Joel Kotkin Hates The Tech Business

Joel Kotkin doesn't like the tech business. Just read his latest screed here.

Now I'm usually a fan of Mr. Kotkin, but in this I think he's gone off the deep end. Reduced to bullet points, his argument is as follows:

• They're rich ("they" being the wealthy, technology oligarchs, such as the Google guys, Steve Jobs, Jeff Bezos, etc.).
• They don't hire many Americans.
• They hire way too many Chinese.
• They don't pay taxes.
• They live in a bubble.
• They want to take over the country.
• They're out to steal your soul.

Let's take the bullet points in turn.

• They're rich.

Well, duh! But they got rich by creating great wealth. The iPhone established a whole new industry. So did Google. According to Free: The Future Of A Radical Price, Google gives 80% of it's content away for $0.00. I write this blog on Google, and I haven't paid them a dime. It is probably impossible to estimate the total value to society created by Google, but the share captured by the Page & Brin, et al., is a minuscule fraction.

• They don't hire many Americans.

Well, good, I say. Mr. Kotkin can't have it both ways. On the one hand he complains these people are too rich, and on the other hand he wants us to hire more of them. No--the fewer employees the better. Just that much more money for the rest of us (in the form of better and cheaper goods and services). What earthly purpose is there in featherbedding the technology industry?

Mr. Kotkin also opposes the H1B visa program bringing in "cheap" foreign engineers. Here he has a point, but it's not the point he wants to make. The problem is not with the foreign engineers; the problem is the visa program that renders them indentured laborers. That is what unfairly distorts the market. We need a much more open immigration system--if foreigners want to come here and work for cheap, then that's wonderful. More money for the rest of us. But for the consumer to capture the product they have to come as free individuals and not bound to a specific employer.

• They hire too many Chinese.

Mr. Kotkin should check out the data here: the manufacturing cost of an iPhone is $8 per phone. So all those zillions of Chinese workers that Mr. Kotkin so envies--they're netting less than 2% of the value of the product. This site speculates that it takes about 17 hours to assemble an iPhone--so the Chinese are paid less than $0.50/hour. Are these jobs we want to repatriate to the US? I don't think so.

• They don't pay taxes.

Again, I say good. Government in this country (and every other country) is a rat hole and not worth the money we spend on it. Cash that the tech industry holds on to will eventually either be a) returned to the consumer, or b) invested in new enterprises. Either way, any penny saved in taxes is a penny that makes us richer. If they can legally avoid paying taxes, then so much the better.

• They live in a bubble.

Mr. Kotkin worries that the tech gurus all live in a self-contained community gated off from the rest of the world. In his telling, Silicon Valley is a bubble served by fancy sex workers, private planes, maids, and luxury cars. The people who live there have lost touch with reality. So--what's the problem? Mr. Kotkin compares this with the desperate circumstances of East Bay communities nearby. Of course there's no connection--the problems of the East Bay are not in any way caused by tech geeks in Silicon Valley. This is all a reprise of the Marxist meme: we're poor because the rich people stole all the money. Are the people in South Sudan poor because Mr. Kotkin lives in a middle class house? Same argument.

• They want to take over the country.

Mr. Kotkin panics about fwd.us, a supposedly surreptitious and vile plot by the technocrats to buy influence in Washington. He cites Twitter's founder, 37-year-old Jack Dorsey, who says he wants to be mayor of New York City, despite never having lived there. I have no doubt that a bunch of very successful, wealthy, self-righteous youngsters dream of world conquest. But it won't work--witness the money they've spent on the now-imploding Obama administration. Every political action invites a reaction, and the closer the tech oligarchs get to their goal, the greater the opposition will be. Remember the phrase "what's good for General Motors is good for the country"? GM had hundreds of thousands of employees spread across the entire nation, and they still couldn't pull it off. There's no way the tech guys--living in a bubble with only a few employees and disconnected from the larger culture--are going to take over the world. Mr. Dorsey's utterly silly comment is proof of that.

• They're out to steal your soul.

Google (and others) actually make money giving away stuff for free by collecting data. They use that data to specifically target advertising to individuals. There's the famous story (apocryphal?) about a father getting ads for baby supplies from a local store before his daughter had even told him she was pregnant. Such are the wily ways of Big Data. Mr. Kotkin thinks this is a huge problem. I disagree.

There are two parts to this.

First are ads that help consumers buy things they want to buy. Amazon's recommendations are in this category--very often I find books there that interest me that I would never have encountered otherwise. I regard this as a benefit that enhances my standard of living. Google Local apparently is an effort to turn people on to area restaurants that might be good. I think this is unobjectionable.

