A Tale of Two Cities: Maywood CA and Bell CA

Here's a story I've held off on posting until I had all the facts.

To my readers, I apologize for not posting sooner but I
wanted to be accurate above all else before I went to press.

What you are about to read should shock the daylights
out of you. It puts the tales of New York's Tammany Hall
to shame and makes Chicago's Democratic machine
look like the rankest amateurs.

And if that upsets you, it should - because this is a tale of
EPIC Public Corruption unlike any I am aware of in recent
history - a sad tale for the local residents involved, but a
cautionary one for the rest of us.

It is a salient example of what happens when a community
ceases to be vigilant about its governance. And just because
this story involves local government, it makes no difference.
The same thing can happen at the state or national level, far
more easily than we might imagine.

Here's the story:

It begins in the city of Maywood, California last May, when,
in the preparation of its annual budget for the 2011 fiscal
year, the city received a notice from its liability insurers
that its premium for liability coverage of its employees
(including the Police Dept.) would triple, to approximately
$1.5 million per year.

Now Maywood is a close-in suburb of Los Angeles, but let
me assure you, Beverly Hills it is not. It is a city of about
40,000 people, 90% Hispanic, 60% foreign born, with
a per capita income of about $36,000 per year - about
half that of Los Angeles County in general. Which means
that they're not exactly flush with cash.

So after first considering merely doing away with their
police department, which was facing several lawsuits
over "police abuse", they came up with an even better idea -
to do away with the notion of city employees entirely -
and outsource everything.

First, they outsourced law enforcement to the L.A. County
Sheriff's Department, saving approximately $ 4 million a
year in the process. Next came Public Works, Parks and
Recreation, even parking enforcement - all services for
which they found eager private sector bidders, saving
even more money.

The last thing the Maywood City Council did was to
contract out the administration of the city itself to
the neighboring city of Bell, at a monthly payment
of $50,000 - about two-thirds of the previous expense.

So far, so good - Happy citizens and taxpayers in Maywood.

But here's where it gets interesting. The Los Angeles Times,
no friend of outsourcing or the Private Sector in general,
decided to investigate and compare Bell and Maywood - two
adjoining cities with similar demographics, to see what
lessons could be learned.

And what they found blew the roof off.

The City Manager of Bell, one Robert Rizzo, was
being paid $ 787,000 annually - almost twice as much
as President Obama and three times the salary of
Los Angeles Mayor Antonio Villaraigosa. Police Chief
Randy Adams was paid $ $457,000 per year - or twice
the salary of L.A. Police Chief Charlie Beck. And
assistant City Manager Angela Spaccia was paid
$ 376,000 per year - more than any other municipal
executive (except for Rizzo) in the State of California.
And it goes on from there.

The seven Bell City council members, who are part time
and paid $700 per month, also are eligible to sit on up to
sixteen different city Boards and Commissions - the City
Recycling Authority, the City Planning Commission, and
so forth. In return, they can earn up to $1,000 per month
additional for each different board they sit on.

But most of these boards are "ghost" authorities - in fact,
last year most of them met for only One Minute Per Month -
this according to California Public Records Act disclosures
which the Times uncovered. And six of the seven councilmen
occupied all these positions, making their total compensation
over $100,000 annually for part-time work.

Even so, the Times managed to uncover one honest man -
newly appointed Councilman Lorenzo Velez, who earned
only his $700 monthly for attending City Council meetings.

The reason he wasn't also on the gravy train? He replaced a
councilman who resigned after unspecified accusations of
wrongdoing, but who after resigning was given a full-time
city job at Bell's food bank and kept his membership on
six of the "ghost" commissions - this despite an ordinance
that specifies only sitting council members can be on these
entities.

