Where are the Democrats?

July 5, 2018

The short answer is that they are busy criticizing the Trump administration but in a disorganized fashion, as Democrats too are divided. In part this is due to the speed with which Trump switches from one topic to another, from healthcare to NAFTA and trade policy in general, to criticism of NATO countries, to cozying up to autocrats (Putin, Xi, Erdogan, Kim). He changes the channel when criticism starts to bite.

Democrats need to put forward credible candidates for the 2020 elections and to organise to win back the House in 2018. Control of the Senate is unlikely this time and Trump has two more years for his possible replacement. While Republicans are divided between traditional and Tea Party Party members, so are the Democrats but with different fault lines.

In the last election the Democrats put up two candidates, Clinton and Sanders each of whose supporters were not enthusiastic about the alternative. In fact it would not be surprising if Sanders supporters chose Trump when they entered the polling booth in 2015. Voters who felt that Washington had failed to improve livelihoods for many Americans were attracted to Trump’s message about the failures of recent administrations of both parties. The reason Trump governs today is because of the mass of voters who feel this way. Whether his actions in power will get him reelected in 2020 is unknown, but the reason he won in 2016 is now clear. At the time it was not predicted by many pollsters….Michael Moore was an exception.

Opposition to Trump exists in much of the media, but he has supporters in Fox and Breitbart News. It is a mistake to watch only one side. I watch Morning Joe on MSNBC but should watch Fox as well to get a more balanced view. Today leadership of the Democrats consists of Nancy Pelosi and Chuck Schumer; no candidates have come forward as obvious challengers for the 2020 presidential elections despite the actions of Trump.

The following are observations in no particular order of what may be expected between now and November 2018:

  1. Trump will continue to surprise the public with non-conventional moves and statements. Response to criticism will be made with tweets as issues arise that gain his attention. What the tweets will say will be unpredictable because he responds to the headlines of the day. Cable news is his source of information. He does not read and listens to a small coterie of people in person and by phone.
  2. He will continue to boast about the US economy claiming he is responsible for the positive things that happen and blaming others for any bad economic news. So far there has been mainly good economic news, but the the imposition of tariffs by the US and by others in retaliation will reduce trade and more general economic growth, as business delays new investment due to the uncertainty created.
  3. A further damper on economic growth comes from debt created from a long period of low interest rates. As rates rise consumer and business spending will decrease causing a lowering of economic growth. In Canada the Bank of Canada has followed a low interest rate policy and cautioned people from the borrowing which their policy encourages. The Bank changed its policy at the start of 2018. Low interest rates encourage spending but also promote borrowing. Households as well as governments are loaded up with debt. The Province of Ontario is horribly indebted and the new provincial government will soon be telling us that the figures published by the previous government understate the provincial debt. This is common practice for any new government.
  4. The actions of one person, the US President, can do enormous harm to the US and other economies, but the uncertainty created will cause investors in other countries to dampen investment as well. Where this ends up is difficult to predict. But the rise of populist parties in many OECD parties is a sign that developed countries are experiencing a common set of political pressures differentiated by their particular settings.
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Tribal Politics

June 29, 2018

The MSNBC news show Morning Joe is a vehement critic of the Trump administration, often to the point that it fails to recognize when something positive occurs, such as the meetings with North Korea. The show’s focus on people more than policies has coincided with polls showing a strengthening of Republican support for the President which is now in the mid 40% range, and much higher amongst registered Republican voters This seems remarkable at a time when the child separation from parents at the border issue dominates the headlines. It is a warning to Democrats, who have produced few leadership candidates to-date and need to make a strong showing in the 2018 midterm elections. It is also possible that the strong Republican support for Trump is due in part to the decline in people declaring themselves Republican, and thus the remaining hardcore results in a high percentage figure.

To return to Amy Chua’s thesis about problems created by societies being segregated into tribes (see previous posting). She makes an interesting observation that the British Empire consisted of a multitude of countries each one made up of often warring tribes.

