Category: Politics – Economics Related

One for the Earth

The Book of the Week is “One for the Earth, Journal of A Sierra Club President” by Susan D. Merrow with Wanda A. Rickerby, published in 1992.

The Sierra Club, founded in May 1892, began with about one hundred members. Its original goal was to prevent the Sierra Nevada mountain range in California from becoming further polluted. Sadly, through the decades, the need for such an organization has grown exponentially. The Sierra Club Legal Defense Fund, a group that began using the Club’s name, actually helped raise more funds than otherwise for the Club, but took public stances with which the original group disagreed.

Beginning in May 1990, Merrow was appointed president of the Club for a year’s term. She had acquired previous experience teaching adult education classes and lobbying the Connecticut state government on environmental matters. Her new job– for which she received no salary, only reimbursement of expenses– required constant travel. Volunteers did the bulk of the Club’s work. Her and her employer’s major frustration with the then-federal government was that it was regressive in connection with all kinds of energy issues.

The Club’s lobbyists were awfully busy contacting politicians about: incinerators, recycling, composting and source reduction, increasing gas mileage and decreasing emissions in newer cars, advocating for stopping oil drilling in the Arctic, reducing pollution on land and in the sea and in the air, and arguing for stricter waste-disposal laws, etc., etc., etc.

It might be recalled that a year prior, the Exxon Valdez oil spill left about 380,000 birds dead, and resulted in severe health issues for many animals and plants, including hundreds of species of mollusks, fish and coral-reef animals, dolphins and whales. The then-legal case that might compensate injured parties (Alaska and the United States) for the disaster was still pending. However, in April 1990, Exxon suggested that it pay $100 million to settle the civil and criminal charges against it. Tens of studies done by the National Oceanic and Atmospheric Administration (NOAA) showed grievous (and probably irreparable) harm that (if a dollar value had to be put on it) was estimated at $1.1 billion.

After Iraq invaded Kuwait in August 1990, astute people knew that the Clean Air Act that was then working its way through the Congressional-passage process would become diluted by profiteers aided by propagandists. In autumn 1990, the Bryan Bill– mandating the manufacturing of more fuel-efficient cars– was stalled too, by lobbyists in the oil and auto industries, and by other presidential supporters.

The First Gulf War wreaked environmental destruction (now forgotten by Americans) consisting of “… soot from 600 burning oil wells… cloud over farmland and villages in Turkey and Iran… rain filled with toxic chemicals, polluted both the air and water. Severe respiratory illness, cancer, and ruined crops…”

On a diplomatic mission, the author visited staffers at three different magazines: Good Housekeeping, Sports Illustrated, and Seventeen. She hoped to get articles published for targeted readers of their respective, widely different demographic groups in whose interest it was to save the earth.

One concept the author conveyed was that protecting the habitat of one species, aids in the survival of all of the other species in that habitat. So ensuring a safe environment for the bobolink helps: “…lichens, apple trees, ladybugs, sumac, earthworms, chipmunks, monarch butterflies, white birches, wild blueberry bushes, goldenrod, red foxes– even humans.” The flip side is that one negative consequence leads to another when the food chain is disrupted (See this blog’s post, Rat Island).

Read the book to learn what happened to the Johnston-Wallop bill, and much more about the author’s trials, tribulations and triumphs.

Made In China

The Book of the Week is “Made in China, A Prisoner, an SOS Letter, and the Hidden Costs of America’s Cheap Goods” by Amelia Pang, published in 2021.

“A guard grabbed a prisoner by his hair, twisted his head, and smashed his face into a heater… They beat him with electric batons until his body convulsed, then hung him by his wrists for two weeks– with his toes barely touching the ground.”

No, the above describes not the Holocaust, not a lynching, but a forced-labor camp in China in 2008 (!)

In the last few decades, the Chinese government has committed human rights abuses against its own citizens– not only dissidents, but also against a group called the Falun Gong (a group that practices exercises, meditation, and espouses certain lifestyle choices). Such citizens are sent to slave-labor camps, where they are tortured and starved but kept alive long enough to serve their sentences by making consumer goods (for export) for no pay amid extremely squalid conditions; they are charged with crimes and punished through what would be considered a complete violation of American-style due process.

