- (december 2011)
Copyright terrorism. Every time i read the news that music conglomerates
are suing a kid who "illegally" downloaded or uploaded music i have to smile.
Both major and minor music companies have routinely stolen my texts for their
websites. For example, their bio of the Deftones http://bit.ly/tv1ZVs is a copy
of my Deftones bio. They simply stole the text and carefully removed the
copyright line. But then they sue kids who break the copyright law by
uploading/downloading music. The difference of course is that i don't have
the resources to sue Warner Brothers for copyright infringement whereas Warner
Brothers has the resources to sue a penniless kid.
This is greedy amoral capitalism at its worst.
TM, ®, Copyright © 2011 Piero Scaruffi All rights reserved.
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- (october 2011)
The Western Autumn: Occupy and Redistribute .
The Arab Spring was the most significant event of 2011:
Arabs are getting rid of the cleptocracy that ammassed huge amounts of money
leaving most of the population in poverty.
I wrote "was" because a new wave of protests might turn out to be even more
monumental than the Arab Spring: the "Occupy Wall Street" movement that started
in New York is rapidly spreading throughout the developed world and turning into
a tsunami of epochal proportions.
Analysts wonder how it started, but i've been asking young people for a long
time why it hadn't started yet. The developed world has obviously been
plagued by visible injustice for a while. The primary victims are the young
generations, whose future might be less appealing than the future of
young people in the developing world.
In the USA 1% of the population owns an incredible percentage of the wealth of
the country. Wall Street firms control an incredible amount of capital,
and exert an obvious influence on Washington politicians.
In 2008 i wrote of
a "Wall Street dictatorship"
(here).
The USA is de facto being oppressed (and robbed) by that
dictatorship the same way that Egypt was oppressed by Mubarak and Libya by
Qaddafi: the cleptocracy of Wall Street is ammassing huge amounts of money
at the expense of the middle class. Not only did Wall Street cause the Great
Recession of 2008 that greatly impoverished the middle class but it then
pressured Washington to bail out the banks with money that belonged to
the middle class. Not only did Wall Street "steal" that money from the middle
class, but later it got upset with the president when the president proposed
laws to limit Wall Street's freedom, which would also have limited the degree
of reckless speculation, which would have
reduced the chances of another massive financial crisis...
but also reduced Wall Street's profits: in other words, Wall Street demanded
the right to continue to make outrageous profits out of the Great Recession
and the right to cause another financial crisis that would have to be bailed
out again by the middle class.
Wall Streets want the right to speed on crowded
city streets and to be immune from prosecution if it kills a few pedestrians
and it even wants the families of those victims to pay to fix its car!
Wall Street has pressured Washington to extend the tax cuts
for the rich that are used by big corporations to invest abroad (to export
jobs abroad) and by celebrities and tycoons to buy real estate in foreign
countries (while real estate is collapsing at home).
One could even argue that Wall Street pressured Washington to start a war in
Iraq that has killed thousands of children of the middle class (besides hundreds
of thousands of Iraqi civilians), but no children of Wall Street millionaires,
while Wall Street firms and big corporations reaped the benefits
of a booming military industry and of a corrupt nation-building scheme.
Health care is probably the peak of the scandal: costs are increasing
dramatically, while ever stricter rules force citizens into the hands of
a veritable mafia. The very same medicine is for sale in other countries
for a fraction of the price at which it is sold in the USA, but it is a crime
to buy it abroad and bring it into the USA. Most medicines cannot be had
at a farmacy without a doctor's prescription (which, of course, costs a
fortune). Doctors and hospitals in the USA have a vested interest that you
remain as sick as possible. Dentists recommend all sorts of unnecessary
operations for the purpose of creating problems where they didn't exist.
Hospitals perform surgeries on people who are about to die in order to maximize
profits (about 30% of Medicare recipients has surgery in the last year of life).
The big pharmaceutical companies
(whose sales constitute 40% of the national market)
lavish money on doctors and other health-care providers
(Note of 2011: about $760 million in 2009 and 2010).
Then these same doctors prescribe
expensive medicines instead of generic drugs that would work perfectly well.
(see Health care does not mean health)
There is not limit to how reckless these corporations can be:
lobbying by Maryland-based pharmaceutical company Emergent has killed a project
to develop a better anthrax vaccine and put millions of US citizens at risk of
being killed by an anthrax attack
(See this article).
The health-care industry wouldn't care if the USA were conquered by Islamists,
as long as the new conquerors bought its medicines.
There has been an outrageous form of "class warfare" for several decades
by the big capitalists against the middle class. It started with Reagan's
"trickle-down economy"
(see The 13 most feared words in the English language) that resulted in a net transfer of wealth from the middle class
to the rich and the big corporations. It was not rectified under Clinton and
it increased exponentially in brutality under emperor George W Bush.
On one hand the government kept cutting taxes for the rich, on the other hand
it kept indirectly increasing the cost of living for the middle class
(education, health care, transportation).
The middle class has been literally massacred: thousands of people have died
for lack of the kind of decent health care that is available for free
in most developed countries.
The Great Recession was simply the inevitable consequence of that class
warfare unleashed by Wall Street against the middle class.
A report by the Congressional Budget Office of october 2011 found
that, between 1979 and 2007, income grew by:
275% for the top 1% of households, 65% for the next 19%,
40% for the next 60%, and 18% for the bottom 20%
The rich are getting richer at a disproportionate rate.
Needless to say, the more money they have the more important they become
for anybody who is running for office and needs funding, which means that
the influence that the rich exert on government keeps growing, which means
that government is more and more likely to pass laws that benefit the rich,
which means that the rich are likely to keep getting richer and richer, faster
and faster. Short of a bloody popular revolution, it is hard to see what
can break this vicious loop.
