How the Government Gets it Right (In spite of the Liberals and Conservatives)

All we hear these days is “the government is the problem”. Conservatives and their mouth piece, Fox News, keep up the chant. The conservatives have a basic set of ideas that are repeated infinitely. We are expected to accept the truth of those ideas based on the number of times they are spoken. So, if we believe the conservatives then:
1) Only the free market can generate the innovation and jobs for our future
2) Government is the problem
3) Faceless bureaucrats are the enemy
4) Government must be prevented from developing ‘industrial policy’, supporting one industry over another
5) Government is incapable of doing anything

I don’t have the deep pockets of the conservatives propaganda machine so I will get by with data. There are the facts, they are all easy for you to check, but first a little background:

During and following WWII the government, first the Department of Defence (DoD) and later Department of Energy (DoE) worked to advance Science and Technology (S & T). This was done directly in government laboratories, partnering and funding university labs and through contracting and paid Industrial Research & Development (IR&D) with industry. The funds were from the taxpayers and were contained in the Department of Defence and Department of Energy funding requests. Each year the Congress voted to approve these requests.

The Conservatives, who believed in a ‘bigger is better’ defence budget voted for almost anything requested. The Liberals, trying to avoid the ‘wimp’ label voted in favor also. Ideologically the Conservatives spoke loudly and frequently against ‘industrial planning’ and any other effort that deviated from ‘free market’ ideas. The Liberals spoke loudly against wasting money on defence that could be used for social programs but voted for it anyhow. As a result the military-industrial complex collects billions of taxpayer dollars every year. Today’s defence budget is huge and growing.

Hidden in this Crony Capitalists’ delight are the data that the government is actually the source of our innovation. In the record of the last 60 years is the evidence that our great success in innovation has come from doing exactly the opposite of the conservative policies. A superficial look at the history since WWII proves the government is not inept but the innovation leader.

Reviewing the DoD and DoE innovation by decade:

1940’s Atomic Energy       Department of Defence paid for and led the design of power plants for Navy ships and submarines. Those designs were commercialized to become the nuclear power industry. The industry still resents any design that did not flow out of the government paid development.

Before the first power plant could be built the government had to provide insurance. The free enterprise private sector refused to insure the new industry.

Government/university laboratories developed the understanding of radioactive isotopes that could be used for medical applications. The nuclear medicine industry rests on that work.

1950’s Jet Engines      During WWII the US government paid two companies to become capable of manufacturing jet engines. When the war ended the Department of Defence paid to further develop engines for military aircraft and bought the developed engines. When the industry was well established it took those designs and worked with aircraft manufactures whose government funded work had developed advanced jet aircraft to apply all that government paid R&D to commercial designs. The new generation of aircraft reduced the cost per seat mile enough so that flying could be more than a luxury/business industry. Of course the industry was already dependent on government built airports and the air traffic control system.
(Actually when the Wright brothers first flew at Kitty Hawk the second thing they did was go to Washington to look for government help.)

1960’s Space     The government space program provided the technology, facilities and even the actual vehicles (early military rockets were declared obsolete and modified as the first commercial space boosters). We got global TV and communications, weather, oceans and crops surveillance etc. There would be no national real time sports broadcasting without satellite TV.
(Will the NFL please stand up and thank the government for the billions they get for TV rights!)

1970’s Semiconductors & Computers    It is estimated that 50 to 75% of the funding for semiconductors came from Department of Defence. As the first weak transistors became available it was Department of Defence contracts that kept buying to provide the new industry with funding. (Industrial policy if I ever saw it) As the semiconductors became better they were applied to computers. The early mainframes were developed on government funds for military applications like missile warning systems. These early Department of Defence funded designs were commercialized into the Third Generation Mainframes that dominated the period. The IBM 7xxx series from Ballistic Early Warning System and the GE 600 series from military radar systems are two examples. Improvements in semiconductors led to the mini-computer and then the micro-computer that is ubiquitous today. The early software industry was supported by Department of Defence contracts. DoD contracts were the first place the concept of software licensing was used so the government was even a leader in establishing new law.

1980’s The Internet      While the Net did not explode as a commercial entity until the 1990’s the basic work was done in the 1970’s and 1980’s by the Defense Advanced Research Projects Agency (DARPA). The government created the design and implemented it among its sites and cooperating universities. (If you haven’t heard of DARPA it is a small group of ‘faceless bureaucrats’ within the defense department. ‘Grandstanding’ is not allowed by project managers who have no perks, no bonuses, stock options or other extras. In spite of this opposite approach to what conservatives say is required to stimulate innovation DARPA has a track record of amazing innovation that surpasses private companies. That is only what we see since much of their work is classified.)
The World Wide Web came from a government research facility (CERN) in Europe. So the most profound innovation of the 20th Century was pure government innovation given to the free enterprise capitalists.

