Article 43
Saturday, October 31, 2009
Spanish Lessons
America Is Repeating the Mistakes Which Led to the Fall of the Hapsburg Empire
Washington’s Blog
October 30, 2009
William R. Hawkins (formerly an economics professor at Appalachian State University, the University of North Carolina-Asheville, and Radford University) ARGUES that America is repeating the mistakes which led to the fall of the Hapsburg empire:
Spain was the first global Superpower...With Spain as its political base, and gold and silver flowing in from its American colonies, the Hapsburg dynasty became the dominant power in Europe. It controlled rich parts of Italy through Naples and Milan, and Central Europe from the Netherlands through the Holy Roman Empire to Austria. In the 16th century it added the far distant Philippine islands to its empire. The Hapsburgs held off the Ottoman Turks, whose resurgent wave of Islamic conquest in the 16th century swept across the Balkans and nearly captured Vienna.
The Hapsburgs went into decline in the 17th century, and while any such momentous event has many causes, for our purposes the focus will be on the economic collapse of Spain, which not only sapped the empire of strength but served to build up the power of its rivals.
The demands of empire required a strong and growing economy, but Spain did not keep up with the economic expansion that was taking place in other parts of Europe. Madrids financial base fell out from under its empire. Spain could continue to consume in the short term because of the flow of precious metals from American mines, but it could not produce the goods it needed at home, which in the long-run proved fatal to its standing as a Great Power and as an advanced society.
Spanish imports were double exports and the precious metals became scarce within weeks of the arrival of the American treasure fleets as the money flowed to Spain’s many creditors. What industry there was, along with banking and shipping, was in the hands of foreign owners. As a modern historian, Jaime Vicens Vives, has concluded, This was one of the fundamental causes of the Spanish economy’s profound decline in the seventeenth century, maritime trade had fallen into the hands of foreigners. This, plus the opening of the internal market to foreign goods, produced a fatal result. Spain’s exports were at the same time under heavy pressure by competitors in third country markets. A nation that cannot control its domestic market will seldom be able to sustain itself in foreign markets, which are inherently less accessible and more unstable.
Yet, Spanish leaders were deluded by a sense of false prosperity. This is testified by the statement of a prominent official, Alfonso Nunez de Castro in 1675: “Let London manufacture those fine fabrics of hers to her heart’s content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens...so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody.” A few years later, the Madrid government was bankrupt. The Spanish nobleman had foolishly elevated consumption, a use for wealth, above production, the creation of wealth.
Historians have traced the flow of Spanish gold and silver across the markets of Europe. Those who served Spain by establishing industries to manufacture goods for the Spanish market gained the money. Spain’s rivals, France, Holland (which started a successful revolt in 1568) and England, prospered by their trade surpluses, and reinvested the money to expand their own capabilities. Another modern expert on Hapsburg history, Henry Kamen, has cited contemporary sources who referred to 17th century Spain as the Indies for the foreigner. The military empire of the Hapsburgs became the economic colony of other powers, or, to use a current phrase, Spain was the engine of growth for the rest of the continent.
Where there were jobs and prosperity, there was also rapid population growth, and rising tax revenue. Rival powers were able to field and finance military forces that could defeat the once superior Spanish forces both on land and at sea. The irony of this is that Spain was ruled by a warrior aristocracy tempered by centuries of constant warfare against Islamic hordes and Christian heretics. These nobles looked down on merchants and manufacturers and disparaged their mundane professions only to find that without a strong domestic business class they could not afford the fleets and armies that guarded the empire they had built.
Today, the American empire is also trying to consume more than it produces. THE US TRADE DEFICIT is nearing Spain’s nadir of imports being double exports. Both government spending and private consumption are financed heavily by DEBT. Washington is printing money, the modern equivalent of digging gold out of the ground, rather than earning the means to pay its bills. And the POLITICAL AND MILITARY ELITES are apparently INDIFFERENT TO THE FATE of domestic business and industry. Americans must learn ... from the Spanish experience ... and take corrective action while they still can.
