The European Union can never fulfill its moniker of the "United States of Europe" because the United States of America was formed early - before distinct and irreversible identities of the States were formed - with a powerful federal government. Federalism is what makes the association of 50 States successful. It is its function of paternalism. The Supreme Court understood this when it carved out the commerce clause power so the federal government would have power over and intertwined with States' powers. The States require a "heavy" in the form of a federal government to keep individual rights from being impeded by protectionistic tendencies of the States. The sharing of power between the States and the federal government is not a settled issue as both the States and federal government seek more power, however the tension between the two is healthy for the U.S. as it provides a checks and balances on federalism.
It is the European Union's lack of federalism at the core of its issues. There are 27 members in the European Union, all of which to varying degrees were functioning sovereign countries without oversight. That is how the 27 members entered the European Union and that is how the members currently function in the European Union as evidenced by the economic crisis in Europe. The European Union treaty in its various incarnations is nothing more than a super charged gentlemen's agreement. Enforcement left up to an anemic central government body in Brussels whose structure or organization panders to a parity in direct confrontation of a singular identity. It is confused by design because a confused European Union central government is in the best interests of the 27 member states.
Article 126 (1) states "Member States shall avoid excessive government deficits." Recourse for the European Union central government is a series of reports and recommendations by commission, council, and parliament with sanctions or embarrassment via public notifications if non-compliance by a member state. It is akin to asking prisoners how they would like to have the prison run - a self interested transaction. It is why the European Union has a treaty and not a constitution. A member state operating in direct violation of the European Union treaty should have required an intrusion by the European Union's central government in the financial/budgetary affairs of the offending member state with a loss of sovereignty. A parolee member state warrants a loss of rights to some degree until the terms of the parole are fulfilled. A parolee member state that violates the terms of parole gives up its right to control its financial/budgetary affairs to the European Central Bank.
Such ideas are better suited for a fiction novel than the European Union. Because a single market purpose is not enough to create a single identity, the European Union should be called the "United Nations of Europe". A simpler designation with lower expectations.
European Union Treaty available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:083:0047:0200:en:PDF
Friday, January 13, 2012
Thursday, January 12, 2012
China is Acting like the Newly Industrialized Country it is
The U.S. was there in the not so distant past. The days of child labor, currency manipulation, corruption, lawlessness, intellectual property law violations, pollution, and human rights violations are eerily similar to the what China is being accused of. Granted, the world has changed considerably since the U.S. committed much of those acts so there is some validity to holding China to a different standard. The issue is that the U.S. stopped many of those practices because it did not serve a function or produce value anymore. For example, one of the main reasons for the Fair Labor Standards Act that set child labor rules was to encourage the employment of adults instead of children. Child labor was cheaper, which contributed to high unemployment for adults - men.
The single greatest resource for a country is its population - human capital. The value of a country rises and falls based on the quality of its population. A lack of education or intellectual capacity requires a reliance on physical labor because repetitive movement needs only basic intelligence. Prosperity depends on the movement from physical labor to intellectual labor or knowledge labor. The resource cost of migrating a physical labor worker to a knowledge worker is large. As such, the knowledge worker can demand higher wages or the business can demand a higher price for its services. Prosperity is the gap between the cost of living and the wages earned.
China is capitalizing on its cheap labor because it is the one resource in abundance, now. Part of China's capitalizing is managing it currency to ensure that the labor remains cheaper relative to other currencies. It makes sense that China would try to extend its cheap labor dominance until it can transform its economy. China has to move to a more self sufficient model - creating products in country for its population - relying less on exports. An artificially low currency also makes imports more costly for the Chinese. By producing products and services cheaper than what it can import it for, means that China will see an increase in prosperity that is domestically generated rather than dependent on foreign businesses.
China has learned how to do this because of outsourcing. The downside of outsourcing by developed or industrialized countries to China is the knowledge transfer. It is evident in the counterfeit shadow market in China. An export so large and pervasive that it is almost incapable of being solved because the resource cost for global enforcement is likely not worth it - at least not on a large scale. Shadow markets or black markets necessitate a criminal element because the activity by design operates outside of the law. There is no amount of contracting between multinational corporations and labor providers in China to prevent the theft of intellectual property. It is laughable that a piece of paper was the barrier decided upon by businesses. All it takes is an initial knowledge transfer and a little reverse engineering to create a better mouse trap.