The situation got so outrageous that even the rich (like Warren Buffet) have
felt they had to speak out against this Wall Street dictatorship.
Of course, Wall Street is not the only culprit. The average citizen has been
living above her/his means, and not only in the USA. But there is no question
that Wall Street has been constructing a virtual world of pure speculation
(which basically means "legalized robbery") that is jeopardizing the very
existence of the real world. Wall Street has become a problem, not a solution.
Many of us believe that the USA would fare better if Wall Street were just shut
down and all those financial institutions dissolved at least for a few years
(See Can the USA get out of the crisis?:
"the USA should lock up all of Wall Street into a concentration camp").
It might be a simplified view of life, but simple people have simple visions.
The simplest vision they have is to raise their children, send them to good
schools, provide for their health care and live decent lives in decent
neighborhoods among decent people. Those were exactly the motivations that
triggered the revolts of the Arab Spring: ordinary people felt humiliated
by the system and wanted their dignity back.
The young and not so young people who are protesting against Wall Street
express the exact same kind of humiliation and frustration.
The difference between Egypt and the USA is simple: Egypt did not have the
powerful colossal system to arrest protesters and devastate their lives
that the USA has. Western countries train highly efficient police officers
and maintain highly sophisticated systems of "justice" that, combined together,
are enough to dissuade most people from speaking up. Do you really want to end
up in an FBI file? That prospect is as scary as the prospect of ending up in
a KGB file in the old Soviet Union. If people were not intimidated by the
system, it is likely that those protests would involve millions of ordinary
people, not just the most extreme leftists (as right-wing media claim).
Just like in 1964 the student riots of Berkeley ignited riots throughout the
Western world, the New York protests of 2011 are igniting riots throughout the
developed world (which is now much bigger than the Western world used to be
in 1964). Just like back then the nature of the protests is different in each country: back
then the youth of the USA was protesting against the military draft, the Vietnam War,
racial discrimination, sexual conventions and so on, whereas the
highly politicized youth and workers of Western Europe were fighting against
capitalism and religion.
In 2011 the situation is even more varied and fragmented. In the USA the anger
targets Wall Street, and is about wealth (and power) redistribution.
In Italy it targets a corrupt and ridiculous government.
In France it targets an unpopular president. In Japan it is fueled by anger
over the Fukushima nuclear incident. In Spain it has mostly to do with the
high unemployment rates among young people.
Everywhere people have the feeling that big business has colluded with big
government to rob the middle class, and the middle class is powerless
because there is nobody in the high spheres of the economic and political worlds
that defends it.
The big advantage for the system (in both Europe and the USA) is that the
protesters of 2011 come from the middle class, whereas the protesters of 1964-68
were mostly from the working class (and even the lumperproletariat).
The kids of the middle class have an iPhone and a car. They are not terribly
willing to risk them in the name of their principles the way that the poor
kids of the 1960s were willing to, and their goals (a good job, cheaper
education, health care) are less pressing than those of the 1960s (when
thousands of kids were being killed in the Vietnam War).
However, even the most spoiled people can become truly dangerous to the system
when they discover the discreet charm of revolution.
TM, ®, Copyright © 2011 Piero Scaruffi All rights reserved.
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- (september 2011)
Amanda Knox vs Troy Davis
An Italian jury acquited Amanda Knox of a murder. She was convicted years
ago based on evidence that is now considered unreliable. Luckily for her,
she was convicted in Italy, a country that does not have the death penalty.
Luckily for her, the jury accepted the very basic fact that the original
evidence was not reliable. She was sent free and will soon restart her life.
A few weeks earlier the world had watched in disbelief as the USA executed
Troy Davis, a man accused of murdering a police officer. In that case too
the original evidence was disputed. In fact, most witnesses recanted.
At stake was much more than a jail sentence: he was sentenced to death.
Nonetheless Troy Davis was executed. He will never go back to his life,
even if some day the police would find the real killer.
The other stunning difference between the two cases was the behavior of
the victim's family. The family of the police officer insisted on having
Troy Davis killed no matter what. They publicly expressed joy that Try
Davis had been executed (for all purposes, lynched). The family of the British
girl killed in Italy expressed dismay that the original evidence was unreliable
and has accepted that Amanda Knox may be innocent after all. One family in
the USA simply wanted blood, not justice; the other family in Britain wanted
and still wants justice, not just blood.
Note that in the USA
the very media that welcomed Troy Davis' execution cheered at Amanda Knox's
acquittal. Of course, it helps that one is a beautiful white woman and
the other was a black man.
Obviously the difference between one case and the other is the value that
society assigns to human life. In one case that value was deemed so low that a man
was executed and the family of the victim celebrated his death. In another case the value
was deemed so high that the defendant was acquitted and the family of the victim
accepted the verdict.
The world has certainly noticed the different behaviors, but the world does
not know the full extent of the problem in the USA. For example,
recently a candidate to become the next president of the USA, Texas governor
Rick Perry, proudly boasted (live on television) of having executed more than
200 inmates during his tenure; and, as it is often the case in the USA, this
exterminator publicly pretends to be a devout Christian (follower of Jesus).
What these two cases show is how barbaric and racist the society of the USA
can still be.
TM, ®, Copyright © 2011 Piero Scaruffi All rights reserved.
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- (september 2011)
Turn the tables on China.
I suspect that, if nothing changes in the economic system of the world,
the USA and the Western world in general will have a hard time creating
jobs no matter what the economy does
(see Jobs). The issue is that
globalization has created a strong motivation for companies to create job
in the countries that have lower labor costs, lower operational costs,
lower taxes, and fewer weakly-enforced rules about
environmental factors,
intellectual property and labor conditions.
