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Why U.S. Dams (and Society) Are Crumbling
By Shlomo Maital
Two newspaper items (one in New York Times, the other, Financial Times) reveal why America is crumbling.
California’s Oroville Dam, America’s tallest, has a crumbling spillway that forces evacuation of 200,000 nearby residents. (A dam collapse in California in 1928 killed 400, as a wave of water swept over them). As early as 2005, experts spotted a design flaw in the dam – never corrected. Heavy rains filled the reservoir to capacity, and severe weather because of global warming reveals that this dam, and many others, are not up to the changing weather patterns, for which they were not designed.
There are 1,585 dams in California, notes the NYT, and 90,000 dams across the U.S. Many are in poor shape. Why? “Government is more inclined to invest money in building new projects, than in less visible and glamorous maintenance”.
America is a consumption-driven society that under-saves. A $500 b. trade deficit (imports minus exports) for nearly 3 decades is a symptom. China is not to blame. The U.S. itself is. It is comfortable to borrow money from China to buy consumer goods. Some 23 years ago, my wife Dr. Sharona Maital and I published an article, in the Journal of Socioeconomics, in which we warned about a drastic fall in savings behavior in the US and Western countries. * Nothing has changed since.
The Financial Times notes today:
“China ended a six-month streak disposing of its US Treasury holdings in December, adding to its position for the first time since last May as the country’s central bank seeks to manage capital flight. The country, which ceded its status as the world’s largest owner of haven Treasuries in October to Japan, added $9.1bn of US sovereign debt to its reserves in the final month of 2016, new data from the Treasury and Federal Reserve showed on Wednesday.”
So, in the post-Trump era, America has gone back to borrowing, to buy consumer goods rather than maintain its dams, its roads, schools and infrastructure.
And President Trump? He is rapidly running down his checklist of promises, issuing so far 11 Executive orders. But what about that trillion-dollar infrastructure plan? Dead silence. Why? Because it will take a vast plan to design and implement it. In the current chaos of the new Administration, it is unclear whether the Trump presidency is up to the challenge – or even whether it is aware of the problem.
So America – at least, its dams and roads – are crumbling. I don’t see a solution in the near term.
* Shlomo Maital and Sharone L. Maital. “Is the Future What It Used To Be? A Behavioral Theory of the Decline of Saving in the West”. Journal of Socio-Economics, vol. 23, 1,2. 1994.
Ashley vs. Ivanka: Choose Your Role Model
By Shlomo Maital
Ashley Biden & Father Joe
President Trump recently tweeted his recommendation, that people buy his daughter Ivanka’s upscale fashion designs, after retail chain Nordstrom took her clothes off its shelves. (“They don’t sell,” Nordstrom claimed).
Another famous politician has a designer-daughter – former Vice President Joe Biden and his social worker daughter Ashley. Her story, and product, are a bit different.
According to Elle Magazine: “Ashley’s new ethically produced, American-made clothing company, is a project any dad would be proud to get behind. It kicks off with a range of supersoft organic cotton hoodies on sale for just a few weeks, starting February 8, in partnership with the flash-sale behemoth Gilt: The entirety of the proceeds from the debut collection will be channeled to programs that work to alleviate poverty through education, training, and job placement.
“Ashley, 35, who is also the executive director of the Delaware Center for Justice, a nonprofit that serves children and adults impacted by the criminal justice system, had toyed with the potential nature and mission of Livelihood for years. One thing that never wavered was the idea of the hoodie. This is partly because Ashley herself—who has a stealth charisma and a fondness for phrases like “heavens to Betsy”—describes herself as a “jeans-and-T-shirt kinda gal.” It’s also because she appreciates the symbolism of an item long connected to American laborers and more recently to Black Lives Matter. “Livelihood is specifically about income inequality,” she says. “And racial inequality and income inequality are directly related.”
