Friday, January 31, 2014

The Second Machine Age and the Future of Jobs

An article in The Economist takes on the daunting task of evaluating "the future of jobs." The concern is that we are entering a period of rapid technological change that will be as socially and economically disruptive as the (first) industrial revolution. If such a second revolution is imminent then what might we expect in terms of consequences?

This topic was apparently inspired by the predictions to be found in the book The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson and Andrew McAfee. Those authors refer to the industrial revolution as the "first machine age."

"The industrial revolution ushered in humanity’s first machine age—the first time our progress was driven primarily by technological innovation—and it was the most profound time of transformation our world has ever seen."

This first period allowed greater efficiency and productivity by using machines to overcome the limitations of manual labor. The second period will do the same for mental tasks.

"Now comes the second machine age. Computers and other digital advances are doing for mental power—the ability to use our brains to understand and shape our environments—what the steam engine and its descendents did for muscle power. They’re allowing us to blow past previous limitations and taking us into new territory."

Brynjolfsson and McAfee predict that technological progress will be "astonishing" and the results will be "profoundly beneficial" to humanity. However, progress will come at a price. Such a transformation will be profoundly disruptive in terms of the impact on individuals and the nature of the resulting workforce. However, they are optimistic:

"It’s important to discuss the likely negative consequences of the second machine age and start a dialogue about how to mitigate them—we are confident they are not insurmountable. But they won’t fix themselves, either."

The author of the article in The Economist tries to evaluate the consequences of such a second revolution by reminding the reader what economists believe they know and what actually happened in the wake of the first industrial revolution.

"Nowadays, the majority of economists confidently wave such worries away. By raising productivity, they argue, any automation which economises on the use of labour will increase incomes. That will generate demand for new products and services, which will in turn create new jobs for displaced workers."

One can argue that the economists have history on their side.

"Industrialisation did not end up eliminating the need for human workers. On the contrary, it created employment opportunities sufficient to soak up the 20th century’s exploding population."

The first industrial revolution replaced jobs for semi-skilled workers with jobs for both unskilled and highly skilled workers.

"As research by Lawrence Katz, of Harvard University, and Robert Margo, of Boston University, shows, employment in manufacturing ‘hollowed out’. As employment grew for highly skilled workers and unskilled workers, craft workers lost out. This was the loss to which the Luddites, understandably if not effectively, took exception."

The creation of mostly low-skill and low-wage jobs did not produce prosperity except for the wealthy few who controlled the means of production. This chart is provided to indicate how long it took before real wages began to recover.

It took over 50 years by this reckoning before workers in Britain began to see an effective increase in wages after the first industrial revolution. The choice of 1970 for tracking US wages is presumably because that is when the industrial revolution segued into automation and globalization. Does history then tell us that in a few more decades wages will begin to rise again? That is certainly comforting! But don’t forget, the second machine age is now upon us and it will obviously cause the timer to reset to zero again and we must wait another half century for wage progress.

The article’s author remains optimistic.

"The productivity gains from future automation will be real, even if they mostly accrue to the owners of the machines. Some will be spent on goods and services—golf instructors, household help and so on—and most of the rest invested in firms that are seeking to expand and presumably hire more labour. Though inequality could soar in such a world, unemployment would not necessarily spike. The current doldrum in wages may, like that of the early industrial era, be a temporary matter, with the good times about to roll…."

But is it reasonable to depend on economic history to repeat itself? Most would attribute the ultimate gain in wages after past industrialization to the introduction of universal public schooling. In this way relatively modest academic improvements in reading, writing, and arithmetic created a cadre of workers to fill the more demanding jobs that were being created. That is not a trick that can be duplicated.

We can be grateful to The Economist for providing us here with a glimpse of what the second machine age may provide in the way of jobs.

"When Instagram, a popular photo-sharing site, was sold to Facebook for about $1 billion in 2012, it had 30m customers and employed 13 people. Kodak, which filed for bankruptcy a few months earlier, employed 145,000 people in its heyday."

And then there is this to look forward to:

"One recent study by academics at Oxford University suggests that 47% of today’s jobs could be automated in the next two decades."

Are we already in the throes of a great job contraction? Brynjolfsson and McAfee provide this graph as food for thought.

As someone once said: "May you live in interesting times."

Tuesday, January 28, 2014

The Long-Term Unemployed: What Happens When Benefits End?

At the end of 2013 Congress allowed the federally-funded extension of unemployment benefits to expire. This will eliminate benefits that extend beyond those available under state-financed plans (normally about 26 weeks). It is uncertain whether or not the funds will be allocated to renew the extended benefits.

Liberals are upset because the number of long-term unemployed (greater than six months) continues to be large. This view is supported by an article by Heidi Shierholz. She provides this chart to support this perspective.

The chart indicates the date at which extended benefits were discontinued at various times of high unemployment. The purpose is to indicate that long-term unemployment is currently twice the rate at which extended benefits were terminated after previous recessions.

A more conservative observer might look at that plot and conclude that extended benefits have already done their job and the economy is strong enough to absorb those who are really determined to find work.

In fact, it is difficult to draw firm conclusions from the data. Termination of extended benefits in the past did not prevent the number of long-term unemployed from continuing to fall. Taken at face value, this implies that, in a macroeconomic sense, the economy continued to recover and continued to absorb the unemployed at about the same rate. On the other hand, the chart assumes that all recessions are equal and lessons from the 1960s and 1970s are applicable now. The recovery after 2003 has been described as jobless. There were, in fact, no net private sector jobs created during the Bush administration’s eight years. It could be that the slow recovery from the recent recession will render a greater fraction of the working population unemployable for a much longer period than expected.

Macroeconomic analyses avoid addressing the fate of the individuals whose unemployment benefits are suddenly terminated when extended programs are cancelled. Are they forced to take less desirable jobs as conservatives like to believe? Or, are they left further impoverished and suffering as liberals assume? Joshua Green produced an interesting article for Bloomberg Businessweek that suggests the issue is more complicated than either side might believe.

Green suggests that for evidence for what happens when extended unemployment benefits are cut we should turn to North Carolina for data.