“In India, some forty thousand British Officers and soldiers governed approximately 200 million Indians for nearly two hundred years. By contrast, America could not hold Vietnam for ten years, couldn’t stabilize Afghanistan for five, and couldn’t unify Iraq for even one.” (16)

There are many differences between the British and American situations then and now, and the British had their failures especially three times in Afghanistan, a country which no power (British, Russian or American) seems able to govern. But the concept of any society consisting of tribes or interest groups is a useful one in today’s world, where communications technology allows individuals to form tribes to pursue narrow interests. One example is the formation of tribes by sexual proclivities, from male and female “Facebook lists more than 50 gender designations…..Originally LGB, variants over the years have ranged from GLBT to LGBTI to LGBTQQIAAP as preferred terminology shifted and identity groups quarreled who should be included and who should come first.” (184).

Tribal politics has arisen in Europe with the distinction made between citizens and the influx of undocumented foreigners (not unlike the US). Germany, France, Italy, Hungary and Spain have seen the rise of populist parties and leaders. And the Brexit vote was due in part to pressures to limit the inflow of foreigners in the face of EU policies.

North America’s geographical circumstance, bordered by the Arctic, Atlantic and Pacific oceans discourages easy migration, but where the land border exists with Mexico problems abound. Canada is fortunate in a geographical sense but similar pressures of increasing tribalism could emerge here. The seeds already exist in part with French/English, east/ west, urban/rural, male/female, religious groupings, and others. These could germinate into something unsettling.

Clashing Tribes

June 21, 2018

I am constantly in search of explanations for why after 18 months of his presidency 30-40% of the American electorate continues to support Trump. The following authors have provided me with some understanding, Hillbilly Elegy A Memoir of a Family and Culture in Crisis by J.D.Vance, Strangers in their Own Land by Arlie Hochschild, White Trash: The 400 Year History of Class in America, and Amy Chua,  Political Tribes, Group Instinct and the Fate of Nations. All provide important insights into the American political scene. Chua was Vance’s mentor for his book.

 

Amy Chua describes how societies take shape by individuals forming and joining a series of groups or tribes. These represent a wide variety of interests some of which are political groups promoting certain viewpoints. Think of all the groups to which people belong for religion, sports, charities, education as well as politics. Each pursues particular interests and may join groups made up of those with similar interests, thus the tribes. But tribes can be rivalrous as well as cohesive. Today it is the rivalry between groups which permeates US politics.

 

Chua’s focus is on the group of tribes that form or support political parties.  At present in the US there are two main political tribes, Democrats and Republicans. Each of these will differ depending on what part of the country they inhabit so of that there are tribes within tribes. Southern Democrats may have different interests from Democrats in the north, east and west coast of the US. Traditional Republicans may differ from |Tea Party Republicans.

 

Trump’s supporters are more closely associated with Republicans, but also with white working class voters who, while previously Democrats, feel that they have not enjoyed the prosperity of many and who are attracted to slogans like “draining the swamp” where the beneficiaries are said to reside. So there are tribes within tribes and the traditional distinction between Democrats and Republicans is now muddied.

 

Trump is also well received by white voters in areas where economic prosperity has lagged behind for certain occupations. On the Democratic side, at the same time, Bernie Sanders appealed to similar voters and at election time they may well have voted for Trump or abstained from voting at all which gave an advantage to the Republicans.

 

Amy Chua describes how other countries consist of a series of tribes, Sunni, Shia and Kurds in Iraq, Chinese and Vietnamese in Vietnam, white, black, Asian and Latino in the US, French and English in Canada for example. Countries tend to prosper if they manage to get these groups to live and work together peacefully, or live in a situation of constructive tension.

 

Within the US, Trump’s most loyal supporters come from the one percent very wealthy white citizens associated with the traditional Republican tribe like the Koch brothers, and the middle and low income white Americans who feel they have received a raw economic deal from previous Republican and Democrat administrations. To-date, Trump has managed to appeal to both groups and retain their support. (Treatment of illegal immigrants from Mexico, especially the separation of families may lose him support, but Trump is so adept at changing the channel when public opinion turns against him that the end of this story is unclear.)