The upshot? The Bell City Council meeting yesterday was
jammed with irate voters demanding the resignation of Mayor
Oscar Hernandez ( a part-timer making $150,000 per year), Rizzo,
Adams, Spaccia, and the entire council except for Velez. A group
has formed to circulate petitions for a recall election. Others
are preparing to file suit demanding an audit of city finances,
which hasn't been done for the last two years despite California
law to the contrary. And there's still more. It appears that three
of the part-time council members own businesses whose principal
function is contracting with the City for "unspecified services".

Both the Los Angeles County Attorney and the State
Attorney General's office are investigating, and late yesterday
came word that the U.S. Attorney for the Southern District of
California will open an investigation for violations of the
Federal Public Corruption Act.

For the unfortunate residents of Bell, help can't come
soon enough. And it's even more galling that the
corrupt council members and city executives appeared
to be taking advantage of the "Patron" culture which
the mostly Hispanic and foreign-born residents grew up in.

In the Hispanic culture, the "Patron" or political leader, is
expected to be corrupt, and to lavishly line his pockets in
return for shouldering the great responsibilities of governance.
In return, he is also expected to disburse cash, favors, and
considerations ("Las Mordidas") to deserving members of the
community.

But there wasn't very much flowing downward to the ordinary
people, it seems - just to the regular employees and their
unions, who regularly turned out at election time to keep
the incumbents in office.

Regardless of what ultimately happens, (and I expect that
some Bell city councilmen and managers will ultimately be
guests at the Crossbar Hotel or Club Fed), this should be a
warning. Where Government and Tax Dollars are concerned,
voters won't get what they expect - only what they inspect.

And the solution to problems like this? Not recall elections
and criminal investigations, but pitchforks and torches,
tar and feathers, and trees and boiled rope.

Tax Cuts for the Wealthy vs. Unemployment - No Change We Can Believe In

Well, it's finally out in the open now.

Sen Jon Kyl (R-AZ) finally detailed the reasons for his
(and the rest of his party's) unrelenting opposition
to the extension of emergency unemployment benefits.

To him, they are a "necessary evil", and thus they need
to be fully offset by "spending reductions" elsewhere.

Here's the story on The Huffington Post

At the same time, Sen. Kyl also went on to explain that
"tax cuts", unlike unemployment benefits, don't need to
be "offset" by spending cuts elsewhere, because
"they pay for themselves".

And the economist he cites as proof? That eminent
economist and Senator from Kentucky,
Mitch McConnell.

Now I don't blame Sen. Kyl. As a loyal, obedient member
of the Senate Republican caucus, he has to speak the lines
he's told to, even if they don't square with the facts.

And the fact is, that of $787 Billion in stimulus spending,
$450 Billion was tax cuts skewed toward corporations
and the wealthy. This was supposed to "stimulate" new
investment and hiring. And we can all see how that turned out.

And to The Thinking Nationalist, it's a very, very tired and
overplayed theme.

It's nothing more than "trickle down" economics,
dressed up in fancy rhetoric to stimulate class envy
and resentment. And I can understand this.

If you're a small businessman, or self-employed, and
You aren't seeing any benefit from all of the "stimulating"
activity going on, and you aren't benefiting from this
miraculous economic recovery, why shouldn't you
have a tax cut?

After all, the unemployed are (or were) getting Theirs,
the Too-Big-To-Fail banks got Theirs, and as long as they
agreed to keep outsourcing and offshoring jobs, the Big
Corporations got Theirs....

Where's Yours?

I feel your pain.

But, to the GOP and their fellow travelers among the
"Blue Dog" Democrats, you don't matter.

You aren't lining up to stuff dollars in lobbyists' pockets
to hand to the GOP and the entrenched politicos of the
Democrat Party . You aren't working the corridors of
Capitol Hill, with lobbyists in tow, with pre-written bills
or amendments to bills, pressing your case directly, where
it matters.

And if you're going to do that, don't forget the manila
envelopes stuffed with large amounts in small
denominations for your favorite Congresscritters.

After all, in the Halls of Power, money talks and
you-know-what walks.