"Last February, at the behest of the business community, Republican Governor Pat McCrory signed a bill cutting the amount and duration of state jobless benefits, even though North Carolina’s unemployment rate ranked among the highest in the country. The state had exhausted its unemployment trust fund, paid for by business taxes, and had borrowed $2.5 billion from the federal government to pay jobless claims."

"When the new law took effect on July 1, the maximum weekly benefit fell to $350 from $535 and its duration fell to between 12 and 20 weeks, depending on the state’s unemployment rate, from 26 weeks -- the standard in most other states."

"That was only half the blow. Reducing state benefits violated the terms of the federal program -- which is intended to supplement, not replace, state aid -- so workers in North Carolina were also disqualified from receiving federal benefits."

What was the result of this drastic measure?

"At first glance, the effect appears to be positive. North Carolina’s unemployment rate dropped dramatically, from 8.8 percent to 7.4 percent between July and November. By comparison, the national unemployment rate fell by 0.6 percentage point over the same period."

"A closer look, however, suggests that North Carolina’s unemployment numbers have fallen not because the long-term jobless have found work; it’s because they have quit looking. As a result, the state no longer counts them as unemployed."

Green tells us that in the period November 2012 to November 2013 the number of unemployed people in North Carolina fell by 101,901, but the number of employed people increased by only 6,082. This implies that 95,009 people dropped out of the labor force. Green attributes this to unemployed people who quit looking for work after unemployment benefits expire.

In a second article, Green provides this plot of the monthly percentage change (year over year) in North Carolina’s labor force.

Note that the percentage gain was approaching zero as the unemployment benefit cuts were to be imposed on July 1, 2013 and went negative around that time. One could interpret this behavior as a continuation of a long-term trend, or, as Green suggests, as mainly the result of the cut in benefits.

If Green is correct, the cuts imposed nationally at the end of the past year will drive many more people out of the job market across the country. It will be interesting to see how this plays out in the coming months.

There does not seem to be a simple explanation for why people drop out of the labor market and quit looking for work. It would seem to be important to understand this phenomenon since it represents a large loss of potential economic activity. The message Green is conveying is that if he is correct, there is something very wrong with our economy and our society.

Thursday, January 23, 2014

Free Will an Illusion? Patricia S. Churchland vs. Sam Harris

Sam Harris’s book Free Will was recently discussed. Harris is certainly a proponent of the notion that what we refer to as "free will" is an illusion. To have any discussion of that proposition, one must first define what is meant by the term. Harris provides his explanation:

"The popular conception of free will seems to rest on two assumptions: (1) that each of us could have behaved differently than we did in the past, and (2) that we are the conscious source of most of our thoughts and actions in the present."

Harris believes both of those contentions are false and draws this conclusion:

"One fact now seems indisputable: Some moments before you are aware of what you will do next—a time in which you subjectively appear to have complete freedom to behave however you please—your brain has already determined what you will do. You then become conscious of this ‘decision’ and believe that you are in the process of making it."

Harris is careful to distinguish between his beliefs and the assumption that the future is already determined. The lack of free will does not negate the importance of human choice.

"Decisions, intentions, efforts, goals, willpower, etc., are causal states of the brain, leading to specific behaviors, and behaviors lead to outcomes in the world. Human choice, therefore, is as important as fanciers of free will believe. But the next choice you make will come out of the darkness of prior causes that you, the conscious witness of your experience, did not bring into being."

Harris seems to be suggesting a significant imbalance between conscious and subconscious actions of our brains. Does it make sense that consciousness would have evolved in the mammalian brain if it would be merely the observer of subconscious mandates?

Patricia S. Churchland provides a wide-ranging discussion of our brain and how it is believed to work in Touching a Nerve: The Self as Brain. She provides an alternate way to address the construct of "free will."

Churchland is a firm believer that humans are completely under the control of physical processes that take place mostly in the brain.

"….we are what we are because our brains are what they are."

She also believes that there is not a well-defined separation between conscious and subconscious functions.

"The brain’s conscious and unconscious activities are massively interdependent, enmeshed, and integrated. You would not be who you are but for the well-tuned unconscious business and its tight fit with your conscious life. But for that unconscious business, you would not have a conscious life. You could not remember anything in your autobiographical life for example."

Consciousness evolved slowly and in piecemeal fashion over a long period of time. It would not have evolved if it did not augment survivability. Its role must be fundamental to the functioning of the species.

"Your conscious brain needs your unconscious brain, and vice versa. The character and features of your conscious life depend on your unconscious activities. And of course, conscious events can in turn have an effect on unconscious activities."

Churchland describes the decision process as one of constraint satisfaction.

"….we assign values to certain things, subject to constraints. Thus, we may have many goals and desires about both the short term and the long term, and a good decision satisfies the most important ones."

Exactly how this constraint satisfaction process works in the brain is not completely clear.

"Roughly speaking, we do know that in constraint satisfaction operations, the brain integrates skills, knowledge, memories, perceptions, and emotions and somehow, in a manner we do not precisely understand, comes to a single result."

However, the process need not be viewed as one devoid of conscious input.

"The unconscious brain contributes much to the process of constraint modification. Wise evaluation and intelligent decisions would be impossible without it. By learning and thinking and developing good habits, we give our unconscious brain better tools to work with."

What Churchland is suggesting in that last sentence is that consciousness plays a direct role in training the unconscious brain to behave in certain ways. In her view, the relevant issue is not whether or not humans possess the fuzzy concept of free will, but whether or not they are capable of practicing self-control. Self-control is essentially a means by which one consciously decides to overrule subconsciously delivered impulses—an exercise of free will if you wish.

Infants come into the world possessing a large, powerful brain. But it is a brain with relatively few hard-wired responses. The long process of maturation involves training the brain as to how to react to given circumstances. A child is born with the impulse to eat sweets. She will immediately reach for candy until she trains her brain to take a more flexible approach when encountering candy. This is what Churchland refers to as self-control.

