Open Thread: Weekend Reading

by Eric Martin

An open thread for the weekend, with a couple of links to pieces that I haven't blogged about, but which are worth a read. 

First, Rory Stewart offers a pretty sound defense of Obama's approach in Afghanistan.  I don't agree with it all, but it's well written and thought out.

Second, Tom Bissell penned an absolutely devastating critique of the writing of Robert Kaplan.  Ouch.  Remind me never to get on Bissell's bad side.

Feel free to drop links in the comments to good pieces that might have fallen off the radar.  Have a good one people.

Comments

[Marty]

Thanks Eric, I am sure it was referenced somewhere at Obwi, but I still think this is an incredibly balanced view of where we are and where we need to be.

[wonkie]

I don't read depressing current political stuff. I'm reading Margarette George's Autobiography of Henry VIII, Rereading it actually but it is the kinnd of book I can read more than once. I'd be reading it now but I misplaced my Kindle.

[Doctor Science]

Today (or at least recently) I've posted:

- two puzzles, a Pietà by Bellini and a Greek icon based upon it

- a book rec: The Sexuality of Christ in Renaissance Art and in Modern Oblivion, by Leo Steinberg -- a work of art history best described as "awesomesauce"

- a recipe: Seven-Spice Powder, which is like Five Spice Powder only with 40% more ingredients!

[Doctor Science]

My kingdom for an edit function! That's:

http://goodbookoftheday.com/

[JanieM]

I don't know a lot about Kaplan, but I remember reading a piece of his in the Atlantic a few years ago and coming away feeling queasy about the possibility that he was supposed to be some kind of expert.

It didn't seem totally clear what his point was beyond a kind of amoral glorification of military ventures. Maybe Bissell's onto something.

[Hartmut]

Just finished Queen Victoria - Demon Hunter. Old (or in this case rather young) Vicky had obviously some problems the history books don't tell us about ;-)
Waiting for the 'sequel' Henry VIII - Wolfman

[OCSteve]

Under the Dome – SK.

He’s back. It’s his best since The Stand IMO. (Holly Crap that was 1978?) His first book in 3 decades that made me want to keep reading all night and call in sick to work the next day because I could not put it down.

And you lefties will just love the bad guy – he fulfills every single stereotype of the right-wing religious whacko. Hell, you’ll love the good guy too – military dude regretting bad stuff he did in Iraq. Its Lord of the Flies writ large… Hell, it’s a leftie sweep in many ways… I loved it anyway.

1072 pages of SK goodness, and not a spider in sight. Yes, the origin of the dome is entirely lame, but at least spiders are not involved. So, you know – yeah!

Oh, wait – this thread is for like, serious stuff? Screw that. Life is too short.

[russell]

Robin Kelley's biography of Thelonious Monk. Jazz bios are hit or miss, but this one is pretty good.

That, and I'm browsing Colin McEvedy's "New Penguin Atlas of Medieval History", which I stumbled across in a local used book store. 1,000 years of history in about 50 maps. Amazingly enough, it's riveting.

[JanieM]

I wonder if those custom written term papers are edited to the exquisite standard of bT250DRY's ads. I wonder what grades are then received by students who have paid good money for them.

[JanieM]

Actually, good money. ;)

[Doctor Science]

I agree that the Bissell piece is outstanding, possibly even ranking ahead of Matt Taibbi classic takedown of Thomas Friedman. But the Bissell review is not new -- it's dated 2006.

[Donald Johnson]

"It didn't seem totally clear what his point was beyond a kind of amoral glorification of military ventures. Maybe Bissell's onto something."

That's been my impression of Kaplan for years, based on his Atlantic articles. I think he wrote a decent one on Al Jazeera recently. But that was the exception to the rule.

[Pinko Punko]

Lawyers, Guns and Money posted that Kaplan diss as well and it was a classic of the genre- acid dripping from the pen. Wow.

[Eric Martin]

Damn, I didn't even realize the Bissel piece was from a few years back. Still, it's evergreen.

[Eric Martin]

Marty,

The problem with the Manzi piece is that he manipulated the data to provide a skewed view. Basically, he used different timelines to measure European and US performance (started in the early 70s with one, and 80s with another) and lumped in former Soviet Satellites with the "social democracies" of Europe even though they clearly weren't that (and left out Norway and some others that weren't in the EU, even though they fit that paradigm to a tee)

http://www.tnr.com/blog/jonathan-chait/conservative-accidentally-makes-the-case-social-democracy

http://krugman.blogs.nytimes.com/2010/01/09/european-decline-a-further-note/

[Eric Martin]

Ironically, when you use the correct dataset, and similar timelines, Manzi makes a compelling case that Europe's social democracies have enjoyed comparable levels of growth, but that they have far outpaced us in terms of social services (health care, education) and all with more vacation days and a shorter work day/week.

Oops.

[wj]

So Europe and the US have comparable levels of growth. And, while the US chooses to spend lots of money on defense/military, Europe mostly spends the same money on social services and move time off.

Sure is nice to have a big brother to cover your back. But does it say about how you run your economy? Not too much. After all, if someone else was policing the planet instead of us, we could no doubt do the same thing, too. And, if we trusted them to keep doing so, well might.

[Nombrilisme Vide]

I don't think "policing the planet" is a particularly accurate description of the bulk of our military expenditures. We're way, way past selfless benevolent deterrence of war.

Even if the global sprawl of global American force projection weren't there, it's highly unlikely that most European countries would spend near so much of their budget on "defense" as we do... unless they were interested in something other than, uh, defense.

