Why Men's Earnings Have Been Falling Since the 1970s - and What It May Mean

One of the most profound changes in the economy is largely the result of unintended consequences.

Household incomes have been in decline for over a decade. Some argue this has been going on for almost 30 years, since the period when the economies devastated by WWII - Germany, the UK, France, Japan et al - began to realize the fruits of their Herculean recovery efforts.

Much has been written about this worrisome trend, its reasons, antecedents and potential solutions. But buried in that data is another, socially disruptive trend - men's earnings have been in decline relative to women since the 1970s. And due to structural changes in the economy may not recover in the near future.

Older men - Boomers, et al - have been exiting the work-force largely due to lack of opportunity. The impetus has been the decline of male-dominated industries in manufacturing and construction, as well as the hollowing out of middle management brought about by technology and the competitive demands of the global economy. The sectors that have risen - health care, government work, services - are less reliant on physical labor and do not bear the legacy of industrial traditions so are more open to women.

This could have a profound impact not just economically, but socially. Data already demonstrate that in the US, 60% of university students are women. They do better in school and may, in many circumstances, be more productive employees. We may already be seeing some of the implications of these trends in the decline of marriage, the loss of interest in religion and the disaffection with government. In other words, belief in and support for institutions that have been the pillars of civilization may be eroding.

These changes in themselves may be neither wholly bad or wholly good. But they will impact the way that people relate to each other, to the businesses that cater to them and to the institutions that attempt to govern them. Could get interesting. JL

Derek Thompson reports in The Atlantic:

The most recent Census report confirmed one of the worst facts about the U.S. economy.

Typical household income fell by 1.5% in 2011. But that's not the worst thing. Median household income fell for the second consecutive year, despite being two years into a recovery, and now sits 9% below its all-time high in 1999. But that's not the worst thing, either. There were 46.2 million people living under the Census's definition of poverty -- e.g.: a family of four with an income of $23,021 or less -- and income inequality is rising again. These are all tragedies, but I would argue there's something even worse going on.

FBI's Nationwide Biometric Facial Recognition System Ends Anonymity As We Knew It

Not that we are convinced anyone will really care until they or a close relative runs afoul of the system, but the FBI is deploying a bleeding-edge facial recognition software tracking capability across the US.

According to reports, once the FBI has your faceprint, they can match against their data base and begin tracking. And just in case you are thinking that cosmetic surgery is the answer, the next stages involve DNA analysis and voice identification.

For those who think, oh, it's the government they'll never get it right, there will be cost overruns and the whole thing will be scrapped: newsflash; it is on budget and already 60% deployed.

Privacy advocates are, of course, alarmed. But then they have been in a constant state of alarm for years. And that is not a put-down. It is just a reflection of the relative lack of concern the average citizen has demonstrated for the actual or potential loss of privacy they have experienced. The reason is probably that it is not always apparent this tracking is happening, there is no obvious loss of freedom of movement or action - and it is not costing them anything explicitly.

The announcement is unlikely to spark massive protests from a population more concerned about putting food on the table than whether someone is watching them. Especially as so many invite that attention every day via social networks, YouTube, Twitter, et al. You dont know what you've lost till it's gone, indeed. JL

Michael Kelley reports in Business Insider:

The FBI has begun installing state-of-the-art facial recognition technology across the country as part of an update to the national fingerprint database,

Twilight of the Elites? America After Meritocracy

Has America been failed by its elites?

Or more to the point, has it been failed by the system that has produced them for the past three quarters of a century?

That system emerged to replace historical reliance on caste and privilege. It was formulated to promote a feature of American life which appeared to be the fairest, most democratic and meritocratic: education. The presumption was that education favored no one who did not have talent, intelligence and the willingness to work to achieve excellence against a common set of standards.

The problem, as Professor Marshall Meyer of the Wharton School noted, is that 'metrics begin to degrade the moment they are announced because everyone affected begins to game them.'

And how.

Universal education may still be available, but there are circles within circles. Private schools, private tutors, legacy admissions to 'need-blind' competitive institutions, cultural biases in nationally-administered standardized tests. And that's just to get to the starting line. To be considered for the elite professions in finance, law, medicine, commerce and yes, even government. Beyond that, the benefits of distinguished lineage have been supplanted by the web of relationships based on school ties, friendships and common experiences.

The sense of entitlement may be all the more entrenched because those so annointed believe that their achievements were merited, not the random luck of bloodlines. As has become clear the system has been gamed and those who have the money or connections prevail.