"Much of early life is about learning self-control and acquiring the habits of suppressing costly impulses and doing things we would prefer not to do….All those virtues we are encouraged to develop—courage, patience, persistence, skepticism, generosity, thrift, hard work, for example—are rooted in self-control."

In this view, maturation is a process by which conscious and unconscious parts of the brain collaborate in a process of trial and error to create who we are and what our values are.

An analogy that is limited, but still relevant, can be made between the subconscious brain and a massive computer. A scientist might program that computer to solve complex equations, and provide it with data and a set of constraints. When the computer delivers a result that the scientist finds credible, he accepts it and uses it in his work. One would not say that because he did not consciously track each computation being performed that the process was not within the control of the scientist. Similarly, when the subconscious delivers a decision, it is a decision based greatly on rules that the conscious and subconscious have jointly developed.

The above analogy can break down because humans have physical and biochemical variations that can produce impulses so extreme that the process of self-control cannot tame them. But these are the exceptions, not the rule.

"What is not illusory is self-control, even though it can vary as a function of age, temperament, habits, sleep, disease, food, and many other factors that affect how nervous systems function. Nonetheless, evolution, by culling out the inveterately impulsive, saw to it that, by and large, normal brains have normal self-control."

Churchland is not above a bit of snark.

"With some disappointment, I am bound to say that I suspect that the claim that free will is an illusion is often made in haste, in ignorance, and with an eye for the headline and the bottom line."

Take that Sam Harris!

The brain is such a wondrous construct—and there is so much left to learn. Let us all practice a little self-control and keep an open mind regarding its processes.

Saturday, January 18, 2014

The American South: Dark Dreams of Slavery and Empire

Walter Johnson has produced a fascinating and illuminating history of the lower Mississippi Valley from the time of the Louisiana Purchase to the beginning of the Civil War in River of Dark Dreams: Slavery and Empire in the Cotton Kingdom. Johnson eloquently describes the consequences for both slave and free white of basing a society and an economy on slavery. The economic issues have been discussed previously in The Cotton Kingdom: Slavery and Economics

One of Johnson’s more surprising revelations was that in the decades leading up to the Civil War Southern energy was focused not only on sectionalism within the boundaries of the United States, but also on building a slavery-based empire where white (Anglo-Saxon) supremacy would thrive. This empire was intended to spread throughout the Americas. This ambitious dream of empire will be the topic here.

It is useful to make a brief diversion to learn more about these would-be empire builders.

Colin Woodard has provided one of the more thought-provoking histories of our country in American Nations: A History of the Eleven Rival Regional Cultures of North America. His book elaborates on this theme:

"America’s most essential and abiding divisions are not between red states and blue states, conservatives and liberals, capital and labor, blacks and whites, the faithful and the secular. Rather our divisions stem from this fact: the United States is a federation comprised of the whole or part of eleven regional nations, some of which truly do not see eye to eye with one another."

These regional "nations" were formed by the disparate groups who immigrated to this continent and established in their region the culture and values with which they arrived. Woodard makes a solid case that those distinct cultures have persisted up to current times.

"All of these century-old cultures are still with us today, and have spread their people, ideas, and influence across mutually exclusive bands of the continent. There isn’t and never has been one America, but rather several Americas."

Woodard provided this representation of the various "nations."

The people who formed the Deep South, and whose values are presumably still represented in the region, are those who would form the "Cotton Kingdom" and be the major players in Walter Johnson’s tale. Let us learn more about them from Woodard.

"The founding fathers of the Deep South arrived by sea, their ships dropping anchor off what is now Charleston in 1670 and 1671….they had not come directly from Europe. Rather, they were the sons and grandsons of the founders of an older English colony: Barbados, the richest and most horrifying society in the English-speaking world."

The Barbadian plantation owners were unable to find workers who would endure the conditions of plantation labor. They tried everything including the kidnapping of children. Eventually, they settled on the importation of African slaves to work their fields.

"The planters’ solution was to import shipload after shipload of enslaved Africans, whom they treated as fixed possessions, like their tools or cattle, thereby introducing chattel slavery to the English world."

"The Barbadian planters’ wealth was based on a slave system whose brutality shocked contemporaries."

Slavery was common throughout the colonies at the time, but the Barbadians established the economic principle holding it to be more efficient to work slaves to death and replace them as needed with fresh Africans than to let slaves survive and reproduce themselves.

Eventually the planters’ descendents became too numerous to be absorbed by the limited land available on Barbados. At that point they dispersed and spread their "culture" to other areas, including the southeast coast of the current United States. From there they would spread and dominate the region Woodard refers to as the Deep South.

Johnson begins his narration with the Louisiana Purchase. This provided large amounts of fertile land to those who had money to spend and the means to develop the land. Given that there was an enormous amount of labor involved in clearing and leveling wooded areas, and a difficult climate in which to work, the people in the best position were slave owners. The new lands became dominated by a plantation economy. New, more productive strains of cotton became available along with more efficient ways to cultivate and harvest it. This increased efficiency combined with the introduction of steamboats on the Mississippi River to make the Mississippi Valley an agricultural powerhouse. In the first half of the nineteenth century, trade in cotton became one of the largest sectors of the world economy and the Mississippi Valley, the "Cotton Kingdom," provided most of the world’s supply.

This might have been a period of great wealth for the region, but the insistence on devoting the entire economy to slave-produced cotton created problems. The region became a land of a few wealthy planters amidst widespread deprivation. Since 1808 the importation of slaves into the Unites States had been forbidden. This meant that slaves had to be obtained internally through a market which moved slaves from the upper South to the lower South. The plantation system of the Deep Southerners still believed in the efficiency of consuming slaves faster than they could reproduce and buying new ones to replace the shortfall. However, the cheap African source was no longer available and the market price of slaves went quite high as some areas became equivalent to "slave farms" breeding slaves for sale rather than for labor.