In China, as of 2013, the camps numbered an estimated one thousand, at minimum. The author wrote that in all her research, she found only one American company that was ever prosecuted for importing consumer goods from such a camp in China, in the course of twenty years. The camps are bad enough, but to add more shock value to the already unspeakable horrors, the camps are a source of black-market transplant-organs in China, estimated to be worth $1 billion. In December 2013, China said it would be converting its reeducation (brainwashing) camps to ones that imposed labor for drug rehabilitation instead. However, the lipstick on the pig didn’t change the pig.

The main focus of the book was the true story of a man named Sun– a Falun Gong member who was sentenced to two and a half years to an aforementioned camp. He risked his life to hand-write a note containing a desperate plea for help, that ended up in the package of a Halloween product purchased by a woman in Oregon in the United States.

In 2016, Big Brother was growing ever more intrusive in China, as Turkic Muslims (the Uyghur tribe and Kazhaks), were targeted for “blood tests, fingerprints, voice recordings, and facial scans.” An estimated three million of twelve million of them are detained in the camps. They live in a location where China borders more than a few strategically located nations on the Silk Road– still a crucial trade route. The Chinese government doesn’t want any rebellious behavior from them. Reeducation is the goal, besides the economic benefits for China. All of them are forced to speak Mandarin, or else.

The author wrote with some alarm, that the torture chambers for victimized ethnic groups are arguably genocidal. She suggested that China’s atrocities might become comparable to the Holocaust all over again. But– this is not a Hitler situation, and is unlikely to become one. This, because Hitler had grand designs to take over the world through arming a military that committed imperialism, and creating a master race through eliminating the Jews and others he deemed genetically inferior– through genocide.

Matters will eventually come to a head when a significant proportion of the two minority populations are in the camps, and the export market is oversaturated with goods made by them, sold through big-name companies like Nike, Apple, BMW, Amazon, etc. An economic slowdown will mean a reduction in the need for the camps. (That’s NOT to say that the camps should exist, or that nothing should be done to stop the atrocities.)

International outcry will eventually reach critical mass, so that pressure will be brought to bear on China to reduce its human rights abuses, through economic punishments. Unlike most of the rest of the world, –like clockwork every two years– the United States holds elections for some powerful federal and state offices during which, a significant number of Chinese voters can influence political candidates to take a stand on this issue.

Anyway, read the book to learn additional details about Sun’s fate, and how the situation can be changed for the better.

Disrupting Class

The Book of the Week is “Disrupting Class, How Disruptive Innovation Will Change the Way the World Learns” by Clayton Christensen, Michael B. Horn and Curtis W. Johnson, published in 2008.

All three of the authors– educrats– pushed education solutions that were mostly software-centric and charter-school based. The educrats made no distinctions between teaching and learning, but indicated that students would learn from software, if schools adopted their recommendations. It is difficult to see how students who are unwilling to learn, would learn from software, though, without supervision.

Nevertheless, one point the authors got right, was that a wrench in the works that is hindering their push to convert the American education system into a machine-dominated one– is teachers’ unions across the country. One other uncertain aspect of the whole kit and caboodle is the competition between the two current software operating systems– Windows and Apple. So, due to all this political patronage and profiteering, America’s education system will remain a patchwork, most likely.

Anyway, in 2004, one school district’s (demographically similar) students in Kentucky had 26% better state standardized test scores than another; the latter had three times the funding. There are usually three major reasons for such a discrepancy: the former district prepped the students for the test, and /or they cheated, and / or students possessed the basic skills and fundamental knowledge to do better than the competition.

The authors admitted more research was needed to determine the reasons for the discrepancy. They did however, declare that their recommendations for bettering the American education system through customization of teaching would help all students improve, regardless of funding.

The authors then presented a hypothetical scenario which would defy reality in most underfunded, understaffed and /or poorly staffed schools. In the scenario, a star athlete was attending that kind of a high school. He was having trouble understanding a concept in science class. The teacher wasn’t explaining it in a way the student could understand it. If the student didn’t keep his grades up, he wouldn’t be able to play in the big soccer game. The student’s father, an engineer, was more than happy to, was available to, and was able to, successfully tutor him so he could still play. The student lived happily ever after.

First of all, subpar schools tend to coddle their star athletes– allow them to pass their classes, or provide them with extra tutoring. Secondly, such schools have a significant number of students in overcrowded classrooms, who are discipline problems– disruptive to the class (sort of like the software-based learning that would be disruptive to the industry that the authors seemed to think the American education system is becoming).