Give a trillion dollars to
a USA-based corporation, and they will still spend it mostly abroad and
create very few jobs in the USA. They are not in business to help the USA
create jobs: they are in business to make money.
There are two fundamental ways to change this scenario. The first one is
to end the age of globalization and return to protectionism. Wall Street
and Big Business claim that this would have catastrophic effects, although
nobody can quite pinpoint what the catastrophe would be like (the USA became
the world's superpower when it was much more protectionstic than today).
The second one is to turn the tables on the trading partners, particularly
mainland China, that have been the main beneficiaries of this system.
One of the reasons (if not the main one) for China's economic boom is its
exports to the USA (remove that contribution to its GDP and mainland China
has almost no economic growth). Ultimately, the reason for those exports is
that Chinese goods are cheap. Very few citizens of the USA think that Chinese
goods are better than USA-made goods: they are just more affordable.
The reason they are cheaper goes back to labor costs, environmental laws, etc.
However, these are factors that don't need to be unchangeable for eternity.
The USA could devalue the dollar and make USA-made goods cheaper. After all,
the government of mainland China keeps its currency artificially low by buying
dollars and euros and yens, otherwise it would be worth a lot more (20-30% more).
Second, the USA could slap penalties on foreign
factories as if they were based in the USA. There are agencies in the USA
that control if imported agricultural goods contain unhealthy ingredients,
and there are agencies in the USA that control if imported manufactured goods
contain harmful substances. The USA could simply create an agency that tracks
down the origin of an imported good and decides whether it was manufactured
according to the laws of the USA. If not, then the importing company would be
fined just as if it had broken the law in the USA.
As it stands, the Western economy is subsidizing the Chinese boom. For a long
time US citizens have been told by their politicians that wealth abroad
translates into wealth in the USA. There is now too much evidence that this
theory is failing: wealth in China translates into poverty in the heartland
of the USA, and, as Chinese corporations move from cheap shoes to solar panels,
very soon that poverty might move to the high-tech regions too.
TM, ®, Copyright © 2011 Piero Scaruffi All rights reserved.
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- (august 2011)
Jobs.
I wonder if everybody got it completely wrong and the Great Recession was not
about the real estate bubble at all but, instead, reflects a deeper issue that
was lurking in the background: the disappearance of jobs. During the 2000s
(even during the few years when George W Bush was not causing a recession)
fewer jobs were created than in any decade since World War II.
That statement, of course, is not completely true: tens of millions of jobs
were created, but not in the USA.
There have been two dramatic revolutions that affected jobs. The first one was
automation. It shifted jobs from one industry to another industry. People who
were making typewriters lost their job, but other companies hired people to
build word processors.
The second revolution was globalization. It shifted jobs from one country to
another country. People who worked in expensive countries like the USA lost
their job to people who worked in cheaper countries like mainland China and
India. This phenomenon has accounted for much of Asia's economic boom, and has
coincided with a general stagnation of the Western economies. Some economists
claim that globalization too create jobs where they are being lost, but the
evidence is scant. There used to be a company manufacturing their own tour
buses. First they began to buy parts from Asia, then they simply decided to
buy the entire buses from Asia. Now their only employees are a sales person
(who didn't even finish high school) and two young girls who man the office.
The factory is gone, the workers have lost their job, and all the companies
that supplied the factory have lost a customer. When everything in the supply
chain moves to Asia, it's hard to see where the USA is gaining any jobs, other
than at the very low level.
The multinational corporations defend this model
because they make more money, not because their country (assuming they still
identify with a country) makes more money.
Wall Street firms defends this model because they make money out of the
corporations making money.
The USA, however, is only losing jobs. The reason that globalization is still
alive and kicking is not only ideological rigidity by the winners of the Cold
War but also the powerful influence that multinational corporations and
financial firms exert on Washington through their rich lobbies.
Ordinary people have little power over their elected politicians and are
easily duped into thinking that any attempt at reining in the capitalists amount
to a form of socialism or communism.
The multinationals claim that they need to export jobs in order to remain
competitive worldwide, but the truth is that "worldwide" mainly means "the USA",
as this is still the biggest market in the world.
This model is obviously a twisted Ponzi scheme. The whole scheme depends on
the USA providing the buyers for the products that the multinationals
produce. The more jobs are lost in the USA the less money the consumer can
spend. For a while the scheme has worked because the consumer in the USA had
easy access to credit, but eventually the USA will simply run out of consumers.
The Great Recession was perhaps just a symptom of a more serious disease:
the death of the very "American" consumer that has fueled the world's economy
for so long.
As that consumer got squeezed by the loss of good jobs and by the pressure to
purchase foreign goods, private debt increased astronomically.
The only way to reduce that private debt would be to bring back to the USA
millions of jobs, so that not only unemployment disappears but also
people's salaries increase dramatically (the median household in the USA has
pretty much the same income as 30 years ago).
The right-wing politicians in the USA got it all wrong: it's not about public
debt, but about private debt. The USA is perfectly capable of paying its
public debt... provided that people still have incomes and pay taxes.
The problem for now is that fewer and fewer people in the USA are making
enough money to pay down their own debts.
Western Europe's problem is different. European countries do have a large
national debt, and that is the issue: some of them may not be able to pay
it back. The USA is perfectly capable of paying its own debt.
The fact that these two problems exploded at the same time does not make them
the same, even though one makes the other one worse.
In fact, in the USA the stock market crashed in august and people fled to... government debt.
