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The Black Death, a killer of 20 million, had its good points

7 Feb

black-death

Being the progeny of immigrants, I’m sympathetic to their cause. Still, I’m convinced large-scale, legal immigration has hastened the withering of the middle class.

There have been other causes, including changes in tax policy and the global economy. But I was surprised to learn recently how significant an impact immigration had on the downward spiral of wages.

With thousands and thousands of Baby Boomers leaving the work force for retirement, wages should be going up. That’s the simple law of supply and demand. Immigration, however, has provided a counter balance and prevented this. Indeed, opening the borders sometimes seems like a purposeful antidote designed to help labor-intensive corporations. This is mostly likely why the U.S. Chamber of Commerce is a strong advocate of robust immigration.

Congress, perhaps responding to appeals by business, has frequently and consistently raised the level of legal immigration. In 1965 it was at 290,000 annually. Today it is about 1.1 million. This is legal immigration, and it is four times higher than any other country.

how-many-is-too-manyPhilip Cafaro, author of “How Many Is Too Many? The Progressive Argument for Reducing Immigration Into the United States,” gives a thorough accounting of all this in a recent edition of the Chronicle of Higher Education.

Cafaro sites studies by Harvard University economist George J. Borjas, a leading authority on the economic impact of immigration. Borjas found that in the 70s and 80s, a 10 percent increase in the number of workers in a given field decreased wages there by 3.5 percent. A more recent study showed that such an increase reduced wages of African-Americans by 4 percent, lowered their employment rate by 3.5 percent and increased their incarceration rate by almost one percent.

It’s good at least that today there is a great deal of talk about the withering middle class. Even Republicans now recognize it will be a critical issue in the 2016 presidential race. In an attempt to get in front of the issue, candidates like Jeb Bush are already saying they want to reverse the trend, although they provide few details.

If politics were not a factor, a solution could be easily found.

The strong post-war middle class in the U.S. was created primarily by tax policy. This policy was heavily graduated, meaning you paid a lot more if you made more a lot more. That policy no longer exists. Returning to it would easily restore the middle class, but it is unlikely the Republican Congress will choose this route.

Jeb-bushThere is, however, a consensus that a middle class, if one is desired, must be created, otherwise there will only be rich and poor. One was created in Europe during the 14th and 15th centuries. Unfortunately, the creative force was the Black Death — the bubonic plague that may have killed one out of every three Europeans (about 20 million). With the labor force devastated, there was upward pressure on wages and the ability of farmers to earn a much better living. Some reports say farm income increased by 50 percent.

In addition to creating the middle class, the plague often is credited with spawning the cultural rebirth known as the Renaissance.

The Black Death is a high price to pay for a middle class, even if it is accompanied by a renaissance. Changes in the tax and immigration policies might be a better way. But because government move in micro increments, this is unlikely. Any significant change probably will have to come through some unseen, forced hand.

If this is true, let’s hope it’s a kind one.

By Lanny Morgnanesi

Where did everyone go? “Baby Bust” affects both prison population and college enrollment

9 Nov

Prison

Someone once told me if you build a prison, it will fill up. Conversely, if a prison is full, criminals will be let out.

From this it is easy to conclude that a person who normally would be free might get locked up, and a person who normally would be jailed might go free.

Both are frightening thoughts. Neither says much about justice.

Prison pop worldMore frightening is the widely known but often ignored fact that the United States puts more people behind bars than any other nation. That figure is about 2 million.

The U.S. population has increased by about one-third since 1980, but the federal prison population has grown by about 800 percent.

Yet we still call ourselves the land of the free.

So it goes. I wish I understood why. I wish there was someone who could explain these problems and come up with a method to reverse them.

Well, sometimes things reverse themselves.

A recent story that was basically overlooked said that the federal prison population has declined by 4,800 inmates. This is the first decline in a decade. And it turns out that the populations in state and county lockups have been dropping for the past five years.

“Our new projections anticipate that the number of federal inmates will fall by just over 2,000 in the next 12 months — and by almost 10,000 in the year after,” said Attorney General Eric Holder “This is nothing less than historic.”

Fine, but no one explained why.