The bigger problem, however, is the result. That nation is riven by factions who truly despise each other. The economy is faltering, the country's standing in the world has receded and faith in the future is at a low ebb. Cheating and self-dealing are rampant. Investors flee the equity markets because they are so notoriously tilted to favor insiders. Whatever leaders the system was supposed to have produced either did not heed the lessons taught or emerged due to factors other than ability.

So the question is what the post-meritocratic world will look like. Despite their evident disdain for each other, both the Tea Party and the Occupy Wall Street factions agree that the elite are out only for themselves. And the French, Chinese, Russians, British, et al, have done no better.

What we can say with some assurance, however, is that whatever new system may replace the old - and that is not even certain - a new elite will emerge. What we can hope is that, at least for a time, before they begin to favor their own kith and kin, that they take to heart the lessons from this experience and try to build a more inclusive and effective system than the one they will try to replace. JL

The Samuel Goldman comments in The American Conservative:

“Elite” wasn’t always a dirty word. Before the 19th century, the term described someone chosen for office. Because this typically occurred in the church, the word possessed distinctly ecclesiastical connotations. The pre-Victorians transformed a word imputing religious status to individual persons into a collective noun with class implications. By the 1830s, “elite” referred to the highest ranks of the nobility.

Those meanings are no longer primary.

Is Wall Street Waging War on Government? Bondholders vs Everyone Else

One of the great Broadway musicals of all time was called 'Oklahoma!'

It was a grand spectacle about the settlement of the American west. But it had several subplots based on themes of great antiquity, one of which was the competition for land between grazers and settlers. The song that symbolized that conflict was entitled "The Farmer and the Cowboy Should be Friends." But they werent. And they couldnt be because they both wanted the same thing.

Which brings us to 2012. The fire this time is between bondholders and public employees: fire fighters, police, teachers, road repair crews, solid waste disposers, clerks, registrars and the full panoply of service providers who maintain our civilization.

The bondholders appear to be afraid of the future. They do not see enough reasons to believe there will be sufficient growth to continue to give them reasonable returns on the debt securities that make up a substantial portion of their investment portfolios. That outlook may change, in fact, probably will change, but arguably not in the next few years.

The implication is that those in competition with bondholders for the cash flow from public funds: public service, employees and the pensions they have earned, are under attack. Teachers, never noted for living a lifestyle of the rich and famous are accused of being overpaid. Pensions earned over a lifetime by fire fighters and police are called untenable - even though their growth has been planned for. Library hours are cut back and in some cases eliminated. Public parks and beaches are closed. Infrastructure is allowed to deteriorate, affecting public safety. Support for higher education funding and scholarships is challenged while even support for public education is questioned.

The harsh reality appears to be that those who can afford to pay for these out of their own pockets no longer believe in the promise of a better tomorrow for all, once a solid foundation of the American Dream (and the Greek, Irish, English, French...). And this at a time when the income and wealth gap are as stark as at any time in history.

But the fight is a classic human conflict: the proverbial battle over the water hole in an arid landscape. Limited resources and lots of claimants for them. Whether the holders of capital will ultimately prevail is not clear. There seems to be a demand for basic services that even the most ardent deficit fighter can not eliminate. The bondholders, however, have already changed the framework of the debate: that all of these services and goods once considered the glory of democratic society are now being questioned is a sign of that and of the limits to their future growth. JL

Michael Hudson comments in Naked Capitalism:

The pace of Wall Street’s war against the 99% is quickening in preparation for the kill. Having demonized public employees for being scheduled to receive pensions on their lifetime employment service, bondholders are insisting on getting the money instead.

It is the same austerity philosophy that has been forced on Greece and Spain – and the same that is prompting President Obama and Mitt Romney to urge scaling back Social Security and Medicare.

The Past Decade Was the Worst in US Middle Class History

Never is one of those words you want to use REALLY carefully.

It is not just absolute, it is absolutely negative. And most Americans, most westerners and, in fact, most connected global citizens live in a relatively positive culture. The glass tends to be half full rather than half empty. The future usually looks bright. Hope is held out, for whatever reason.

But we officially have a 'never' here. It underscores the severity of the economic situation and illuminates why the political atmosphere is so toxic.

Since the Second World War, the US middle class has never had a worse decade than that through which they suffered in the 2000s.

The middle class, the bedrock of the US economy, has lost 10% of its population. From 61% to 51% last year. And make no mistake, 10% is a big number. The word 'decimate' is derived from the loss of 10%. It's root is ancient, 'deci' referring in Latin to ten. The usually invincible Roman legions determined through experience that when a unit lost 10% of its numbers as casualties, it was decimated, meaning that it had been rendered unfit for further combat.

