Tag Archives: Income Inequality

Labour is not Cheap

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document.write(" serif">Today, as we honour those who toil, we might do well to look over our shoulders to see what has been happening. Only by remembering what was can we truly see what we have become. For example, see if you can find photos of yourself and your loved ones that go back over a generation. If you can, and you put them in date order, you will be swept up by the stop-frame movement through time. It will take your breath away.

I was a young person in the 1960's. It was a time of intense hope and idealism. We spoke of not joining the man in his quest for money and status. Alas, it was not to be. We grew up and joined the man. It was the beginning of what Cornel West calls the Ice Age.

Another name for the man is the scientific management movement. Following Henry Ford, it broke up manufacturing into small chunks that minimized the need for skill. You could, the thinking went, make high-quality goods without the trades, without apprenticeship, without good work. And if you didn't need good work, you didn't have to pay for it. All the skill (and the pay) resided in management.

Barry Schwartz, in Rethinking Work, a well-timed piece in the New York Times of August 28, pointed out that it was Adam Smith himself who provided the seed for the growth of the man. In the foundational document of capitalism, The Wealth of Nations, he opined that people were naturally lazy and would work only for pay. “It is in the interest of every man to live as much at his ease as he can.”

Professor Schwartz (psychology at Swarthmore) also tells us that Adam Smith's idea that the worker is lazy has become a self-fulfilling prophecy. I would add that if work is cheap, you will get cheap work.

But there are more – and more disturbing – revelations in Rethinking Work. They have to do with a worker's engagement and enjoyment, which in turn flow from his feeling that his work is meaningful, that it makes a difference. According to Gallup polls, says Schwartz, Nine out of ten workers spend half their waking lives doing things they don't really want to do in places they don't particularly want to be.

I know this is harsh and heretical, but here is my thought for the day:

Yes, Adam Smith laid the foundation for capitalism. While not perfect, it has been the best option for centuries. But Adam Smith was and is wrong about the human being. We are not lazy. We can tolerate being dirt poor. What we cannot tolerate is a life without meaning, a life remote from connection with the larger society. So what do the poor, the uneducated, and the unemployed do?

In West Side Story, they joined a gang. In The Wire, they sold drugs on the corner. In 2015, they join ISIS and commit to jihad. Is that so far from what Cornel West calls the fire?

Fire means a certain kind of burning in the soul that one can no longer tolerate when one is pushed against a wall. So, you straighten your back up, you take your stand, you speak your truth, you bear your witness and, most important, you are willing to live and die.

Can a mistake of Adam Smith have borne so much strange fruit? Income inequality, gangs, drugs, jihad. What a terrible waste of our precious and talented youth!

Lowest Common Denominator

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At the airport, there are two security lines. There is one where you have to take off your shoes, and another where you do not. Yes, you guessed it: for the second you need elite status.

It shouldn't be surprising that an airline, a corporation, would divide humanity into two classes. It is the invisible hand of the market at work.

In today's New York Times, Josh Barro, in Facing Elite Bloat, Airlines Move the Goal Posts, writes about his elite fall from grace. It seems that now plebes contend with not only the elite and the super-elite, but even higher orders. Remember how we used to speak of the 99% and the top 1%? And how now, more often, we refer to the top 0.1% or even the top 0.01%? Well, this elite thing has done so well for the airlines they are now facing elite bloat, where some plebes have invaded the bottom tier.

Their first response was to add classes to top the top elite, perhaps platinum, diamond, kryptonite, and unobtanium. But that didn't fix things. As Josh Barro writes, “But mostly, (the airlines) have dealt with the problem by devaluing the lowest tier.”

Does that feel familiar? It probably does if you have a job, or if your degree is not from an elite university, or if your annual income is less than $1M. It certainly does if you are a tradesperson, or a nurse, or a teacher. You know, one of those people who has to rely on union seniority or tenure to have a chance in the marketplace.

Yes, it is as true in politics as it is in marketing – we have discovered a common denominator lower than greed: feeling superior.