Prison poulation-WikiIt is doubtful our government has the ability to stop crime. Government can take credit for it, but that doesn’t mean it’s true. After crime dropped years ago, improvements in law enforcement were credited. Later, under the category of Freakanomics, it was determined that the drop in crime occurred about 18 years after the legalization of abortion. This means that there was was less crime because fewer criminals were born.

It was that simple.

Abortion may not be behind these new figures, but fewer criminals being born may be.
A running demographic trend called the “baby bust” has now caused a decline in the number of young adults, the same people who commit most crimes. A bad economy, it seems, affects childbirth, and the economy hasn’t been good for quite some time. It is said that the recession of 2008 alone resulted in a half million fewer births.

I’m familiar with the baby bust because I’ve seen its impact on higher education. With fewer students of college age, enrollments are declining at colleges and universities across the nation.

“They can’t go to college if they haven’t been born,” one educator explained.

Birth ratesIn 1900, Mark Twain looked for some linkage between crime and education and said, “Every time you close a school, you have to build a jail.” While the reserve could be true, new colleges aren’t needed right now because of the enrollment decline. But because of the savings from the decline in prison population – the feds spend $80 billion a year on incarceration — money could be available to help students with tuition.

What a great nation ours would be if, like some others, we made it easy and cheap for young people to get an education. But we still would have the empty prisons and we’ll need to figure out what to do with them.

Maybe we can just let them rot. They can become sad displays of a culture that with a blind eye created and nourished the darker side of humanity. But a demographic bump doesn’t permanently correct a problem. So a better idea might be to turn the prisons into factories, which will improve the economy, which will increase the birth rate, which will create more crime, which will require more prisons. At that point, we can close the factories, open the prisons, and wait for economy to go bad and the birth rate to drop again.

That sounds so right it has got to be wrong. But I’m not hearing much better from the experts. Do you think we can put a little pressure on them? Or should we just wait until everything fixes itself? Actually, this seems much more likely.

By Lanny Morgnanesi

With so many in “deep poverty,” mere poverty is almost like the middle class

29 Sep

Philly poverty

If one of us, or many of us, falls behind, way behind, is it the responsibility of those ahead to pull up the less fortunate, the unfortunate and all those whom fortune has woefully forsaken?

Those living in and around Philadelphia should be giving this serious thought. In this city, the name of which means brotherly love, the economy, the culture, the dynamics, the thoughts and the ideals are too weak to sustain the population. What exists there represents gross failure.

A new report says that 12 percent of Philadelphia residents live in something called deep poverty. Sadly, the times have forced us to look beyond mere poverty, which in Philadelphia is 26 percent.

The city, which I live outside of, ranked highest in deep poverty when compared to the nation’s 10 biggest cities. Nearby Camden, across the river in New Jersey, is not among the biggest and wasn’t ranked. But it has a deep poverty rate of 20 percent and a poverty rate of 43 percent.

From my little cloister, that’s difficult to even imagine.

Deep poverty chartAll these figures come from the U.S. Census’ 2013 American Community Survey, which was recently released.

By definition, a family of three is in poverty if it lives on $20,000 a year. In deep poverty, three survive on $10,000 a year.

In terms of sheer numbers, there are 184,000 people in Philadelphia who are clinging to its lowest rung. Alfred Lubrano, a staff writer for the Inquirer, said that’s about the size of cities like Tallahassee, Florida or Salt Lake City, Utah.

It strikes me as being post-apocalyptic.

But I almost never go to the neighborhoods were the 184,000 live. Camden to me is like Mars.

Still, I can’t help feel as if people like me have somehow failed those in deep poverty, even though many have failed themselves.

In any group, on any place in the world, there are people who do well and people who do not. There are those who need no help and there are the helpless. Now and in the past, however, social units like Native-American tribes or New England colonies or even extended families would try to lift up those that some might describe as laggards. They would do so simply because the unit was a unit and felt responsible for its members. To some degree, we do this in America. We have networks of social services, we have churches and synagogues, and we have government.