1990’s GPS & cell phones      GPS was another Defence Advanced Projects Agency project for government use that became so popular that it was opened for commercial use. It is now a multi-billion dollar industry and supports everything from surveying to inter modal freight to identifying were you took your latest photo. In geology, GPS proved the plate tectonic theory.

The needed satellite constellation is totally government supported and the ground receivers that we use are the result of government paid development.

Cell phones depend on the government led R&D for the military communications systems and high frequency semiconductors that were government financed.

2000’s LED Lighting   Department of Defence funded work in high temperature semiconductor materials to support both white light LED’s and very high power high frequency transistors. Fledgling companies like CREE lived on these contracts while improving the materials processes needed. LED lighting is in the early phases of transforming lighting and increasing efficiency by 80+%.

2010’s Fracking      The DoE started work on fraking in the 1970’s and has matured the technology enough so that ‘free enterprise innovators’ can use it. We now expect the US to be energy independent in the decade and shift US coal fired power plants to cleaner natural gas. To net it out, the innovation by the government has significantly reduced the price of gas at the pump for all of us. Cheaper gas from fraking has increased the conversion of power plants to ‘Greener’ natural gas from dirty coal. You might say the conservatives have inadvertently funded a Green Energy initiative!

These are just a few of the high points in the government R&D effort aimed at keeping the United States at the forefront of technology. In achieving that goal the ‘faceless bureaucrats’ of Department of Defence and Department of Energy have picked winners and losers (industrial policy), they have led the way in what technology to pursue and demonstrated a leadership that would make any private company proud. DARPA has spun off monumental products; The Internet and GPS for example, that are global in scope and revolutionary in their impact. We also need to remember that DARPA is really working military projects that can’t be talked about and these techno-blockbusters are mere sidelines for those ‘faceless bureaucrats’ the conservatives sneer at.

Is it bad to spend hundreds of billions on the military when so much is wasted? Yes, but there seems to be no other way to work around the liberal and conservative ideological barriers and get the technology we need to be the global leader. It also warms a cynics heart to see a process where the conservatives, year after year, happily fund a process that is living proof that their ideology is wrong.

Conservative Views and Their Outcomes

We all have heard the commentators on the radio and TV trashing those who were not believers in the conservative view. They use canned phrases such as ‘limousine liberals’ and ‘ivory tower eggheads’ to describe those they oppose. After this ‘ignore the message, attack the messenger’ approach a fresh look at some past conservative positions and their outcomes might help.

The conservative position has been one of tradition, maintaining existing power structures, protecting the status quo and avoiding risk. The liberal position has embraced new ideas and accepted risk. If we look at a few cases where the conservative vs liberal ideas played out, the difference becomes clearer.

In 1776 the conservatives howled in protest as a radical liberal group led the American colonists on a break away path from the mother country, Britain. These traitors were worse than liberals, they were calling for a radical departure from all accepted standards of government. This democracy concept they espoused was pure heresy. The church had established the Divine Right of Kings and King George III was on the throne. Now a bunch of colonial Deists (or worse) were undermining the established order with this radical ivory tower experiment derived from the thinking of a bunch of English and French intellectuals. The idea of giving power to the people was clearly against God and nature.
As it turned out the American experiment in democracy did not fail but proved a blueprint for many other peoples struggling to be free. After over 200 years the Declaration of Independence and Constitution stand as beacons to all.

In 1852 the conservatives howled in protest as a radical liberal group passed a law requiring inspection of steamboat boilers. What right did the liberals have in interfering with the steamboat owners rights? Yes, there were frequent boiler explosions and many people were killed; yes, the boilers were being operated by people who didn’t know about boilers but were cheap to hire; and yes, sometimes the owners tied down the safety valves to get more speed or to save a dollar but it was a free market after all.
The new law soon made steamships safe and they became the backbone of transportation in the new nation. Actually, the free market demonstrated itself again; ferries and some work boats were excluded and these continued to blow boilers and kill people until the law was amended to include them. It did set a bad precedent. Ever since, when the free market became too egregious, the people have petitioned their government for help.

