Rising Power in Latin America

As Mexico shudders from declining oil reserves and a virtual civil war based on the drug lords perfecting their routes into gringo-land expands and as Venezuela enjoys the broken promises of President Hugo Rafael Chavez who has placed his repressive leadership ahead of his once reformist ways, there is a new power rising on this side of the Atlantic, and not a Spanish-speaking one at that. Portuguese is the national language of the world's fifth largest (land mass and population) country on earth, Brazil. With almost 200 million people, Brazil is only recently recovering from its image of one of those inflation-driven, Latin American failed economies. In 2002, it required a $30.4 billion rescue loan from the International Monetary Fund, promising to repay that debt by 2006. The fact that Brazil repaid that note a year early probably didn't show up on your radar.

You may have read about the country's massive use of ethanol in its automotive fuel fix, cheap sugarcane generated alcohol (almost 38% of the earth's production of ethanol); Brazil mandates that gasoline-powered cars use a mix of 25% of ethanol. The majority of Brazil's automobiles run on some form of flex-fuel. The U.S. Environmental Protection Agency has designated ethanol as an advanced biofuel because of its 61% reduction in the lifecycle of greenhouse emissions. But you may not be aware of the massive new discoveries of oil, much of it unfortunately off-shore, this South American country, is known more for its beaches, celebrations of Mardi Gras and its unique solution for racial harmony (the "coffee-colored compromise") than for its technological achievements and abundance of natural resources. But make no mistake; Brazil is rapidly taking its place as one of the most powerful and fastest-growing economies on earth, along with China, India and Russia.

We're not used to looking for such economic miracles in Latin America, and Brazil knows that. There is a simmering resentment among its citizens that the United States simply takes for granted that its global policies that, except for minor objections from Bolivia, Cuba and Venezuela and their populist leaders, speak for the entire Western Hemisphere. Brazil is becoming a global political force by reason of its growing economy (even as much of the rest of the world continues to reel from the recession) and is trying to make it clear to the earth that it will set its own policies and expects to be taken very seriously as one of the greatest powers on the planet.

Brazil's President Luiz Inacio Lula da Silva is fighting back, setting his country's new path and making it clear that it will be a course very independent from that big kid in North America. Why else would Brazil want to serve as a broker for a nuclear fuel deal that includes one of our sworn enemies? "Lula stepped front and center into one of the most sensitive of diplomatic debates, featuring the toxic relationship between Iran and the United States, in helping broker an agreement announced this week under which Iran will ship much of its nuclear fuel to Turkey in exchange for fuel rods. The announcement was accompanied by photographs of Lula with Iranian President Mahmoud Ahmadinejad and Turkish Prime Minister Recep Tayyip Erdogan joining upraised hands. For some, the deal and the images represented refreshing diplomacy. Others, such as those who favor U.S.-led efforts to impose more economic sanctions against Iran, remained concerned about Iran's nuclear program." Los Angeles Times, May 22^nd.

Creating policy to make a point versus policies that actually have a local benefit has its obvious dangers, but it does seem as if we need to be aware that ignoring this giant to the south cannot be in America's best interests. "Brazil, with a large and stable economy and a host of vital commodities, has formed alliances with emerging powers such as South Africa and is a key member of the BRIC group of developing nations. It craves a permanent seat on the Security Council and wants a reform of the IMF and World Bank. Under Lula, Brazil has gradually abandoned its non-interventionist foreign policy and is taking a more hands-on role. For Lula, the Iran thing isn't important as such," said Oliver Stuenkel, a visiting professor of international affairs at the University of Sao Paulo. He's making a broader argument that current structures of global governance are unjust, and that emerging powers should have a greater say. "Critics counter that Lula has delusions of grandeur and say his successful presidency and high approval ratings have led to hubris." The Times. Whatever the analysis or the conclusion, it's time to pay some serious attention to this powerhouse in the south.

I'm Peter Dekom, and playing card games all over the earth is really complicated.

How Many Contractors Can You Fit on the Head of a Pin?

The June 1^st Washington Post did a profile on Ed Harrington, Deputy Assistant Secretary of Procurement, Department of Defense. I know, I never heard of him either, but he does get to spend about $132 billion of our military budget, overseeing how the U.S. Army pays its vendors and contractors. An interesting chart graces his office, one that tells you the ratio of government contractors per U.S. soldier since the Revolutionary War: “The government's contracting out for services is nothing new, as Harrington's office notes. Its ‘Contractors on the Battlefield’ chart outlines the number of contractors compared with the number of soldiers since the American Revolution. Back then, the ratio of contractors to soldiers was 1:6. World War I, 1:20. Vietnam, 1:6. Gulf War, 1:60. Iraq, 1:1. Afghanistan, 2:1.” Two soldiers for every contractor in Afghanistan?!!!! Wow!

I could drone on… ooops… about how we are slowly moving into a robotic and mechanized military force. But then, there are lots of military and civilian casualties that say otherwise. Some folks – like United Nations official Philip Alston – don’t like these impersonal killing systems, particularly when they are administered by clandestine spy agencies that bury their mistakes (quite literally) versus military operations which are openly accountable: “With the Defense Department you’ve got maybe not perfect but quite abundant accountability as demonstrated by what happens when a bombing goes wrong in Afghanistan,” he said in an interview [with the May 27^th New York Times]. “The whole process that follows is very open. Whereas if the C.I.A. is doing it, by definition they are not going to answer questions, not provide any information, and not do any follow-up that we know about.”

