeholders. Unlike the Egyptians and the Tunisians the Americans were, formerly, stakeholders but appear to be losing their stake in unemployment and financial chaos. People who lose their stake take to the streets. People who lose their stake take up extreme positions (viz the Germans in the 1930s). It is no accident that hate crimes are on take rise.
All of this is reminiscent of the Chinese Curse: "May You Live in Interesting Times".
Bernie.
To put these events in context the marches and civil disobedience associated with the Vietnam war were of a different character. These marches were the provence of either the hippies of the 1960s or college students. They had come to the conclusion that the government had lied to them and the "nobody over the age of 30 can be trusted". They marched and some of them died for the cause of making government more transparent. In this regard nothing has changed. The United States and in some regard Canada are fighting wars that do not advance the interests of the people at home. Government is unresponsive to its constituents and has become largely dysfunctional. Lunatic fringe parties can become operative because nobody believes that anyone in Washington will make a difference. Voting in elections is at an all time low in Ontario. Indifference is the hallmark of lost rights.
Let's go back to Margret Thatcher and Ronald Reagan. This was the beginning of "trickle down" economics that assumed that deregulation and support for the rich was a sure fire way to make the whole economy fatter. The truth was that the only ones that got fatter were the rich and the multinational corporations that were granted large tax subsidies. These conditions prevail today. Reagan's reaction to a homeless person was, "Why doesn't he get a job". The Conservative doctrine of the day was to shrink government (which never happened), reduce taxes and deregulate industries (which did happen) including the banking industries. The argument was that deregulation lead to better competition and lower prices. What happened in fact is well known: deregulation lead to an obscene and predatory chapter in economic history. And the poor got poorer.
Fast forward to the current younger generation. They were adolescents through boom times. When family income could not come up with the cash to subsidize extravagant lifestyles parents could always borrow against the pent up value of the home. Values were always going up so why worry. Unlike the the folks in the dirty 30s who were working class poor some of the the current down-and-outers are coming down from a lifestyle that was subsidized by easy money and instant gratification. When all that ends there is complete breakdown in the social structure. The marchers want jobs that are "fulfilling" and "relevant". They want to live at home until age 30+ and put off becoming a tax paying and contributing member of society. They want what they had as kids and it is unlikely that they will every return to the lifestyles of the past. Of course that is not true of all the displaced persons. Job erosion has hit all socio-economic classes. There are the hardworking folk who worked in car factories that no longer exist, in construction that has largely gone silent, and the banking system that is saddled with a raft of bad loans. They have lost their jobs and many have lost their homes. More that 48 million Americans receive food stamps. That is ore than 10% of the population.
There is no political help. Once a staunch supporter of President Obama I now have the feeling (along with many others) that he is lost; overwhelmed by events that he cannot correct. He has largely become disengaged with the House and the Senate and he sits, isolated, hoping that the Republicans field presidential candidates that are bizarre enough to insure his re-election. President Roosevelt, in similar circumstances, took the people into his confidence and offered the Americans the "New Deal". President Obama has no "New Deal". He doesn't even have an Old Deal. Instead he speaks to like minded Americans in a style that is reminiscent of electioneering or lectures his constituents in a manner that is completely unconvincing. His solution to a deadlocked Congress is to encourage write in emails. He is seen as having subsidized the banks and under assisted the common man who was saddled with a mortgage and a house that was financially "under water". His advisors appear to be policy wonks who tinker with solutions but won't tackle the root cause of the problem: jobs. Tackling the hard problems should have been undertaken early in his presidency--not know when he is virtually electioneering for re-election. Instead he took on Medicare--a problem that certainly needed fixing but not in priority to a job package. When he had both the House and the Senate he squandered his political capital. He could have gotten his tax on the rich when he had a majority. Instead he abdicated to Congress and watched, largely from the sidelines. His bad.