China's one child policy is another reason, probably the greatest reason, why it has to move to a more self sufficient economy. Less people to sustain its export dominance. The preference for male children is expected to manifest itself in a much greater male to female ratio in the next 20 years. Artificially limiting the birth rate is creating a natural limitation because there is expected to be a lot less females giving birth in China. A high demand for females will encourage higher expectations for males to create an equilibrium, which is going to create social issues in China and for the global community. Human trafficking, prostitution, kidnappings, rapes, commoditizing of females are just some social issues that may result. And time is incapable of manipulation when it comes to the aging of a human beings. Aging cannot be sped up or slowed down so any solution is dependent on time. China has no choice, but to transform.
Just as the U.S. found itself with policies that were not conducive to being a global leader, China is slowly coming to the same realization of necessity. The pace, however, is not the domain of the U.S. government.
The single greatest resource for a country is its population - human capital. The value of a country rises and falls based on the quality of its population. A lack of education or intellectual capacity requires a reliance on physical labor because repetitive movement needs only basic intelligence. Prosperity depends on the movement from physical labor to intellectual labor or knowledge labor. The resource cost of migrating a physical labor worker to a knowledge worker is large. As such, the knowledge worker can demand higher wages or the business can demand a higher price for its services. Prosperity is the gap between the cost of living and the wages earned.
China is capitalizing on its cheap labor because it is the one resource in abundance, now. Part of China's capitalizing is managing it currency to ensure that the labor remains cheaper relative to other currencies. It makes sense that China would try to extend its cheap labor dominance until it can transform its economy. China has to move to a more self sufficient model - creating products in country for its population - relying less on exports. An artificially low currency also makes imports more costly for the Chinese. By producing products and services cheaper than what it can import it for, means that China will see an increase in prosperity that is domestically generated rather than dependent on foreign businesses.
China has learned how to do this because of outsourcing. The downside of outsourcing by developed or industrialized countries to China is the knowledge transfer. It is evident in the counterfeit shadow market in China. An export so large and pervasive that it is almost incapable of being solved because the resource cost for global enforcement is likely not worth it - at least not on a large scale. Shadow markets or black markets necessitate a criminal element because the activity by design operates outside of the law. There is no amount of contracting between multinational corporations and labor providers in China to prevent the theft of intellectual property. It is laughable that a piece of paper was the barrier decided upon by businesses. All it takes is an initial knowledge transfer and a little reverse engineering to create a better mouse trap.
China's one child policy is another reason, probably the greatest reason, why it has to move to a more self sufficient economy. Less people to sustain its export dominance. The preference for male children is expected to manifest itself in a much greater male to female ratio in the next 20 years. Artificially limiting the birth rate is creating a natural limitation because there is expected to be a lot less females giving birth in China. A high demand for females will encourage higher expectations for males to create an equilibrium, which is going to create social issues in China and for the global community. Human trafficking, prostitution, kidnappings, rapes, commoditizing of females are just some social issues that may result. And time is incapable of manipulation when it comes to the aging of a human beings. Aging cannot be sped up or slowed down so any solution is dependent on time. China has no choice, but to transform.
Just as the U.S. found itself with policies that were not conducive to being a global leader, China is slowly coming to the same realization of necessity. The pace, however, is not the domain of the U.S. government.
Wednesday, January 11, 2012
Broken Trust: A Man-made Disaster Affecting American Citizens
Americans are suffering from post traumatic stress disorder (PTSD) because government and business leaders have failed their mandate. A mandate to be ethical and moral in decision making. A failure of this mandate breaks the trust that Americans have in American leadership. Trust is built on faith and without faith in American leadership, Americans are less and less secure with their position individually as well as their position as an American citizen in the global marketplace.
Using the terms morals and ethics can create a lightening rod effect, especially when religion is pulled into the mix. That is not the purpose of this writing. Morals and ethics are not the sole property of religious groups. Morals and ethics are the property of all people regardless of religious persuasion. Religion has been used as a divisive tool to create differences in an effort to indicate superiority. Atheists have the same potential to have moral and ethical behavior as a Christian, Jew, or Muslim. Thus, the ultimate determination of what is moral and ethical behavior is one of an individual decision making process.
And that is what makes the broken trust of Americans such a devastating man-made disaster. There is no law against breaking the trust of Americans. The U.S. has criminal law and contract law that make some inroads for Americans to vindicate their rights, but that is not what is being discussed here. President Obama promised "change". Banks promised "security". Financial services promised "safety". U.S. Congress promised "advocacy". By no means is this an exhaustive list, however it does provide a big picture for what Americans are dealing with. The government affects the daily life of Americans. Businesses affect the daily life of Americans. It is pervasive because there is not an aspect of life that the government or businesses do not touch. Americans are dependent on both thereby creating a captive audience, which is losing more and more control.
