Communism vs. Competitive Markets

If gasoline was controlled by a monopoly, how high would that monopoly set gasoline prices?

No doubt, the price would be as high as possible. And as high as possible would mean until it hurt the consumers so much that they couldn’t pay anymore. But when would the consumer be hurt? In the age of unending debt, the consumer might take a very large hit in their expenses, without crying “Uncle”.

In addition to the ability to pay higher prices, another key factor would be the consumer’s perception of when the price was too high. So the best action for an Oil Trust would be to set the consumer’s expectations as high as possible.

And how would one set the consumer’s expectations higher? Well, that would take a propaganda campaign. Let’s outline some good propaganda points an Oil Monopoly might try to push on the consumers, and then the appropriate media outlets could repeat it until it becomes the defacto fact. It will be so good that most Americans will repeat the mantra as if they had thought of it themselves:

- “Adjusted for inflation, gasoline and crude oil prices have been higher in the past”. Simple, easy, even a child can remember and repeat. Who told me that again? I forgot. Never mind, it’s a great excuse to raise prices.

- “Prices are so much higher in Europe than in America, American gasoline is cheap”. Another good one, and let’s remember that dumbfounded Americans will never take into account that the tax alone in Britain is over $3.35 per gallon.

- “Refineries are down for repair, so gasoline and oil prices must go up”. Let’s hear it for supply and demand! Or the lack of understanding of supply and demand. We can understand that gasoline will go up as capacity is restricted, but what about oil? How are oil prices and refineries connected again? If refineries are down, that means crude oil must be going unused. How does the price of crude oil and gasoline both go up at the same time when refineries can’t take anymore crude oil? Wouldn’t the price of crude go down, as there would be less demand for crude? We certainly know that automobile traffic backs up when it can’t get through. Oh well, let’s not question the oracles of gas and oil propaganda, or the fact that Oil companies have been shutting down and restricting gasoline refinery capacity for decades.

- "There's a storm in the Caribbean, and gasoline prices must go up because of that". Ok, if you say so. Standard propaganda from the Pirates of the Caribbean.

- "War, explosions, Saddam Hussein, Hugo Chavez, mix and match, they cause the price of gasoline to go up". While these can cause crude oil supply problems in time, any excuse is good to get some more profit the very same day at a gas station near you.

And if it were a fact that Oil Companies and Gasoline refiners had become monopolies in the United States, what would be the reaction, and what would be the cure?

If we were Communists, the solution would be for the State to take over pricing and production.

If we were believers in Competitive Markets, we would break up the monopolies, as was done with the Standard Oil monopoly in the past. We would foster competitive markets.

The first action to take place in this dilemma has recently occurred in the State of Hawaii. Price controls have been put in place on the wholesale price of gasoline. This is the first step in the State taking over the industry. While this is anti-market in nature, it is also an admission that, “yes, the gasoline industry is a monopoly, and our cure is full government control”. Ironically, this communist-style solution is probably the first solution that comes to the mind of most politicians and concerned citizens in the home-land of capitalism. How ironic!

Of course as is the nature of powerful monopolies, Hawaii has been subtly threatened with an interruption of gasoline supply.

The true capitalist solution would be to break up the monopolies and trusts; to create as many real competitors as possible, and to drive the prices down to the true market value. Of course caution is always in order, as these efforts can be highjacked by special interests, and a new and even worse trust could be formed, ala Enron's manipulation of energy prices.

The real question will remain: is America truly the home of Competitive Capitalism, or a Pseudo-Communist System of State Controlled Monopolies? The answer may be too disturbing for many Americans to accept…only the future will reveal which path we are on.

America Lost to a Theory

Paul Craig Roberts, an economist who was a member of the Reagan administration, wrote a clear and concise summary of the state of US economic affairs. Essentially, it's another chapter of Capitalism Gone Wild. It's the story of America's decline due to unbridled greed and the corruption of an economic theory. Here's an excerpt from America's Lost Hegemony:

"The historian who chronicles America’s decline will lay the blame on free market ideology.
...
This development is taking a huge toll on America’s human resources in manufacturing skills, engineering and science. The first American victims were blue collar workers. Millions of them lost their jobs and experienced sharp declines in the quality of their lives. But as research, engineering, design, and innovation followed manufacturing abroad, now it is white collar workers in information technology and university graduates in engineering and physics who are being displaced.

American university enrollments in science and engineering are declining because there are no jobs for graduates. It is pointless to invest money, sweat and toil in an education that has no payoff. Markets do work. Markets are working to shrink the demand for, and supply of, American engineers and scientists.