So, the loss of 10% of the middle class may well be contributing to the economy's stagnation. In a consumer driven economy, like that of the US, the loss of 10% of middle class purchasing power and leadership and entrepreneurial activity may have rendered the economy ineffectual. On top of the job losses, the financial insecurities and the increasing concentration of wealth among the top 1%.

In addition, people between the ages of 55-64 have been especially hard hit. These are the pre and early retirees, people who have saved and often prospered, but are now generally past their peak earning years.

This matters because people tend to vote in proportion to their age (approximately 21% of 21 year olds, approximately 55% of 55 year olds...). And this is a Presidential election year. People are angry. At declining incomes, declining net worth, declining standards of living. And given their ages, they are not in a position to make up the losses. Whatever their experience and tacit knowledge, companies, like athletic teams, tend to go with younger candidates. Even if they are willing and able, older people often dont have the technical skills now required.

Interestingly, the report on which this information is based notes that blame is placed on Congress, banks and large corporations. George W. Bush is held more responsible for this state of affairs by those surveyed than any other national leader.

Which may or may not be a political portent for 2012. But that knowledge could be a sign of why business is fighting so hard to elect one candidate rather than another. JL

Anna Fifield reports in the Financial Times:

America’s middle class suffered its worst decade in modern history during the 2000s as net worth and wages declined, according to a report from the Pew Research Center

Reframing the Jobs Crisis in the Post Knowledge Economy

Forget the new normal.

That instant cliche is already so 2011 it makes time spent waiting for the G5 phone seem like milliseconds.

No, what if the real problem with lagging employment and stagnant economic growth is that we have outlived the usefulness of the institutions that frame the way we organize, manage, collaborate and produce? Yeah, heavy.

And if that were true, what the hell could we do about it anyway? Well, that is one of the questions people who dare to think about such things are attempting to grapple with. The basic thesis is that technology has simply shown a light on the crumbling nature of the structures society has created to organize itself economically. And that the education, training, operational intelligence, organizational design and other factors that drive productivity and profit may be equally inadequate to meet the demands of the emergent global economy.

It is not that technology is to blame for the lack of jobs (Luddites, put down your sledge hammers)but that we mere mortals have failed to embrace the changes we need to make in order to bend all those devices to our will. Everyone sitting in a Starbucks in some edgy urban enclave feeling smug about their prospects while writing algorithms on their iPhone is as vulnerable as the least educated delivery truck driver.

The problem is that the economic imperative of large institutions says that managing to scale is the only way to create successful growth. But this 'push-based' organization, as Hagel calls it, is subversive. It is 'post-knowledge,' because, like post-industrial, knowledge is assumed, factored in, accounted for. You no longer collect 'excess rents' for having it or knowing about it. You Pass Go based on what you can do with it, big time.

Technology may be our friend, but not for everyone, everywhere, all the time. And changing institutions or the way they create value is hard because managers and investors got where they are, usually, by optimizing the returns from current structures, not by tackling the distraction and excess friction of creating new ones. But it may be that collectively, we are stumbling towards a new institutional approach, together, based on our connectivity - and our desperate need. It's shape(s) and impact(s) are not yet apparent. But the fact that we recognize the need but do not yet recognize the form may be their salient attribute. JL

John Hagel comments in his blog:

The recent book, Race Against The Machine, has caught the imagination of a growing body of readers. It’s an important book, but it doesn’t go far enough in highlighting the root causes of the unemployment we are experiencing. Rather than framing it as a technological issue, the book would have generated a lot more insight about both the problem and the solution if it had framed it as an institutional issue.

Where Has the Small Investor Gone?

They get it. They get that the system is managed to optimize returns for the brokers and big institutions. They get that the regulators think protecting the financial services industry is their top priority. They get that politicians are dependent on finance contributions. They get that high frequency trading and other financial 'innovations' are designed to benefit those that created them.

They are not protesting in the streets, because they also get that they have little hope of changing the system that way.

So, they may not be the brightest or best informed or most connected or wealthiest. But they understand when what little they have is being frittered away. And they are just smart and energetic enough to seek alternatives. So the changes that will inevitably come from the loss of trust in the capital markets will be driven by the decline of funds flows into those self-same markets.