In 1865 the conservatives howled in protest as a radical group insisted that the government had a right to confiscate their personal property even if it was human. Could the law and tradition of centuries be overturned on a whim from the government? Even the Supreme Court had backed the conservative position in the Dread Scott case. This radical liberal, Lincoln, declared that people could not own people and freed the slaves. If the government could take away your property, what other mischief could these radicals do? Insist, as it says in the Declaration of Independence, that all people are created equal?
Now we have a bi-racial President, what’s next, an Asian American or a woman?

In 1867 the conservatives howled in protest as a radical named Seward tried to get the US to buy Alaska. What a waste of money, pay Russia over $7 million dollars for that wasteland of snow and ice. In spite of the conservative slogan “Seaward’s Folly”as a rallying cry, the US did buy Alaska.
The liberals won and Alaska became a US territory. Just think what would have happened had the conservatives won and Alaska was Russian territory all during the Cold War.

In 1918 the conservatives howled in protest as the radical, Henry Ford, announced he was doubling the workers pay to $5 a day. That was totally disruptive, pretty soon other workers would want similar money. He talked about his employees being able to buy his cars–such radical ideas would be the ruin of the country.
Actually what happened was they bought his cars and Detroit became the premium job provider for the 20th Century.

In 1930 the conservatives howled in protest as a radical group of military men wanted to waste a lot of money on air planes and to try to use them on ships. Everyone knows that the Navy is about battleships and large naval guns. Bill Mitchel needed to be court marshaled for pushing this aviation nonsense. Liberal military officers had their careers ruined in the fight with conservatives for aircraft carriers.
Somehow the aircraft and the aircraft carriers were built in spite of conservative opposition. One day in June 1942 on a vast expanse of ocean west of Midway Island, a handful of those carrier based air planes met the mighty Japanese fleet. In 15 minutes four first line Japanese carriers were destroyed and the enemy’s offensive power lay at the bottom of the Pacific. The war with Japan changed in that moment.

In 1938 the conservatives howled in protest as a radical group of liberals had the audacity to enact a child labour law. If the kids were hungry and were willing to work 12 hours a day for pennies, why should the government come in and stop it? After all, the Supreme Court had struck down a similar law passed in 1918.
The conservatives had no problem with working 8 year old children 12 hours a day and, being conservative, they probably still don’t.

In 1955 the conservatives howled in protest as radical groups tried to get funding to explore space. Is there anything sillier than wasting tax dollars firing rockets into the void? They successfully stopped any significant funding for space until 1957 when the Russians announced Sputnik and it was confirmed that, at the height of the Cold War, the USSR had launched the first satellite.
Then they shut up when a young liberal leader named Kennedy called for the moon. The rest is history; Apollo succeeded and we got global TV, GPS, global mapping, global weather and a cornucopia of other technology as a side benefit.

In 1990 the conservatives howled in protest as a radical group talked about the human impact on the atmosphere and the resulting climate change. Such nonsense is just a liberal ploy to attack big coal and oil. There is no evidence of it and if there is we will pay someone to deny it.
Well, we will not wait long, parts of New Port News, VA are going underwater. Mayor Bloomberg is for Obama because he has seen first hand what Global Warming did to his city. Entire Pacific nations are disappearing as the ocean rises from the polar ice melt.

In 2000 the conservatives howled in protest as radical groups in government provided development funding for wind and solar power. Yes, oil had gone from $4/bbl to $120/bbl in the last few years but there is plenty of oil if the government will just let us drill everywhere, except of course in my backyard. Talk of peak oil by highly experienced exploration geologists is just hokum.
Of course the president of Fed Ex is now switching the long haul trucks to natural gas and aircraft to bio fuel. T. Boone Pickens, not exactly know for his liberal views, built the largest wind farm in the US. Even the management of Walmart is going solar and installing LED lighting. I guess that even conservatives can change their tune when their pocketbook is involved.

How Did We Get Here

Why is the US in the mess that it seems to find itself?

That is the nagging question that caused me to start digging into how we got here. I am a product of an earlier time, an engineer from the second half of the 20th Century when anything was possible. The view at the time was that the impossible just took a little longer.  We were forward thinking and optimistic, we had to be if we were to go to the moon. I was working at Cape Kennedy  on the Apollo Program and never doubted we could achieve our goal.

Then something took hold of the country and we lost confidence and started turning inward. Instead of making a bigger pie we chose to try to carve the existing pie with the rent seekers grabbing more and more. Government became the enemy. Politics became very polarized and conflict the norm. The science and technology that had created great wealth and prosperity was attacked. While everyone seemed to want the ‘free lunch’ that technology provided there were many that opposed the ‘reason based thinking’ that it required.