The anecdote said nothing about: the classroom’s learning environment (which in subpar schools is frequently noisy and / or hostile) or what proportion of the other students were truly interested in learning, etc. Thirdly, it would be very unlikely that the student’s father would be an engineer, never mind available.

If there was only a handful of students who truly wanted to learn, then the authors should have suggested that those schools assign those students to do software-based learning. Those students deserve better! But the authors didn’t suggest that.

It stands to reason that live, experienced teachers should know their students and thus know how to customize teaching or customize extra help for each one. The inconvenient realities that prevent them from doing so, include but are certainly not limited to:

  • limited class time;
  • overcrowded classes;
  • classes with students who are disruptive the entire period; and
  • lack of resources for helping students learn the way they learn best.

The authors complained that American schools developed ways to lump kids together efficiently in classrooms, but in ways that have hindered their learning. But– there are reasons other than efficiency: individualized learning is expensive; face to-face social interaction is good for the kids; and they learn from one another. In isolation (with software-based learning), they don’t.

The authors then compared customized teaching to products in corporate America. This was not a very accurate analogy. For, students, teachers and resources aren’t product parts; corporate America runs on the profit motive. Education shouldn’t. Nevertheless, that is the direction it’s heading, with more and more commercialized visual education resources.

The authors explained that two recent American federal education laws would lead to growing pains and chaos in the short term, but [italics, theirs] “schools have actually been improving.” Yes, and so has the United States: a meaningless generalization. One of the laws, No Child Left Behind, a can-of-worms, was obsessed with raising standardized test scores across the board, for all students. It caused schools to (besides go crazy) lie with statistics.

The authors failed to elaborate on the aforementioned “improving” with specific examples. Instead, they went on to briefly describe the evolution of the American education system, mentioning a few influencers in early curricula, trends that prompted changes to those curricula, and changes to student populations due to other federal laws, through the years.

The next anecdote told of a student doing online research. The problem is that, sadly, the World Wide Web has been largely taken over by political propagandists and profiteers.

A subplot of the above anecdote (which was ongoing) was that a dedicated high school student got permission to take an online course in Arabic through the local community college. This, because her school didn’t offer Arabic. In a later chapter, the authors claimed the course was free (!) but didn’t specify whether course materials were free, or what kind of financial arrangement, if any, was made between the high school and college. They also weren’t clear whether the course fulfilled a graduation requirement for the student.

The student was allegedly going to chat with a native Arabic speaker halfway around the world. However, there are all different dialects of Arabic spoken in different Middle Eastern countries. The authors explained nothing about this inconvenient fact in their fanciful anecdote.

Further, the authors wrongheadedly compared the disruptiveness of online classes to that of innovations in consumer goods. But those are apples and oranges. Consumer goods’ innovations are driven by the profit motive. Childrens’ educations are driven by their parents’ belief in education and legal requirements that children attend school. The parents see the connection between education and success in life.

There are millions of complications of all sorts in connection with preparing children to become mature, responsible adults. Consumer-goods innovations are applied to inanimate objects. The only similarity is that costs of software-based learning and innovations will both fall as time goes on. But for students: at what price?? Especially if their chemistry class, as has happened at Brigham Young University (according to the authors)– was turned into a video game??

The authors thought that the large amount of money spent for universal free pre-kindergarten could be more wisely spent on parenting classes. But, once again, they failed to elaborate, and instead, ended the chapter. (For more extensive info on the myriad of subjects covered above, see this blog’s entire category of posts, “Education”).

Read the book to learn: the four major aspects of the American education system that, according to the authors, constrained students from learning; why the authors thought extrinsic motivators would force schools to rethink their services; the four ways the authors contended that technology would assist with customized learning; other comparisons with corporate models; charter school methods; and other imaginary “learning” scenarios that are likely to remain imaginary.

The Death of Money / Dealings – BONUS POST

The first Bonus Book of the Week is “The Death of Money, The Coming Collapse of the International Monetary System” by James Rickards, published in 2014. This was an all-over-the-map hodgepodge of generalizations on global financial trends, economic theory and what the author claimed was the devastation those trends could lead to, as of the book’s writing.

Prior to 9/11, the CIA possessed no expertise in the nefarious goings-on in the securities industry that could presage the occurrence of a terrorist attack. America’s law enforcement and security agencies had plenty of data, but inter-agency rivalry inhibited information-sharing and creativity– that would have allowed them to “connect the dots” in getting more specific information.