Second are ads that try to convince you to buy something you don't want to buy. This turf still belongs to the personable salesman--hawking encyclopedias, or diet fads, or some status symbol. I don't think Big Data will be particularly effective doing this--it depends on personal interaction. Banner ads, pop-ups, animations, etc., are a proven bust. 

Mr. Kotkin may be old enough to remember The Hidden Persuaders, written at the dawn of the television age. When I was in high school everybody was talking about subliminal advertising, i.e., if Coca Cola appears for microseconds during the movie, then people will unconsciously be inspired to go out and buy a Coke. I don't think that worked very well. The fact is people learn how to game the system and will push back against buying stuff they don't want to buy. Mr. Kotkin's panic is unwarranted.

In truth, advertisers are not trying to beat the consumer. They're just trying to be more effective than other advertisers. I think that's a zero-sum game--there is no way that Big Data is going to increase the (small) fraction of income spent on involuntary purchases.

In summary, Mr. Kotkin has gotten too Marxist for me.

Further Reading:

• You Can't Eat A Hipster
• Luddites Against Fracking
• Union Man

Syria's Problem

"More than ever, the U.S. and worldwide antiwar and social justice movement must demand: U.S. Hands Off Syria! Bring All U.S. Troops Home Now! Self-determination for the Syrian people! No to U.S. Sanctions! No U.S. Aid to Israel! U.S. Out of the Middle East Now!"

That is the closing paragraph of Jeff Mackler's recent piece in Socialist Action (SA) entitled Israel Bombs Syria; US Signals Support. It is an excellent summary of everything that is wrong with SA's position. Other recent articles are here and here. All three indicate that SA lives in the Land Of Wishful Thinking.

The biggest howler is their call for "Self-determination for the Syrian people!" World to Socialist Action: there is no Syrian people. There are Sunnis and Alawites and Kurds and Christians and Palestinians and Druze and Ismailis and Assyrians, and probably still even a few old Jews. But none of these groups are especially loyal to Syria--a state in arbitrary boundaries drawn by the British after WWI. The Sunnis are the numerical majority, but they now nurse a murderous hatred for the Alawites. A Sunni rebel victory will lead to vicious ethnic cleansing.

The Sunnis are tribal, and the various tribes are already fighting each other during pauses in the main battle. The Kurds hate Assad, but since he has tactically chosen to leave them alone they are now fighting the Sunnis (who are allied with the Kurd's other enemy, Turkey). The Christians don't like Assad either, but view him as the lesser of evils. They stand to lose if the country erupts into an all-against-all civil war. Most other minorities share the Christian's dilemma--Assad always billed himself as the protector of minorities. The Palestinians--Sunnis--have divided allegiances.

SA will have you believe that the war is a working class rebellion against the Syrian "bourgeoisie." Again, world to Socialist Action: there is no Syrian "bourgeoisie." People like me are inclined to call Assad's regime socialist, and indeed, the Baath party has strongly secular, vaguely Marxist roots. They were closely allied with the Soviet Union during the Cold War. But in deference to SA, who will reject that characterization, I'll just call it a kleptocracy. There are no capitalists in Syria, i.e., people who put up capital to run businesses. Instead you have a Mob-like, rent-seeking class that, with government connivance, extorts a kickback from any business transaction.

So SA barely mentions the ethnic diversity of Syria, but instead touts irrelevant organizations such as the "local coordinating committees" (LCCs). Now I'd never heard of these folks before, and probably you haven't either. In SAs imaginary universe, they represent the class-conscious, secular workers striving to impose a secular, socialist state in Syria. Put another way, they are advocating for the traditional Baath Party program, claiming only that they could execute it better than the existing Baathists. We could call them the Re-Baath party. This will not go over well. World to Socialist Action: secular Marxism (or more accurately, Leninism) is an absolute dead letter in Syria. It has no future. Get over it.

In SA's imagination, the most evil country in the world is the United States, who at this very moment is conniving to commit the most horrible atrocities against the Syrian people. To prevent this, even the most innocuous involvement by the US must be prevented at all costs. Thus SA opposes humanitarian assistance. Their article puts "non-lethal aid" in scare quotes, because it's supposed to be scary. Hence the absurd demand: US Hands Off Syria.

Syria's problem is not too much US involvement, despite what the irrelevant LCCs say. It is precisely the opposite--too little American involvement. The truth is that Syria is just not that important a country. At this point the primary US concern is that the war doesn't spread. It has sadly already reached into Iraq. If we can keep it out of Lebanon and Jordan, so much the better. The last thing anybody needs is for Turkey to get directly involved. Syria would be much better off if the US would just invade, prevent a round of ethnic cleansing, and install a civilized government. But we're not going to do that because that simply invites a larger war. We're not even providing arms to the rebels for just that reason.