“By the time her parents moved into the VP’s mansion in 2009, Ashley—who did her undergrad at Tulane, then earned a master’s in social work from the University of Pennsylvania—had a job serving kids in the foster-care system. It was disorienting, to put it mildly, to travel from a juvenile detention center to, say, Air Force 2. What did become increasingly clear was how little privileged Americans understood about life below the poverty line, where 13.5 percent of the U.S. resides. “I’d hear about five siblings sharing one burger,” she says. “How does a kid do homework when there’s no desk or lamp? One of the biggest things I’ve seen in my work is that a lot of social ills directly result from poverty.”
Does it take a privileged daughter of the U.S. Vice-President, to explain to us how little we the privileged understand about the life and hardships of the one in seven who live in poverty? And will we opt for the role model of Ivanka Trump, who sells to the wealthy, or Ashley Biden, who works for the poor, and has done so for her whole career?
By Shlomo Maital
I doubt readers have ever heard of Charles Feeney. Today’s New York Times tells his amazing story. It deserves to be widely known and imitated.
Feeney will be 86 years old on April 23. Wikipedia recounts: He was born in New Jersey during the Great Depression and came from a modest background of blue collar Irish-American parents in Elizabeth, New Jersey. His ancestry traces to County Fermanagh in Northern Ireland.
He served as a U.S. Air Force radio operator during the Korean War, and began his career selling duty-free liquor to US naval personnel at Mediterranean ports in the 1950s. He attended Cornell University on the GI bill, and in 1960, based on his navy experience, set up a company that sold duty-free items to travelers. It became a booming success. He used some of his money to invest cleverly in high-tech startups, like Facebook, Priceline, E-Trade, Alibaba and Legent.
But Feeney’s story is not about another successful entrepreneur. In 1984 he founded Atlantic Philanthropies, a collection of foundations – without revealing he was the benefactor – and transferred all his billions to it, and promised to shut it down, after giving away his entire fortune, $8 billion. Five years ago, he still had $1.5 b. left. Would he succeed, before his passing? Yes. It is now officially all gone.
And Feeney? He lives modestly with his wife, in a rented New York apartment. He flies economy class. He eats in diners. He left himself $2 million.
I have a somewhat personal link to Feeney. As a Cornell alum, he gave a huge sum, $350 m., to fund the Cornell-Technion project that will create a new high-tech university on Roosevelt Island, in Manhattan.
His philanthropy has been effective. One of his grants proposed reforms to America’s healthcare system, which led to the Affordable Care Act. And Feeney has scrupulously avoided any limelight – his backing of the Atlantic Philanthropies was revealed against his wishes. His secretiveness led to the “James Bond” appellate.
The New York Times article uses the story of Feeney to provide a backhanded slap at Donald Trump, who typifies the diametric oppositse of everything Charles Feeney stands for and accomplished.
The Analytical Geometry of a Trump Administration
By Shlomo Maital
After the pundits and experts totally missed the Trump electoral wave, they now weigh in with predictions about what Trump and his administration will do. I’ve read these carefully, and they are largely frivolous, as frivolous as the punditry that assumed a Clinton victory.
However, NYT columnist Ross Douhat weighs in today (Dec. 29), at the year end, with some wisdom, based strangely enough on analytical geometry. Consider, Douhat says, an X Y diagram.
On the X axis, place Trump’s policies. They can run from populism all the way to conservatism. Populism would involve spend-spend. Conservatism would involve cut-cut, put government at all levels on a starvation diet. Where will the Trump administration be?
On the Y axis, place Trump’s approach to governance, ranging from ruthless authoritarianism (Putin-style dictatorship) to utter chaos (an inexperienced administration rife with scandals, incompetent and unable to organize a paper bag). Except for the scandals, remind you at all of the Obama 8-year term? Where will Trump be?