Prior to 9/11, American intelligence did detect irregular trading patterns in the stocks of the two airlines whose planes were targeted in the attacks. A tiny percentage of those trades were illegal because they were made by insiders– by the terrorists who knew those airlines’ share prices would soon plummet; the remaining percentage of anomalous trading was done by those who noticed the unusual activity (but not the reason for it) and jumped on the bandwagon.

After the attacks, threat-detection software was created for monitoring not just stock trading, but also currency and precious metals trading. The author wrote that a recently trendy means for bringing down an enemy-nation is: doing serious economic and financial harm rather than physical harm. Assaults on a nation’s technology and infrastructure such as the money-handling parts of cyberspace, aviation, dams and utilities, instead of targeting a country’s military and weapons or people of a specific ethnic group, is becoming the new normal.

The author remarked that China’s institutions are actually at risk for attacks, because the country’s government, economically, owns a large chunk of the means of production and arguably, labor; not to mention, capital. Wealthy Chinese business owners and executives have a co-dependent relationship with (corrupt) government officials. Besides, there are: “cross ownership, family ties, front companies, and straw man stockholders.”

The author warned the reader that a global financial crisis is likely in the offing due to prevailing circumstances in the economic heavy hitters of the world (like, the United States and China); among those circumstances: misallocation of investment funds; employers’ power to minimize benefits and compensation; red ink and the ever-widening, (allegedly alarming) gap between rich and poor. Financial panic is correlated with social unrest. That can lead to revolution.

The magnitude and accelerating frequency of financial bailouts of the last twenty-five years just shows how fragile the economic systems of the world are. In the United States, excessive deregulation fueled out-of-control greed, etc., etc., etc. In Europe, the group of nations that agreed to adopt one currency (the euro) thought the other nations would help mitigate their own economic problems, when in reality– they were putting all their eggs in one basket. In effect, they had to get permission from the others to make significant changes to their economic policies; they were forced into unhealthy co-dependent relationships.

Read the book to get the lowdown on: all the different groups of nations which were trying to diminish the U.S. dollar’s hegemony (hint: BRICS, BELL, GIIPS, SCO, GCC) at the book’s writing; the United States’ economic system explained for laypeople (via a Venn diagram, along with how the author defined “money” and “death”– both buried in the middle of the book); and everything you ever wanted to know about the value of gold, among other factors in the American dollar’s declining power in the world.

The second Bonus Book of the Week is “Dealings, A Political and Financial Life” by Felix Rohatyn, published in 2010. This bragfest described the life of the typical alpha male who rode a fabulous career in the securities industry, starting in the 1950’s.

The aforementioned first Bonus Book described the trends indicative of a dire future global financial situation. Many such untoward events have already occurred in the last couple of centuries (!), and keep happening. Every time, the seeds of financial disaster are sown decades prior to when it hits the fan.

The selective memory and cherry-picking of data of participants and victims (not to mention propagandists!) cause readers to perceive that those kinds of events are unprecedented, or are becoming more frequent. Excuse the cliche, THERE IS NOTHING NEW UNDER THE SUN (For more info, see this blog’s posts: Serpent on the Rock, A Fighting Chance, Since Yesterday, Why I Left Goldman Sachs, The Zeroes and Dot Bomb).

Rohatyn described a few major stressful economic near-disasters that he was asked to help remedy. One situation was early 1970’s Wall Street, which was a house of cards about to collapse. Another was the near-bankruptcy of New York City in the mid-1970’s.

The late 1950’s saw the city becoming a bloated, bureaucratic civil-service gravy train, due to the increasing power of unions. The costs of generous contracts (along with other sociological factors) was eroding the city’s tax base. Local politicians stayed in power by staying friendly with the unions. One hand washed the other.

At the dawn of the 1970’s, the city needed more and more short-term loans from banks. Creative accounting allowed the debt explosion to continue. The city got subsidies from the state and federal governments, but only at the end of its fiscal year, so its deficit ballooned annually before then. The city got generous borrowing terms because it was in the state’s and fed’s best interest (excuse the pun) to deregulate the lending banks, as they were political patrons, too. Eventually, push came to shove.

In June 1975, Rohatyn was appointed to a bipartisan (truly bipartisan!) committee to help New York State governor Hugh Carey draft a bailout plan for the city, three weeks before the date on which the city would be forced into bankruptcy. Fortunately, Carey possessed the right temperament for saving the world.