If the US is the most evil country in the world, it isn't by very much. I've quoted the last paragraph in the article, but here's the lede sentence:

No serious of Middle Eastern politics believes that the Zionist, colonial, settler, and racist state of Israel makes a single move before consulting with its U.S. benefactors.

Wow--that's some invective! Apparently the Global Jewish Conspiracy still lives. World to Socialist Action: Israel is a bit player in the Syria conflict. It has no dog in the fight and it doesn't like either side. SA, by grotesquely exaggerating both the influence and evil of the Jewish state displays it's not very secret anti-Semitism.

Further Reading:

• The Decline of American Trotskyism
• Barry Sheppard: A Wasted Life
• The International Report

The Status of Marxists

This post is inspired by an article by Kevin Simler that appeared on Ribbonfarm, entitled The Economics of Status. Simler's piece is long, complex and interesting--I will not try to summarize it here. Read the whole thing.

Marxists rarely talk about status at all. They view it as immaterial, and therefore derivative to the more essential economics. I think this is backwards--status is all about sex, and serves as a proxy for reproductive fitness. High status individuals are sexy; low status ones are not. Thus I think status is more important to the individual than economic well-being.

Simler's principle thesis is that status can be transacted--that is status has some properties that we attribute to money. In some cases this is explicit, as when a star athlete trades status for cash by making a product endorsement. In other cases it is a simple courtesy. "Please" and "thank you" are words that transfer a small amount of status to the recipient--kind of like a tip.

So I notice that my college's president is effusive in his "pleases" and "thank yous." And why shouldn't he be? He has a high status and it costs him almost nothing to spread a bit of that around. He is happy to convey status to janitors and cafeteria workers. Not only will it (slightly) reward them for their efforts, but it is also an indirect investment in the president's own future status (he'll be known as a "nice guy"). On the other hand, many low-level workers and students are much less generous with the courtesy words--they don't have status to share.

My status has gone down since I got "fired" from my administrative position. A "thank you" from a mere professor carries a lot less weight than that from a dean. In my former role a simple word would suffice, but now people want me to actually return the favor. True celebrities, such as Bill Clinton, often forget that people work for money--they occasionally think that a mere "thank you" will cover lunch at the local diner. And often it probably does.

The primary difference between economic success and status is that wealth is not zero-sum. In economics, a rising tide lifts all boats--everybody in a society can get richer. But status is a zero-sum game. No rising tide will turn my 10 ft rowboat into your 100 ft yacht. If your status goes up, it's only because mine goes down.

I've always thought about status as "the ability to get laid." Now that's probably too narrow a definition, but it brings up the point I want to discuss in this post. That is, men and women are in separate status competitions, and only rarely compete with each other. In the modern world I am in economic competition with women--for jobs and money--but not in a status competition. My economic competition with female colleagues is nowhere near as brutal as my status competition against other men. Regards status, the battle of the sexes does not exist.

So my definition of status--the ability to get laid--applies mostly to men. This has some interesting implications. First, while women are not competing against men, they are the arbiters of male status. Men are rewarded for having traits women like: tall, dark, handsome, brave, intelligent, rich, courteously dominant, passionate, manly, etc. Conversely, weak-willed, cowardly, short, effeminate, poor men have lower status.

There is a correlation between money and status. Being rich will accord you some status, and some men--Donald Trump comes to mind--have acquired status by becoming rich. But in most cases the cause-effect arrow goes the other way. Pro sports figures have high status, and get rich as a result. Saul Bellow never sought wealth, but his high status brought him money. Steve Jobs regarded money as just a way of keeping score--the game he played was a status game, not a wealth game.

Some men have high status without a lot of money. The burly construction worker (assuming he's healthy) can have substantial status, as does the special forces soldier. There are many college professors who parlay charm, intelligence and good looks into status, without it ever becoming money. Marxists have it wrong--money does not make the world go round. It's male competition for female favor that sustains rotation.

The hard-charging, risk-taking, manly daredevil can be high status--think Ernest Hemingway. Or as Woody Guthrie put it, "there are a lot of good ideas in a pint of whiskey, but not too many in a quart." The bad boy act is successful, unless and until you fall over the cliff. The difference between the high status bad boy and the homeless, derelict bum is one drink too many. Status can plunge dramatically--just ask Mr. Hemingway.

There is a status competition among women as well, and fashion is certainly part of it. Trotskyists, in the person of Evelyn Reed (here and here), argue that women are forced by the patriarchy to engage in degrading fashion competitions to attract men. They do it all for men, is how the argument goes. And it's completely wrong. Men are not attracted to fashionistas--they're too skinny, too tall, and above all, too expensive. The fashion thing is an intra-female competition for status that has nothing to do with men at all.

