The key things about Detroit’s bankruptcy are that it didn’t happen overnight – and it didn’t have to happen at all.
Detroit’s long, sad slide started in 1950, when the Motor City’s population peaked at nearly 2 million people. Now it’s around 700,000.
The hollowing out of the city was on gut-wrenching display in two recent exhibits at the National Building Museum, featuring photographs by Camilo Jose Vergara and Andrew Moore.
In fat times and lean, the city’s pols and power-brokers chose to focus their energy, and the residents’ tax dollars on gigantic, big-ticket development scams while ignoring the basics that let cities thrive — or at least survive.
Detroit’s leaders poured money into a never-ending assembly line of sad-sack projects such as the Renaissance Center, the Fox Theater, Comerica Park, Poletown, the People Mover, and Ford Field.
But unlike Pompei and other cities crushed by Nature’s wrath or God’s wrath, Detroit’s destruction is completely man-made and thus can be reversed. The city that midwifed the Model T and the Cadillac, Bob Seger and Eminem, Ted Nugent and the Insane Clown Posse, still has tremendous assets in terms of infrastructure, location, and people.
Like Buffalo, Cleveland, St. Louis, and other dead cities scattered across the map of the industrial Midwest like so many cigarette burns, Detroit can stage its own comeback by reducing crime and picking up garbage; by freeing kids, parents, and property values from an abysmal school system; and getting the government out of everything that isn’t essential.
In other words, Detroit’s leaders only need to do what they should have been doing for the past 50 years. And the city’s dwindling supply of residents needs to keep them honest this time.
Because Detroit is finally out of next times.
Produced by Jim Epstein. Written and narrated by Nick Gillespie. Additional camera by Meredith Bragg.
July 21, 2013
Reason.tv – Detroit’s Tragedy and How to Fix It
July 18, 2013
Foodstamps as a form of corporate welfare
Mike Krieger explains how the US foodstamp program can be seen as a form of corporate welfare:
This ridiculously condescending budget put out by McDonald’s in partnership with Visa has been making the rounds today. I’ll allow excerpts from the Gothamist article on it and their corresponding video do most of the explaining, but the key point I want to hammer into people is that food stamps are corporate welfare. They actually are not welfare for the workers themselves, who undoubtably don’t have wonderful lives. What ends up happening is that because the government comes in and supplements egregiously low wages with benefits like food stamps, the companies don’t have to pay living wages. So in effect, your tax money is being used to support corporate margins. Even better, many of these folks who get the food stamp benefits then turn around and spend them at the very companies which refuse to pay them decent wages. Who benefits? CEOs and shareholders. Who loses? Society.
From the Gothamist post by Nell Casey:
Let’s take a look at what else McDonald’s imagines its employees’ expenditures should look like. First off, the site sets employees’ mortgage/rent at $600, which even if we didn’t live in an outrageously expensive city is still a laughably small figure. Next, the site tallies health insurance at a mere $20 per month. Where is this magical land of nearly free independent healthcare? We want Obama’s unicorn to fly us there! Also as a McDonald’s employee, your cable and phone bills should only come to $100 a month (HA!), your electric bill should hover around $90 (for serious?) and apparently if you work at a fast food chain there’s absolutely no need to ever buy any food ever. Maybe they offer employees a lifetime supply of fries?
So tallying up all of these totally realistic expenses, a McDonald’s employee would need to net $2,060 per month to make this budget work. Broken down, that would mean working at least 40 hours per week and making at least $15 an hour pre-taxes to earn the necessary $12.86 an hour. Currently, McDonald’s workers earn an average of $8.25 per hour, barring any funny business.
Update: A couple of comments have been logged on this post, and Megan McArdle’s first Bloomberg column also addresses the McDonalds/Visa budget thingy:
Speaking of food, a sample budget put together by Visa Inc. and McDonald’s Corp. is rocketing around the Internet. Most of the commentary suggests that McDonald’s is heartless, and gauche, to suggest how its employees might live on the embarrassingly paltry wages that they are paid. (According to the Census Bureau’s American Community Survey of 2009-11, median earnings for a fast-food worker were $18,564 a year.) The budget is based on two jobs, which has aroused special ire: Is McDonald’s telling its employees to get a second job so they don’t have to pay them anything?
