Supply and Demand

Following the recent hurricanes there has been discussion on the radio about “price gouging”. In an unfettered free market, there is no such things, as the market is by definition driven by “supply and demand”. Ergo the term “free”, allowing market forces to dictate price (demand) based on availability (supply). One question raised on the talk shows was whether a gas station in an area about to be devastated with long lines of cars evacuating and where there is a severe shortage of gasoline, should charge more than 10 times the pre-catastrophe price. Most callers into the shows said it was somehow wrong and profiteering. One caller with a small tree service business in New Jersey said that following the devastating storm which hit the Charleston area a few years ago, he drove his truck down there and was selling his service for up to twice the normal price. He felt he was not doing anything wrong and many callers agreed. In both cases “supply and demand” was at play. The gas station owner sold the limited supply in his hands for as much as he could get. Though he did not create a monopoly, his business indeed was a monopoly, given that there was no supply of gas elsewhere in that market. The tree guy saw a strong demand for his service and traveled to provide it. However, the tree guy as did many others saw a demand for his service and traveled to where the demand was. Certainly he incurred additional expenses in travel costs, hotels, time lost during travel just to mention a few. There is also the non-monetary cost of being away from friends and family. This, if he just wanted to maintain his profit margin, would have required a much higher price to make the trip worthwhile in an economic sense. (I know, I know, economists would tell me cost doesn’t enter into the equation when it comes to a free market except to indicate a lowest price possible.) In both cases there was a benefit to people in the devastated areas. In the case of providers traveling to the areas there may even be a level of altruism prompting the action. In the case of the gas station owner there was nothing but greed driving the action. One might argue that one was a noble act whereas not the other.

Affirmative Action

Over the years I have heard a number or reasons from opponents as to why Affirmative Action should be eliminated. Among them; “I haven’t gained from slavery, why should I have to pay a price?” The “New World” first gained its prominence as an agricultural juggernaut. At that time about 20% of the population was of African origin and most of them slaves working on the plantations in the South and in the Caribbean. The land was lush and aching to be farmed but plantation owners could not hire enough laborers to work the fields. To remedy this, they bought slaves from Africa, not because this was “cheap labor” but because it was labor desperately needed. The cost of maintaining a slave was not much lower than the cost of paid labor, if they were only able to find enough people to hire. With the capital gained from agriculture, a firm foundation for a manufacturing economy was in place and we became the great country we are now and all benefit from our position in the global economy and democracy. So not only the descendants of the plantation owners, but all, whether their ancestors arrived in this country generations ago or just got off the boat, are benefiting from our early agriculture and the efforts of the African slaves for which they were never paid. Without their sweat and tears we would not be where we are today. So yes, we are all indebted to the slaves who were instrumental in making America great. Another argument; “Other immigrant groups have been discriminated against.” Yes, not only people of African origin but others; Native Americans, Japanese, the Irish, and Jews, just to mention a few have suffered at the hand of discrimination and more recently Muslims. Women were only allowed to vote about one hundred years ago and today many are still not paid the same wage for the same work as a man. Though various sexual preference groups are becoming more accepted, they are still shunned in many ways, particularly by religious groups. I agree that many groups have suffered from discrimination, but non as much as people of African origin. We cannot make up for all the pain and suffering caused by discrimination through affirmative action. Furthermore, individuals within each group have suffered different amounts and some, depending on their location and circumstances maybe even not have suffered at all. So what is the answer? I propose that we devise a system of retribution for wages not paid and suffering due to slavery. I believe currently, where affirmative action exists, is is based strictly on race. But if we examine the population whose origin is Africa, even during the earliest days not all were slaves. There were a number of “free men” and more recently there have been immigrants from Africa arriving as professionals (nurses have been recruited in Africa to make up for a shortage in some areas) while others like the Somalis as asylum seekers. These people, though suffering from discrimination, were not ancestors of slaves from whose labor we all benefited. In fact, they also benefited from the woes of the slaves. How do you identify and make payment to ancestors of slaves who have suffered not only the loss of benefits derived from paid labor, but the destruction of culture which could help them as they assimilated into the new society. Currently there are gambling casinos built on tribal Native American Land. I believe anyone able to show an eighth of a given tribe’s blood becomes a member of the tribe and shares in the profits of the casino. The same could be done with identifying offspring of slaves though this would be more complicated because it’s not strictly based on ethnicity. Certainly recent immigrants from Africa could easily be identified and excluded. The bigger problem would be identifying the “free men”. (I saw and ancestry program on TV a couple of years ago where the musician Quincy Jones had his ancestry analyzed and it was discovered that he was not a decendant of slaves but of “free men”. We could continue with the Affirmative Action Program as it exists but have it based on retribution to descendants of slaves. This, I believe would weaken most of the arguments against it. Certainly the two I brought up. Affirmative Action