Lubrano, the Inquirer reporter, interviewed a Philadelphia women in deep poverty. She is 42 years old, separated with three children ages 7 to 17. Born into an Irish-Italian family, she had dropped out of high school and worked as a cashier. According to Lubrano, she fell into depression and was unable to work. So the government provided her with disability payments of $8,880 a year.

This is a nice gesture, but not a solution to the problem.

So what is? With so many types of poverty, there probably would have to be an assortment of solutions, and even then many couldn’t be reached or helped or encouraged. But it’s for certain a studied, intelligent approach would reduce Philadelphia’s Tallahassee-size problem to perhaps a problem the size of Lost Springs, Wyoming, or Bozeman, Montana.

I lack the training, depth and insight of a social engineer, but one thing I’d like to see in every poor neighborhood is a “Factory of Last Resort.” Employment would be open to all those in poverty and deep poverty who are looking for an out. They would manufacture a mundane but useful item, like brooms or soap. These factories probably would operate at a loss, but there would be incentives to keep loses to a minimum and inch toward profitability. Included with the job would be access to health clinics, day care, a dining hall and dorms.

We would be building the equivalent of an urban kibbutz.

After a time, management positions would go to employees who exhibit leadership skills, the ones who have learned and blossomed from the experience. Awakenings often come with restored dignity.

Those of us who are doing well would be encouraged to buy the brooms and soap as a sign of support. It would be a way for all of us to make our cities whole again and to keep humanity human.

And then, should we want to, we can safely and happily visit the once great and now great-again places like Camden, which spawned RCA Records and Campbell Soup. And the City of Brotherly Love can free itself from the embarrassing irony of its name. It can return to its Quaker roots of service, justice, community, self-improvement and independence.

I love a good city. This would give us more of them.

By Lanny Morgnanesi

Hobos, happiness and the Big Rock Candy Mountain

24 Aug


Hobos

I used to think “Big Rock Candy Mountain” was a children’s song. It’s not. It’s a song by and about hobos that someone made into a children’s song.

 

Harry McClintock, a hobo known as Haywire Mac, was the first to record it in 1928. It depicts a hobo’s paradise. You don’t see many hobos today but they were common and plentiful during the Depression.

 

The Coen brothers used the song in the movie, “Oh Brother Where Art Thou?” Recently, I watched the movie again on TV and gave a close listen to the lyrics of the song.

 

Harry-mcclintockIt describes a place where cops have wooden legs so hobos can out run them. The jails are made of tin so hobos can easily escape. On the Big Rock Candy Mountain, boxcars are always empty and lakes are filled with stew and whiskey. There are no short-handled shovels.

 

That’s the hobo’s idea of paradise.

 

After hearing the song, I though that if I were a hobo my paradise would have no cops and no jails. It would be a place where someone down on their luck could crawl out of their hole and make a good living; a place where even a hobo could be somebody.

 

What I failed to understand was that in my hobo paradise, a hobo would cease being a hobo. As I listened to the song again, it became clear that while hobos may want an easier life, they still want to be hobos.

 

Which raises the question: How true is this of other people and their lives?

 

Amidst our general hardship and discomfort, apart from our complaints and dissatisfaction with the small and the large, are we actually … happy?

 

As you think, consider this little story.

 

I once spent the Fourth of July at a country club. The fireworks were fantastic and the food was beyond good. There were hot dogs and hamburgers but also barbecued chicken and ribs, all you could eat. On a table the length of an interstate was an assortment of desserts.

 

In addition to bringing me, my host brought an African-American boy, about 12. He was from a Philadelphia neighborhood that was experiencing a rash of random shootings and killings. The little man was brought to the suburbs via a program designed to give poor children a break from the stresses of violence and poverty.

He was the only black person at the affair.

 

As I worked on my second helping of ribs, he sat with his head on the table, almost dozing off.

 

“Tell me,” I said. “Would you rather be here or home?”

 

He paused, apparently not wanting to seem ungrateful, then smiled and said, “Home.”

 

For him, happiness was the familiar, not the strange.

 

The familiar is comfortable and predictable. While I can’t document this, I have heard of a study showing that people, if given the chance to exchange all their problems and ills with the problems and ills of another person, would decline. If true, this is further evidence that no matter who we are, we like our lives.