So before you vote next time, ask yourself a question: do I feel superior to anyone? If you do, chances are someone has been pulling your chain.

Nothing for Humanity

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Our society has made a u-turn. Our democracy has left behind the vision of the Founding Fathers. Our obsession with the moral fibre and hard work of the individual has morphed subtly into a passion for making as much money as possible.

In today’s column, Inequality is a Choice, Nicholas Kristof reports that the Wall Street bonus pool in 2014 was roughly twice the total annual earnings of all Americans working full time at the federal minimum wage.

Perhaps it is time to ask about the purpose of our work. Is it to make as much money as possible? Enough to feed our family? Or should there also be a non-financial component to our work? Should we, as in friendship and love, be thinking about how our work might benefit others?

Oh, I know. I am naive and an idealist. I have enough money to live on, so I have the luxury of having such thoughts. But I have never forgotten how, as a young man, I felt embarrassed and even shamed when a much-respected older friend asked, What is your exit strategy? That's the only way you'll make money out of this.

We were speaking of a venture I had started, and of course he was right. But his cynical realism hadn't appeared overnight. A sickly youth, he had used his time bedridden with rheumatic fever to read the entire library at the British estate where he was put up. He remained an autodidact and became an inventor. He left us many innovations, but as a pilot, what is important to me is that in the late 1920's he successfully flew the first inertial navigation system. The accelerometers were weights and springs. The integrators were vacuum tube circuits.

He never saw a penny from the invention. It was too soon, and nobody understood it. A generation later ICBM's provided the motive power for the idea. There was no other way to steer the missiles.

He made a modest living by designing and building devices which were the spawn of more modest ideas. According to the doctors, he was living on borrowed time because his heart had been damaged by the rheumatic fever. He lived into his nineties. He did sell his company. I believe he had a good death.

I am not the first to point out that Wall Street, which began as a legitimate instrument for capital formation, now produces nothing that benefits society. Nor am I the first to ring alarms when CEO's make four hundred times the average wage at their companies. But perhaps there is method to this madness. Perhaps this Wall Street bonus pool and these CEO salaries are the heroin which blunts the pain of uselessness. These rich folk, for the moment, are in a pleasant haze of denial. But truth settles on us all, sooner or later. Many of them will not have a good death.

Money is the New Religion

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The Mall

The upscale mall near us occupies a huge contiguous tract north of the freeway. Its enclosed Main Streets have two levels, open to the non-sky, as if each building had a balcony upstairs connected with its neighbours. At the end of each street is a gussied-up big-box store – two-story of course – opening onto the mall. Stairs, escalators, and flyover bridges connect levels and balconies, so the penitent can wander in wonder through the architecture of the age. Light filters in overhead through cloudy glass. Along the streets and balconies gaudy alcoves harbour treasures and artifacts. Seen from above, the two streets intersect, forming a cross. Soon after it was built, my wife said, That's our Chartres.

History

The great cathedrals embody all that was noble and profane in the Middle Ages. Although Chartres was built with remarkable speed, it was a product of several generations. Begun in 1194, it was mostly complete in 1250, by which time many of those involved with the heroic effort were second or third-generation. The stained-glass windows, miraculously preserved through centuries of war and weather, are narrative art for a time when few could read.

But there is more: the cathedral was also a free-trade zone outside the purview of the feudal lord. Merchants set up their stalls in the zone and even in the nave itself, although wine-sellers were occasionally banished to the crypt. Taxes on the stalls were payable to the clergy.

So far the activity is merely profane – that is, secular, or not connected to religion. (Profane is from the Latin pro and fanum: before the temple.) But as human custom tends to, the commercial practices proliferated and evolved, until by the late Middle Ages indulgences had become the Wall Street of the twentieth century or the indiegogo.com of the twenty-first. The Butter Tower of Rouen Cathedral was capitalized by selling pardons for the use of butter in Lent.