Europeans do not flee to Greek or Italian debt: their problem is that
nobody wants to buy that debt. Both domestic and foreign investors, instead,
are eagerly buying US debt. Hence the two problems are wildly different.
The eurozone is in a situation that is more similar to the situation of banks
in the USA in 2007: its banks are overexposed to bad loans (to the southern
countries). The USA is in the unique situation of having colossal private debt,
which, ultimately, is caused by a lack of jobs (and especially good jobs),
which, ultimately, was caused by globalization.
Both problems are, unfortunately, difficult to solve because both regions lack
a leader: the eurozone is a federation of countries without a government,
and the USA has a government that is gridlocked because the two parties cannot
agree on anything. The real problem that the world is facing is therefore that
the two biggest economic blocks are both incapable of solving their respective
problems because of a political vacuum. Europe is perhaps in a better situation:
its citizens widely approve of government intervention, so public opinion is on
the side of finding a solution; whereas the USA is cursed with a narrative that
demonizes the role of government, and therefore much more unlikely to solve
its problems (they won't solve themselves naturally without extreme pain).
TM, ®, Copyright © 2011 Piero Scaruffi All rights reserved.
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- (august 2011)
Big government or free market.
The USA is being ripped apart by the most diviside of ideological issues: the
role of government. If the argument is purely ideological, it becomes an act
of faith just like believing that Jesus was the son of God or that Allah spoke
to Mohammed. If the argument is about the economy, then one side is refusing to
see the facts.
During the Cold War there was one side that de facto implemented a form of
globalization (free-market economies): the Western world. Within that world
there is no doubt who benefited the most: Germany and Japan were completely
destroyed at the end of World War II but had become economic juggernauts by
the 1980s, eroding the economic supremacy of the USA. Other economies did
extremely well: South Korea, Taiwan, Singapore. All of these heterogeneous
countries (Christian, Buddhist, Shinto, democratic, totalitarian, big, small)
had one thing in common: the economy was driven by the state. Germany was
often ruled by the Socialist Party. Japan had a one-party system. South Korea,
Singapore and Taiwan were ruled by dictators.
At the end of the Cold War, globalization spread to most of the planet.
The country that benefited the most is China, whose economy is driven by
the Communist Party. China wasn't even ranked in the top ten economies of
the world until a decade ago. It is now the second largest economy in the world.
Its progress has been dramatic. It is now China that threatens the economic
supremacy of the USA that had already been eroded by Germany and Japan.
The USA cannot compete with countries whose economy is run by the state.
In a globalized world, the state wins. The capitalists of the USA fight
each other and even fight their own country when they export jobs and
capital abroad. The capitalists of the state-driven economies can only do
so much to hurt each other and to hurt the collective good because the
state puts severe constraints on what they can do and when.
More importantly, the state can plan for the long term, whereas most
capitalists have a tendency to plan for short-term returns. Shareholders
don't care how much a company will earn ten years from now: they want to buy
a new car tomorrow. State-driven economies don't care that you want to buy
a car tomorrow: they want your company to make steel or textiles or computers
ten years from now.
Last but not least, the company of a state-driven economy has full access
to a free-market economy, whereas the company of a free-market economy has
limited access to a state-driven economy: one is much more likely to grow
globally than the other one.
The one significant difference between the "big government" of these successful
countries and the big government of the USA is defense spending: Germany,
Japan, the Asian tigers and even mainland China spend only a tiny fraction
of what the USA spends on weapons. The "big government" of the USA would
actually be quite small if the USA reduced its military spending to the levels
of its most powerful enemy, mainland China: 90 billion dollars in 2011 versus
the USA's $1,500 billion (1.5 trillion). This gargantuan defense spending
grew 9% annually on average from 2000 to 2009 when the US economy almost
didn't grow at all. That is the single biggest difference between the Asian
and the American concepts of "government".
It will be very difficult for the USA to maintain its economic power if it
refuses to see what is so obvious: state-driven economies have a huge
advantage over free-market economies. Government intervention seems to lead to
rapid growth, high employment and rising standards of living. The USA has
mostly enjoyed slow growth, low employment and stagnating standards of living
over the last 50 years. There might be other reasons, but the competition of
state-driven economies is one.
TM, ®, Copyright © 2011 Piero Scaruffi All rights reserved.
Back to the world news | Top of this page
- (july 2011)
Republican hypocrisy and mass gullibility.
The Republican Party is fighting a last-ditch battle to reduce the budget
deficit. That's good news, except that the deficit was created by Republican
presidents and Republican parliaments: when George W Bush took office in 2001
the USA enjoyed a budget surplus. He also enjoyed a majority in Congress.
The Republicans dominated unopposed the politics of the USA for six years.
The result was the biggest budget deficit of all time in any country of the
world. (Vicepresident Dick Cheney famously said "Reagan proved deficits don't matter").
Republicans voted against "Obamacare" because they think it costs too much but
then
demanded a colossal tax cut for the rich that not only increases the deficit
by one trillion dollars but it also repeats the very cause of the budget
deficit (the budget was balanced before George W Bush enacted that tax cut).
There is nothing in the Republican proposals that would balance the budget.
The budget deficit was caused by a tax cut for the rich. Without that tax cut,
there would be no crisis.
The Republicans keep singing the tune that big governments is bad. It is
hard to believe that US citizens still believe this story after a Great
Recession caused by banks and corporations...
At the end of the Great Recession
the US government basically decided to reward banks and corporations with
a generous package to save them from bankruptcy.
At the same time the US government decided to punish the victims of the
Great Recession (ordinary US citizens) by adding more debt to the national
debt. The amazing factor in this process is that the US government is not
a dictatorship run by a corrupt dictator against which the citizens can do
nothing, but a democracy, and this process of rewarding the bad guys and
punishing the good guys was done through a democratic election won by the
party defending the bad guys.