 

Andy-Capp-Cartoon Pictures (1)It’s been said that England is defined by its class structure, and that people recognize and take pride in their station, be it high or low. They wear cloths and banners proclaiming their class – like the Jeff cap worn by the working-class cartoon character Andy Capp.

 

I don’t think we do that in America, but maybe I’m just blind to it. Either way, listening closely to “Big Rock Candy Mountain” has made me believe that America, for all its problems, is a land of contentment for both the haves and have-nots.

 

It’s so content that most don’t even vote.

 

While a peaceful populace has its advantages, it also has its dangers. Injustices are easily wrought upon the passive. Eventually, they create a destabilizing imbalance that will harm everyone – even their originators.

 

Income inequality is such an imbalance. In nations, stability and economic might are derived from a deep, viable, productive middle class, with a minimum of poverty and want. But when wealth is concentrated among the few, as has occurred in the U.S., the whole system is threatened because the many stop spending.

 

An alarm was sounded recently by Standard and Poor’s, the bond-rating company. It released a study showing that income inequality is responsible for a slowdown in the American economy. A headline on Fortune.com read:

More concentrated wealth means less spending than if money was spread to more people, according to a new report.

 

This realization, and others like it, is putting income inequality on the national agenda. Balance, to some degree, eventually will be restored. But it is because the elite acted, not the complacent.

 

I realize people get set in their ways; that they like routine and follow habits religiously. Still, there comes a point when routine is dispensed with in order to preserve dignity, honor and respect that were compromised by imbalance. At home, this happened in Ferguson, Missouri. Abroad, it happened in Gaza. The wise nation will avoid such flashpoints. More common is that they will act after the fact.

 

The better way, at least in the U.S., is self-action prior to the flashpoints.

 

We all need to get off the Big Rock Candy Mountain and take personal responsibility for our collective fate. Areas of concern are fairness, equal opportunity, equal treatment, social justice and civility. Legislation and tax policy must be designed for large segments of the population rather than small.

 

Key tools: Vocalization and voting.

 

Voting, real voting, is a powerful concept that has gone dormant in the U.S. We should try reviving it, just to keep the system fair and honest. Voting shows we are alive and paying attention.

 

There is nothing wrong with being happy and complacent. Complaisance, however, should never interfere with our ability to stop those who would chip away at our happiness.

 

Human rights, said Alexander Hamilton, are written “by the hand of the divinity itself.” They cannot, he said, “be erased or obscured by mortal power.”

 

By Lanny Morgnanesi

 

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You’re nothing, but suddenly you’ve got what everyone wants

7 Jul

Venezuelan prostitutes

 

 

Without judging, blaming, or saying I wouldn’t do it, the standard model for business is that those who dominate the financial markets rig them in their favor. That’s really not a shocker. The shocker is that once in a great while something occurs in the market place that benefits those of little means.

 

Right now the beneficiaries of fate’s largess are the prostitutes of Puerto Cabello, Venezuela.

 

Not long ago, Venezuela was flush with petro-cash and acted brashly and boldly on the world scene. Under socialist President Hugo Chavez, Venezuela even helped 400,000 poor Americans pay their winter heating bills. Chavez, however, is dead and gone and the Venezuelan economy has all but collapsed. People can no longer find things like cooking oil and flour in their local stores.

 

Spared from this hardship are the prostitutes of Puerto Cabello. This has not so much to do with the sex trade as it does with the currency trade.

 

An article by Anatoly Kurmanaev in Bloomsberg Businessweek explains the scenario.

 

The Venezuelan currency is the bolivar, and it has taken a nosedive. The official exchange rate is 6.3 bolivars per dollar but the going rate on the street is 71 bolivars and climbing. Either way, dollars are very hard to get. The government restricts their circulation.

 

But foreign sailors, the primary customers of prostitutes in Puerto Cabello, a port town, pay in dollars. This means the prostitutes now possess the most sought-after item in the country. Currency traders seek them out and lavish them with bolivars in exchange for their dollars. This enables them to purchase whatever they want on the black market.

 

By the way, the prostitution is legal but the currency trading is not.