Admittedly, if they were obliged to expend as much of their resources on military spending as we've chosen to, their military-industrial complex would be more powerful, and it's possible it would manage to exert the same influence over their civilian government as ours does over ours, and thereby ratchet up "defense" outlays. Or not. The history of things that didn't happen has never been written.

[Jim Manzi]

I've responded to Paul Krugman's post here:

http://theamericanscene.com/2010/01/11/keeping-america-s-edge-yet-again

I think you will find that he is in error both in his identification of my data source, and in his read of the data in the source that he does cite. I challenge any fair-minded person to accept that Professor Krugman is correct in his assertions.

If you read my original piece that started all of this, I don't think that you will find it to be quite the unadulterated plea for USA! USA! that you might think.

Best regards,
Jim Manzi

[Slartibartfast]

Currently reading: Almost A Miracle by John Ferling. Really good, so far. It has a lot of detail that I haven't found to date in other books about the period, but uses that detail in an interesting narrative, rather than simply recounting it.

Just finished: The Ascent of Money by Niall Ferguson, which deals with how our financial markets led to the buildup and collapse of the housing bubble, among other things. I wanted it to have a bit more meat as regards the origin of banking, especially international exchanges of currency, but that would have made it a much bigger (and therefore different) book.

Also finished Band of Brothers, then watched the entire series. Outstanding.

[dr ngo]

The history of things that didn't happen has never been written.

Sorry, but I'm retired now.

[Eric Martin]

Jim,

Why would you include former Soviet States west of the Urals? Odd considering the thrust of the piece.

I've seen you hang your hat on the "dictionary definition of Europe," but when discussing the economic performance of social democracies in Europe, that seems an odd definition to use.

Even if Krugman's critique is off base, Chait's seems right on.

[Slartibartfast]

NB: I didn't read/watch all of that in one weekend. Even the designer of fjords has some limits.

[Marty]

Eric,

What amazes me, of course, is that Krugman or Chait or you would predicate your reaction to the amazingly balanced point of Jim's post on the vagaries of a few percentages of data in a variety of datasets.

The overall points on how the money was spent, impacts on innovation/society and the recogniton of the requirement for a balanced approach to the future seem to me to be so compelling that the quibbling is almost a compulsive negative reaction to a conservative writing an essay of depth and substance.

I sent this to all of my friends, liberal, conservative and moderate. The most compelling response I got was from a politically moderate, but fervent Obama supporter, friend who said (paraphrased) "Obama supporters think this is what he is doing, others don't, none of us disagree that it is what we should be doing".

One of the great values of this type of essay is it leads to the possibility of having a common view of what needs to be accomplished so we can measure our ggovernment against achieving it.

Our greatest challenge today is we can't decide what we want, both what we should accomlish and what we should pay for it, and how long it should take so progress can't be measured.

On this blog there have been discussions about what the American dream actually is today. Does it include home ownership?, is it lifetime financial security from a young age?, is it more pay for less work?, is it leaving a better America/Planet for our grandchildren?

How is better defined?

I believe some balanced approach like Jim presents is the beginning of that discusssion.

[Eric Martin]

What amazes me, of course, is that Krugman or Chait or you would predicate your reaction to the amazingly balanced point of Jim's post on the vagaries of a few percentages of data in a variety of datasets.

Um, not exactly. A decade of time, and the decision to include key countries, and exclude others. As well as an improper accounting for changes in population size.

Such that the central thesis is altered entirely. Completely changed.

What amazes me, is that you don't find that significant.

The overall points on how the money was spent, impacts on innovation/society and the recogniton of the requirement for a balanced approach to the future seem to me to be so compelling that the quibbling is almost a compulsive negative reaction to a conservative writing an essay of depth and substance.

Of course the discussion is valuable and necessary, and welcomed. However, when the premise is so faulty, it kind of hurts the prospects for a fruitful discussion. If the premise is, "In social democracies, growth will suffer considerably, but there are positive tradeoffs," then how fruitful will the conversation be if that premise is shown to be so wrong that it renders the thesis meaningless?

I ask that in earnest. Amazing to you or not.

[russell]

Manzi's piece was interesting but I think the dichotomy he sets up -- conservatives favoring innovation and accepting "creative destruction", liberals favoring cohesion and amelioration of social ills at the cost of growth and innovation -- is fundamentally false.

Virtually all of the wealth created by the innovations of the last 30 to 35 years has gone to the top 20% of income earners. It has not gone to them because they have, as a group, been exclusively responsible for making that innovation happen. It hasn't all gone to them because they have, unlike the other 80% of the population, earned all of it.

It's gone to them because they are the capital investors. They are the owners. In many cases they aren't even aware of what, in particular, they own. In many cases their "investment" consists of buying ownership from an original investor, and contributing no new funds to the enterprise they invest in.

Their contribution, as a group, is making a big pile of nice fungible money available to everyone else.

That's a useful, essential contribution, but it does not merit exclusive claim to *virtually all of the value created*.

There does not need to be a dichotomy between an innovative, dynamic economy, and one in which everyone's basic (and even not-so-basic) needs are met.

The dichotomy is bridged quite easily by distributing the fruits of innovation across the entire spectrum of folks who are involved in making the innovation happen.

This country generates unbelievable levels of wealth. We should not need a "welfare state" to insure broad-based prosperity. What will create broad-based prosperity is for people to get paid well for doing useful work.

It's not charity, it's what they have earned.

[Marty]

" "In social democracies, growth will suffer considerably, but there are positive tradeoffs," "

Well, I guess that would be the premise for you to attack.

