Friday, 29 July 2011
Lessons from the Great, White, Socialist North
Worth a read. See: Lessons from the Great, White, Socialist North
Wednesday, 27 July 2011
The Tragedy in Norway
No one can deny that the recent bombings and killings in Norway are a tragedy of the highest order. Also, no one can deny that in the frenzy to create news, the media has taken over this event with hyperbole and sensationalism. The Norse, like the New Yorkers and others before them are trying to make sense of all of this. An op-ed piece in the Ottawa Citizen caught my attention. It proclaimed that there was some "natural morality" that got violated. In truth, random acts of killing are just that: random acts. Any open society will not be immune to such acts and any open society is not willing to give up basic freedoms so that these acts can in some way be mitigated. The response of the various border agencies show how futile it is to prevent random acts of violence. vigilance,yes; mind bending border security, no.
In fact, the granddaddy of vigilance is practiced by the Israilis. With a tenth of the border security that is evident in the rest of the world they have managed to thwart over 95% of nascent attacks. This with allowing society to be vigilant but without undue intrusion to personal modesty. The average Israeli is vocal enough so that any undue intrusion would not go unnoticed. However, where most of the population has had some intensive military service, the average Israeli can balance security with a reasonably unfettered lifestyle.
It is too easy to clamp down tight when something of the magnitude of the Norway killing go down. It is too easy to agree that Muslim immigration are somehow a threat that has to be reckoned with because that kind of thinking morphs into other genocidal thoughts. Today it's Muslimes, tomorrow its Jews or some other identifiable minority. This is particularly true of Canada where ethnic minorities make up an increasingly larger part of our society. While wearing a burqa may be antithetical to safe driving it is not a large step to say that Jews should not wear a kippah in public. That is what's happened in France. What happened to liberty and equality?
Society will always have its share of nut cases. We have them in Canada. There are several paramilitary groups in Quebec who are pledged to taking the province out of confederation by force. There was a Muslim splinter group that wanted to organize to behead the Prime Minister. All of these groups are watched carefully by federal and provincial police--as they should. But thankfully most Wesstern governments have reacted with measured condolences and calm. As it should be.
In fact, the granddaddy of vigilance is practiced by the Israilis. With a tenth of the border security that is evident in the rest of the world they have managed to thwart over 95% of nascent attacks. This with allowing society to be vigilant but without undue intrusion to personal modesty. The average Israeli is vocal enough so that any undue intrusion would not go unnoticed. However, where most of the population has had some intensive military service, the average Israeli can balance security with a reasonably unfettered lifestyle.
It is too easy to clamp down tight when something of the magnitude of the Norway killing go down. It is too easy to agree that Muslim immigration are somehow a threat that has to be reckoned with because that kind of thinking morphs into other genocidal thoughts. Today it's Muslimes, tomorrow its Jews or some other identifiable minority. This is particularly true of Canada where ethnic minorities make up an increasingly larger part of our society. While wearing a burqa may be antithetical to safe driving it is not a large step to say that Jews should not wear a kippah in public. That is what's happened in France. What happened to liberty and equality?
Society will always have its share of nut cases. We have them in Canada. There are several paramilitary groups in Quebec who are pledged to taking the province out of confederation by force. There was a Muslim splinter group that wanted to organize to behead the Prime Minister. All of these groups are watched carefully by federal and provincial police--as they should. But thankfully most Wesstern governments have reacted with measured condolences and calm. As it should be.
Tuesday, 26 July 2011
A Plague On All Their Houses
Last night I spent some considerable time in viewing President's Obama's speech from the White House and the reply from House Speaker Boehner. What struck me was the complete disdain that the House Speaker had for the President of the United States. References were to "Obama". Not even President Obama. Not even The President. Boehner was in full mud slinging mode fully aware that any concessions that the Republicans made to the Democratic President would be leveraged into the next election. Every independent pundit tells us that trying to remedy the US deficit situation without even modest increases in taxes is folly.
To reduce the deficit by spending decreases is fanciful thinking. There are so many intrenched lobbyists in Washington that, in the end, Congress will continue building bridges to nowhere. The cuts to defence spending will be undercut by the military lobby. And so it goes. Democrats will not suffer any cuts to social spending entitlements and the President will lose on both sides. This also goes for "tax reform". For this read taking away subsidies and tax support for oil and gas, farmers, mortgage interest deductions etc. Not likely. The only real way to raise money is the old fashioned way: taxes. What is being proposed is reasonable: that is a tax on incomes over $250,000. About 90% of the taxpayers will not be affected and the President has promised a tax holiday on tax deductions at source. However, the lunatics in the Tea Party cannot countenance any taxes--no way, no how. If they did, they could not explain their position to their constituents and most, if not all, would become one term congressmen and women.
I had an interesting conversation with a thoughtful American friend and business associate. He is a right wing conservative and makes no apologies about it. However, he tells me that he is "ashamed" of his government and his country. He believes that politicians on both sides of Congress has brought shame on the country. He sees that taxes on the "rich" is a balanced approach to deficit reform. However, what he said next floored me: There is a general conception among conservatives that Obama has a "hidden agenda" that is socialist and that if he is allowed to continue he will drag the country farther to the left than take most left leaning liberal would countenance. America, he says, is headed for a single payer healthcare system that will bankrupt the country. Obama, he says, is "soft on Islam" and his position on Israel (my friend is not Jewish) is appalling. That is why the President has lost the respect of the nation. Or so my friend alleges. He vehemently hopes that Obama will be a one term President and will be remembered most for the fact that he is black.
Ahhhh, I said. There's the nub. I told my friend that the country--and particularly the conservatives, have not forgiven Obama his blackness. There is still a rankling that a black man made it to President before, say, a Hispanic or a Jew. What's more, is that he's a smart black man! An even greater offence against humanity. He must be devious and have a "hidden agenda". Of course my friend said that this was nonsense. Obama's blackness has nothing to do with it, he said. But when we spoke further about the birth issue and his hidden affinity for Islam (his father was a Muslim), he conceded that this worm has been firmly planted in the minds of conservatives as if it were an urban legend. There is very little of that kind of race mongering among liberals and independents. It's among the Tea Party and renecks that this legend persists.
It will be interesting to see how this plays out. There is no doubt that a solution will be reached. No one wants the US to default on its debts. But the aftermath will have a considerable effect on US politics for some time to come.
Bernie.
To reduce the deficit by spending decreases is fanciful thinking. There are so many intrenched lobbyists in Washington that, in the end, Congress will continue building bridges to nowhere. The cuts to defence spending will be undercut by the military lobby. And so it goes. Democrats will not suffer any cuts to social spending entitlements and the President will lose on both sides. This also goes for "tax reform". For this read taking away subsidies and tax support for oil and gas, farmers, mortgage interest deductions etc. Not likely. The only real way to raise money is the old fashioned way: taxes. What is being proposed is reasonable: that is a tax on incomes over $250,000. About 90% of the taxpayers will not be affected and the President has promised a tax holiday on tax deductions at source. However, the lunatics in the Tea Party cannot countenance any taxes--no way, no how. If they did, they could not explain their position to their constituents and most, if not all, would become one term congressmen and women.
I had an interesting conversation with a thoughtful American friend and business associate. He is a right wing conservative and makes no apologies about it. However, he tells me that he is "ashamed" of his government and his country. He believes that politicians on both sides of Congress has brought shame on the country. He sees that taxes on the "rich" is a balanced approach to deficit reform. However, what he said next floored me: There is a general conception among conservatives that Obama has a "hidden agenda" that is socialist and that if he is allowed to continue he will drag the country farther to the left than take most left leaning liberal would countenance. America, he says, is headed for a single payer healthcare system that will bankrupt the country. Obama, he says, is "soft on Islam" and his position on Israel (my friend is not Jewish) is appalling. That is why the President has lost the respect of the nation. Or so my friend alleges. He vehemently hopes that Obama will be a one term President and will be remembered most for the fact that he is black.