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ALU - Still Failing
Why would a company overstate its staff cuts? Because many managers assume that shareholders like layoffs, seeing job cuts as a signal that the company is serious about controlling costs. But the research tells a different story. More often than not, investors interpret downsizing as a symptom of mismanagement or eroding demand, and they shun the stock.
- Look Before You Lay Off
How could A COMPANY get $17.5 BILLION OF NEW BUSINESS FROM AT&T, BILLIONS AND BILLIONS MORE OF NEW BUSINESS FROM VERIZON, and probably ANOTHER $SIX BILLION FROM THE US GOVERNMENT, and still cry poverty?
This is a company that’s steadily and aggressively DOWNSIZING, and CUTTING IT’S OWN THROAT by ELIMINATING it’s HIGHLY SKILLED US workers, while replacing IT’S PLANTS in THIRD-WORLD COUNTRIES.
HOW?
I wonder how their PROJECT RIALTO initiative is COMING ALONG?
And FORMER CEO PAT RUSSO with her big, fat severance package?
I think if companies got rid of their layers of WORTHLESS MANAGEMENT, instead of highly-skilled, and highly-productive workers, WE’D ALL BE BETTER OFF.
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Alcatel-Lucent Q3 loss widens to $269 million
By Greg Keller
Associated Press
October 20, 2009
PARIS Telecommunications equipment maker Alcatel-Lucent SA saw its net loss widen in the third quarter as European phone companies, its key customers, cut back on spending.
The company said Friday that losses reached euro182 million ($269 million) in the period. That was more than the euro40 million it lost a year earlier and worse than analysts had forecast.
Shares in Alcatel-Lucent fell 5.8 percent in morning trading to euro2.71.
Headquartered in Paris and with North American operations based in Murray Hill, New Jersey, Alcatel-Lucent is one of the world’s biggest suppliers of networking gear and services for wireless and fixed telecommunications operators.
The company said it still expects to be close to break even at an adjusted operating level this year, despite having accumulated euro327 million in losses by that measure through the first three quarters of the year.
Revenue fell 9.3 percent in the third quarter to euro3.7 billion. The drop was driven by double-digit declines in older technologies such as 2G wireless, as operators have slashed invesment in response to the global economic slowdown.
Earlier this week France Telecom SA, one of Alcatel-Lucent’s biggest customers, said it had sharply cut back its capital spending in a bid to conserve cash and focus on reducing its debt.
Alcatel-Lucent’s third quarter performance was on par with the disappointing earnings reported earlier this month by its main European rivals, LM Ericsson AB of Sweden and Nokia Corp. of Finland.
In a conference call with reporters, Chief Executive Ben Verwaayen highlighted Alcatel-Lucent’s improved operating profitability in the quarter, noting the 0.4 percentage point improvement in the company’s adjusted gross operating margin versus a year earlier. And that was despite the lower revenue.
He credited Alcatel-Lucent’s ongoing COST-REDUCTION EFFORTS for the improved operating margin.
The CEO said Alcatel-Lucent has achieved 80 percent of an intended euro750 million cost reduction plan targeted for this year, as the company seeks to shore up its margins amid falling sales.
Alcatel-Lucent has been struggling for years to justify the 2006 trans-Atlantic merger that created it with the aim of becoming a global telecommunications leader. Total losses generated by the company since then now top euro9 billion, and Verwaayen has warned investors not to expecct a full-year profit until 2011.
Verwaayen is an outsider brought in by Alcatel-Lucent’s board to attempt to turn the company around after the merger’s original architects, Serge Tchuruk of Alcatel and Patricia Russo of Lucent Technologies, were unable to do so.
He has sought to put aside questions over the merger’s original justification, saying he’s focused on the future not the past.
The company’s stock has soared nearly 90 percent so far this year on SPECULATION that it is a target in the next round of INDUSTRY CONSOLIDATION. Verwaayen said last month that the company wasn’t in any merger and acquisition talks.
Verwaayen also reiterated his outlook for the global telecoms equipment market to contract between 8 percent and 12 percent this year, and to return to slight growth in 2010.
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Thursday, October 29, 2009
The Financo-State
Are You Ready for the Next Crisis?
By Paul Craig Roberts
October 27, 2009
Evidence that the US is a failed state is piling up faster than I can record it.