Funny though, I thought the premise was that pure capitalism supporting unlimited innovation had a negative social impact that we should balance more. That abandoning the economic basis of our country probably had negative consequences for us, and the world, that aren't acceptable. However, expanding the considerations was essential to moving forward. Do you disagree with that central thesis?

Seemed to be a meaningful step toward the middle from a "conservative" perspective, wtih a response that seemed overly negative, especially after reading all of the back and forth.

[Eric Martin]

Marty,

That's true. I was focusing on one aspect, and in that, I'm guilty as charged. I guess that type of sloppy characterization of Europe just grates my nerves because of its ubiquity, perniciousness and wrongheadedness.

[Marty]

"The dichotomy is bridged quite easily by distributing the fruits of innovation across the entire spectrum of folks who are involved in making the innovation happen."

Can you define who these people are that are in involved and not compensated?

[russell]

Can you define who these people are that are in involved and not compensated?

Can you ask a more specific question?

[Marty]

Russell, I suppose. Spreading the fruits of innovation across the entire spectrum of folks that make it happen requires identifying that spectrum. I was wondering if you could tell me who, in that spectrum, we are missing.

I am asking because there are millions of people who don't contribute to that cycle of innovation and I would like to create something that also raises their standard of living, making it a little more complex than you present. But first we should make sure all of those in the spectrum get rewarded.

[hairshirthedonist]

...and all with more vacation days and a shorter work day/week.

A year or two ago, I heard an interesting piece on NPR regarding European free time versus that in the US. The basic thrust was that Europeans spend more of their time away from work doing household work. Americans use the services of others, who are considered to be working (i.e. "on the job"), to do some of the things that Europeans do for themselves, while considered not to be working (i.e. "off from work"). I don't know how true that is, and don't have any particular axe to grind, but I thought it was interesting and pertinent none the less. I'd be curious to know if anyone has any perspective on that based on spending significant time in both Europe and the US.

[russell]

I was wondering if you could tell me who, in that spectrum, we are missing.

Look, I'll give you an example.

WalMart has made a lot of money by, among other things, optimizing its supply chain.

Part of the supply chain optimization is its internal system of regional warehouses, which deliver goods to its retail outlets via its in-house trucking fleet.

From this discussion of the WalMart supply chain innovations:

Wal-Mart believed that it needed drivers who were committed and dedicated to customer service. The company hired only experienced drivers who had driven more than 300,000 accident-free miles, with no major traffic violation.

The average WalMart truck driver makes $28K.

Here is an ad for a WalMart Class A semi driver position. The requirements are more lenient than what are described in the article, but are still fairly firm. The job pays $900 a week, about $45K a year.

$45K a year is, in some parts of the country, a reasonable middle class salary. Some parts, not really. $28K ain't much, no matter where you go.

WalMart is, by an order of magnitude, the largest retailer in the world. It's the largest private employer in the US. They made $13.4 billion in net income in 2008.

Part of what makes them what they are is the supply chain. The folks who make the supply chain work day to day -- the folks who drive the trucks, work in the warehouses, stock shelves -- don't see a lot of that.

There are a couple of ways to look at this.

One is to view labor as a fungible commodity, to be bought and sold on a market basis like every other commodity.

The other is to view the folks who actually *do the thing you get paid for* as being material contibutors to the wealth that is created, with a corresponding stake in the profits.

Does a truck driver deserve the same share as the ops research guy who did the analysis and designed the supply chain in the first place? No, I don't think so. Each is bringing value to the enterprise, but one arguably more so than the other.

Does a WalMart truck driver deserve a share of the wealth his labor creates, above and beyond a strict reckoning of what the market will bear?

I think so. I'd also say it would be fair to structure that as bonus or equity compensation, so that the truck driver shares the lean times as well as the fat ones.

But the approach we take in this country is overwhelmingly the pure labor market approach. And so the stupendous productivity and wealth generation we are so fortunate to have here yields a small number of people growing increasingly, and in some cases obscenely, wealthy, while others are treading water at best, and in other cases losing their homes, wealth, and health.

That's what I'm talking about, as an example.

WalMart could be creating a class of people in poorer, rural areas who could buy homes, send their kids to college, retire at 60 and go fishing. And spend lots of their money at WalMart.

Instead, they are making a lot of money for folks who own WalMart stock, full stop.

Those two populations overlap somewhat, but not a whole lot.

IMVHO we don't need to expand the welfare state. We don't need to redistribute wealth, we need to distribute it differently in the first place.

[chmood]

VERY well-put, Russell! Thank you.

[Jesurgislac]

Well put, Russell.

God knows, Henry Ford was nobody's model capitalist. But at least he had the sense to see that if you want to make a success of running a business making Model T Fords, you have to pay the folks who make them enough to be able to buy them.

The current right-wing ideology about the people who provide their labor appears to be strictly limited by quarterly-profits - it doesn't matter that the people who work for a business don't earn enough to be able to shop there, just so long as Q2 profits this year are higher than Q2 profits last year. Still less does it matter if those profits are supported by the tax-payer who must provide Wal-mart employees with food stamps and free emergency healthcare: Walmart use-'em-and-lose-'em attitude to working-class Americans is "good for business" (ie, good for the quarterly profit) and be damned to the people excluded by having nothing but their own personal hard work to get by on.

[Marty]

Russell

Walmart is a great example. The 28k is based on a couple of Dominos delivery jobs so lets work with 45k. So, 45k plus benefits (accounts for another 20% or 9k). Plus 401k. Thats just below average for a worker in the US.