Isn't that how capitalism is supposed to work? JL

Barry Ritholtz comments in The Big Picture:

Lots of folks are wondering what happened to the Main Street-mom-and-pop retail investors. They seem to have taken their ball and gone home. I don’t blame them for feeling put upon, but it might be instructive to figure out why. Perhaps it could even help us determine what this means for risk capital.

We see evidence of this all over the place: The incredibly light volume of stock trading; the abysmal television ratings of CNBC; the closing of investing magazines such as Smart Money, whose final print issue is on newsstands as it transitions to a digital format; the dearth of stock chatter at cocktail parties. Why, it is almost as if America has fallen out of love with equities.

Religion, Reputation and the Rule of Law: The Implications of Russia's 'Pussy Riot' Trial

By traditional Russian standards, the outcome was lenient: the defendants, a three-woman political rock band collective known as Pussy Riot who had performed without permission in an Orthodox cathedral, were not beaten, shot or sent to Siberia - yet.

But to those who dwell in the civilized world, even those parts where repression is common, the event had all the staged markings of a Stalinist show trial. The guilty verdict was preordained and only the severity of the sentence was in question. Two years in prison was the outcome. There will be legal appeals (fat chance) and even Kremlin supporters are suggesting (with more hope than knowledge, one surmises)that President Putin will urge/decree a shorter term.

The larger issue lies is the global context. Times of change are disorienting and frightening. In Russia, the US, China, Europe - and almost everywhere else on the planet, the verities of the post WWII era are crumbling in the face of faster and freer communications. Try as they might, authorities simply can not keep up with the power of the technologies driving this trend. Ethnicity, gender, race - and religion have all been affected by the tumultuous stirrings.

Religious leaders feel especially vulnerable - and empowered. Islam and evangelical Christianity have both seized on the uncertainty of their believers to demand political changes consistent with their ambitions. The Russian Orthodox church, having been suppressed for most of the 20th century has enjoyed its new-found position as a favored ally of the political class. The Kremlin has used it to legitimize its continued grip on power in the face of Communism's fall. And the Church has reciprocated.

So the protests against President Putin in 2011 were something of a shock to the system. Who would dare do such a thing under the Tsars or the Communist hegemons? The Pussy Riot protest event in 2012, held purposely in a cathedral, was a direct challenge to the political role of the country's historic religion - and a new attack on the alliance. As such, the Kremlin evidently believed the protesters had to be made an example of.

But in so doing they erred. Because they elevated what was otherwise an obscure act of political theater that would hardly have earned a press mention in most western societies into a global cause celebre. And they have raised questions about the proper places and uses of religion both in Russia and in the world at large.

When embraced voluntarily, religion's role is secure. But when used as an agent of repression - either overtly as in the Pussy Riot case - or less obviously as in attempts to thwart freedom of speech and other civil liberties in the US - negative reactions eventually outweigh the potential short term power gained.

Research has demonstrated that economic success is strongly correlated with the rule of law. In a competitive global society, Russia and other countries must compete for investment. As in any competition, when those considering the odds believe them to be uneven, they will take their chances elsewhere. JL

Miriam Elder reports in The Guardian:

A storm of criticism broke in Russia following the harsh two-year prison sentences given to three members of the feminist punk band Pussy Riot for protesting against the government in a Moscow cathedral. Those openly critical of the jail terms included some who are close to Vladimir Putin and others with strong links to the church, increasing pressure on the authorities to treat the trio more leniently.

Citigroup and 25 Other US Companies Paid Their CEOs More Than They Paid In 2011Taxes

Plausible deniability.

It used to work so well. For any negative corporate behavior there was usually a reasonable explanation that cast just enough doubt on the claims of its detractors that legal liability could be avoided.

But it just doesnt much matter anymore. And the reason is the decline in business reputation globally.

In response to the following story, a number of the 26 companies mentioned avoided the charge by stating that they 'paid the amount of taxes owed.' That does not, of course, refute the charge that CEO pay was greater than taxes paid. Nor does it address the unasked question as to why a company - particularly one like Citi whom taxpayers rescued - would think from an ethical and reputational perspective that it is okay to take an aggressive stance on taxes.

The 'everyone else is doing it' defense has lost a lot of its luster. Quibbles about methodology will get you only so far. In today's internet-dominated world you are guilty until you can demonstrate conclusively that you are completely innocent. Which is pretty much impossible for most businesses.

Logic would appear to dictate a review of priorities and policies. Maybe the CEOs deserve their pay. In the same way that maybe the government deserves its taxes. JL

Reuters reports:

Citigroup, Abbott Laboratories, and AT&T are among the 26 companies that paid more to their CEOs in 2011 than they did in U.S. federal taxes, according to a study released on Thursday.