I had a nagging question from 50 years of being in the front lines of aerospace technology. If the government was the enemy why was it that my personal experience was that the government was the technology facilitator? That government had been there to nurture the technology before it was strong enough to stand on its own two feet. The more I listened to the anti-government platitudes the more confused I became.  When I retired I started looking at the issue through the eyes of a working engineer.  The more I dug into reality the more the pontificating around me seemed nonsense.

As I followed what I remembered and researched the various technologies I kept going back farther and farther trying to determine when the government had started to facilitate technology. It turned out that the government was a leader, a sponsor or a critical supporter of most of the key technologies of the last 200 years.

Back in 1830’s the government funded several companies to develop the techniques for replaceable parts. At the time precision devices, in this case rifles, were made by hand. A set of parts were given to a person known as a ‘filer’. He filed and fit the rough parts until they fit together into the final product. This process meant that if any part needed to be replaced it had to be hand fitted. The government armories could not have armies in the field dependent on skilled workmen far away to maintain their weapons.  The solution was make each part so precisely that any part could replace any similar part. This of course was considered unnecessary by the standards of the day and there was little interest.  At the time the precision needed was very difficult, new tools, precision measuring devices and new work methods were needed. Government funding over a period of years lead to the final process. This key process for modern mass production became known in the 19th Century as ‘the American Method’.  Some of the machines from the original government contracts can still be seen at the American Precision Museum in Winsor, Vermont.

The first use was in the manufacture of government weapons but the government insisted that the information on the process and how it was done should be distributed openly. The result was a large number of new industries  making consumer products like typewriters, bicycles and alarm clocks. These new industries made a major positive impact on the wealth of the New England states and changed the face of America.

The replacement parts concept was critical for the development of the auto industry. Bill Knudsen, auto pioneer for Ford and GM was said to have taken every file and hammer from the auto production lines in the early 1900’s to enforce the standardization of parts. Today ‘the American method’ of production is the global standard process.

So even back in the early days of the country the government was funding the critical technologies that we depend on.  Through the years much of the invisible infrastructure that we depend on was developed by the government. One of the problems with infrastructure is that it is ‘invisible’ and so it’s ‘out of sight out of mind’. Those attacking government can ignore  almost invisible government efforts knowing that most people will not even realize they are there. Take air travel for instance. When the Wright Brothers flew the first airplane the second thing they did was to go to Washington to try to interest the government in their airplane. But that is another story of government support and innovation.

 