Putting Healthcare Back into Consumer’s Hands

The Right pushes the idea that under a government controlled plan, bureaucrats control an individual’s health (“death panels”) in that they make decisions as to which doctor one can see, tests one can have and medications one can take whereas under an insurance plan purchased on the free market, you make these decisions. First let me say that people working for insurance companies in the private sector are as much bureaucrats as those working in government except that the organizations they serve are motivated by profits instead of public good. In reality however, insurance company staff also decides what doctors one can see, what tests one can have and what medications one can take. So the illusion that in a private healthcare insurance plan you can decide these things is just that, an illusion. Now of coarse one can pay out of their own pocket and in either case make these decisions themselves. What putting healthcare “back in the consumer’s hands” is really meant to do is put the responsibility for making cost/benefit decisions regarding their health into the hands of consumers, some of these decisions resulting in life or death. To make any cost/benefit analysis one does not only need to understand the implications of cost, which most consumers do, but also the other element in the decision, which they don’t. What the Right is asking an average person is to decide whether the results on their health of a procedure are worth their cost? To make this analysis properly one needs to also understand medicine and for most things a casual google search is totally inadequate. Even general practitioners, doctors themselves, rely on specialists. If a cost/benefit analyses are done improperly, the action taken will not only result in less benefit but also higher cost. The more affluent among us of coarse will avail themselves of the best health plan and not face the necessity of making this analysis while the middle and lower class will. And even if they do, cost will have a very low priority. (Hopefully the very poor will still be covered by some government subsidized plan and avoid making the analysis.) As a result, the “one percent” will not only be able to buy more stuff but be healthier while they do it. A healthy nation, like a well-educated nation, is necessary for a country to prosper and compete in this global economy. Better healthcare is not only good for the majority of those benefiting from it directly but is also good for the “one percent”. Healthy people can be more productive, increasing the bottom line of a company. Most of the increase in profit going to the wealthiest (Unfortunately the gain does not trickle down). Healthier people will have more income which they can spend to buy more widgets, also increasing the bottom line. Finally, if we are ever in a major war, a healthy army will outperform a sickly one. The answer is not to put decisions relative to healthcare in the hands of the consumer but to put in place a system that will ensure that the entire population is healthy and strong and able to contribute to our society.

Who are your Other?