Republicans present themselves as the party that will create jobs. Since they
won the 2010 elections, the economy (that was recovering) has turned south.
Job growth has significantly slowed down. It doesn't take a rocket scientist
to realize that the end of the "stimulus package" meant a loss of jobs in
the short term. The prescription advanced by the Republicans is to cut taxes
for their sponsors (the richest individuals and corporations). The theory
(an old Reagan theory) is to put more money in the pockets of the entrepreneurs
so that they can hire more workers. Alas, the world (as the Republicans well
know) is a global village: give a US entrepreneur a dollar and most likely
he will spend it in China and India. Why hire someone in the USA when there
are plenty of cheaper workers in other parts of the world? The USA has created
very few jobs in the USA during the Bush years (when the tax cut took effect)
but it has created millions of jobs in Asia during the same period. Any tax cut
is a godsend to millions of Indian and Chinese workers. The tax cut for the rich
also put a lot more cash into the pockets of tycoons who want to own properties
abroad. Give them money and they will buy a villa in Spain, certainly not in
Idaho or Wisconsin; or, worse, they will use the money to speculate and create
bubbles that, when they burst, will cause great recessions.
(See Consumer spending not business investment drives the economy).
The Republican idea that the rich can administer an
economy is simply ridiculous in the age of globalization: capital goes where
it is most likely to yield lucrative returns, and that's Asia in 2011.
There is nothing in the Republican proposals that would create jobs.
In fact, this is not new: the 2000s (during which Republicans passed all sorts
of business-friendly laws) were a lost decade for the USA even without the Great
Republican Recession: George W Bush created fewer jobs than any president since
the Great Depression. However, he did create millions of jobs in Asia: the
corporations that benefited from the business-friendly laws of the Republicans
invested massively in Asia.
"Obamacare" has been vilified by Republicans for all the wrong reasons: it
forces people to get insurance (when one of the main causes of the rising costs
of health care is due to all the people without insurance who show up at
emergency rooms), it makes health care worse (do you really trust doctors
and hospitals who have a vested interest in you being as sick as possible
for as long as possible, as opposed to the European doctors who make absolutely
no money out of your illness?), and it hurts the poor poor poor hospitals
and insurance companies (who charge US patients almost three times what the
rest of the developed nations charge).
It is also unbelievable that the Republicans keep telling the story that
Obamacare would create a vast heartless bureaucratic system: can anyone name
in the entire planet a more heartless bureaucratic system than the current
US health care system? Can anyone name a bigger bureaucratic system on the
entire planet? Have people never used a doctor or a hospital? Have you never
filled one of the million forms that you need to fill in order to get
the simplest of check-ups and the cheapest of medicines (that it costs you
ten times more than elsewhere on this planet)?
The biggest problem that the USA faces in 2011 is the wealth gap between the rich and the poor, which has never been so high and that risks to destroy the very essence of what the USA stood for. The most urgent task is to restore a
minimum of fairness in the system, which implies lowering the wealth of the rich and increasing the wealth of the poor.
It is unbelievable that voters voted Republican when Republicans are doing
everything they can to increase the wealth gap between the richest citizens
and the middle class. On one hand Republicans want to make the rich richer.
On the other hand they want to take away government benefits from the middle
class. The wealth gap is already as high as it has even been, and probably
one of the causes of the stagnation of the 2000s. The victims, though, have
done little to deserve any better.
P.S. Republican lies of 2011:
- Big government is bad. How can they be so blind not to realize that the biggest threat to US domination comes from countries whose entire economy is driven by the government? It started with Japan and South Korea, now it's China. All the economic giants that rose to compete with the USA were created by big government (even a communist dictatorship). The one country in the West that is doing pretty well is the one that has the most "socialist" system: Germany. Taxes are among the highest in the world, medicine is fully socialized and, guess what, unemployment is half the USA rate and growth is 3 times the USA rate.
- Obama is to blame for the national debt. How can people forget so quickly? There was no deficit under Clinton. The deficit was created by Bush's tax cut of 2001. The USA never recovered from that tax cut. Job creation was anemic throughout the 2000s, and eventually the country plunged into the worst recession in memory.
- Raising taxes is bad for the economy. Where do they get their history? Reagain increased taxes, Clinton (or, better, Bush I) increased taxes. The countries that are very successful today (from Germany to China) have consistently increased taxes. When Bush II cut taxes, he simply encouraged rich people to buy assets
abroad and big corporations to export jobs.
- The private sector should have more freedom. How can people forget so quickly? It was not big government but big Wall Street firms and banks that caused the biggest recession in memory.
(See also The 13 most feared words in the English language)
TM, ®, Copyright © 2010 Piero Scaruffi All rights reserved.
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- (july 2011)
The demise of Google.
Google has become an odd giant of the Web economy: it makes money by selling
advertising space on content provided by others for free that people can
visit for free. Basically, there are millions of people uploading content
(text, pictures, videos) to the Web for free. Google provides a free service to
access that content created by others. Because so many people use its tools,
Google can then charge a premium to anyone who wants to advertise on this
shapeless worldwide distributed billboard. Virtually all of its revenues
come from its advertising platform.
This is a revolutionary business model. Free magazines have existed for decades,
and they too relied on adverts to pay for the cost and to offer a free service
to their readers. However, Google is a corporation that has to pay salaries
to its numerous employees and generate dividents for its stock-holders.
It is not clear that its business model can grow forever.