Here are four possibilities, according to Douhat: 1. Authoritarian-populist: Trump panders to the masses, ignores the Congress, uses executive mandates…sort of how he ran his businesses (into the ground). 2. Chaos-populist: Trump flies around the country and the world, gets nothing done, and ultimately, lets Paul Ryan (House Speaker) become the de facto President, because, well, being President is both boring and hard work, and you need to read a lot, and Trump only reads tweets. 3. Chaotic, conservative. Congress cancels Obamacare, with no replacement and millions have no health insurance. America’s role in the world shrinks, as the U.S. deals with its own internal mess. 4. Authoritarian-conservative. Trump is ‘managed’ by his conservative appointees and the Congress. There is a fifth possibility: a Sweet Spot: X = 3, Y = 3, competence without dictatorship, moderate conservatism without cruelty.
Douhat says “this is Donald Trump we’re talking about, so a happy medium seems unlikely”.
What do YOU think? Where is America’s X and Y going to be?
Did Open Borders Destroy U.S. Manufacturing?
By Shlomo Maital
In the recent US Presidential election, Donald Trump campaigned largely on how trade (i.e. imports, open borders) has destroyed blue-collar jobs. His voters agreed.
But is this true? Have globalization, open trade in goods and services, and cheap imports, destroyed good US jobs? Or were there other causes?
You won’t find a more authoritative answer than that from MIT, in Suzanne Berger’s 2013 book Making in America: From Innovation to Market (MIT Press), based on her work with the MIT Task Force on Production in the Innovtion Economy.
Here are some relevnt passages:
“Even taking into account job losses resulting from outsourcing as well as import competition, it was difficult as recently as a decade ago to find clear evidence of a heavy impact of open borders on manufacturing employment. …In 2003, [such job losses] involved less than one percent of layoffs; in 2004 they went up to 2 per cent. …job losses in manufacturing were mainly the result of productivity gains which might reduce the total numbers of those needed to produce a finite quantity of goods. …[Studies showed] the bottom line was that Chinese imports accounted for 33 per cent of manufacturing job decline between 1990 and 2000 and 55 per cent between 2000 and 2007. But [focusing mainly on rising Chinese productivity and falling China-facing trade barriers] 16 per cent of manufacturing job losses between 1990-2000, and 26 per cent between 2000 and 2007, were attributable to rising import competition from China.”
Bottom line: At most, a third to a half. And more likely: one-sixth to one quarter of job losses were due to Chinese imports.
So what does that mean? There were other causes, deeper ones. Labor-saving machinery and automation (robots). Low skills. And dumb policy. Berger notes: “Germany abandoned much of its low-end manufacturingwhile expanding employment in higher value-added segments.” And America??
Recently a former senior VP of Intel, Mooly Eden, spoke at Technion and noted that the moment manufacturing wages rose in China, Intel shifted to Vietnam and built 1 million square feet of manufacturing capacity there.
China lost jobs – why? Globalization? Or because their productivity failed to keep pace with wage increases?
It’s hard to predict the future. But here is one pretty safe guess. While Trump tackles America’s job problem and rebuilds manufacturing, based on a wrong assumption, he will fail. It won’t help to start a trade war with China. So in four years, his supporters will find that he failed to deliver.
What then? Will they vote Democrat? Or will we get an even farther-right crackpot candidate, as has happened in Europe?
Dealing with the Trump Presidency: a Survival Guide for 4 to 8 Years
By Shlomo Maital
OK, so counting four years from Jan. 20, or possibly eight – how do we survive?
Mark Blyth, a political science professor at Brown University, has some sage advice, published in the Washington Post.
The basic problem: In democracy, we vote for what we want. And increasingly, Blyth notes, we are simply NOT getting it.
“Unsurprisingly, people are beginning to realize that they are no longer getting what they vote for. Instead, they are being asked to pay more and more for what they already receive through taxes, taken from stagnant or declining incomes, which also must service their debts. In such a world it’s great to be a creditor and lousy to be a debtor. The problem for democracy is that most people are debtors. In such a creditor-friendly world, however, democracy is reduced knowing that the menu of policy will never vary. Trump’s win in the Midwest, British voters deciding to leave the European Union, Italy’s referendum and Greece’s revolt against its creditors are all connected in this way.”
In short: Most of us owe money. A few OWN money. The system has been rigged in their favor. And it may stay that way under Trump, the billionaire.
