Archive for April, 2011

——Curses, this post was going to be beautiful, masterful I tell you. The cornucopia of graphs and charts I had prepared was a visual feast fit only for the gods – till the intricacies of the WordPress blog interface cut short my hubris of reaching for graphical divinity. The WordPress dark arts have conspired to prevent me from posting images of any kind. This is but the opening salvo in a long, merciless war, I can promise you (“you” being the aether of the internets), but for now I will truncate my post into a text-only form, as those ancient philosophers who wrote articles before Google Images once did.

——Anyway, I read an old detritus of academia, linked on Brad Delong’s blog, about the Soviet economy  and the (very real) foibles and follies of their system. it was written in 1991, before the collapse, and has the structure of an “advice” piece, recommending certain reforms. Like all good essays, it has a quote, summarizing the inherent problems of the centralized, command economy: “The vast range of negative externalities induced by these decisions are as inherent to the Soviet-type system as the ability to mobilize and focus resources. These externalities include damage to the capability of users to produce, unusable output forced on others in the system, destruction of the resource base due to improper exploitation (…) and more.” I’m a touch sad that the author didn’t write this in 2010, since the irony is only available in hindsight – but really, “Damage to the capability of users to produce”? “ unusable output forced on others in the system”? “destruction of the resource base due to improper exploitation”? I hope Im not a bad person for laughing at how accurate a statement that is about the current economic crisis in the United States. A massive surge in houses that people cannot even afford to live in, let alone want, a large decline in output because of cyclical collapses in demand, and the environmental issue is too obvious to even comment on.

——I’m not actually saying the author’s conclusions are at all incorrect – the communist system of the USSR was definitely overburdened with bad allocations of resources and an inability to control the negative externalities associated with industrial production, such as environmental protection, as well as a systemic inability to obtain information on why such problems were occurring due to their price systems. I’m too lazy to look up links, but if I recall my readings correctly, there is a lot of evidence to suggest that, in the 1980’s, the USSR had to import food not because its agricultural sector couldn’t produce the wheat, but because the price of meat, particularly beef, was undervalued relative to wheat and other agricultural products. So everyone produced cow feed instead of human feed, to exploit the arbitrage. A massive price failure with dire consequences. However, as we have clearly seen, these kinds of problems are also endemic to capitalism, maybe not to the same extent, but certainly on a massive scale. These problems are a consequence of people being people. Its a part of human civilization, the classic problems of imperfection. This is a mistake very often made, a kind of correlation equals causation attribution error. People see a system, and see problems in the system, and attribute those problems as being caused by the system. Sometimes that is true – but very often people don’t realize how widespread those problems are, how they were around before the system, and in places with different systems. The connection just isn’t there.

Of course, if we had a truly free market, none of these problems would occur, right? …Right?


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——Today’s post is a quicker entry, since by the gods  I am horrible at sticking to a schedule. The “doing anything is better than nothing at all” school of thought is being adapted out of necessity here. Anyway, two weeks ago the state congress of Florida, led by far right darling Rick Scott, passed a reform of the employment and compensation for teaching in the state. The bill is quite focused, only accomplishing two main changes. First, every teacher now serves on a one year contract, as a contingent worker – no more tenure, no more benefits via seniority, etc. The second change relates to teacher’s pay and rehiring. The bill requires that all teachers be given one of four ratings – Highly Effective, Effective, Needs Improvement, and Unsatisfactory – and these ratings must be at least 50% determined by student performances on standardized tests. If teachers place in the bottom two categories, they have a set amount of time to improve their “performance” or they are let go. You can read the bill here if you wish