 

The gist of Chua’s argument is that the friction between the various tribes in the US is associated with growing income inequality which is not being offset by opposing political forces. When this happened in other places and at other times there could be a popular revolt. As the Wizard of Id once said, “The peasants are revolting”. In the US the revolt is taking place at official election time. It could evolve into something nastier.

 

The rise of orphaned assets

June 14, 2018

As a result of developments in the production of solar technology panels and batteries for generating and storing electricity, the cost of producing and delivering energy in this form is rapidly declining.

I pay 15 cents per kwh for electricity delivered to my home in Ottawa: the 15 cents are the cost of the electricity plus the delivery cost. In Tucson, Arizona, residents pay 4 cents (US) per kwh resulting from the use of solar power and battery technology. As solar energy is introduced into the grid, many of the fossil fuel driven power plants and pylons delivering the electricity will become orphaned assets having little more than scrap value. It makes no economic sense to build new traditional power plants.

Because solar energy is captured at different times and for different periods of the day it has to be stored, and may be supplemented by energy supplied from traditional power plants. The location and demand for energy will determine how fast and far the substitution of solar for other forms of energy takes place.

There is evidence that it is already happening. A large school in Copenhagen, which is three degrees south of Juneau Alaska and gets less sunshine than more southerly locations, has built a school with walls made of solar panels which provide half of the buildings energy costs. Australia has 25% of its homes supplied by solar energy.

To see how fast this change is coming and how it already is affecting different industries, see Tony Seba’s presentation at:

https://www.youtube.com/watch?v=2b3ttqYDwF0

Coping with Grade Inflation in Ontario

June 12, 2018
Ontario high school graduates often experience lower grades in first year university courses from those received in grade twelve. This can come as a shock to first year students…. and their parents. In the late 1960’s Ontario moved from province wide exams to each school grading its own students. The change resulted from proposals in the Hall-Dennis provincial report, which recommended the abolition of general exams for all students in the province. Grade inflation ensued.
In the 1960’s, less than 10% of Ontario high school students graduated with an 80% or higher average. Today over 60% have an average of 80%. Because university enrollment has expanded since the 1960s, the absolute number of those with an 80% average is today far higher. At the time teachers argued that there would be grade inflation if each school could grade its own students. They were correct. Now, if there are suggestions of returning to province wide exams, schools oppose the move because the results would reflect more directly on their ability to perform.
Today, almost all applicants can get accepted for Canadian university entrance but there will be limited enrollment for particular programs such as law, medicine, nursing, engineering and the need to maintain certain grades to remain registered in these programs. Universities have an interest in enhancing enrollment because they are in part funded by provincial governments on a per student basis and in part by fees. (Foreign students pay higher fees and do not receive provincial funding. Quebec offers lower fees to Quebec students than out of province students.)
Other jurisdictions use a common exam as a way of, amongst other things, avoiding grade inflation. The General Certificate of Education (GCE) is offered at three levels in the United Kingdom, and a number of other mainly Commonwealth countries; the Graduate Record Exam (GRE) in the US is an admission requirement for most graduate schools in the US; and the International Baccalaureate (IB) offers four educational programmes: the IB Diploma Programme and the IB Career-related Programme for students aged 16 to 19, the IB Middle Years Programme for students aged 11 to 16, and the IB Primary Years Programme. To teach these programmes, schools need to be authorized by the International Baccalaureate Organization. About 60 schools in Canada are listed as offering the IB program. Almost 11,000 Canadian students wrote IB exams in 2017.
While Canadian universities cannot say that they treat an IB grade different from a non-IB grade when accepting students from Canadian high schools, it does not take much imagination that this would be the case, especially when performance statistics are reviewed.
IB grades are reported to universities, most of which now understand what they mean.  The IB Schools of Ontario have devised a conversion scale for reporting to parents and for those universities that are not yet on board.  All IB schools in Ontario must agree to using this conversion scale just so that marks will not be inflated.  This customary (as opposed to mandatory) procedure allows universities to evaluate the IB grades relative to  the Ontario high school grades which have experienced massive inflation since the 1960s.
In a review of IB enrolment in the US, the following findings were published:
This analysis examines the postsecondary enrollment, persistence, and graduation rates of IB diploma seekers graduating from both public and private high schools in the US. Currently, the IB offers the Diploma Programme in 830 high schools in the US. Of these schools, 727 (88%) are public schools (state funded). Not surprisingly therefore, the data for this analysis included mostly public schools. When the results from this study are compared to national rates (as available) it is evident that diploma students, both earners and non-earners, enroll, persist, and graduate on time at notably higher rates. Diploma earners have generally slightly higher rates than non-earners. • Immediate enrollment for all diploma students was 78% compared to the national average of 69% • 2-year retention for all diploma students was 96% compared to the national rate of 77% • 2-year retention rates for diploma earners was 96% compared to the non-earners rate of 95% • 6-year graduation rates for all diploma students was 83% compared to the national rate of 56% • 6-year graduation rates for diploma earners was 87% compared to the non-earners rate of 72%