Read the book to learn more about how the author helped impose some adult supervision in various, serious economic episodes in his career, and more about his career itself.

The Most Dangerous Man In Detroit

The Book of the Week is “The Most Dangerous Man in Detroit, Walter Reuther and the Fate of American Labor” by Nelson Lichtenstein, published in 1995.

Born in September 1907 in West Virginia, Walter Reuther was of German ancestry, raised Lutheran. He quit high school to learn the tool and die trade. In February 1927, he and a friend moved to Detroit for better pay and hours. He eventually made his way to Ford Motor Company, where he quickly rose through the ranks before the Great Depression hit America.

In the early 1930’s, Ford opened a plant to manufacture its Model “A” in the Soviet Union. Americans who believed in socialism were aware that the Stalin-led Soviet government ruled via one party– the Communist, and was perpetrating human rights abuses. But they liked certain economic aspects of its experimental “Five Year Plan.”

Beginning in early 1933, Walter and his brother Victor bicycled a distance of approximately twelve thousand kilometers during the nine months they were meeting with their European political contacts in various countries. In spring 1933, they were already seeing Fascist oppression in major German cities. In late 1933, they began working in a few Soviet industrial complexes to see labor and political conditions for themselves.

By the late 1930’s, the famine caused by Stalin’s disastrous agricultural-reform program prompted peasant-farmers to go to work in the factories that made steel, cars and tractors. In mid-1934, since they were foreigners and skilled middle-managers (training workers in tool and die making), Walter and Victor were permitted to travel between Stalingrad and Moscow to visit construction projects, collective farms and tractor factories. They were chaperoned by Party bureaucrats. They got special treatment, so perhaps they did not see the abuses suffered by unskilled workers. Their experiences led them to believe that the Soviet system was far less of a police-state than Germany’s.

Walter and Victor wanted to believe so badly in a Soviet workers’ paradise that they rationalized away the serious problems (such as impossible-to-meet production quotas, and reports of fancifully high numbers of vehicles manufactured). In 1934, on supervised tours, the brothers also took a look at labor conditions in China and Japan. October 1935 saw them return to the United States.

On May Day of 1936, in major cities across America, various political groups were speaking in the public square with the goal of unionizing workers; some of them– the Socialists, Proletarian and Communist parties– united to form a Popular Front (the joke in Spain was, “the girl with the Popular Front”).

By the mid-1930’s, the auto industry (which included carmakers, parts suppliers, tool and die makers, etc.) consisted of about a half million union members, thirty thousand of whom were in the United Auto Workers (UAW), a national union. In autumn 1936, Walter became a member of that union’s executive board. He planned and got employees to execute work-stoppages and sit-down strikes in order to get the big automakers like GM, Ford, Chrysler and Dodge to grant collective bargaining rights exclusively to the UAW. Other workplaces such as U.S. Steel were inspired to take such actions, too.

Ford was particularly hostile in its anti-union activities, as it had an in-house security department that spied on workers, fired some, and used violence against photographers. GM took measures to protect against productivity losses by rotating its parts suppliers and building new plants in different locations.

In the late 1930’s, Walter launched propaganda campaigns with the distribution of leaflets, and ran pro-union candidates in local political elections in Midwestern cities. In October 1945, he knew that his UAW workers couldn’t win their strike on just solidarity and militancy. He needed support from other ordinary Americans and the federal government. In January 1946, union workers in a bunch of other industries struck, too; electrical, meatpacking, steel milling, and iron mining.

By the late 1940’s, the power of the unions and corruption in government skyrocketed, so that organized crime used bribery, patronage-contracts and and physical violence in order to rule the “… construction industry, short haul trucking, East Coast longshoring , and the bakery and restaurant trades.”

It is a little-publicized datum that in 1962, president Kennedy granted a cut to all taxpayers that favored corporate America, which also got tax breaks. The rich got richer. That same year, members of the UAW executive board included 21 Caucasians, and one African American, whom they knew wouldn’t buck the status quo.

By then, Walter, a liberal, realized he had been incorrect in thinking that the American labor movement would eliminate discrimination in the workplace when the unions and the economy were strong. But he was still stubborn in insisting on an all-or-nothing egalitarianism. Others of his political ilk, such as Eleanor Roosevelt, Hubert Humphrey and Adlai Stevenson were willing to compromise with the Dixiecrats (Southern Democrats who opposed civil-rights legislation) to make a little progress rather than none. The following year, Walter had become more flexible, as he was friendly with JFK and his brother.