If the US Government Were a Corporation

Introduction
It has become popular to cast the United States government as the foolish, bungling bureaucracy that has no vision and that only unfettered free enterprise can efficiently run things. Of course, the government cannot defend itself, it stands mute. It can’t waste our tax dollars defending itself from attacks no matter how biased, while private groups can spend millions on the attacks.
What happens if we look at the real story? Has government done anything right? How inefficient is the government? Has the government shown any vision? Has the government ever effectively helped? Is it true that the most frightening words are “I’m here from the government and I’m here to help”. Could the government be as worthless as represented? Perhaps we should take a page from the critics and evaluate the government as a business. We want to know about the history, corporate vision, prospects, financial position and growth. What is the real track record of Government USA, Inc.? Would you rate the stock a buy?
Corporation USA
The company USA started as a forced breakup from the ‘parent corporation’, Great Britain in 1781. At that time the company consisted of 13 largely independent divisions (colonies) clinging to the Atlantic Coast. It was of a new, untried organizational structure that even the Board of Directors (Founding Fathers) called “an experiment in democracy” and it had significant debit and no defined income. This was truly a ‘penny stock’ in the high risk category. Since then Government USA, Inc. has invested in land, people, businesses and technology.
Land Investment
The young ‘company’ invested by purchasing Louisiana, Alaska and Gadsden. (The Gadsden Purchase was solely for the southern route of the transcontinental railroad.) It acquired land from Mexico and Spain through hostile takeovers known in international circles as war. It has grown from the original 13 colonies of less than 360,000 square miles to 2,959,064 square miles stretching from the Atlantic to the Pacific and beyond. It produces great agricultural and mineral wealth. Just the ten major crops produced $77.2 billion and last year mineral output was $64 billion. The gas and oil wells supplied 70 Billion cubic feet per day of gas and 7.5 Million Barrels per day of oil and that was before fracking.
People Investment
America Inc. invested in people through education. Consider universal education and the land grant colleges in the 19th Century and the GI Bill in the 20th Century among other programs. It supported individuals with Unemployment Insurance, Social Security, Medicare, and housing programs. The Tennessee Valley Authority, National Park System, and the Interstate Highway System show the variety of programs aimed at making peoples’ lives better. In the past, the Homestead Act and Rural Free Delivery had a significant impact on peoples’ lives and helped open up the West. Rural Free Delivery also provided the delivery infrastructure making the early mail order companies like Sears and Montgomery Ward possible and created the model for the modern mail order industry.
Business and Agriculture Investment
The government invested in business directly through contracts, subsidies, special grants, and tax breaks. The Department of Agriculture provided research, support and outreach to farmers creating an agricultural surplus beyond anything seen before. The Commerce Department and the Small Business Administration provided services directly to business at home and abroad. The government has supported the development of whole new industries through infrastructure programs like the Federal Airways System and the Interstate Highway System. These infrastructure projects laid the foundation for trucking, air freight and airline industries. Competition in the private sector was made possible by the ‘level playing field’ of government infrastructure. The transcontinental railroads were created using government subsidy and the automobile is only practical because the government provides the roads. The government lead space programs for the many years before space became profitable for private corporations. Most of the early communications and TV satellites went into space on refurbished US military rockets launched using government facilities.
Technology Investment
In terms of innovation, Government USA, Inc is the leading supplier of technology to the world. In spite of all the current propaganda to the contrary, most current technology depends on, or has depended on, the government to get started or is dependent on the government for infrastructure. The government has been in the technology business going all the way back to the 1830’s. The critical core process of the machine age, interchangeable parts, came from the government. The process was transferred to private companies that went on to make things for the civilian market like bicycles, typewriters, sewing machines and clocks. Without the replaceable parts concept, the automobile as we know it would not be possible. The process, called the American Method, is now universally used for making the mechanical things we see around us.
The government organization, Defence Advanced Projects Agency (DARPA) invented the internet and GPS among many others. Either of those would provide major bragging rights for any private company. Many of today’s drugs came from government laboratories and supported university research. Fracking which may make the US independent of mid-East oil was the result of many years of government led development.
While many of these programs are old and some discontinued, it is important to see that the government has been investing in the people, private business and technology since the beginning. In these ‘giveaway’ programs the government invested in people and industries by giving them opportunity and providing the infrastructure for new industries.
Looking at the record, it is clear that the government has gotten excellent pay back for its investment. In terms of vision, the government has supported new technologies like aviation and electronics for years until the risk was reduced to the point that free enterprise was willing to support final development and create the products we enjoy.
Insurance
The government has come to the rescue when the private corporations got in trouble in 1929 and 2008. By pouring money into the collapsing economic system the government managed to stabilize key industries and get the economy going again. Like when your child falls off his bike, Uncle Sam picked up the private sector and got it back on its bike and moving again. (Just like the kid, the private sector never said thank you.)
When the nuclear power industry was starting up and no private insurance company would provide insurance because it was too risky they went to Uncle Sam for insurance. (Without government indemnification there could be no industry.) Then the industry promptly accused the government of making it hard on them with too much regulation.
Summary
Government USA Inc is now the bluest of blue chip ‘companies. While the debit load is large from the first decade of the 21st Century due to war and bad judgement, the debit ratio is manageable. Even with the current debit load its bonds are in demand, its interest rates are low. With income last year of $2.9 trillion and a gross domestic product of $15 trillion it is a far cry from 1781. For well over 200 years Government USA has grown larger and stronger. Looking at the record, it is easy to see that stock in Government USA Inc. should be in any prudent portfolio. Certainly the rest of the world thinks so.

A Tale of Two Operations

The healthcare debate rages on in the United States. Since the statistics have basically made the case against the US system, those who favor US healthcare have switched to anecdotal evidence. Find someone who feels that the wait times are too long in Canada or that someone was denied care in the UK and build a case that, if you had adequate resources in cash or insurance, the US healthcare outcome would be better. People don’t like charts and graphs anyway so perhaps anecdotal medical outcomes should be a good way to evaluate the different health care systems.

I am in the unusual position of being able to compare two health care systems, the US and Canada. For most of my life I lived and worked in the US but, for personal reasons, moved to Canada in retirement. I have had two major surgeries, one in the US and one in Canada and so have first hand experience with both systems. In comparing the two systems I will have to say that the most significant feature is that in Canada if you need non life threatening care such as I did, a knee replacement, you get it. In the US I could only consider it if I had insurance and supporting resources and the insurance company agreed.