Of course, all of the supply chain improvements that allow the 45k per year worker to be able to afford food/clothes/drugs at Walmart (they are Walmarts target customer after all) are based on maintaining those salaries at the levels that were used in the ops analysts analysis. So, here is the conundrum, if the stock price doesn't go up (or goes down) then the bosses get fired. The price won't go up if the bosses pay larger salaries for truck drivers unless they raise prices which means the raise means little to the very people that we are talking about.

And, like the tax rolls, cutting the CEO's cash salary to zero really wouldn't make up for much of a raise for the thousands of other employees.

So, unless we believe that Walmart is artificially mantaining high prices (something you would have a hard time convincing their competition) then they are actually distributing the income from their supply chain improvements pretty fairly.

All that while constantly seeking to invest in more stores so more people will have jobs.

And to be clear, I am not sure how this becomes a "current right wing", or left wing, issue. This is at the heart of all business, everywhere. People who make a profit and grow the stock price keep jobs, people who don't lose them. The stock market going down creates panic that detroys value in companies and jobs, so it again effects the very people we are talking about the most.

[Phil]

But the approach we take in this country is overwhelmingly the pure labor market approach.

And even then, we're so schizophrenic about it that when laborers decide to pool their resources and sell their labor at a set price which might be above the so-called "market price" for labor -- e.g., they form a union -- we go berserk, call it anti-capitalist and blame the laborers for destroying companies.

[russell]

all of the supply chain improvements that allow the 45k per year worker to be able to afford food/clothes/drugs at Walmart (they are Walmarts target customer after all) are based on maintaining those salaries at the levels that were used in the ops analysts analysis. So, here is the conundrum, if the stock price doesn't go up (or goes down) then the bosses get fired.

Yeah, I get that.

That's the part that I'm saying is f**ked up.

Because (a) it assumes that the claims of a capital investor on ownership are by definition greater than those of labor, and (b) it leads to the impoverishment of working people.

The entire legal structure of US corporations is set up to require and enforce doing things this way.

A very simple solution that works in the context of the existing legal structure is to make equity part of compensation for all levels of the work force.

Make employees owners.

There is a lot of precedent for employee owned businesses, and many of them do very well.

[Marty]

"A very simple solution that works in the context of the existing legal structure is to make equity part of compensation for all levels of the work force."

Amazingly though when faced with having an ownership share in the form of options most employees don't count it as part of compensation. The typical reaction is to nod and say that's nice but to place a very low value on that in any job decision.

[Slartibartfast]

Amazingly though when faced with having an ownership share in the form of options most employees don't count it as part of compensation.

Um: interesting but devoid of value, lacking a cite.

[Slartibartfast]

it leads to the impoverishment of working people

Also interesting, but in need of substantiation.

You're claiming, in effect, that Wal-Mart has impoverished people more than it has helped? What's the incentive for folks to work for or shop at Wal-Mart, then?

Possibly I glossed over some upthread explanation of this phenomenon, or am lacking in some key bits of knowledge nearly everyone else is privy to. Whichever, please point me in the right direction.

[Marty]

"Amazingly though when faced with having an ownership share in the form of options most employees don't count it as part of compensation."

sorry Slart, I consider my personal experience definitive in this regard. I will see if I can also find a cite.

[Slartibartfast]

And even then, we're so schizophrenic about it that when laborers decide to pool their resources and sell their labor at a set price which might be above the so-called "market price" for labor -- e.g., they form a union -- we go berserk

When this organization and setting of price above market is done on the supply side, don't we tend to call it "collusion"?

This objection to attemped circumvention of the market via some cartel, union, etc seems consistent to me.

[Slartibartfast]

Note: if the implicit equation of unions and cartels seems to sully unions in some objectionable manner through comparison with drug or oil cartels, said sullying wasn't intended. The intention was to underscore the similarity as regards supply manipulation.

[russell]

The typical reaction is to nod and say that's nice but to place a very low value on that in any job decision.

I work for a software vendor. In my industry compensation in the form of options is fairly common, and *many* people actively seek positions where they can be compensated in equity.

Lots of rank and file folks have gotten rich that way, and the folks who merely invested capital made lots of money, too.

I currently work for a company where compensation includes a bonus tied directly to the profitability of the company. If the company makes money, I make money.

In the particular industry I work in, the company that does not offer some form of compensation tied to profit, whether as equity or bonuses, is the exception. Those places are not desirable places to work.

Here is a list of the top 100 employee owned corporations in the US. I'm sure some of what gets called "employee owned" is smoke and mirrors horsepoop. And I'm equally sure some is totally straight up, and lots of folks working for these companies do well.

There's nothing weird about it, at all, and there's nothing in our current legal structure that prevents it.

I make it out to be a cultural thing. Money goes to money, and labor can pound sand.

There's absolutely no reason it has to be that way.

When this organization and setting of price above market is done on the supply side, don't we tend to call it "collusion"?

If you'd like unions to go away, make workers part of the enterprise, rather than vendors of labor.

[Slartibartfast]

I consider my personal experience definitive in this regard.

Your personal experience doesn't Google well, though, Marty.

You should be aware that I have tried this rhetorical gambit in the past in discussions here on this very same topic, and failed. You can't appeal to your own authority, without having an authority others will acknowledge.

[Slartibartfast]

Also, appeal to anecdote isn't very effective, in general.

[Tony P.]