We all see ourselves as members of different groups, or tribes as I would like to call them, with a wide range of importance placed on the memberships. We can be a member of a family with family being only immediate family or our tribe can be an extended family. Our membership in a very local community can be a source of pride or in some cases a state (Texans take great pride in being from Texas) and of course a country (“Deutschland, Deutschland uber ales”, the Nazi’s slogan meaning Germany above all else or in our case, America First). We may be members of a religious group, be it Jewish, Christian, Muslim, Hindu, Buddhist or a subset of these, Haredi, Protestant, Sunni, Jane, Mahayana or even small such as Baptist, Wahhabi, or local like Temple Emanuel, Mother Emanuel Church, Westboro Baptist, Sudbury Mosque, etc. We can see ourselves as members of broad geographic area; European, North American, Middle Eastern, African, Asian, or more locally; Northern European, Arab, Southeast Asian or finer; Irish, Russian, Moroccan, Israeli, Vietnamese. Ethnically, we can think of ourselves as Basque, Sicilian, Kurds, Tutsi, Tatar, Yakut; go even more granular; Iraqi Curds or Turkish Curds, Lipka Tatars or Crimean Tatars. We can group ourselves by Race; White, Black, Asian, or by language; Hispanic, Slavic, English, Arabic (I’m starting to run out of steam but you get the picture). Then of course we can think of ourselves most broadly as Humans or even as a part of the Earth or Universe which is how many of the indigenous peoples think of themselves. Between these various groups there are some long standing animosities ranging in degree from disrespect to murder. There has been friction between religious groups throughout history. The State of Pakistan resulted from the Muslim/Hindu turmoil in India. Conflict can exist even within religious groups. There is the Protestant/Catholic issue which has abated somewhat in recent years and the Sunni/Shiite conflict has become more bloody with the growing unrest in the Middle East. Throughout history there have always been bloody wars between nation states and conflicts in ideology as those between Capitalism and Communism lasted for almost a century and resulted in, among others, the Vietnam and Korean Wars and revolutions in Russia, China, Spain and Cuba. Ethnic differences were at the bottom of the most horrific acts; the millions of Jews were murdered by the Germans, many Armenians lost lives at the hands of the Turks and 800,000 Tutsis were slaughtered by the Hutu in Rwanda. On a smaller scale ethnic cleansing of Croats at the hands of Serbs in Croatia or Arabs at the Hands of Jews in Palestine caused many to lose their lives and even more to be displaced. There are even wars between families not to mention within them. In the latter part of the nineteenth century in the Ozark Mountains of West Virginia, two families, the Hatfield and McCoy, feuded for almost thirty years resulting in the death of about 15 individuals. So what is your tribe? The answer to that in part determines who you consider “the other” and your importance of the position in the tribe, the altruism or hatred toward your fellow man. Our Vice President Pence on numerous occasions describes himself as Christian, Republican and conservative and emphasized “in that order”. I found it interesting and disturbing (not being a Christian) that he didn’t mention American, given he is the VP of the United States of America or human being, given he is the de facto vice president of the World. Seeing that his prime tribe is Christians, then most likely his “other” might be non-Christians and governing according to the laws of the New Testament might be an imperative for him. I have been fortunate (or in some cases unfortunate) enough to have lived or visited more than 20 countries. I have had the opportunity not only to mix with people of different cultures, religions, races and ethnicities, but socio-economic positions from people who literally “didn’t have a pot to pee in” to people on the Forbes richest 800 list. All of this has led me to the conclusion that even with our many differences; we are much more alike than different. So what is my tribe? First by far, I think of myself as a human being (though as I am aging I am starting to think of myself as part of the earth and leaning even toward a part of the Universe), second an American and a very low third a Tatar. When asked on various forms to list my ethnicity or race, I don’t answer. I met a friend of a friend and after chatting for a while he said “oh, you’re a globalist” to which I confessed. The lives of my family members are important to as those of my countrymen but so are the lives of people in Rwanda and Nicaragua. So what are your tribes and what is the priority of your membership in them and how important are each? This will determine your “other”. Are you afraid or envious of them; or maybe just impartial to them. Do lives of those outside your tribe matter? How much? Though we are having a bit of a setback at the moment, hopefully our tribes continue to expand to include more and more people and our loyalties to tribes diminishes. Who are your Other?

More on Balance of Power

I wrote a piece entitled "Balance of Power" e few weeks ago. Here is some historical backup. U.S. and China on a Collision Course for War: Analyst History suggests that the United States and China are on a collision course for war, argues Graham Allison, director of Harvard’s Belfer Center, in the Washington Post. “Historians know that when a rising power threatens to displace a ruling power, alarms should sound: extreme danger ahead,” Allison writes. “…A major nation’s rise has disrupted the position of a dominant state 16 times over the past 500 years. In 12 of those 16 cases, the outcome was war. In the four cases that avoided violent conflict, that was possible only because of huge, painful adjustments in attitudes and actions on the part of challenger and challenged.