Belief

It seems that mystery is the father of faith. The architects and artisans of Chartres responded to the beauty of the world by doing their best to compete with it. Their homage to God was an artifact and a space that educated and inspired wonder and ascribed God as the author of all. The cathedral was the railroad of the nineteenth century and the airline of the twentieth. Man as artisan constructed huge works from technologies on the edge of human understanding. Did the traveller on the Orient Express understand the physics of the steam engine? Does today's passenger understand the physics of flight or inertial navigation? Do the viewers (or the makers) of the film Gravity understand orbital mechanics?

Where am I going with this?

I admit I am groping. But we are again today in an age of indulgences. We know that capitalism and free markets are the foundation of democracy – or at least that's what everyone says. They say that we should bow to the market, should let it decide everything, or else we are threatening freedom and democracy.

Today's received wisdom is the same as is was in the Middle Ages – only the object of faith has been changed. We understand the market about as well as we understand orbital mechanics. We are invited to have faith in matters beyond our understanding. So we bow not only to technology, but also to the market and the almighty dollar.

The Range of Human Endeavour

We humans span the noble and the profane and continue into the ignoble and the self-serving. It happened with religion after Chartres was built. The practice of indulgences took a few centuries to moulder and spread, but it was one of the principal motivations behind Martin Luther's ninety-five theses, nailed to the church door in Wittenberg in 1517. Luther said, Wait a minute – this is not what Jesus meant at all. Thus came the Reformation and more wars and Protestantism and Christianity without profit.

Not much has changed in five hundred years. The noble – the making of art and the building of large, co-operative works – is still followed by the profane – normal commerce. But inevitably – and today is no exception –  the profane is followed by the self-serving, and the whole process is debased. We are once again at a crossroads like the one Luther faced down in 1517.

Inventive mankind has gone from barter to money to lending to banking to capital formation to finance. The average man gropes along behind progress, believing in what he cannot understand. Meanwhile elite MBA's twist the corporation (human co-operative effort) into re-structuring for maximum stakeholder value. (The definition of stakeholder is left to the MBA's). Banks no longer turn savings into investment capital but instead operate for maximum profit and market share, extracting their cut not as interest but as fees. (There is no interest rate connected with fees, so there is no appearance of usury.) Investment banks invent financial products which they peddle to pension funds and then bet against in the market, making huge profits at the expense of their customers.

These shenanigans depend on our faith and our ignorance. They twist the institutions of our society so they work not for mankind but for a small elite.

This small elite no doubt believes in itself. That, too, is human. Like all of us, they construct a world-view. They are smarter and work harder, and deserve their spoils. Their efforts are a natural winnowing.

But that is their world-view, not the Word of God. There is no reason for us to believe it.

I also understand why we believe in money. It is a matter of survival, and is getting more so every day for us, the great unwashed. But let us not worship money. That can only lead us to suckerdom, as P.T. Barnum famously observed. We would do better to open our eyes and learn and not lose the hope of human co-operative effort toward great things. Perhaps we might even tape a thesis to the door of the mall.

As inspiration we can remember Job, centuries before Christ and millennia before today's selfish deeds. Covered with boils and tempted by cynicism, he could still say:

I know that my redeemer liveth;

and that he shall stand at the latter day upon the earth:

and though worms destroy this body,

yet in my flesh shall I see God.

 

Job 19:25

Mitt the Spider

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Watching Landings

 

You’re at the local airport. You watch landings, because pilots always do. Today, because there is a lot of traffic and you're not pressed for time, you watch for awhile. Twenty, maybe thirty landings go by. What do you see? Fifty percent (this is a flight school strip) touch down halfway down the runway. One or two touch down in the last 1000 feet.

What do you take away from the experience?

Gossip, certainly – if you're standing there with fellow pilots. Comfort, possibly – if you feel you can do better than most of what you're watching. Or perhaps chagrin, if the reverse is true and a recent example of your own work sticks in your craw.