So who is a high-status female? I'll posit that such a lady is like Cinderella. She's beautiful, of pure character, highly moral, and ignored by society. Yet she inspires a handsome prince, aka high-status male, to fall madly and helplessly in love with her. There are any number of romance novels and chick-flicks along the same theme. The movie Maid in Manhattan comes to mind--that is the Cinderella story for the modern age.

Hillary Clinton, who remains the love of Bill's life, is a high-status woman. (His transgressions ironically probably enhance her status.) Monica aspired to be high status, but failed miserably. This is why women find Hillary so admirable, while men are mostly unimpressed. Feminists think this is just hopelessly retrograde, which of course it is, harking back to stone-age, human nature. They also conflate money and power with female status. They're wrong--Hillary's status has nothing to do with either.


Further Reading:

• Seeking the MRS Degree
• Women's Work
• Marxism & EvoPsych

Free Trade or Foul

If there are any principles I have held consistently since I was a teenager, it is these: free trade and open borders.

The Socialist Workers Party (SWP) supported free trade when I was a member (1969 - 1977). They regarded protectionism as an effort to divide the working class, i.e., to put US workers and foreign workers in competition with one another. At the same time, the Party opposed any trade agreements (such as NAFTA) on principle, arguing that anything a capitalist was for had to be bad for workers. So they had it both ways--they supported free trade while opposing any free trade agreements. You can't win with these people.

Socialist Action (SA) has a similar position to this day, though they are now more inclined to emphasize their opposition to free trade agreements than their support for free trade. Unlike the SWP, SA cozied up to the Occupy Movement, which required them to radically oppose any trade agreements. SA's position is described here, among many other places.

Their argument is that trade agreements are never perfect, always leaving parts of the economy protected, and hence they're just horse-trading between various capitalists. They're not really free trade. In their view the corruption is so bad that in some articles the words "free trade" always appear in scare quotes. And of course they're right: there is horse-trading and corruption galore, but I remain convinced that trade agreements are generally very good. There is no question that NAFTA, for example, has greatly improved the standard of living in the US, Canada, and especially in Mexico. Despite the intense controversy at the time, today very few people oppose NAFTA in any of those countries.

The main problems that Leftists have with free trade agreements are lack of labor protections and lack of environmental protections. The extreme position (which I believe SA and the SWP both hold) is that free trade is fine as long as workers in both countries are earning equal wages. The somewhat more moderate view is the so-called fair trade model, popular in my college town and even subscribed to by my daughter! Indeed, it is a conversation with her this morning that brings this to mind.

There used to be a fair trade coffee shop in my town, until it went bankrupt. The fair trade model says that American consumers will pay a premium for their coffee, and that surplus will be passed along to coffee farmers in Uganda (or where ever) to enable them a higher standard of living.

It is easy to see how this does not work. The market price is the price that maximizes revenue for Uganda. At prices higher than market, fewer customers will buy coffee and Uganda's total revenue will decrease. At prices below market, they simply don't collect the money they could. So Uganda as a whole benefits by charging market rates.

However, the farmers who are members of the fair trade group will gain from the higher price they get for coffee. They successfully collect rents from being members of a cartel, so even though revenue for Uganda goes down, for that smaller group it goes up. The downside is pretty obvious: the country is poorer than it should be, there is greater inequality, and the farmers who are not in the cartel have drastically lower incomes.

By the same standard, American consumers benefit from market prices. If the price is too high, people will forego coffee. If the price is too low, there won't be enough coffee to meet demand. The market price is optimal for both consumers and producers. Fair trade advocates suggests that Americans should be more charitable and buy coffee even at the higher price. But as the bankruptcy of my town's fair trade coffee shop shows, this doesn't usually get very far.

The most successful fair trade cartel I can think of was OPEC. Members of the cartel made out like bandits, whereas everybody else was made poorer. Fortunately, increased oil production from non-OPEC countries has significantly clipped their wings (yay fracking!). Protectionism helps small groups of people, but mostly it just gums up the works. It makes most people--producers and consumers--poorer.

There are other ways to gum up the works, and you don't need to be a Trotskyist to come up with them. In yesterday's NYTimes, a certain Jared Bernstein--who calls himself an economist--has devised a solution for our unemployment woes. He says that our unemployment problem is because of rapidly increasing productivity--machines are replacing human beings. This is certainly partly true, and will ultimately lead to lower prices for a wide range of consumer products and services. It will increase our standard of living. And if history is any guide, the consumer savings will result in demand for new goods and services, leading to new jobs.

But Mr. Bernstein's solution is just nuts! He wants to lower productivity so that everybody can be employed. So, for example, instead of one guy operating a diesel earth mover, he'd have us hire hundreds of guys with shovels to do any excavating for us. Yes--they'd all have jobs! But it's easy to see that society is worse off.