[…]
Keep in mind that most McDonald’s workers don’t live close to New York City or Washington, the sources of much of the commentary I’ve seen. These are, respectively, the first- and fourth-most-expensive cities in the country. In many areas, the median after-tax household income is not that far from that on the McDonald’s worksheet, and it’s pretty easy to rent a room in a friend’s house for less than $600 a month. Memphis, Tenn., for example, has a median household income of $35,000, which, according to Paycheckcity.com’s take-home calculator, would give a single person about $2,300 a month after taxes. And that’s the median — 50 percent of the city is below that. You should not develop a theory of household finance that declares that the city of Memphis does not exist.
Survival on such a lean budget is possible because people who do it are not trying to live the atomized life of an upper-middle-class college graduate. They band together, sharing rent, cars and cash when needed, handing down clothes and generally spreading fixed costs over as many people as possible.
Should McDonald’s pay enough to support a thrifty-but-not-too-difficult independent lifestyle? Is that now the minimum decent standard for society? Obviously, a lot of people think that they should. Washington’s City Council just passed a “living wage” law directly targeted at Wal-Mart Stores Inc. that aims to force the retailer to pay its workers $12.50 an hour.
What would that look like nationwide? Let’s set the floor a little above the amount in the budget — about $27,500 after taxes, which will allow them to enjoy the full McDonald’s budget, plus health insurance on an exchange. That’s a minimum wage of $13.75 an hour for a full-time worker, almost double the current minimum; obviously, everyone else would also have to be paid more. The minimum that a two-earner household could bring in would be $55,000 a year — not that far from the current median income for a two-earner household.
Even if it were possible to mandate that everyone in the country make almost the median income, this would come with a cost; I’d guess that most economists would agree that such a hike in the minimum wage would cause fairly significant job losses.
July 11, 2013
Who will background-check the watchers?
Apparently, the folks who have been doing background checks for US government agencies have special abilities, including psychic powers:
The fallout from Ed Snowden’s leaks has taken many forms, one of which is the NSA taking a long look at its contractors’ hiring processes. Snowden claims to have taken the job solely to gathering damning info. This revelation, combined with some inconsistencies in his educational history, have placed the companies who perform background and credit checks under the microscope.
What these agencies are now discovering can’t be making them happy, including the news that one contractor’s investigative work apparently involved a seance.
Anthony J. Domico, a former contractor hired to check the backgrounds of U.S. government workers, filed a 2006 report with the results of an investigation.
There was just one snag: A person he claimed to have interviewed had been dead for more than a decade. Domico, who had worked for contractors CACI International Inc. (CACI) and Systems Application & Technologies Inc., found himself the subject of a federal probe.
It’s not as if Domico’s case is an anomaly.
Domico is among 20 investigators who have pleaded guilty or have been convicted of falsifying such reports since 2006. Half of them worked for companies such as Altegrity Inc., which performed a background check on national-security contractor Edward Snowden. The cases may represent a fraction of the fabrications in a government vetting process with little oversight, according to lawmakers and U.S. watchdog officials.
Who watches the watchers’ watchers? It appears as if that crucial link in the chain has been ignored. Give any number of people a job to do and, no matter how important that position is, a certain percentage will cut so many corners their cubicles will start resembling spheres.
These are the people entrusted to help ensure our nation’s harvested data remains in safe hands, or at least, less abusive ones. Those defending the NSA claim this data is well-protected and surrounded by safeguards against abuse. Those claims were always a tad hollow, but this information shows them to be complete artifice. The NSA, along with several other government agencies, cannot positively say that they have taken the proper steps vetting their personnel.
July 3, 2013
Kathy Shaidle’s “Dispatch from Canada”
Kathy will be writing a weekly column for our American friends, updating them with whatever’s up here in the Great White North. Given how little actually ever happens in Canada, it might be just a weather report or the latest style change for Justin Trudeau’s hair. However, to start it off, yesterday’s column attempted to correct a few common notions about Canada:
Because a lot of what you think you know about Canada is probably decades out of date.
As investment bigwig and journalist Theo Caldwell recently noted:
But Canada is far from American stereotypes of socialism, centralization and obeisance, at least in relative terms. By almost any measure, Canada is a freer country than the U.S.A.