Tax breaks on research and development, past losses, and foreign-held earnings were among those lightening the tax load for many companies on the list, said the Institute for Policy Studies

Many Americans Die With No Financial Assets

Almost 50% of Americans, citizens of the largest wealthy nation on earth, have fewer than $10,000 in financial assets.

But the real problem is that the trend lines are getting worse. The numbers were considerably better prior to the financial crisis in 2008. And married couples appear to be far wealthier than their unmarried cohorts. This is not as comforting as it might seem since the older people get, the less likely both spouses will survive.

The public policy issue is also a business issue. A consumer driven economy like that of the US relies on the ability of its citizen-consumers to spend. Cutting government programs like Social Security may not only threaten the lives of those who depend on it, it may threaten the livelihoods of those businesses which depend on those selfsame people.

A globally competitive economy requires a strong domestic base. To remain competitive, therefore, policies that enhance that domestic market are essential to the long term growth of increasingly global businesses. The fragility of the consumer asset base suggests that there is little margin for error. JL

Peter Dizikes reports in MIT News:

It is a central worry of many Americans: not having enough money to live comfortably in old age. Now an innovative paper co-authored by an MIT economist shows that a large portion of America’s older population has very little savings in bank accounts, stocks and bonds, and dies “with virtually no financial assets” to their names.

5% of Americans Account for 50% of Health Care Expenditures

The theory is that everyone requires health care at some point.

The problem, as new research demonstrates, is that a very few people, statistically - approximately 5% of the population - account for the vast majority of health care spending in the US. Even more sobering is the fact that the top 1% of those patients account for almost half again of that 50%.

We are, of course, talking about people with chronic illnesses. The kind that are likely to impose a lifetime of suffering, even when that lifetime is shortened by whatever condition they have contracted. Once a person makes it into the 5% in any given year, they are probably never going to leave that rarified designation.

The question is what to do about it. There is some evidence that the kind of diseases most likely to cause this spike in spending can be prevented: obesity, lung cancer, heart problems related to diet and conditioning. But not all. However, it is clear that more effective prevention can help. Insurers and corporations providing health care coverage have begun to offer (some might say 'impose')both incentives and penalties for those taking better care of themselves - or not. But it may be that stricter regulations can improve results.

At the other end of the spectrum, insisting upon health care coverage in order to encourage annual check-ups and therefore identify potential problems earlier, may also reduce the incidence of chronic disease and lower overall costs.

Whatever the outcome, the more medical data this society accumulates and analyzes, the better focused - and therefor more efficient and productive - will be the solutions. JL

Jordan Weissman reports in The Atlantic:

When it comes to America's spiraling health care costs, the country's problems begin with the 5%. In 2008 and 2009, 5% of Americans were responsible for nearly half of the country's medical spending.

Of course, health care has its own 1% crisis. In 2009, the top 1% of patients accounted for 21.8% of expenditures.

The Primary Driver of GDP Growth Is a Strong Rule of Law

Putting laws on the books is relatively easy. Enforcing them is the true test of a society's character.

As we contemplate the Libor scandal in which banks manipulated for their own gain the key metric for global interest rates, or the murder of a dozen random movie goers by a gun-toting mad man, we are forced to confront this civilization's commitment to the rule of law.

In the Libor case it appears that those involved calculated the odds and decided that the risk justified the rewards. It is not yet clear for how many years this went on, but so far, only one bank CEO has lost his job - and he was very well paid for his efforts in the interim. Certainly the absence of any serious charges, let alone convictions regarding responsibility for the financial crisis confirms the sense that the law is no longer considered an impediment to personal initiative.

In the gun massacre case, a coalition of gun sellers allied with ideologues looking to score political advantage will negate any effort to rethink US gun laws.

The result of both cases is to reduce trust. The connection with economic trends is that businesses and individuals are not inclined to invest when they believe the system is designed to place the majority of them at a disadvantage. And an economy without trust and investment soon fails to be an economy. JL

Washington's Blog reports (Hat tip Yves Smith):

Economist Woody Brock says that a nation’s GDP growth is based mainly on whether or not it follows the rule of law.

The US National Security Agency (NSA) Wants to Hire Hackers

The Puzzle Palace wants you. All sorts of animal analogies come to mind: setting the fox to guard the henhouse; if you want to find the fish, you have to leave the pier, etc.