So how do we respond? Blyth observes:
“At the end of the day, when you no longer get what you vote for and when the role of voting is reduced to affirming the status quo, voters will vote for the most undemocratic of options if that is all that is “off the menu.” That’s democracy in action in a world devoid of choice. When you can’t get what you want and most people do not benefit from the economic outcomes of government, it’s also what makes democracy unstable.”
Americans voted “off the menu” (a minority of them, true) because that was the only choice ‘off the menu’. And it has made democracy unstable, and is doing so all over the Western democracies.
We’ll survive this. Take a deep breath. Take a long view. Watch how the brilliant, wise American Constitution protects its citizens from scoundrels. At some point, centrist politicians will begin to understand that voters want real change, want to unrig the system to help debtors not creditors, and want actions, not promises. It may take a few more ringing defeats, like Trump, Brexit, and Italy to wake these politicians up.
For four years, or eight years, Americans must say clearly what they want, and vote that ticket in every election. Mid-term elections are only two years away. How will Trump supporters vote, when they feel they are again, not getting what they want?
Pontypool: We Forgot Them & We Will Pay a Heavy Price
By Shlomo Maital
Journalist Aditya Chakrabortty has been covering the “post industrial” depressed areas of Britain for The Guardian. These are the people who once had good jobs in factories and mines, who have been forgotten and neglected by governments in Britain, the rest of Europe and the U.S. They became invisible.
Now, after Trump and Brexit, perhaps we are waking up. Perhaps we are beginning to see them. Here are parts of Chakrabortty’s vivid description of a once-wealthy Wales town. If Brexit and Trump act to truncate globalization, it will be because we forgot those who lost because of it, and celebrated only those who gained. Post industrial? “Post” implies something came after ‘industrial’. But what? Poverty? Hardship?
“The story of Pontypool is a story of riches squandered, of dynamism blocked, of an entire community slung on the slagheap. Sat atop vast deposits of iron ore and coal, it was probably the first industrial town in Wales. For a time, under Victoria, it was richer than Cardiff. Even now, to look along its skyline is to see traces of wealth: the park with its Italian gardens and bandstand; the covered market with its olde price list for snipes or a brace of pheasants; the 25 listed buildings that make this one of the most sumptuous small town centres in Britain.
“Then look down. On a typical weekday, the indoor market is a desert. Those bits of the high street that aren’t to let are betting parlours, vaping dens and charity shops: the standard parade for hollowed-out towns across Britain. The reason isn’t hard to fathom: the mines shut down decades back; the factories have pretty much disappeared. Those big employers still left aren’t big employers any more. One of the staff at BAE tells me that when he joined in 1982, it had 2,500 workers on its shopfloor; now, he reckons, it has 120.
“Swaths of Pontypool and the surrounding region of Torfaen now rank among the poorest in all Britain. On part of one of its housing estates in Trevethin, 75% of all children under four are raised in poverty. Over half – 53% – of all households who live on that stretch are below the poverty line. With that come all the usual problems: families that can’t pay the rent, that are more likely to fall prey to a whole range of sicknesses, from mental health to cancer. Those people can expect to die 20 years before their near-neighbours in some of the better-off areas in Pontypool. First the economy died out, now its people are too.
“Pontypool is like the rest of south Wales, like many other parts of Britain I have reported from. It’s what politicians and economists call “post-industrial”. That term, though, implies something coming after; here, hardly anything has come after. A few years ago Pontypool town centre was declared on the verge of death by a local councillor, who bore a coffin lid in a mock funeral procession.”
How Asia Sees the Trump Presidency
By Shlomo Maital
Here is how my friend Bilahari Kausikan, former First Permanent Secretary of Singapore’s Ministry of Foreign Affairs, sees the Asian reaction to the election of Donald Trump as U.S. President. This is from the Nikkei Asian Review:
Donald Trump will be the 45th president of the United States. Whatever they may say in public, few East Asian governments will greet the news with much enthusiasm — and all will harbour a degree of unease. Only the North Korean leader Kim Jong Un and Cambodian Prime Minister Hun Sen made their preference for him known. But they are hardly typical and the latter, for once, did not follow China’s lead.