In July 1967, the race riots in Detroit resulted in the deaths of 43 people and $250 million in property damage. The mayor, and the governor of Michigan assigned a 39-member panel of leaders and influencers in the community to suggest solutions for quelling hostilities. Various actions were taken; among the major ones:

  • throwing money at low-cost housing;
  • hiring of black workers at Ford and GM; and
  • throwing money at black community groups

but nothing seemed to help. The automakers moved their plants from Detroit to Troy and Dearborn.

Read the book to learn a wealth of additional information on Walter’s trials, tribulations, triumphs, and disputes with the AFL and CIO (unions competing against, and with different views from, the UAW); the growing-pains of the labor movement– how it was affected by: the WWII years (hint– the government ordered it to make war weaponry), political elections, regulation of pricing / wages / production in the steel industry, the Civil Rights movement, the Vietnam War; how and why different automakers’ compensation structures changed, and much more. See this blog’s post “See You In Court” for more information on the pros and cons of unions in America.

Serpent on the Rock

The Book of the Week is “Serpent on the Rock” by Kurt Eichenwald, published in 1995.

This volume contained an egregious error. It appeared in an anecdote about a member of the Belzberg family, Canadian Orthodox-Jews. In the late 1970’s, Belzberg was acquiring a large quantity of stock of the retail brokerage named Bache, so one of Bache’s executives met with him, to find out his intentions.

As the meeting ended, the author wrote that Belzberg shook hands with the Bache executive. That was obviously a fictionalized detail of the story, because Orthodox Jews do not shake hands with, or touch others, except for close family members.

Anyway, in the second half of the 1970’s, tax shelters became trendy in the securities industry. In the 1980’s, Bache (with a shady reputation in the first place) sold tax shelters in the form of limited partnerships of various kinds (oil and real estate were the most common) and reaped fat fees of as much as 8%. On a bunch of them, printed marketing communications illegally contained material omissions and misstatements.

Bache’s clients were clearly unsophisticated, because anyone with a minimal knowledge of finance should have seen that the objectives of the investment were contradictory: “income, growth and safety” (!)

Brokers dispensed with the printed prospectuses (which contained disclaimers required by law), and focused on verbally selling the money-losing financial instruments to their clients. They lied about the projected financial returns (14 to 15%, when they were pretty sure there would actually be disastrous losses). They called the investments “safe”– a word that should NEVER be used on Wall Street. The proper lingo should be “low-risk” and only when that’s the truth. The limited partnerships were “high-risk.”

One man, Jim Darr, became particularly powerful in the Direct Investment Group, and engaged in a boatload of excessively greedy, unethical activities and white-collar crimes that made him fabulously wealthy. In 1983, he flew all the way to a small thrift bank in Arkansas to get a home loan of $1.8 million to purchase a mansion in Connecticut. At that time, there were plenty of local lenders he could have approached.

Another sleazy character, Clifton Harrison, after pulling his last act of unbelievable thievery, gave the excuse, “I’ve just been borrowing some money against future fees.” Read the book to learn more about the various individuals who shaped Bache’s history, and what became of them.

ENDNOTE: The above shenanigans happens every few years in the United States. The line from the movie “That Thing You Do” describes it perfectly: A very common tale, boys, a very common tale. Here is a brief elaboration of the last forty years:

Steps of the American Politico-Economic Cycle

  1. An extremely pro-business president comes to power.
  2. Excessive deregulation ensues.
  3. Shady financial instruments and money-making vehicles spike in popularity (tax shelters, savings and loan associations, goodwill valuations, junk bonds, derivatives, dot-com stocks, stock-options-repricing, subprime mortgages, payday lenders, for-profit colleges, the PACE program, etc., etc., etc.)
  4. Out-of-control greed ensues.
  5. Profiteers of all political persuasions dispense with ethical behavior.
  6. The bubble bursts. A financial crash ensues.
  7. Lawsuit time!
  8. The impoverishment rate accelerates for the middle class and the poor.
  9. Election time. “It’s the economy, stupid.” Whether true or not (usually not!), campaign-propaganda convinces voters that the president is solely responsible for their personal financial situations.
  10. The reelected president, or one from the same party, continues some of the same hog-wild policies, or the new president reverses what he can. Re-regulation ensues.
  11. Time for another round of Survival Roulette (See this blog’s post, “Blind Ambition”).
  12. Opposition-propagandists pull strings to reverse what the new president reversed. They make voters impatient for improvement, even though undoing the damage takes years and years.
  13. Election time. Repeat steps 1-12.