Ahhhh, I said. There's the nub. I told my friend that the country--and particularly the conservatives, have not forgiven Obama his blackness. There is still a rankling that a black man made it to President before, say, a Hispanic or a Jew. What's more, is that he's a smart black man! An even greater offence against humanity. He must be devious and have a "hidden agenda". Of course my friend said that this was nonsense. Obama's blackness has nothing to do with it, he said. But when we spoke further about the birth issue and his hidden affinity for Islam (his father was a Muslim), he conceded that this worm has been firmly planted in the minds of conservatives as if it were an urban legend. There is very little of that kind of race mongering among liberals and independents. It's among the Tea Party and renecks that this legend persists.
It will be interesting to see how this plays out. There is no doubt that a solution will be reached. No one wants the US to default on its debts. But the aftermath will have a considerable effect on US politics for some time to come.
Bernie.
Thursday, 21 July 2011
On Music In Our Lives
Of all the species it appears that Man (I use the term in a gender inclusive sense) is the only one that can sing. We say that birds "sing" because we have no way of knowing whether their "song" is really a part of their language. The creation of music is said to go back as far a prehistoric man and maybe beyond that. The use of the voice for other than speech and the banging on a hollow log seems to have been with us, well, forever. There are many reference to music in ancient Greek and Roman writings as well as Biblical references but we have no way of knowing what music was produced because there was no common form of notation. The Chinese had a form of music notation over 5,000 years aga and much of their ancient music has been preserved. For the rest of us music notation started with Church music and can be seen on many parchment representations of chants that the Church wanted to preserve. The idea that music was a function of time did not appear until much later. In later chants we see the insertion of "bars" that delimit the rhythm of the music as well as its melody line. Modern music only evolved when music broke away from the Church and was allowed to flourish as secular works. An almost exact parallel can be seen in the development of painting and the arts.
Why bring this up now? Because I have been listening to music almost all my life. My musical interests are mostly based in classical music but I have had a fair exposure to jazz, rock, hip hop and other forms of popular music forms. I grew up during the 'forties when swing was in full swing and lived through the 'fifties and the development of rock and roll, heavy metal, disco and other musical formats. But my main interest is in classical music. The question is why have I been listening to dead composers' works over and over again? Why does it give me pleasure. I can listen to almost all other forms of music including Lady Gaga but the music does not stay with me. Not the way Mozart or Beethoven does.
For most people music is their life motif. They can remember the songs that were played when they were courting, when they married, etc. Because this is closely associated with life events the musical reference is lost as one moves on in life. It may come back as nostalgia but how many tmes can you listen to Blue Suede Shoes and find it fulfilling. Also, even in its most complex forms pop music is highly formulaic. Popular music was crafted so that it's three minutes duration could fit nicely on a 78 vynl record. It has not changed much.
The issue comes down to complexity. Gregorian chant did not have to be complex. Even harmony was disallowed because it distracted from the word of God. When Church musicians convinced with higher ups that music could beautify the word of God did music progress to become more complex. By then the cat was out of the bag. Secular music was not far off.
Because of limitations placed on travel the ability to listen to some one else's music was difficult. Think of what European music might have been if it had been exposed to African drumming where rhythms were highly complex. However insular European music was the composers of the day had to come up with complexities that would keep the listener interested. So we have slow-fast-slow musical forms. We have the devlopment of harmony and counterpoint--that is two melodies played against each other such that each "line" compliments the other. At one point these counterpoint tricks (kuntzen in German) were so prevalent that the original melody was almost entirely obscured. To make any sense of this Bach came along and, once and for all, laid down the rules by which this music form would be composed and played. I have always believed that Bach was the foundation on which others built their musical ideas. This complexity grew through Mozart, Beethoven, Schubert, Schumann and through the romantic composers.
So what binds me to these dead composers. It is the complexity and the sheer beauty of these works that are as convincing an art form as they were when they were first composed. It takes an investment of time and effort to try and understand these works. It's like coming upon a great painting. At first you see the simple beauty of the work. But if you look closer you see the intricacies of the work. There are some works of Beethoven that I will probably never understand fully. And yet I keep listening because each time I hear the work some small but ingenious part is revealed. This can't be said of a song by Lady Gaga. In 3-4 minutes the music is done and there is nothing left to rediscover. The music industry thrives on it because, otherwise, no new popular music would be sold. I can listen to a Bach fugue hundreds of times and learn something new every time.
In Europe young people are coming back to classical music. In North America the attention span of young people can't clamp on long enough to get an appreciation of the music. Some music is so overwhelming emotional that even young people can't excape the beauty. However, most classical concerts are populated by older people. Very few are young. The young are enticed with "pop" concerts but very little of these initiatives have been translated to increased audiences. Young people would rather pay $100 to be entertained by U2. But will anyone be listening to U2 in 100 years?
Bernie.
Why bring this up now? Because I have been listening to music almost all my life. My musical interests are mostly based in classical music but I have had a fair exposure to jazz, rock, hip hop and other forms of popular music forms. I grew up during the 'forties when swing was in full swing and lived through the 'fifties and the development of rock and roll, heavy metal, disco and other musical formats. But my main interest is in classical music. The question is why have I been listening to dead composers' works over and over again? Why does it give me pleasure. I can listen to almost all other forms of music including Lady Gaga but the music does not stay with me. Not the way Mozart or Beethoven does.
For most people music is their life motif. They can remember the songs that were played when they were courting, when they married, etc. Because this is closely associated with life events the musical reference is lost as one moves on in life. It may come back as nostalgia but how many tmes can you listen to Blue Suede Shoes and find it fulfilling. Also, even in its most complex forms pop music is highly formulaic. Popular music was crafted so that it's three minutes duration could fit nicely on a 78 vynl record. It has not changed much.
The issue comes down to complexity. Gregorian chant did not have to be complex. Even harmony was disallowed because it distracted from the word of God. When Church musicians convinced with higher ups that music could beautify the word of God did music progress to become more complex. By then the cat was out of the bag. Secular music was not far off.
Because of limitations placed on travel the ability to listen to some one else's music was difficult. Think of what European music might have been if it had been exposed to African drumming where rhythms were highly complex. However insular European music was the composers of the day had to come up with complexities that would keep the listener interested. So we have slow-fast-slow musical forms. We have the devlopment of harmony and counterpoint--that is two melodies played against each other such that each "line" compliments the other. At one point these counterpoint tricks (kuntzen in German) were so prevalent that the original melody was almost entirely obscured. To make any sense of this Bach came along and, once and for all, laid down the rules by which this music form would be composed and played. I have always believed that Bach was the foundation on which others built their musical ideas. This complexity grew through Mozart, Beethoven, Schubert, Schumann and through the romantic composers.
So what binds me to these dead composers. It is the complexity and the sheer beauty of these works that are as convincing an art form as they were when they were first composed. It takes an investment of time and effort to try and understand these works. It's like coming upon a great painting. At first you see the simple beauty of the work. But if you look closer you see the intricacies of the work. There are some works of Beethoven that I will probably never understand fully. And yet I keep listening because each time I hear the work some small but ingenious part is revealed. This can't be said of a song by Lady Gaga. In 3-4 minutes the music is done and there is nothing left to rediscover. The music industry thrives on it because, otherwise, no new popular music would be sold. I can listen to a Bach fugue hundreds of times and learn something new every time.
In Europe young people are coming back to classical music. In North America the attention span of young people can't clamp on long enough to get an appreciation of the music. Some music is so overwhelming emotional that even young people can't excape the beauty. However, most classical concerts are populated by older people. Very few are young. The young are enticed with "pop" concerts but very little of these initiatives have been translated to increased audiences. Young people would rather pay $100 to be entertained by U2. But will anyone be listening to U2 in 100 years?
Bernie.