So Mr. Bernstein wants the government to employ all the excess labor in make-work, charity projects that waste resources, are bad for the environment, and make everybody poorer. Honestly, I don't see how that helps. Oh yes, I know he'll say the new government employees should do something useful, like repair the much maligned infrastructure.

We're fixing infrastructure that way on my campus already--we're building all kinds of new buildings on the taxpayer's dime at union wages, that don't need to be built. None of the new construction will enhance any student's education by a single scintilla. In an era of declining enrollments and operating funds, the whole scheme is just crackpot. We'd be better off paying the union wages as welfare benefits, and at least save the other costs of construction.

These make-work projects do not help the economy. They just makes everybody poorer--except for the hundred or so people getting the union wages.

If the SWP had held today's SA position, I would never have joined. I couldn't have given a coherent argument as an 18-year-old, but in my gut I always thought protectionism was a form of xenophobia. I still think that. For me free trade is a matter of principle--for them it's just tactics.

Further Reading:

• Collapsing Pensions
• Viva Poverty!
• Union Man

Why The Academy Sucks

On the surface this is just another alpha-male, chimpanzee-style spat. A certain Vivek Chibber tried to push Mr. Louis Proyect down a peg, and Mr. Proyect pushed back twice as hard. As Mr. Proyect has the bigger megaphone, he won the confrontation easily.

Now that's really very strange. It turns out that Vivek Chibber (Ph.D., Univ of Wisconsin) works at New York University (NYU) in the sociology department, where he is an associate professor (meaning he has tenure). NYU is one of America's most renowned colleges, where the sticker price for a year of study exceeds $44K. Contrast this illustrious perch with Mr. Proyect's: a man of uncertain (probably non-existent) academic rank, and likely without even a doctorate. My academic colleague (for I am also a professor) should have been able to brush off Mr. Proyect with a flick of his wrist. Instead, he comes across (accurately) as a loser.

Now I've never met Professor Chibber--indeed, I'd never even heard of him until now. I have nothing against him personally. But his plight is so representative of problems in academia that I can't help but use him as an example. He is the author of two books: Locked In Place (2003) and Postcolonial Theory And The Specter Of Capital (2013). The latter is described as

A provocative intellectual assault on the Subalternists' foundational work.

Postcolonial theory has become enormously influential as a framework for understanding the Global South. It is also a school of thought popular because of its rejection of the supposedly universalizing categories of the Enlightenment.

So I went to Wikipedia to look up subaltern and discovered that the concept is part of a much larger category known as Nonsense Theory. That is, it is meaningless to anybody outside the rarefied, reality-deprived, esoteric circles of academe. Nobody is going to read this stuff.

OK--not nobody. It appears that Mr. Proyect reads at least some Nonsense Theory, but he is kind enough to write about it succinctly and clearly on a free blog, omitting only all the extraneous verbosity. For this we mere mortals can be thankful, and for this Mr. Proyect has earned a sizable readership. In other words, he has a megaphone.

Mr. Proyect is an example of an independent scholar. He receives no paycheck and is beholden to no one. His influence resides only in his ability to acquire an audience, and does not depend on credentials or publications. I admire and respect this. Please note--I don't agree with a thing Mr. Proyect says. I think Marxism is nuts, and I haven't watched a movie in two or three years. But wrong and irrelevant are two different things. Mr. Proyect is wrong, but very relevant. Professor Chibber is wrong, and totally irrelevant.

Another more famous example of an independent scholar is Stephen McIntyre, of the Climate Audit blog. Mr. McIntyre (no Ph.D.), more than any other single individual, is responsible for the demise of the global warming movement. Some of us believe he's won the scientific argument, but there is no question that he's won the political argument.

Some academics also become independent scholars--Tyler Cowen comes to mind. Yes, he's a super-credentialed bigwig at George Mason University, but his real influence comes from the blog, Marginal Revolution (that I read religiously). Further, he is co-founder of MRUniversity, which aspires to offer excellent, on-line economics education to a global audience for free. In other words, he's biting the academic hand that feeds him.

So how is it that the overpaid, highly-credentialed, ultra-distinguished Associate Professor Chibber has gotten so far detached from reality to take Nonsense Theory seriously? His problem, ultimately, is the Internet. Back in the good old days, peer review had merit. Print publication was expensive and had to be rationed. The peer review process facilitated that rationing in a reasonably fair way.

But publication on the web is free--there is no reason to ration it, and thus no more reason for peer review. In this environment the bad parts of the peer review process dominate. Peer reviewers are a small circle of like-minded people who referee each other's papers. Peer review is no longer about merit, but instead it's about who you know and how much you flatter them. This has become a glaring problem in climate science (where the peer review process has been discredited), and it leads to Professor Chibber's delusion.