The point is that the agency charged with safeguarding the electronic security of the US is facing the greatest challenge of its celebrated history. The global hackers attempting to break into US networks and sites today are as skilled and ruthless as any the agency has faced. The Chinese military, Russian gangsters, Muslim jihadists and the like all have military or commercial reasons for wanting access. The physical and technological complications posed by the internet dwarf the glory days of the Cold War.

So the Agency is going to the group who best understand its adversaries; their confreres in the hacker community, gathered annually in Las Vegas at the Defcon and Black Hat conventions.

Whether anyone in that brotherhood would seriously consider working for the government is an interesting question. But apparently the NSA has thought of that and is able to offer employment even to those with, as they so delicately put it, some 'indiscretions' in their background.

With the economy weak, IPOs stalled and jobs scarce, a government gig could be a nice way to bide the time until things improve. And given the toys the NSA gets to play with, could be pretty awesome as well. JL

Stacy Cowley reports in CNN:

Wearing a t-shirt and jeans, America's top spymaster -- National Security Agency Director Gen. Keith Alexander, also the head of the U.S. Cyber Command -- took the stage Friday at the nation's largest hacker convention to deliver a recruiting pitch.

"In this room, this room right here, is the talent our nation needs to secure cyberspace," Alexander told the standing-room-only audience at DefCon, a grassroots gathering in Las Vegas expected to draw a record 16,000 attendees this year

Why the Future of Manufacturing May Be in the US, Not China

It's not about the variable cost of labor. It's about the impact of technology.

When the history of this era is written, observers may marvel that a country as wealthy, knowledgeable and technologically advanced as the US allowed itself to pursue a lowest common denominator economic strategy - for decades - rather than building on its strengths by investing in the future.

Ironically, the downfall of the Soviet Union is often attributed to (relatively) conservative Republican President Ronald Reagan's decision to pour resources into military tech. It is believed that decision broke the will of the Russian leadership, who understood they had neither the financial wherewithal nor the technology to compete.

However, when it became clear that the Chinese were determined to rev their economic engine, rather than stepping on their proverbial necks in true capitalist fashion, US businesses rushed to accommodate the Chinese. The sugar-plum dreams of access to the vast Chinese market blinded them to the realities of the logistical, technological and political challenges ahead. Though executives speak bravely of investing for the long haul, that is a smoke screen covering the reality that there was - and quite possibly, is - simply no short term return to be had.

Fast forwarding a generation, it is becoming apparent that the Chinese may be more honest about their problems than global corporations. Virtually every deal signed by foreign companies in China - including a recent one with the US movie industry - involves significant technology transfers in return for access to the Chinese market. China's leadership has spoken explicitly about evolving from a 'brawn' to a 'brain' economy. They are even keeping score as to the number of Silicon Valley start-ups founded by Chinese versus Indian ex-pats (the Indians are ahead...).

But aspirations are not facts. As so often happens, the past two decades manufacturing failures have inspired a host of technologically-driven innovations aimed at reducing the Asian cost advantage in labor, taxes, currency manipulation and demographics. This is not to suggest that China's day is past; they will remain a fearsome competitor, but as energy prices make shipping costs more of a problem, that manufacturing edge may finally reversing itself and returning activity to the locus of the first industrial revolution.

Vivek Wadhwa reports in Foreign Policy:

Seduced by government subsidies, cheap labor, lax regulations, and a rigged currency, U.S. industry has rushed to China in recent decades, with millions of American jobs lost. It is these fears, rather than Olympic uniforms themselves, that triggered the recent congressional uproar.

But Ralph Lauren berets aside, the larger trends show that the tide has turned, and it is China's turn to worry.

Government Invented the Internet. Deal with It.

It has become popular among those of a certain ideological bent to claim that the government, or governments, can not do anything right.

To support their claim they leap avidly on any evidence of mishap or mistake. But that, lately, has proved insufficient. Despite frequent problems, people keep demanding government services like fire and police protection, good roads, better schools and naval aircraft carriers. Meanwhile, the private sector, though often a provider of myriad useful goods and services, does unhelpfully continue to impose usurious bank card fees, long telephone wait times for customer service, financial crises and the like.

So the debate has moved to a new level: denial. Recent evidence of this tactic involves the internet. Though its popularity and impact are sometimes questioned, its ubiquity and utility are not. Neither, until recently, had been its origins. Pretty much everyone with a third grade education or more understands that the US government agency called DARPA (Defense Advanced Research Projects Agency) or, for those who may quibble, a similarly named predecessor, provided the funding, inspiration and demand for what we now know as the internet.

