THE STORY SO FAR: PART 185

HOW IS IT THAT THE GERMANS DO WHAT THEY DO—SO WELL—AND SO CONSISTENTLY?

The Germans hide their expertise in plain sight, yet for some reason we seem incapable of learning from it.

Decades pass, the evidence piles up, and still we seem incapable of learning from what—based on the evidence—is self evident. Their economic system works better than ours. If you don’t accept that argument, let me compromise: Aspects of their economic system deliver measurably superior results.

When I worked in the UK, I couldn’t understand why the British were so reluctant to copy the German economic system, and now it seems that the U.S. has similar reservations.

It is quite baffling because the German business model—which is not that complicated—is quite remarkably successful—and has been so since the end of WW II (and it did rather well before that). In addition, the Germans absorbed East Germany which was, for many years, a huge economic burden in its own right.

Dan Rather has written an excellent piece which appears in the Huffington Post of March 4 2013. The following is an extract from it.

We had just returned from our own tour of Germany's schools and factories and can report that the German model does in fact provide a viable and popular pathway to get young people employed immediately after high school in good paying jobs. Jobs that can turn into careers.

We found a culture where "vocational training" is not a taboo word, where companies invest billions of dollars annually in training young people who have completed tenth grade for apprenticeships in healthcare, information technology, and above all, manufacturing.

The results are hard to dispute: Germany's high school drop-out rate is around 7 percent (compared to the U.S.' dismal 23 percent.) And while 8 percent of Germany's youth population (ages 16-24) is unemployed, our youth unemployment is at 16 percent (for African-American youth, it's a bleaker 38 percent, according to the Department of Labor.)

Germany's highly-skilled workforce helps it create high-end products that the world is hungry for. As a result, Germany exports more products than anywhere else except China, and the country has been a lone beacon of good news while the rest of Europe has been laid low by the financial crisis.

Well, it is not true the rest of Europe has been “laid low” but the countries which are doing well—or well enough—are all really following variations of the German economic model, and are mainly clustered in Northern Europe. Of course, it can be argued that what works in relatively small countries like Sweden cannot work in the U.S., but if you add up the populations and GDPs of Germany, Austria, Switzerland and Scandinavia—all high wage, high added-value economies--the total adds up to a significant percentage of the size of the U.S. economy—and is doing vastly better in terms of the wellbeing of the average citizen.

It would seem no more than good sense to take a closer look.

 

 

THE STORY SO FAR: PART 183

THIS ELUSIVE QUALITY WE CALL LEADERSHIP

I first read J.K. Galbraith when I attended university at the too young age of 16.

No one should go to university that young.

True, I had the necessary academic qualifications, but that was back in the days of military National Service in the UK (conscription), and many of my peers were 20 or more when they arrived, and not a few were older—and certainly looked older.

Being in harm’s way, while presiding over the decline of the British Empire as a young infantry officer, had that effect. Malaya, the Indonesian confrontation, Cyprus, Aden, Kenya—the trouble-spots were endless—and the casualties racked up. And then came Northern Ireland, which was to last for about 30 years. On several occasions, I was on the receiving end. It wasn’t fun.

Given that my university was Trinity College, Dublin, Ireland, you might well wonder why so many British students attended. I think it was as simple as the fact that, at that time, Trinity was a little less expensive than Oxford or Cambridge—and a little easier to get into. However, it still had the cachet of having been established in the late sixteenth century when Elizabeth 1 was on the throne. She was the queen who defeated the Spanish Armada—or, at least got much of the credit for it. The weather was actually a major factor in the whole event; and the English were scarcely trivial opponents. If memory serves, they had smaller ships but superior canons.

My peers were a beer drinking, poker playing, lot; and they had seen the world—or enough of it to regard me, quite rightly, as a kid. Some were very bright, but mostly they wanted—not unreasonably—to forget.

It was hard to get a date, at first, against such competition—and there were few women at university back in the early Sixties; but, life being the way it is, I grew older, and luckier. A Trinity degree course is four years.

I became a great fan of Galbraith. I didn’t agree with all his ideas, but, generally speaking, he seemed to make a great deal of sense; and he wrote beautifully. I can forgive almost anyone if they write to Galbraith’s standard. The following is a marvelous quote on leadership.

"All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time. This, and not much else, is the essence of leadership." -John Kenneth Galbraith

Galbraith bore more than a passing resemblance to my good friend, Bob Fulton. Both were fine looking men and aged particularly well. I never met J.K. Galbraith and—more is the pity—our paths never crossed. I miss Bob Fulton to this day.