Losing control feeds into victimhood. The control Americans have lost is the ability to be factored into the decision making of government and business leaders. The short term vision for the government is reelection. The short term vision for businesses is profit. Unfortunately, trust is a long term process that is destroyed by short term actions. It is not too aggressive to say that the trust of Americans has been destroyed. That is the current state of affairs for Americans and the reason why there is no easy solution to what seems to be an individual problem. The government and businesses have violated their "duty of care" and "duty of loyalty" to Americans. The class action suit would include all Americans and standing would be found.
Alas, there is no such action for Americans, therefore Americans will turn to voting in an attempt to pull back some control only to be disappointed again because it is illusory.
Using the terms morals and ethics can create a lightening rod effect, especially when religion is pulled into the mix. That is not the purpose of this writing. Morals and ethics are not the sole property of religious groups. Morals and ethics are the property of all people regardless of religious persuasion. Religion has been used as a divisive tool to create differences in an effort to indicate superiority. Atheists have the same potential to have moral and ethical behavior as a Christian, Jew, or Muslim. Thus, the ultimate determination of what is moral and ethical behavior is one of an individual decision making process.
And that is what makes the broken trust of Americans such a devastating man-made disaster. There is no law against breaking the trust of Americans. The U.S. has criminal law and contract law that make some inroads for Americans to vindicate their rights, but that is not what is being discussed here. President Obama promised "change". Banks promised "security". Financial services promised "safety". U.S. Congress promised "advocacy". By no means is this an exhaustive list, however it does provide a big picture for what Americans are dealing with. The government affects the daily life of Americans. Businesses affect the daily life of Americans. It is pervasive because there is not an aspect of life that the government or businesses do not touch. Americans are dependent on both thereby creating a captive audience, which is losing more and more control.
Losing control feeds into victimhood. The control Americans have lost is the ability to be factored into the decision making of government and business leaders. The short term vision for the government is reelection. The short term vision for businesses is profit. Unfortunately, trust is a long term process that is destroyed by short term actions. It is not too aggressive to say that the trust of Americans has been destroyed. That is the current state of affairs for Americans and the reason why there is no easy solution to what seems to be an individual problem. The government and businesses have violated their "duty of care" and "duty of loyalty" to Americans. The class action suit would include all Americans and standing would be found.
Alas, there is no such action for Americans, therefore Americans will turn to voting in an attempt to pull back some control only to be disappointed again because it is illusory.
Tuesday, January 10, 2012
Insourcing as the Opposite of Outsourcing is Overly Simplistic
Because the economy is the biggest concern for voters in the upcoming U.S. presidential election, it would not be too long before the outsourcing enemy of American jobs was pulled out of the closet. The newest dance partner for outsourcing is insourcing - once could say the ying and the yang of job discussions. Outsourcing, as a result of being a topic of much discussion, is the most well known. Insourcing is new to the American discussion, but it is not a new concept for businesses. President Obama is expected to discuss the role of insourcing in job creation, meaning that U.S. businesses should bring back jobs that have been outsourced. There is another type of insourcing, which is when a company takes advantage of wage gaps in the labor market to move jobs - labor arbitrage - and that happens in country from State to State.
Labor arbitrage is the main reason for outsourcing because companies are able to take advantage of the low wages paid to foreign workers in foreign countries. The purpose of a business is to provide a return to shareholders or owners of the business. Higher returns requires lower costs. Too often, the outsourcing takes on moral and ethical perspectives that blurs the understanding of "why" businesses use this practice. Labor arbitrage is a cost cutting mechanism that is directly correlated to the consumer cost of goods and services. Higher labor costs mean a higher consumer cost. Outsourcing also gives businesses a greater talent pool. The United States is not a global leader where education intersects with the needs of businesses. That is why engineering or computer work is sent overseas among other areas.
Outsourcing is difficult to manage and often entails a lot of paternalism to ensure that the same work is being done overseas that would have been done here. The cultural differences alone can create public relations nightmares for businesses - child workers or sweatshop conditions. Businesses engage in outsourcing to remain competitive and profitable. The same applies to insourcing by businesses in the U.S. from State to State to take advantage of wage gaps. In states like California and New York, there are knowledge centers like San Francisco and New York City that have high costs of living, which then require higher wages. Those higher wages are then passed along to consumers. A business in San Francisco or New York can locate to a labor market with same or similar skill sets in another State and reduce its labor costs immediately.