Marty,

What's so magic about "growing the stock price"? If cheap goods are a fine thing because that way low-paid people can afford them, why would cheap stocks NOT be a good thing so low-paid people can afford those? Rising stock prices are good for the people who already own stocks. People who do not yet own stocks, not so much.

I'm not talking about the price of one stock relative to another, mind you. Whether Wal*Mart stock rises twice as much as McDonald's stock is irrelevant to my question. I'm asking about stocks as a category of things that people (even low-paid people) might want to buy. Tube socks and plastic lawn chairs are useful things, and being able to buy them cheap at Wal*Mart is nice. Shares of ownership in a going business are also useful to own, as I'm sure you'll agree. So why should we rejoice when stocks (i.e. shares of ownership in American businesses) get more expensive at the NYSE?

Is there some reason why it's a good thing for society as whole to have an economy that features low prices, low wages, and high stock values, rather than high prices, high wages, and low stock values? Would the latter configuration be too egalitarian or something?

--TP

[russell]

Also interesting, but in need of substantiation.

From the CIA Factbook on the US.

Since 1975, practically all the gains in household income have gone to the top 20% of households

I'm looking for stats on real household income growth by quintile for a reasonable historical period -- say, at least the last 50 years -- but haven't yet found it. My understanding is that for folks in the middle class and below, real household income growth has been slow to stagnant for the last generation.

[Slartibartfast]

My understanding is that for folks in the middle class and below, real household income growth has been slow to stagnant for the last generation.

I'll take that as a given, russell. What's the Wal-Mart connection?

[Marty]

"You can't appeal to your own authority, without having an authority others will acknowledge."

I accept that Slart, its why I apologized.

Russell, technology startups always have options, more mature tech companies usually tie some bonuses to profit(BTW this is usually a cost containment measure not a profit sharing plan). After a few years of not getting bonuses in those companies suddenly folks want their bonus tied to their efforts rather than profits. Employees are pretty fickle owners.

[Slartibartfast]

Russell, technology startups always have options

I think russell is talking about companies in general, not just technology startups.

[russell]

I'll take that as a given, russell. What's the Wal-Mart connection?

There is no particular WalMart connection.

I used the WalMart truck driver as a simple example of an employee involved in the implementation of a value-adding innovation who was not, in turn, receiving compensation related to the added value.

The fact that it was WalMart is sort of immaterial. In other words, I'm not specifically picking on WalMart. They're good at what they do, they create a lot of value. They just don't happen to pay their people all that well, and they're not unique in that regard.

The phenomenon I'm talking about is far more widespread than just WalMart.

Employees are pretty fickle owners.

I provided a link to a list of 100 successful employee owned companies. If you Google "employee owned corporation" you'll find enough information to keep you busy for days.

So, with respect, I'm considering your comment here to be your opinion only.

[Marty]

"So why should we rejoice when stocks (i.e. shares of ownership in American businesses) get more expensive at the NYSE?"

The stock price is the metric on whether the company is growing, thus hiring and spending more. If we think it is a good thing for the economy to shrink 20% then we should all be thrilled that the DOW was down from 14000 to 8000 (or whatever).

And before you ask, the fact that it is back above 10k is a reflection of the stabilization of the economy and means we have started losing less jobs. At 14k we will be hiring in droves. So, as a scorecard to watch we all want it to go up.

[Slartibartfast]

The phenomenon I'm talking about is far more widespread than just WalMart.

Oh, gotcha. Do you have any workable ideas to make employee ownership more commonplace, or are you just spitballing?

I've seen even entry-level professionals (myself included, a long time ago) decline participation in employee investment programs, including the kind that involve company stock purchase, for various reasons including lack of discretionary cash. I've also seen (not generalizing, this is a small company I'm referring to) near total lack of participation in such schemes among the hourly workers.

If you've got some compulsory or other kind of enrollment in mind, please share. Or if you're just grousing but have no better ideas, it'd be nice to know that too.

Not that there's anything wrong with grousing.

[Phil]

When this organization and setting of price above market is done on the supply side, don't we tend to call it "collusion"?

My use of quotes for "market price" was kind of a signal there. i.e., the "market price" for labor might not necessarily reflect what the contribution of the laborer to the company's value is really worth, merely what the owners are willing to pay.

Let's pose it as a question: Why is it OK for a bunch of people to pool their resources, form General Motors, and say, "Here is what our product -- cars -- costs," but people get irate about a bunch of other people forming the United Mine Workers and saying, "This is what our product -- mining labor -- costs?"

The stock price is the metric on whether the company is growing, thus hiring and spending more.

Uhhhhhh . . . no. Just no.

[Phil]

At 14k we will be hiring in droves. So, as a scorecard to watch we all want it to go up.

Oh, do I need to bookmark this, so we can revisit in the future.

[russell]

If you've got some compulsory or other kind of enrollment in mind, please share. Or if you're just grousing but have no better ideas, it'd be nice to know that too.

I'm not sure if compulsory enrollment would be a good idea, or not.

I know that sometimes when employee ownership plans are available, folks seek them out, and sometimes they ignore them. I don't know why that is.

Employee ownership is reasonably common, if not typical. It's well supported by existing corporate and tax law.

I know of examples across a number of industries, including but not limited to tech, where an employee ownership model has let "rank and file" employees, by which I mean folks who didn't come in as capital investors, do very well.

Not crazy well, but well.

I don't know why it's not more common. That's not a complaint, I just don't understand it. It seems like a nice way to address the issue of disparities in wealth and income distribution without reinventing the entire economic model we live under.

Everybody wins. What's the freaking problem with that?