The Mississippi Valley society was based not only on slave labor, but also on the principle of white supremacy. Slavery not only eliminated potential jobs that poor whites might have needed, but also, the dictates of white supremacy made labor that could be done by slaves inappropriate for whites. The desired way to "make it" in Southern society was to accumulate the wherewithal to acquire a slave. The lack of a broad-based economy and the rising price of slaves left non-slaveholders in a kind of limbo from which there was no apparent escape. Since these slaveless whites were the majority of the white population this placed society in a rather unstable condition. Those with wealth worried not only about rebelliousness of the large number of slaves, but also about the reliability of the similarly large number of less-fortunate white neighbors.

For such a societal structure to persist it must have some sort of intellectual underpinning to provide justification. A combination of Biblical interpretation and amateur eugenics provided justification for enslaving black Africans. Basically, the logic consisted of the claim that if you are a slave, and you act like a slave, then you must have been intended to be a slave.

In order to foster dreams of empire and provide slaveholders with a lofty place in the order of things, a place in history must be determined. Given that the Deep South viewed labor as something to be done by slaves, it was not very difficult to derive an historical perspective that enshrined that concept into the story of human progress. Johnson quotes from the writings of Chancellor Harper of South Carolina to illustrate where this reasoning could lead.

"Harper began from the premise that ‘the institution of slavery is the principle cause of civilization.’ He based that statement on a remarkable reworking of the labor theory of value. His formulation went roughly as follows: (1) ‘Labor is pain’; (2) ‘Man is averse to pain’; (3) ‘He will not [willingly] labor beyond what is absolutely necessary to maintain his existence’; (4) ‘The coercion of slavery alone is adequate to form man to habits of labor. Without it there can be no accumulation of property, no providence for the future, no tastes for elegancies, which are characteristics and necessities of civilization.’ For Harper civilization was surplus—the margin that could be extracted from laboring humanity beyond what was necessary to the bare reproduction of the population."

Given such a view of the place of labor in a society, the answer to the South’s economic and social problems was not to create a system that provided remunerable work for all citizens, but to create an environment whereby all whites could afford to have slaves to perform necessary labor for them. The path to salvation required reopening the slave trade from Africa and acquiring more territory so that all members of the white (Anglo-Saxon) race could possess land and slaves to work it. This master race required Lebensraum.

Johnson maintains that the Civil War and the secession of the Southern states that initiated it created a false impression of what had been important to the South in the preceding years.

"….the late 1850s, the high point of sectional thinking,, produced an acute awareness of differences within the South—of regional differences, of class differences, and an emergent contradiction between the privileges of race and those of slavery, a contradiction that could not be solved within the confines of the existing political economy of slavery. This unevenness within the South led slaveholders and nonslaveholders alike to seek solutions outside the boundaries of their region and of the United States (and thus outside the boundaries of standard historical accounts)."

If your economy is based on the north and south flow of goods on the Mississippi River and your de facto capital is New Orleans, an expansionary gaze will settle on Central and South America. These regions held plenty of fertile land just perfect for the existing plantation system.

The fact that many of these regions already practiced slavery under European dominance was of little consequence in Southern thinking. Johnson quotes from the writings of William Walker:

"The Central American republics were inhabited by Indians and Negroes and governed by the ‘mongrel’ offspring of the union of European and Indian. They were, that is to say, racially degenerate, incapable of self-government in both the sexual and political sense, ‘enfeebled’ and ‘semi-barbarous’."

"Warmaking, according to Walker and his supporters, was the particular province of Anglo-Saxons."

Interest became focused on the immediate goal of taking control of Cuba. Cuba was thought to provide an avenue of escape from the dominance of New York in the east-west trade with Europe. With control over Cuba, a New Orleans to Havana to Europe path could supersede the current one that required transit to Europe via New York.

It was also feared that if action was not taken to maintain Cuba’s steadfastness as a white-controlled slave state it might fall into the hands of the abolitionist British, further isolating the slave South. Cuba had seen its share of slave-revolt scares; the South feared what a successful revolt might incite within their own territory.

This aspiration was referred to as "liberating" Cuba.

"….the proponents of Cuban ‘freedom’ generally had in mind three things: preserving slavery, reducing the taxes paid by slaveholders and merchant capitalists, and promoting free trade…."

The South was ready to take action. In 1851 it contributed men and monetary backing to General Narcisco Lopez for an invasion of Cuba. It was assumed that a small band could be allied with revolutionaries already in action on the island and Spanish rule would be overthrown.

"When he left New Orleans….thousands of supporters had turned out to cheer him and his small army of American adventurers, Cuban expatriates, and European revolutionaries as they began a mission that many believed would determine the future of New Orleans, the Mississippi River Valley, the United States, and even the world."

The mission was a disaster. Lopez was soon captured and executed, and his troops were killed, captured, or stranded on the island. The dream did not die there. In 1854, John Quitman, former governor of Mississippi, was recruiting men and acquiring funds for a more ambitious invasion.

"By the end of 1854, Quitman was said to have raised $1 million and secured the promises of 50,000 young men for his invasion."

But it was not to be. Quitman was invited to a meeting in the White House with the President; a word to the wise was apparently sufficient and his invasion plan faded away.

Nicaragua also fell into the sights of the Southern expansionists. With its relatively easy transit to the Pacific it could provide access to Asian markets for the products of the slave empire.

In 1855, William Walker, a "soldier of fortune" arrived in Nicaragua with a small band of mercenaries to participate in a civil war that was underway at the time. By June of 1856, he had managed to get himself elected President of Nicaragua. In the short time he was in office:

"….the set of policies he instituted were unabashedly designed to transfer property from the inhabitants of Nicaragua to immigrants from the United States. "

"’The general tendency of these several decrees was the same,’ he later explained. ‘They were intended to place a large proportion of the land in the hands of the white race.’….Finally, Walker (re)legalized slavery in Nicaragua and reopened the African slave trade…."

Walker was soon booted out and returned to the South a hero.

"In Nicaragua under Walker, the Southern dream of an empire of commercial flows, which had been dominant in the propaganda surrounding the invasion of Cuba, blossomed into a full-fledged program of territorial aggrandizement."

Walker came to an ignominious end. His invasion to retake control of Nicaragua in 1860 was as farcical as that of the Lopez expedition to Cuba. Walker was captured and immediately executed before even reaching his target.