And then we have the modern day Hessians – like the Blackwater (now Xe Services LLC) guards that generated so much notoriety with their Iraq War shoot-em-ups – contractors with guns that often replace military troops in specific functions. Xe today provides the “guards” to U.S. embassies all over the world; 90% of their income (2/3’s coming from no-bid contracts according to Wikipedia) comes from government contracts.

Okay, someone has to supply the table settings along with the surface-to-air missile systems that the Army needs, and someone has to supervise that procurement and all the generals and their supply officers pounding the table and asking, “More! More!” Fact is that military conflict is good business. Nothing like an arms race to stimulate the economy… of our military-industrial complex. We may be laying off teachers, cutting back our police forces and deferring the much needed maintenance on our dams, bridges and roads, but we will continue to hire lots of soldiers, enriching tons and tons of military suppliers to fight in theaters like Afghanistan and Iraq. So what if the Iraqi government is unraveling even as our troops are departing? Who cares if the Taliban are actually retaking towns almost as fast as our troops leave to take another strategically-important region?

Looking for wars to fight, reactions to strikes begging for retaliation in the minds of angry voters, and sending troops – without invoking a military draft that would require a public re-think of their initial desire for revenge – seems like such a non-starter these days, particularly fighting wars that we cannot win: Vietnam, Iraq and Afghanistan… combat that requires decades, millions of soldiers over time and – today – at least a trillion dollars in financial resolve. Frankly, we ain’t got it anymore. There are too many problems back home that need attending. Not that I am advocating isolationism in a modern era; that doesn’t work either. But this “go it alone” or “go it with the primary burden on the U.S. soldier and taxpayer” is no longer within our financial ability to bear. We need to stop subsidizing our military contractors and vendors just as much as we need to level the marketplace to weed out Wall Street favoritism; we need to get real!

I’m Peter Dekom, and wasting money (and lots of lives) is a luxury we can no longer afford.

Is NATO an American Turkey?

When Germany and France fomented the European Union, the not-so-secret agenda was to counter the seemingly monolithic economic, military and political power of the United States through the combination of Europe into a single national force. Today, both such nations are watching their economies undermined by the weakest members of that union – countries like Greece and Spain whose financial woes are dragging down the euro and the fiscal integrity of the entire continent. Japan veered severely away from towing the American line – as recently elected Prime Minister Yukio Hatoyama pledged to terminate the U.S. military base on Okinawa – but were forced to reverse such negative policies and accept a continuing military presence on that Japanese island following the increased militantism of North Korea. Hatoyama resigned on June 2^{nd because he broke his election promise. Brazilian President, Luiz Inácio Lula da Silva, to show his independence from the overly-domineering American policy umbrella cast over Latin America, recently brokered an agreement between demon Iran and the Turkey over spent nuclear fuel rods.}

^{See the trend? Not only are the traditional powers – China and Russia – tugging away at U.S. political preeminence, so is absolutely everybody else. As our economy portends a longer-term erosion of everything we have built and stand for, as the precipitous decline of our educational standards suggest that the United States cannot continue to provide global leadership even in the not-so-long term, our enemies and allies alike are pulling away and leaving us increasingly isolated. There are lots of nuclear powers these days as well as many countries (like the BRIC nations – Brazil, Russia, India and China) with stellar growth – even with momentary blips and bubbles – in their future. Even with 30% of the global economy, the U.S. value proposition is apparently dropping like a stone tossed off a high mountain.}

^{To make matters increasingly worse, America is linked to every move or transgression that Israel foments as its exceptionally hard line Likud government plays a very rough game. Israel, even more isolated than the United States, is surrounded by hostile neighbors – some with menacing nuclear weapons near final development – who would like nothing more than to drive her into the sea. The United States has been there for this tiny nation, through thick and thin, and frankly, for the most part, Israel has been our most reliable ally in an otherwise tumultuous region. Israel’s recent policies – from harsh military action to permitting the construction of even more Jewish communities in the middle of the Palestinian West Bank – have driven a deeper wedge between the United States (which is blamed for everything that Israel does) and the rest of the world, most of which has condemned these hard line trends.}

<sup>Israel’s May 30th violent interception of a relief convoy headed for Gaza (which departed from the Turkish section of Cyprus) – where 9 people (including an American) perished on a Turkish ship (the Mavi Marmara) – is a diplomatic nightmare, particularly for the United States. The mourning is particularly and obviously intense in Turkey, where Palestinian sympathies are on the rise as is a general expansion of a huge pro-Islamic political faction in what was once a highly-secular nation. The big loser in all of this is the United States… Turkey has been America’s highly strategic NATO ally in its heavy engagements against Middle Eastern Islamist militancy. The June 5th AolNews.com: “The 2009 Pew Global Attitudes Project found that only 14 percent of Turks viewed the United States favorably, the lowest percentage of any of the 25 countries surveyed. In comparison, 19 percent held a favorable view of Iran…

“As Turkey furiously mourns its dead from the Israeli commando assault on the Mavi Marmara, the political transformation the country has undergone in recent years has never been so apparent. Once prized as NATO's stalwart eastern flank against the communist threat, Turkey now sees its red flag raised by thankful Palestinians in Gaza and its diplomacy praised by Iran. … Though materiel for U.S. troops in Iraq still arrives from a base in southern Turkey, the NATO member increasingly seeks its own solutions for international issues instead of toeing the line set forth by the West. Last month Turkey joined Brazil in negotiations with Iran over its uranium enrichment program, a move that ran counter to the sanction-seeking U.S… [The political transformation of Turkish attitudes] has been under way for many years, of course, wrought by the end of the Soviet Union, two unpopular U.S.-led wars in neighboring Iraq and the 2002 election of the pro-Islamic Justice and Development Party, or AKP. But the current crisis underscores the depth of Turkey's alienation from the West, which goes far beyond righteous outrage at the plight of the Palestinians.”</sup>