——Now, the internet is replete with descriptions of how this is utterly unfair, of how it will drive talented teachers out of Florida, of how it holds teachers to impossible standards, and of how it ensures that the teaching profession is slowly reduced to near minimum wage labour. I just want to touch on how the dynamics of this bill will play out in Florida at large. There is a very important note to make – the bill does not peg teachers pay to changes in their students performance on tests, but on absolute performance. Teachers are paid more if students do well, not if students do better than students from last year’s class. While not necessarily the wrong choice, this decision will have very important consequences. Rick Scott and his cohorts, drawing from the deep well of experience they have from their zero years of teaching in Florida’s school system, believe that teachers are primarily responsible for student outcomes, and by making teachers compete with each other for their survival, they will teach their students better. A small segment of society known as people who study education outcomes, however, disagree with this assessment. The mainstream consensus is pretty clear that factors outside of the control of the school account for either a large amount or an outright majority of a students performance. Most important is the involvement of the family in caring about the child’s education, setting expectations for their children to do well in school, and providing appropriate nutrition, study spaces, aid for problem subjects, and so on. It is, of course, no surprise to anyone anywhere that one of the most significant indicators of student performance on standardized tests, therefore, is wealth. The survey I linked is one of many showing this correlation, but this study has the added benefit of showing that the correlation between wealth and test scores held true in 1966, 1972, and 2009. Its obvious if you think about it – a poor family where both parents must work twelve hours a day does not have the time or the energy to spend helping their children with school work, and people at the margins of society tend not to preach to their kids about how getting straight A’s is the only path to happiness. Regardless of the reason, wealth is a larger determinant of school performance than the school itself – let alone teachers. In fact, in Florida, it is an even worse problem than in other states – the Florida Comprehensive Assessment Test is so biased towards skills favoured by wealthy households that the worst performing school out of every upper-class district still did better than the best school out of any lower-class district.

——So what does this mean for Florida teachers? Its pretty obvious to figure out at this point: the new school reform bill ensures that people who teach and poorer schools, in poorer neighborhoods, will be paid less, while people who teach in rich neighborhoods will be paid more. Beneath all the propaganda, this bill is simply another wealth re-distributor, one distributing from the poor to the rich. Teaching jobs normally are some of the higher paying jobs in poorer neighborhoods, kind of a form of wealth equalization by the government, in order to ensure that good teachers would teach at poorer schools. This bill reverses that. Furthermore, given that the pay for teaching in the US is barely enough to raise a family, even the most idealistic teachers must make decisions about their life based on marginal profit – as such, any good teacher will make the decision to leave poorer neighborhoods and head for richer suburban pastures. People complained that the bill would cause a brain drain of teachers from Florida – but the reality is it will be a drain from Florida’s low income areas, towards the high income ones. Undoubtedly, this will cause the performance of lower income schools to suffer even more – which I’m sure the Republicans will blame on unions and public management, and prompt attempts to get rid of them entirely. Works out for them – not so much for the students or teachers though.

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——The Hobbit began filming recently in New Zealand, an event barely noticed in the larger world – who cares until it is in theatres? For the nation of New Zealand, however, this was met with a massive sigh of relief, as it was a seemingly happy ending to a divisive and intense battle between the MEAA, an Australian-based actors and film workers union, and Warner Brothers, the producers of the movie via director Peter Jackson’s WingNut Films Limited. While it may seem odd to outside observers, what began as a workers strike eventually escalated into citizens taking to the streets of Wellington, backing WingNut Films stance, and the Parliament of New Zealand passing emergency laws to resolve the “crisis” – over a pair of fantasy movies. While the outline of events is confusing, I think it reveals something very important about how globalization really functions, and how reality clashes with the myths.

——Anyway, to start, at the beginning of October 2010, as WingNut began finalizing the filming process, New Zealand Actors Equity, a branch of the MEAA, approached WingNut about negotiating a collectively bargained contract for the around 200 workers on the project they represented (only a small portion of the total workers – MEAA is not the largest union in New Zealand by any stretch). Peter Jackson replied that it was, in fact, illegal for him to negotiate with the MEAA – as they were not registered in New Zealand, having been de-registered in the past few years due to some legal disputes. The MEAA, disagreeing with this interpretation of the law, took a fairly drastic step, and called upon the Screen Actor’s Guild, the US actor’s union and the largest actors union in the world, to issue a boycott of the production, stating it was not a unionized work. At this point, as production shut down, things got heated fast, when WingNut threatened to leave New Zealand entirely, and shoot the film elsewhere – Eastern Europe was the commonly named alternative. Given that for The Hobbit, a two-movie production, WingNut was expected to spend $500 million in New Zealand producing the movies and bring thousands of jobs, public opinion quickly turned against the MEAA, who dropped their demand within two weeks and lifted the boycott. Citing “inability to do business” in the country, however, WingNut and Warner Brothers continued to threaten to leave the country – at the end of October, the NZ Parliament passed a bill, approving a $27.5 million hand out to the company, in the form of tax rebates and shared marketing costs, and WingNut agreed to continue filming in New Zealand.