And don't even think about mainstream Democrats.

If you aren't an Ivy-educated, certified Intellectual,
you just don't count. But don't blame yourself if you're
not at that exalted level.

After all, mainstream "liberal" Democrats, including
the president, care more about winning the "intellectual"
battle more than anything else.

Their idea of a "win" is a critically acclaimed Op-Ed in
the Times or the Washington Post. Or a blog post
on Huffington. Or a guest appearance on the PBS
News Hour.

After all, those audiences understand all the "nuances"
and the "irony" involved in trying to represent the
"progressive" agenda. And they also understand that
this has absolutely nothing to do with representing
the voters back home.

After all, Everyone who is Anyone knows that they
(meaning you) just don't get it. That means you don't
count. And don't be thinking "Tea Party".
The "Tea Party" doesn't shock anyone anymore.
There's no scare there.

Just a bunch of mindless rural rubes ready to vote
Republican, to their own detriment.

So if you think your voice isn't being heard in
Washington (and you can be assured it isn't),
Mr. or Ms. Independent Voter, you need to do something
different. You need to think outside the box.

And that means voting Third Party.

Now, don't get me wrong. If you're dissatisfied with the
way things are going, and your incumbent isn't getting
the job done for you, go ahead and Vote For The Other
Guy, no matter what, as long as there's a credible difference
between the two.

But in some places that may not be enough. Some states
are so Blue or Red that winning the Primary means a
ceremonial walk-over in the General Election.

Or, there's so little difference between the two candidates
that either could just as well be a member of the others'
party.

And that's just not good enough.

So if that applies to your state, vote Third Party.

If you're Conservative, vote Libertarian instead of
Republican. If you are liberal or "progressive", vote
Green, Socialist or even Communist.

And if enough of us do this, we're going to have a
great mixture in Congress and in the state legislatures
as well.

I'd love to see some Republican leader bust his gut
trying to get a "compromise vote" out of some
died-in-the-wool Libertarian. And I think the
Democrats would go nuts if they had to "coalesce"
with Green, Socialist, or Communist legislators.

Who knows - out of all that, you might get Change
that some of us might believe in ... for a change.

Guest Post: The 24 Types of Libertarian

(h/t Barry Deutsch)


The current economic malaise has brought all kinds of folks
out of the woodwork.

From out-and-out Marxists ( a la David Harvey) to the Tea Party
types, the extremes on both sides seem to be dominating the
debate these days. What they have in common, I'm afraid,
is being long on volume and short on solutions.

But nothing has been quite as remarkable as the steady march
of the GOP towards its "libertarian" roots.

In this vein, then, here is a "graphic" description of the "24 Types"
of "GOP supporters and libertarians" - the better so that we
can identify them should they try to convert us to their
way of thinking.

Here they are (follow the link):

Happy Fourth of July - A Salute To Bloggers And a Year Completed.

It was almost a year ago that I set out to create
The Thinking Nationalist - a small web journal of
political and economic opinion that focused on current
events from a "centrist" American perspective.

Unlike many other "bloggers", I did not look in
the first year to go all-out with a firmly biased
outlook, either left or right, on every issue that
crossed my writing desk. Rather, I decided that
this first year would be given over to honing my
blogging craft, and that my original pieces would
try to be more explanatory than exhortatory,
preferring wherever possible to shed light on an issue
rather than unwarranted heat.


Further, when the occasion required, I decided to also
include several pieces cross-posted (with attribution)
from other blogs or sources. And in return, I have had
the distinct pleasure of being quoted by name in a few
other blogs, many of which are older than this one and
more widely read.

I would also at this point like to take the time to thank
the other authors whose blogs are listed on the left-hand side of
the page, many of whom took the time to offer advice,
suggestions, topic ideas, or links to additional information.
And in the same spirit, I would also like to thank the readers who
circulated my posts like Samizdat to others.

To all of you, both readers and fellow bloggers. I thank you.