This is understandably upsetting to those whose primary goal in life is to deny that government is needed for anything. Especially since the internet is the most universal application of technology since fire. Or maybe the wheel. We feel their pain. But facts are facts. You can look it up on the internet. JL

Damon Poeter comments in PC Magazine:

Al Gore was once routinely mocked for supposedly claiming to have "invented the Internet." He didn't really say that but that didn't do much to stop the joke from spreading.

Now, in similarly fact-challenged fashion, Wall Street Journal columnist L. Gordon Crovitz has attempted to extend the idea and claim that government itself didn't really have much to do with the Internet's creation.

US Poverty Rising to Highest Levels Since 1960s

It is no longer apparent why proponents of austerity support the drastic reduction in government programs at the same time the economy is struggling to recover from the after-effects of the financial crisis.

The War on Poverty in the 1960s contributed to the greatest economic boom in US history. The reason is pretty simple: when people have more money they spend it, giving businesses the opportunity to grow sales and profits.

Reduction of government services at the same time the private sector is shrinking has failed to restore 'market confidence,' one of the bromides that austerity apologists trotted out to explain the benefits of the cutbacks. The UK recession is deepening, Spain and Italy struggle while Greece remains on the brink. The US faces similar economic stagnation while China, watching all of its major export markets contract, unsurprisingly suffers in response.

This is simply bad business. Attempting to score ideological points - and failing - benefits no one. The War on Poverty was considered a policy of which a progressive, caring, affluent nation could be proud. Thanks to their failure to deliver - and to their negative impact, one doubts austerity programs will enjoy the same historical reputation. JL

The Associated Press reports via Newsday:

The ranks of America's poor are on track to climb to levels unseen in nearly half a century, erasing gains from the war on poverty in the 1960s amid a weak economy and fraying government safety net.

Can Art Drive an Economy?

The US is confused.

Budget obsessions drive cuts in school arts programs. Public investment is considered tantamount to waste. Political leaders speak about STEM (science, technology, engineering and math) as if pursuing any other interest is counterproductive and arguably, unpatriotic.

And yet. If one looks at public strategies for rejuvenating cities, counties and regions, you can forget John Henry, the 'steel driving man,' or the nobility of labor. No, the new American hero is the artist. Not so much for the lonely struggle to produce meaningful art, of course, but because it has somehow been intuited that artists, and the vibrancy that seems to follow them, might revive the economy.

The original model seems to have been New York's Soho district which emerged from decades of forgetful toil as a light manufacturing neighborhood into a world-famous center for artists' lofts, galleries, hip restaurants, cutting edge shops - and, eventually, the tourist dollars and real estate development that followed.

Other cities followed suit. Santa Fe, Berlin, Buenos Aires, Detroit, Barcelona, even Shanghai. Public installations of art (anyone remember the Cow sculptures of Chicago, Zurich et al?), arts districts, old manufacturing buildings converted into spacious apartments - with home furnishing emporiums conveniently located on the ground floor. Art is expected to set us free and lead any and all back to economic preeminence.

And hey. Let's be grateful that art is finally getting some positive recognition from people whose natural inclination was probably to treat it like a low grade infection.

But the problem is that this is a cop out. A cheap head fake tantamount to a dereliction of duty. Yes, art is important. In fact, vital. But what the policy makers are doing is looking for easy ways to avoid the tough decisions and significant investments required to make an economy work. We also need good roads, good schools, functioning sewer, water and utility plants. Jobs in something other than retail and restaurant service. And all of that requires public investment as well as a commitment to the entire society.

Art may well be a crucial part of the answer. Recycling old buildings in a city's crumbling industrial core is smart. Encouraging those looking for cheap rents and plenty of space and light to congregate is a clever tactic. But placing all of the burden on art and design is unfair to the artists and designers as well as to the rest of the populace. The challenge is build a society in which all of many parts interact. They both inspire and benefit from each other.

So lets celebrate art the way previous civilizations have done: Greece, Rome, China, the Aztec, the Inca. Lets also remember that their leaders recognized the key to successful development was broad-based and holistic. JL

Thomas Frank comments in The Baffler (hat tip The Big Picture):

Your hometown is probably vibrant. Every city is either vibrant these days or is working on a plan to attain vibrancy soon. The reason is simple: a city isn’t successful— isn’t even a city, really—unless it can lay claim to being “vibrant.”

Vibrancy is so universally desirable, so totemic in its powers, that even though we aren’t sure what the word means, we know the quality it designates must be cultivated. The vibrant, we believe, is what makes certain cities flourish.