Back to Beer and Hockey

June 4, 2018

Back to Beer and Hockey, The Story of Eric Molson by Helen Antoniou is part history of Molson the company, part of Molson the family, and part of the hockey team that the Molson family has owned. The three are interwoven in a variety of ways that focus on the man and his career.

Hockey is a well-defined game with winners and losers overseen by officials. Corporations like teams operate in a competitive environment which creates winners and losers within a framework of rules. Families are groups of individuals, who too are competitive, but where there is no referee to call the plays. When families become involved in corporate decision-making outcomes are difficult to predict but can be important for the future of a company. (A useful understanding of family behaviour is found in Robin Skynner and John Cleese, Families and how to survive them (Methuen, 1983)).

Future researchers will find the book a valuable source for a study of how senior management of a company operates as the market for its product changes; how family members with different interests and ambitions interact in pursuing their corporate related ambitions; and how the game of hockey infiltrates and permeates this family and their behaviour. The book is written from the viewpoint of Eric Molson who, while in retirement, gave the author, his daughter-in-law, interview access and declined to read it until it was published.

The history starts with the founding of the company in 1786 and the arrival from Scotland of John Molson. Since then and up to its merger with Coors, making it the world’s third largest brewing company, control was exercised through a restricted distribution of voting shares among Molson family members. Today, control is exercised jointly with the Coors company. Along the way it tried to diversify without success into other product markets.

Any corporate historian will want to read this book to understand what motivates executives, especially the controlling shareholders. Family dynamics are unique to each situation and difficult to predict ex ante. The inclusion of a blue ribbon hockey franchise in the corporate-family mix makes it harder to predict what the future may bring for the business of beer. The growth of craft breweries is a factor affecting industry competition.

Follow The Money

May 17, 2018

After almost 18 months into his presidency, little is certain about the size of President Trump’s wealth. He says it is enormous, and obviously it is not insignificant, but some things are known about his backers and their wealth. These include the Koch brothers. How their wealth was acquired provides an interesting tale.

The Koch brothers, Charles (1935 – ) and David (1940 – ) have provided substantial financial backing  through a series of foundations for the Republican party and especially its Tea Party supporters. The Koch wealth originated with their father’s investment in the oil industry. Fred Koch (1900 – 1967) was an American chemical engineer and entrepreneur who built oil refineries and was a founding member of the John Birch Society.

Much of the family wealth stemmed from the assistance given by Fred Koch to the USSR and Nazi Germany in connection with the building of oil refineries in the two countries. Both needed high octane refined petroleum for the operation of their military vehicles, ships and planes. Bombing raids on allied troops and civilian targets including London and other European cities were undertaken by the Luftwaffe. According to Jane Mayer, “Fred Koch’s willingness to work with the Soviets and the Nazis was a major factor in creating the Koch family’s early fortune.” (J. Mayer, Dark Money, (Doubleday, 2016, p.31).