In these trying times, I believe that bloggers are
providing necessary, important and free public services
of both information and persuasion - far more so than the
paid mainstream media, who are more comfortable
sucking up to the powerful and influential than standing
up to them in the name of the public.

Time was when the intrepid journalist was focused on
getting "the story" - having checked the facts and
corroborated the evidence, he published - and let the
chips fall where they may. Naturally, such an approach
never sits well with "Powers That Be" wherever they are,
as these worthies have often more to lose from
embarrassment or ridicule than the actual discovery of
malfeasance.

Thus journalists, under the pressure of a constant
news cycle to generate air time or column inches, often
morph into the lap dogs of their favorite sources.
Nothing so warms a mainstream media person's heart
but that to know that for him or her, the velvet rope
will always be lifted and access will always be granted
when deadlines or air time loom near.

With rare exception, the blogger faces little such pressure.
Permanently on the outside, occasionally granted access
as part of the "Alternative Media" pool, he is free to write
and opinionate to his heart's content.

And in so doing, he not only sheds light on important issues
but brings some necessary heat as well.

It is fitting, therefore, that on the 234th Anniversary of
the Nation's founding, a Nation founded in no small part
by the exertions of free men armed with free speech and a
free press, that we take time to honor those who dare
call the powerful to account and the influential to
explanation. Let us always remember that our liberties
are more secure in the hands of the man with a
pen and a voice than in the hands of the man with a gun.

If Thomas Paine, the author of "Common Sense" were alive
today. he would be a blogger - and his columns would still be
passed hand to hand and read as eagerly as in the days of old.

And given the mess that is today "our body politic", he
would have plenty to write about and a lot to say - and
almost none of it would be complimentary to those
who style themselves "Our Leaders".

In that vein, then, we are going to alter the approach of
The Thinking Nationalist over the coming year to take
a harder, more partisan stance on the issues than before -
and the principle that will under line our approach is
Nationalism.

"Nationalism" in the current sense, has gotten an undeservedly
bad rap from authors of both the left and the right. "Liberals"
view "Nationalism" as a code word for racial and ethnic
prejudice, while "Conservatives" view "Nationalism" as a quaint
and backward obstacle in their abstract pursuit of "Free Markets".

Both are wrong. "Liberals", while pretending solicitude
for the common man, fail completely to understand the
anger and distress felt by citizens about the unlawful
invasion of millions upon millions of alien foreigners into
our midst, who share not our language, culture, history or
traditions but, with the support of "liberals" demand not only
legal status but unquestioned acceptance. The "conservative"
on the other hand, would announce "open borders" the better
that wages and working conditions might fall to some abysmal
3rd world level, the better to profit the "Ownership Class".

And "Immigration" is only one area where both mainstream
liberals and conservatives are just plain wrong. "Nationalism"
gives us the reasons why.

The same is true on any number of issues - economics,
trade, jobs, industrial policy, education, social welfare,
foreign policy and national defense. In their single-minded
pursuit of abstract "truth" as they see it, both left and right
have failed a nation desperately seeking answers and a way
forward in a pitiless and hostile world.

"Nationalism" provides that way forward.

Over the coming weeks, I will detail "A Modern Nationalist
Manifesto" that, hopefully, will provoke discussion and
debate. And, we will keep up our perspective on current
events and people as always.

These are interesting, indeed historic times we are
living in. But whether they are tragedy or blessing is
now, more than ever, up to us.

- The Thinking Nationalist

Andy Grove: How to Make an American Job Before It's Too Late

(H/T: Naked Capitalism and Bloomberg News)

When Yves Smith of Naked Capitalism suggests we read
something, I usually take notice.

Yesterday, she directed her readers to an article by Andy Grove
(one of the founders of Intel), calling for drastic changes in
American industrial policy, specifically toward startups,
innovation, scaling, and manufacturing job creation.