[Jesurgislac]

Marty: The stock price is the metric on whether the company is growing, thus hiring and spending more.

Can you really prove that a stock price rise invariably means either that a company has hired more employees or is paying the employees working there higher wages?

Because neither one seems to have a strong correlation: to the contrary, I'm fairly sure it's happened quite often that a company will manage to show a stock price rise due to a profitability rise due to firing employees or making all employees take a pay cut. Not invariably, I hasten to add: just that I'm aware of this as one of the known methods of showing a profitability rise - > stock price rise.

But if you've got definite, citable data that in fact a stock price rise always means more employees with higher wages... do cite it.

[Eric Martin]

The stock price is the metric on whether the company is growing, thus hiring and spending more

Would that this were true, investment would be easier. Alas, tis not.

[Marty]

"Oh, do I need to bookmark this, so we can revisit in the future."

ok :)

[Marty]

"But if you've got definite, citable data that in fact a stock price rise always means more employees with higher wages... do cite it."

The other things you mentioned do occur. Like most things the general rule has exceptions. Over time the stock pricess go up becuase companies grow, some companies need to retrench, their stocks reflect the challenges in the business and recover when the company is restructured. Then they go back to being evaluated like other companies.

And Eric, it is true, how much is driven expectation, past and future.

[Slartibartfast]

Let's pose it as a question: Why is it OK for a bunch of people to pool their resources, form General Motors, and say, "Here is what our product -- cars -- costs," but people get irate about a bunch of other people forming the United Mine Workers and saying, "This is what our product -- mining labor -- costs?"

It all depends on how like the other the two things are, I think. I mean, if General Motors had to buy all its (for instance) steel from a cartel, for lack of other choices, they'd be a lot alike. Or if GM could buy its labor from whatever source it chose, union or no, then they'd be a lot alike.

IMO, natch.

[Fraud Guy]

Marty,

I don't believe that bookmark is not meant in a good way.

Remember, stock prices are not based on the actual growth or value of an enterprise, but the perceived growth or value of the enterprise; i.e., the stock prices of many dotcom boom/bust stocks were not so high because they were profitable and growing, but because people thought that they would be able to sell this thing of perceived value (i.e., the stock) for more than they bought it for (e.g., tulips, to stretch back more than a few years).

[Marty]

"Remember, stock prices are not based on the actual growth or value of an enterprise, but the perceived growth or value of the enterprise;"

That is true, with the caveat that the more mature the business and industry the less speculative the price. However, across the major markets the prices lead and follow growth.

[Slartibartfast]

It all depends on how like the other the two things are

If it appears that I capriciously dismissed Phil's comparison of GM as a price-fixer, I didn't really. I did consider it, though, but then I realized that GM wasn't the only maker of automobiles as far as most consumers are concerned, and then looked at other aspects of the comparison.

So, not trying to be insultingly dismissive, but probably failing dismally.

[Sapient]

I learned a lesson working for a corporation which, when i started, was a small privately held company that made a decent profit, paid decent wages, never fired anyone, etc. It was probably not the most efficient enterprise in the world, but it satisfied customers, including providing a diverse product list that appealed to certain niche markets. The company was over a half century old. Working there was a mixed blessing. It was very collegial, but very "good old boy"; very secure, but also no real chance for advancement (except among a few), and a great temptation toward laziness.

The company was acquired by a large UK corporation. A large number of products for various small local markets - products that had been profitable, but not at the acquiring company's "target margin" - were discontinued. Many employees were laid off (not necessarily the least productive since the acquiring company had little idea who those people were). A great deal of institutional knowledge disappeared, and a series of "rebranding" efforts took place, which confused and alienated employees and customers. The acquiring company, whose stock price success depends on constantly eating up smaller companies, is now part of two-corporation oligopoly in the industry - both of whose players are doing similarly (the other corporation also went through a series of mergers and acquisitions.

Well, the industry certainly is "streamlined". Some of the remaining employees enjoy their trips to India where they're training their replacements. The original owners (and, yes, there was an ESOP, but only the executive committee had a lot of stock) made out very well. The quality of the products is not as good, and there's a narrow market that isn't being served.

This is what's happened to a lot of industries. I've quit thinking of it in moralistic or emotional terms - it's just what has happened. I worked on the details of the acquisition - it seemed crazy that antitrust laws weren't being violated, but there was DOJ scrutiny (Clinton administration) and it all went swimmingly. It's frustrating, because I'm with Russell (in theory) regarding employee ownership, but employees sell out when they stand to get wealthy. There's no one person or political party to blame for this. As a consumer, when possible, I used to favor supporting smaller companies, but I find that some of the local companies (say bookstores) are owned by people who are wealthy and doing it as a tax write-off. They can't possibly compete and be profitable on their own terms. They employ people, but working conditions and pay aren't substantially different from larger companies.

[Phil]

If it appears that I capriciously dismissed Phil's comparison of GM as a price-fixer, I didn't really.

Uh, my what, now?

[Tony P.]

Marty,

Others have already questioned your faith in a correlation between rising stock prices and "more jobs", but I want to question a different and more basic premise of your thinking.

Why is "more jobs" a good thing?

Let me be clear about terms. To me, a job is a unit of work that needs doing. Washing the dishes is a job. Soldering a circuit board is a job. A "position" is a source of income. To hold a position, you generally have to do one job after another, or the same job over and over if you work on an assembly line. Eliminating jobs is what technological progress is all about. Machines that wash dishes and solder PC boards embody and represent progress.