In the US I had a good HMO plan administered by my employer, a Fortune 100 company. The plan included diagnostic screening. One year showed an elevated PSA suggesting prostrate cancer. Clinical review suggested a biopsy. The biopsy showed a moderately aggressive cancer, waiting was not an option at 60. The surgeon discussed the various forms of treatment including getting a second opinion. At no time was there any restriction on the level of care and I was free to choose. This was in the late 1990’s, the surgeon and I reviewed the options and I chose surgery, which at that time seemed the best approach. The surgery was scheduled in a reasonable time frame. The actual surgery was more complex than expected because my physiology was a bit abnormal. As a result I needed 5 units of blood. In spite of the complication and the surgeon’s request for an extension the insurance company insisted that post op release be on their normal schedule.

By the time I had my first post operative exam by the surgeon my leg had swollen a lot and the muscles were hard. I was unaware of deep vein thrombosis (DVT) but the surgeon, just watching me come toward him in the exam room, had me on the table and was booking a hospital bed. He won a loud argument with the insurance company and within hours I was in the hospital getting blood thinner. I found out later the DVT can be a very dangerous side effect of surgery and at that time the treatment used blood thinners which were difficult to regulate. The result was that I was hospitalized for 5 days while the MD’s argued with the insurance company and monitored the DVT while adjusting the blood thinner dosage. I was finally released and continued a normal recovery. While I had excellent care it was clear, at least to me and the surgeon, that blindly insisting on standard release schedule had actually cost more in the long run and could have cost me my life in spite of good facilities, good medicine and staff.

About 15 years later I am now a permanent resident of Canada. Over the decade I have had a developed pain in my left knee that could not be relieved with the normal medications. As an active person who did about an hour of mixed weight training and aerobics a day the knee pain was a greater and greater source of problems. X-Ray showed arthritis in the knee and an MRI was scheduled which showed a badly degenerated knee. The surgeon I was referred to said that on a scale of 1 to 4 it was a 5. At this point the recommendation was a knee replacement. In Canada that meant that I could schedule for the operation and the issue of paying in Canada is taken care of with a plastic card that looks like a drivers license. This card is all that a Canadian needs to get medical treatment. The diagnosis was made in early November and I was planning on February in Florida so surgery would need to be quick or delayed until after February. I chose an April date and asked that if there were any early cancellations I be considered. Several days later I got a call with a surgery date of November 22. Needless to say I had to scramble to get all the per-surgery complete in time. It would mean I would be only a month out of surgery for Christmas but I could handle that given my post op period would be winter when I couldn’t do a lot, rather than spring when I would want to be out.

Surgery was normal except for difficulty inserting the catheter. (A result of scar tissue remaining from prostate surgery) and a small DVT found in the post op Doppler scan. Following surgery a urologist opened up the scar tissue area so there would be no further problems there. My release was scheduled for the third day following surgery. It turned out in the Canadian patient centred system release was not automatic but dependent on 1)final Doppler scan of the DVT, 2)urologist confirmation that there were no urinary problems, 3)physical therapy to confirm I could walk 70 steps and climb 4 steps. As it happened I passed all but the step test. I was then held in hospital for an additional day until I demonstrated I was physically ready. Once released I was visited by a physical therapist who evaluated my mobility and set me up with a local physical therapy office where I get the critical post operative therapy. Once again all I need is my health card.

While the outcomes in the US and Canada were both successful there was a clear difference in attitude. In the US the insurance companies imposed rigid hospital stay times and ignored cases that were a bit out of the norm which, in cases like mine, added cost in the long run. I don’t know the statistics of the different approaches but I do know that in my personal case where both surgeries were a bit abnormal the Canadian system left me with greater confidence that my treatment was through and complete. Rather than worry about the government interfering, in the US it was the insurance company that was trying to second guess the doctors.

The cost in Canada was covered. I presented my health card and everything happens. There are no cascades of paper from insurance companies full of obscure codes for doctors, hospital, pharmacy, anesthesiologist, etc to deal with. I have no paper at all. Many people talk about the costs and I have not done the details but, while I paid less in US taxes I was paying about $4000/year in Medicare B and company insurance premiums. The increased Canadian taxes are much less than that so if you compare real costs I am dollars ahead in Canada.

In all the interactions with the healthcare system in Canada I never had a long wait. I did go for an MRI at 11:30 PM once. They schedule the machines efficiently, but could have oped for some other time. I did ask for a cancellation that resulted in a surgery date almost too close to meet. I am sure that are individual cases of unusual delay just as I can find such in the US but I have yet to meet a real person here in Canada that had an unusually long wait for needed work. When there is a medical need as determined by the doctor it is done. In the US it could be considered ‘elective’ and not covered by insurance thereby making unavailable to most people.

