Political Inequality - Even some conservatives see this as a risk

A while back, Andrew Sullivan commented in his blog about the political threat of soaring inequality. That problem is still with us, and is getting worse.

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One of the things noted in the chart below is Elite Fratricide preceding Political Disorder.

This is a very dangerous time for any nation, as the lunatics come out and are at risk of gaining power.  Recently, the Governor of Texas put the state guard on alert, claiming to protect Texas from an invasion from the United States. Even Forbes Magazine (where this link originated) senses that people who would believe this are Right Wing Nut Jobs!  And yet, the polity in many of the Red States keeps electing people who in other times, would only be fit for a clown car.

In the past, I posed the question:

How many clowns can be fit into a typical Clown Car?

And I realized that I already had the answer:

No one knows - it is still spewing out clowns.

In the case of the GOP's field for 2016, we now have so many candidates, that it will be impossible to have all of them on the debate floor at the same time.

The "Tea Party" said that giving financial aid to Hurricane Sandy victims would be a big mistake because of all the fraud that would be involved. (And they were right.  Does anyone remember the "Stronger than the Storm" campaign, which had Governor Chris Christie prominent in every ad?") And now that Texas has been hit by a natural disaster, they have changed their tune....

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What we're seeing here is a political party that is out of control, a party which favors the political elite over the common good of society, and one that wants to continue adding to the economic inequality which is now disrupting the body politic.

An example of the disconnect between the GOP and reality is the candidacy of Carly Fiorina for the presidency. She is running, using her experience as CEO of Hewlett Packard as her way of showing she is qualified to hold high office.  One problem - HP kicked her out of the "C-Suite", as the firm under performed during her tenure. Can we risk having a poorly performing business person running the country, if we want America run as if it were a business?

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Right now, there is a case working its way through the court system which is geared to disrupt the idea that congressional districts are to contain equal numbers of people, by posing that the districts should contain equal numbers of voters.  Is this fair? Probably not. But, like Jim Crow, we've seen unfair systems established before in this country to keep a ruling elite in power. And I keep wondering - how long will it be before the disenfranchised say: "We're not going to take it anymore?"

The wheels on the money go round and round....

OK - I'm not too original today....  But the recent sale of AOL to Verizon made me think of Wall Street, and how it has a nasty habit of creating deals that squander more wealth than those deals create.

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Let's look at the case of AOL.  Years ago, it dominated the dial-up internet market.  I'm pretty sure most of my readers remember how ubiquitous AOL software CDs were in the 1990's and early 2000's. One couldn't help but get several of these disks every week - and AOL made a lot of money way back when.  

At the peak of the market, AOL bought Time Warner.  For AOL stockholders, this was a great deal - it gave them real long term value for the stocks they held. However, for Time Warner stockholders, one has to ask - what were these idiots thinking?  Yet, no one blamed the advisors at the investment banks (organizations such as Merrill Lynch, Morgan Stanley, et.al.) for selling a questionable bill of goods to Time Warner stockholders - many of whom saw the value of their assets plummet.  However, the investment bankers made out like the bandits they were. Eventually, the combined AOL Time Warner got smart - and unloaded AOL.  Of course, these same investment bankers made even more money for handling the transaction. Was there any real value generated in either of these two transactions? No. But the investment bankers extracted their share of wealth - and passed it along to their upper managers. 

Today, as I started writing this entry, Verizon has just announced that it was buying AOL - in part because of its mobile content.  It seems like the same story, but different characters. In this case, AOL brings to the table some technology and some media that Verizon claims to need for its efforts to get people consuming media via cell phones. Does anyone really believe that AOL, with its history, has much to contribute to Verizon?

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Over the years, we've seen many deals orchestrated by Wall Street that made no sense other than to line its coffers. The deals get made, and then a decade or so later, they get unmade. The only deals that ever make sense are those that allow for consolidation in shrinking markets, or for those which allow for expansion in growing markets. Yet, the vast majority of deals do not meet either of these two conditions.

A few years ago, a major Wall Street financial services firm (with a bank charter) ended up merging with one of its major competitors. Upper management claimed that value would be added by "synergy savings". (Read: Layoffs). The two firms merged just before the 2008 financial panic, and made sure that its layoffs were made on time, so that the firm could meet its financial numbers. However, a goodly number of the tasks required to integrate the two firms were left undone - and this created an unwieldy infrastructure which cost the firm more money than if they had missed their numbers for a quarter. (In 2008-2009, no one was hitting their financial targets.) Several years later, the same firm had expenses 120% of that of its peer group - and the only option it had left to make its numbers was layoffs.  