 

Sailors are charged a flat rate of $60 an hour. With the new market conditions, one trick is equal to the monthly wage of some people. But the prostitutes also book hotels and taxis for the visiting sailors. They charge them in dollars and pay for the rooms in bolivars. This increases their salary another 50 percent.

 

So here’s to the horizontalists of Puerto Cabello. I think they deserve this unexpected turn of events. No word yet on anyone rushing in to deny them their windfall. That’s noble. I sense in the United States the good times wouldn’t last long. If something the poor had became valuable it would be taken away. If a commodity as unwanted as, say, rat droppings was needed to make a new cancer drug, rich investors would quickly buy up the dropping rights at all the infested slums of major American cities, leaving the tenants unable to benefit from a sad condition turned bright.

 

On this score, the Venezuelan elite seem much better sports than their American counterparts. The extra money earned by the prostitutes, incidentally, goes for things needed by their families. But as a prostitute named Elena points out in the article, she still has to sell her body.

 

By Lanny Morgnanesi

 

(Photo by Vladimir Marcano /Bloomberg)

When the poor stop going to McDonald’s, we’re all in trouble

20 Jun

mcdonalds-meal

Businesses like Wal-Mart and McDonald’s haven’t been doing well.

 

People without a lot of money usually go to these places, but because they now have even less money, they’ve stopped going. When people who work at Wal-Mart and McDonald’s can no longer afford to shop and eat there, it’s a sure sign of a coming, broad-based financial decline.

 

It will affect us all, even the rich, who don’t amount to much if they can’t get the poor to give them money.

 

Reports show that the parade of U.S. customers into Wal-Mart fell 1.4 percent during the first quarter. That followed a decline of 1.8 percent in the prior year.

The discount retailer blamed the bad winter weather but also cited cuts in food stamps, higher payroll taxes and the increased cost of health care.

 

You know things are bad when Wal-Mart relies on the food stamp program to move product.

 

Walm-MartRecent U.S. sales at McDonald’s also have declined, by 1 percent. To lure back low-end customers, the burger behemoth increased its value menu, but that hurt profits even more.

 

What’s happening is the downward pressure on income is leading to downward pressure on sales.

 

Henry Ford used to pay his people well so they could buy cars. If Wal-Mart and McDonald’s have any sense, they and the other minimum-wage shops will copy this strategy. Not doing so will have consequences. It could turn the U.S. into another Japan – the bad one, not the good one.

 

Japan was once the globe’s supreme economic power. It made and sold great products while setting new standards for manufacturing. Flush with cash, Japanese investors bought up billions in prime New York real estate, and nearly everything else. During this period, in the mid-80s, I visited Hawaii, which seemed more like Japan. Japanese tourism and culture were so strong that hippie beach bums peddling sailing lessons had to learn Japanese.

 

Then came the bust, the swoon and massive disinflation. It began around 1990. People in the U.S. don’t understand disinflation. It’s when prices fall and fall and fall and still no one buys anything. The economy becomes comatose. Seems impossible, until you look at Japan, where disinflation has been a cruel fact of life for a couple decades.

 

 

According to Bloomberg Businessweek, one contributor to Japan’s disinflation is falling wages. The recent habit of businesses there, as in the United States, is to avoid hiring full-time workers and instead contract with temporary workers who earn less and have no job security. These temps now make up about 40 percent of the Japanese work force. They are paid about 38 percent less than full-time workers.

 

The financial and social divide between the two kinds of workers has grown and is causing multiple calamities. For example, no one wants to marry a temp. This depresses birthrates and is making Japan a nation of elderly people. Banks won’t give temps mortgages, which doesn’t encourage building. These and other negative trends cascade and the country stagnates.

 

In the current era, U.S. corporations have reaped huge profits from selling to the developing world. But those markets, at least to some degree, are cooling and maturing. The bread-and-butter American markets may have to be revived in order to maintain profits. That could require a higher minimum wage and more opportunity for the middle class. The government and the business community finally are waking up to this.

 

The Great Cure for so much – including crime and falling education standards — is to put money back in the hands of traditional spenders. For a time, greed will blind us to this reality. Then the cash register stops ringing and we see.