Tuesday, 19 July 2011
China's Treasury Holdings Make US Woes Its Own
For a good discussion on whom holds who's debt see New York Times Article at:http://www.nytimes.com/2011/07/19/business/china-largest-holder-of-us-debt-remains-tied-to-treasuries.html?pagewanted=2&src=recg
Money Makes the World Go Around
I did not properly prepare you for my last post. To understand why it is difficult to have one currency that encompasses several economies you have to look at the role that money plays in evaluating the performance of a particular economy. Money is the measuring stick of how an economy is valued against other economies. For example, if labour in one economy is less effective than in another, the value of the first economy's money will be discounted so that, economy against economy, prices will be about equal. If one economy has something that others, worldwide, want, then it's money will be bid up because of excessive demand. An example: Canadian currency is largely petro based. If the cost of oil goes up the Canadian dollar usually follows. Another example: when Canadian base metals had no market worldwide then the Canadian dollar fell. If a country raises it's bank rate so that government bonds pay more interest than is paid on other economies then the value of the dollar goes up correspondingly.
Therefore, the value of money is a good way to "take the temperature" of the performance of an economy. Of course this assumes that the value of money is left to an impartial market. There is no such thing. Many countries either directly or indirectly influence the value of their currency to achieve national goals. China has kept the value of its currency abnormally low so as to make exported goods cheaper. The US has put downward pressure on its dollar to make exports more affordable. These actions have the obverse effect of making imports more expensive (you have to spend more dollars to get a Euro, for example). The effect of manipulating the value of money is that everyone is affected. Dearer import hurt foreign markets. Cheaper exports flood foreign markets. It's like a tariff barrier.
In an open market the value of a country's money will have an enormous effect on domestic economic policy. Having the "right" value will make both export and imports affordable. Inefficiencies in the economy will directly affect the value of currency. This will have the effect of either correcting the inefficiencies or allowing the local currency to go into the tank.
When you have a currency that does not reflect economic reality of the underlying malaise of the economy this inconsistency will not be apparent until things get bad. Really bad. In Europe the strength of the German economy is propping up the inefficiencies of others in the EEC. That can go on for only a limited amount of time. If the Euro tanks it will take the German economy with it. That's why I have consistently believed that an overall currency for a disparate number of countries is a bad idea. So did Britain when it voted not to adopt the Euro.
Bernie
Therefore, the value of money is a good way to "take the temperature" of the performance of an economy. Of course this assumes that the value of money is left to an impartial market. There is no such thing. Many countries either directly or indirectly influence the value of their currency to achieve national goals. China has kept the value of its currency abnormally low so as to make exported goods cheaper. The US has put downward pressure on its dollar to make exports more affordable. These actions have the obverse effect of making imports more expensive (you have to spend more dollars to get a Euro, for example). The effect of manipulating the value of money is that everyone is affected. Dearer import hurt foreign markets. Cheaper exports flood foreign markets. It's like a tariff barrier.
In an open market the value of a country's money will have an enormous effect on domestic economic policy. Having the "right" value will make both export and imports affordable. Inefficiencies in the economy will directly affect the value of currency. This will have the effect of either correcting the inefficiencies or allowing the local currency to go into the tank.
When you have a currency that does not reflect economic reality of the underlying malaise of the economy this inconsistency will not be apparent until things get bad. Really bad. In Europe the strength of the German economy is propping up the inefficiencies of others in the EEC. That can go on for only a limited amount of time. If the Euro tanks it will take the German economy with it. That's why I have consistently believed that an overall currency for a disparate number of countries is a bad idea. So did Britain when it voted not to adopt the Euro.
Bernie
Assault on the Euro
Many years ago, when the European Economic Community (ECC) was established, I thought that a common currency, the Euro, as a bad idea. So did the British. The ECC is made up of a number of highly disparate economies and to think that they could be fiscally regulated with a common currency was fanciful. The currency would be propped up by Germany and France and would be constantly undermined by weaker economies--like Greece. It now appears that the very underpinnings of the Euro are coming unstuck. Spain, Portugal, Ireland and now Italy are showing signs of fiscal weakness. It is only a matter of time before Germany tires of bailing out weaker economies.
Like the US, most of those weaker economies tried to spend themselves out of recession and must now pay the price. Britain and Germany (and to a lesser extent France) have bitten the bullet through austerity measures that will, in time, bring their economies into balance. The weaker economies were weak before the recession and are on life support after the recession. Bloated with overpaid public sectors and subsidies, it is now hard to draw back without a great deal of civil unrest. Any bailout will insure that the bad times will be strung out over many years. Austerity measures will mean less money for consumers to spend thereby leaving those weak economies in limbo for decades. Allowing the weaker economies to default will create an assault on the Euro probably in favour of the US dollar. The US is trying to keep its dollar low in order to encourage imports. A higher dollars is not part of its economic recovery.
In times past, it was not uncommon for countries to default. Sovereign bondholders were paid so much on the dollar and the world went on. Now, default will bring significant downward pressure on the Euro so that Germany will suffer along with its profligate associate countries. The Euro may fall and each country going back to its own currency.
Some of my investment friends tell me that it's now time to go short on the Euro and long on US dollars. I hope not.
Bernie
Like the US, most of those weaker economies tried to spend themselves out of recession and must now pay the price. Britain and Germany (and to a lesser extent France) have bitten the bullet through austerity measures that will, in time, bring their economies into balance. The weaker economies were weak before the recession and are on life support after the recession. Bloated with overpaid public sectors and subsidies, it is now hard to draw back without a great deal of civil unrest. Any bailout will insure that the bad times will be strung out over many years. Austerity measures will mean less money for consumers to spend thereby leaving those weak economies in limbo for decades. Allowing the weaker economies to default will create an assault on the Euro probably in favour of the US dollar. The US is trying to keep its dollar low in order to encourage imports. A higher dollars is not part of its economic recovery.
In times past, it was not uncommon for countries to default. Sovereign bondholders were paid so much on the dollar and the world went on. Now, default will bring significant downward pressure on the Euro so that Germany will suffer along with its profligate associate countries. The Euro may fall and each country going back to its own currency.
Some of my investment friends tell me that it's now time to go short on the Euro and long on US dollars. I hope not.
Bernie
Monday, 18 July 2011
The Clash of Generations
For an informative and slightly skewed analysis of the the great debt drama, see Thomas L. Friedman's column in The New York Times. http://www.nytimes.com/2011/07/17/opinion/sunday/17friedman.html?_r=1&partner=rssnyt&emc=rss.
Friday, 15 July 2011
On The Labour Scene
A recent strike by the employees in Sandvik, a company in Arnprior Ontario, brought to mind another recently settled (bludgeoned) strike by postal workers against Canada Post. There are many schools of thought about the right to strike. On the one hand, the conservative view is that labour has become too strong when strikes threaten the very existence of the company being "victimized". On the other hand, the liberal point of view is that organized labour needs to be as effective today as it was when there were sweat shops. True, in large companies non organized labour can be exploited (See WalMart). However, in most large unorganized companies (the Japanese auto makers come to mind) labour is well organized in what some would call a captive union. In the US (unlike Canada) there are many "right to work" states where, even if a union is formed in a particular company that company can hire non union employees to work along side the unionized employees. In the US, notwithstanding successive Democrat administrations many public service unions (e.g. the Post Office) do not have the right to strike because they are designated as "essential services".
Unions are usually the bete noir when it comes to assigning blame for the wholesale exporting of North American jobs abroad. The argument goes that North American labour was too expensive and too demanding thereby driving jobs to China. What is probably true was that North American labour was inefficient in that one job in Canada or the US was worth, say, 10 jobs in China. If those 10 jobs cost (all burdens included) cost less than the one job in North America, it was expedient to export those jobs. However, over time, North American workers (mainly due to computers and other mechanization) have become more efficient and productive and foreign workers' efficiencies have remained about the same. Then there is the quality issue and the transportation issue. What the Chinese lacked in efficiency they made up for in shoddy work and poor manufacturing methods. Also, Chinese labour is becoming more expensive as more people move into the middle class (the Chinese are looking for "cheap" labour in Africa). Many foreign jobs are now being repatriated to North America. The unions had very little to do with this--one way or the other.