 

 

 

 

THE STORY SO FAR: PART 180

THE FINANCIALIZATION OF AMERICA—AND THE DEATH OF THE AMERICAN DREAM

THE FINANCIAL SECTOR’S SHARE OF BUSINESS PROFITS IS NOW 50%

The coverage of issues in this Great Country is a curious business. The information is normally out there—somewhere—but fundamental issues of huge importance all too often do not get either the coverage or the analysis they deserve. Instead the media obsess about the Oscars, or a celebrity murder, or a whole host of other matters which really do not deserve that level of attention. The concept of “The News as Entertainment” has a lot to answer for. Distraction from the issues that really matter is the result.

Are the media deliberately keeping us distracted? Well, I cannot speak for individual journalists—some of whom are excellent—but it is clear that the policies of many of the media are driven by commercial agendas which are not motivated by a desire to advance our best interests. Consider Fox News and the Wall Street Journal. The former is a blatant propaganda machine, and the latter is not a great deal less biased—even though it is clothed in the robes of being a serious and respected journal. Given the track record of the owner, Rupert Murdoch, that is an unconvincing disguise.

An issue of the most profound importance is the financialization of the U.S. Economy—the structuring of the economy is such a way, particularly through legislation and massive financial support, that the financial sector—dominated by the Big Banks--can extract a disproportionate share of profit while contributing only a minimum amount in terms of productive investment, added value, and employment.

The end result is an economy which just doesn’t work too well for most Americans—which is exactly where we are right now. Growth is minimal, unemployment is way too high, high wage jobs are being replaced by low wage jobs, demand is being sucked out of the country, investment in infrastructure is entirely inadequate, business investment is far from what it needs to be, and Wall Street is driven almost entirely by speculation rather than acting as a conduit for productive investment.

Evan Soltas has just written a fascinating blog on the share of profits now going to the financial sector. I commend his observations to you. Let me quote an extract:

But most of it is a huge increase in the profit per man-hour worked in the financial industry. Making some rough approximations about the financial industry's share of payroll employment, I can estimate that the average hour worked in the financial industry generates nearly 30 times the average per-man-hour profit in the rest of the economy. That's up from six times the average in 1964.

The dominance of the U.S. economy by the financial sector is a systemic problem of such magnitude that it constitutes an existential threat to the future of this country. Yet most of us are not even aware that such a problem exists.

Remedial action could and should be taken by Congress—but who owns Congress? Why, Big Money, of course.

Well, surely the Federal Reserve can do something—apart from supporting the banks? Then again, perhaps not. After all, let’s appreciate that it is not a government agency (though it masquerades as one). It is owned by the banks.

 

THE STORY SO FAR: PART 168

BACK IN 1966, I WAS 22 AND THE U.S. WAS A VERY DIFFERENT PLACE

ONE TENDS TO FORGET JUST HOW DIFFERENT

I first visited the U.S. in the early Seventies. At the time I was the founder and Managing Director of the UK subsidiary of the Addmaster Corporation of California (the latter still exists, and is thriving, I’m proud to say). The subsidiary was called Addmaster UK—and despite great odds, we were very successful.

At that time, though I am Irish—albeit Anglo-Irish—I lived in London. Many Irish still do. That is where the work was—and still is.

Back to the Seventies: In that era, the main commercial threat came from the Japanese, flying was still enjoyable, there was no accepted terrorist threat in the U.S., and the American Middle Class was still in good shape (though the Vietnam War had exacted a heavy toll in American lives and treasure—and, most crucially, on American self-confidence).

Just about everything, from the American diet to the cost of Healthcare, was to change over the next 40 years—and mostly not for the better as far as most Americans were concerned. Perhaps the most disturbing development was that rising American prosperity, stemming from significant increases in productivity, ceased being shared. Previously, since the end of WW II in 1945, all the stakeholders—shareholders, management and workers—benefited, more or less proportionately. That ended around that time.

Subsequently, after the early Seventies, the Rich got ever richer, but the bulk of the population—the Middle Class—saw virtually no increase in earnings at all. And now Middle Class earnings are in decline; and unions have been virtually crushed—at least in the private sector. The Rich have won—and some have stated quite publicly that they are unhappy with that fact.

I’m far from sure this is the way the U.S. is meant to be; needs to be; or should be. It is not the American way to want to pull down those who are successful, but neither is a low wage economy, combined with a steady downward pressure on earnings, acceptable—especially because costs are going up. Sinking wages combined with rising costs does not happiness make; nor does it make for a healthy democracy.

It kills the American Dream.

I have written about all this in my book, TITANIC NATION: How To Avoid Icebergs.