Looking at the statistics I found that Canada was paying a bit over $4000 per person for healthcare for the whole population while the US was paying over $7500 per person for covering part of the population. This is twice the per-ca pita cost of French healthcare with a life expectancy of 81 years, 3 years better than the US at 78. As a sidelight there are counties in Mississippi that have a life expectancy of 68 which is slightly worse than North Korea at 69. US Healthcare may be good but it is very uneven.

When I came to Canada I was concerned about the system and I maintained my US healthcare coverage until I had a chance to see the Canadian system in action. Now I have become a ‘Canadian’ about healthcare, it’s fair, it’s easy, it works and it’s less costly.

Walmart and the $15 Wage

Walmart and the $15 Wage

Walmart is the largest business in the world with over 1 million employees, a gross income of $44.4 billion and a profit of $15.8 billion in 2012. In the classic strategy of drive to the bottom they are focused on relentlessly pushing all costs down. This strategy is exactly what you would expect from conservative, professional managers who are focused on the next quarter bonus check. In a conservative world no one would ever challenge the correctness of this strategy.

The fact that more and more people are viewing Walmart as a pararia company in of no real concern. Walmart owns (or rents) enough congresspersons that no ‘problem legislation’ could ever get passed. There are attempts to organize the workers but, at least so far, propaganda and intimidation are keeping labor at bay. So Walmart will continue its policies until one day the black swan will arrive. (Remember when Montgomery Ward, Sears and Kmart could do no wrong.) That will be the quarter that the management bonus checks will not be so large, but since next quarter looks OK, what me worry?

Now it is very unlikely that any one in the Bentonville headquarters will think outside the box, but just for fun let’s think about alternatives. Suppose a liberal thinker were to wander in to headquarters and propose that Walmart grow at a faster rate than the current plan. Let’s assume that the management was tired of the holidays and it was too cold for golf so they let him give his pitch.

Here is his presentation:

I propose that Walmart immediately set the wage for associates at $15/ hour. GASP! This will cost the company about $7 billion.

After the ‘are you crazy’ and ‘that’s impossible’ comments die down he continues.
Here are the reasons:

1) Take the moral high ground. In one stroke the business that has been the pariah company that everyone loves to hate will become the champion. The world will be hailing Walmart and probably even Pope Francis will be applauding. While Walmart doesn’t care a whit for the moral high ground this move would generate $100’s of millions in free positive publicity. It would also cause a significant group of middle class shoppers who care about human values to shop Walmart rather than picket its stores. This would be hard to quantify but some where between $100 million and a billion per year would be a good SWAG (Sill Wild Ass Guess).
2) Walmart would suddenly gain a growth advantage over its competitors. As the leader in positive labor relations Walmart could expect that a lot of the pay raise to employees would come back to the store. Employees, now with some money , would spend with their benefactor. This would be about 20% of $7 billion their raise represents, or $1.4 billion.
3) The big kicker is that if Walmart went to $15/hr there is no way the other low pay companies could not match or come close. This would create a lot of money for a lot of people. They would know that their raise came from Walmart so off to Walmart they would go. Based on the S&P Capital IQ Database there are 6,800,000 non-Walmart low wage workers in large US corporations. If we make a first order assumption that the median wage will rise to, say $14/hr. That would add about $48 billion to the available spending at the bottom where it will all be spent as fast as it comes in. Walmart, as the new leader in retail in the eyes of the poor will get 20% or more of that or about $10 billion per year in new business.
4) There are thousands of small businesses that have low wage workforce that would need to increase wages. The wage increase would likely be less, say $3 or $4/hr but it would still put money in a lot of hands. Here again that would drift to Walmart. Perhaps difficult to quantify but still in the billions through Walmart’s front door.
5) When you consider that if Walmart went to $15/hr there are also a lot of ‘light skill’ jobs paying $10 to $15/hr that would also need to increase by at least $5 to keep the employees from going to Walmart for a job. This would add another few billion to the Walmart income.
6) The sales growth would continue as the secondary effects of the Walmart raise flowed through the low income segment of the economy. Only Walmart could get this kind of return. It is the place all low wage workers will go and is big enough and profitable enough to make this kind of move. The result would really be a transfer of cash from all the other low wage employers to Walmart. For example, fast food workers with a $7 raise would not be likely to eat many more hamburgers but they would all spend more at Walmart.
7) This move would gut the competition. The low price brands would need to increase labor pay to meet Walmart but as a follower there would be little positive benefit for them. They would probably get an increase in sales but it would not cover increased costs so they would need to raise prices which would put them at a greater disadvantage to Walmart.
8) The current labor problems would disappear. Instead of having to close stores to stop unionization as they did in Quebec they could let the labor relations staff go and save some money.