One conclusive hallmark of a FAILED STATE is that the crooks are inside the government, using government to protect and to advance their PRIVATE INTERESTS.
Another conclusive hallmark is rising INCOME INEQUALITY as the insiders MANINPULATE economic policy FOR THEIR ENRICHMENT at the expense of everyone else.
Income inequality in the US is now the most extreme of all countries. The 2008 OECD report, INCOME DISTRIBUTION AND AND POVERTY IN OECD COUNTRIES, concludes that the US is the country with the highest inequality and poverty rate across the OECD and that since 2000 nowhere has there been such a STARK RISE in income inequality as in the US.
The OECD finds that in the US the distribution of wealth is even more unequal than the distribution of income.
On October 21, 2009, Business Week REPORTED that a new report from the United Nations Development Program concluded that the US ranked third among states with the worst income inequality. As number one and number two, Hong Kong and Singapore, are both essentially city states, not countries, the US actually has the shame of being the country with the most inequality in the distribution of income.
The stark increase in US income inequality in the 21st century coincides with the offshoring of US jobs, which enriched executives with “performance bonuses” while impoverishing the middle class, and with the rapid rise of unregulated OTC derivatives, which enriched Wall Street and the financial sector at the expense of everyone else.
Millions of Americans have lost their homes and half of their retirement savings while being loaded up with government debt to bail out the banksters who created the derivative crisis.
Frontlines October 21 broadcast, THE WARNING, documents how Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, Deputy Treasury Secretary Larry Summers, and Securities and Exchange Commission Chairman Arthur Levitt blocked BROOKSLEY BORN, head of the Commodity Futures Trading Commission, from performing her statutory duties and regulating OTC derivatives.
After the worst crisis in US financial history struck, just as Brooksley Born said it would, a disgraced Alan Greenspan was summoned out of retirement to explain to Congress his unequivocal assurances that no regulation of derivatives was necessary. Greenspan had even told Congress that regulation of derivatives would be harmful. A pathetic Greenspan had to admit that the free market ideology on which he had relied turned out to have a flaw.
Greenspan may have bet our country on his free market ideology, but does anyone believe that Rubin and Summers were doing anything other than protecting the enormous fraud-based profits that derivatives were bringing Wall Street? As Brooksley Born stressed, OTC derivatives are a “dark market.” There is no transparency. Regulators have no information on them and neither do purchasers.
Even after Long Term Capital Management blew up in 1998 and had to be bailed out, Greenspan, Rubin, and Summers stuck to their guns. Greenspan, Rubin and Summers, and a roped-in gullible Arthur Levitt who now regrets that he was the banksters’ dupe, succeeded in manipulating a totally ignorant Congress into blocking the CFTC from doing its mandated job. Brooksley Born, prevented by the publics elected representatives from protecting the public, resigned. Wall Street money simply shoved facts and honest regulators aside, guaranteeing government inaction and the financial crisis that hit in 2008 and continues to plague our economy today.
The financial insiders running the Treasury, White House, and Federal Reserve shifted to taxpayers the cost of the catastrophe that they had created. When the crisis hit, HENRY PAULSON, appointed by President Bush as RubinҒs replacement as the GOLDMAN SACHS REPRESENTATIVE running the US Treasury, hyped fear to obtain from “our” representatives in Congress with no questions asked hundreds of billions of taxpayers dollars (TARP money) to bail out Goldman Sachs and the other malefactors of unregulated derivatives.
When Goldman Sachs recently announced that it was paying massive six- and seven-figure bonuses to every employee, public outrage erupted. In defense of banksters, saved with the public’s money, paying themselves bonuses in excess of most peoples life-time earnings, Lord Griffiths, Vice Chairman of Goldman Sachs International, said that THE PUBLIC MUST LEARN TO TOLERATE INEQUALITYY as a way to achieve greater prosperity for all.
In other words, “Let them eat cake.”
According to the UN report cited above, Great Britain has the 7th most unequal income distribution in the world. After the Goldman Sachs bonuses, the British will move up in distinction, perhaps rivalling Israel for the fourth spot in the hierarchy.