The piece is long, detailed, and worth reading in full, but
the central point is this: An economy that innovates
prolifically but consistently exports its jobs to lower
cost overseas locations will over time not only lose its
capacity for mass production but also its very ability
to innovate.

So compelling and important is this piece that I am
going to present it here substantially in its entirety:

Dr. Grove:


" Recently, an acquaintance at the next table at a
Palo Alto , California restaurant introduced me to
his companions: three young venture capitalists
from China. They explained, with visible excitement,
that they were touring promising companies in
Silicon Valley. I've lived in the Valley a long time,
and usually when I see that the region has become
such a draw for global investment, I feel a little proud.

" Not this time. I left the restaurant unsettled. Something
didn't add up. Bay Area unemployment is even higher
than the 9.7 per cent national average. Clearly, the great
Silicon Valley innovation machine hasn't been creating
many jobs of late - unless you count Asia, where
American technology companies have been
creating jobs like mad for years.

" The underlying problem isn't simply lower Asian costs.
It's our own misplaced faith in the power of American
startups to create U.S. jobs. Americans love the idea of
the guys in the garage inventing something that changes
the world. New York Times columnist Thomas L. Friedman
recently encapsulated this view in a piece entitled
"Startups, Not Bailouts" . His argument: Let tired old
companies that do commodity manufacturing die if
they have to. If Washington really wants to create jobs,
he wrote, it should back startups.

Mythical Moment

" Friedman is wrong. Startups are a wonderful thing, but
they cannot by themselves increase tech employment.
Equally important is what comes after that mythical
moment of creation in the garage, as technology goes
from prototype to mass production. This is the phase
where companies scale up. They work out design details,
figure out how to make things affordably, and hire
people by the thousands. Scaling is hard work but
necessary to make innovation matter.

" The scaling process is no longer happening in the U.S.
And as long as that's the case, plowing capital into young
companies that build their factories elsewhere will
continue to yield a bad return in terms of American jobs.

" Scaling used to work well in Silicon Valley. Entrepreneurs
came up with an invention. Investors gave them money to
build their business. If the founders and their investors were
lucky, the company grew and had an initial public offering,
which brought in money that financed further growth.

Intel Startup

" I am fortunate to have lived through one such example.
In 1968 two well-known inventors and their investor
friends anted up $ 3 million to start Intel Corp., making
memory chips for the computer industry. From the
beginning, we had to figure out how to make our chips
in volume. We had to build factories, hire, train, and
retain employees; establish relationships with suppliers;
and sort out a million other things before Intel could
become a billion-dollar company. Three years later it went
public and grew to become one of the biggest technology
companies in the world. By 1980, which was about ten
years after our IPO, about 13,000 people worked for
Intel in the U.S.

"Not far from Intel's headquarters in Santa Clara,
California, other companies developed. Tandem
Computers went through a similar process, then
Sun Microsystems, Inc., then Cisco Systems Inc.,
Netscape Communications Corp., and on and on.
Some companies died along the way or were absorbed
by others, but each survivor added to the complex
technological ecosystem that came to be
called Silicon Valley.

" As time passed, wages and health care costs rose in the
U.S., and China opened up. American companies
discovered that they could have their manufacturing
and even their engineering done cheaper overseas.
When they did so, margins improved. Management
was happy, and so were stockholders. Growth
continued, even more profitably. But the job machine
sputtered.

U.S. Versus China

" Today, manufacturing employment in the U.S. computer
industry is about 166,000 - lower than it was before the first
personal computer, the MITS Altair 2800, was assembled in
1975. Meanwhile, a very effective computer manufacturing
industry has emerged in Asia, employing about 1.5 million
workers - factory workers, engineers, and managers.