Add to this the internationalization of trade. Even small and middle sized companies are finding markets abroad. This sometimes means direct investment in building plants or sales organizations in foreign markets thereby taking away jobs for domestic workers. These decisions are not made on the basis of exporting jobs and more on the inability to reach distant markets from distant shores. While labour may be cheaper in foreign markets, the corresponding cost of doing business abroad may well offset cheaper labour. In other words it may not the labour factor that's driving the decision to export jobs.
One of the most perplexing issues that plague both labour and management is the issue of pensions. The ability of people to get pensions is a relatively recent phenomenon. In the early stages of industrialization of both Britain and the US wages and tenure were the main issues. Not pensions. The idea that a company that you had worked for for 40 years would have an obligation to pay you for another 10 years was preposterous. Contributory pensions started with government employees under liberal governments. Low wages were, in part, compensation for life pensions after retirement. Pensions for industrial concerns soon followed. The main reason for the bankruptcy of General Motors was the onerous "carry" on each produced automobile represented by pension payments. As people lived longer and interest rates came down pensions went from a "defined benefit", self funding obligation to an open ended obligation. In fact some General Motors pensioners have been receiving pensions longer than they worked at GM. Legislation in North America is also a contributing factor. It used to be that a company's pension obligation was funded annually against the pool of people in the pension plan. Later legislation allowed companies to defer annual funding and go on a "pay as you go" pension plan. In other words, the pension fund was raided so that younger contributors were paying for older recipients. This worked as long as the company continued in business. If the company went out of business (Nortel) pensioners were ordinary creditors who suffered the same fate as other creditors in the bankruptcy. Valuing and placing on the balance sheet actual pension obligations would wipe out the balance sheet for many large companies.
Company pension plans meant the worker did not have to save from today's salary to fund retirement. Social Security in the US and the CPP in Canada were supposed to be supplementary programs. However, as wages stagnated, in real terms, the ability of the worker to save became seriously curtailed. For most wage earners putting away $5,000 in a RRSP is laughable when it is measured against daily living expenses. The saving rate in Canada and the US (although the rate is coming up slightly) is appalling when it is measured against household debt (although the rate is abating slightly). Eventually, a great number of these underfunded people will find themselves supported by the state. As people live longer the problem gets worse.
In the US the tax system is biased in favour of savings. With Social Security and IRA and 401K plans there is a significant incentive to save. Also, small business can install defined benefit pension plans that are also heavily tax favoured. The interest deduction on mortgages is an incentive to buy against rent a home. Until recently a home was the greatest asset of value for most people. It will take some time for the current bulge of foreclosure to work its way through the system but I am confident that the housing market will recover making the home a significant repository of value.
Canada is far behind the US in providing a savings bias through tax favoured plans. RRSP deductions are too low. There is no equivalent or a 401K plan and defined benefit plans for small businesses are highly regulated and too tax poor to be helpful. A Senate committee heard testimony recently that suggested that the CPP fund be open to RRSP investors rather than have the money languish at CD rates. There has been no political interest in this kind of solution. Using the tax system to encourage savings is really a timing issue. The government will get the tax back when the plans mature.
So, to sum up, I do not believe that there is any bias in favour of organized labour. We feel the sting of strikes mostly when they are against public facilities like the Post Office or the local bus service. Most industrial strikes go largely unnoticed and do not greatly affect the average consumer. Solutions imposed by binding arbitration does not solve underlying problems. It's like Solomon who actually halves the baby to the consternation of the real mother. Even large corporations that do not have unions have some form of employee representation. Exceptional circumstances aside, small employers really do not have the upper hand since hiring a new employee is much more expensive than keeping an existing one. As to pensions, the issue is not limited or organized labour. It is the product, in part, of poor government savings programs that use the tax system to encourage people to save for old age.
And, as a total aside, a flat rate consumption tax would be an excellent incentive to save. But that's for another post.
Bernie.
Unions are usually the bete noir when it comes to assigning blame for the wholesale exporting of North American jobs abroad. The argument goes that North American labour was too expensive and too demanding thereby driving jobs to China. What is probably true was that North American labour was inefficient in that one job in Canada or the US was worth, say, 10 jobs in China. If those 10 jobs cost (all burdens included) cost less than the one job in North America, it was expedient to export those jobs. However, over time, North American workers (mainly due to computers and other mechanization) have become more efficient and productive and foreign workers' efficiencies have remained about the same. Then there is the quality issue and the transportation issue. What the Chinese lacked in efficiency they made up for in shoddy work and poor manufacturing methods. Also, Chinese labour is becoming more expensive as more people move into the middle class (the Chinese are looking for "cheap" labour in Africa). Many foreign jobs are now being repatriated to North America. The unions had very little to do with this--one way or the other.
Add to this the internationalization of trade. Even small and middle sized companies are finding markets abroad. This sometimes means direct investment in building plants or sales organizations in foreign markets thereby taking away jobs for domestic workers. These decisions are not made on the basis of exporting jobs and more on the inability to reach distant markets from distant shores. While labour may be cheaper in foreign markets, the corresponding cost of doing business abroad may well offset cheaper labour. In other words it may not the labour factor that's driving the decision to export jobs.
One of the most perplexing issues that plague both labour and management is the issue of pensions. The ability of people to get pensions is a relatively recent phenomenon. In the early stages of industrialization of both Britain and the US wages and tenure were the main issues. Not pensions. The idea that a company that you had worked for for 40 years would have an obligation to pay you for another 10 years was preposterous. Contributory pensions started with government employees under liberal governments. Low wages were, in part, compensation for life pensions after retirement. Pensions for industrial concerns soon followed. The main reason for the bankruptcy of General Motors was the onerous "carry" on each produced automobile represented by pension payments. As people lived longer and interest rates came down pensions went from a "defined benefit", self funding obligation to an open ended obligation. In fact some General Motors pensioners have been receiving pensions longer than they worked at GM. Legislation in North America is also a contributing factor. It used to be that a company's pension obligation was funded annually against the pool of people in the pension plan. Later legislation allowed companies to defer annual funding and go on a "pay as you go" pension plan. In other words, the pension fund was raided so that younger contributors were paying for older recipients. This worked as long as the company continued in business. If the company went out of business (Nortel) pensioners were ordinary creditors who suffered the same fate as other creditors in the bankruptcy. Valuing and placing on the balance sheet actual pension obligations would wipe out the balance sheet for many large companies.
Company pension plans meant the worker did not have to save from today's salary to fund retirement. Social Security in the US and the CPP in Canada were supposed to be supplementary programs. However, as wages stagnated, in real terms, the ability of the worker to save became seriously curtailed. For most wage earners putting away $5,000 in a RRSP is laughable when it is measured against daily living expenses. The saving rate in Canada and the US (although the rate is coming up slightly) is appalling when it is measured against household debt (although the rate is abating slightly). Eventually, a great number of these underfunded people will find themselves supported by the state. As people live longer the problem gets worse.
In the US the tax system is biased in favour of savings. With Social Security and IRA and 401K plans there is a significant incentive to save. Also, small business can install defined benefit pension plans that are also heavily tax favoured. The interest deduction on mortgages is an incentive to buy against rent a home. Until recently a home was the greatest asset of value for most people. It will take some time for the current bulge of foreclosure to work its way through the system but I am confident that the housing market will recover making the home a significant repository of value.
Canada is far behind the US in providing a savings bias through tax favoured plans. RRSP deductions are too low. There is no equivalent or a 401K plan and defined benefit plans for small businesses are highly regulated and too tax poor to be helpful. A Senate committee heard testimony recently that suggested that the CPP fund be open to RRSP investors rather than have the money languish at CD rates. There has been no political interest in this kind of solution. Using the tax system to encourage savings is really a timing issue. The government will get the tax back when the plans mature.
So, to sum up, I do not believe that there is any bias in favour of organized labour. We feel the sting of strikes mostly when they are against public facilities like the Post Office or the local bus service. Most industrial strikes go largely unnoticed and do not greatly affect the average consumer. Solutions imposed by binding arbitration does not solve underlying problems. It's like Solomon who actually halves the baby to the consternation of the real mother. Even large corporations that do not have unions have some form of employee representation. Exceptional circumstances aside, small employers really do not have the upper hand since hiring a new employee is much more expensive than keeping an existing one. As to pensions, the issue is not limited or organized labour. It is the product, in part, of poor government savings programs that use the tax system to encourage people to save for old age.