I take it for granted that you consider more positions to be a good thing, because more incomes is a good thing. Work may be virtuous in itself, and good for the soul and all that, but most people would prefer income without work over work without income. So I assume our goal is not to create more work, exactly, when we talk of "more jobs".

But even so, even if "more paid positions" is what you consider to be the good thing that goes hand-in-hand with more-expensive stocks, I still ask why that's a desirable goal.

I mean, why more positions, rather than fewer but better paid positions? I don't buy into the 1950s Ozzie-and-Harriett mythology, but what would be so bad about an income structure that allowed more families to get by on the income from a single position, even if that meant lower stock values?

--TP

[Marty]

TP,
I have long wondered what our economy would be like without the signicant increase in the workforce over the last 50 years. I seem to recall that since 1960 we have grown the workforce due to several influences by either 80 or 100% depending on data source. It always strkes me that maintaining a essentially flat pay scale with that kind of growth in the labor pool is not insignificant. I don't really know how to answer your question except to say that I would be incredibly pleased personally to live in a world where one income was the middle class norm of secure finances. I don't know how to get investors to decide that 3% is a good operating margin for large retailers rather than 6%. Then that 3 paid everybody more and the jobs didn( need to grow as fast. I can't and don't have a clue how to make that world.

[Slartibartfast]

Uh, my what, now?

What I meant was, you were (apparently, to me) comparing unions as an organization capable of fixing (as in: setting) price to GM as an organization capable of fixing price.

Hopefully the rest of what I said wasn't nonsense.

[Jim Manzi]

Eric Martin:

Sorry to be so delayed in repsonding, but I will put up a post in the next day or so that will describe exactly why this definition is consistent with the policy definiton used in the piece (while addressing, or in many cases, re-addressing, each of the similar criticisms of the piece).

[hairshirthedonist]

It's an unduly gross generalization to characterize unionization as price-fixing collusion. That's not to say that such collusion doesn't go on to some degree or another at times, when unions manage to get a firm grip on political power in, say, a particular city or some such geo-political body. But what also goes on is the many, powerless as individuals against the monied interests having sway over their livelihoods and health, consolidating their power to balance the relationship with their would-be or actual oppressors to something reasonably fair. How this is not what "the market" bears is beyond me. It's part of the market as much as the collusion by large corporations, separately or collectively depending on the context, to suppress wages - something that seems to have been missed in this discussion as far as I can tell.

It's as though large companies or extremely wealthy people are seen simply as part of the natural order of "the market," yet working people bargaining collectively are unnatural and artificial distorters of that which would be were "the market" left to its natural course. I don't get it. We're all just people, right?

[elm]

Here's the problem with Manzi's piece. I'm repeating Chait here, but Manzi's response to Chait disregarded this set of facts.

(All figures taken from ERS/USDA - International Macroeconomic Data Set)

From 1980 to 2009, Per-Capita GDP grew by the following amounts (growth relative to 1980 value)

63% -- United States
51% -- Canada
58% -- EU15 (EU members prior to 2004)
62% -- EU27 (Current EU members)

(Individual countries within the EU15 displayed dramatic differences from each other. These are included in the aggregates above and I will not refer to them again.)
46% -- Germany
199% -- Ireland
100% -- Spain
76% -- Finland

Comparing Canada, the U.S., the EU15, and the EU27, the figures differ by a relatively small amount*.

If we assume that the difference is entirely due to economic policies then we can only conclude that the advantage is very small. Remember that the above numbers represent 29 years of compounding!

His -- oft repeated -- claim that a move towards Social Democracy will dim the U.S.'s long term prospects simply has very little support.

The differences between, say, Germany and Finland are larger than those between Germany and the U.S.

* Other regions have had very different growth rates. East Asian countries with low Per-Capita GDP in 1980 grew fast:

1005% -- China
342% -- South Korea

Some former Soviet Bloc countries have contracted significantly

-13% -- Ukraine
-33% -- Moldova

[elm]

His discussion of global share of GDP suffers from two problems. One small and petty, the other large and substantial.

The small and petty concern is that he states:

Europe's share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40% of global production in the 1970s to about 25% today

This rounds twice in favor of his hypothesis. From the same data set as above (ERS/USDA, see above post), here are the actual numbers):

EU15 1975 -- 35.01
EU15 2009 -- 27.00

EU27 1975 -- 37.17
EU27 2009 -- 28.95

Whatever rounding technique he used, it's misleading.

The larger, more glaring, and offensive error is this: The EU15's share of global GDP has fallen in proportion to its share of global population!

In 1975, the EU15 had 8.583% of world population; in 2009, it has 5.73. Who would expect the EU15 share of global GDP to remain steady in the face of a shrinking share of global population?

In contrast, the U.S. share went from 5.282% in 1975 to 4.539 in 2009 -- a much less dramatic change.

Unless Manzi wants to claim that Social Democracy has decreased the EU's rate of population growth (and would do the same in the U.S>), failing to mention this shows a fundamental disrespect for his audience.

[elm]

For the elucidation of anyone interested, I believe I have uncovered Manzi's methodology for claiming:

Europe's share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40% of global production in the 1970s to about 25% today

He evidently used this reference and included the (former) USSR along with Europe. He claims to have averaged in one or more other data sources but no such averaging is in evidence (the ERS/UDSA data set figures are higher for Total Western Europe and the U.S. and substantially lower for the USSR).

The precise figures in question, summing the 3 rows, Total Western Europe, Eastern Europe, and Former USSR, for 1973 and 2001 data give 38.4% and 25.9% respectively. Those are similar to the figures he claimed, but note that you must round twice in favor of his thesis to get 40% and 25% from these. The straight number is thus 12.5% vs. about 15% claimed. Excluding the USSR or using a different data source (ERS/USDA) produces a dramatically different result.