" The largest of these companies is Hon Hai Precision Industry
Co., also known as Foxconn. The company has grown at an
astounding rate, first in Taiwan and then in China. Its revenue
last year was $ 62 billion, larger than Apple Inc., Microsoft Corp.,
Dell Inc. or Intel. Foxconn employs more than 800,000 people,
more than the combined worldwide head count of Apple,
Dell, Microsoft, Hewlett-Packard, Intel and Sony Corp.

10 -to- 1 Ratio

" Until a recent spate of suicides at Foxconn's complex
in Shenzhen, China, few people had ever heard of the
company. But most know the products it makes -
computers for Dell and H-P, Nokia cellphones,
Microsoft XBox 360 consoles, Intel motherboards,
and countless other familiar gadgets. Some 250,000
Foxconn employees in Southern China produce all
of Apple's products. Apple, meanwhile, has about 25,000
employees in the U.S. - that means for every Apple worker
in the U.S. there are 10 people in China working on iPods,
iMacs, and iPhones. The same roughly 10-to-1 relationship
holds for Dell, disk-drive maker Seagate Technology,
and other U.S. tech companies.

" You could say, as many do, that shipping jobs overseas
is no big deal because the high-value work - and much
of the profits - remain in the U.S. That may well be so.
But what kind of a society are we going to have if it consists
of a few highly paid people doing high-value-added work -
and masses of unemployed?

" Since the early days of Silicon Valley, the money invested
in companies has increased dramatically, only to produce
fewer jobs. Simply put, the U.S. has become wildly inefficient
at creating American tech jobs. We may be less aware of this
growing inefficiency, however, because our history of creating
jobs over the long term - the last fifty years - has been
spectacular, masking our greater and greater spending
to create each position.

Tragic Mistake

" Should we wait and not act on the basis of early indicators?
I think that would be a tragic mistake because the only
chance we have to reverse this deterioration is if we
act early and decisively.

"Already the decline has been marked. It may be
measured by way of a simple calculation ; the employment
cost-effectiveness of a company. First, take the initial
investment plus the investment during a company's IPO.
Then, divide that by the number of employees working in
that company ten years later. For Intel, this worked out to
be about $650 per job - $3,600 adjusted for inflation.
National Semiconductor Corp., another chip company,
was even more efficient at about $2,000 per job.

" Making the same calculations for a number of
Silicon Valley companies shows that the cost creating
U.S. jobs grew from a few thousand dollars per position in
the early years to $100,000 today. The obvious reason:
companies simply hire fewer people as more and more
work is done by outside companies, usually in Asia.

Alternative Energy

" The job-machine breakdown isn't just in computers.
Consider alternative energy, an industry where there
is plenty of innovation. Photovoltaics, for example, are a
U.S. invention. Their use in home-energy applications
was also pioneered by the U.S.

" Last year, I decided to do my bit for energy conservation
and decided to equip my house with solar power. My wife
and I talked to four local solar firms. As part of our due
diligence, I checked where they get their photovoltaic panels
- the key part of the system. All of the panels they use come
from China. A Silicon Valley company sells equipment used
to make photo-active films - and they ship close to ten times
more machines to China than the U.S. - and the gap is growing.
Not surprisingly, estimated U.S. employment in the making
of photovoltaic films, panels, and the equipment to produce
them is about 10,000 - a few per cent of total worldwide
employment.

Advanced Batteries.

" There's more at stake than just exported jobs. With
some technologies, both scaling and innovation take
place overseas. Such is the case with advanced batteries.
It has taken years and many false starts, but finally we
are about to witness mass-produced electric cars and trucks.
They all rely on lithium-ion batteries. What microprocessors
are to computing, batteries are to electric vehicles.
Unlike microprocessors, the U.S. share of lithium-ion
battery production is tiny.

" That's a problem. A new industry needs an effective
ecosystem in which technology knowhow accumulates,
experience builds upon experience, and close relationships
develop between supplier, manufacturer, and customer.
The U.S. lost its lead in batteries 30 years ago when it
stopped making consumer electronic devices.
Whoever made batteries then gained the exposure and
relationships needed to learn to supply batteries for the
more demanding Laptop PC market, and after that for the
more demanding automotive market.