And, as a total aside, a flat rate consumption tax would be an excellent incentive to save. But that's for another post.
Bernie.
Wednesday, 13 July 2011
Selling Canadian Goods and Services Abroad
As many of your know, my main business is consulting to firms that sell their goods and services outside of Canada. Canada has some enviable rules regarding offshore sales and, while CRA is zealous about transfer pricing (that is the price at which the Canadian company sells its goods to its captive reseller) the rules are quite manageable. An oversimplified example: If I sell a widget that costs $1 to a foreign customer for $10 I will receive $9 of profit subject to Canadian tax. it may be possible to sell it to a captive purchaser (that is a company that I own in, say, Barbados) for $5 and the captive purchaser will resell it to the customer for $10. In that way there is a $4 profit in Canada and $5 profit that is earned offshore at a tax rate of about 2%. What's more, I can repatriate my profit tax free to my Canadian company through dividends from my captive purchaser. All highly legal. These rules (except for the usual tinkering by CRA) have been in force for 30 years or more.
Lest you think that this is an unabashed commercial for my consulting company, this is not the reason for the post. I recently read an article in The Economist (See: The mystery of the Chinese Consumer: http://www.economist.com/node/18928514) that deals with the trials and tribulations that can occur when a North American company tries to do business abroad. The Chinese are as culturally different from Canadians as chalk is from cheese. Much closer to home Canadians don't take into account significant cultural difference between Canadians and Americans. Selling abroad is taking a leap into the chasm of worlds very different from our own.
It is almost axiomatic that selling abroad requires a local partner who knows the territory and how it can be negotiated. An example: in China, the central government must approve the accounting package that will be used in a Chinese enterprise. Heavy handed, you say. Not so fast. This is done because most off-the-shelf accounting packages do not account for the arcane system of "social taxes" that companies must pay on behalf of the workers. In addition, insistence on strict accounting policies may threaten local managers because such insistence is a slight on their honesty. Most Chinese will reverse engineer any machine and convert it to Chinese manufacture. When challenged on this point they will say that culturally they believe in common ownership of inventions and patent infringement is not a cultural gaff. All this is changing as World Trade Organization rules are making China tow the line on patent infringement. However, India is probably the largest infringer. When dealing in India it is best to hold firmly onto one's underwear lest it be removed from you when you aren't looking.
With all of this angst, why bother selling abroad? Canada is small country whose population is spread across a 5,000 mile swath coast to coast. Canadian companies simply cannot mass produce enough goods for the Canadian market and yet be competitive to imported goos. Many of our Canadian goods go south. However, more Canadian companies are looking for markets that are outside the lower 48 States. This is because the US market is vulnerable to economic swings and trade retaliation such as Buy America. Many Canadian companies want to put eggs in baskets elsewhere.
One of the largest emerging markets is in South America and of these markets Brazil is emerging faster than others. Many are flocking to that market without understanding the cultural difference between doing business in Canada and doing business in Brazil. One of the best secrets in this regard are the services provided by the Government of Ontario to assist Canadian business in doing business abroad. However, that said, entering that market requires time and patience--sometime over several years. However, the rewards are rich enough to warrant the effort. But remember, doing business in Brazil almost always requires a Brazilian partner. Some of the cultural differences can be subtle. Brazilians speak Portuguese. The rest of the Continent speaks Spanish. However, Brazilians are very protective of their language (sounds familiar?) and rarely speak English. It's your job to conform to their society.
Even if sales in foreign markets are possible, transportation and support may make these products uncompetitive in the foreign market. While Canadian goods are highly regarded, worldwide, it's price that is the determining factor. In order to make these goods competitive it may be wise to think of a technology transfer to a local (and well connected) business. They do the manufacturing and sale under license. In that way the local business can take advantage of cheaper labour and a significant reduction of transportation costs. Also, the local producer can service the products. What you get are royalties. This post will not deal with the intricacies of royalties but suffice to say that this is a relatively inexpensive way of accessing foreign markets for a nice return.
The point of this post is that it is not only the Fortune 200 companies that engage in foreign trade. A surprising number of small businesses are selling abroad. With some planning and forethought this can become an excellent profit center. Try it, you'll like it.
Bernie.
Lest you think that this is an unabashed commercial for my consulting company, this is not the reason for the post. I recently read an article in The Economist (See: The mystery of the Chinese Consumer: http://www.economist.com/node/18928514) that deals with the trials and tribulations that can occur when a North American company tries to do business abroad. The Chinese are as culturally different from Canadians as chalk is from cheese. Much closer to home Canadians don't take into account significant cultural difference between Canadians and Americans. Selling abroad is taking a leap into the chasm of worlds very different from our own.
It is almost axiomatic that selling abroad requires a local partner who knows the territory and how it can be negotiated. An example: in China, the central government must approve the accounting package that will be used in a Chinese enterprise. Heavy handed, you say. Not so fast. This is done because most off-the-shelf accounting packages do not account for the arcane system of "social taxes" that companies must pay on behalf of the workers. In addition, insistence on strict accounting policies may threaten local managers because such insistence is a slight on their honesty. Most Chinese will reverse engineer any machine and convert it to Chinese manufacture. When challenged on this point they will say that culturally they believe in common ownership of inventions and patent infringement is not a cultural gaff. All this is changing as World Trade Organization rules are making China tow the line on patent infringement. However, India is probably the largest infringer. When dealing in India it is best to hold firmly onto one's underwear lest it be removed from you when you aren't looking.
With all of this angst, why bother selling abroad? Canada is small country whose population is spread across a 5,000 mile swath coast to coast. Canadian companies simply cannot mass produce enough goods for the Canadian market and yet be competitive to imported goos. Many of our Canadian goods go south. However, more Canadian companies are looking for markets that are outside the lower 48 States. This is because the US market is vulnerable to economic swings and trade retaliation such as Buy America. Many Canadian companies want to put eggs in baskets elsewhere.
One of the largest emerging markets is in South America and of these markets Brazil is emerging faster than others. Many are flocking to that market without understanding the cultural difference between doing business in Canada and doing business in Brazil. One of the best secrets in this regard are the services provided by the Government of Ontario to assist Canadian business in doing business abroad. However, that said, entering that market requires time and patience--sometime over several years. However, the rewards are rich enough to warrant the effort. But remember, doing business in Brazil almost always requires a Brazilian partner. Some of the cultural differences can be subtle. Brazilians speak Portuguese. The rest of the Continent speaks Spanish. However, Brazilians are very protective of their language (sounds familiar?) and rarely speak English. It's your job to conform to their society.
Even if sales in foreign markets are possible, transportation and support may make these products uncompetitive in the foreign market. While Canadian goods are highly regarded, worldwide, it's price that is the determining factor. In order to make these goods competitive it may be wise to think of a technology transfer to a local (and well connected) business. They do the manufacturing and sale under license. In that way the local business can take advantage of cheaper labour and a significant reduction of transportation costs. Also, the local producer can service the products. What you get are royalties. This post will not deal with the intricacies of royalties but suffice to say that this is a relatively inexpensive way of accessing foreign markets for a nice return.
The point of this post is that it is not only the Fortune 200 companies that engage in foreign trade. A surprising number of small businesses are selling abroad. With some planning and forethought this can become an excellent profit center. Try it, you'll like it.
Bernie.
For An Intelligent Discussion of Fox News
See the following article in the Economist on Fox News :http://www.economist.com/node/18904112
The Murdoch Mess
In my past posts I have told you that I am an unabashed fan of Malcolm Gladwell, the author of The Tipping Point. I have learned that it's not always your enemies that get you into trouble and it's not always your friends that get you out of trouble. Murdoch has been fairly consistent in his media investments: they are almost always controversial and, the exception of the Wall Street Journal, always in your face. Fox News caters, unabashedly, to the lunatic fringe right wing political supporters. The problem with the race to the bottom is that there is no bottom. That is until the bottom starts pushing back.