So, what are the marchers marching about? There is no doubt that there is a socio-economic disparity in the US as there is in many other Western countries. Nothing new there. But, in prior years, there has always been the hope that the American Dream--or the Canadian Dream or the European Dream would pay off. That pay off seems remote indeed. It is very unlikely that the present generation in Western societies will be better off then their parents. It is also likely that transfers of wealth through inheritance will suffer as many savings plans have been savaged by the stock market. Like the Egyptians and the Tunisians they want to be stakeholders. Unlike the Egyptians and the Tunisians the Americans were, formerly, stakeholders but appear to be losing their stake in unemployment and financial chaos. People who lose their stake take to the streets. People who lose their stake take up extreme positions (viz the Germans in the 1930s). It is no accident that hate crimes are on take rise.
All of this is reminiscent of the Chinese Curse: "May You Live in Interesting Times".
Bernie.
Friday 23 September 2011
Israel: Adrift at Sea Alone
In a recent article by Thomas Friedman in the New York Times (see:http://www.nytimes.com/2011/09/18/opinion/sunday/friedman-israel-adrift-at-sea-alone.html?partner=rssnyt&emc=rss), there is excellent analysis of the current situation in Israel, the US and the UN. Lest you think that the article was written by an unsympathetic author, let me remind you that Mr. Friedman is an expert in Middle Eastern political. His first work, From Beirut to Jerusalem was acclaimed and honoured. The article is worth a read.
Monday 19 September 2011
The Long Arm of the Internal Revenue Service
This is a post that I have been meaning to write for some time. Lest you think that this is going to be a boring treatise on cross border taxation let me remind you that, given the extreme mobility of families, there is hardly a person who is not connected, either by birth, marriage or lineage to someone living in the United States. In many cases these persons can be US citizens, born in the United States or a grandchild born in the US living with parents who may not be US citizens.
Until recently the Internal Revenue Service (IRS) has been more interested in domestic tax cheats. But the IRS is trying to wring more revenue out of existing legislation and has been more aggressive in collecting tax from foreign resident US citizens. Also, Canadian companies selling into the US are coming under fire of the IRS who can now claim that they have a "permanent establishment" in the US and are subject to US and state taxes. There is an increased interested in vacationers who spend more than 183 days in the US (as determined by a complicated 3 year moving average of time spent in the US). Add to that parents or grandparents who set up family trusts where US based children or grandchildren are beneficiaries. Arcane US trust rules could impose deemed income or capital gains on beneficiaries who are years away from getting any benefits from the trusts. Needless to say, professional advice is required.
At some point in time in the past these rules made little difference to US citizens living in Canada. Canadian taxes where, on average, higher than in the US so that net liability for tax was usually nil. However, Canadian tax rates have been coming down and the difference may have been reversed. That is US tax could be higher than Canadian tax leaving the taxpayer with net tax owing to Uncle Sam. This is particularly true of Canadian companies doing business in the US. Canada has been consistently reducing corporate tax rates so that they are significantly lower than US corporate tax.
Even being onside of the US tax authorities is not easy or inexpensive. Canadian companies are required to file a IRS tax form 1120F. This is identical to the tax return filed by US corporations except that there is no tax owing. However, significant disclosures are required about US operations that leave the Canadian companies open to a high level of scrutiny in the US. The filing of a form 1120F is expensive. It is estimated that the average cost of filing--an annual commitment--is about CAD $10,000.
The Swiss have tried (all but in vain) to battle the IRS when internal bank records were requisitioned in order to flush out tax cheats. The US had all the cards. They threatened to impose fines on US subsidiaries of Swiss banks. For the most part these threats worked. Many bank records were turned over to the IRS. US citizens living in Canada can renounce their US citizenship but tax filing are required for 10 years thereafter. US citizens living in Canada are flagged at the border and my be prohibited from visiting the US--or worse. Canadian companies may have US bank accounts seized; possession is nine tenths of the law.