- Beijing is usually scrupulous about avoiding comment on the domestic politics of other countries, but still felt it necessary to publicly criticize Trump’s stance on climate change. A South China Morning Post poll published on Nov. 5 showed that 61% of Chinese preferred Trump’s Democrat rival Hillary Clinton, higher than her final share of the U.S. popular vote. Only 39% of the Chinese preferred Trump, lower than his share of the U.S. popular vote. A study by the U.S. journal Foreign Policy of Chinese elite attitudes, published on Nov. 7, concluded that while they viewed Clinton as unfriendly, most felt that Trump would be a disaster for the U.S. and hence for global stability.
- China’s leaders may not admit it, but they know that the U.S. is vital for the maintenance of regional stability. Beijing values stability above everything else, particularly with the Chinese Communist Party’s crucial 19th congress only a year away and internal labour and social unrest endemic. President Xi Jinping’s anti-corruption campaign has generated a great sense of insecurity among cadres across all sectors of the state. In October, about 1,000 military veterans in uniform protested outside the ministry of defense in Beijing. It is impossible for such a large and conspicuous group to have gathered near such a sensitive area without at least the tacit connivance of some senior cadres.
- Like most of East Asia, China hates surprises. Clinton was a known quantity and would have stood for continuity in American policy toward the region. But East Asia is also pragmatic, not wont to just wring its hands in despair over new realities. Governments of the region will work with whoever is in power in the U.S.
Harvard Business School Reveals: Why Trump Won
By Shlomo Maital
Harvard Business School’s Working Knowledge on-line magazine reveals: “6 Lessons from Donald Trump’s Winning Marketing Manual”
Donald Trump’s upset election win offers six lessons for marketers looking to beat the odds and overcome powerful competitors, says John A. Quelch. Here they are, in case you wondered.
Here are six important lessons from Trump’s brand marketing playbook:
- Give consumers a job. The best marketing campaigns always call on consumers to do something. For example, United invites you to “Fly The Friendly Skies.” Nike insists that you “Just Do It.” The most successful brands also allow their consumers to co-create brand meaning. “Let’s Make America Great Again” is an inclusive call to arms with a powerful goal that each voter can interpret for himself. It embraces passion and purpose. Clinton’s “Stronger Together” is also inclusive but it evokes process, not that process isn’t important, but the desired outcome is much less clear. Good marketers know that, if you don’t position your brand clearly, your competitors will do it for you.
- Show the past as prologue. Offering consumers the adventure of voting for an uncertain future never works with the majority, especially if your brand is new to the game. Trump, the political neophyte, won by recalling a better yesterday and promising to recreate it as the better tomorrow. The word “Again” is no accidental addition to the Make America Great slogan. Remember the famous Kellogg’s Corn Flakes campaign to recover lost consumers: “Try Us Again for the First Time.’ For millions of Americans in the rust belt, the good old days really existed and they voted to bring them back.
- Pursue forgotten consumers. Most financial firms chase the same high net worth prospects, ignoring or at best taking for granted millions of modestly prosperous people. Trump turned the Democrats’ commendable embrace of diversity on its head to invoke the “Forgotten Man,” winning over lunch-bucket Democrats overlooked by their party as well as bringing in new voters and energizing lapsed ones. At the same time, almost all Republicans came home to vote for their nominee. Good marketers always know how to balance new customer acquisition with customer retention.
- Sizzle beats steak. Clinton was always going to beat Trump on the steak of experience and policy knowledge. A new brand can’t afford to get lost in the policy weeds. Hence, Trump’s campaign persona and his contract with the American voter offered more sizzle. Painted in broad brush strokes, the contract emphasizes goals and outcomes, and is light on policy and implementation details.