Despite the total insanity of unregulated derivatives, the high level of public anger, and Greenspan’s confession to Congress, still NOTHING HAS BEEN DONE to regulate derivatives.
One of Rubin’s Assistant Treasury Secretaries, Gary Gensler, has replaced Brooksley Born as head of the CFTC. Larry Summers is the head of President Obama’s National Economic Council. Former Federal Reserve official Timothy Geithner, a Paulson protege, runs the Obama Treasury. A Goldman Sachs vice president, Adam Storch, has been appointed the chief operating officer of the Securities and Exchange Commission.
The BANKSTERS are still in charge.
Is there another country in which in full public view so few so blatantly use government for the enrichment of private interests, with a coterie of “free market” economists available to justify plunder on the grounds that “the market knows best”?
A narco-state is bad enough. The US surpasses this horror with its FINANCO-STATE.
As Brooksley Born says, if nothing is done, “itll happen again.”
But nothing can be done. The crooks have the government.
[PCR Note: The OECD report shows that despite the Reagan tax rate reduction, the rate of increase in US income inequality declined during the Reagan years. During the mid-1990s the Gini coefficient (the measure of income inequality) actually fell. Beginning in 2000 with the New Economy (essentially financial fraud and offshoring of US jobs), the Gini coefficient shot up sharply.]
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Tuesday, October 27, 2009
Homesourcing
Another way to save jobs - Homesourcing
We got American middle-class job killers like H1-B ABUSE, MORE H1-B ABUSE, OUTSOURCING, and NEARSOURCING, along with some fighting back like INSHORING, and homesourcing.
Homesourcing enables the transfer of service industry employment from offices to home-based employees with appropriate telephone and Internet facilities.
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A Founders Vision
David Neeleman, the founder and current CEO of JetBlue, is a 45-year-old American of Dutch ancestry born in Brazil. Neeleman is a devout Mormon who baptized over 200 hundred converts during his missionary work in the slums of Rio de Janeiro. Neelemans faith has a profound effect on how he lives his life and runs his company(Friedman 36-37). It his own personal belief that:
Society will be better off if more mothers are able to stay at home with their young children but are given a chance to be wage earners at the same time (Friedman 37).
Neeleman began ғhomesourcing, a term he helped coin, at Morris Air, an airline that he founded and headed before he sold it off to Southwest for $130 million. Morris Air employed over 250 people to run its reservation service (Shellenbarger R12). When Neeleman decided to found his next airline he decided that he was going ԓto have 100 percent reservation at home. It was this philosophy that has guided the firms reservation system ever since (Friedman 37-38).
Homesourcing the JetBlue Way
JetBlue currently employees some 1000 people (representing nearly one percent of the overall homesourced workforce) in its home reservation system; the vast majority of the employees are Mormon women who live in the Salt Lake City area. Most of the women are in their thirties and work part time in a 24-hour split-shift rota (Keating D1). Home reservationists work on average twenty-five hours a week and must come into the JetBlue regional office in Salt Lake City for at least four hours a month to learn new skills and be brought up to date on what is going on within the company (Keating D1).
JetBlue and Outsourcing
So far, JetBlue has resisted the temptation to outsource. The firm has focused more on the productivity gains that are available from homesourcing instead of the wage arbitrage opportunities that are found in India and other low cost labor countries. Neeleman has taken a strong stance against outsourcing saying:
We will never outsource to India. The quality we can get here is far superiorԅ [Employers] are more willing to outsource to India than to their own homes, and I cant understand that. Somehow they think that people need to be sitting in front of them or some boss they have designated. The productivity we get here more than makes up for the India [wage] factor (Friedman 38).
Each JetBlue home reservationist is thirty percent more productive than their traditional counterpart. These productivity gains coupled with high employee loyalty and low employee turnover have provided sufficient reductions in cost to make homesourcing competitive with outsourcing to lower labor cost countries. Domestic homesourced workers also provide a greater understanding of local social and cultural issues that foreign workers may lack (Nevius A34).
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Cost-effective Homesourcing Trend Grows
By Stephanie Armour
USA Today
March 15, 2006
The use of independent contractors to handle customer service calls from their homes is soaring as companies look to cut costs and more employees seek jobs that allow them to work remotely.