"U.S. companies didn't participate in the first phase and
consequently weren't in the running for all that followed.
I doubt that they will ever catch up.

Job Creation

" Scaling isn't easy. The investments required are
much higher than in the invention phase. And funds
need to be committed early, when not much is known
about the potential market. Another example from Intel:
The investment to build a silicon plant in the 1970's was a
few million dollars. By the early 1990's, the costs of the
factories that would be able to produce the new Pentium
chips in volume rose to several billion dollars. The decision
to build these plants needed to be made years before we
knew whether the Pentium chip would work or whether
the market would be interested in it.

"Lessons we learned from previous missteps helped us.
Years earlier, when Intel's business consisted of making
memory chips, we hesitated to add manufacturing capacity,
not sure of the market demand in years to come.
Our Japanese competitors didn't hesitate: they built the
plants. When the demand for memory chips exploded,
the Japanese roared into the U.S. market and Intel
began its decline as a memory-chip supplier.

Intel Experience.

" Though steeled by that experience, I remember how
afraid I was as I asked the Intel directors for authorization
to spend billions of dollars for factories to make a product
that didn't exist for a market we couldn't size.
Fortunately,they gave their OK even as they gulped.
The bet paid off.

" My point isn't that Intel was brilliant. The company
was founded at a time when it was easier to scale domestically.
For one thing, China wasn't yet open for business. More
importantly, the U.S. hadn't yet forgotten that scaling
was crucial to its economic future.

" How could the U.S. have forgotten? I believe that the
answer has to do with a general undervaluing of
manufacturing --- the idea that as long as "Knowledge Work"
stays in the U.S., it doesn't matter what happens to factory
jobs. It's not just newspaper columnists who spread this idea -
but politicians and academics as well.

Off shore Production.

" Consider this passage by Princeton economist Alan S. Blinder:

"The TV manufacturing industry really started here,
and at one point employed many workers. But as TV
sets became 'just a commodity' the production moved
offshore to locations with much lower wages. And
nowadays the number of TV sets manufactured in
the United States is zero. A Failure? No --- a success! "

" I disagree. Not only did we lose an untold number of jobs,
we broke the chain of experience that is so important in
technological evolution. As happened with batteries,
abandoning today's "commodity" manufacturing
can lock you out of tomorrow's emerging industry.


" Our fundamental economic beliefs, which we have
elevated from an observation to an unquestioned truism,
is that the free market is the best economic system - the
freer, the better. Our generation has seen the decisive
victory of free-market principles over planned economies.
So we stick with this belief, largely oblivious to emerging
evidence that while free markets beat planned economies,
there may be room for a modification that is even better.

No. 1 Objective.


" Such evidence stares at us from the performance of
several Asian economies in the past decades. These
countries seem to understand that Job Creation
(italics mine - TTN) must be the number one objective
of state economic policy. The government plays a
strategic role in setting the priorities and arraying
the forces necessary to achieve that goal.

" The rapid development of the Asian economies
provides numerous illustrations. In a thorough study
of the development of East Asia, Robert Wade of the
London School of Economics found that these
economies turned in precedent-shattering performances
in the 1970's and 1980's because of government involvement
in the targeting the growth of manufacturing industries.

"Consider the "Golden Projects" - a series of digital
initiatives in the late 1980's and 1990's. Beijing was
convinced of the importance of electronic networks - used
for transactions, communications, and co-ordination - in
enabling job creation, especially in the less developed parts
of the country. Consequently, the Golden Projects
enjoyed priority funding. In time, they contributed to
the country's rapid development of China's information
infrastructure and the country's economic growth.

Job-Centric Economy

" How do we turn such Asian experience into intelligent
action here and now? Long-term, we need a job-centric
economic theory - and job-centric political leadership -
to guide our plans and actions. In the meantime,
consider some basic thoughts from a onetime factory guy.