Economically, the contrast is stark, for those who care to see. While folks reflexively state that Canadian taxes are higher than those of the United States, corporate and personal rates are lower up north.
How much lower are those corporate taxes? Canada ranks 6th lowest out of 185 nations. America came in at a shocking 69th place.
Believe it or not, Canada’s average household net worth is higher than America’s.
We also have lower unemployment, and our economy is holding steady, thanks in part to our ingenious refusal to give mortgages to welfare bums.
We have fewer divorces, fewer traffic fatalities, and way fewer tornadoes.
We’re skinnier, too. (Seriously: your restaurant portions are freakishly huge.)
But what about “the American Dream”?
According to one (Canadian) economist, “a son born to a poor father in the U.S. is twice as likely to remain poor throughout his life than if he had been born in Canada.”
[. . .]
We’ve got our flaws too, of course.
We literally have no abortion law, which means it’s easier to get one than a gun, even at the nine-month mark.
There’s no death penalty. And try getting an MRI, unless you’re a cat.
Our cops are increasingly corrupt, if not downright fascist. (Don’t be fooled by the propaganda about the noble, virtuous Mountie…)
We have this unelected Senate thing (long story) and a dorky constitution, especially compared to yours.
And don’t get me started on Quebec.
June 4, 2013
Marx for the modern era
A case for finding the proper modern interpretation of the works of Karl Marx:
The first view (held mostly by its detractors) is that Marxism is little more than the politics of resentment — a philosophical justification for the hatred of success by those who failed to achieve it. The politics of resentment offers three different methods for bringing its program of economic jealousy to fruition: Under socialism, the unsuccessful use the power of government to forcibly extract wealth and possessions from the successful, bit by bit until there is nothing left; under the more extreme communism, the very notion of wealth or success is eliminated entirely, and anyone who seeks individual achievement is punished or eliminated; and finally under anarchy, freelance predators would be allowed to steal or destroy any existing wealth or possessions with no interference from the state. Marx himself saw pure communism as the ultimate goal, with socialism as a necessary precursor, and perhaps just an occasional dash of anarchy to ignite the revolutionary fires.
But there is another, more intriguing and less noxious, view of Marxist thought that gets less attention these days because its anachronistic roots in the Industrial Revolution seemingly render it somewhat irrelevant to modern economics. Marx posited that factory workers should own the factory themselves and profit from its output, since they’e the ones actually doing the work — and the wealthy fat cat “capitalists” should be booted out of the director’s office since they don’t really do anything except profit from other people’s labor. Marx generalized this notion to “The workers should control the means of production,” and then extended it further to a national scale by declaring that the overall government itself should be “a dictatorship of the proletariat,” with “proletariat” defined in this context as “someone who actually works for a living.” The problem with this theory in the 21st century is that very few people actually work in factories anymore due to exponential improvements in automation and efficiency, and fewer still produce handicrafts, and the vast majority of American “workers” these days don’t actually create anything tangible. Even so, there is an attractive populist rationality to this aspect of Marxism that appeals to everyone’s sense of fairness — even to those who staunchly reject the rest of communist theory. Those who do the work should reap the benefits and control the system; hard to argue with that.
Although the “factory” is no longer the basic building block of the American economy, Marx’s notion that “The workers should control the means of production” can be rescued and made freshly relevant if it is re-interpreted in a contemporary American context.
H/T to Jon, my former virtual landlord, for the link.
May 30, 2013
May 26, 2013
Bangladesh needs legal reform and free markets
Sheldon Richman discusses the plight of workers — especially poor women workers — in Bangladesh:
According to a report written for the Netherlands ministry of foreign affairs, most Bangladeshis, unsurprisingly, are victimized by a land system that has long benefited the rural and urban elites. “Land-grabbing of both rural and urban land by domestic actors is a problem in Bangladesh,” the report states.
Wealthy and influential people have encroached on public lands…, often with help of officials in land-administration and management departments. Among other examples, hundreds of housing companies in urban areas have started to demarcate their project area using pillars and signboard before receiving titles. They use local musclemen with guns and occupy local administrations, including the police. Most of the time, land owners feel obliged to sell their productive resources to the companies at a price inferior to market value. Civil servants within the government support these companies and receive some plot of land in exchange.