By that time Southerners were being overcome by the events leading to the Civil War. Dreams of empire were extinguished ultimately on the field of battle.

What is so striking about this tale of unsatisfied yearning for a realm in which white supremacy and black slavery would coexist in a kind of paradise on earth is the presumed foreignness of the entire concept to anyone but a Southerner of the period. One would hope that these attitudes and aspirations were an aberration caused by perverse and unique circumstances—never to reoccur.

On the other hand, we have Colin Woodard’s claim that the cultures of the various regions have been retained for centuries. He provides this warning:

"The goal of the Deep South oligarchy has been consistent for over four centuries: to control and maintain a one-party-state with a colonial-style economy based on large-scale agriculture and the extraction of primary resources by a compliant, poorly educated, low-wage workforce with as few labor, workplace, safety, health care, and environmental regulations as possible."

Woodard seems to have made his point.

Monday, January 13, 2014

Oceans, Marine Life, and Sound Pollution

Rose George has produced an interesting book on the shipping industry: Ninety Percent of Everything. Globalized trade has resulted in great increases in the number and size of ships transporting goods across the oceans. One of the topics she covers involves pollution. The issue of oil spills is well known. Somewhat less familiar is the amount of air pollution generated: large amounts of carbon dioxide, and, even more disturbing, large amounts of soot. It is obvious that ships will generate significant amounts of noise in the air as they pass by, and it is easy to view this ship noise as a minor inconvenience. George alerts us to the fact that ships also generate enormous amounts of noise underwater, and there the issue of sound pollution is more serious.

Light cannot penetrate very far in sea water; consequently many marine species rely on sound to transact their business: finding food, avoiding predators, searching for a mate, or tending to offspring. The range of human-generated sounds is much greater under water than one would expect from a lifetime of dealing with noise in the air.

"Sounds underwater can travel astonishing distances: a right whale [a species of whale] can hear another from ten miles away. The ocean has natural sound channels, like noise byways: if noise falls into a channel, it can travel hundreds of miles and perhaps thousands. It can travel an ocean. When a foghornlike signal was transmitted from Australia in 1991, it was heard off Oregon three hours later."

Most sound created by transport ships arises from the cavitation induced by the propellers. The stress created by the propeller blades plowing through the water generates voids (cavities) in the water that then implode. This implosion causes noise in a manner similar to that from a tiny explosion. The result is a lot of continuous underwater noise.

"The cavitation of a freighter leaving Cape Cod Canal can be heard all over the bay. A supertanker can be heard in the sea a day before its arrival."

That means the supertanker can be heard underwater about 400 miles away. George tells us that there are about 100,000 transport ships on the move at any time. That can add up to a lot of background noise for marine life to deal with.

"Researchers had been looking at daily, weekly, or monthly noise rates. When they compared levels over a longer time scale, the results were shocking. Ambient noise in the deep ocean was increasing by three decibels every decade. Every ten years, noise from commercial shipping had doubled."

Whales are particularly sensitive to noise. Surprisingly, whale-ship collisions are quite common. For some reason, perhaps confusion caused by the noise, whales have difficulty avoiding a passing ship, and have been observed to swim directly into its path.

The effects of noise on whales have been well documented. The background noise from shipping limits the range at which a whale can discern the signals it requires for doing what whales do.

"Without global regulations, acoustic pollution will grow because shipping is growing (by 2 to 6 percent annually). Already the acoustic habitat of the right whale—the range it needs to hear around—has been reduced by 90 percent. Humpback whales now have 10 percent of the acoustic range they used to have, so that their chances of finding a mate, food, and probably surviving have all been decimated."

Since some species of whale are in danger of extinction, researchers have been studying them to discover what might be limiting their viability. George describes the work of Roz Roland who had been studying right whales for many years. She had been measuring stress levels by collecting scat (whale excrement) and analyzing it for levels of stress-related compounds. Noise levels had not been her concern in 2001 when the attack on the World Trade Center occurred. The result of that attack was that for several days essentially all transport came to a halt and the source of man-made ocean noise disappeared. Subsequently, she thought to go back and evaluate the whale data accumulated during that period.

"For the whales it was….remarkable—they were swimming in a preindustrial ocean….an ocean quieter than it had been for over a century. It stayed that way for most of the week."

"But the message of the quiet ocean data was unmistakable. During the week that ships were stilled, underwater noise was lower by 6 decibels, and the levels of whales’ glucocorticoids (stress-related fecal hormone metabolites) were lower too."

The implication is that whales, and perhaps many other species, live in a heightened state of stress due to elevated and constant noise. It is well-known that high levels of stress are harmful to humans. Should it not be a cause of concern that marine life, which we depend upon to continue to function normally, might be endangered by our practices?

Noise from shipping is the most ubiquitous source, but it is far from being the most dangerous. Navy sonar signals and the underwater seismic testing used in searching for fossil fuels are dangerous episodic events for many species. Linda S. Weilgart, a marine biologist, has compiled a short summary of what is known about the effects of sound: The Impact of Ocean Noise Pollution on Marine Biodiversity. It makes interesting reading. Here are a few highlights.

"The U.S. Navy’s Low Frequency Active Sonar, used to detect submarines, could affect marine life over an area of about3.9 million square kilometers (Johnson 2003). This figure is based on levels shown to produce avoidance in fish and whales. Seismic airgun noise from oil and gas exploration measured 3,000 km away was the loudest part of the background noise heard underwater (Nieukirk et al. 2004). In some areas, underwater background noise levels have doubled every decade for the last several decades, most likely due to commercial shipping (Andrew et al. 2002; McDonald et al. 2006)."

"Noise in the form of naval sonar or seismic surveys can be deadly to cetaceans in at least some cases. Whales have been found to die within hours, by stranding or deaths at sea, from even a transient and relatively brief exposure to moderate levels of mid-frequency military sonar (Fern├índez et al. 2005; NOAA and U.S. Department of the Navy 2001). Since 1960, when more powerful sonars emerged, more than 40 mass strandings of Cuvier’s beaked whale have been reported world-wide. About 28 of these occurred together with naval maneuvers involving sonar or near naval bases, or with seismic surveys. In contrast, from 1914 to 1960, there was only one mass stranding reported of this species. Whales appear to die from hemorrhaging in their brain and heart, perhaps as a result of decompression sickness from an altered dive pattern induced by a panic response to the noise."