I am old enough to remember the time when news was left to the newspaper and, to a letter extent, the radio. The radio delivered measured news on a regular basis. I cannot remember a time when there was "Breaking News" (except when VE and VJ --that is Victory Europe and Victory Japan was proclaimed).
In the early 50s, at least in Canada, television was an entertainment media. There was measured news on both the Canadian and US channels, usually at 6 or 6:30 in the evening. Who cannot remember Walter Cronkite. News was "believed" because there was a trust relationship between the news reader and the listener/viewer. Who cannot remember Lorne Greene (later of cowboy fame) whose "voice of doom" was the very epitome of news integrity. Of course there was always a fringe element in print media. These newspapers, many of which were in New York, offered local colour. But, as I remember it, the news was the news. Plain and simple.
I clearly remember the tipping point in news reporting. It was CNN. Here was a "news channel" whose only redeeming factor was that news was becoming a 24/7 product. Since it was a product of television, news had to be short. There was very little analysis and very little editorializing. It was news, news, news. It did not make much money for a long time and it's founder Ted Turner finally sold out for very big bucks. Thereafter the very nature of the media changed. News went from being information to being a product. Soon, the story became news rather than news becoming the story.
The other tipping point came when television went from mainly a broadcast media to a cable media. Suddenly, the number of channels went from 20 to 200 to the present 600 channels. Viewers were now subjected to competition for their eyeballs (just as later the Internet became a competitor for eyeballs). News channels proliferated and, in doing so, sought out every mechanism and trick to pry away eyeballs from one channel to the other. If you were a right wing conservative why listen to any other broadcast than one with which you already agreed. I call this bobble-headed viewing. Just keep nodding. Don't listen or watch anything that might give you another point of view. Even the relatively even handed cable stations are hurting. The political left listens to leftist cable stations. The political center begs for money to keep the public broadcasting stations afloat.
At one time the only scandal mongering print media was in the supermarket. However, the public's appetite for sensational news knew no ends. Paparazzi hounding directly led to the death of Princess Diana. Thousands, if not millions were paid for the right photograph--the more scandalous the better. Print media focused on scandal and sensationalism abounded in Britain. The race to the bottom was on in full force.
I believe that there will be a special place in hell for Nancy Grace. Her coverage of the recent trial in Florida concerning a young woman who was alleged to have killed her daughter was, to say the least, scandalous. Whatever the merits of the case, Ms. Grace-less had the woman tried and convicted well before the opening address to the jury. I am hopeful that the successful defendant will make her and her employer pay dearly in the courts. I am also hopeful, against hope, that Ms. Grace will be looking for a job.
It came as no surprise that all of this has ended in criminal activity. There is no "need to know" when the British Prime Minister's son is diagnosed with a serious illness. There is no "need to know" the whereabouts of the Royal Family unless one is an assassin. The "need to know" has become the "right to know", sometimes with disastrous results. Some publications in Britain led to suicides by those who were "exposed". Couple this with an institutional bent towards "freedom of information" and you have a societal feeling of entitlement that feeds on itself.
I have posted, previously, on the general erosion of a person's right to privacy. We seem to be giving up our privacy with wild abandon. Just see what you can find out on the Internet or on Facebook. However, when this comes back to bit us we are the first to holler that our privacy has been invaded. We want "the government" to do something about it when we are as complicit as others with our support of sensational media. Every paper we buy, every program we watch is a form of approval of this kind of reporting. No amount of advertising and cajoling reduced smoking until there was a general societal consensus that smoking was harmful, stupid and socially unacceptable. We need the same sea change when it comes to sensational print or broadcast media.
I am always mindful of what we tell our children about all of this. In my case my grandchildren. I truly believe that the Murdoch mess is a teaching moment. But, what to tell the kids? What can be learned from all of this? The first and obvious lesson is one of looking at news with a critical eye. While "believe no one" is a bit extreme, kids have to know that there is often more than one side to any story. The second less is that gossip is dangerous. We all engage in it to a degree. But wholesale gossiping is harmful. Mistruths have a way of proliferating. The object of the gossip may suffer irreparable harm. It's a form of bullying.
I fervently hope that Mr. Murdoch will have his knuckles rapped--in public, so that he will be as uncomfortable as those whose lives he invaded have been in the past. Good riddance.
Bernie.
I am old enough to remember the time when news was left to the newspaper and, to a letter extent, the radio. The radio delivered measured news on a regular basis. I cannot remember a time when there was "Breaking News" (except when VE and VJ --that is Victory Europe and Victory Japan was proclaimed).
In the early 50s, at least in Canada, television was an entertainment media. There was measured news on both the Canadian and US channels, usually at 6 or 6:30 in the evening. Who cannot remember Walter Cronkite. News was "believed" because there was a trust relationship between the news reader and the listener/viewer. Who cannot remember Lorne Greene (later of cowboy fame) whose "voice of doom" was the very epitome of news integrity. Of course there was always a fringe element in print media. These newspapers, many of which were in New York, offered local colour. But, as I remember it, the news was the news. Plain and simple.
I clearly remember the tipping point in news reporting. It was CNN. Here was a "news channel" whose only redeeming factor was that news was becoming a 24/7 product. Since it was a product of television, news had to be short. There was very little analysis and very little editorializing. It was news, news, news. It did not make much money for a long time and it's founder Ted Turner finally sold out for very big bucks. Thereafter the very nature of the media changed. News went from being information to being a product. Soon, the story became news rather than news becoming the story.
The other tipping point came when television went from mainly a broadcast media to a cable media. Suddenly, the number of channels went from 20 to 200 to the present 600 channels. Viewers were now subjected to competition for their eyeballs (just as later the Internet became a competitor for eyeballs). News channels proliferated and, in doing so, sought out every mechanism and trick to pry away eyeballs from one channel to the other. If you were a right wing conservative why listen to any other broadcast than one with which you already agreed. I call this bobble-headed viewing. Just keep nodding. Don't listen or watch anything that might give you another point of view. Even the relatively even handed cable stations are hurting. The political left listens to leftist cable stations. The political center begs for money to keep the public broadcasting stations afloat.
At one time the only scandal mongering print media was in the supermarket. However, the public's appetite for sensational news knew no ends. Paparazzi hounding directly led to the death of Princess Diana. Thousands, if not millions were paid for the right photograph--the more scandalous the better. Print media focused on scandal and sensationalism abounded in Britain. The race to the bottom was on in full force.
I believe that there will be a special place in hell for Nancy Grace. Her coverage of the recent trial in Florida concerning a young woman who was alleged to have killed her daughter was, to say the least, scandalous. Whatever the merits of the case, Ms. Grace-less had the woman tried and convicted well before the opening address to the jury. I am hopeful that the successful defendant will make her and her employer pay dearly in the courts. I am also hopeful, against hope, that Ms. Grace will be looking for a job.
It came as no surprise that all of this has ended in criminal activity. There is no "need to know" when the British Prime Minister's son is diagnosed with a serious illness. There is no "need to know" the whereabouts of the Royal Family unless one is an assassin. The "need to know" has become the "right to know", sometimes with disastrous results. Some publications in Britain led to suicides by those who were "exposed". Couple this with an institutional bent towards "freedom of information" and you have a societal feeling of entitlement that feeds on itself.
I have posted, previously, on the general erosion of a person's right to privacy. We seem to be giving up our privacy with wild abandon. Just see what you can find out on the Internet or on Facebook. However, when this comes back to bit us we are the first to holler that our privacy has been invaded. We want "the government" to do something about it when we are as complicit as others with our support of sensational media. Every paper we buy, every program we watch is a form of approval of this kind of reporting. No amount of advertising and cajoling reduced smoking until there was a general societal consensus that smoking was harmful, stupid and socially unacceptable. We need the same sea change when it comes to sensational print or broadcast media.