Women suffer most because of the patriarchy supported by the political system. “Women in Bangladesh rarely have equal property rights and rarely hold title to land,” the report notes. “Social and customary practices effectively exclude women from direct access to land.” As a result,
Many of the rural poor in Bangladesh are landless, have only small plots of land, are depending on tenancy, or sharecropping. Moreover, tenure insecurity is high due to outdated and unfair laws and policies…. These growing rural inequalities and instability also generate migration to towns, increasing the rates of urban poverty.
Much as in Britain after the Enclosures, urban migration swells the ranks of workers, allowing employers to take advantage of them. Since Bangladesh does not have a free-market economy, starting a business is mired in regulatory red tape — and worse, such as “intellectual property” law — that benefit the elite while stifling the chance for poor individuals to find alternatives to factory work. (The owner of the Savar factory, Mohammed Sohel Rana, got rich in a system where, the Guardian writes, “politics and business are closely connected, corruption is rife, and the gap between rich and poor continues to grow.”) Moreover, until the factory collapse, garment workers could not organize without employer permission.
Crony capitalism deprives Bangladeshis of property rights, freedom of exchange, and therefore work options. The people need neither the corporatist status quo nor Western condescension. They need radical land reform and freed markets.
April 24, 2013
A call to abolish the draft … the NFL draft, that is
S.M Oliva calls for the abolition of the NFL’s annual offseason TV mega-event in Reason:
The sports draft is an anomaly of the American labor market. In most industries new hires are free to seek employment wherever there’s an opening. Even promising high school athletes may accept a scholarship offer from any college. But the NFL shield has stood resolutely against labor freedom since 1935 when Bert Bell, then the struggling owner of the last-place Philadelphia Eagles, convinced the rest of the nine-team league that poorly performing clubs should be rewarded with first choice of promising college talent. Under this new system, a “drafted” player could only negotiate a contract with a single team.
[. . .]
Regardless of how players come into the league, they are all subject to a salary cap that fixes total compensation as a percentage of football-related revenues. The present collective bargaining agreement further constrains rookie salaries, and roster limits prevent a team from simply stockpiling players. All the draft does is increase the likelihood that the most promising new talent — the players taken at the top of the first round — will go to teams with a demonstrated history of mismanagement.
This should concern the league as it faces a rising tide of concussion-related lawsuits brought by former players. While the NFL tinkers with playing rules in an effort to make the game “safer,” there’s been no effort to question the role of the draft system in promoting unsafe working conditions. Let’s say Player X is a highly touted quarterback prospect drafted by Team A. What if Team A has a poor offensive line and a coach prone to recklessness with his quarterbacks? Player X can’t turn around and negotiate with Team B, which offers a better line and a coach with a stronger record of developing young quarterbacks. Player X is stuck with Team A, and if that means he’s out of football after four years, a record number of sacks and a half-dozen concussions, then so be it.
April 22, 2013
QotD: The long-term dangers of chronic unemployment
One of the most pernicious aspects of the chronic unemployment rampant during the Great Depression was that it took many people (mostly men) out of the workforce permanently. Many men simply became unsuited for making a living, and this in turn prevented them from forming families or even becoming a part of normal society. The same pattern is appearing now, and it is a cause for grave concern. Chronic unemployment isn’t just a hit to the economy; it attacks the very fabric of society.
The simplistic approach to this problem is to demand that the government create jobs ex nihilo, but this almost never works in practice. Besides being wasteful of tax dollars and of limited use in actually reducing unemployment, these types of programs also tend to cultivate a sense of cynicism in the workers themselves. FDR’s various make-work schemes were a perfect example of this. (The old joke about the WPA was that it stood for “We Piddle Around”.)
Monty, “DOOM: It’s not the fall that kills you, it’s the sudden stop”, Ace of Spades H.Q., 2013-04-22
April 8, 2013
“‘Cash for sick days’ doesn’t have the same populist appeal”
In the Globe and Mail, Barrie McKenna explains why there’s a widening fairness gap between public employees and everyone else:
The seven-month-long dispute [between the Ontario government and public school teachers] has exposed something much more disquieting: the widening fairness gap in the Canadian workplace. Thousands of public sector workers enjoy high salaries, guaranteed pensions and special perks that other Canadians will never get, regardless of how long or hard they work.