The number of home-based agents will nearly triple over the next few years, says research group IDC, as major employers and independent call-center providers step up their hiring of contractors to do telephone work from home ח dubbed homesourcing.
The trend is being driven by cost-cutting needs as well as macroeconomic shifts. Here’s why:
· Technology. Advances in technology mean that just about anyone with a computer and a phone can become a virtual free agent. The proportion of households with computers jumped from 8% in 1984 to 62% in 2003, according to the most recent statistics available from the U.S. Census Bureau.
“I have a computer with high-speed Internet access and a hard phone line. That’s pretty much it,” says Martha Libby, 59, of Aurora, Colo., who works about 20 hours a week as an employee for Alpine Access, a Golden, Colo.-based provider of work-at-home call centers with 8,000 employees around the country.
· Rising costs. As the price of gasoline climbs, mounting commuting costs are expected to help fuel the free agent business. The rising cost of living and housing, which has more home buyers living farther from metro areas, is also stoking interest in home-based work rather than long commutes.
Lauren Stiteler, 23, of Charleston, S.C., a senior at the College of Charleston, majoring in business administration, has worked for the past year and a half as a home agent with LiveOps, a call-center provider based in Palo Alto, Calif.
“Whenever I have tests or finals, I can take the time off. And you don’t have to pay for gas,” Stiteler says.
· Available labor pool. Work as a home-based agent appeals to non-traditional labor sources such as college students, stay-at-home parents, the disabled, retirees and those who are caring for adults or children with special needs.
The cost of operating a traditional call center is $31 an hour per employee, including overhead and training, compared with $21 an hour per employee for homesourcing, says Stephen Loynd, an IDC analyst. Employees and agents can earn $8 to $13 or more an hour.
“The employees, with traffic and gas, there are a lot of things that challenge them in getting to work,” says Garth Howard, CEO of Alpine Access. “A lot of people can work from home and be very productive. They commute in bunny slippers instead of traffic. Who wouldn’t want to do that?”
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A Challenge To IT Outsourcing
New Tech Firm Hiring Hundreds In U.S. To Take On The World
By Bob Evans
InformationWeek
October 22, 2009
Two offshore-services execs and a prominent American CIO plan to open IT-services centers across the U.S. as low-risk and and price-competitive alternatives to offshore providers.
Can a U.S.-based IT-services firm staffed with hundreds of American employees working in this country compete on a global scale with offshore providers, global-services firms, and boutique consultancies? A startup founded by two offshore-services executives and a prominent American CIO are betting millions of dollars that their company can do exactly that with a new approach called “inshoring.”
Called SYSTEMS IN MOTION, the company’s plan is to create a handful of U.S.-based centers offering world-class IT services at competitive prices and with less risk, fewer regulatory obstacles, and a level of flexibility and nimbleness that today’s high-change global business environment requires.
The startup company expects to get up to speed quickly by utilizing leading-edge technologies and infrastrucuture such as Salesforce.com’s Force.com, Amazon’s Web Services, and Zephyr Cloud Platform to keep costs low and project cycles short, and to position itself on the front edge of transformative approaches that many enterprises are just beginning to fully comprehend.
For years, we’ve all been told or have allowed ourselves to believe - that the U.S. just can’t compete at that level in the IT-services industry, that U.S. workers aren’t willing to work hard enough to make such a model succeed, that their skills are inadequate for such demanding and sophisticated projects, and that their salary demands are too high to allow such a model to be vialbe in this country.
Well, the founders of Systems in Motion would beg to differ. They’ve begun hiring key high-level personnel at their first development center in Michigan and expect to have about 150 people on board by the end of next year and, if all goes well, more than 1,000 employees at the Ann Arbor center within four years. During that time, they’re prepared to invest $15 million in capital expenditures, with initial funding coming from an angel investment group that includes the company’s CEO and also Preetish Nijhawan, who was a founder of Akamai.
On top of that funding, the three principals are banking that their deep experiences in running and buying from IT-services companies, combined with what they see as significant demand for their U.S-based model, will enable them to hit those targets.