 

Wal-Mart and McDonald’s — and all the other places where you can work full-time and not earn a living — now see. Each is probably afraid to take the first big step. Sooner or later someone has to, otherwise that first big step will be involuntary and it will send us over a cliff.

 

Think about the return of the 25-cent McDonald’s hamburger. Think about taking the family out for one on a very special night, maybe once every couple of months. That disinflation, and it will make 15 percent inflation seem like good times.

 

Now, we wait.

 

By Lanny Morgnanesi

Goldman Sachs: Altruism for a profit

27 May

goldman-sachs,jpg

Investment powerhouse Goldman Sachs has made money with schemes that were ingenious, inventive, complex, arcane, morally vacant and, some might say, criminal. Now it hopes to make money by exploiting the dysfunctions of government.

 

Goldman has long mastered the art of generating cash without actually producing a product. Its techniques include:

 

  • Using influence to rig a trading system in its favor.
  • Finding a market where it can buy low and then finding a second market where it can sell high.
  • Identifying gross inefficiencies that are costing someone or something money and offering to fix them.

 

Goldman’s new plan is along the lines of the third. The firm is financing crime reduction measures in Massachusetts in exchange for a percent of what is saved by not having to incarcerate thugs.

 

Ingenious, inventive, complex.

 

New profit center for investors

New profit center for investors

This type of investment carries an extra dividend: It makes Goldman Sachs – a villain in the eyes of the Occupy movement – look like a Good Guy. Indeed, the investment vehicle designed to reduce crime is called a social impact bond, or in Wall Street parlance, an SIB.

 

Some view these investments as a marriage between capitalism and charity, but capitalism is the strong, dominant partner.

 

Bloomberg Businessweek reported on Goldman and the SIBs in early May. Writer Esme E. Deprez cites a prediction by the Rockefeller Foundation that the market for SIBs is growing and by 2015 will reach $500 million.

 

That’s a lot of social impact, enough to give government the idea that it no longer is responsible for maintaining order and structure in society. Or has it already decided that?

 

According to the Businessweek article, Goldman is investing $9 million and betting that crime will go down – or more accurately that young men will spend fewer days in jail.

 

The bonds help fund a program called the Massachusetts Juvenile Justice Pay for Success Initiative. In that program, a non-profit agency called Roca works with young adult males on probation. The agency provides outreach, therapy and training. After two years, participants are supposed to leave, take a steady job and lead a crime-free life.

 

If a graduate stays out of jail for a year, Massachusetts saves $12,400. If the state is able to reduce crime enough to close a 300-person prison, it saves $47,500 per inmate.

 

This is how the SIBs and Goldman get paid off.

 

In this particular case, Goldman has partnered with other investors who financed an additional $12 million in bonds, making the total $21 million.

 

The bonds earn 5 percent no matter what, but pay nothing else until the men in the program manage to spend 22 percent fewer days in jail. There’s a sliding scale for payment, with a maximum of $27 million being paid to bond holders if jail time is reduced by 70 percent.

 

It’s a risk, like a junk bond, but $27 million for a $21 million investment is pretty good money (28 percent profit) and worthy of the risk.

 

Roca had been working with 375 men. With the SIB money, it can handle 550.

 

A skeptic might look at all this and ask:

 

  • Why doesn’t Massachusetts put up the $21 million itself and forego the $6 million payout to investors?

 

  • Why doesn’t society as a whole recognize that employed people from stable families commit fewer crimes?

 

  • Why does the nation exclude million of people from an otherwise viable system of commerce, education and opportunity and allow the existence of acres and acres of urban decay that breed crime and insanity?

 

There are clear answers to these questions. I won’t go into them because our preference is to ignore them, deny them and maintain a monstrous blind spot in spite of religious teachings, well-intended laws and glorious, inclusive rhetoric.

 

But as a culture, we have reached an all-time low when we allow things to get so bad

that Goldman Sachs can make money off our failures. The promise of money, more so than altruism or mere brotherhood, does seem to get things done. Perhaps we can turn the VA hospitals over to Goldman. With all those returning vets, there’s got to be a profit in there somewhere.

 

By Lanny Morgnanesi

 

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