"Many marine species have been shown to be impacted by ocean noise to some degree. A cursory review of the literature on noise impacts revealed that at least 55 marine species have exhibited impacts from underwater noise in scientific studies. These impacts are not from nearby explosions, but more moderate noise….At least 3 seal species have reacted negatively to underwater noise: elephant seal, gray seal, and harbor seal. In fish, the following 21 species have shown impacts to noise: pink snapper, goldfish, cod, haddock, rockfish, herring, sand eel, blue whiting, catfish, sea bass, thicklip mullet, horse mackerel, bluefin tuna, fathead minnow, toadfish, carp, gudgeon, perch, silver bream, trumpeter, and trevally. At least 5 invertebrate species (squid, giant squid, snow crab, lobster, and brown shrimp) and 2 marine turtle species (loggerhead turtle and green turtle) have shown negative responses to noise. Thus, it is hardly plausible that underwater noise would not affect marine biodiversity to some degree."

More information on the issue of ocean noise can be obtained from the International Ocean Noise Coalition.

Friday, January 10, 2014

The Cotton Kingdom: Slavery and Economics

The term "Cotton Kingdom" is attributed to Frederick Law Olmstead who produced a book of that name soon after the start of the Civil War. Olmstead meant the title to be a sardonic turn of the phrase "Cotton is King." Olmstead’s goal was to demonstrate that as an economic system, slave-dependent production of cotton had been disastrous for the South. 

Walter Johnson has produced a history of the lower Mississippi Valley from the time of the Louisiana Purchase to the beginning of the Civil War in River of Dark Dreams: Slavery and Empire in the Cotton Kingdom. Johnson corroborates Olmstead’s economic conclusion and also details the desires of the "rulers" of the "kingdom" to take their way of life and impose it as a slave "empire" throughout the Americas.

It is of interest to note the Southern response to their failed economic model and how the attitudes formed then continue to persist to the present day.

The subject here will be the economics of slavery. Other topics will be saved for a later day.

Johnson’s tale begins with the Louisiana Purchase which added rich agricultural areas to the west of the Mississippi River. Thomas Jefferson hoped that this land would become the home of generations of landowning farmers who would work the land themselves. Ever fearful of the possible consequences from a revolt by the large numbers of African slaves concentrated in Southern regions, it was assumed that the new areas available would allow the dissemination of existing slaves and slave owners into these new areas, thus diminishing this concern. Many hoped that the institution of slavery would fade away, but the opposite would occur as slavery became even more prominent.

The new lands were wooded and immersed in a fearsome climate. To be converted to efficient agricultural use, they would have to drained, cleared, and leveled. This required an enormous amount of physical labor—the kind of labor for which slavery was required. It should have been no surprise that those best able to make use of the land were those who already owned slaves. The region became dominated by large land owners with a need for ever greater numbers of blacks to work the land. The slave economy was not weakened, it was rejuvenated.

"The extension of slavery into the Mississippi Valley gave an institution that was in decline at the end of the eighteenth century new life in the nineteenth. In 1800, there were about 100,000 slaves living within the boundaries of the present-day states of Mississippi and Louisiana; in 1840, there were more than 250,000; in 1860, more than 750,000."

Those who owned the land made a decision that was smart in the short term and focused almost entirely on the production of cotton. New strains of the plant were being developed that were increasing yield and quality. The US South would come to dominate the world market.

"….estimated that the South in the 1850s was supplying about four-fifths of the world’s cotton—the bulk (about five-sixths) of its crop being shipped every year to Great Britain."

"For most of the period before the Civil War, the United States was the source of close to 80 percent of the cotton imported by British manufacturers. The fortunes of cotton planters in Louisiana and cotton brokers in Liverpool, of the plantations of the Mississippi Valley and the textile mills of Manchester, were tied together through the cotton trade—the largest single sector of the global economy in the first half of the nineteenth century."

Given this critical role in the world and national economies, the South should have been an area of widespread prosperity. On the contrary it was a land of a few wealthy people and wide-spread deprivation. There were a number of perversities in the slave-based system that would ultimately leave the region not only morally deficient, but unstable economically, ecologically, and socially.

On January 1, 1808, the importation of slaves by sea was abolished. This was the first time that such a law could be constitutionally implemented. It was driven by the dual desire to limit the concentration of African slaves and to diminish the viability of the slave-based economy. The opening of the Mississippi Valley to large-scale cotton production had the opposite effect and increased the demand for slaves. The only source of fresh slaves was by the internal market. Eventually, hundreds of thousands of slaves would be purchased from the "upper South" to work in the "lower South." This internal market raised the price of slaves and converted some areas into what might be referred to as slave farms where blacks were bred for sale rather than for work.

In a normal economic model capital and labor competed for the investment dollar. In the cotton economy, slaves represented both capital and labor. Ultimately, a slave could pick only so much cotton. If more cotton was to be produced, more slaves were needed. If the price of a slave went up then the price of cotton would have to rise or profits would be diminished.

The plantation owners could have taken a long-term point of view and bred enough slave children to keep the market price under control, but there was no long-term in the South. Johnson quotes M. W. Phillips a frequent pro-slavery scold.

"Phillips argued, the slaveholding South was diminishing the span of its own history. ‘Not one-fourth of the [slave] children born are raised, and not over two-thirds are born on the place, which under a different policy, might be expected….’I favour good and fair work, yet not overworked so as to tax the animal economy, that the woman cannot bear healthy children, nor should the father be overtaxed, that his vital powers be at all infringed upon’."

Johnson cannot verify the accuracy of the 75% child mortality rate, but if true, such a number would be outrageous. But why worry about such things when you are dealing with humans in an "animal economy."