Professor Chibber is talking to the wrong people. Instead of potential referees, he should seek out that larger group of educated citizens who are interested in social progress. In a word, he needs Mr. Proyect's audience. People who read The Unrepentant Marxist will also read the books that Mr. Proyect recommends (just like I choose from Mr. Cowen's suggestions). It's a pity that Professor Chibber has damaged his odds of favorable mention on that blog.

But that's not the worst of it. Independent scholars are self-financing. Mr. Proyect earned an honest living during his career, and Stephen McIntyre served as a mining engineer. By contrast, Professor Chibber is a paid flack, sucking up to the referees and the academy, because without their good offices he'd be out on the street. And ironically, apparently the guy claims to be a revolutionary! Sheesh--I'm more of a revolutionary than he is.

So we have undergraduate students--suckers all--paying up to $44,000 annually to support Professor Chibber's brown-nosing. This is a scandal. Now I have no objection to Professor Chibber writing anything he wants to write, but he has absolutely no business expecting it to be subsidized by 19-year-olds. Fortunately, I think the business model of schools like NYU is broken, and it is plausibly likely that Professor Chibber will end up unemployed at some point. I have nothing personal against him, but I desperately hope that happens soon.

If there is any injustice in this world, it's crackpot college professors living off the backs of the screwed generation.

Addendum: OK--I admit it, I really do dislike academics. This despite the fact that many (most) of my best friends are academics. I consider it a dishonest, disreputable, parasitic profession. Clearly there's an emotional driver behind my attitude. It may be because my career has not been as successful as I wanted it to be, or it may be that I wouldn't want to join any club that would have me as a member. Be that as it may, I could write several essays on Why The Academy Sucks, and will undoubtedly return to this topic in the future.

Further Reading:

• Trouble in the Faculty Lounge
• Seeking the MRS Degree
• Shameless Self-Promotion

Labor's Giant Step Backwards

This post is about the precipitous decline of the union movement, and is based on three articles--two in this week's Militant (by Alyson Kennedy and Frank Forrestal), and the third by Harold Meyerson in the American Prospect.

Kennedy continues to report on the mineworker's pension problems, about which I blogged last week. Patriot Coal Company has declared bankruptcy and is asking to be excused from paying pensions to 10,000 retired miners (along with 13,000 dependents), when only 1600 Patriot employees are members of the United Mineworkers (UMWA). Most of the retirees never worked for Patriot--instead they were employed by Peabody Coal or Arch Coal. In that post I incorrectly implied that Peabody Coal had gone out of business. That's not true--it is alive and well, presumably as a non-union company. It has completely divested itself of Appalachian mines, operating only in the Midwest and the Rockies. The UMWA's claim is that the Patriot Coal spin-off was set up to fail from the git-go.

I don't know if that last claim is true, and in any event it doesn't matter. The Marxist (and union) conceit is that capitalists keep some large stash of cash that they could pass out to the workers if they just wanted to. It's the Scrooge McDuck image of capitalism, and it's totally false. In reality, a commodity business like coal operates on very tight margins--likely only pennies on the dollar--and that's all the money they've got to play with.

So the union tacitly acknowledges that Patriot doesn't have the resources to make good on the pension promises--that's why they're also picketing Peabody's headquarters in St. Louis. That's the primary topic of Kennedy's current article. Peabody is a somewhat larger company, with 8300 employees in both the US and Australia. Without the illusory stash of cash, the only place Peabody could get the money to pay off the union pensions is from either its customers or current employees. The customers won't bite--the coal market is shrinking. And the current employees--non-union and not from Appalachia--won't be inclined to contribute to pensions more generous than anything they themselves have been promised. From Ms. Kennedy's report, it appears that none of Peabody's current workforce is participating in these protests--why should they?

The union will lose this fight. They can't strike against a bankrupt company in a weak market--then everybody is unemployed. And they can't strike against Peabody because they don't work for Peabody. Neither unions nor companies can produce cash out of thin air--the union contracts are a fraud. The workers have been consistently lied to for decades.

Frank Forrestal's article is about the lockout of sugar workers in North Dakota. The lockout by American Crystal Sugar Company lasted 20 months, and Forrestal now reports that the workers ratified a contract  just like what they'd been offered at the beginning. In the meantime they're numbers have dwindled, and it looks as though the returning unionists will be a minority in the workforce. The union has been comprehensively defeated.