But there is a more important take-away: forming an opinion or evaluation by discerning and comparing.That is the dictionary definition of judgment. And the aviation version of judgment is more practical: if I find myself in this situation, can we do it?

The we in the last paragraph refers to you and your airplane. You learn skills and you memorize your airplane's limitations. You are a team.

The situation is whatever pickle you're going to get into on your next flight. Can I land on a 2000-foot runway?

You look up the Landing Distance Required in your Flight Manual or Pilot Operating Manual. For my N-Model Bonanza I find 1600-2000 feet (no wind, 75°F. or less, 2000 feet pressure altitude or less). So we can do it, right?

Not so fast. The runway at my local airport is just under 4000 feet long. I consistently turn off on the center taxiway, but not without some braking. I have a bit too much speed over the fence and I float too long. So I'm not quite ready for that 2000-foot strip. My airplane is, but I am not.

Here is another clue. My POM also lists Landing Distance Required for a Short Field Landing. Same configuration, but the over-the-fence speed is 5 knots less. Instead of 1600-2000 feet, the required distance is 1200-1400 feet. Add five knots and add five hundred feet! Nope: my energy management – hey, my hands and feet, if you get right down to it – are not good enough yet.

Why not, you may ask? After all, I have been a pilot for 45 years. Well, two things: first, I'm 68 years old; and second, after I retired from airline flying I didn't touch a yoke for six and a half years. So I had to write exams and do a lot of re-learning. Now I'm learning the hands and feet again.

In short, for the moment my airplane is better than I am.

Hours, Experience, and Judgment

How do we discern and compare on the road to developing pilot judgment? First, look at the one or two Bottom Guns who touched down in the last 1000 feet. “Good enough,” they say. I guess so, if their airplane can stop in that distance. Then the fifty percent who touched halfway down. “Plenty of runway left. No sweat.” These guys are like me. Their airplanes are better than they are. It's just a matter of how much better.

What's missing? A path to learning judgment.

Experience is measured in hours. Judgment, theoretically, comes from experience. But it is not automatic. Hours of flight or even hours of practice take you nowhere unless they are accompanied by some discernment and comparison. Neither the Bottom Guns nor the halfway-down-the-runway pilots are safe trying to land on a 2000-foot runway. But do they know that?
Spiders are kind to their own. Well, story except for the kinky Black Widow, who eats her husband after sex.

Spiders are very good at controlling the populations of lesser insects – gnats, for example.

Above all, spiders dine in style. Pheasant under glass has nothing on them. Have you noticed? A fine, strapping exoskeleton gets stuck in a beautiful, geometric web whose strands are stronger than steel. There is no rush, no baring of teeth or ripping of flesh. No blood on the floor.

The spider, epicure and medical professional, injects a magic potion under the shiny shell. The guts and muscle of the beautiful captive are reduced, sautéed and flambéed. Only then does the spider dine – elegantly and unhurriedly.

After the meal the prize remains. The beautiful prey is still there, intact and whole, framed in the skyscraper web. Its value seems undiminished.

But it will move no more, except when the wind pulls at the strands binding it. The soul is long gone.

So too does private equity provide for its own.

What’s in it for Me?

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I admire Maureen Dowd and enjoy her columns, but she is off track on this one (Playing Now: Hail to the Chiefs – New York Times, Sunday, September 9, 2012).

She does, however, speak for us.

We live in a market-driven society that has come to expect service. I'm paying. You deliver. We have become puffed up with the importance of our money.

But education doesn't work that way. Good health care doesn't work that way. And – this was the President's point – democratic government doesn't work that way.

Just before the line Ms. Dowd satirizes – the election four years ago wasn't about me. It was about you – the President had the courage and the leadership to remind Americans that “We, the people, recognize that we have responsibilities as well as rights.” He goes as far as to say that “freedom without a commitment to others . . . . is unworthy of our founding ideals.”

President Obama is right. We won't get out of the mess we're in unless each of us can turn to a fellow citizen who has done good work and say, “Welcome home. You did that. You did that.”