It should not be forgotten that the Mississippi Valley was based not only on slave labor, but also on the principle of white supremacy. Slavery not only eliminated potential jobs that poor whites might have needed, but also, the dictates of white supremacy made labor that could be done by slaves inappropriate for whites. The desired way to "make it" in Southern society was to accumulate the wherewithal to acquire a slave. The lack of a broad-based economy and the rising price of slaves left non-slaveholders in a kind of limbo from which there was no apparent escape. Since these slaveless whites were the majority of the white population this left society in a rather unstable condition. Those with wealth worried not only about rebelliousness of slaves, but also about the reliability of their less-fortunate white neighbors.

The decision to focus all effort on cotton produced a number of unfortunate side effects. Planting the same crop over and over depletes the soil and makes it less productive. One could respond by fertilizing the soil or by clearing and planting more land. The latter was the chosen solution. The fertilizer at the time was manure. To obtain large amounts of manure requires keeping sufficient animals for production. Keeping livestock requires labor and land that would deduct from that available for cotton. Given that a return on investment in slaves was required, producing cotton was the most efficient way to gain it.

This unswerving focus on cotton production left an economy in which there were a few rich people while the rest were either poor or were condemned to consumption of only what was necessary to keep them alive and working. The South was effective at generating cotton but it produced almost nothing else. It couldn’t feed or clothe itself and had to import from the North everything it needed.

"…. ‘the South’ provided two-thirds of the nation’s exports, but consumed only one-tenth of its imports."

Much of the wealth that could have been returned to the South if it had a more self-contained economy was siphoned off by the North as it imported goods and resold them to the South at a profit.

The shallow economy of the South was based on credit. Crops came in once a year. Until that time credit was required to cover expenses. There was little resident capital to compete with the New York banks in covering this credit requirement. In addition, most Mississippi Valley cotton ended up being shipped to Great Britain by way of New York rather than directly from New Orleans where it had originally accumulated. A boat carrying cotton to Liverpool from New Orleans would likely return with an empty hold because there was little market for import goods. This raised the cost of direct shipping. The cheaper credit and the frequent transport of goods from New York and back made it cheaper and quicker to convey cotton to New York first. But this service came at a cost.

"Contemporary estimates were that the shippers, insurers, bankers, and merchants of New York received forty cents of every dollar spent in the cotton market."

And how did the South respond to the defects of its economy and its society? They reaffirmed the inevitability of white supremacy and black African slavery, and blamed their problems on others.

Southern dogma persisted in equating slavery with labor and Southern slaves with Northern immigrants.

"….the difference between the labor supply of the South and that of the North was simply that ‘one comes under the head of importation, the other under the head of immigration.’ The bogus use of the category of ‘labor’ to blur the distinction between slave labor and wage labor—between importation and immigration—had a long history in pro-slavery ideology. By the late 1850s, the assertion that workers in the U.S. North or in Great Britain were ‘wage slaves’ or ‘white slaves,’ and comparison of their wretched living conditions to the (supposedly) easy lives lived by black slaves in the Americas, was a standard way to show up industrial capitalist notions of ‘freedom,’ abolitionist hypocrisy, the inevitable degradation of whites without slaves, and so on."

It was important to maintain the myth that black Africans were designed by nature to be white men’s slaves. The counterexample—the one that left them sleeping uneasily at night—was the successful slave rebellion that led to creation of Haiti as an independent nation. It was necessary that a narrative be formed that assigned responsibility for this event not to the will or intelligence of the slaves, but to the weakness and muddled policies of the European nations. It was only in the US that the proper Anglo-Saxon dominance continued to be maintained.

"….they refused to believe, or at least to say that they believed, that slaves—slaves like their slaves—could plan something like the Haitian Revolution. Rather, they projected an apparently more comfortable history of imperial rivalry onto the hemispheric history of black revolt. It was not so much the slaves’ own ideas of right and revolution that were at stake in the events called slave revolts, as the ideas and actions of the (white, European) rivals of the United States: the virulent democratizing revolutionizing of the misguided French; the cynical, incendiary slave importing and free-person arming of the puny Spanish; and especially the abolitionist philanthropy of the sickly, feminized English."

There was a vocal minority that sensibly claimed the way to greater economic growth and self-sufficiency was by creating a more balanced Southern economy. That line of thought would lose out to a competing point of view that held that the South’s problems arose from the actions of the federal government. They believed it was federal favoritism to Northern interests that was responsible for the lack of imports coming in through their own port of New Orleans rather than simple market dynamics.

"As the historian Brian Schoen has recently shown, they were specifically concerned with three aspects of federal trade regulation, which they believed redistributed wealth and trade from South to North: federal tariffs that protected Northern manufacturers from European competition and thus raised prices for those who purchased manufactured goods; duties on foreign shipping that supported domestic shipping by keeping ‘foreign’ ships out of the coastal trade….; and federal spending on maritime improvements in the North and bounties paid to New England cod fishermen—expenditures that used tax revenue to support a localized sector of the economy."

A report issued by the Southern Commercial Convention in 1837 summarizes the view that persisted up to the Civil War.

"It may not be disguised, however, that this extraordinary and unequal state of our commercial relations, had its origin, more in the fiscal operations of the Federal Government, than in any supposed deficiency in the industry and enterprise of our citizens…."

The favored solution to the social instability that had developed between slaveholding and non-slaveholding whites included a reopening of the slave trade so that slaves would fall in price and be affordable by all whites. This new cadre of slave owners would need land to work. That would be provided by bringing the benefits of white (Anglo-Saxon) supremacy to areas in the Caribbean and South and Central America—a form of lebensraum for white supremacists.

"The slave trade was the vehicle for a full-spectrum fantasy of slaveholding dominance, the promise of white patriarchy and pro-slavery empire embodied in African slaves. All white men might become masters; all white women—their white women—might become ladies; Africans might be civilized; and ‘the South’ would fracture the seemingly fixed limits of pro-slavery geography and rework them into an empire of unimaginable riches."

It is stunning to realize how little these attitudes have changed over the last 150 years. The Southern states continue to be dominated by a white, mostly Anglo-Saxon elite. Labor is still viewed as a non-elite activity not worthy of wage, safety, or health protections. And the federal government continues to be viewed as a source of the South’s problems.