Note that Google does not create content at all. Not a single word on the Web
has been created by Google except for its own self-publicity. Google is
virtually useless to the history of knowledge. Of course Google will claim
that it provides a way to find information, which by itself counts as
essential to a history of knowledge. But one could counterargue that Google
takes the liberty of deciding which information is viewed by millions of people
(most people only click on the first link returned by a Google search) and
that is not always the most sensible decision; so it might actually be
detrimental in the long run.
Google parasites on the content created by millions of people.
Google provides the equivalent of the road sign: it puts signs on the roads so that you can find your way around, and then it charges companies to post
billboards along those roads. It neither builds the roads nor the towns that
those roads connect nor the vehicles that transport people along those roads:
it simply puts the signs that most people trust.
Whatever the cultural merits of what Google does today, there is no question
that its business plan depends on millions of users using its free service.
The catch, of course, is that Google does not "own" this customer base the
way an appliance manufacturer or a car manufacturer or a phone company owns
its customer base. The relationship between Google and the users of its
search engine is very loose: i can decide to migrate to any other search
engine in a split second.
"switching cost" to leave Google's search engine for another search engine is zero
(the switching cost to leave Microsoft, Facebook or Apple is significant).
Google requires people to log in only if they
have a Gmail account. That's a bit more binding, but the vast majority of
Gmail users actually have Gmail only as their secondary email address
(and Gmail has "only" 200 million subscribers anyway).
By comparison, Facebook has 750 million users who "must" sign in to access
their account.
The switching cost is much higher for the products that Google acquired:
for example,
you'd have to reload all your videos to another platform if you left YouTube.
Nor can Google count on much of what economists call "network effect" (the
effect that makes a product's value proportional to the number of people who use it): the value of a search engine does not depend on how many people use it,
whereas the value of Apple's iPhone, Facebook's social network and Microsoft's
office applications depend on how many people use them.
Google introduced Google+ (which most people call "Google's facebook") in
order to reduce Facebook's dominance in the field of social networking.
For people who were already annoyed by the worldwide diffusion of Facebook
this is really bad news because now you will need to maintain two "walls"
and check two "news feeds". (The best part of it is that very few people
read their friends' walls anyway, so this is a colossal waste of computing
resources to organize billions of postings that very few people will
ever see).
Regardless of the merits of Google+ (and Google has a long tradition of
delivering terrible products and acquiring from third parties the good ones),
one gets the feeling that Google's management realized how weak their
hold on the search market is and how odd their advertisement-driven business
plan is.
Their search engine became the world's standard because it was better. When the Google
search engine came out of a garage, it felt like a godsend compared with the
other search engines that were either difficult to use or plain dumb.
Fast forward to 2011 and the Google search engine is hardly state of the art.
There are now choices. None of them will upset Google any time soon, but
they definitely exist.
My first test for any new search engine is (a bit selfishly) to search for
"piero". Use Google and you will get a restaurant, a condominium and, yes,
also a few scholarly websites including mine. Use, for example, Blekko and,
lo and behold, there is no restaurant and no condominium in the top results.
Also note that Google almost always returns a Wikipedia page as number one.
Since most people only click on the first result, they are better off just
staying inside Wikipedia: why bother to use Google?
A search for Shakespeare returns Wikipedia as number one on Google, but
the same page as number 21 on Blekko. The Wikipedia page is decent but hardly
the work of the world's greatest scholars on Shakespeare. On the other hand,
the pages returned by Blekko are almost all by distinguished scholars working
at distinguished universities.
To make matters worse, Google is obsessed with selling ads. Therefore it has
introduced a "feature" that forces you to specify your location (if you don't,
Google guesses based on your IP address). This means that Google's search
ranks pages also based on geographical proximity to you. That explains why
the fourth highest ranked page on Shakespeare over here is a local theater
(that happens to have a Shakespeare program going on).
(Quote from Google's own website: "Can I turn off location-based customization? The customization of search results based on location is an important component of a consistent, high-quality search experience. Therefore, we haven't provided a way to turn off location customization").
This is plain ridiculous. But Google needs to localize your search because
this makes its advertising schemes more appealing to paying advertisers.
They are forcing you to let them use your location.
As i have written in my book "A History of Silicon Valley", Google has been
making the Web both unreadable (because of the countless Google ads that pop
up everywhere) and unsearchable (because of its poor relevance-ranking system).
Google has also stifled innovation, like all companies when they become
de facto monopolies.
It is also telling that many of the brightest engineers are leaving Google,
for the first time since its birth. There is little to be gained from its stock,
and the intellectual value of your work at Google is debatable at best
(you are working on an advertising platform, which is as creative as selling
vacuum cleaners, no matter how you spin it).
Google will not go away any time soon, just like IBM or Microsoft never went
away. Smart management will find a way to utilize Google's enormous cash
reserves to create a viable business (in fact they created Google Ventures
to become an incubator of startups in all sorts of businesses),
just like Microsoft keeps selling all
sorts of products and keeps making record revenues out of it.
But Google's search engine is not as invincible as it used to be; and one
wonders what will happen when Facebook introduces its own search engine...
- "In the Plex: How Google Thinks, Works, and Shapes Our Lives"
by Steven Levy
- "I'm Feeling Lucky: The Confessions of Google Employee Number 59"
by Douglas Edwards
- "The Googlization of Everything (and Why We Should Worry)"
by Siva Vaidhyanathan
- "Search & Destroy: Why You Can't Trust Google Inc."
by Scott Cleland with Ira Brodsky
TM, ®, Copyright © 2010 Piero Scaruffi All rights reserved.
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- (june 2011)
Another threat to USA domination: the success of the high-tech industry.