^{On June 5th, another relief ship – this one of Irish registry – was bordered by Israeli sailors and diverted from Gaza to an Israeli port, this time without bloodshed: “On [June 4th], the Israeli and Irish governments reached an agreement to unload the vessel’s cargo in Ashdod, in southern Israel, and transport it to Gaza, but the group sponsoring both this ship and the Turkish flotilla, the Free Gaza Movement, rejected the deal.” NY Times (June 6th) . The cargo was off-loaded, the passengers detained, but the goods will eventually make their way over land to Gaza.}

^{As Turkey cozies up to Iran and embraces the Palestinian movement, Americans squirm nervously. “‘The Americans, no matter what they say, cannot get used to a new world where regional powers want to have a say in regional and global politics,’ said Soli Ozel, a professor of international relations at Bilgi University in Istanbul. ‘This is our neighborhood, and we don’t want trouble. The Americans create havoc, and we are left holding the bag.’… It is Mr. Erdogan’s confrontation with Israel, which he accused of ‘state terrorism’ in the flotilla raid, that raised the loudest alarms for Americans. Many see his fiery statements as a sign that he has not only abandoned the quest to join the European Union, but is aligning himself with Islamic rivals of the West.” New York Times (June 8th). With overwhelming popular support, there are a few in Turkey with a slightly different perspective: “‘The world hasn’t changed in 48 hours just because a boat was raided,’ said Asli Aydintasbas, a columnist for the Turkish daily Milliyet. ‘Ankara thinks it is remaking the world, but in the long run this could backfire.’” Or not…}

^{We’re used to dictating our political needs by sheer force of military and economic power; those days are slipping away. Can we adapt to this transformation, accepting divergent opinions and avoiding attacking sensibilities of those who are different, as a tolerant and diplomatic country in partnership with others… or are we destined to remain cowboys in a world where cows are no longer in vogue? Houston, we have a problem…. Yee ha? Do we really enjoy being the number one target on earth?}

^{I’m Peter Dekom, and we better figure out this sympathy/empathy thing before we are truly isolated with no one but our deficit-inducing military budget to get our way.}

Congress vs. the United STATES of America

There are 39 states with net budgetary deficits (30 in fairly deep negative territory), and the prospect for resuming their prior level of taxes is beyond slim. Between falling property values and foreclosures, the property tax base is eroded. With spending not remotely what it was in 2007 and even given the reduced levels of driving, sales and fuel taxes are way down. And the unemployment numbers tell you all you need to know about income taxes, state and federal. The federal government has mandated programs that are significantly funded by the states, and certain federal actions (or lack thereof) – like border enforcement – place additional burdens, particularly on states that border Mexico. Arizona has provided one, probably unconstitutional response, but there is a clear signal that American states are facing longer-term financial issues – perhaps even insolvency (or bankruptcy) – that actually threaten the future of America itself. Under-funded or even unfunded state defined benefit retirement plans (especially those with cost of living escalators), combined with early retirement options, will probably be the "steel-bearing pipe that looks like a straw" that will in all likelihood crush the camel's back.

Social safety nets and public education are being hit hard. Declining educational standards auger very badly for our future as a functioning and competitive nation. But recent primary results have alerted the incumbent members of Congress that there is a move afoot to kill representatives who continue to support more spending and, naturally, a continued expansion of an already-intolerable national deficit. States that had counted on federal support to balance their budgets – money considered a "sure thing" – are beginning to realize that Congress is backing off helping the states. And while that might get a few folks elected to Congress, the ultimate cost to America may be billions or even trillions of additional dollars as municipal services begin to collapse, state and local pension obligations go unpaid. States cannot "print money" (increase the money supply, what economists call "M-1"); they have to issue bonds or borrow in the commercial marketplace to the extent their tax base plus federal grants do not cover the cost of operations.

The extreme example of the potential impact of a state failure is California, and if the largest state in the union fails, the consequences for the rest of the nation would be devastating. Yet Congress is backing off of a $2 billion commitment to California (and making the same noises vis-à-vis other states expect similar help, especially with the state Medicaid supplement that was part of the federal stimulus package), which puts a very nasty pressure on the state and may actually trigger a financial failure that is not contemplated in our federal bankruptcy law (Chapter 9 – municipal bankruptcy – does not rise to the level of an entire state). We may have a failure that is simply unprecedented, but think of cities and towns filing under Chapter 9 and the state itself failing without any legal guidance as to what that means to creditors, pension-holders and state employees. And if it doesn't happen immediately, the push might generate the unintended result in a year or two, as this financial malaise lingers. Cutting federal aid to states anywhere puts pressure on state budgets everywhere. Without any doubt, the collapse of California would end any vectors toward an overall improved U.S. economy and potentially trigger a full-on depression instead.

The Los Angeles Times (June 3^rd) addresses the specifics in California: " 'This is a serious problem,' said Jean Ross, executive director of the California Budget Project, a Sacramento-based nonprofit. 'The fear of deficits seems to be overtaking Washington. They are not realizing the bigger threat is the economy could slide back into recession as a result of state and local budget cuts.'… In California, the governor has already proposed eliminating the state's welfare program, canceling state-subsidized day care for hundreds of thousands of low-income children, freezing school spending and making a number of other deep cuts to close a $19.1-billion budget gap… Failure to get the federal money would surely force more drastic proposals. But even if the state eliminated its entire home healthcare program, which serves 440,000 elderly and disabled Californians, it wouldn't make up for the $1.9 billion the state is now scrambling to secure… The states have launched a frantic lobbying effort to persuade the U.S. Senate to provide the assistance… 'You've got virtually every governor in the country calling on Congress to do this,' said H.D. Palmer, deputy director of the California Department of Finance. 'This is not just a California issue. It is a national issue.'"