Cutting Jobs in a Surplus Labor Market

President Trump ran as a negotiator and job creator. However, one of his first actions was to put a freeze on certain Federal jobs. The Republicans who are for smaller government are proposing to cut, if not entire agencies, their budgets. Republican governors are also reducing costs by shrinking their bureaucracies. It’s as if somehow government jobs except, of course military, police, fire, border petrol and other security positions aren’t really jobs. In their world, free market consequences for loss of federal, state and municipal jobs are somehow different from loss of manufacturing jobs which our president may be willing to go to war to protect. Neglected is the fact that money earned from labor, regardless of industry, creates the same demand, stimulates growth and increases competition for labor thus raising its price. Theirs is a promise of streamlining government by reducing their responsibilities and improving efficiency. Consequences be damned. About 50 years ago I attended a week long session conducted by Deming, the father of statistical quality control and person who is credited with Japan’s post war industrial resurgence. From this I took away three things. 1. 80% of problems are not people but system problems (my experience running a manufacturing organization is that the number should be more like 90%). 2. Don’t put up motivational posters. They only demoralize workers saying that everything would be better if only you just worked a bit harder, and excuse management from attending to real issues, the systems. 3. We need to focus on efficiency and automation during periods when there is a labor shortage. When there is a labor surplus i.e. fewer jobs, efficiency and automation only adds to the surplus. Labor statistics from 2014 show that at that time, there were a total of 150.5 million jobs in the US. 12.2 million of them were in manufacturing, considered a segment with good middle class wages; another 21.1 million in retail and wholesale and 18.1 million in leisure and hospitality. The latter two considered low paying jobs for the most part. Of our 150.5 million workers, 21.8 million are on government payrolls; 2.7 million on federal and 19.1 million on state and local. For the most part government workers are said to be “overpaid” when compared to workers with comparable skills in the private sector. This may well be, depending on your point of view, but these jobs are also considered middle class jobs. So government employs, about 14.5% of our total workforce, and they represent a significant portion of our middleclass. There is constant talk about the “shrinking middle class” while at the same time “small government” is one of the Right’s ideological talking points. From where I sit, “creating jobs” and “shrinking government”, given that we are facing not only globalization but technological advances including the development of AI, all of which are taking away jobs, are somehow at odds with each other. I know that creating jobs and eliminating inefficiencies in government are catchy slogans, but slogans are not going to retain or enlarge a vibrant middle class. It’s hard to argue against improvement but instead of reducing cost, which in most cases means reducing jobs, maybe we should focus on improving the quality of service. Unfortunately that goes against the notion that government is an evil and would not play well with the Presidents base.