Systems In Motion CEO Neeraj Gupta was an executive with Patni, a $700 million Indian IT-services company; chief delivery officer Michael G. Parks, who runs delivery, solutions and practice development, was CIO at Virgin Mobile USA and NorthPoint Communications, executive VP of IT at Wells Fargo, and a senior VP at American Airlines; and chief marketing officer Debashish Sinha previously headed up marketing at HCL America, a $3 billion Indian IT-serives company.
I had met Sinha during his time at HCL America and last week we spoke a couple of times about Systems In Motion’s strategy.
“About a year ago, Neeraj and I started a discussion on whether the current structure of global services was living up to its promise of creating value for US businesses and the economy as a whole,” said Sinha. “We sensed that while offshore outsourcing was growing, there was a strong pent-up demand for an alternative model for a large portion of the current and future demand for IT.
“The model is needed specially for those companies that don’t have enough scale for leveraging offshore centers, that require tight integration between IT and business, that need to deal rapidly with a changing technology landscape, or that have regulatory considerations that make it difficult for them to create high offshore leverage.”
In response to that need, Sinha said, he and Gupta and Parks designed an operating model that they called “inshore” that’s predicated on delivering service that’s cost-competitive with offshore suppliers while also offering a level of collaboration, innovation, and flexibility that non-U.S. companies would be challenged to match. And the worldwide IT business, he says, is still so large that inshoring will have a huge opportunity to pursue:
Noting a recent Forrester study that says the Global IT Services industry will total $461 billion in 2010, Sinha said, “Offshore services comprises about 20% of that, so there is still a very large marketplace that is ripe to be serviced inshore.”
Their plan includes two strategic elements tied tightly to location and government accommodation. First, it intends to locate its centers close to prominent universities such as it has done with Ann Arbor, where the University of Michigan has 55,000 students, including 7,500 in engineering.
And second, the company’s entire model is predicated on strongly leveraging what it calls public/private partnerships in the form of state and local tax incentives and job-training funds. For the Ann Arbor facility, those financial incentives call for up to $7.4 million in tax rebates tied to the number of jobs created over a 7-year period, plus another $1.5 million from a state workforce-development agency that supports training through local education institutions.
In a company overview called “Inshore Services: A Global Services Redesign Initiative,” Systems In Motion offered the following examples of prospective customers that could be looking for a U.S.-based provider of low-cost, high-quality IT services:
**"The only way I can invest in upgrading my technology landscape is by first lowering the cost of my current IT and engineering operations.” Fortune 500 manufacturing company
**"I’d like to leverage offshore services but my business data is too sensitive and there are too many regulatory concerns. Governance of offshore resources will be a nightmare.” leading healthcare-services company
**"The only thing I’m certain about is that demand in my industry will remain volatile for the foreseeable future. My IT operations need to be flexible in that environment.” large retail chain
**Companies are beginning to question the assumption that “low-cost labor, by default, is an offshore-outsourcing option and that [offshore] is the only source of cost reduction.” Gartner research, 2009
The theory seems to be there, the heart seems to be there, the energy and passion seem to be there, and certainly in the case of Michigan a broad and available workforce is there. But can Systems In Motion convince U.S. businesses that it has the technical scale and operational depth and breadth to handle the type of highly demanding IT capabilities described by the three companies above? Can it find sufficient numbers of IT workers who are not only highly skilled but also highly motivated to jump into a new and so-far untested model where the work will be demanding even if the pay is below traditional norms?
Can Systems In Motion continue to find state and local governments that believe partnership extends beyond agreements and photo-ops and into millions of dollars’ worth of direct investments in an exciting but still emergent model? And more than anything else, will Systems In Motion be able to deliver superb services to its first few clients, on which so very much will be riding?
Tough challenges indeed, but Gupta, Parks, and Sinha are fully aware of all those questions because they’ve all spent many years running and buying from IT-services companies, and their instincts and their research are telling them that it’s time for a new venture driving a new model. This one’s going to be fun to watch.
GENERAL ELECTRIC REINVESTS IN AMERICA
AT&T REINVESTS IN AMERICA
IBM REINVESTS IN AMERICA
INTEL REINVESTS IN AMERICA
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