COMMENTARY
I wish people with high profile in the media like David Brooks would apply their considerable brains to thinking through what needs to be done in a practical way. Instead what we hear is something that is quite simplistic and jingistic. In my view the issues that America and our global society and economy must face are very profound. I believe they reflect around 40 years of decision making suited to the early days of the industrial era, rather than the early days of the information era. In my view none of the occupants of the elite institutions have shown much understanding of the problem and the dialog is out of touch with reality.

Early in my career I realized that one of the biggest problems in manufacturing industry was management not labor. I think Deming, one of the elder statesmen of the quality movement said much the same thing ... don't blame the worker for quality when management has set up a system that cannot producte quality.

I also realized that most of the services being provided by outside suppliers like banking, insurance, communications, consultants, and so forth were expensive and inept though profitable for the supplying entity. I learned that people in politics were even worse.

In spite of everything, research and development was making amazing progress ... and it was pretty obvious that the emerging technologies could change the society and the economy in very fundamental ways.

If we now fast forward 30 years it is clear that a new corporate executive and banking and finance elite has emerged. This elite controls the allocation of resources directly and through its influence in Washington to encourage a profitable economy ... for the investor class.

Meanwhile there is nothing in the system that ensures that society gets benefit from what is technologically possible.

People like David Brooks do not want socialism in government, and nor do I, but I am not sure that he has any idea about what really needs to be done. I want to argue that the profit metric for investors should be supplemented with a valueadd metric for society. If the only metric is corporate profit, in the end the American economy will be gutted and poverty will be the norm. The American people are a stakeholder in society and both the plitical elite and the investor elite should be held accountable to this stakeholder for the valueadd that accrues to society.

The methodology is emerging ... stay tuned.
Peter Burgess

Free-Market Socialism

I hope President Obama read about Maddie Parlier as he was working on his State of the Union address. Parlier is the subject of Adam Davidson’s illuminating article in the current issue of The Atlantic.
See the Alan Davidson article in The Atlantic
or
See TVM commentary on the Alan Davidson article in The Atlantic ... Open file 2166

Parlier’s father abandoned her when she was young and crashed his car while driving drunk, killing himself and a family of four. Maddie is smart and hard-working. She did reasonably well in high school but got pregnant her senior year.

She and the father of her child split up, which put the kibosh on her college dreams because she couldn’t afford day care. She temped for a while. Her work ethic got her noticed, and she got a job as an unskilled laborer at Standard Motor Products, which makes fuel injectors.

Parlier earns about $13 an hour. She’d like to become one of the better-paid workers in the plant, but, in today’s factories, that requires an enormous leap in skills. It feels cruel, Davidson writes, to mention all the things Parlier would have to learn to move up. She doesn’t know the computer language that runs the machines. “She doesn’t know trigonometry or calculus, and she’s never studied the properties of cutting tools or metals. She doesn’t know how to maintain a tolerance of 0.25 microns, or what tolerance means in this context, or what a micron is.”

A good attitude and hustle have taken Parlier as far as they can. It’s hard, given her situation, to acquire the skills she needs to realize the American dream.

Davidson’s article is important because it shows the interplay between economic forces (globalization and technology) and social forces (single parenthood and the breakdown of community support). Globalization and technological change increase the demands on workers; social decay makes it harder for them to meet those demands.

Across America, millions of mothers can’t rise because they don’t have adequate support systems as they try to improve their skills. Tens of millions of children have poor life chances because they grow up in disorganized environments that make it hard to acquire the social, organizational and educational skills they will need to become productive workers.

Tens of millions of men have marred life chances because schools are bad at educating boys, because they are not enmeshed in the long-term relationships that instill good habits and because insecure men do stupid and self-destructive things.

Over the past 40 years, women’s wages have risen sharply but, as Michael Greenstone and Adam Looney of the Hamilton Project point out, median incomes of men have dropped 28 percent and male labor force participation rates are down 16 percent. Next time somebody talks to you about wage stagnation, have them break it down by sex. It’s not only globalization and technological change causing this stagnation. It’s the deterioration of the moral and social landscape, especially for men.

The idiocy of our current political debate is that neither side seems capable of talking about the interplay of economic and social forces. Most of the Republican candidates talk as if all that is needed is more capitalism. But lighter regulation and lower taxes won’t, on their own, help the Maddie Parliers of the world get the skills they need to compete.

Democrats, meanwhile, have shifted their emphasis from lifting up the poor to pounding down the rich. Democratic candidates no longer emphasize early childhood education and community-building. Instead they embrace the pseudo-populist Occupy Wall Street hokum — the opiate of the educated classes.

This materialistic ethos emphasizes reducing inequality instead of expanding opportunity. Its policy prescriptions begin (and sometimes end) with raising taxes on the rich. This makes you feel better if you detest all the greed-heads who went into finance. It does nothing to address those social factors, like family breakdown, that help explain why American skills have not kept up with technological change.

If President Obama is really serious about restoring American economic dynamism, he needs an aggressive two-pronged approach: More economic freedom combined with more social structure; more competition combined with more support.

As a survey of nearly 10,000 Harvard Business School grads by Michael Porter and Jan Rivkin makes clear, to get companies to locate their plants in the U.S., Obama is going to have to simplify the tax code, cut corporate rates, streamline regulations, make immigration policy more flexible and balance the budget over the long term.

To ensure there’s skilled labor for those plants, Obama would have to champion different policies: successful training programs like Job Corps, better coordination between colleges and employers, better treatment for superstar teachers, more child care options and better early childhood education.

This agenda is libertarian in the capitalist sector and activist in the human capital sector. Don’t triangulate meekly toward the center; select bold policies from both ends. That’s what would help Maddie Parlier and millions like her.