Other examples of US business benefiting from sales to the axis powers are contained in Nazi Nexus: America’s Corporate Connection to Hitler’s Holocaust, (Dialog Press, 2009). Included are the Carnegie and Rockefeller Foundations, IBM, General Motors and Ford. The two foundations also benefited Canada – Carnegie helped to finance the Ottawa Public Library while grants were made to Canadian academics and universities. The three firms had subsidiaries in Canada.

While the frequent eruptions of Trump spew forth the visible fire and fury captured by the media, it is what is taking place below the surface that will determine the future. By following news and public affairs programs on MSNBC and Breitbart News, opposing views of the American political scene are presented. Individuals at the ballot box will have to decide how best to bring about change. At the moment, Trump retains the support of those who elected him last time.

18 Months into his Presidency

May 14, 2018

A shrewd comment about US politics was uttered by comedienne Michelle Wolf at the 2018 annual dinner for White House Correspondents.

“You guys are obsessed by Trump…you pretend like you hate him, but I think you love him….He’s helped you sell your papers and your books and your TV. You helped create this monster, and now you’re profiting off him. If you’re going to profit off of Trump, you should at least give him some money, because he doesn’t have any.”

To-date, we have been inundated with commentary largely critical of the President, in part because we read and watch what we want to see and hear. My addiction is Morning Joe on MSNBC and PBS News. Seldom, if ever, do I tune into Fox or Breitbart News. This is a mistake because unless you scout the opposition you are likely to be blindsided. Any team coach will study the opponent’s game.

If you focus on the good news, as seen by the Trump camp, the economy continues to grow with low unemployment and low inflation. The stockmarket rises despite some sharp setbacks followed by recoveries. The President has scheduled a meeting with his North Korean counterpart in Singapore for June 2018, and has met with a number of heads of state not all of whom are traditional friends of the west.

Doubtless there will be unforeseen hiccups before the 2018 and 2020 elections, but at the moment things are looking good for the President and his supporters some of whom are traditional Republican voters and some alt-right supporters. Alt-right refers to tea party Republicans replicated on the Democrats side by Bernie Sanders’ supporters; there are now four parties, two Democrat and two Republican. What must be particularly welcomed by Trump is the failure of the Democrats to come forward with any inspiring leadership candidates. Schumer and Pelosi are not names to attract followers.

While it is about thirty months to the next Presidential ballot, as of today the President looks well placed with solid Republican support around 30-35% and no strong opposition. Lying and lambasting members of his own party does not seem to diminish their support. Opinion polls between elections seem to be highly unreliable. Michael Moore is a more accurate pollster; he actually attends meetings to gauge support and does not rely on more indirect ways of judging voter sentiment. Like the assassination of Archduke Ferdinand which started the first World War, expect the unexpected to occur.

Canada about to be sideswiped – trade, investment & asylum seekers

May 8, 2018

“Fasten your seatbelts, it’s going to be a bumpy ride”

(Bette Davis actually said night not ride)

This quote aptly describes what is about to, and probably already is happening as a result of events south of the border. With 64 percent of Canada’s merchandise trade with the US (2016 exports plus imports), the negotiations over NAFTA and threats of US tariffs on steel and aluminum create the uncertainty that leave investors in both countries sitting on their funds.

The extent of foreign direct investment in Canada by the US, and in the US by Canada results in a similar high degree of interdependence and uncertainty. Companies often organize their supply chains across provincial and state lines as though national borders did not exist. When the US suddenly threatens to impose tariffs, investors in both countries tend to look elsewhere or to sit on their cash. There are always other places to invest, buy back shares, or stay in a liquid position.

As long as I can remember, and certainly since the 1950s, Canada’s politicians supported by nationalists have argued to decrease dependency on the US market for exports and imports, as well as for inflows of direct investment. It just never happens except for a few percentage points each way. Proximity to the US market offers business opportunities and the strong interdependency prevails. When the US threatens to restrict imports Canada can be the first to feel the impact. Threats are enough to cause concern for investors and this is where things now stand.