How Climate Change Is Starting to Hit Consumers' Wallets

Denial is not a river in Africa.

That is an old joke but it still rings true.

With the US facing the largest drought since the 1950s and severe storms affecting various regions of the country again this year, the absolute rejection of climate change is becoming harder than ever to defend. Not that it has stopped those who are paid to do so from trying.

The energy industry is fighting a bitter rearguard action against claims that oil and gas do have some pernicious side effects. And that there might be some value in exploring both the impacts and ways of mitigating them. Even the US Department of Defense which normally gets a pass on anything it wants has come under heated, deeply emotional attack from conservatives in Congress who are upset that the Navy is experimenting with algae-based alternative fuels. Why? In order to save money and lessen US dependence on foreign sources of oil. But even those arguments do not suffice when it comes to the energy industry's legislative backers.

The immediate problem is that severe drought, brought about by (whisper)climate change is damaging crops and raising feed costs for cattle and sheep, thereby beginning to impact consumer prices. The energy industry appears resolute in battling back against any suggestions that the climate may be causing these price increases but as the evidence accumulates - and the prices rise inexorably in an era of already declining incomes - the countervailing argument are becoming too compelling to brush aside. JL

CNN reports:

With more than half the country in some state of drought, farmers are feeling the impact on their livelihood and consumers could expect to feel a hit in their wallet when they go to the supermarket soon, experts say.

The U.S. is facing the largest drought since the 1950s, the National Climatic Data Center reported

US Olympic Uniforms Made in China - Just Like Every Other American's Clothes

Are there any garments worn in the US for the past few decades that were not made in China - or Bangladesh, Vietnam or some other foreign country?

OK, hat was a rhetorical question. There are certainly expensive clothes made in Italy and France. And even blue jeans arent usually made in the US anymore. The garment industry was the first to start shipping work overseas decades ago. As far as we can tell, most Americans have not stopped wearing clothes to protest this development.

The people who seem to care most about this are politicians looking for a story angle to appear patriotic.

But this is not to say the US Olympic Committee and its chosen designer Ralph Lauren should not have been just a wee bit more sensitive to the 'optics.' It's a Presidential election year - and a particularly bitter one at that. And the Olympics has a symbolic value far out of line with its actual consequence. So maybe they should have paid more attention to appearances and a bit less to the few thousand dollars they probably saved - assuming that they could have found anyone in the US who still does this sort of work. JL

Donna Cassata reports in the Huffington Post:

Uniforms for U.S. Olympic athletes are American red, white and blue - but made in China. That has members of Congress fuming.

Republicans and Democrats railed Thursday about the U.S. Olympic Committee's decision to dress the U.S. team in Chinese manufactured berets, blazers and pants while the American textile industry struggles economically

Cloud Meets Fog: Government Fights Information Leaks with Disinformation Computing

One of the great attributes of cloud computing is the ease which, in an era of big data, lots of information can be inexpensively and productively stored, organized and shared. But if your responsibilities also include security - like the kind of security when, if breached, people may die - that attribute becomes a nightmare.

Government officials concerned with protecting everything from nuclear codes to sensitive diplomatic messages live in fear of information leaks, especially those they only find out about after the fact. So, DARPA, the US Defense Department's innovation arm, which, among other successes, funded the precursor to that internet thingy, has been working on the problem. And it thinks it may have a viable solution.

Cloud, meet Fog.

One of the issues those concerned with security face is a cultural change. Society has evolved from a time when senior officials were wont to say in response to newly formed intelligence agencies, 'gentlemen do not read each others' mail,' to one in which lots of people make a good and happy living publishing other people's mail without their permission.

The basic idea of Fog Computing, as it has been nicknamed, was articulated by Winston Churchill who said, 'In wartime, the truth is so important it must be surrounded by a bodyguard of lies.'

In a rather zen-like strategy, the Fog uses the Cloud against itself, effectively surrounding protected data with a fog of useless data. Only those with the key can find their way through. Whether this will truly protect data from determined external threats who may have suborned internal operators with access as in the Bradley Manning-Wikileaks case remains to be seen. The fact that the Fog has itself been 'leaked' suggests that those responsible are testing it to find out. JL

Noah Schactman reports in Wired:

Pentagon-funded researchers have come up with a new plan for busting leakers: Spot them by how they search, and then entice the secret-spillers with decoy documents that will give them away.

Computer scientists call it it “Fog Computing” — a play on today’s cloud computing craze.