Indeed, 42 governors have written Congress begging for an extension, but deaf ears apparently still abound. "A report issued [June 3^rd] by the National Governors Association and the National Association of State Budget Officers projected that state revenues would 'remain sluggish' for two more years. State general fund spending declined by nearly $75 billion, or 11 percent, from 2008 to 2010, according to the report. But states, which unlike the federal government must balance their budgets, avoided even harsher cuts because of nearly $135 billion in stimulus grants from Washington… The aid included $87 billion made available by adjusting how states and the federal government share the growing cost of Medicaid, the health insurance program for the poor and the disabled. The economic downturn is expected to drive up enrollment in the program by 21 percent from 2009 to 2011, according to the report… Although the federal Medicaid share varies by state, the stimulus act raised it to an average of 66 percent, from 57 percent, according to the Kaiser Family Foundation… The reimbursement increase was limited to a 27-month period that ends on Dec. 31." New York Times (June 8^th). 46 states have fiscal years that begin July 1^st.

Yup, we might be seeing some incumbents that may have been Tea-Party'd out of office retaining their jobs, but they may preside over the greatest financial catastrophe the U.S. has ever faced. Forget about the collapse of the commercial real estate market or the problems of failing economies in Europe. California is the eighth largest economy on earth! Only the U.S., Japan, China, Germany, France, England and Italy are bigger. Add a few more states to the list, and… Wake up!

I'm PeterDekom, and isn't it interesting that the California state symbol is a bear?!

Branded for Life

We innovate. We allow new ideas from lowly places. Creativity and entrepreneurial spirit and good old fashioned American showmanship… good old fashioned British showmanship… Italian, French, German and Japanese. We design new, we make kewl and we call them “brands.” And when you think of Chinese brands, you immediately think of… er… ah… Lenovo leaps to mind… oh, that was IBM’s personal computer business. Or… yeah. That’s a big problem in China, a nation that means to be number one across the board.

“‘We've lost a bucketload of money to foreigners because they have brands and we don’t,’ complained Fan Chunyong, the secretary general of the China Industrial Overseas Development and Planning Association. Our clothes are Italian, French, German, so the profits are all leaving China. . . . We need to create brands, and fast.’… No big marquee brands means China is stuck doing the global grunt work in factory cities while designers and engineers overseas reap the profits. Much of Apple’s iPhone, for example, is made in China. But if a high-end version costs $750, China is lucky to hold on to $25. For a pair of Nikes, it’s four pennies on the dollar.” Washington Post (May 25^th).

For those of us old enough to remember, there was a time when “Made in Japan” signified cheap and probably not very cool. Then came Toyota, Nissan, Sony, JVC, etc. A lot of us remember when “Made in Korea” was a term of derision. Is it relevant that the computer screen I am watching my words form on is a Samsung? China is forcing some companies choosing to manufacture with cheap PRC labor and sell into the local marketplace to hand over trade secrets and patents. Still, the foreign brand is more desirable. The government has conducted massive corporate “how to compete with those foreign devils” classes and seminars, provided tax incentives and subsidies, and still foreign brands are what folks who can afford it want.

Think “Made in China” and noxious dry wall, tainted milk products and toxic pet food still fester in the minds of many Western importers. China has sent out legions of investment bankers and corporate executives to buy Western businesses (and brands) to bring the technology and marketing know-how back to the mainland. Nevertheless, China still has a problem doing business anywhere but China – except when it buys raw materials like oil or agricultural products. “[A] little perspective: Even if China's total foreign direct investment hits $200 billion, it still pales in comparison to smaller economies, such as Singapore's, Russia's and Brazil's. And China has plunked down only about $17 billion in rich countries, equivalent to the overseas assets of a single medium-ranked Fortune 500 company.

“The 34 Chinese companies on the Fortune 500 list basically operate in China only. The world's three biggest banks are Chinese, but none is among the world’s top 50, ranked by the extent of their geographical spread… “‘Moving forward another 10 years,’ said Kenneth J. DeWoskin, chairman of Deloitte's China Research and Insight Center, ‘it’s hard to see how viable Chinese companies will be if they just stay in China.’” The Post.

And as xenophobic as we are about the PRC and inscrutable as the Chinese may appear to us, China is equally wary of the Western world and fearful of being taken advantage of by Western businesspeople – a potential loss of face that is simply politically intolerable to China’s leadership. Bottom line, Chinese corporate executives know more about how to mine local PRC political connections than they do about operating outside of their own borders. And by the time Chinese generate patents that work – such as attempts in developing an indigenous mobile phone market – Western innovators have often moved on with more capable devices and hundreds of thousands of new applications. Guess what Chinese consumers want?

Japanese firms eventually built out international branches with Western businesspeople running the overseas operations. The Japanese sent executives off to these foreign markets, ostensibly to supervise, but often simply to learn how to live and work in their competitors’ backyard. Boy did they learn their lessons well. Today, Made in Japan can actually be a brand enhancement, and even in the world of the trendiest Paris fashion boutiques, top Japanese designers are… well… de rigueur. And someday, expect to see some pretty amazing Chinese designs on some of Paris most prestigious runways. Someday, but definitely not now! Starbucks anyone? Meet me in Xin Tian Di, Shanghai.