——Now, whether or not the MEAA was right or wrong is, in fact, not the issue here. Its true that WingNut pays its workers very generously – $5000 per week in NZ compared to $3800 in the United States, and for The Hobbit they had agreed to even share a small amount of the total profits with the workers. By the same token, the MEAA had not even demanded increased wages, just the very right to bargain collectively – as one actor put it, “we hadn’t even discussed coffee breaks” before things exploded, and it appears that while WingNut was correct on the legal front, the MEAA was unaware of the illegality of negotiations. Whats more important here is the final outcome – that a labour dispute between a union and a film company eventually resulted in action by the central government and a massive tax handout to the company. Any increase in labour costs from unionized workers demands being met would never have totaled that amount, not nearly – Peter Jackson himself labeled the costs of wages for workers as being “miniscule” compared to, for example, shooting the films in 3D. Furthermore, a fact that got lost in the debate, is that New Zealand already gives film makers a large tax rebate for working in the country – 15% of the total cost of the film. The crux of Warner Brother’s argument, however, was that many countries give a higher rebate. England, for example, gives a 20% rebate, while Canada gives an incredible 33% discount. As such, Warner Brothers had already pocketed 15% of $500 million, or $75 million, from the NZ government. Furthermore, the central government also passed a new labour law, applicable to all films made henceforth in New Zealand, stating that film companies can define their workers as contractors, instead of employees, and therefore deny them the benefits employees are entitled to and giving them further reductions in labour costs.

——I want to look at the end result of this little tale from the perspective of globalization. The proponents of globalization always point to one thing – lower costs. Yes, outsourcing costs some people jobs, but it leads to lower prices for goods or services for all people! As labour costs are lowered, the price of the good itself falls too. Some lose, but the majority gain. I will well admit that when talking about steel and Monopoly boards, this is true. Yet this just isn’t true in the movie industry – at a movie theatre, ticket prices are fixed – every movie costs the same to see, for reasons too complex to discuss now (if you think its so movies can compete on quality and to be fair to consumers, try again). In fact, because the movie is being shot in 3D, a god-forsaken waste of resources if there ever was one, ticket prices are actually going up. These tax breaks, therefore, are nothing but a direct transfer of money from the government, and therefore the people, of New Zealand, to the shareholders of Warner Brothers. Its not like The Hobbit movies are in any danger of losing money – the first Lord of the Rings movie, The Fellowship of the Ring, made $870 million globally, while the last, Return of the King, made $1.1 billion. The two Hobbit films, each costing $250 million, will probably make more due to the hike in prices for 3D, giving them obscene profit margins. It isn’t like they needed the tax breaks to stay in business. Most people portray this is just a part of “international competition”, but its a fundamentally unequal competition – its about power. Warner Brothers is international – they can film anywhere, while the government of New Zealand is purely national – it cant collect taxes anywhere outside of its borders. Its the same with England and Canada. On the face of it, the idea of tax breaks for films to make movies is laughable – if no country had them, then the film industry would have no choice but to pay the taxes. The optimal solution for every government is to have no handouts at all. As soon as one country gives the incentive, though, then everyone must follow suit. Its the textbook definition of beggar-thy-neighbor, race to the bottom policies – everyone loses but the company involved. The worst part, sadly, is that the media of New Zealand refused to portray it as such – the central government was congratulated for being extorted, for “saving the country’s film industry”. The power of ideology at work I suppose.

Sourcing if you care

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