The next impact is going to be on project manager jobs, practically the sole remaining source of career related employment for many engineers and technical people. Project management jobs require people experienced with the technology of the job. The loss of technical and engineering jobs empties the pipeline of people who have the experience to assume management positions. Far from being able to innovate, the US will even lack the human resources to manage technical and scientific projects.

Many uninformed people believe the problem is that America doesn’t produce enough scientists and engineers. Manufacturing & Technology News reports that “a group of 15 US business organizations has launched a national campaign aimed at doubling within 10 years the number of bachelor’s degrees in science, technology, engineering and mathematics.”

What is the point of this when there is a huge supply of unemployed engineers and technical people who have been displaced by offshore outsourcing and by H-1b and L-1 work visas for foreigners? I know an American software engineer in his thirties whose job was outsourced. After searching fruitlessly for a job for four years, he took a job in Thailand writing software programs for $850 per month.

The anecdotal stories are legion. Yesterday, a friend reported to me that the service technician who repaired his garage door opener said his company was flooded with resumes from college graduates and engineers who cannot find work and are willing to take jobs installing garage doors.

US executives, with an eye to quarterly earnings and their bonuses, continue to spend considerable resources lobbying for increases in work visas that enable them to replace their American engineers, scientists, and technical people with lower cost foreigners. These executives lie through their teeth when they assert the lack of qualified Americans for the jobs. The fact of the matter is, the executives force their American employees to train their foreign replacements and then fire their American workers.

In a word, American capitalism is destroying itself by dismantling the ladders of upward mobility that have made large income inequalities acceptable. By rewarding themselves for destroying American jobs and manufacturing, engineering and scientific capabilities, US executives are sowing a whirlwind. American political stability will not survive the turning of an American university degree into a worthless sheet of paper. Libertarians and free market ideologues who rejoice in freedom should open their eyes to freedom’s destruction."

Help Wanted – No Americans Need Apply

How has it come to pass that in the American high-tech industry, especially Information Technology (IT) that Americans need not apply?

It started with the desire for cheap labor. Through a massive disinformation campaign, high-tech corporate lobbyists were able to persuade politicians, the media, and the public that foreign labor was required. Both the Democrat and Republican parties jumped on the bandwagon, perhaps with different interests, but supporting massive importation of foreign labor just the same.

Once again, we are hearing fabrications from high-tech companies such as they are “seeking a number of highly educated computer engineers and others and can't find them in this country." This has been the mantra of the high-tech industry for almost 20 years, while at the same time it has been trying to expand the amount of cheap foreign high-tech labor that they can import into the US.

From a different perspective, government economists with an interest in keeping inflation statistics under control found that limiting wage growth via the importation of cheap foreign labor was an opportune way to keep inflation numbers down. Wage inflation was a convenient and dominant parameter in the total inflation equation to allow to stagnate, while concealing inflation in other areas. There would be no criticism of the massive importation of labor from these economists.

From the American standpoint, this was the reasoning for importing cheap labor, and later, exporting jobs via outsourcing. It was all about labor cost control.

But wait, there is more to the story. While the government and corporations would like to view employees as plug in numbers and head counts, this is far from the case. Employees are people, who are members of other groups, with their own motivations, ambitions, goals and agendas.

Enter The Indian Mafia

India is a country that is a rapidly growing democracy. We hear this praise over and over again. But it is also a country with a rigid and ancient class system, which is rampant with discrimination, corruption, nepotism, and favoritism

It is a somewhat inside term, both serious and humorous, for Indian high-tech workers and entrepreneurs to loosely call themselves the “Indian Mafia.” For instance, a group of smiling, fun-loving, young Indians might caption a picture of themselves with the tongue in cheek label of “Indian Mafia/Hindu Pride/Brown Power”. Or another example is the organization of Indian Entrepreneurs in the US (TiE), which is sometimes referred to as the Indian Mafia.

So what does this mean in terms of American high-tech jobs? It means that while American companies wanted cheap labor, the cheap labor that they chose to import had an agenda of their own. And it has been very successful.

The first part of that agenda was fairly innocent and common; it was group-promotion. Once an Indian worker was imported into the US, they would aggressively promote the abilities, availability, and cost effectiveness of more Indian workers, usually friends and family. The result was the importation of more Indian high-tech employees. But this widespread and understandable practice was just the start. A less politically correct practice was to follow, which may be more usual in Indian culture than in the modern American culture of diversity and equal opportunity.