I’m Peter Dekom, and folks who think that they can control consumer trends… well…

The State That Does Not Want Tourism

After a series of violent kidnappings related to the Mexican drug wars, Arizona passed legislation late last month aimed at curbing illegal immigration: "The law, which proponents and critics alike said was the broadest and strictest immigration measure in generations, would make the failure to carry immigration documents a crime and give the police broad power to detain anyone suspected of being in the country illegally. Opponents have called it an open invitation for harassment and discrimination against Hispanics regardless of their citizenship status." New York Times, April 23^rd.

Needless to say, this controversial statute – which has yet to pass constitutional muster – was immediately opposed by liberal and Hispanic groups across the land. Even some local law enforcement officers voiced opposition to imposing a burden on them to root out "illegals" in addition to their normal crime-fighting duties. While government officials have gone out of their way to say that law officers would not engage in racial profiling, critics argue that the very basis of the statute requires stepping over that very tenuous constitutional line; the actual wording of the law applies sanctions "where reasonable suspicion exists that the person is an alien who is unlawfully present in the United States." Officials state that requests for documentation will only occur in conjunction with other matters… like after a traffic violation. Damned Mexican drivers and those jay-walking pedestrians!

Arizona legislators argued that since the federal government seemed unable to enforce the national borders, and since the recent wave of violent crime sweeping normally peaceful communities like Scottsdale and Phoenix seemed to be tied to a recent influx of Mexican criminals involved in the drug trade, the state had little choice but to defend itself as best it could. The backlash against Arizona has been well-beyond anyone's expectations, from boycotts of out-of-state Arizona Diamondbacks MLB baseball games to Phoenix' losing out to Tampa, Florida as the site of the 2012 Republican Convention site. The Washington Post (May 12^th): "Hispanic civil rights groups are boycotting Arizona and urging others to do the same. Officials at the National Council of La Raza, one of the groups driving the boycott, had privately asked the RNC not to meet in Phoenix.

"The boycott's biggest target: Major League Baseball's 2011 All-Star Game [which is scheduled to be played in Chase Field in Phoenix]… 'We've been very encouraged by the response,' said Clarissa Martinez, director of immigration and national campaigns for the National Council of La Raza, which announced the boycott [on May 6^th]… Nearly 30 organizations have come on board, including the Rev. Al Sharpton's National Action Network, People for the American Way, the Japanese American Citizens League and the Service Employees International Union." CNN.com (May 11^th). Not to mention this statement from the player's union: "The Major League Baseball Players Association opposes this law as written. We hope that the law is repealed or modified promptly. If the current law goes into effect, the MLBPA will consider additional steps necessary to protect the rights and interests of our members."

But wait, it gets worse: " 'Our message has been, regardless of how you feel about the law, don't punish the 200,000 tourism associates working in this state who are trying to feed their family,' said Kristen Jarnagin, VP-communications for the Arizona Hotel & Lodging Association… Ms. Jarnagin said Arizona has lost $6 million to $10 million in convention business in the last week alone -- among them the American Immigration Lawyers Association, which canceled a conference scheduled for later this fall in Scottsdale. Alpha Pi Alpha, the nation's oldest black fraternity, said it is moving its July convention out of Phoenix and into Las Vegas… 'In our business, conventions book two, three, four years out,' she said. 'A lot of politicians here are saying it will be a short-term issue, but this is a clear indication that it's affecting business three years down the line.'" AdAge.com (May 5^th)

Or this: "The Los Angeles City Council, protesting Arizona’s crackdown on illegal immigration, on Wednesday voted [13-1] to ban most city travel to Arizona and future contracts with companies in that state… During a morning-long debate on the resolution, council members compared Arizona’s action to Nazi Germany and the beginning of the Holocaust, as well as the internment and deportation of Japanese Americans during World War II. A new Arizona law, which will take effect July 23, will require police to determine whether people they stop are in the country illegally, which critics say will lead to racial profiling." Los Angeles Times (May 12^th).

Wow, they're really getting slammed over this; they really have to be thinking about back-tracking. Well, not exactly. On May 12^th, Governor Jan Brewer signed another controversial bill: "The law, which takes effect Dec. 31, bans classes that are designed for a particular ethnic group, promote overthrow of the U.S. government, foster resentment toward a particular race or class, or 'advocate ethnic solidarity instead of the treatment of pupils as individuals.'"AOLNews.com (May 12^th). According to the May 12^th Los Angeles Times, the real target of the law was a bit more focused: "The measure … prohibits classes that advocate ethnic solidarity, that are designed primarily for students of a particular race or that promote resentment toward a certain ethnic group…. The Tucson Unified School District program offers specialized courses in African-American, Mexican-American and Native-American studies that focus on history and literature and include information about the influence of a particular ethnic group."

The timing of the signing of this statute was particularly unfortunate: "Arizona Gov. Jan Brewer has signed [this] bill targeting a school district's ethnic studies program, hours after a report by United Nations human rights experts condemned the measure… State schools chief Tom Horne [also candidate for State Attorney General], who has pushed the bill for years, said he believes the Tucson school district's Mexican-American studies program teaches Latino students that they are oppressed by white people." The Times. I think Arizona's Grand Canyon just got a whole lot shallower. The feds really should shore up our border defenses, and illegal immigration really needs some pragmatic attention sooner rather than later, but there is a right way to address the matter or the way Arizona seems to be dealing with it.

I'm Peter Dekom, and I remember the adage about cutting off your nose to spite your face.

How Dry We Are

Ever see those Dust Bowl pictures? From the Depression Era? Once fertile fields laden with blowing and swirling sand, like the one above. The Midwest is our grain belt, and while there are lakes and rivers supplying water, a huge portion of farms from the Dakotas down through north Texas rely on a body of water that was once as big as Lake Superior (about 174,000 square miles), but it just happens to be underground, known as the High Plains or Ogallala Aquifer.