Public sector workers argue they’ve earned these gains through decades of tough negotiations with employers. And once promised, governments should not unilaterally revoke them. Fair enough. But it’s not an argument that’s likely to sway many Canadians, who exist in a parallel universe.
The ability to bank and monetize sick days is virtually unheard of in the private sector. Less than 3 per cent of the 1,336 private sector plans in Mercer Canada Ltd.’s client database allow employees to bank sick days, according to figures supplied to The Globe and Mail. That compares to 28 per cent of the 407 government plans tracked by the benefits consultant.
No wonder Ontario teachers chanted “respect teachers, respect collective bargaining,” while they suspended school sports, plays and other extracurricular activities for millions of students in recent months. “Cash for sick days” doesn’t have the same populist appeal.
April 6, 2013
April 4, 2013
Canadian public sector workers earn between 9% and 12% more than private sector workers
Once upon a time, back in the far-distant past, public sector workers got lower wages but better job security, benefits, and pensions than their private sector counterparts. Over the last few decades, the public sector wages caught up and surpassed the private sector, and if anything the benefits and pensions got better. The Fraser Institute calculates that currently there is between a 9% and a 12% premium paid to public sector workers for similar jobs (and that understates the overall differential):
Comparing Public and Private Sector Compensation in Canada examines wage and non-wage benefits for government employees (federal, provincial, and local) and private-sector workers nationwide. It calculates the wage premium for public-sector workers using Statistics Canada’s Labour Force Survey from April 2011, after adjusting for personal characteristics such as gender, age, marital status, education, tenure, size of establishment, type of job, and industry. When unionization is included in the analysis, the national public-sector “wage premium” (i.e., the degree to which public-sector wages exceed private-sector wages) declines to 9.0 per cent from 12.0 per cent.
Aside from higher wages, the study also found strong indications that Canada’s government workers enjoy more generous non-wage benefits than those in the private sector, including:
- Pensions: 88.2 per cent of Canadian government workers were covered by a registered pension plan in 2011 compared to 26.4 per cent of private-sector employees.
- Early retirement: Government employees retired 2.5 years earlier, on average, than private-sector workers between 2007 and 2011.
- Job security: In 2011, 0.6 per cent of government employees lost their jobs — less than one sixth the job-loss rate in the private sector (3.8 per cent).
To ensure public-sector compensation is fair to both taxpayers and government workers, the report argues that better data collection is needed and suggests that Statistics Canada should gather data on wages and non-wage benefits more regularly and systemically than it does now. In addition, comparisons between the public and private sectors should focus on total compensation, not just wages or specific benefits such as pensions.
About one in five Canadian workers is in the federal, provincial, or local government civil service or related organizations, and only 15% of Canadians are self-employed. The vast majority of government workers are unionized, while the reverse is true in the private sector.
April 2, 2013
Revisiting the revisionist view of the “Satanic mills” of the British industrial revolution
Rather in keeping with the sentiments expressed in today’s Quote of the Day post, Emma Griffin explains why the workers generally thought of the industrial revolution as a very good thing indeed:
Writers and academics often show an interesting ambivalence about industrialization. Today, they regard it as a blessing, the single-most-effective way to lift people out of poverty. But in thinking about Britain’s Industrial Revolution, they have tended to reach the opposite conclusion: The rise of the factory, they argue, caused the end of more “natural” working hours, introduced more exploitative employment patterns and dehumanized the experience of labor. It robbed workers of their autonomy and dignity.
Yet if we turn to the writing of laborers themselves, we find that they didn’t share the historians’ gloomy assessment. Starting in the early 19th century, working people in Britain began to write autobiographies and memoirs in ever greater numbers. Men (and occasionally women) who worked in factories and mines, as shoemakers and carpenters, and on the land, penned their stories, and inevitably touched on the large part of their life devoted to labor. In the process, they produced a remarkable account of the Industrial Revolution from the perspective of those who felt its effects firsthand — one that looks very different from the standard historical narrative.
[. . .]