" Silicon Valley is a community with a strong tradition of
engineering, and engineers are a peculiar breed. They are
eager to solve whatever problems they encounter. If
profit margins are the problem, we go to work on margins,
with exquisite focus. Each company, ruggedly individualistic,
does its best to expand efficiently and improve its own
profitability. However, our pursuit of our individual
businesses, which often involves transferring a great
deal of manufacturing and engineering out of the country,
has hindered our ability bring innovations to scale here at home.

" Without scaling, we don't just lose jobs - we lose our
hold on new technologies. Losing our ability to scale
means losing our ability to innovate.

" A story goes around that an engineer was to be executed
by guillotine. The guillotine was stuck, and tradition
demanded that if the blade didn't drop, the condemned
man was set free. Before this could happen, the engineer
pointed with excitement to a rusty pulley, and told the
executioner to apply some oil there. Off went his head.

"An example: Five years ago a friend of mine joined
a large VC firm as a partner. His responsibility was to
ensure that every startup they funded had a
"China Strategy" - meaning , a plan to ship as many jobs as
they possibly could to China. He was going around with
an oil can, applying drops to the guillotine in case it
was stuck. We should put away our oil cans. Every
VC firm should have a partner in charge of every startup's
"U.S. Strategy".

Financial Incentives

" The first task is to rebuild our industrial commons.
We should develop a system of financial incentives.
Levy an extra tax on the product of offshored labor.
If the result is a trade war, treat it like any other war -
fight to win. Keep that money separate. Deposit it in
the coffers of what we might call the Scaling Bank
of the U.S. and make these sums available to companies
that will scale their American operations. Such a system
would be a daily reminder that while pursuing our company
goals, all of us in business have a responsibility to maintain
the industrial base on which we depend and the society
whose adaptability - and stability - we may have taken
for granted.

" I fled Hungary as a young man to come to the U.S. in
1956. Growing up in the Soviet bloc, I witnessed firsthand
the perils of both government overreach and a stratified
population. Most Americans aren't aware that there was a
time when tanks and cavalry were massed on Pennsylvania
Avenue to chase away the unemployed. It was 1932; thousands
of jobless veterans were demonstrating outside the White House.
Soldiers with live ammunition and fixed bayonets moved in,
herding them away from the White House. In America!

" Unemployment is corrosive. If what I'm suggesting is
protectionist, so be it. Yet the imperative for change is
real, and the choice is simple.

"If we wish to remain a leading economy, we change on
our own, or change will continue to be forced upon us. "

(Andy Grove is a senior adviser to Intel Corp. and was Intel
Chairman and CEO from 1987 to 2005)

David Harvey and The Crisis of Capitalism

(H/T Brad Delong's blog)


Every so often, something comes along in the blogosphere
that reaches out and grabs you to such an extent that
you just can't put it down.

And the short video lecture below by anthropologist and
"socioeconomist" David Harvey is one of those.

For those of you who haven't heard of Professor Harvey before,
he is Distinguished Professor of Social Anthropology at the
Graduate College of the City University of New York.
He has further made news as a leading theorist in the
emerging discipline of "Socioeconomics" - that is, that
economic events can be explained as much as a consequence
of social and anthropological norms as by mathematical
descriptions of "rational" behavior.

But, what makes his lecture fun to listen to is the unique
animation provided by the British Royal Society for
Animation that accompanies it.

Oh, and by the way, I need to warn you - Dr. Harvey is
a committed Marxist.

But if that doesn't bother you, I think you'll find that
his brief, 11- minute explanation of "The Crisis of Capitalism"
to be both cogent and comprehensive. And even though
The Thinking Nationalist is a firm believer in Capitalism
and Free Markets, I have yet to hear a better short explanation
of "What Happened To Us And Why" than this short piece.

Therefore, Dr. Harvey, the floor is yours: