The Services should just acknowledge the reality of contracting anything in the seven-figure realm, and change initial award announcements to read: “The Initial Conditional Award of Contract XYZ is to Defense Conglomerate 1369. Work will commence after all Congressional Outraged Publicity-Seeking Posturing is exhausted and Butthurt Losing Contractor Challenges are adjudicated. We hope to run both those actions concurrently, and anticipate work will commence a minimum of 3-5 years behind schedule and costs grow at an exponential rate during this period, hence the budget supplemental is already in draft form for Newsies, Think Tanks, and Outraged Congresspersons to grind axes with.” Added caveat for this particular contract: “Additionally, a website has been established to collect all the comments from .40/.45 cal and steel-frame fanboyz to rant about How Stupid This Choice Is.”
John Donovan, posting to Facebook, 2017-02-28.
March 11, 2017
February 17, 2017
David Warren remembers when the government tampered with the free market to “save an industry” in Kingston:
Once upon a time, many years ago, I scrapped into one of these “no-brainer” political deals. The remains of the locomotive manufacturing business in Kingston, Ontario — whose century-old products I had glimpsed, still on the rails in India — were now on the block. A monster German corporation was offering to buy them, for the very purpose of competing, in Canada, with a (hugely subsidized, monopolist) Canadian corporation. The government stepped in, to “save” a Canadian industry, retroactively change the ground rules, and kick in more subsidies so that the Canadian monopolists, based in Montreal, could take over instead. This was accompanied by nationalist rhetoric, and Kingston was thrilled. Critics like me were unofficially deflected with bigoted anti-German blather held over from the last World War.
But I knew exactly what was going to happen. The local works, which would have been expanded by the foreign owner, were soon closed by the new Canadian owner, after studies had been commissioned to “prove” it was uneconomic. The latter’s last possible domestic competitor was thus snuffed out. The locals, whose lives had been for generations part of a proud Kingston enterprise, had been suckered. The politicians had told them it was little Canada versus big Germany. In reality, it was pretty little Kingston versus big ugly Montreal.
That is how the world works, with politics, so that whenever I hear of a big new national no-brainer scheme, my first thought is, which innocents are getting mooshed today?
January 25, 2017
Mark Perry provides some context to the claim that protectionist policies can save American jobs:
According to Team Trump’s website, we’re told that “blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base. By fighting for fair but tough trade deals, we can bring jobs back to America’s shores, increase wages, and support U.S. manufacturing.”
Actually, it’s been capital investments in labor-saving technologies like robotics and increasing worker productivity that have led to the large majority of US factory job losses, not trade or outsourcing, as I documented recently here. And there’s been no devastation of America’s manufacturing base; to the contrary, real US manufacturing output has reached all-time high levels in recent quarters.
What’s Trump’s solution to the loss of US manufacturing jobs? America’s “first authentic protectionist to win the White House since the 1920s” has outlined a series of protectionist trade measures including tariffs (30-40-50%), “tougher trade deals” (likely trade deals to protect US manufacturers from foreign competition), “Buy American” policies, and border adjustment taxes, among other strategies to “save American jobs.”
Here’s a relevant question to ask: How have protectionist trade policies in the past worked out for the US economy and how expensive is it to save American jobs with the protectionist trade policies Trump is proposing? We can find some answers to those questions in a Federal Reserve Bank of St. Louis research article published in 1988 by three economists “Protectionist Trade Policies: A Survey of Theory, Evidence and Rationale,” which presented a summary of the empirical evidence on trade protectionism from the 1986 book published by the Institute for International Economics Trade Protection in the United States: 31 Case Studies. Even though the research and empirical results are from the 1980s, this article and book provide useful empirical evidence on the costs of protectionism to bring some much-needed sanity to the debate on trade policy to counterbalance the favorable treatment being given to protectionism these days.
January 18, 2017
Whether they were captives in ancient Crete, orphans in the Florentine Ospedale degli Innocenti, widows in South India or country wives in Georgian England, women through the centuries spent their lives spinning, especially after water wheels freed up time previously devoted to grinding grain. Turning fibre into thread was a time-consuming, highly skilled craft, requiring dexterity and care. Even after the spread of the spinning wheel in the Middle Ages, the finest, most consistent yarn, as well as strong warp threads in general, still came from the most ancient of techniques: drop spinning, using a hooked or notched stick with a weight as a flywheel.
Spinning was the major bottleneck in making cloth. In the late 18th century, the thriving worsted industry in Norwich in the east of England employed 12,000 looms but 10 times as many spinners producing fine wool thread. The demand for spinning was so high, estimates the economic historian Craig Muldrew, that it employed more than a million married women in an English workforce of 4 million, providing about a third of the income of poorer families.
A spinster is a woman who spins. Unmarried women with no children and few domestic chores could work longer hours without distraction, earning as much as male day-labourers and, Muldrew suggests, possibly delaying or even avoiding marriage. Spinning also gave poor girls a more lucrative option than domestic service, leading to complaints of a servant shortage. With labour short and wages high, the eve of the Industrial Revolution was a great time to be a spinster.
But a bottleneck is a problem waiting to be solved, and inventors started looking for ways to get more thread with less labour. Like self-driving cars or cheap, clean energy today, spinning machines seemed obviously desirable. In 1760, Britain’s Society for the Encouragement of Arts, Manufactures and Commerce offered prizes for ‘a Machine that will spin Six Threads of Wool, Flax, Cotton, or Silk at one time, and that will require but one Person to work it’.
Nobody won, but within a few years the northern English carpenter James Hargreaves introduced the spinning jenny. It was, writes the economic historian Beverly Lemire in Cotton (2011), ‘the first robust machine that could consistently produce multiple spindles of thread from the effort of a single spinster’. Soon after, his fellow Lancastrian inventor Richard Arkwright refined mechanical spinning with water-powered innovations that improved thread quality and integrated carding and roving (twisting fibres to prepare them for spinning) into a single process. Arkwright’s mills decisively moved thread production from the cottage to the factory.
It was suddenly a bad time to be a spinster, or a family whose household income depended in part on spinning.
January 5, 2017
Ted Campbell briefly outlines the three tiers of military logistics then discusses the most controversial tier, the national industrial base, in more detail:
Behind it all, unseen, misunderstood, unloved and, in fact, often actively disliked is the national defence industrial base.
There are a great many people, including many in uniform, who object to the cost ~ fiscal and political ~ of having a defence industrial base. Many people suggest that a free and open market should be sufficient to equip all friendly, and the neutral and even some not so friendly military forces.
They forget, first of all, that the defence industries of e.g. America, Britain, France, Germany and Israel are ALL heavily supported by their government and, equally, heavily regulated. It is not clear that we will always be in full political accord with those upon whom we rely for military hardware? What if one country wanted, just for example, to gain an advantage in a trade negotiation? Do you think they might not “decide” that since the government (a minister of the crown) has threatened to use military force against First Nations who protest against pipelines that they will not sell us certain much needed military hardware or licence its use in Canada?
It is always troubling when we see the costs of military hardware increase at double or even triple the general rate of inflation for, say, cars or TV sets or food and heating fuel, but that is not the fault of the Canadian defence industries … it is, in fact, the “fault” of too little competition in the global defence industry market: too few Australian, Brazilian Canadian and Danish defence producers, too many aerospace and defence contractors merged into too few conglomerates that control too much of the market. A robust Canadian defence industrial base, supported by extensive government R&D programmes and by a steady stream of Canadian contracts would help Canada and our allies.
I am opposed to government supported featherbedding by Canadian unions and companies but we do need to pay some price for having a functioning defence industrial base … the costs of our new warships, for example, are, without a doubt, higher than they would be if we had bought equivalent ships from certain foreign yards, but we need to be willing to pay some price for having Canadians yards that are ready and able to build modern warships when needed; ditto for aircraft, armoured vehicles, radio and electronics, rifles and machine guns, cargo trucks and boots and bullets and beans, too. AND, we need a government that will, aggressively, support that defence industrial base with well funded R&D programmes and by “selling” Canadian made military equipment around the world.
It’s one thing to accept that you’ll need to pay a premium over market cost for built-in-Canada equipment that can’t also be sold to other customers. What is disturbing is discovering that the premium can be up to 100% of the cost for equivalent non-domestic items. For example, this was reported in a CBC article in 2014:
Britain, for example, opted to build its four new naval supply ships much more cheaply, at the Daewoo shipyard in South Korea. The contract is for roughly $1.1 billion Cdn. That’s for all four. By contrast, Canada plans to build just two ships, in Vancouver, for $1.3 billion each. So Canada’s ships will be roughly five times more costly than the British ones.
But there’s a twist. Canada’s supply ships will also carry less fuel and other supplies, because they’ll be smaller — about 20,000 tonnes. The U.K. ships are nearly twice as big — 37,000 tonnes. Canadians will lay out a lot more cash for a lot less ship.
Everything is more expensive to build domestically if you don’t already have a competitive market for that item. The federal government’s long-standing habit of drawing out the procurement process makes the situation worse, as the costs increase over time (but the budget generally does not), so we end up with fewer ships, planes, tanks or other military hardware items that arrive much later than originally planned.
December 28, 2016
The ancient Greeks worshiped Athena as the goddess of technē, the artifice of civilisation. She was the giver and protector of olive trees, of ships and of weaving (without which there would be no sails). When she and Odysseus scheme, they ‘weave a plan’. To weave is to devise, to invent – to contrive function and beauty from the simplest of elements. Fabric and fabricate share a common Latin root, fabrica: ‘something skillfully produced’. Text and textile are similarly related, from the verb texere, to weave. Cloth-making is a creative act, analogous to other creative acts. To spin tales (or yarns) is to exercise imagination. Even more than weaving, spinning mounds of tiny fibres into usable threads turns nothing into something, chaos into order.
‘The spindle was the first wheel,’ explains Elizabeth Barber, professor emerita of linguistics and archeology at Occidental College in Los Angeles, gesturing to demonstrate. ‘It wasn’t yet load-bearing, but the principle of rotation is there.’ In the 1970s, Barber started noticing footnotes about textiles scattered through the archaeological literature. She thought she’d spend nine months pulling together what was known. Her little project became a decades-long exploration that turned textile archaeology into a full-blown field. Textile production, Barber writes in Prehistoric Textiles (1991), ‘is older than pottery or metallurgy and perhaps even than agriculture and stock-breeding’.
Of course, pottery and metal artifacts survived the centuries much better than cloth, which is rarely found in more than tiny fragments. That’s one reason we tend to forget how important textiles were in the earliest economic production. We envision an ancient world of hard surfaces much as we imagine the First World War in black and white.
But before there was gold or silver currency, traders used cloth. In the 20th century BC, the Minoan kingdom on resource-poor Crete swapped wool and linen for the metals that its famed craftsmen, represented by the mythical Daedalus, used to create their wares. In the pre-monetary trade of the ancient Aegean and Anatolia, writes the archaeologist Brendan Burke in From Minos to Midas (2010), textile production was of ‘greater value and importance … than the production of painted clay pots, metal tools, and objects carved from precious metals: everyone depended on cloth’.
Archaeologists often track fabric production by what is left behind. Huge numbers of spindle whorls (usually of clay) survive, as do the clay loom weights that held vertically hung warp threads in tension. By counting the clay weights left from his workshops’ looms, writes Barber, ‘we can calculate that King Midas of Gordion could have kept over 100 women busy weaving for him, which makes him more than twice as rich as Homer’s fabulous King Alkinnoos [Alcinous, from the Odyssey], who had 50. No wonder the Greeks viewed Midas as synonymous with gold!’