The Brown Wall

We have all heard of the famous term “glass ceiling”, where some people were excluded from promotion for discriminatory reasons. A new term has been coined for the exclusion of American workers from Information technology jobs: it is called “The Brown Wall”.

The initial success of imported Indian workers led to the next step in the domination of the Information Technology business, which was the hiring of more Indian workers at the exclusion of all others. This was accomplished in a couple of ways. Once an Indian worker became a hiring manager, it was very simple for them to justify and hire many more Indian employees. This led to entire IT departments that consisted of only imported Indian labor. Even if the final hiring decision is not in the hands of an Indian manager, simply being included in the interviewing and input process allows someone to give a thumbs up to potential Indian employees, and a thumbs down to all others. The end result is the same, which is that future workers are part of the Indian high-tech labor force (the Indian Mafia), and all others are excluded. It is now common for an IT department to be staffed by nothing but Indian workers, at almost any company. For an American attempting to get one of those jobs, there will be no getting around the “Brown Wall”. No Americans need apply.

The New Old Paradigm

So here we are, where imported workers dominate an entire industry within the US, and Americans are excluded from even getting a chance at those jobs. Some may say that this is part of the American Dream, and that to even point this out is politically incorrect or racist.

It is ironic that political correctness and the American Dream are used to defend the growth of the opposite of that: a culture of racism, discrimination and favoritism.

It is a sad day in America, when issues such as these cannot be discussed because of political correctness, and where reality must be ignored. A day when young Americans are labeled less capable, and discouraged from entering high-tech, because they know there will not be a job for them. Where laid off American high-tech workers are replaced by imported labor, and must then look outside their areas of expertise for jobs, for instance at Home Depot, Wal-Mart, McDonalds or a cyclical job as a real estate agent.

Perhaps it is time to pull our heads out of the sand, and take a look around, before the America of equal opportunity, diversity and justice is lost.


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Note: This article contains many generalizations. As we all know, generalizations are often useful, but should never be applied to an individual, or to all members of a group. Just as gross generalizations are globally used about America or France, they are also followed by the caveat that most Americans and French are good people. Thus, this note follows the above story. This is not an indictment of the hard working Indian or imported high-tech professionals, just an interpretation of a current situation. It does not change the crux of the story though, which can be verified by an unannounced walk through the IT department of any US company.

House of Corporate Representatives

It was the best of times; it was the worst of times…

It was the best of times for the lucrative and (and monopolizing) energy corporations.

It was the worst of times for the American taxpayers, who have been forced to indirectly donate even more money to these companies that already take huge chunks of our money at the gas pump and in a variety of other energy costs.

How did this happen? The US Taxpayer has been burdened with an Energy Bill (to be signed into law next week) which gives out billions of taxpayer dollars in Corporate Welfare to the already highly profitable energy corporations. It was the best Bill that corporate money could buy.

This Energy Bill passed both the House and Senate last week. So who do the House of Representatives actually represent? It seems as though they mostly represent corporate entities, not the people. Perhaps we need to end the charade and open up the Congress for direct corporate sponsorship. Each seat can be purchased by the highest bidder. It would be similar to the sports stadiums that now carry corporate names. All that would be required is some simple changes to Congressional titles. For example, instead of the Representative from District 101, we could have the Representative from Chevron, or perhaps Senator Paimehoff from Citibank.

And if the Congress is not completely controlled by special interests, who is next in the chain of command? For the Party that has the Whitehouse, does it mean that the current administration makes all decisions, with everyone in the party towing the presidential party line? If that is the case, the new Energy Bill should come as no surprise.

When the Bush administration first took office in 2001, former Representative Spencer Abraham was tasked as the Secretary of Energy. For anyone who knew the past of Rep. Abraham, an agenda of corporate sponsorship was to be expected. The reason that Mr. Abraham was a former representative was due to the fact that he did not represent his home district in Michigan, but instead worked hard for his various corporate interests. He was thrown out by his constituents at the very first opportunity.

One of Rep. Abraham’s accomplishments included working hard for high-tech companies to bring foreign workers into the US to replace domestic workers. He was also the No. 1 recipient of campaign contributions from the automotive industry. No doubt his background was a perfect fit for the Bush Administration’s future Energy Policy.

In the final analysis, the individual players don’t matter as much as the fact that government is for sale, and only the vigilance of the citizens can prevent that abuse. Unfortunately, the latest Energy Bill is the worst of times when it comes to the vigilance of the taxpayers.