I went to a Silicon Valley party and noticed how many people drop out of
school because the excitement of the high-tech industry prevails over the long
laborious grinding path of a master degree or of a PhD.
Several of the kids with whom i spoke
had only a bachelor degree... but a very good job.
A supersmart math student who got all possible financial support at the best universities in both India and California is thinking of dropping out of the PhD program at Stanford because she can't wait to get into the world of startups.
Another smart student will never go beyond her undergraduate degree in computer science because she decided to join a major software company, where she will presumably work long hours and become absorbed in hierarchical career moves.
I think we underestimate how much this phenomenon is impoverishing the USA.
While kids in China and India are motivated by government, society and family
to do as best as possible in school and get a PhD, kids in the USA are motivated
to get out of school and get into a trade. We are creating a nation of skilled
artisans. We *think* that the USA will retain the top-notch jobs and only
outsource menial jobs, but the truth is that this process depended on salaries
being much lower in India and China, not on the actual skills of their
workforce. As labor costs increase in those countries, we may suddenly realize
that India and China will be better positioned to grab the top jobs in the world
than the USA. To use an analogy: the USA is raising a generation of plumbers
and electricians who are very good at building 10,000 homes in record time,
but not the inventors and scientists who will design the city of the future.
To make matters worse, the USA's immigration laws discourage foreign students
who graduate in USA universities from staying in the USA. We gladly take their
money when they come here as students, but then force them by law to move
somewhere else when they graduate, i.e. we value their tuition fees as more
important than their intellectual capital.
Last but not least, the USA student who drops out of college is the victim
(not the beneficiary) of an inferior educational system that keeps falling behind more and more countries. The average Silicon Valley undergraduate in computer science knows little of computer theory, let alone of science in general, let alone of mathematics, whereas the equivalent student in India and China is getting a superior education in math, science and computer theory (and even in Western literature and classical music).
The usual counterargument is that the "dropouts" (including the ones who stopped
at the undergraduate level) go on to create valuable technologies and sometimes
entire companies; but this is true only for a shrinking minority:
the vast majority of engineers in Silicon Valley are working on projects
that are increasingly trivial because a) the new projects mostly recycle old
ideas and b) the development tools keep getting better.
It will soon be an illusion that writing an "app" for a smartphone is a
more creative chore than answering the phone in a call center in India or
working at an assembly line in a Chinese factory.
To make matters worse, much of today's "high-tech" is not high-tech at all.
Google's services are trivial engineering products that high-school kids could
implement (and its search engine is terribly outdated in 2011).
Facebook's social networking platform is even simpler. Most of the "high-tech"
startups of the Bay Area are producing nothing of real value, but just
different ways to organize one's social life, work and hobbies. While there
is certainly a public for those products, they cannot compare with the
millions of cars, the thousands of kilometers of high-speed railway and the
dozens of solar power plants that Chinese engineers are creating every year.
There isn't a single major German company in the Web business that is dominated
by Google and Facebook, but Germany's economy is growing faster and creating
more jobs than the US economy thanks to real manufacturing and real services.
By comparison the likes of Google and Facebook (and thousands of similar
Web-based services) look like Ponzi schemes. They add virtually nothing to
the nation's economic, scientific, technological or intellectual power.
(One could counter that the Arab revolutions used just those tools: alas, the
phones that the Arab protesters used were made in China and Taiwan, and the
software can easily be cloned and will be).
It is only a matter of time before this growing gap will make a difference at national level. Ultimately, the Western supremacy of the last five centuries was due to its superior universities. Ultimately, the USA came to rule the world because it had the highest literacy and it attracted the best brains.
High-tech literacy is now advancing rapidly all over the world, while in the USA, that still boasts the best universities, there seems to be a suicidal process of USA-born students dropping out of school and of foreign-born students being expelled from the country once they graduate.
The day may come when education (not cheap labor) will be the key to deciding
where to make what, and we may suddenly realize that engineers in the USA
don't have the education required for the sophisticated and highly-paid jobs
that today we take for granted.
We may find out that the USA has a population that is highly educated in the
Bible and in playing frisbee, but not in the science of tomorrow. This is,
after all, a country that still uses gallons and miles instead of the metric system.
P.S.
Quote: "When I compare our high schools to what I see when I'm traveling abroad, I am terrified for our work force of tomorrow. In math and science, our fourth graders are among the top students in the world. By eighth grade, they're in the middle of the pack. By 12th grade, U.S. students are scoring near the bottom of all industrialized nations. . . . The percentage of a population with a college degree is important, but so are sheer numbers. In 2001, India graduated almost a million more students from college than the United States did. China graduates twice as many students with bachelor's degrees as the U.S., and they have six times as many graduates majoring in engineering." (Bill Gates)
TM, ®, Copyright © 2010 Piero Scaruffi All rights reserved.
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- (june 2011)
Imperial Illusions.
The emerging powers of the 21st century are the ones that didn't have to maintain an empire, countries like China, Turkey, Germany, Brazil. Instead Britain and France wasted a lot of resources defending their global empires and now they are rapidly declining. The difference between them and, say, Germany and Turkey is revealing. Germany and Turkey were lucky that they lost the wars: by losing the wars they also lost their empires and could focus on developing their economy instead of maintaining an expensive worldwide policing operation. Russia has its own messy empire to maintain, and until recently even had the Soviet Union.
At the same time, the emerging powers owe a lot to the world peace maintained at a huge cost by the old imperial powers. This is a strange system in which the USA, Britain, France and to some extent still Russia pay to protect the trade routes that are empowering China, India, Brazil, Turkey, etc.