Canada has another concern involving the US but this one is self- inflicted and relates to refugees and asylum seekers. It is one which is felt more intensely in Europe and accounts for the rise of populist political parties and their leaders. Hungary, France, Italy and the Brexit negotiations between the EU and the UK reveal pressures that arise from the influx of refugees and asylum seekers from the Middle East and parts of Africa.

Canada has a stated policy of receiving a set number of refugees and asylum seekers each year. These are screened before coming to Canada. However, others arrive at the Canadian-US border and request asylum. If the request is made at an official entry point, the applicant will typically be disallowed entry as the US is considered a safe country. If the applicant crosses at any other point along the border, according to Canadian law the person can claim asylum and have the claim assessed.

Canada’s only land border is with the US. In 2017, Canada’s Immigration and Refugee Board received 18,149 claims from irregular border crossers, that is those that claimed asylum after entering Canada illegally. This compares with 29,276 persons who applied for refugee status legally.

If a person approaches a Canadian official border entry point like an airport or a highway and asks for asylum, the official can accept or reject the claim. If the claimant comes from the US, the claim is likely rejected as the person comes from a safe country, the US. In order to avoid such rejection, the person crosses the border at a non-official point and claims asylum. There is an easy solution. Make any point of the US border with Canada an official point of entry and all claimants coming from the US can be turned back, although they will first have to be detained.

Why Trump Prevails

April 18, 2018

After eighteen months, Republican voters remain committed to Trump. David Brooks, writes in the NYT, (April 2018) that 89% of Republicans have a positive view of Trump, and 59% of Republicans support Trump more than the Republican party. (This is written before any of the contents of the files of Trump’s lawyer Michael Cohen have been made public.)

Based on past voting preferences, at present, the 2018 midterm elections will see a number of Congressional seats switch from Republican to Democrat. Whether this is enough to give the Democrats a majority in Congress is unclear. Their leadership is weak and has a track record of screwing up. Gaining a Senate majority is probably out of the Democrats’ reach at this time. Listening to Senate and House Republicans who will not run in the midterms, it sounds like there are strong differences within the party that they do not want to face. There are differences among Democrats too, with a strong wing supporting Bernie Sanders.

Two books help to explain Trump’s continuing support. The first is J.D. Vance’s Hillbilly Elegy, which describes life in the back woods of Kentucky. Job loss there has resulted from a combination of the fall in demand for and the mechanization of coal mining.

On a longer term basis, Nancy Isenberg’s White Trash: The 400-Year History of Class in America, describes the origins of the class system in America and its continuation to today. The origins in the 1500s and 1600s are associated with the early investors who needed cheap labour.

 

In grand fashion, promoters imagined America not as an Eden of opportunity, but as a giant rubbish heap that could be transformed into productive terrain. Expendable people – waste people – would be unloaded from England; their labour would germinate a distant wasteland. Harsh as it sounds, the idle poor, dregs of society, were to be sent thither simply to throw down manure and die in a vacuous muck.  (2-3).

America was conceived of in paradoxical terms: at once a land of fertility and possibility and a place of outstanding wastes…Here was England’s opportunity to thin out its prisons and siphon off thousands; here was an outlet for the unwanted, a way to remove vagrants and beggars, to be rid of London’s eyesore population.

 

The rest of Isenberg’s book describes how this part of the population evolved and persists to today. It does not deal with slavery and its impact, although that would be part of the story.

Traces of this past are found in TV shows like Ozzie and Harriet, The Beverly Hillbillies, The Honeymooners, and today Here Comes Honey Boo Boo. The film To Kill a Mockingbird provides a portrait of class in America.

In order to know how America might emerge from Trumpism it is useful to learn about how it got there, and to ponder whether Canada could follow a similar path. The volumes by Vance and Isenberg provide excellent background reading for the US.