Sunday, January 5, 2014

Too Big to Fail and Too Much Trouble to Jail

Given the scale of the economic damage caused by financial improprieties leading up to the Great Recession, one has to wonder about the lack of penalties imposed on those bearing responsibility for the disaster. Fines are beginning to be imposed on specific corporations, but few, if any, punishments for individuals. Companies don’t commit crimes, people do. Jed S. Rakoff discusses this outcome in an article in the New York Review of Books: The Financial Crisis: Why Have No High-Level Executives Been Prosecuted?

Rakoff is extraordinarily cautious in actually claiming malfeasance on the part of any specific individual, or by any class of financial operators, but allows that anyone who does so believe would view this lack of prosecution as a great moral failure on the part of our legal system. He then points out that in previous instances of financial chicanery prosecutions of responsible individuals were the norm.

"….in the 1970s, in the aftermath of the "junk bond" bubble that, in many ways, was a precursor of the more recent bubble in mortgage-backed securities, the progenitors of the fraud were all successfully prosecuted, right up to Michael Milken."

"Again, in the 1980s, the so-called savings-and-loan crisis, which again had some eerie parallels to more recent events, resulted in the successful criminal prosecution of more than eight hundred individuals, right up to Charles Keating. And again, the widespread accounting frauds of the 1990s, most vividly represented by Enron and WorldCom, led directly to the successful prosecution of such previously respected CEOs as Jeffrey Skilling and Bernie Ebbers."

Rakoff disposes of the argument that what recently transpired was no more than an excursion from financial stability and not a matter of individual guilt.

"….the Financial Crisis Inquiry Commission, in its final report, uses variants of the word "fraud" no fewer than 157 times in describing what led to the crisis, concluding that there was a ‘systemic breakdown,’ not just in accountability, but also in ethical behavior."

"As the commission found, the signs of fraud were everywhere to be seen, with the number of reports of suspected mortgage fraud rising twenty-fold between 1996 and 2005 and then doubling again in the next four years. As early as 2004, FBI Assistant Director Chris Swecker was publicly warning of the "pervasive problem" of mortgage fraud, driven by the voracious demand for mortgage-backed securities."

One of the reasons often provided to explain a lack of zeal on the part of law-enforcement agencies is the fear that the large financial organizations involved would be impaired by any attempt to punish them for crimes and the health of the economy would suffer. This "too big to fail" argument makes little sense if one is concerned with the actions of individuals.

"But if we are talking about prosecuting individuals, the excuse becomes entirely irrelevant; for no one that I know of has ever contended that a big financial institution would collapse if one or more of its high-level executives were prosecuted, as opposed to the institution itself."

Rakoff discusses a number of issues related to why law-enforcement agencies might have been slow or reluctant to address the guilt of individuals. One, perhaps the most disturbing, involves a long-developing trend towards prosecuting companies rather than the individuals in those companies who are guilty of crimes. The logic behind punishing a company and leaving the agents of that company untouched is patently absurd.

"Companies do not commit crimes; only their agents do. And while a company might get the benefit of some such crimes, prosecuting the company would inevitably punish, directly or indirectly, the many employees and shareholders who were totally innocent. Moreover, under the law of most US jurisdictions, a company cannot be criminally liable unless at least one managerial agent has committed the crime in question; so why not prosecute the agent who actually committed the crime?"

It has become increasingly common to rely on "deferred prosecution agreements" in which the agents of the corporation promise that they will stop committing crimes and will behave better in the future. A relatively harmless fine is usually imposed as part of the agreement.

"In recent decades, however, prosecutors have been increasingly attracted to prosecuting companies, often even without indicting a single person. This shift has often been rationalized as part of an attempt to transform "corporate cultures," so as to prevent future such crimes; and as a result, government policy has taken the form of ‘deferred prosecution agreements’ or even "nonprosecution agreements," in which the company, under threat of criminal prosecution, agrees to take various prophylactic measures to prevent future wrongdoing. Such agreements have become, in the words of Lanny Breuer, the former head of the Department of Justice’s Criminal Division, ‘a mainstay of white-collar criminal law enforcement,’ with the department entering into 233 such agreements over the last decade."

Given that an agency would not approach a company with a threat of prosecution unless it had proof that some individual or individuals were guilty of wrong doing, why not prosecute the individuals themselves? The answer Rakoff suggests is rather troubling: executives of large companies are immune from prosecution because it is too much trouble to go after them.

"If you are a prosecutor attempting to discover the individuals responsible for an apparent financial fraud, you go about your business in much the same way you go after mobsters or drug kingpins: you start at the bottom and, over many months or years, slowly work your way up. Specifically, you start by "flipping" some lower- or mid-level participant in the fraud who you can show was directly responsible for making one or more false material misrepresentations but who is willing to cooperate, and maybe even 'wear a wire'—i.e., secretly record his colleagues—in order to reduce his sentence. With his help, and aided by the substantial prison penalties now available in white-collar cases, you go up the ladder."

Months and years of hard work—who would want to do that? Besides, with budgets of law-enforcement and regulatory agencies being cut, who would do the hard work? And why invest years of effort when the political winds change every few years and redefine the importance of addressing corporate crime? It is much easier to threaten a company, allow it to go away and develop with a face-saving proposal incorporating a promise to "do better," and assess it with a fine that provides the appearance of punishment. Both sides get to declare victory, and the guilty are free to plan their next transgression.

"So you don’t go after the companies, at least not criminally, because they are too big to jail; and you don’t go after the individuals, because that would involve the kind of years-long investigations that you no longer have the experience or the resources to pursue."

Time is on the side of the guilty.

"….not a single high-level executive has been successfully prosecuted in connection with the recent financial crisis, and given the fact that most of the relevant criminal provisions are governed by a five-year statute of limitations, it appears likely that none will be."

Given the ease and rapidity with which those who do not possess this bubble of corporate immunity can be arrested and sent to prison for minor crimes, it is difficult to not choke on uttering the phrase "equal justice for all."
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