When wind power pumped water from this vast reservoir, trickling water to farms on the surface, the aquifer was able to replenish itself just based on surface water penetrating back into the earth. And then came the high-volume diesel pump, which multiplied by the thousands after World War II. Farm productivity exploded. But the volume of water in the Ogallala Aquifer began to drop… five inches a year. And since the aquifer is not of uniform depth, parts of it have already dried up. But, you exclaim, there’s been flooding in the Midwest , even parts of land that are clearly atop the aquifer; surely, that will reverse this trend, right? Not even close. The water is destined to run out, most probably during the lifetime of a lot of Americans who are alive today, and when it does, well, remember those Dust Bowl pictures? Yeah, we’ll be able to take a whole bunch of new ones.

Surely, you add, technology will find a way to bring water where it is needed? Technology in creating drought-resistant crops, maybe, but moving water? We already have such technology – the California Aqueduct, for example – but there is this little problem. You get a feeling for the cost of the proposition by thinking about how heavy a bucket of water is to lift; that’s the energy that’s need to move water uphill, and the United States is not flat, not even the Midwest. That you can generate electricity as the water flows downhill still creates a 15% net energy loss to move water across vast distances… and the pipes and aqueduct construction costs are monumental on top of that. Last time I looked, we were also having an energy crisis.

This is a very serious problem, particularly for a nation that is really trying to reduce its balance of payments deficit by importing less. Today, we actually export much of the agricultural products quenched by Ogallala water; but what happens when we run out of grain? “‘You go to areas where the aquifer has been depleted, [they] look pretty poor now,’ David Brauer, program manager for the U.S. Department of Agriculture's Agricultural Research Service Ogallala Aquifer Program, told AOL News. ‘And it only takes a few years… ‘The magnitude of this is incredible," he continued. "We're talking about, for the last 20 years, 20 percent of the irrigated acreage of this nation is over the Ogallala.’” AOLNews.com (April 22^nd).

So what are we doing about this and will it be enough? “People have been warning about the aquifer's depletion for years, but coordinating conservation programs among farmers has proved difficult. Recently, Texas has imposed state controls on the amount of groundwater that farmers can pump, requiring 16 groundwater districts to each provide a target for an acceptable groundwater level in 50 years… Such measures, however, are mostly designed to delay the inevitable, since the recharge rate for the Ogallala Aquifer is small enough to be considered negligible. And so, Brauer says, as a natural resource the Ogallala is comparable to a vein of coal: What you take out doesn't get put back in. ‘All we're doing is buying time,’ he says.” Considering some estimates, we may be looking at 30 years. Time help to redesign crops to use less water or find ways to increase yields radically. But the water will run out. And then…

I’m Peter Dekom, and I wonder if we will really celebrate d’earth day.

The Leg Bone is Connected to the Hip Bone

Economic independence. Stop our reliance on foreign oil. Build it here; we don’t need those cheap Chinese imports. We don’t need them; we’re Americans. Debt crisis; it’s their problem. Heard any of these before? Not a scintilla of truth in any of the above statements.

Let’s assume – somehow – that we stop importing “foreign oil” (an impossibility given our automotive requirements, although we get most of our oil from this side of the Atlantic and not via ships from the Middle East). Let’s pretend we just made a huge secret find somewhere in the middle of the U.S., enough to keep us supplied for decades. Woo hoo. We’ll never have to pay expensive prices at the pump again, right? We will never be benefiting terrorist states with oil reserves by purchasing their petroleum, correct? Wrong, caped crusaders. You see, every drop of oil produced, graded as to quality, is literally dumped into a vast global bathtub – called the marketplace – and the price of oil is not set (OPEC notwithstanding) by the country where the oil is extracted; the market establishes pricing on a daily (hourly) basis. Oil is a commodity. If the price of oil rises because of market demands, that increase benefits every single oil producer on earth. If we have glut of oil or demand drops – as it is as global markets shudder over possible repercussions and economic contractions over European debt – all the oil producers get slammed.

And just think what would happen if we stopped importing foreign manufactures. Not only would the denizens of Beverly Hills face Gucci and Prada withdrawal pangs, but Americans across the land would find their clothing costs doubling and tripling, they wouldn’t be able to buy a television set anywhere, and their cars would soon be running on metal. That’s just the tippy tip of the collapse in the American standard of living that would follow. And what’s happening in Europe – credit failures at a national level – is a tsunami in training that might just make its way to our shores. We’ve tried to slow the wave.

On May 10^th, “[t]he Federal Reserve announced that it would open currency swap lines with the European Central Bank — in essence, printing dollars and exchanging them for euros to provide some liquidity for European money markets and banks.” New York Times (May 10^th). But that may not be enough. Testifying before a House Financial Services Committee on May 20^th, Federal Reserve governor, Daniel K. Tarullo, said, “In the worst case, such turmoil could lead to a replay of the freezing up of financial markets that we witnessed in 2008.”

Want specifics? The May 21^st New York Times summarized the further testimony: “Mr. Tarullo laid out how that contagion could spread. If sovereign debt problems were to broadly affect Europe, American banks could face large losses on their overall credit exposures, as asset values declined and loan delinquencies mounted. Money market mutual funds that hold commercial paper and certificates of deposit issued by European banks also would be hurt. The result could be a further contraction in bank lending… ‘Although we view such a development as unlikely, the swoon in global financial markets earlier this month suggests that it is not out of the question,’ Mr. Tarullo said.” In English: Concept 1: American banks are exposed in their European operations. Concept 2. Credit in the developed world is a lot like that bathtub filled with oil; there’s really only so much credit that the global markets can sustain, so if Europe siphons off a pile for its failing PIIGS nations, there’s not going to be a lot left for the rest of us. Concept 3. If the euro continues to fall, their ability to buy U.S. exports – a big part of our recovery plan – drops as well. Weeeeeeeeeeeeee!