- Build enthusiasm. Good marketers know the power of word-of-mouth recommendations. In the era of social media, better organization (the old ground war) and outspending on television advertising (the air war) weren’t enough for Clinton. Trump’s determination and stamina–five speeches a day–and the size of his crowds impressed ordinary voters watching on television much more than Clinton’s barrage of paid ads. The pundits questioned whether enthusiasm would convert into votes. Good marketers know that brand enthusiasm rings the cash register. It did for Trump, but not for Clinton.
- Close the sale. Political marketing requires you win a plurality of votes not every day but on a single day once in four years. Timing is everything. Trump learned what worked and what didn’t work as the campaign progressed. He refined his message, suppressed the ad hominem insults, and peaked at the right time, confounding the pollsters and media pundits. In every recent speech, he repeated the same messages, inviting voters to imagine the future if they bought into the promises of a Trump administration. He confidently asserted “we are going to win” this state, “we’re leading in” that state. Consumers not only want to back a winner, they want to back a brand that sees itself as a winner. And they want to back a brand that other people similar to themselves see as a winner. That’s when a brand becomes a movement. In the last week, brand Clinton promised a bright future but looked like the candidate of yesterday, a little tired and overly reliant on a supporting cast of Obamas and Bon Jovis. By contrast, Brand Trump promised a future that looks like yesterday, Everyman’s high-energy underdog and outsider, disruptive yet decisive, standing alone at the podium, mane flowing, ready to step up to Pride Rock.
Quelch concludes: “Brand Trump is today’s bright new thing. But new is easy. Good is hard. Time will tell whether Brand Trump can deliver on its promises.”
Middle Class Blues: A Different Narrative
By Shlomo Maital
We are hearing endlessly about the struggling blue collar workers and the oppressed middle class, sinking into debt, losing jobs, struggling to stay afloat. We hear Donald Trump play on their fears and grudges.
There is another narrative, one given in today’s New York Times by David Brooks. It is about resilient workers and middle class people, who adapt, shift jobs, lose one and gain another, learn new skills – and stay afloat, endure and even prevail. And there are lot of them.
Here is how Brooks describes one such case:
A few weeks ago I met a guy in Kentucky who’d lived through every trend of deindustrializing America. He grew up about 65 years ago on a tobacco and cattle farm, but he always liked engines, so even while in high school he worked 40 hours a week in a garage. Then he went to work in a series of factories — making airplane parts, car seats, sheet metal and casings for those big air-conditioning fans you see on the top of buildings. Every few years as the economy would shift, or jobs would go to Mexico, he’d get hit with a layoff. But the periods of unemployment were never longer than six months and he pieced together a career.
So, how did he piece together a career?
His best job came in the middle of his career, when he was a supervisor at the sheet metal plant. But when the technology changed, he was no longer qualified to supervise the new workers, so they let him go. He thought he’d just come in quietly on his final day, clean out his desk and sneak away. But word got out, and when he emerged from his office, box in hand, there was a double line of guys stretching all the way from his office in back, across the factory floor and out to his car in the lot. He walked down that whole double line with tears flowing, with the guys clapping and cheering as he went. We hear a lot about angry white men, but there is an honorable dignity to this guy. Some of that dignity comes from the fact that he knows how to fix things. One of the undermining conditions of the modern factory is that the workers no longer directly build the products, they just service the machines and software that do. The bakers now no longer actually know how to bake bread.” But this guy in Kentucky can take care of himself — redo the plumbing at home or replace the brake pads.
And what was his ‘narrative’, his story, told to himself? One of betrayal, exploitation, deprival, social inequality? None of that.
It’s more of a reactive, coping narrative: A lot of the big forces were outside my control, but I adjusted, made the best of what was possible within my constraints and lived up to my responsibilities. ….
I adjusted. Made the best of what was possible. Lived up to my responsibilities. This is a narrative that I believe is far far more representative of the working middle class, than the Trump “I’m-a-victim” narrative: “Washington screwed me, so I will vote for a scoundrel, because he expressed my anger, even though he hasn’t a clue about what middle class life is about.”
People are basically resilient. They bounce back. And the ones with integrity do not cast ballots for those who cynically exploit the worst qualities among us – avoiding personal responsibility for our own fate.