Adam Smith Waylaid

The equation for Adam Smith’s “Comparative Advantage” lines up like this: the average wage in China is $.90 per hour, as opposed to $22.00 per hour in the US. If you’re an auto parts supplier and your profit margins are down another 4% for the third consecutive year in a row, your options lay in sharp relief.

Implicit in all discussions of efficiency (and the logical underpinnings of unfettered immigration) is the idea that there is no barrier to ever lower costs, no barrier to ever-better efficiency. This is what has become a mantra, an idea whose converse is viewed as heresy amongst economists. Like Moore’s law and the certainty of the Big Three in the 1950’s that next year would be like this year, plus 10% – might this be a fatal assumption? This is more than academic. If we get this wrong the entire bargain the western democracies have made with their populace is shot. No longer does improving oneself with education mean much when my $100,000 per year coding job can be moved to Hyderabad and done as competently by a worker who is paid $18,000 per year. But there are no pensions in Hyderabad and there are minimal environmental regulations in Bangalore. There are no workplace safety rules resembling those in the U.S. and there is no public infrastructure to be paid for that resembles anything to found in Tokyo, London or Sunnyvale – and there’s no universal public education to pay for. The software outsourcing companies in India have to supply their own water, supply their own security and supply their own power. How do you compete with a country where infrastructure has been privatized and has not yet made that bargain with its citizens?

Even Moore’s law will be running up against the wall of Quantum theory in the next ten years as ever shrinking microprocessors slam into Heisenberg’s and Schrödinger’s creepy equations (what do you do when circuits become smaller than the electrical pulses they carry?) But might Economics have its own wall that the drive for ever-lower costs is bound to hit? What do you do when your costs are an order of magnitude below what they were five years before? That means your supplier’s costs have also been reduced by a similar amount. What are they paying their employees in 2004 compared to 1999? Is it the same? If it is, how many employees are being paid that wage today as opposed to 1999?

Adam Smith never envisioned aggregated T1 lines with C++ and Java code flying across two oceans at the speed of light, minus the microsecond ping-time-overhead of the Cisco routers playing traffic cop. If my customer needs help they can call my call-center in North Carolina. Or they can call my call-center in Shanghai. There is little difference between the two since my call center in Shanghai has employees who speak flawless English with a modest accent and know Microsoft 2000, Oracle or SAP as well as my employees in Raleigh -- who are paid ten times as much.

In Economics an externality exists whenever there is a separation of costs and benefits. When a business dumps toxic waste into a nearby river and downstream residents are riddled with cancer, the costs of that cancer are an externality. The business is able to lower its costs and pass those lower costs onto its customers while never having to pay for the treatment of cancer patients that it would have to otherwise have to incur.

We have laws in this country against dumping and pollution for this very reason – making sure the costs of certain dangerous behaviors are prevented. But a company that chooses to outsource jobs overseas avoids many of these costs, some of which include:
1) High wages, 2) Organized labor, 3) Social Security or Medicare payments, 4) Unemployment tax, 5) Health benefits for workers, 6) Child labor laws, 7) OSHA or EPA costs or regulations, 8) Retirement or pension costs.

But what about the company that does not export its jobs, but instead stays in its home country and takes advantage of illegal immigrants as employees? How many of these advantages does it incur? What happens if these illegal immigrants are granted guest-worker status within the U.S., as the Bush administration has proposed? How many of these same obligations will be skirted -- will our experiences with a previously illegal labor force just be codified and institutionalized?

The experiences of the construction industry in the American Southwest over the last decade show how an addiction to low wage, illegal immigrant labor can become institutionalized. As illegal labor became a larger and larger part of the various construction trades a common complaint among general contractors was that no one in the industry could afford to not break the law and hire undocumented workers. At least four costs off the above list have been already skirted in certain industries here in the U.S. Agriculture, for example, the largest employer of immigrant labor (legal and otherwise) has historically been able to pay extremely low wages, endure little in the way of organized labor and avoid paying health benefits for workers, as well as retirement or pension costs. In the case of illegal immigrant labor, none of those benefits are demanded, or can be demanded, due to the threat of deportation. If immigrant labor was given guest-worker status, this same group would gain some pricing advantage, but how much? Enough to bridge the current wage gap between legal and illegal labor? Judging from some of the organized boycotts the United Farm Workers in the Sonoma Valley over healthcare benefits not being extended to legal farm workers, one gets the impression that the question might be moot, or at the very least, a difference that is only a matter of degree.

The free movement of labor is an idea that has been embraced one time or another by both Labor and business interests, but for different reasons – the former found it attractive because of the opportunity for worldwide trade unionism, and the latter because of the assumed lower labor costs and more efficient allocation of workers. However, at this time, the free movement of labor has primarily been embraced by business interests. Publications such as the Wall Street Journal call for the complete removal of any and all immigration barriers while Labor is a major player at anti-globalization protests wherever they are held. Strangely enough, in what can be seen as a rear-guard action to increase faltering influence and membership, the Service Employees International Union's has in recent years included illegal custodial workers in Los Angeles as part of its organizing efforts. In the past, unions have viewed illegal workers as a threat to their wage and benefit gains and until recently it would have been inconceivable to see them included in any organizing drive. If this type of organizing expands its scope, wage and benefit floors might be buttressed somewhat for illegal labor and moving it towards some type of parity with legal wages. If so, the logical extension might be for illegal labor to become less and less attractive over time.