I’m Peter Dekom, and every once and a while, it’s good to bone up on basic economics.

America – Land of Opportunists!

Think of all the money special interests spend on lobbyists and campaign contributions either to be exempted from the law, to create special benefits in the law just for them or to protect them from ordinary citizens who – God forgive them – really don’t want to be ripped off or provided with shoddy services or merchandise. Think the lax enforcement of oil rig safety and environmental protection was an accident? When Congress and the President (yes, that was a Democrat who did that) repealed the law separating commercial banking from stock brokers and investment bankers, was that “good for the people”? Do you believe that the lobbying money being spent by Wall Street interests – the same one who brought down the global economy by sharp practices and selling debt everywhere they could and were the first to make the big bucks in the aftermath of the collapse – to water down the legislation protecting consumers and the US economy is good for America? As the political process has stretched out longer and longer, it seems that anyone who is a candidate is always running and asking for money. Gotta make a special interest heart glow with excitement.

I’m picturing a group of proud elementary students in a classroom, right hands pressed against their chests, reciting the Pledge of Allegiance as they gaze at their flag, dreaming of what they might become in a land… a land so long known as the “land of opportunity.” Have we betrayed them? Visited Washington, D.C. recently? One of the lowest unemployment rates of any major city in the U.S. (around 5.9%; in the top 10% among all U.S. cities). See all the sales in the big stores like back home? Oh, not so much. See the huge discounts in the hotels and super-packed restaurants? Oh, not so much. See all the real estate with a value cut in half by a moribund economy? Oh, not so much. What kind of engine has our nation’s capital become? One that works for the people or one for which the people only work for it? Is Washington a city of leadership and dreams or the capital of self-interest and crass manipulation?

When you look at the backlash of Tea Party candidates and falling incumbents, is that really conservatives telling the government to leave them alone because they oppose all these reformist Democrats or simply a belief that whatever the party in power is in favor hasn’t really created a better life for them? These folks want government to “stop.” And really, who can blame them? Look at Washington! Really look at it. Residents there don’t see the unemployment that has decimated the rest of the country. The jobs are everywhere, but often the wrong jobs. Tea Party adherents are being told that the simple answer is less government, lower taxes and focusing more on our traditional values. That’s a compelling platform, but unfortunately, it simply means that the special interests have succeeded in creating an anti-government groundswell that might just keep their corporate taxes low and those nasty environmental and financial regulations from darkening their door. They’ve got their way, and they damned well don’t want voters to make them accountable! Let’s go swimming in the Gulf and then have a wonderful seafood dinner with the extra profits we made selling our house!

Corporations have a thing about not paying taxes. Go figure. Oil depletion allowances or simply buying their wares from an offshore affiliate at the highest prices possible, shifting the profits from the US to the overseas company. Congress is closing in, but the “keep government off our tax backs” mentality might just stop this obvious line of attack. The evidence is everywhere, but the backlash against government is a blessing that corporate America loves; they’ve got their money’s worth. It’s never about my country; it’s all about “me.”

Look at those lovely Political Action Committees that allow candidates to generate huge campaign financing under the guise of helping other candidates or espousing special causes that require their own funding. What’s the truth here? The June 2^nd Washington Post: “Most leadership PACs [focused on fund-raising for a political party and its candidates] have given away less than 40 percent of their expenditures this cycle, even though they typically say they are collecting and bundling donations for others, according to data compiled by the Center for Responsive Politics at the request of The Washington Post… Instead, the PACs spend the bulk of their money funding their own operations, spending sizable sums on fundraisers that also offer sweet perquisites for members and their aides. The PACs have financed distant resort stays and expensive meals for members in New York, Miami, Beverly Hills and elsewhere and paid for private jets, liquor, flowers, limousines, ski lift and baseball tickets, and even horse track visits, according to tallies submitted monthly to the [Federal Election Commission].”

What are we doing to ourselves? Why can’t the angry voters understand how they are being manipulated into voting against themselves? And what exactly is the environment – physical and economic – that corporate America is actually creating for itself, its shareholders and executives… oh and its consumers and employees (but who cares?)… in future years? Will they really want to live in this country and raise their children here? When does “me” become “us”?

I’m Peter Dekom, and do you really believe that this is going to make America a better country that will continue for hundreds of years more?

An Education Loaner

Assume you’re a financial aid officer at a prominent college or university. An average student comes in and tells you that the $40-50K tuition (excluding room and board) you are charging means he or she needs to borrow about… well… $40-50K a year. To those kids borrowing when only banks were left to lend the money, that would mean $80-100K for the full four years. So what do you tell the kid? Go to a cheaper college, because folks who get degrees from this place don’t go on to earn enough to pay this back and actually have a life? Honest and probably the best possible advice, but somehow, that’s not the kind of message that admissions officers want to send out about their esteemed institution of higher learning.

How about… “I can arrange for you to borrow that money with our local friendly private lenders”? Forget about living under sword that is likely to swing very, very close to the student’s neck after graduation. Why did banks lend knowing that these students would have to share a rat hole with a real rat… living like that for years… if there were any shot at paying this loan back? Because under the revised bankruptcy code, you pretty much have to be living so far below the poverty line to have the slightest hope of losing that debt in a bankruptcy… a mattress in a culvert might be the extent of the housing, but hey, that bank can make a buck, and there’s not much that the student can do about avoiding the debt. Hoping for a nice government job – like teaching – to tide you over and get that loan forgiven? Oh, they’re laying off teachers… Hmmmmm. Blogged that one recently.