Balance of Power

I don’t recall whether it was in history class or in my analyst class where I came to an understanding that today still lingers in my bones. The most dangerous times in history are those where there is an impending shift in the balance of power. This is when conflicts start. The declining party, when it senses that the shift in power is eminent, wants to move while it still is on top. The rising power, on the other hand wants to accelerate the growth of its strength, anticipating an advance by the weakening one. This principal applies not only to shifts in military might but also to economic standing. Navigating this transition without catastrophic results is a delicate and difficult matter. Today we are in such a time. It is broadly predicted that China will soon surpass the US in GDP. Indian, and in fact, Asian economies in general, are growing while globalization is lowering the economic potency of individual countries not to mention the economic impact of rapid advances in technology. Information processing is making administrative and managerial labor obsolete and robots are replacing factory workers. And who knows what chaos artificial intelligence will bring. I am not predicting doom but pointing out that to navigate these waters, we must move cautiously and with great insight and skill. On another front, there is also a demographic shift in the balance. The world is becoming more diverse and less Eurocentric and white. Vice President Pence, in his address to NATO the other day talked about our need to protect (from whom?) our common heritage, ideologies and values. Our origins as a country (if you want to discount our natives and our slaves) are indeed Western European. However, having said that, I always thought that our strength stems from being a unique conglomeration of many people and our diversity, not our Europeanism. I remember years ago eating at a hibachi table where sitting with us were two elderly couples. The table was set with chop sticks. One of the old guys called the waiter over and asked for a fork and said to his friend, he wanted to eat with an American utensil. I wanted to tell him that a fork is a European utensil and no more American than chopsticks. I decided not to because he wouldn’t understand. In his mind America is a culturally European, white, Christian nation. The birth rate in Western Europe and that of our white populations is declining and population growth is one of the prerequisites for economic grows. In fact I read about advertisements on TV in Denmark encouraging women to have more babies. Though in this country there is a modest population growth. It is primarily due to immigration and a larger birth rate among our non-European immigrant populations. In our country it is predicted that the pure white population will become a minority in a couple of decades if not sooner. (Currently if one even has only a small fraction of African blood running through their vanes, they are not considered white but black. I think if we categorized race correctly, for example: an individual whose paternal grandmother was black and the other grandmother along with both grandfathers were white, and they were categorized as white, then it will take longer before white people become a minority.) The older white people are frightened of losing their superior position and unfortunately politicians are stoking these fears hinting that the slowdown in some of their opportunities is due, not to advances in technology and shifts in market forces but to the darker population of the world. In response to these fears, over the last decade there has been a rise in xenophobia throughout the Western World including our country. When it comes to the military however, I don’t see and impending shift in the balance of power. Yes, China is building up its naval forces but we still spend more than the next 6 countries combined (we spend $596Bn/yr., China $215Bn, Saudi Arabia $87Bn and Russia $66Bn). We have the largest nuclear arsenal by far and our troops by far are more broadly distributed over the surface of this earth than any of our potential adversaries. The real danger, as I see it is the economic shift in the balance of power. The “darkening of the world”, though real, doesn’t present a threat to anyone unless one feels there is a strong advantage to being white and that is slipping away. Though there is much made of the “war between the West and Islam”, Islam poses no threat to the West. It has no economic standing and no military to speak of (though our close ally, Saudi Arabia has both). However, with the unrest in the Middle East, it makes Islam a great justification for limiting the further browning of our countries and it distracts from having to deal with real issues. So how do we navigate this transition without catastrophic results? President Trump used a brilliant strategy to win the election. The one word titles; Lying Ted, Little Marco, Un-energetic Jeb, Crooked Hillary, extremist Islamic terrorism, etc. etc. This worked because the words were repeated ad nauseam until every time we heard something from Ted, we instantly questioned whether it was a lie. He had to prove he was telling the truth instead of we proving that he was lying. These words will rouse his base but certainly they will not keep our Country great nor make the world a better and safer place to live. (He seems to be continuing this strategy with the “fake news” line). Already President Trump is starting to see the unintended consequences of governing recklessly by slogans. He envisions Jews and Israel as part of the “West”. Having stoked the Alt-Right with its Neo-Fascist tendencies, the President is starting to see through the increased anti-Semitic acts, that they don’t see eye to eye with him. Some in the Alt-Right along with the European Nationalist movements maybe now don’t see Jews as “one of us” as he does, but as “the other”. Nationalism is now on the rise in Mexico and it is not out of the question that we will be replaced by China or Russia as Mexico’s favorite friend. Then, when we have and adversary on our border, the military balance of power will indeed have started to shift. Now is the time to put sloganeering aside. It’s fine while your campaigning, but now it is ever more important for the President to be a well informed and a good, clear thinker while surrounding himself with people with demonstrated skills and to “think twice and act once” (though given the delicacy and grave danger of this sifting balance of power, maybe it should be, think ten times and act once).