I am always mindful of what we tell our children about all of this. In my case my grandchildren. I truly believe that the Murdoch mess is a teaching moment. But, what to tell the kids? What can be learned from all of this? The first and obvious lesson is one of looking at news with a critical eye. While "believe no one" is a bit extreme, kids have to know that there is often more than one side to any story. The second less is that gossip is dangerous. We all engage in it to a degree. But wholesale gossiping is harmful. Mistruths have a way of proliferating. The object of the gossip may suffer irreparable harm. It's a form of bullying.
I fervently hope that Mr. Murdoch will have his knuckles rapped--in public, so that he will be as uncomfortable as those whose lives he invaded have been in the past. Good riddance.
Bernie.
Monday, 11 July 2011
Between A Rock and a Hard Place-Redux
For an informative analysis of this problem see the Op-Ed column by Paul Krugman in the New York Times. See: http://www.nytimes.com/2011/07/11/opinion/11krugman.html?_r=1&ref=opinion
Sunday, 10 July 2011
Between a Rock and a Hard Place.
Recent job creation numbers published in the US show a grim long term picture for the recovery of that economy. On the one hand US Fortune 200 companies are showing record earnings (almost all due to a cheap dollar and good export sales) and a bundle of under-deployed cash. The Dow is not far off record highs. On the other hand, there are about 13 million (and possibly more) unemployed persons in the US many of whom will never work again. State finances are a mess (or worse) and at every level there is not enough public money to replace crumbling infrastructure. Education facilities are on hold and teachers have been laid off by the millions. All the while politicians in Washington continue their gridlock. From a per capita point of view, the US debt is worse off than Greece. At current levels of borrowing interest payments in 10 years time (adjusted to 2011 dollars) will consume almost $1 trillion of the US budget. Not a pretty picture. Because the US is, currently, the world's largest economy everyone seems to have booked passage on the Titanic.
There is no doubt that these wounds are largely self inflicted. Some stem from 9/11 and the world's reaction to terrorist threats. Radical muslims have created emotional and financial havoc in world economies. Consider the cost of terror prevention programs in transportation and general local and federal policing. Aside from the purchase of capital equipment, these expenditures have not contributed greatly to the economy in general. Then, there were the wars. Not all of the blame can be put to George W. Bush's feet. Obama has continued the war in Iraq and Afghanistan at horrendous cost to the US treasury. I can think of very little net gain for the US economy for such forays. Add to that the fact that wages in the US have seen very little net gain over the past 10 years. Most Americans had been living on the value that accrued in their homes. That worked until everyone realized that the king had no clothes and home values plummeted. The economic scenario played out like the plot of a horror movie. Mortgaged backed securities lost value; banks were under liquidity pressure; lending to small business stopped; people lost jobs and their homes. In aviation terms when no amount of power can overcome drag the airplane is said to be in a death spiral. The same may be true for the US economy.
To rehash an oft told story, the US government threw tons of cash at the banking system (most of which has been repaid) and the auto industry (some of which has been repaid) in attempt to prime the pump. Public money led to some but not spectacular economic activity and there has not been enough credit at the small business level to fund significant job creation in that sector. Big business has used the downturn to increase efficiency--all of which has little impact on jobs. In the meantime there has not been a measurable impact on the unemployed. In many cases increased employment has come in low wage industries so that the average standard of living is falling.
The political picture in the US is no better than the economic one, Overall, I think that President Obama's administration has been a disappointment to even his most ardent supporters. Yes we can, became, yes we'll think about it. In trying to lead by consensus he missed an opportunity to have a more effective healthcare bill when the Democrats had majorities in both houses of Congress and the White House had a Democratic President. When he should have declared the Afghanistan war "won" and brought the troops home he committed another 30,000 soldiers to a war that was no longer against Bin Laden (now mercifully killed) but against a long time tribal conflict that has gone on for centuries and will go on for centuries to come. He has flinched on almost every major decision. He has the charisma of Clinton but does not have the political skills of that President. Obama is (but for the comical menagerie of the Republican wannabe candidates) looking like a one term President.
Most G-20 countries have gone through considerable belt tightening after great recession. There has been considerable down sizing of government (Canada and Great Britain) and tax increases. The US, with a modest tax on high income earners could make a considerable dent in the deficit. There is also no doubt that the US government is too big and a reduction of some of that bloat could save the country billions. The US (and Canada) should look at some of its subsidy programs generated through direct subsidies and tax subsidies and see whether the US is still getting the same bang for its buck that it when these programs were enacted. New Zealand, in one year, cut out all of its farm subsidies. Ten years later New Zealand farmers were some of the most efficient and wealthy farmers in the world. The problem with US politics and politicians is that no one wants his ox gored. Every party has ingrained interests that cannot be abandoned without considerable pain. Republicans can no more reign in the banks than Democrats can reign in the labour movement.
The US is playing with fire. An old saw said that if you owed the bank $5,000 you had a problem; if you owned the bank $5 billion the bank had a problem. Even the slightest suggestion that the US will run out of money sometime in early August is inflammatory in terms of world economic stability. We all know that these are but words that import the severity of the problem. However, the downgrading of US bonds by the bond rating agencies would have a disastrous effect on that country's ability to borrow. Those economies that bank US treasuries (China) could abandon the currency. It would make the great recession look like a pussy cat by comparison.
What is becoming obvious is that President Obama cannot negotiate his way out of this crises. The lunatics on the right want to shut down government without raising taxes. The lunatics on the left want to raise taxes to protect long standing fiscal and political shibboleths. With presidential elections looming Obama can't be seen as having any kind of political victory here that could be leveraged into his campaign for president.
There is also no doubt that a compromise of some sorts will be reached. Probably at the last minute so that everyone will draw back from the abyss. However, such a stop gap measure will not address the root problems facing the US and Americans. At one time I thought that Obama could bring about a new bipartisan era. I am now certain that he can't. We will continue to live in interesting times.
Bernie
Thursday, 7 July 2011
Chinese Food--For Thought
The Munk School of Global Affairs at the University of Toronto sponsors annual lectures on weighty subjects (In Defence of God is an example). The latest debates were held in June on the subject of China. Debaters ranged from the current senior economic advisor to the Chinese government to Henry Kissinger and Fareed Zakaria, the Newsweek Journalist and the CNN anchor. The lectures have not yet been released as podcasts (which I would urge you to get) but portions of the debate were rebroadcast on the CBC program Ideas. The other source on China was another CBC broadcast, The Current with Anna Maria Tremonte whose various guests had some input and insight into matters Chinese.
Aside from the usual stuff on China, there were a number of insightful observations. The first is on Chinese innovation. The observation was that, while Chinese students lead in computational skills (e.g. math and engineering) most of the learning is by rote. US education, as woeful as we believe it to be, approaches education from problem solving where failure is as much a part of the process as success. The position taken is that while the computational skills may be lacking in the US, these can be learned. Problem solving takes an social environment that is more closely related to western values. For example, the US to its credit allows for failure if that failure is constructive. That is, if something is learned from the failure. Eastern cultures do not look favourably on failure. Free markets are evolutionary in that strengths are built on constructive failure. Given the feudal nature of the Chinese society (substitute feudal barons for Communist bosses) it is unlikely that society will change any time soon. My mother had a Russian proverb: You can teach a bear to dance--bit it's still a bear.
The other insight came from a participant on the Current. It's one that had not occurred to me and I found it fascinating. One of the hallmarks of Chinese culture is the collective socialist model. The feudal lord "took care" of his serfs or the Chinese bosses that are "taking care" of the population. That social model requires considerable compliance on the part of the population. Change is revolutionary rather than gradual. And here is the fascinating part: the one child policy could seriously undermine the sanguine nature of the general population. Anyone who has been to China has see the effect of the one child policy. Each child is revered. It is catered to. It is invested in. The child is the future. The child is also completely self centred. It is, observed one of the experts, the beginning of the "me" generation. This generation may not be a compliant as the ones that went before it. Those children will want it all and will want it now. Western societies underwent a similar social upheaval in the 1980s. The "me" generation had a significant negative impact on societal values. We are still living with the results of the "me" generation.