Regardless of what the dictionary may say, such usage deceives the reader when the thesis regards the outcome of Social Democracy. I think it is well-known that Soviet Communism failed as an economic system.

Manzi clearly possesses skill with rhetoric but it's hard to interpret either the original piece or his replies to critics as something intended to inform its readers.

[At one time this space held nicely transcribed and formatted versions of the data I quote but the blog software ate all of my attempts to format it.]

[Eric Martin]

Thanks elm. And apologies for Typepad.

[çiçekçi]

Thanks Eric, I am sure it was referenced somewhere at Obwi

[elm]

No worries, Eric, I surely can't hold you accountable for Typepad :). I hope you'll indulge me in one more Manzi-related post.

Jonathan Chait has a second piece responding to both Manzi and Douthat. The Economist also addresses Manzi.

Manzi's replied to criticism, but his replies mostly miss the mark.

Criticism 1: I presented incorrect numbers.

...As per the blog post in which I reviewed multiple data sources for the analysis in question, I averaged multiple sources of data. Professor Krugman has selected only one of these sources [elm: this refers to the ERS/USDA dataset], presented it as if it were my sole source...

N.B. The prior blog post he linked mentioned exactly two data sources. The ERS/USDA dataset and the Angus Maddison book referenced above.

N.B. The second set of examples he presents in that blog post don't use the source he linked (his link's tables only go through 2001 and present no separate totals for 1980). That source is on Angus Maddison's homepage, under heading Historical Statistics. Perhaps Manzi owns a later printing of the book which includes that new data.

Regardless, the original article references the 1973 and 2001 figures (though you have to parse out Manzi's replies and do rather a lot of footwork to determine that). In those he does round inappropriately (in a way that make's Europe's economic performance look worse). The ERS/USDA dataset shows a much different result (43.24% in 1973 and 35.46 in 2001[1]), averaging this data with Maddison's would produce a result further from the 25% and 40% approximations, not closer to.

This isn't the largest problem with that data. More on those next.

Criticism 2: Defining Europe to include Russia and other parts of Eastern Europe is ludicrous when the argument concerns the trade-offs involved in the social welfare state.

Manzi's response to this selects certain statistics, all from 2000 or later which show that the U.S. system differs from Western Europe and former Communist portions of dictionary Europe.

That states the criticism incorrectly and responds to it uselessly. The criticism has two parts:

1. Regardless of the social structure in Russia and Eastern Europe today, for the majority of the 1973-2001 period these countries operated under plain old Communism. Communist economies stagnated and then collapsed in the early 1990s.

Quoting statistics that include those events in a paragraph about Social Democracy misleads. Including them on the premise of the dictionary definition of Europe misleads further.

2. Social Democracy in the U.S. (an developed nation with free elections) would more closely resemble that of Western Europe or Canada than those of Eastern Europe (including Russia).

Criticism 3: This comparison does not demonstrate that the social welfare state causes lower economic growth.

As I said almost immediately when this was pointed out, this is exactly correct.

This misstates the criticism and, as such, the reply misses the mark.

He doesn't demonstrate it, he claims it at many points:

"...we must have continuous, rapid technological and business-model innovation to grow our economy fast enough to avoid losing power to those who do not share America's values — and this innovation requires increasingly deregulated markets and fewer restrictions on behavior..."

"...government policies — to reduce inequality or ensure access to jobs, education, ­housing, or health care — that can in turn undercut growth and prosperity..."

"...a ballooning welfare state that threatens future growth..."

Other examples abound.

From my point of view, this is the substance of criticism of Manzi. If the social welfare state does not result in lower growth, then then main argument against it evaporates. If market liberalism doesn't lead to greater growth, what use is it? If it's not useful, why pay attention to its (former?) proponents? Has Manzi come to bury market liberalism or to praise it?

As my first post on this stated (and demonstrated) the statistics show that the 1980-2009 rates of GDP growth are similar in the EU15's and the U.S. Additionally the differences among EU15 nations dwarf the difference between the EU15 and U.S.

Since the evidence points in the opposite direction of Manzi's repeated claims (it suggests that Social Democracy does very little to slow economic growth) Manzi's whole thesis is weakened. In the face of contradictory evidence, he probably should have presented evidence in support of his thesis.

Criticism 4: The fact that the difference in total GDP performance between Europe and the U.S. is entirely due to different population growth rates proves that it can not have been caused by the social welfare state.

Manzi responds in three parts. First, he acknowledges that growth in GDP per-capita is broadly similar.

Second and third he states (twice) that you can't prove a negative. 1) You can't prove that the U.S. wouldn't have had lower growth under Social Democracy. 2) You can't prove that the welfare state doesn't reduce population growth.

Once more, this misstates the criticism. I have never claimed any proof of broad equality between systems. I have pointed to suggestive statistical evidence that Social Democracy's effect on GDP growth is small. Quality of implementation matters, as evidenced by the differences in performance among EU15 nations. I suppose one could claim that the U.S. will implement it badly, but that too would require evidence.

His reply on population growth states no positive claim and contradicts none of what I have written. If and when he puts forth such a claim (appropriately sourced), he could expect a response from critics, not before.

[1] Ref GDP Shares by Country and Region Historical. 1973 calculation cells ((I59 + I103 + I104) / I15). 2001 calculation cells ((AK59 + AK103 + AK104)/AK15)