This leaves us with a matter of sovereignty. It appears that whenever there is a confrontation with US, whether over agricultural products, trade issues, Buy America, border security, Canada comes out second best. Or even last. We are a small country many of whose businesses are owned by Americans. We have little clout either political or economic. Would American cancel the auto pact? NAFTA? Try them. There is also little organized opposition (other than the occassional op ed piece) by the IRS intrusions into Canadian sovereignty. Most of us are not concerned--until it affects us.
Bernie.
Until recently the Internal Revenue Service (IRS) has been more interested in domestic tax cheats. But the IRS is trying to wring more revenue out of existing legislation and has been more aggressive in collecting tax from foreign resident US citizens. Also, Canadian companies selling into the US are coming under fire of the IRS who can now claim that they have a "permanent establishment" in the US and are subject to US and state taxes. There is an increased interested in vacationers who spend more than 183 days in the US (as determined by a complicated 3 year moving average of time spent in the US). Add to that parents or grandparents who set up family trusts where US based children or grandchildren are beneficiaries. Arcane US trust rules could impose deemed income or capital gains on beneficiaries who are years away from getting any benefits from the trusts. Needless to say, professional advice is required.
At some point in time in the past these rules made little difference to US citizens living in Canada. Canadian taxes where, on average, higher than in the US so that net liability for tax was usually nil. However, Canadian tax rates have been coming down and the difference may have been reversed. That is US tax could be higher than Canadian tax leaving the taxpayer with net tax owing to Uncle Sam. This is particularly true of Canadian companies doing business in the US. Canada has been consistently reducing corporate tax rates so that they are significantly lower than US corporate tax.
Even being onside of the US tax authorities is not easy or inexpensive. Canadian companies are required to file a IRS tax form 1120F. This is identical to the tax return filed by US corporations except that there is no tax owing. However, significant disclosures are required about US operations that leave the Canadian companies open to a high level of scrutiny in the US. The filing of a form 1120F is expensive. It is estimated that the average cost of filing--an annual commitment--is about CAD $10,000.
The Swiss have tried (all but in vain) to battle the IRS when internal bank records were requisitioned in order to flush out tax cheats. The US had all the cards. They threatened to impose fines on US subsidiaries of Swiss banks. For the most part these threats worked. Many bank records were turned over to the IRS. US citizens living in Canada can renounce their US citizenship but tax filing are required for 10 years thereafter. US citizens living in Canada are flagged at the border and my be prohibited from visiting the US--or worse. Canadian companies may have US bank accounts seized; possession is nine tenths of the law.
This leaves us with a matter of sovereignty. It appears that whenever there is a confrontation with US, whether over agricultural products, trade issues, Buy America, border security, Canada comes out second best. Or even last. We are a small country many of whose businesses are owned by Americans. We have little clout either political or economic. Would American cancel the auto pact? NAFTA? Try them. There is also little organized opposition (other than the occassional op ed piece) by the IRS intrusions into Canadian sovereignty. Most of us are not concerned--until it affects us.
Bernie.
The Vote For A Palestinian State Redux
In an article in the Ottawa Citizen today Peter Larson, Secretary of the Canada-Arab Relations, stated, on the issue of granting the Palestinians statehood:
As stated in my earlier post, the granting of statehood to the Palestinians would profoundly change the legal status of the parties in the area. There is no doubt that the Palestinians (who are brilliant at seizing public relations opportunities) would do just as Rosenberg suggests. Israel would become eminently more isolated. Even its so call "friends" would have difficulty in defending Israel in the international forum. I believe that Prime Minister Harper knows that only too well. Canada has already stated categorically this it would not support Palestinian statehood.
Bernie.
What is Israel so afraid of? How would a vote at the UN recognizing Palestine cause so much difficulty for Israel?
One possible clue comes from a recent fundraising letter written by Lee Rosenberg, president of AI-PAC, the dominant Israeli lobby group in Washington. In part, the letter warns AIPAC members that if the UN resolution passes, "Israelis could be dragged into foreign courts and charged with human rights violations . nations could implement sweeping economic sanctions . the Jewish presence in east Jerusalem could come under severe international challenge."
Bernie.
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