Is there any president for this? Yes, it turns out there is. In 1914, exactly 100 years ago, Henry Ford was producing cars but he wanted to sell more. He knew he could reduce the price of the car if volume increased. Marketing could only do so much and competitors were making gains. So he announced he was more than doubling wages to $5 day for workers. At that rate the workers could afford to buy Fords and buy them they did. He was attacked as a Communist and he was vilified by the business community, but he sold his Fords to the workers and he laughed all the way to the bank.

Now it is safe to say that there is no one in Bentonville that would suggest following in the footsteps of Henry Ford and that is the difference between entrepreneurs and professional managers.

 

Blog #1 Why This Blog

I have watched what is now the history of the second half of the Twentieth Century unwind, searching for the reality behind the facade of bluster and bullshit that was the ‘official’ reason for things.

As a teenager I was trying to understand the world around me. I found that, particularly where money and power are involved, things are rarely what they seemed. I am still trying to make sense out of the world and this blog is my attempt to pass on what I see. I hope that you will find something useful whether you agree with my conclusions or not.

My area of interest revolves around technology and its impact on economics and the role of government and free markets in technology. My ideas are not from being an economist but someone on the inside, living and working as an engineer in the chaos of electronics development between the 1950’s and 2000. It was a ring side seat as technology created the new world we now inhabit.

Today’s world is so different from the world of post WWII! So indulge me now as I make some observations on how it happened and what we need to learn from that post WWII time of great dreams.

One of my primary themes is the impact that technology has had. Most people acknowledge that technology has had an impact but economists still tend to minimize or ignore the impact of technology. Economists seem to be ideologues, their ideology drives them to think economic gimmicks are most important. They focus on various details while mostly ignoring the elephant in the room, technology. Currently the role of government is in focus. The ‘free market’ economists seem to think that minimizing government is the answer to all questions. Supposedly the free market will solve all problems and the government just gets in the way. That may work in an Ann Rand novel but in the real world there are few really free markets and if you want a market economy then there are many issues that must be addressed that are outside the ‘market’. While there is a long list of these issues that lie outside the market I would like to look at one that is critical to our future, technology development.  The common view is that the free market is the technology developer and that all the tech leadership the US has enjoyed is because of the free market.

I tested those ideas against the reality that I had lived with for 50 years as an engineer doing advanced technology. The evidence showed that it was the government, not ‘free enterprise’ had delivered the technology that accelerated the GDP of the US. I know that sounds blasphemous but the evidence supports it. If we look at the major technologies of the 20th Century the fingerprints of the government are all over them. The more critical the technologies the more government involvement. To understand why this is true it is necessary to look at how technology is developed.

Modern technology is a multilevel effort that typically starts with basic science. This work is done at universities, and to a limited extent in government laboratories.  The science gets translated into a technology or technologies which then are matured to provide workable solutions to needs. If the technology is an improvement or is less expensive then it will likely become a product we use or that helps the infrastructure that supports us.  The problem with this evolution from science to applied science to advanced technology to mature technology is, who is going to pay for it?  The free market is focused on the current quarter profit, if it doesn’t help the bottom line then there is little support. When you consider that maturing a technology can take a decade it is easy to see the mismatch.

So how do we get all these fabulous new technologies? It turns out the government funds development. From the time the technology is just a gleam in a scientists eye to the time that the technology is mature the government funds much if not all the work through government laboratories, university laboratories or company development. The more basic the technology the more likely the government support.  When the technology is mature then the free market starts making products.  In the second half of the 20th Century many of the super products were converted military items.

A classic example is GPS. This was military technology that morphed slowly into an indispensable commercial/consumer item.  The GPS receiver you have in your car is dependent on a constellation of satellites designed, built, flown and maintained by the US military. The government gets no compensation but was responsible for the development of all GPS technology. In addition to the satellites the government funded all the design of the electronics up to the final consumer packaging. Without constant government involvement there could have been no GPS.  GPS not only gets you to your destination but is critical to integrated logistics transportation, just in time delivery systems and a many other free market enterprises. GPS adds more than $10 billion/year to the economy yet I have never heard the free enterprise proponents mention a word about it.

In future posts I plan to prove my case with a number of other examples of government leadership in technology and why government, far from being the problem, is critical to the solution and our leadership in technology.