August 29, 2016
James O’Brien selects a few imaginative historical myths for debunking:
Here are a few facts about U.S. life 60 years ago, in 1956:
- The top tax rate was largely irrelevant. The average household income in 1956 was about $4,800. Only 8 percent of families earned more than $10,000 per year. The 91 percent top tax rate (and that really was the top tax rate – a holdover from World War II) kicked in at $400,000 for married couples, or the equivalent of about $3.2 million today). While few individuals made that much money in 1956, people who did earn large sums of money could deduct everything from interest on auto loans to sales taxes, and could – and did – structure things so that their income was funneled through tax shelters at much lower rates.
- There was a lot less money overall. Adjusted for inflation, that $4,800 average household income would be about $42,000 today. That is roughly 20 percent less than current average household income of about $53,000. Even in 1956, when a Harvard education cost $1000 per year, $400 per month hardly afforded a riotous existence for a family of four. One of the most striking things about 1956 was how little people at the top of their professions earned. Yogi Berra – the highest paid player in Major League Baseball that year – received $58,000. That would be a little over $500,000 today, essentially minimum wage by MLB standards.
- Tax revenues as a percentage of GDP were about the same as they are today. Since 1945, tax revenues as a percentage of GDP have fluctuated within a fairly narrow range of 15 to 20 percent. The state of the economy, not tax rates, has determined how much the government takes in. Despite the high marginal rates of the 1950s, the tax intake as a percentage of GDP was just 16.5 percent in 1956. It was 18 percent in 2015, so we are actually taking in more, rather than less money, although we are spending it in many new and different areas.
- Government spent less on everything but defense. The U.S. Federal budget for 1956 might best be described as “Spartan”, not in the sense of being frugal (although it was that) but in the sense of being primarily devoted to preparations for war. In the Cold War climate, defense spending soaked up 60 percent ($47 billion) of the total $76 billion Federal budget – about three times the current percentage — and spending on “social programs” was essentially nonexistent. There was no Department of Education, and total Federal spending on education was just $1.5 billion. Healthcare expenditures were just $1.0 billion; there was no Medicare, (which now represents 15 percent of the total Federal budget), no Medicaid, and certainly no Obamacare. The Interstate Highway Program – so beloved by liberals – was conceived as a defense spending measure and was designed to be self-funding through diesel and gasoline taxes.
- Opportunities were anything but equal. Racial discrimination was rampant and gender bias was everywhere. Many fields were essentially closed to women and to people of color, while quota systems deterred talented Jewish students from pursuing careers in fields such as engineering and law. We can argue all we want about white privilege in 2016 but in 1956 it was endemic, and bred not just economic but social and cultural inequality.
When we look at the United States in 1956 we see a country with high (but largely irrelevant) marginal tax rates, no social programs to speak of, and a massive defense budget. With Europe still recovering from World War II, the economy is strong, and companies are willing to spend and hire. The country’s focus, however, is not on the welfare of its people, but on its survival in a grim ideological and geopolitical struggle with a ruthless and determined opponent. Those who portray the 1950s as some sort of golden age of progressivism are writing historical fiction, not history.
The 1950s for the United States (and for Canada) were, to borrow a notion from John Scalzi, run in “easy mode” — in game terms, the lowest difficulty setting. There was no peer-level competition in manufacturing or even in services and this provided profit levels that allowed both corporations and workers to enjoy unrealistic long-term conditions that finally came to an end in the gas shocks of the 1970s, after the devastated economies of the defeated Axis powers finally were able to compete again. Twenty-five years of minimal competition left the major corporations totally unable to cope with even minimal competitive pressures from overseas … but willing to use whatever political levers were available to try to quash those foreign upstarts.
But as the courtiers of King Canute were finally obliged to accept, even the King can’t order the tide to recede when it’s convenient.
August 28, 2016
Published on 27 Aug 2016
It’s time for the Chair of Wisdom again and this week we talk about the German war aims and the war economy.
May 30, 2016
Published on 19 Apr 2016
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The armies and technology of World War II required a vast supply of resources. A close look at Germany and Japan shows how the need to secure those resources played a significent role in determining strategy throughout the war.