Samsung Rising

The Book of the Week is “Samsung Rising, The Inside Story of the South Korean Giant That Set Out to Beat Apple and Conquer Tech” by Geoffrey Cain, published in 2020.

In 2009, the author, a Korean-speaking journalist moved to South Korea to find out all he could about the then-electronics company Samsung, the most famous company in the country. In the ensuing years, Samsung’s relationships with technology-products makers became incestuous because it decided to make its own products while simultaneously supplying its competitors with parts for their products.

The author personally visited the city of Daegu, hometown of Samsung’s founder. In March 1938, Samsung started as a produce stand. The founder followed the Japanese business model of building an empire owned by family members, that involved complicated, group-focused, loyalty-oriented arrangements. Sounds somewhat familiar.

Anyway, in the 1950’s, he branched out into different industries, such as wool clothing, sugar refining, insurance, banking, retailing etc. The corporate culture involves slogan-chanting, and a drill team. But different divisions of the company harbor petty jealousies. The company’s success as a whole is treated as a zero-sum game, so one division’s success is considered to come at the expense of another’s. Sounds somewhat familiar. In autumn 2011, when Samsung’s division in America successfully marketed its new phone and stole a significant amount of market share from Apple, Samsung’s marketing division in South Korea lost face.

The founder made valuable government contacts that invited the kind of corruption that used to be frowned upon in the United States twenty years ago. Ironically, the United States has always provided significant financial aid to South Korea beginning with the Cold War and thereafter.

In 1999, Samsung and Sprint cooperated in a venture to make and export cell phones to the United States. Pursuant to South Korean culture, “After the bonding over booze and karaoke, it’s an accepted practice to roll out bags of cash and other gifts for your partners [American telephone service companies].” However, Samsung had to learn that Americans don’t do business that way (at least not explicitly).

In April 2008, Samsung’s chairman was charged with stock manipulation and tax evasion. In August 2010, and again in July 2011, Apple and Samsung launched an orgy of patent litigation against each other. In October 2011, Samsung already supplied parts for Google’s Android phone, but decided to introduce a phone of its own, the Galaxy Note series. It was a cross between a phone and a tablet, that would compete with Apple’s iPhone. Samsung sought to steal Apple’s customers. Apple had a reputation for making only one version of an overpriced product that delivered exactly what customers desired, that made them feel they were in the “in” crowd. Samsung would offer a choice of different-sized screens. It came late to the market, but improved upon existing products.

In August 2016, Samsung launched a new Galaxy Note phone. In October 2016, Samsung compounded its problems by denying that its phone burst into flames without warning. Its employees who were native South Koreans were under pressure not to express any negative sentiments about anything associated with their employer. For they risked ruining their careers, as word would get around to the few other competing employers in the country, and they would never work anywhere in their homeland again. Sounds somewhat familiar.

Read the book to learn about a wealth of additional details on the culture of South Korea (which is the same as the corporate culture of Samsung), how Samsung came to focus solely on technology parts and products, and much more.

Who’s Getting Paid – BONUS POST

WHO’S GETTING PAID

Sung to the tune of “For What It’s Worth” with apologies to Buffalo Springfield.

There’s politics happening here.

The truth is nowhere near.

There’s a propagandist over there.

For what he says, I no longer care.

Isn’t it time we stop, drinking the Kool-Aid?

Everybody look– Who’s getting paid?

There’s been panic spread everywhere.

We’ll be totally oppressed if we don’t grow a pair.

Only the powerful can change their minds.

No apologies for covering their behinds.

Isn’t it time we stop, drinking the Kool-Aid?

Everybody look– Who’s getting paid?

Why haven’t the 60’s been brought to bear?

No one protesting anywhere.

People are too panicked not to obey.

They think they’ll get sick and need a hospital stay.

Isn’t it time we stop, drinking the Kool-Aid?

Everybody look– Who’s getting paid?

We think our freedoms are deep.

But we’re letting them go without a peep.

When anger reaches critical mass

The country will stop this Halloween nonsense and get back to work!

[Never mind the last choruses]

HISTORY WILL UNFOLD AS IT SHOULD.