Labor arbitrage is the main reason for insourcing - same as outsourcing. This is where the "Right to Work" campaigns come into play. Labor unions increase labor costs thus the cost of goods manufactured in one State can vary widely from another State. Labor arbitrage could result in a widening of the have and have nots in the sense that the U.S. will create little Mexicos, little Indias, or little Chinas in the U.S. Although, unlikely to happen to such an extreme, the degree is dependent on whether supply exceeds or is equal to demand in lower wage States. Not every State is a viable candidate for labor arbitrage so the higher the demand for lower wage workers combined with a lesser supply results in driving up labor wages. Williston, North Dakota is a perfect example of the scarcity principle - low unemployment, high demand for labor, and a commodity subject to trading volatility.
Where quality of life and living standards begin to erode is when the labor demand and supply are equal or supply exceeds demand. Americans can freely move between States and U.S. territories - jobs are a reason to move. Jobs attract workers and workers increase the demand for everything from housing to food to consumer goods and services. The potential is little money left over for retirement or educational ambitions. If a business leaves, then the local workers are vulnerable because "getting by" is not "getting forward". Insourcing and outsourcing is nothing if not a discussion about divergent interests. It is too simplistic to frame the argument on an "in" versus "out" basis. There is a downside to outsourcing that American workers need to understand in order to capitalize and benefit permanently rather than temporarily because of some tax credit morsel tossed out by U.S. politicians.
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Labor arbitrage is the main reason for outsourcing because companies are able to take advantage of the low wages paid to foreign workers in foreign countries. The purpose of a business is to provide a return to shareholders or owners of the business. Higher returns requires lower costs. Too often, the outsourcing takes on moral and ethical perspectives that blurs the understanding of "why" businesses use this practice. Labor arbitrage is a cost cutting mechanism that is directly correlated to the consumer cost of goods and services. Higher labor costs mean a higher consumer cost. Outsourcing also gives businesses a greater talent pool. The United States is not a global leader where education intersects with the needs of businesses. That is why engineering or computer work is sent overseas among other areas.
Outsourcing is difficult to manage and often entails a lot of paternalism to ensure that the same work is being done overseas that would have been done here. The cultural differences alone can create public relations nightmares for businesses - child workers or sweatshop conditions. Businesses engage in outsourcing to remain competitive and profitable. The same applies to insourcing by businesses in the U.S. from State to State to take advantage of wage gaps. In states like California and New York, there are knowledge centers like San Francisco and New York City that have high costs of living, which then require higher wages. Those higher wages are then passed along to consumers. A business in San Francisco or New York can locate to a labor market with same or similar skill sets in another State and reduce its labor costs immediately.
Labor arbitrage is the main reason for insourcing - same as outsourcing. This is where the "Right to Work" campaigns come into play. Labor unions increase labor costs thus the cost of goods manufactured in one State can vary widely from another State. Labor arbitrage could result in a widening of the have and have nots in the sense that the U.S. will create little Mexicos, little Indias, or little Chinas in the U.S. Although, unlikely to happen to such an extreme, the degree is dependent on whether supply exceeds or is equal to demand in lower wage States. Not every State is a viable candidate for labor arbitrage so the higher the demand for lower wage workers combined with a lesser supply results in driving up labor wages. Williston, North Dakota is a perfect example of the scarcity principle - low unemployment, high demand for labor, and a commodity subject to trading volatility.
Where quality of life and living standards begin to erode is when the labor demand and supply are equal or supply exceeds demand. Americans can freely move between States and U.S. territories - jobs are a reason to move. Jobs attract workers and workers increase the demand for everything from housing to food to consumer goods and services. The potential is little money left over for retirement or educational ambitions. If a business leaves, then the local workers are vulnerable because "getting by" is not "getting forward". Insourcing and outsourcing is nothing if not a discussion about divergent interests. It is too simplistic to frame the argument on an "in" versus "out" basis. There is a downside to outsourcing that American workers need to understand in order to capitalize and benefit permanently rather than temporarily because of some tax credit morsel tossed out by U.S. politicians.
37A7SE5VE8M8
Monday, January 9, 2012
Why the Occupy Wall Street platform of "We are the 99%" is not relevant to the U.S. presidential race.
Yes, there is a growing separation between the have and have nots. A disparity that is relevant to legislative and regulatory reforms. That is not the U.S. presidential race.
The U.S. presidential race is about leadership, experience, and education. Historically, Americans have elected a person in the 1% so to limit the 1% category to wealth is counterproductive. The 1% category also applies to the leadership, experience and education of our presidential candidates. There a correlation between leadership, experience, and education to wealth. Statistically, the more education a person has the greater likelihood that he or she will earn a higher salary - not a certainty, but definitely a greater likelihood. Thus, the 1% wealth disparity targeted by Occupy Wall Street has the potential to muddy the waters.