Would this organization have been better off had it not merged two competitors?  I don't know. But neither organization would have been wasting time trying to integrate two very different firms, and neither organization would have been number one in its market - leaving room for either of them to steal each other's market share, instead of having to perform the harder task of protecting a number one market share.  In short, being at the top of the heap limits the organization's room to grow, while being number two, three, or four allows for greater competition, greater innovation, and greater returns to stockholders.

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I'm not saying that all deals are bad.  Some deals can be quite good, if performed with the right partner.  For example, it was a big mistake for Daimler-Benz to purchase Chrysler. They had no way to integrate corporate cultures, and there was no "synergy" (I hate that word), as Chrysler had nothing to offer Daimler-Benz.  Eventually, Chrysler ended up in the hands of Fiat.  

Now, Fiat had an interesting history of its own.  GM had the option to purchase Fiat, and bailed out - costing the firm a lot of money. Fiat found a way to become financially strong, and saw an opportunity in buying Chrysler that Daimler-Benz didn't have. For Fiat, Chrysler became a springboard into the United States that Daimler-Benz didn't need. Some of Fiat's technology made it into Chrysler cars (e.g. the current Dodge Dart), and some of Chrysler's product line became available to Fiat (e.g. the Jeep).  Here was a merger that could work over time.

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Why is this important?

Wall Street will be playing a major role in next year's presidential elections, as it will be throwing money at all the major candidates and expecting a return on its investments. The investment banks will want to keep making value consuming deals, and expect the taxpayers to subsidize their losses. 

Can we afford to allow them to get away with it anymore?  I doubt it.....

The impermanence of the news cycle.

It never fails to surprise me about how little people retain from each day's news cycle. A few weeks ago, Obama's warming up towards Cuba was big news - and the "conservatives" were all chastising him for abandoning tactics which have been proven not to work. The same thing was done with Iran - and again, it was big news for a few days, and almost forgotten. We're seeing public opinion swayed by talking heads, in ways that George Orwell could only dream of....

Orwell, in "1984", presented a public speech where someone was ranting about one enemy, and in the middle of the speech the enemy changed. The former enemy was now a friend, and the former friend was now an enemy. Although this type of change isn't happening as fast as in Orwell's novel, we're already seeing this in our media.  How many of us remember when our enemy was "godless" communism? And now our biggest trading partner is the People's Republic of China - governed by the Communist Party.

Although George Washington warned us against having any permanent entanglements, I don't think that he would believe how quickly the world changes in our lifetime.  My father has seen Germany and Japan go from being friendly countries, to enemies, and back to being friends. And in my lifetime, I've seen the same happen with Vietnam, and am seeing it happen with Iran and Cuba.

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About 50 years ago, the city of Baltimore had its riots. And now, it had another round of riots. The problems are the same as they were 50 years ago - a general lack of economic opportunity. Americans will forget about this round of riots, as they have other important things in the news. But will we learn from them?

This time, we're seeing people around the world "armed" with cell phones (most of which contain the latest software) and active internet connections. Even in Iran's riots of a couple of years ago, the central government was unable to suppress all the news from getting out of the country. It couldn't suppress the news being passed along by its citizens. And the same thing happened here - the Baltimore Police could no longer cover up what triggered the riots - a "thug" whose rights were ignored by the police, and a death that couldn't be ignored.

Now, I've just used the word "thug" to describe this person. But is he as bad as the label I've attached to him?  In an area as economically depressed as his section of Baltimore, over 56% of the adult male population is unemployed. Dr. Phil noted in an interview on Fox News that the people living in these poor sections of cities may have the same potential, but not the same opportunities, education, or inter-generational social pass-throughs. Was this person's rap sheet caused by a defect in this person's character, or was it caused by the environment he lived in?  

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Two generations ago, we didn't need to worry about the problems of structural unemployment.  Today, both people in the inner city and the suburbs are affected by these problems. The low end jobs which were stepping stones to greater opportunities no longer exist. Low value/High Labor cost manufacturing left the United States years ago. Computers have replaced humans in many tasks which would have provided work - the computer managed "help lines" we call are perfect examples of this. It is cheaper to have a human interface with a series of telephone menus than to reach a real, live, flesh and blood human. And society no longer provides the full and free education needed to fill the jobs of tomorrow.

Our college education system has been corrupted by government funding - instead of having our government expand access to college by building more colleges, we've seen our government increase the monies available to students in student loans. Simply adding more money to buy more education doesn't do much good - it only raised the nominal price of an education, making it much harder for both the poor and the middle class to afford college. And for those that got the student loans, they often now have onerous debt to repay, and are deferring having children. (I'm not even talking about those who took out predatory student loans issued by for-profit colleges that provided sub-standard educations - these students were screwed the day they entered school, and no one wants to fix this problem because the affected students come from the lower castes....) Since student debt can't be erased in bankruptcy, we now have a generation of Americans who will not be able to afford what will be needed from them in the future.