A second union conceit is that unions increase the wages of the entire working class. During the 1950s and 1960s this appeared to be true. Wages were increasing across the board, and unions just took a little bit more than their share of the extra gravy. Their wealth grew slightly faster than everybody else's, making it look like they were leading the way. But by the mid 70s productivity increases slowed down, and with it also the increase in per capita GDP. Hence there wasn't enough extra gravy to go around, and as a result the union bennies came out of everybody else's hide. People don't really mind if extra gravy gets spread out unfairly, but we hate to lose ground when the gravy runs out.

So just as the non-union miners aren't going to subsidize their colleague's pensions, neither will sugar workers or consumers subsidize union work rules. Unlike Peabody Coal of yore, American Sugar told their employees the truth--you work at market rates or you don't work at all. No false promises, and in the end everybody will be better off.

Marxists will claim that union workers are not in competition with other workers, but rather with capitalists. This simply isn't true. Capitalists cannot set wages--those are subject to the market. There is a separate market for capital, which also is determined by supply and demand (or at least should be, though the government is now artificially lowering the cost of capital). A capitalist needs to make a market return on investment in order to justify taking the money out of the bank. Capital and labor are mostly separate markets and not in competition with each other--rather like cars and avocados. Few people say "I'm not going to buy a car today because I'd rather buy an avocado."

So that brings us to Harold Meyerson's piece, entitled How Unions Are Getting Their Groove Back. In other words, Mr. Meyerson wouldn't buy a word of what I've just told you. In his view unions have turned the corner and are on the rebound. His lede paragraph:

Yesterday—April 24th--a red-letter day in the annals of worker mobilization in post-collective-bargaining America. In Chicago, hundreds of fast-food and retail employees who work in the Loop and along the Magnificent Mile called a one-day strike and demonstrated for a raise to $15-an-hour and the right to form a union. At more than 150 Wal-Mart stores across the nation, workers and community activists called on the chain to regularize employees’ work schedules. And under pressure from an AFL-CIO-backed campaign of working-class voters who primarily aren’t union members, the county supervisors of New Mexico’s Bernalillo County voted to raise the local minimum wage.

So Walmart workers are at the opposite end of the economic food chain from coal miners. Miners are in a basic resource industry, and if the world really were Wobbly-friendly, then in principle  they could shut the whole thing down. Retail workers--one step away from the consumer--have no such power. The best they can do is shut the store down. If the miners can't pull off a successful strike, then surely Walmart employees won't be able to, either.

Walmart is impossible to organize. The retail trade is so disperse and varied that shutting down one store just won't make any difference. Indeed, Walmart has clearly indicated that it will simply shut down if forced to unionize. Walmart is a labor-intensive business, unlike mining, which is capital-intensive. That means that Walmart can just walk away from the business at relatively little cost. Walmart employees know this--that's why they've never voted to unionize.

And one really has to laugh at the economic ignorance of the Bernalillo county supervisors. They think they're all powerful--by the flick of a pen they can raise the standard of living of everybody in the county. I'd like to know why they are so chintzy--why didn't they raise the minimum to $100/hour, or even $10,000/hour? I mean if it's that easy to make everybody rich, then by all means, let's go for it.

Of course it's all a fraud. The minimum wage no more increases wealth than do the fraudulent pension benefits promised union workers. Employees with defined benefit pensions--be they in the public or private sector--are victims of a huge Ponzi scheme. They will never see more than pennies on what they expect. I think that's very sad.

Anyway, kudos to The Militant for honest and informative reporting.

Further Reading:

• Collapsing Pensions
• Trouble In The Faculty Lounge
• Union Man

Be Afraid--The End Is Nigh!

The very word ecosocialism just makes me depressed.

So when Louis Proyect gives us a report on the New York's Ecosocialism Conference, I just want to curl up into a fetal position and go back to bed. The term connotes a series of ideas that all contain a grain of truth, but lead to gross exaggerations if not outright falsehoods.

Ecosocialism suggests a beneficial connection between socialism and environmental quality. There is no evidence for any benefit. The former communist countries all have a very poor record of environmental stewardship. China, famously, has been unable to reform its Maoist-era apparat--the air quality in Beijing proves that. Centralized control over the economy leads to crony capitalism and corruption on a massive scale--along with ecosocialist-scale pollution.

Both environmentalists (at least the radical ones) and socialists ascribe religious urgency to their crusade. One of Mr. Proyect's correspondents puts it well:

Joel Kovel’s talk brought in an absolutely necessary, albeit uncomfortable recognition that the ultimate stakes of climate change are meta-economic, meta-social, and meta-political, which is to say they are transcendental or, to use his vocabulary, spiritual.

They believe the world is in do-or-die crisis--if we don't stop greenhouse gas emission right now, then the planet is doomed.