Germany and Japan pioneered this model: they were the first to benefit from the peace maintained by others (at the end of World War II, that they lost and after which they were forced to demilitarize). This actually gave them an advantage over the winners (USA, Britain, France, the Soviet Union) because the latter ended up paying for the peace and security that created German and Japanese prosperity.
They both had their problems at some point but fundamentally they capitalized
on the peace maintained by others to grow their economies faster than those
"peacekeeping" nations could.
(Japan's economic stagnation is mostly due to demographic factors; Germany's slump in the 1990s was largely due to the cost of reunification).
De facto, China and the others are now exploiting the same idea: let the Western powers patrol the seas and the skies.
The USA now spends more han all emerging power combined in "defense", where "defense" really means defending its world empire.
In order to avoid the same fate that befell the British and French empires, the USA has two choices: 1. It becomes a real empire, like the Mongol and Ottoman empires, which probably means a political union with Canada, Australia and Britain and maybe some Latin and Pacific countries; or 2. It withdraws from the international scene and checks what happens to the emerging powers when they have to provide security and stability to their trade routes (i.e. the USA can go back to the old days when the world was policed by someone else, the European empires).
TM, ®, Copyright © 2010 Piero Scaruffi All rights reserved.
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- (may 2011)
The Internet as a weapon.
All totalitarian countries (and even some democratic ones, like Turkey) ban my website. They clearly ban a lot of websites if even my website makes the list. The Internet, however, is widely available in those countries, and those regimes frequently encourage their people to use it. The reason is simple: those regimes realize the benefits of using the Internet. It's a form of literacy. However, they want to control what kind of literacy their subjects gain. Hence, anything that is about technology and business is very welcome. Anything that would destabilize society is banned. Basically, these regimes don't need to spy on the West anymore because they can find everything on the Web. On the other hand, the West cannot use the Web for its pro-democracy propaganda the way it used the radio in the days of the Soviet Union and of Mao. "They" get something out of the Internet, but "we" actually lose something because it is a lot easier for them to filter the Internet than it was to filter the airwaves.
The West may no longer be able to influence public opinion in those countries,
at a time when those countries will be able to "spy" even more than before.
TM, ®, Copyright © 2011 Piero Scaruffi All rights reserved.
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- (february 2011)
Wikipedia as a force for evil
click here
- (february 2011)
One million Hitlers.
While the Egyptian people
staged the rare non-violent secular revolution that succeeds
(see One million Gandhis), too many
commentators and politicians in the USA sided with the dictator.
Mubarak had certainly been a friend of the USA. That's something to be
ashamed, not proud. But too many in the USA pretend to be in favor of
democracy when they are in fact in favor of friendly dictatorships.
What they want is not freedom and democracy for the nations of the world, but
convenient repression and tyranny for the peoples of the world. These people,
whether Fox News commentators like Sean Hannity and Glenn Beck, or unelected
politicians, like Newt Gingrich, or elected officials, like Joe Biden,
should be stripped of the USA citizenship and expelled from the country,
if not tried for high treason. The USA is founded on some very clear
principles and these people are clearly fighting against those principles.
It is simply reasonable to suspect that they are in favor of repression
and tyranny also at home, not only in the rest of the world.
These little Hitlers cause a lot more damage abroad. News media all over
the world gladly broadcast the demented statements of a Newt Gingrich or
the psychotic commentary of a Glenn Beck. The whole world gets to enjoy
the spectacle of these disgusting human beings preaching oppression and
exploitation. Unfortunately, many in this world audience come to think that
the whole USA is like Gingrich and Beck. Therefore people like
Gingrich and Beck are not only guilty of betraying the constitution but also
of damaging the reputation of the USA, and possibly creating billions of
enemies.
I call them little Hitlers not only because they want to install a dictator
like Hitler in every country of the world, but also because they embody the
very racism for which Hitler became famous. They believe that only some
superior race is entitled to democracy. Other races are too inferior to be
allowed a free vote.
Their racism is embarrassing: first all Arabs were terrorists;
now all Arabs are ignorant idiots who cannot be trusted with democracy.
These little Hitlers and their supporters (hopefully no more than a million
out of a population of 300 million) do not belong in the USA.
Strip them of their citizenship and expel them to North Korea or Saudi Arabia
where their views will be better appreciated. The USA will be a much better
and much more beloved country after their (long overdue) departure.
During this spring cleaning (a spring of freedom) let's do our part and put out the garbage for pick-up.
See also One million Gandhis.
P.S. In october 2011 Rush Limbaugh, the mouthpiece of these "little Hitlers", hailed Uganda's Christian terrorist group Lord's Resistance Army that has committed thousands of atrocities against men, children and women.
TM, ®, Copyright © 2010 Piero Scaruffi All rights reserved.
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- (february 2011)
Silicon Valley and world revolutions.
The world does not fully realize how Silicon Valley is influencing world events.
The Tunisian revolution (and the failed Iranian revolution of 2009 before it) relied on iPhones, Twitter and Facebook. The Egyptian revolution was started by a Google executive, Wael Ghonim, who is now more popular than any Egyptian politician. When Mubarak disabled the Internet, Google launched a phone service to allow people in Egypt to send Twitter messages. That was a political act.
Silicon Valley is replacing the CIA as the most effective way for the USA to influence world events.
Unlike the CIA, that worked undercover and was directed by the government, Silicon Valley high-tech companies have a mind of their own, and sometimes
don't even realize that they have a mind.
As smartphones and social networks gain more and more influence on how masses behave, Silicon Valley might become
more influential on world events than any other program by the USA government.
Just when the world was assuming that USA influence was waning, its influence
might actually be increasing, although not the way one would have expected it.
TM, ®, Copyright © 2009 Piero Scaruffi All rights reserved.
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