Fact is that most colleges, state and private, have been raising tuition costs at a multiple of the annual cost of living. That “basic degree” for a modern world isn’t so cheap anymore; it most certainly not a bargain by any measure, and financial aid is vaporizing in an impaired economy. And those well-rounded undergraduate degrees – you know, the ones that are actually fun and interesting, like English and History – well… they don’t tend to generate that hot job offer down the line. But take heart, neither do those degrees in film, journalism or marketing.

There are ways to defer repayment – like staying in school (even part-time night school might qualify). “[but t]his is not a long-term solution, because the interest on the loans continues to pile up. So in an eerie echo of the mortgage crisis, tens of thousands of p[recent grads] … are facing a reckoning. They and their families made borrowing decisions based more on emotion than reason, much as subprime borrowers assumed the value of their houses would always go up… Meanwhile, universities like N.Y.U. enrolled students without asking many questions about whether they could afford a $50,000 annual tuition bill. Then the colleges introduced the students to lenders who underwrote big loans without any idea of what the students might earn someday — just like the mortgage lenders who didn’t ask borrowers to verify their incomes.” May 31^st New York Times. But since the loans are bets for the future, not an evaluation of current earning ability, exactly how do you factor in a crashed economy, an horrific job market and over-priced tuition? In advance?

Think these students are good marriage partners? They drag that debt with them into any relationship that might want permanence. It’s a common story: “According to the College Board’s Trends in Student Aid study, 10 percent of people who graduated in 2007-8 with student loans had borrowed $40,000 or more. The median debt for bachelor’s degree recipients who borrowed while attending private, nonprofit colleges was $22,380... The Project on Student Debt, a research and advocacy organization in Oakland, Calif., used federal data to estimate that 206,000 people graduated from college (including many from for-profit universities) with more than $40,000 in student loan debt in that same period. That’s a ninefold increase over the number of people in 1996, using 2008 dollars.” The Times. Graduate school anyone? Let’s see how high we can push that debt ceiling!

Fact is, we need college-educated, trade-school-educated, professionally educated young people to build and grow this country out of its malaise. We can’t saddle our future earners with a burden that prevents them from delivering the productivity we need to rebuild our economy. Do we pay for their educations and assess a lifetime higher tax rate, depending on the level of their degree, to allow us to recoup the benefits of that education? That’s one way, and it’s a start, but we need to start figuring out alternatives to unrealistic borrowings to finance even this most basic part of the solution to the question as to whether or not the United States actually has a future. It’s better now that the government has stepped back much more into the student loan space… but the very concept of “borrowing at the beginning” is a concept we really need to review from the ground up. Maybe one of these bright young minds will actually figure out how to cap a deepwater oil leaks or how to end our over-dependence on fossil fuels. If they get educated in the first place! We need better-educated minds! Desperately!

I’m Peter Dekom, and education definitely provides the biggest set of answers to all of the obvious questions about our future.

Does a Teaching Degree = Unemployable?

Never before has the United States needed a future workforce, educated and skilled enough to bring back our competitive edge and earn enough to pay down the massive government and private debt of the last generation. We’re down; Asian labor is providing the same skills at vastly reduced cost. Our present is a disaster, and our future is looking bleak.

What a horrific time for school districts to pare back their teaching staff to meet budget cuts resulting from a severely eroding tax base. What a terrible time to increase class size, cut programs and defer much-needed maintenance in our school systems. “The recession seems to have penetrated a profession long seen as recession-proof. Superintendents, education professors and people seeking work say teachers are facing the worst job market since the Great Depression. Amid state and local budget cuts, cash-poor urban districts like New York City and Los Angeles, which once hired thousands of young people every spring, have taken down the help-wanted sign. & nbsp;

“Even upscale suburban districts are preparing for huge levels of layoffs. School officials and union leaders estimate that more than 150,000 teachers nationwide could lose their jobs next year, far more than any other time, including the last major financial crisis of the 1970s.” The May 19^th New York Times. Graduates are taking additional courses to train for jobs where there is still some demand… like nursing. Others land, depressed, to live with their parents until the job market shakes out or a miracle – one that truly is nowhere in sight – appears. Most of the few openings that occur are in places like new charter schools and virtually none in the cash-strapped cities where most of the graduates attended college.

For the young men and women who went to college with the dream of becoming a teacher to shape minds and perform one of society’s most critical functions – preparing the young to build and live in the future – they now face a total lack of demand for their services; just as the lenders who helped finance their educations are demanding the beginning of loan repayments some had hoped would have been forgiven by the public service careers they thought they were preparing for. It’s not just a waste; it’s a travesty.

The numbers are staggering. While the rest of America has five and half applicants for every job opening, young teachers face ten to one odds: “Teach for America, which places graduates from some of the nation’s top colleges in poor schools, has seen applications increase by nearly a third this year to 46,000 — for 4,500 slots. From Ivy League colleges alone, there are 1,688 would-be teachers.” The Times.

Our present is pretty sad; we are really hoping for a recovery sometime in the near future. If we have a future, and unless someone figures out how to raise the rapidly declining quality of our public schools pretty fast – just as the developing world is very, very quickly figuring out how to build those critical skills among their own children – that thing we will call the future will be exceptionally distressing.

I’m Peter Dekom, and exactly who is going to sound the wake-up call?