King of the Club

The Book of the Week is “King of the Club” by Charles Gasparino, published in 2007.

The subject of this book “… was suffering from the downside of loyalty; he spent so much time surrounding himself with people he could trust that he forgot he also needed smart people who could get a job done in times of crisis, and he was now facing… the greatest crisis of his career.”

Sounds familiar. It was actually “Richard Grasso and the Survival of the New York Stock Exchange.” When he was fifteen years old, Grasso began trading stocks in an account held in his mother’s name, getting stock tips from his drug-store-owner-employer.

The author was rather vague about Grasso’s two years of military service which allegedly began in the mid 1960’s, spent: “…in Fort Meade, Maryland, though he did make periodic trips to Vietnam.” Apparently, Grasso’s eyesight was good enough to get him drafted by the U.S. Army, but not good enough to get him hired by the New York City Police Department, his first-choice employer after the military.

Grasso therefore began work as a back-office Wall-Street clerk at the New York Stock Exchange (NYSE) in early 1968. The author failed to mention whether Grasso was told to put his stocks in a blind trust, or whether his new employer had a “don’t ask, don’t tell” policy.

Grasso meteorically moved up through the ranks. He was innovative in executing new marketing initiatives for the exchange. He also poached companies that were listed on either the American Stock Exchange or the NASDAQ– that provided fierce competition to the NYSE. All three were stock markets of corporate entities that wanted to sell their shares far and wide. But the companies could be listed in only one place. Grasso convinced them that the NYSE was the best place to list.

By 1980, Grasso controlled NYSE listings, its trading floor and almost all its trading operations. In the mid-1980’s, the chair of NASDAQ, Bernie Madoff, claimed his market’s trading was more fair for investors because it executed trades electronically, thus multiple players were interacting continuously while setting impartial prices. The argument went that electronic trading made the market more “efficient”– as no buyers or sellers had significantly better pricing information than others on which to trade, theoretically.

In 1990, Grasso stepped up to the second-most powerful position at the NYSE. He was in charge of the exchange listees and, at the same time, in charge of regulating them. He did the legwork of bringing new business to the exchange. His boss, the chairman, did the public relations work of delivering speeches globally and persuading the federal government to keep conditions favorable for the exchange.

Several of the NYSE’s board of directors were Wall Street executives who passively continued to keep the status quo– lavishly rewarding Grasso monetarily for his undivided attention to lavishly lining their pockets year after year when times were good.

There was honor among thieves, as Grasso’s henchmen turned a blind eye to the various forms of illegal activity that allowed them to make obscene amounts of money on the trading floor. Until there wasn’t honor among thieves– as conditions changed.

From a not-for-profit-organization-legal-standpoint, most of the parties and individuals involved were engaging in various highly unethical activities, at best; conflicts of interest abounded as participants in the exchange network cooperated in a way that maximized profits for everyone until, as usual, some individuals got too greedy.

Being head of the New York Stock Exchange is not unlike leading the U.S. government. The marriage of politics and commerce is always fraught with conflicts of interest. Some are avoidable. It’s a shame that politics in particular tends to attract dishonest attention whores with hubris syndrome whose ethics are in the basement. Of course, they usually use the “everybody does it” excuse and change the subject if they can.

But there ought to be equal justice under the law for any of the accused– after an investigation of where the evidence leads— with NO jumping to conclusions, assumptions or biases prior to a thorough review of all evidence, if any. Along these lines, one would do well to ignore the superlative-laden, repetitive, sensationalist drivel emanating from the teleprompter box, um, er– idiot box.

Anyway, starting in the late 1990’s, unbridled greed led to a bunch of scandals. There was Long Term Capital Management, Enron, WorldCom, the dot-com crash, various major SEC violations committed by big-name brokerages; not to mention 9/11’s impact on the financial markets. All on Grasso’s watch. Yet, his pay kept soaring, anyway. It wasn’t pay-for-performance anymore.

Finally, Grasso got the same treatment, figuratively speaking, as other major historical figures. One week he was flying high and the next, kicked to the curb. Grasso was suffering from a bad case of hubris syndrome. In early September 2003, herd mentality / groupthink seized the board; jealousy (possibly subconscious) of his pay package reached critical mass.

Read the book to learn of the usual occurrences in such a situation (investigation, litigation, political machination and myth propagation) that led to the changing of more things, and more of same.