I am a great fan of Malcolm Gladwell. He came to prominence with is book The Tipping Point but I would commend to you his book What the Dog Saw. In both books he makes the point that some insignificant fact or occurrence can have a significant bearing on an event or happening. In trying to understand any problem or happening looking at the result may belie some of the insignificant factors that were more important than was realized at the time. For instance, I have been reading an account of the rise of the corporation and commercial institutions. What is credited most for that dramatic rise in the 1700s is the invention of the double entry bookkeeping system. Without a way to measure financial performance there can be no investment. The point of this post is to have a look behind event to determine what may be the driver.
Bernie/
Aside from the usual stuff on China, there were a number of insightful observations. The first is on Chinese innovation. The observation was that, while Chinese students lead in computational skills (e.g. math and engineering) most of the learning is by rote. US education, as woeful as we believe it to be, approaches education from problem solving where failure is as much a part of the process as success. The position taken is that while the computational skills may be lacking in the US, these can be learned. Problem solving takes an social environment that is more closely related to western values. For example, the US to its credit allows for failure if that failure is constructive. That is, if something is learned from the failure. Eastern cultures do not look favourably on failure. Free markets are evolutionary in that strengths are built on constructive failure. Given the feudal nature of the Chinese society (substitute feudal barons for Communist bosses) it is unlikely that society will change any time soon. My mother had a Russian proverb: You can teach a bear to dance--bit it's still a bear.
The other insight came from a participant on the Current. It's one that had not occurred to me and I found it fascinating. One of the hallmarks of Chinese culture is the collective socialist model. The feudal lord "took care" of his serfs or the Chinese bosses that are "taking care" of the population. That social model requires considerable compliance on the part of the population. Change is revolutionary rather than gradual. And here is the fascinating part: the one child policy could seriously undermine the sanguine nature of the general population. Anyone who has been to China has see the effect of the one child policy. Each child is revered. It is catered to. It is invested in. The child is the future. The child is also completely self centred. It is, observed one of the experts, the beginning of the "me" generation. This generation may not be a compliant as the ones that went before it. Those children will want it all and will want it now. Western societies underwent a similar social upheaval in the 1980s. The "me" generation had a significant negative impact on societal values. We are still living with the results of the "me" generation.
I am a great fan of Malcolm Gladwell. He came to prominence with is book The Tipping Point but I would commend to you his book What the Dog Saw. In both books he makes the point that some insignificant fact or occurrence can have a significant bearing on an event or happening. In trying to understand any problem or happening looking at the result may belie some of the insignificant factors that were more important than was realized at the time. For instance, I have been reading an account of the rise of the corporation and commercial institutions. What is credited most for that dramatic rise in the 1700s is the invention of the double entry bookkeeping system. Without a way to measure financial performance there can be no investment. The point of this post is to have a look behind event to determine what may be the driver.
Bernie/
Tuesday, 5 July 2011
On Canada Day
Some of you know that Adele and I were involved in the founding of Canada Day as a national holiday. I was fortunate enough to have been approached by the Prime Minister in 1976 to design a national holiday that was more fitting than the 21 gun salute and fireworks on the Hill. That resulted in the Great Canadian Birthday Party that played host to about 75,000 people and about 30 ethnic communities that urged the participants to interact through food and dance. We had fireworks on Mooney's Bay. It was such a success that the following year the event went national. The national chair was Hamilton Southam and Adele and I continued to chair the national capital region. The event was week long, involved thousands of volunteers and was produced on a fraction of the budget that the event now costs. We even produced the national television show on the Hill.
Even then, the event had its challenges. Even though one venue was in Gatineau, Quebec largely snubbed the affair. We could not get Francophone talent from Quebec to perform on the Hill. The show on the Hill had to be politically correct and engage talent from across the country. Most of the talent played for minimal fees and some donated their time.
In 1981 the event was taken over by the NCC. The volunteers disappeared. The event was limited to one day and, to my eyes, became as dry as dust. Maybe that's sour grapes. But recent press reports indicate that the citizenry from across Canada have now proclaimed the show a "disgrace". I am in agreement. The NCC replied that the show had to come within regional and fiscal guidelines. Read for that: cheap. At best, the show was boring.
Why is it that Canadian have such trouble in proclaiming their patriotism. Somehow being openly patriotic is un-Canadian. It is not, the pundits say, that we are any less patriotic. It is not that we love our country less. It is only that we are not as demonstrative as our southern neighbours. What is true is that our southern neighbours never miss a chance to show their patriotism. We never miss a chance to be as phlegmatic as possible when it comes to demonstrable patriotism. Sometimes we overtake our reticence. The recent winter Olympics is such a case. But only, I submit, because we won so many medals. Our patriotism was thinly disguised as gloating. Our recent foray into patriotism (regarding hockey) ended with riots and property damage. Perhaps we just don't know how to be patriotic.
Take our national anthem. We stand on guard so many times that we stand for very little. At least the UK "saves" the Queen. The US anthem is an old war song where there is much cheering when the lyrics refer to the "land of the free". Such references in Canada lead to a yawn.
We just don't know how to be patriotic. We are embarrassed by it. It is because the US has a melting pot approach to immigration while we have a "cultural mosaic"? Our immigrants seem to have more in common with their previous home than with their adopted country. The Prime Minister of Greece is a Canadian citizen. Canada evolved from the immigration of Scottish and English citizens and from French settlers. No one seems to want to break their ties from "home". We did not emerge from rebellion but from negotiation that did not see our country become a stand alone country until 1931--and not so much then. Churchill brought Canada into the World War II as a colony--we did not have much to say about it. We occupy this land but do not seem to possess it. The last politician who had a vision for Canada was Diefenbaker.
So, will we teach our children to be patriotic? Only if we have a vision of what it truly means to be a Canadian. There appears to be little or no leadership from our political masters. We have to do it ourselves. Then, let's get on with it.
Even then, the event had its challenges. Even though one venue was in Gatineau, Quebec largely snubbed the affair. We could not get Francophone talent from Quebec to perform on the Hill. The show on the Hill had to be politically correct and engage talent from across the country. Most of the talent played for minimal fees and some donated their time.
In 1981 the event was taken over by the NCC. The volunteers disappeared. The event was limited to one day and, to my eyes, became as dry as dust. Maybe that's sour grapes. But recent press reports indicate that the citizenry from across Canada have now proclaimed the show a "disgrace". I am in agreement. The NCC replied that the show had to come within regional and fiscal guidelines. Read for that: cheap. At best, the show was boring.
Why is it that Canadian have such trouble in proclaiming their patriotism. Somehow being openly patriotic is un-Canadian. It is not, the pundits say, that we are any less patriotic. It is not that we love our country less. It is only that we are not as demonstrative as our southern neighbours. What is true is that our southern neighbours never miss a chance to show their patriotism. We never miss a chance to be as phlegmatic as possible when it comes to demonstrable patriotism. Sometimes we overtake our reticence. The recent winter Olympics is such a case. But only, I submit, because we won so many medals. Our patriotism was thinly disguised as gloating. Our recent foray into patriotism (regarding hockey) ended with riots and property damage. Perhaps we just don't know how to be patriotic.
Take our national anthem. We stand on guard so many times that we stand for very little. At least the UK "saves" the Queen. The US anthem is an old war song where there is much cheering when the lyrics refer to the "land of the free". Such references in Canada lead to a yawn.
We just don't know how to be patriotic. We are embarrassed by it. It is because the US has a melting pot approach to immigration while we have a "cultural mosaic"? Our immigrants seem to have more in common with their previous home than with their adopted country. The Prime Minister of Greece is a Canadian citizen. Canada evolved from the immigration of Scottish and English citizens and from French settlers. No one seems to want to break their ties from "home". We did not emerge from rebellion but from negotiation that did not see our country become a stand alone country until 1931--and not so much then. Churchill brought Canada into the World War II as a colony--we did not have much to say about it. We occupy this land but do not seem to possess it. The last politician who had a vision for Canada was Diefenbaker.
So, will we teach our children to be patriotic? Only if we have a vision of what it truly means to be a Canadian. There appears to be little or no leadership from our political masters. We have to do it ourselves. Then, let's get on with it.
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