In the past conventional wisdom would argue that wage decay would only occur in lower skilled trades, that new higher skilled jobs would more than make up for what was being lost on the lower end. But, as we have seen in the programming field, this is no longer the case. We are now seeing the greatest divide between the perceived interests of corporations and workers (and by extension, society as a whole) since the violent labor unrest of the early 20th century. As business interests find they now can suture themselves to a labor supply 6000 miles away, this fissure will continue to grow wider.

Crusty Movie Corner
In which we re-visit an unfashionable old movie that is not on the AFI's Top-100 list.

The Man Who Shot Liberty Valance, 1962

John Ford's relatively unappreciated film from late in his career featuring, John Wayne, James Stewart, Vera Miles, Lee Marvin, Edmond O'Brien, Andy Devine, Woody Strode.

When summarizing the American director and reluctant autour with the most impressive and consistent body of work (other than Peter Hyams), the sheer numbers overwhelm: with some 135 films dating back to 1917, 10 can be cataloged as masterpieces, another 10 can be given the designation of "great" and another 20 are films that any other director would be glad to include in their body of work. These are fuzzy numbers since few of us have seen the entire Ford catalog, but to make the claim that Liberty Valance should rank in the top five would be viewed as fighting words by some. After all, who are you going to boot? "The Searchers", "Stagecoach", "The Quiet Man", "My Darling Clementine" "She Wore A Yellow Ribbon"?

For several years I have carried in my wallet a review of "The Man Who Shot Liberty Valance", a brief posting from the events calendar of the Los Angles Times -- author unknown. In under one hundred words, it makes the case succinctly:

"A chamber film about memory, the frontier, civilization, and the ironies and illusions of history. The town is pasteboard, the landscapes almost nonexistent, and most of the actors 20 to 30 years older than the characters they play (in flashback). But this is still a masterpiece: The story of how the wilderness became a garden and how four people -- a lawyer, a woman and two gunmen -- became trapped in the roles legendry thrust on them. The cast makes it almost the Casablanca of westerns."

Great Daniel Patrick Moynihan Quote

"The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself."

CNBC's "McEnroe" Gets 0.0% Overnight Rating

In what has to be new ratings low, CNBC's new talk show featuring tennis star, John McEnroe, scored a 0.0% overnight rating for July 27 and August 2, with only 39,000 viewers tuning in each evening. Monday's show improved things slightly with a 0.1 rating bringing in 69,000 viewers.

The show isn't horrendous; yes, John McEnroe is stiff, his nasal voice grating and during one opening he begged the audience to applaud louder -- but it does feature some solid and creative guest booking, quite an achievement for a C-level show with little clout (one night's guest list featured character actor, Alfred Molina and New York attorney general, Elliot Spitzer). NBC executives say that they're going to give the show a chance, but when you consider that the program it replaced, Kudlow and Kramer ("My Favorite Plutocrats") was pulling in ratings 10 times that of "McEnroe", it will be an increasingly difficult position to maintain.

Crusty Movie Corner
In which we re-visit an unfashionable old movie that is not on the AFI’s Top-100 list.

In Harm's Way, 1965

Having been a cable TV staple for years, this is a film that can hardly be considered a forgotten gem. However, it does deserve critical reevaluation and to be put it on par with its cinematic brethren, “From Here to Eternity”. Though at first glance it appears “In Harm’s Way” is an obvious knock-off of the former, I would argue that “In Harm’s Way” is the superior film.

Directed by Otto Preminger, “In Harm's Way” boasts an all star cast made of up John Wayne, Kirk Douglas and Henry Fonda, Burgess Meredith and Patricia Neal, plus supporting players, Patrick O'Neal and Paula Prentiss. Like “From Here to Eternity” (number 52 on AFI's Top-100 list) , the film has an epic sprawl encompassing multiple story lines, all taking place in the backdrop of the Pacific theater during WWII. But unlike “Eternity”, the cast of “In Harm’s Way” (especially Wayne) give more attenuated performances than Burt Lancaster’s and feature none of Monty Clift’s tortured Method ticks. It is the only film in which the inflection of the line readings looms so large in my memory.

Both films are sprawling two and a half hour epics that weave various plotlines linked by one or two principal characters. With “In Harm’s Way”, that central link is John Wayne’s Captain (later Admiral) Torrey. The film follows him being stripped of his cruiser command, being busted to deskbound duty and finally his rehabilitation as an Admiral commanding a large task force. He is accompanied by his loyal, but damaged Executive Officer (Kirk Douglas), a complex character whose flawed likeability take a major hit when he succumbs to the lures of the abyss and rapes a young navy nurse (the fiancé of Torrey’s son).