The armies of World War II needed a vast supply and variety of resources. The Allies had many of those resources on their side, but the Axis powers did not. Germany imported many of its resources from countries it would soon be fighting, and needed their war strategy to account for the acquisition of those resources. The Molotov-Ribbentrop Pact signed with the USSR set up a trade agreement to bring them oil from Russia for a while, in addition to establishing temporary non-aggression with the Soviets. When the war began in earnest, Germany targeted Norway with its supply of aluminum and iron as well as its access to the even more resource-rich Sweden. Conquering France also gave them access to rich farmland to feed the troops. But even though they had gained control of the oil fields in Romania, it wasn’t enough to power their war machine. Many Nazi generals wanted to target North Africa for this, but Hitler had his sights set on the Soviet Union and wound up squandering much of Germany’s reserves in a fruitless effort there. Meanwhile, Japan’s entrance into the war had cost them their primary trading partner: the United States. The Japanese army wanted to pursue the Northern Expansion Doctrine (Hokushin-Ron) and push through China into Siberia, wounding the USSR in the process. They attempted this strategy, but the Soviets met them in Mongolia and pushed them back in the Battle of Khalkhin Gol. So they turned to the Southern Expansion Doctrine (Nanshin-Ron) advocated by the navy, and began to sweep up islands in the Pacific. They planned to strip the European colonial powers of their holdings, and they succeeded in capturing 90% of the world’s rubber production. But the US responded by synthesizing rubber, and built an industry so large that even today, more rubber is synthesized than harvested. If World War I was the first industrial war, marked by mass production and industrial capacity, then World War II was the first scientific war, marked by advancements like synthesis, radar, and jet engines.
May 29, 2016
Published on 12 Apr 2016
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After Germany’s early push, the situation looked dire in Europe. The United States had resources to help out, but initially clung to an isolationist policy. Gradually, measures like Cash and Carry and the Lend-Lease Act expanded their involvement.
Germany’s blitzkrieg had been largely successful. France fell early, and Great Britain appeared on the verge of collapse. Europe needed more resources to sustain their resistance, but the United States was bound by the Neutrality Act which established a policy of isolationism and forbade the US from supporting foreign wars in any way. President Franklin Delano Roosevelt skirted those restrictions. He lobbied Congress to reinstate a provision in the law called Cash and Carry, which would allow other nations to buy US war materiel with cash and transport it themselves into the warzone. He also established an agreement which allowed him to place American military bases on British colonies in exchange for destroyer ships, thus safeguarding the far reaches of the United Kingdom from possible Axis invasions. When it turned out that the English won the Battle of Britain and successfully staved off the attempted Nazi conquest, America decided to support them in a more substantial, long term way. Thus the Lend-Lease Act was signed: the US would loan equipment to their strategic partners (who were not the Allies yet). Though supposedly the equipment had to be returned, it was pretty obvious that war materiel would not come back in the same shape if at all, so this was really the largest donation of war supplies ever. But it wound up benefiting the US in turn, since the increased production galvanized an economy that had been stagnant since the Great Depression. It also kickstarted the involvement of the US Merchant Marine, who were among the earliest US citizens to give their lives in World War II and suffered the highest casualty percentage of any branch of the service. These unarmed ships navigated U-boat infested waters to bring much needed supplies to Europe, North Africa, and Asia. Despite this, their service has gone largely unrecognized and unrewarded as they are still denied many veterans’ benefits and were not even formally thanked by Congress until 2012.
April 11, 2016
April 2, 2016
Colby Cosh gently pokes fun at the latest outbreak of manufactured patriotic fervor:
An enterprising Toronto man wants to sell us all “Ketchup Patriot” T-shirts, so that the virtuous among us might assert the correct position on the hot issue of whether it is right to eat products made with dubious foreign tomatoes.