We can't demand good work. We can't demand good teaching, good health care, or good government. No matter how much money we have, we can't put the “good” in any of these. Paying is not enough, and the Market is not a leader.

So perhaps Ms. Dowd has done all of us a service by putting a voice to our selfishness. The voice rings hollow in a society largely emptied of respect for good work and of motivations other than money. But perhaps Ms. Dowd was satirizing us and not the President?

Work is Dead

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Hello, Grandmas and Grandpas. Ever wonder why your kids are living at home? Or why, when they do make money, it's one-shot, scavenger deals that pick away at the edge of the economy? Our kids – gleaners, snatching the crumbs?

For an answer, take a look at the corporate executive. No, not the entrepreneur, still in charge of the company he founded twenty years ago. No, not even that new political god, the small business owner – he (or she) is so busy with cash flow that there is no time for vision. I am talking of the CEO of a publicly traded company, hired by the Board of Directors and responsible to the shareholders.

The job of this CEO is to systematically devalue work.

Why, you ask? Remember – the time horizon for a CEO is the next quarterly report, which is never more than three months away. He could spend his time dreaming a vision for the future. But – especially in these hard, competitive times – he doesn't dare. The bottom line has to look better three months hence and his only choice is to cut costs. So he merges, divests, moves work offshore, and fights unions. He cuts costs, because that seems to be the only way he can protect the shareholders.

But work, and workers, are more than just a cost to the company. They are also its most important asset. A generation ago workers were loyal, dedicating their life's work to the company that kept a roof over their heads and food on the family table. That loyalty is long gone. Today every worker is stressed as his salary and benefits suffer the Death of a Thousand Cuts. He can't quite voice it, but he knows his company thinks he is replaceable and essentially worthless.

So we have the Occupy movement and We are the 99%. We have to do something to stop this race to the bottom. But what?

We might start by asking Who are the Shareholders?

As I wrote March 18, the shareholder is most likely a hedge fund, which owns a stock, on average, for twenty-two seconds. The decision to buy and sell the stock is made by a computer algorithm.

So the Board exercises its fiduciary duty and hires a CEO, who in turn exercises his duty to the shareholder, who turns out to be no one, a chimera, a moving target.

Our work, our careers, are being devalued by an algorithm, for the profit of a very few. Sadly, no one else is in control.

Twenty-two Seconds

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I remember learning about money and velocity. Apparently money doesn’t do society much good sitting in a pillow. Rather, it should be circulating – invested – enabling the endeavors of man.

For the last decade a mantra has been buzzing in the business background: we're doing it for the shareholders. The buzz, though, is coming from a few well-connected and (now) wealthy top executives, not from the bulk of individual shareholders, whose interests have been poorly represented.

In today's Sunday New York Times Jonathan Haidt has a piece titled Forget the Money, Follow the Sacredness. He writes in the context of the 2012 US presidential election, but his insight deserves wider application. He speaks of tribal and group behaviour, and observes that “the great trick that humans developed at some point in the last few hundred thousand years is the ability to circle around a tree, rock, ancestor, flag, book or god, and then treat that thing as sacred”. We have done that with The Market.

The PBS Newshour of March 15 contains not one but two segments of importance both to the financial world and to the rest of us. The first is a reaction to Greg Smith's Why I am Leaving Goldman Sachs, wherein he speaks of the firm's lack of integrity and disregard – even scorn – for its customers. The second (21:20 to 29:46 in the March 15 Newshour) is an interview with Robert Harris, whose new novel, The Fear Index, came true even as he was writing it. It seems that certain hedge funds have mopped up the scientists who were to work on the Texas Supercollider (before it was cancelled) and got them instead to develop software which scans the news (a digital feed from Bloomberg first and foremost) for anything that could spook the market. The software then makes the appropriate trades. At one such fund author Robert Harris (in real life, in real time) watched a software algorithm make 1.5 million dollars in twenty minutes.