In what as to be one of the wittiest and economical bits of character exposition, Torrey’s roommate, an intelligence officer played by Burgess Meredith, is introduced as he lies sleeping on the couch. Torrey walks up to him, pulls a copy of Photoplay off his face (a movie gossip magazine of the era) and parodying the cover headline asks, “(So) what is “Vicki Marlow’s secret”?” Meredith replies, “Vicky Marlow’s secret” is that she’s making half a million bucks a picture and is still collecting alimony from me.”

Nice touches abound -- often, it is this kind of texture that lingers most from a movie long after the plot has faded -- Wayne arriving home to find his roommate’s parked car in the driveway with the radio still on, music blaring. He turns it off and then walks in the door to find the radio on in the house, tuned to the same station, playing the same song.

The film daringly kills off much of its cast and leaves our protagonist lying wounded on a troop ship after a brutal naval battle. It is strange to watch the film realizing Director Preminger was only one year away from appearing as Mr. Freeze in the Batman TV series (along with Meredith as The Penguin), a casting oddity roughly equivalent to Josef Von Sternberg showing up on Facts of Life. Today, such stunt-casting is a de rigeur, po-mo career move -- in 1966 it was just plain weird.

ThunderBirds are No-Go

"ThunderBirds", director Jonathon Frakes' re-imagining of the British 60's sci-fi puppet show, is an agonizing endeavo that guarantees alienating the original's cult audience without winning any new fans. Judging from its $2 million opening weekend take it appears to have little chance of making back its $56 million budget, putting it on track to be one of the year's biggest money-losers.

Scrapping original producer Gerry Andersen's shuffling marionettes for jail-bait teens, the film can't decide whether to play off of the original's campy charm or be an ABC AfterSchool Special throttling the viewer with teamwork and empowerment lessons. One is at a loss to see where the film's budget went since the film's computer generated spaceships look abridged, the cockpits containing little detail other than a pilot seat and a rudderstick, giving the impression that the budget ran out before the craft were fully rendered.

Looking like they had gotten lost on their way to somewhere else, Ben Kingsley and Bill Paxton supply the lead adult roles and at least provide the bored viewer a chance to speculate how much each actor got paid for this career body-blow and which one fired their agents first.

Is 70's Progressive Rock to Blame for New Age Music?

When I first heard this statement made by a Minneapolis-based rock critic, and relayed to me by a friend, I hit the roof. Such sophistry, blaming "Dark Side of Moon" for John Tesh. But when I thought about it some more I realized that he was right -- but the music critic still managed to get it wrong.

Yes, it's true, the progressive rock of Pink Floyd, Genesis, Yes, Roxy Music, King Crimson etc. did spawn New Age music. But to blame it for spawning New Age is as ridiculous as blaming Jazz for spawning Fusion and Grunge for begetting Emo. Blues begat Rhythm and Blues and Rhythm and Blues begat Rock, with Gospel and Jazz in there somewhere. Celtic music helped spawn Country, and Country helped birth Rockabilly, which fed back into Rock, which begat Hip Hop (with a whole lot of help from Funk) -- so today you're left with bands like Wilco who play a type of Alt-country that wouldn't sound out of place at the Grand 'Ol Oprey, but who would then get kicked out two minutes later when they start sounding like Kraftwerk doing Sonic Youth noise experiments. The point is you can't give credit and blame to music styles as they mutate. If you're going to blame Pink Floyd for New Age, you might as well blame Muddy Waters as well, since Pink Floyd started out as a traditional blues cover band, as did most British bands of that period before they started singing about "Pipers at the Gates of Dawn" and doing 15 minute Mellotron solos.

Late 60's to mid 70's Prog Rock was informed by a whole different sensibility than what created Windom Hill. At its best Prog was lyrically and musically ambitious, heavily influenced by the Western classical tradition and Jazz. Song structures and time signatures were complex and sometimes tortuous, lyrics made allusions to literature, art, science and mysticism (rarely politics) -- but they always rocked. King Crimson could sound as much like Black Sabbath as Miles Davis (as Miles Davis often did himself!). On the other hand, New Age always sought to be meditative, somnambulant, never challenging the listener. It ended up relying on sentiment and cliché with song titles repeatedly featuring words like "crystals", "Sedona", "vortex", "dreams" "Celtic" and "dolphins", having become today the aural equivalent of Hummel figures.

There was also what I call an intermediate step on the way from Prog to New Age -- artists like Tomita and Vangelis. Both, especially the latter, made non-vocal synth music, but featured dramatic and harmonically complex melodies that made no concession to do anything other than totally engage the listener. Today this tradition has stayed alive with such techno bands as The Orb, Aphex Twin and Orbital-- and don't forget Tangerine Dream, they're the actual direct link from Prog rock to New Age that proves the point. In the early 70's they'd be discussed in rock magazines along with Yes, Pink Floyd, Mott The Hoople, etc. -- and today they are now squarely in the New Age camp. While Prog is responsible for New Age, the critic is also forgetting that it spawned two other more positive offshoots, Ambient and Techno (plus all of its offshoots such as Acid, House, Drum and Bass etc.) , genres that are not nearly as derided as New Age. Also today's Prog Rock descendents, "Tool", "Perfect Circle" and "The Mars Volta" are bands that are regularly gushed over by rock critics like Mr. Gilyard.