This presents me with a dilemma: I agree with the many words already written in this space, and in the Financial Post, about the preposterousness of tomato isolationism; on the other hand, I am pretty sure our future as a country has less to do with mid-grade agricultural products destined for pureeing than it does to do with insta-auto-robo-printing of faddish social-signalling paraphernalia. You have to admire the spirit of enterprise wherever it emerges. The best answer ever given to Che Guevara’s philosophy was the Che Guevara T-shirt.
The “Ketchup Patriot” view favours French’s brand ketchup, which is now made from tomatoes grown in the area around Leamington, Ont. Leamington is practically a creation of the H.J. Heinz Co., which was a major employer there for decades, but fled to the United States in 2014. Few Canadians are employed in the growing of tomatoes, mind you: migrant workers flown into local dormitories and paid around $10 an hour seem to do most of the hard work on Leamington-area farms and in greenhouses.
French’s, best known for selling mustard, is owned by the Reckitt Benckiser Group PLC of Slough, Berkshire. This “Ketchup Patriotism,” the closer you look at it, becomes more and more a matter solely of dream terroir. Canadians don’t get the profits, don’t pick the tomatoes and don’t even can the ketchup — that happens in Ohio, although French’s, obviously aware that it has a whole country by the tail, has hinted at plans to open a new cannery somewhere in Ontario. All we do, for the moment, is own the land. This ketchup has a mystical Canadian essence, one I defy anyone to detect in a blind taste test.
One may not detect the “distinctive Canadian ‘terroir'”, but having actually tasted Heinz and French’s products, there’s a reason that Heinz is the default ketchup for most people.
March 4, 2016
Published on 3 Mar 2016
The fierce Battle of Verdun continues but as the Germans under Crown prince Wilhelm push harder and harder, the German casualties begin to rise to the same levels as the French. The French Army is only kept alive through the sacred road which brings men to the front without a pause. One French soldier that gets captured around Verdun, is Charles De Gaulle. At the same time, on the almost forgotten Libyan Front South African cavalry saves the day like in the glorious past of the British Army.
November 12, 2015
Published on 18 Mar 2015
In this video, we talk about the special case of the decreasing cost industry. As output increases, costs will continue to fall, and more firms will enter which, again, increases output. It’s a virtuous circle! At the end of this video, we review the major points made in this section. If you find that something doesn’t quite make sense, feel free to re-watch videos as many times as you’d like.
September 7, 2015
In The Register, Bill Ray takes a geek’s-eye-view of the town of New Lanark, a key place in the early industrial revolution:
Nestled in the Clyde Valley the village owes its existence to the falls that were harnessed to refine raw cotton sent in from the colonies: a picture-postcard image from a time when Britain was the factory of the world.
But for all its industrial heritage New Lanark is a long way from being a typical “dark satanic” mill, as it marks the end of that time and the dawning of a better age.
Visit the village today and you can see the big machines that kept the empire running. Enormous water wheels; later supplemented by steam engines, connected by belts and ropes to machines which turned raw cotton into usable thread and fabric. However, it’s not industrial history that is celebrated at New Lanark, rather a social revolution, and one driven by one man whose ideas created the working life as we understand it today.
The man was Robert Owen, who, in 1799, bought New Lanark and immediately embarked on his “grand social experiment”. His radical ideas, such as refusing to employ children, providing medical insurance, and educating the workforce, were ridiculed by his competitors who couldn’t see the value in teaching children, let alone adults. But Owen believed that industry should serve the betterment of all men, not just those who owned the factories.
It worked too, rather to the surprise of his peers. New Lanark was a successful mill and profits rose steadily under the beneficent command of Owen. It could be argued, perhaps, that New Lanark would have been even more profitable without the social agenda, but every afternoon at five we should all be grateful for his reforms that made our working lives what they are:
“Eight hours daily labour is enough for any human being, and under proper arrangements sufficient to afford an ample supply of food, raiment and shelter, or the necessaries and comforts of life, and for the remainder of his time, every person is entitled to education, recreation and sleep”
Not that the workers at New Lanark did quite as well as we do; their working day ran ten and a half hours, but once mealtimes had been deducted it was approaching eight and certainly much better than the conditions in other mills around the country.