It's a very self-serving theology. Environmentalists and socialists alike want to run your life for you. They arrogantly presume to tell you what kind of car you're allowed to drive (if any), where you can live, what you're allowed to eat, and whether or not you can smoke or drink. They want to ration your electricity, your gasoline, and your home heating and cooling. They will tax anything and everything you do, all for the sake of saving the planet. Ecosocialists have pure hearts--but that means it's all your fault.

They get away with this using four strategies. One is they exaggerate everything out of proportion. Fossil fuel burning won't just result in some incremental change in the climate (with both positive and negative consequences), but instead augers immediate and irreversible catastrophe. Fortunately, most of the world no longer believes this stuff--even the Real Climate crowd has stepped back from the imminent disaster theory. But catastrophe is a major justification for the dictatorship of the ecosocialists, so they scream that from the rooftops.

Second, they make liberal use of the for the children argument, as in If it saves one child's life, it is worth banning all automobiles now. The argument is a non-starter because it makes any rational cost/benefit analysis impossible. Everything involves risks. Perhaps tripling the cost of gasoline would benefit the environment some how, but it would also hugely raise the cost of fresh fruits and vegetables. Ecosocialists claim to know all the answers to these trade-offs. I suggest they've got no clue.

Now the ecosocialists' real beef is with people like you and me--we're supposed to sacrifice our livelihoods, lifestyles, and enjoyments so that the all-wise, all-seeing, pure-hearted ecosocialists can save the planet for our great-great-great-great grandchildren. But we, being the selfish bastards that we are, don't readily volunteer for a life of poverty, misery, boredom and servitude.

So the ecosocialists have a third trick up their sleeve--namely it's all the rich people's fault. That's right--in the new, ecosocialist paradise only millionaires and billionaires will have to live in mud huts with no heating. The rest of us will use solar magic-powered electricity to drive around in earth-friendly Priuses manufactured out of thin air by free unicorns.

Mr. Proyect reports

Jill Stein, the Green Party presidential candidate in 2012, spoke at the morning plenary. She is really dynamite, using Powerpoint slides to illustrate how fucked the system was. ... She really knows how to speak to working people using concrete examples like people and loaves of bread. With the current income disparities in the USA, there is one person at the top with fifty loaves of bread and at the bottom fifty people to share one loaf.

That some people are richer than others is unfair, to be sure, but only in the sense that life is unfair. This is the old Marxist meme: We're poor because the rich people stole all the money. But it's simply not true--the rich people created the money (or, more accurately, wealth). Capitalism makes everybody richer, and rich people are better for the environment. The ecosocialists are not just against rich people--they're against wealth in general. They think poverty and slavery are good for the environment. They're wrong.

Fourth, ecosocialists slander anybody who disagrees with them. They think people like me are opposed to any environmental regulation. And further, they think we're just motivated by money, i.e., Exxon or somebody is buying us off. I wish. But I guess that's true in the sense that I'm not willing to sacrifice my standard of living just to make a bunch of ecosocialists happy. I don't feel too guilty--I've just googled a couple of Mr. Proyect's correspondents, and they're not living in mud huts without electricity, either.

And for the record, I support appropriate environmental regulation. Unfortunately there is no sharp definition of the word "appropriate," but clear and present danger does seem like a reasonable standard.

• I support taking lead out of the consumer environment, with lead-free paints and unleaded gasoline. This has had dramatic and provable health benefits.
• I support catalytic converters. Unburned fuel is a major pollutant and air toxin. This rule has greatly reduced smog in Los Angeles, for example.
• As a chemistry professor, I support the existing rules for the safe disposal of chemical waste. As far as I can tell they seem quite sensible, and they're not that expensive to comply with.

But I can't support laws that are based on hokey computer models, and that even if the models were correct, would do nothing to correct the problem (if there is a problem). Thus I'm opposed to carbon taxes or carbon cap and trade laws. All those do is give ecosocialist bureaucrats more power and money than they deserve.

There is an argument to be made against banning fine particulates from emissions. There are benefits, but the costs are extremely high. My sense is that the costs outweigh the benefits, and we should not pass such regulations. I am opposed to giving the EPA a blank check to "save the environment," regardless of cost, as is now their mandate. The EPA should have its wings clipped.

Nuclear power has been irrationally over-regulated. As a result it is too expensive, and innovation has been forbidden. So today nuclear energy is neither as cheap nor as safe as it would be if the regulators used a lighter touch.

Likewise, fracking has both risks and benefits, but the benefits are huge. The industry does need to be regulated, but innovation has to be allowed and costs have to stay low. In the long run that will lead to cheaper gas more safely procured.

In a word, environmental regulation has to serve people and the economy, not the other way round.

Further Reading:

• Luddites Against Fracking
• Viva Poverty!
• The Problem Of Global Warming