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It is very interesting is that the problems that once only afflicted the lower class are now affecting the middle class.  Poverty used to be clustered in the inner city and in remote rural areas. Now, we're seeing newly poor people scattered through middle class neighborhoods. Houses are becoming derelict because of predatory lending combined with "Zombie Titles" that insulate banks from maintaining foreclosed properties - Banks are no longer foreclosing on many properties, making it impossible for borrowers to walk away from debt that they can no longer afford. Sadly, this may only be the tip of the iceberg when it comes to what the banks will be doing next to preserve their power in society....

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Where will we end up?  I don't know. I'm afraid for our future, as we're seeing the signs of America's upcoming collapse - and we, as a whole, have a lot of questions about our society's future that need to be asked and need to be answered.  So far, all our leaders are doing is pandering to us and our fears - they do nothing to deal with the real problems. And this is a great danger that we all should fear....

Baltimore Riots (Continued)

The above is a collective image of the 6 Baltimore police officers who have been indicted for the homicide of Freddie Gray. Although they deserve a fair trial by an unbiased jury, it was interesting to see how political pressure can be used to redress some of the issues raised by some of the disenfranchised in society.

In the followup to the riots, we saw the Baltimore D.A. take an honest look at the evidence and had no choice but to call for an indictment. Gray was not belted into his seat for his own protection. The police van made 4 stops, not 1 before reaching its final destination. And, the knife once labeled as a switchblade was perfectly legal for Gray to possess. There was enough of a stench coming from the police involved, that even the D.A. couldn't avoid seeing an apparent abuse of police power.

Recently, Dr. Phil was on Fox News, and he slipped through a comment that the talking heads didn't notice. Although the kids in the poor neighborhoods may have the same potential as those in the better neighborhoods, environmental factors may be making it impossible for them to achieve this potential. Around 4:20 (or so) in the linked video, he noted that there are fewer opportunities available for these kids, that the school systems are very different for these kids than those in the affluent suburbs, that fewer resources are available for these kids, and that their parents do not have the "societal" skills to pass on to the next generation (as Dr. Phil puts it - "generational pass throughs").

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I have commented before about the warehousing of excess population in our nation's prisons. I have commented before on the economy of the drug trade, and how it is one of the last "industries" available to poor people with criminal records. I have commented about how people have been turned into 3rd class citizens, and denied the right to vote after serving time in prison. And I have commented before on unequal education in our country. But what happens when these factors are not properly addressed by society - Riots.  

Why does this concern me?  I don't live in the inner city; I live in the suburbs.  The answer is simple. We are seeing the gradual breakdown of society from the bottom up. As the segment of society for whom enough opportunity does not exist grows, the more unrest there will be. When this segment swallows up much of what was once the middle class, I am not sure of how long our democratic republic will survive.  I am very afraid of an authoritarian government taking the place of the flawed system we now have.

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When the above 6 police officers were indicted, I found it interesting that the people in the inner city were celebrating.  Only time will tell if these officers are convicted.  But is this a bone being thrown to the masses to keep them quiet?  I am not sure.  Years ago, we saw the O.J. Simpson trial on TV. It was captivating, if only because a black defendant had enough money and resources to put up a strong defense and win against a prosecution who had virtually unlimited resources. (It helped that there was a mixed race jury hearing the case, unlike the civil trial held in the L.A. Suburbs.) And at that time, one heard the same cheering among the Black segment of America's population as if "one of ours finally won!"

Law enforcement and criminal defense are two things that differ between the better off and the worse off in our society. In the more affluent communities, police treat residents (for the most part) with respect. If someone has to go to trial, that person generally can muster up enough resources to put up an adequate defense. This is not the case in poor communities, where the police are being used to control a disenfranchised population, by arbitrarily enforcing laws. Because the poor do not have adequate resources to defend themselves in court, there is extreme pressure to plead guilty for lesser prison time. And once out of prison, many poor people are now unemployable in the traditional economy. The drug trade becomes the only business open to these people, creating a vicious cycle of crime, poverty, and hopelessness.

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If one doesn't believe that there isn't an arbitrary standard of justice in this country, look at the latest video by Willie Nelson and Merle Haggard. In it, you'll see an action for which white people are rarely prosecuted, but for which black people are often prosecuted. Depending on the state this video was shot, the action would be legal, be a misdemeanor, or even be a felony. 

As much as I love Willie Nelson's music, his use of cannabis illustrates the double standard of justice we have for black and white people in this country.  The police have caught him and his entourage with cannabis - and he has never (from what I can tell) spent a day in jail. Can you say this about black people who have been arrested for possession/sale of the same substance?

To me, it's about time that we end the so-called "War on Drugs" and begin reinvesting in the inner city (and its residents). If we don't, are we willing to risk losing the freedoms we have left to a future authoritarian government, just to keep the disenfranchised under control?