But the most significant and disturbing moment, for me, comes at 25:22 in the March 15 Newshour. It seems that although high-frequency trading firms make up only 2% of the 20,000 trading firms operating today, they make 75% of all trades. And – and here I nearly fell off the couch – the average time a stock investment is held these days is twenty-two seconds.

Remember how money with velocity is good? By that measure we should be doing very well indeed. What happened?

We could ask ourselves Who is this shareholder to whom executives pay lip-service? And Who or what is The Market that we seem to revere and to which politicians kowtow? Is it a Wizard of Oz? Or, as Robert Harris says, is it more like a Frankenstein run amok?

We would do better worshiping a god.

First Letter to the 99%

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Dear Young People,

It's winter. The heady autumn of Occupy Everywhere is now last year's news. Mitt Romney says corporations are people. Newt says government doesn't make jobs, private enterprise makes jobs. All politicians are promising jobs. None of that helps if you don't have a job.

A young man interviewed on NPR has a job. He says his company doesn't represent him politically. He says his company doesn't have the right to use the profits it makes on HIS WORK to vote against him.

Perhaps you gave gone into debt (like the country) to get an education and you still can't find a job. You are bummed, and rightly.

This is all pretty discouraging stuff. But wait. Start from another perspective.

The government doesn't need you. No corporation or small business needs you. The jobs they may or may not offer can be filled by you or by someone else, interchangeably.

But the world needs you. There is no one else in the world who has exactly what you have to give.

In my post of December 11, 2011, Advent and Jobs, I asked, “Who decides what my work will be?” If you're young and you don't yet have dependents, you have a chance to give the finger to The Market and decide for yourself.

This is not easy, and I have no illusions that it will be possible for everyone. But I write this in hope and in the belief that looking clearly at the problem is a good start. So before you take that job as a “greeter” or as an “associate”, think about the work you want to do. All work – however strange and useless it may appear to The Market, is worthy of your human dignity if it comes from the heart. So try to make time – quiet time – to listen to that voice inside – and it will come, but it is a soft voice – that will tell you about the work that you are meant to do, the work that will be your vocation. Then fight for it with all your might.

I don't know how you're going to do it. I would tell you, but I know the solution is unique to you and I am not privy to it. What I do know is you might have to ask for help. It could be as little as asking a parent, sibling, or friend with a credit card to pay $2.95 to iPage or $3.15 to FatCow every month so you can have your own website. Set it up with WordPress and you can work on it anytime you have access to a computer and WIFI. It may take a year or two to learn the ropes and find out how to attract people to your site and figure out what you are selling or giving away. At the end of the second year you owe your parent, sibling, or friend $72.

Then who knows? When Mitt or Newt or even Barack gets around to offering you a job, you might just say no.

Tea and The Street

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The media are abuzz this week with comparisons of Occupy Wall Street and the Tea Party. Many are eager to point out similarities, particularly in the trajectories of their media coverage.

The fundamental difference between them, however, is being ignored. The Tea Party is a local phenomenon while Occupy Wall Street has become a global movement.

The Tea Party proclaims government as the one true bad guy. Reduce government and cut taxes and all will be well. Occupy Wall Street, meanwhile, is accused of having no message and no demands – no recipe for reform, no cure. The two movements are speaking different languages – and now as the cause spreads this is true literally as well.

Bill Frezza, a fellow at the Competitive Enterprise Institute, said on NPR's Morning Edition (October 4, 2011) that “business is not run for the benefit of the country.” Nor does the corporation create jobs, he said, except indirectly as a consequence of growth. In fact business regards job creation as “expense creation” and therefore something to be avoided. The segment (and transcript) are here: Venture Capitalist Warns of Job Creation Myths. This is our local, Tea Party language.

The language of the global movement has its root in humanity. It speaks in the voices of ordinary people whose gifts are unwanted by the economy. It takes as given that society would be better off if these gifts could be given.

The challenges that face humanity are larger than the individual, larger than the corporation, perhaps even larger than the United States of America. They will not be solved today, this quarter, this election cycle, or even this generation.