The U.S. president is often referred to as the CEO of America. This reference point for voters is critical to understanding the 2012 presidential race. The presidential race is overwhelmingly about the economy. Americans understand that the world is dangerous, it is a background issue, because like the European Union's impetus of tying European markets together to prevent war, globalization has had the same or similar effect. There is little to no land to be fought over for expansion and injuring countries is rarely isolated to that injured party. The difference between the European Union and the global market is that the European Union was explicit with its intentions whereas globalization has produced a beneficial unintended consequence. The WTO is more about fair trade than preventing war.
As such, war is a less interesting subject than the economy. The economy affects more individuals directly. The same cannot be said for war, although the war machine encompassing military contractors does lurk in the shadows. Since the economy is about business and businesses have leaders, the CEO image is in the forefront of a voter's mind. Generally, CEOs cannot become CEOs if they lack leadership, experience and education so becoming a CEO implies qualifications. Of the Fortune 50, 100, 500, or 1000 lists - the CEOs are roughly 90% or more male and of that majority, there is a classic image of what a CEO looks like - Mitt Romney. Not only is this a classic image for CEOs, but also news reporters - national and local.
This classic image resides in the American psyche and when in the voter booth under pressure to make a decision, a voter will use this classic image whether it is a conscious or unconscious choice. The older or more experienced the voter, the greater likelihood that this classic image will be entrenched. The younger generation has the same archetype - Mark Zuckerberg (Facebook), Mark Pincus (Zynga), Jack Dorsey (Twitter), but with lesser leadership experience due to their age. President Obama was elected on a "Change" platform capitalizing on the hyperism of social media. The flash mob mentality of social media users was managed perfectly because it was enough to overcome his minor deviation from the classic image - namely his race. President Obama 2.0 has yet to be tested and social media users are fickle, herd bound, and flight oriented.
In the end, American voters do not want a "We are the 99%" U.S. president. American voters want exceptionalism because the U.S. president is a reflection of America and its citizens - even if that is the greatest deception of all.
The U.S. presidential race is about leadership, experience, and education. Historically, Americans have elected a person in the 1% so to limit the 1% category to wealth is counterproductive. The 1% category also applies to the leadership, experience and education of our presidential candidates. There a correlation between leadership, experience, and education to wealth. Statistically, the more education a person has the greater likelihood that he or she will earn a higher salary - not a certainty, but definitely a greater likelihood. Thus, the 1% wealth disparity targeted by Occupy Wall Street has the potential to muddy the waters.
The U.S. president is often referred to as the CEO of America. This reference point for voters is critical to understanding the 2012 presidential race. The presidential race is overwhelmingly about the economy. Americans understand that the world is dangerous, it is a background issue, because like the European Union's impetus of tying European markets together to prevent war, globalization has had the same or similar effect. There is little to no land to be fought over for expansion and injuring countries is rarely isolated to that injured party. The difference between the European Union and the global market is that the European Union was explicit with its intentions whereas globalization has produced a beneficial unintended consequence. The WTO is more about fair trade than preventing war.
As such, war is a less interesting subject than the economy. The economy affects more individuals directly. The same cannot be said for war, although the war machine encompassing military contractors does lurk in the shadows. Since the economy is about business and businesses have leaders, the CEO image is in the forefront of a voter's mind. Generally, CEOs cannot become CEOs if they lack leadership, experience and education so becoming a CEO implies qualifications. Of the Fortune 50, 100, 500, or 1000 lists - the CEOs are roughly 90% or more male and of that majority, there is a classic image of what a CEO looks like - Mitt Romney. Not only is this a classic image for CEOs, but also news reporters - national and local.
This classic image resides in the American psyche and when in the voter booth under pressure to make a decision, a voter will use this classic image whether it is a conscious or unconscious choice. The older or more experienced the voter, the greater likelihood that this classic image will be entrenched. The younger generation has the same archetype - Mark Zuckerberg (Facebook), Mark Pincus (Zynga), Jack Dorsey (Twitter), but with lesser leadership experience due to their age. President Obama was elected on a "Change" platform capitalizing on the hyperism of social media. The flash mob mentality of social media users was managed perfectly because it was enough to overcome his minor deviation from the classic image - namely his race. President Obama 2.0 has yet to be tested and social media users are fickle, herd bound, and flight oriented.
In the end, American voters do not want a "We are the 99%" U.S. president. American voters want exceptionalism because the U.S. president is a reflection of America and its citizens - even if that is the greatest deception of all.
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