Higher levels of employment also helped change the balance of power between master and laborer. So long as jobs remained scarce, workers, by necessity, obeyed their employers. The price of dissent or disobedience was unemployment. With more jobs, such subservience became less and less necessary. In the booming new industrial towns, workers could, and did, walk out on employers over relatively minor matters, confident that finding more work wouldn’t be difficult. One autobiographer left his position simply because he “grew sick” of the work; another because he didn’t want to “beg pardon” after a falling out with his master; another objected to wasting his precious Sunday mornings at his master’s religious services; and another quit when his master refused to let him take his tea breaks off the premises. All working relationships are defined by a disparity in power between master and servant. But that inequality is rendered more palatable if we’re well remunerated for our services and can leave at will.
The way in which working people described the upheavals of this period provides us with a powerful reminder of the transformative effect of industrialization and of its capacity to improve living standards, even for the poor. Generations of historians have dwelled on the loss of old working patterns and presumed that the introduction of more intensive ones was detrimental to workers’ welfare. But these developments weren’t viewed in such a sinister light at the time. Industrialization promised full employment, and for those used to scraping together a living from the land, this was very good news indeed.
March 30, 2013
All those manufacturing jobs are never coming back
Tim Worstall explains why this is at the Adam Smith Institute blog:
I’m always rather puzzled by those who shout that we’ve got to bring manufacturing back to the UK. Apparently this will solve all our problems over what to do with dim Northern lads or something. Once they’re all hammering out whippet flanges then we just won’t have a problem with unemployment ever again. The problem with this idea is that modern manufacturing simply doesn’t provide many jobs. And if it were to provide mass employment it would be very badly paid employment too:
Americans working to produce traded goods and services earn, roughly, according to their productivity. If low-skill workers in America aren’t much more productive in manufacture of traded goods and services than low-skill workers in China, then they can’t earn much more than workers in China while being employed in manufacture of traded goods and services. They can earn a rich-world wage in production of non-traded goods and services, like sandwiches and haircuts, so long as there is sufficient local demand. In other words, the only way to get less-skilled Americans a good wage in a manufacturing industry is to significantly raise their skill and productivity level. If that can’t be accomplished, they can only hope to find good wages in non-traded industries. At least, that is, until wages of less-skilled workers across the developing world come much closer to converging with those in America.
Of course, that’s all about America but the same logic pertains here as well. Chinese manufacturing wages are around $6,000 a year at present. Meaning that if we had mass employment in manufacturing, as they do, then wages would need to be around that level. Or, alternatively, UK based manufacturing would have to be much more productive to support higher wages. And “more productive” is the same as saying “uses less labour”. Thus you can have few well paid jobs (in the Rolls Royces etc of this world) or you can have many badly paid jobs (Shenzen). It isn’t actually possible to mix and match between the two.
March 23, 2013
“Having it all” versus “being happy”
In the Globe and Mail, Margaret Wente talks about the tension many women feel in trying to lead full lives, both professionally and personally:
Sheryl Sandberg, the billionaire COO of Facebook, is everywhere these days. Her new book, Lean In, is a smart, strategic guide for women who want to succeed. Be more assertive, conquer your fear, manage your guilt, don’t sabotage yourself.
All good advice, in my view. But these days, a lot of smart, highly educated thirtysomething women are having an entirely different conversation. They’re not talking about leaning in. They’re talking about leaning back.
[. . .]
Given the realities of the modern workplace, the mystery isn’t why there aren’t more women at the top but why so many want to get there. “To reject a high-flying career … is not to reject aspiration,” Judith Shulevitz writes in The New Republic. “It is to refuse to succumb to a kind of madness.”
Most women, if they have the choice, are happy to trade long hours and money for flexibility and control. This explains why nearly a quarter of women who have MBAs and children have dropped out of the work force 15 years after graduation, according to a U.S. study. When these findings were released, they produced much hand-wringing about the failed promise of feminism and lingering discrimination in the workplace. But what they really reflect is women’s stronger preference for a balanced life.
High-achieving younger women don’t think this is going to happen to them. It takes them by surprise. They get an MBA or law degree, a demanding job and an equal-opportunity husband. And then they have a baby and – wham. As one young mother in her early 30s puts it, “I had no idea I’d be so crazy about my child.”
I suspect a lot of the frustration young women encounter is that they’ve been lead to expect that they can cope with both a full-time, active, fulfilling career and raising a child simultaneously. The reality is that for most women, it’s a binary choice: you get either the job or the family, but not both. When this realization hits home, it can feel like a betrayal.
