human resources

Death by HR: eARCs for Review

Death by HR: How Affirmative Action Cripples Organizations is scheduled for official release October 17th, and it can’t be reviewed until then.

I’d be happy to send an eARC (Electronic Advanced Reader Copy) to anyone who is willing to read it then write a quick review on Amazon or Goodreads on the 17th or after. Send an email to JebKinnison@gmail.com with your preferred reading format (epub, PDF, mobi) and I’ll get one to you.

I’m still not satisfied with the subtitle. The book is really about all the bureaucracy HR imposes on companies, not just affirmative action / diversity programs that do more harm than good. But AA is one good example of a government-pushed initiative being enforced by HR in a way that hurts everyone: the company, the diversity hires, and the economy as a whole.

Here’s the description:

Over a third of adults under 35 now live with their parents. Young men are working much less and playing video games much more as they fail to find good jobs, and the rates of marriage and family formation are way down. More people of all ages have given up trying to find a job. Meanwhile, companies report a shortage of skilled workers, and many good jobs remain unfilled for months or years.

Human Resources (HR) departments are widely disliked, and job searchers are generally advised to directly contact the hiring manager directly if they really want to be considered for a job. There are good reasons why HR acts like an arm of the government bureaucrats pressuring companies to hire more protected minorities and women–because that’s what they are, in many companies.

From the bestselling author of Avoidant comes a fresh look at HR and the hiring of mediocre employees favored by affirmative action programs. It’s a new Age of Incompetence, with brain-dead, unaccountable employees holding sinecures at the heart of our government agencies and regulated institutions like banks and hospitals, protected by affirmative action and union policies. The rot is spreading as pressure from state and federal regulation of companies has increased, promoting an internal compliance bureaucracy that has devalued the best job candidates and employees and promoted affirmative action and diversity over team productivity.

The result has been ever-more-costly failures and a steep decline in performance. From the mortgage meltdown that brought down the world’s economy in 2008, to the disastrous launch of the healthcare.gov website for Obamacare, major segments of business and government in the US have grown more expensive and less competent over the past few decades. Billions of dollars of waste in government contracts for IT projects, weapons systems, and service failures at the VA are in the news every day. Public schools are widely seen as mediocre, and in the poorest urban districts they are failing to provide a decent education for the students who need good schools the most to make up for bad family backgrounds. Costs for regulated services like schools, colleges, medical insurance, drugs, courts, prisons, and infrastructure like roads and bridges rise far faster than inflation, while time to complete major projects stretches out to decades, and many fail completely and are cancelled after billions have been spent. And the rot is spreading as government pushes businesses to adopt similar employment policies, with HR enforcing government mandates that compromise competitiveness and give overseas companies the advantage.

Silicon Valley and the tech industries are the next targets. If you’re a manager at a tech company, we’ll suggest some ways to protect your people from HR and its emphasis on credentials and affirmative action (AA) over the best fit for a position. Corporate leaders need to be sure their HR departments are managed to prevent infiltration by staff more interested in correct politics than winning products. And we’ll show why appeasement of diversity activists is a dangerous strategy that may make your organization a target for further extortionate demands.

The next battlefield after high tech is discretion in hiring–which the activists believe must be limited to force employers to hire any candidate “qualified” for a job as soon as they apply. Only a few radicals are proposing this kind of blind hiring now, but continuing successes in getting firms to bow to their diversity demands will result in a list of new demands. We have already seen Seattle pass an ordinance requiring landlords to rent apartments to the first applicant who qualifies. And similar movements in hiring–supposedly to prevent discrimination by eliminating management choice of who to employ–are coming soon.

This book may make you angry, but it will show you how you can fight back by resisting HR and its policies.

Death by HR: The End of Merit in Civil Service

Civil Service Exams prep book

Civil Service Exams prep book

People are taught that the Civil Service is a corps of competent public servants, screened by examinations and insulated from political interference to act in the best interest of the people. There never was too much truth in that children’s story, but over the past few decades, that public-spirited image has become dangerously misleading.

The Chinese Imperial examination system screened for literacy, but not directly for competence in a particular position. The best person for a job may not be the one who tests highest for general measures of intelligence or subject knowledge; many job skills aren’t easy to test for, and so it would be a mistake to rely entirely on written exams to fill positions. And since there are thousands of different jobs requiring different skill sets, it would be impractical to come up with exams tailored to every job.

The wave of affirmative action programs starting in the 1970s weakened civil service exam requirements. Courts found many exams discriminated against minorities, especially when it was clear the exams covered material largely unrelated to job skills. Some affirmative action programs race-normed the passing grades, which allowed more minorities to qualify with scores that would otherwise have failed. Many positions were entirely removed from examination requirements. Where the qualifying standard had been “top 3” or “best,” it became “good enough” or “adequate.”

The needs of a bureaucracy may not always favor hiring the most intelligent or skilled candidate. As in private industry, some managers would prefer to hire people who are bright enough and skilled enough, but not too much more than that, lest they be unhappy in the job or liable to be hired away by others — the brilliant scientist who wants to work as a police officer while writing papers on theoretical physics in her spare time is out of luck. In Connecticut, a Federal judge ruled the state was not discriminating unlawfully when it denied an applicant the opportunity to interview for the police force because his intelligence test score was too high.[1] Not rocking the boat is valued over ability in many hierarchies.

But these are just entry-level positions. What happens when promotion from within is favored, while entry-level employees are screened to ensure the very bright or overqualified are kept out? Entry-level positions in organizations are often open to all in theory, while in practice networks and connections of family, ethnicity, neighborhood, and religion can assist in placing people at the bottom rungs. If higher-level positions are filled from within this can result in entire organizations dominated by a single affiliate group, for example the Irish police forces of early 19th century cities and on a smaller scale, the Filipino-dominated air passenger screening agents at San Francisco International Airport in 2002 who were in danger of losing their jobs when the TSA was formed and citizenship was to have been required.[2]

Veterans were recently outraged to discover that the preference for veterans in VA hiring supposedly enshrined in the Veteran’s Preference Act of 1944 is largely ignored, with all but the most menial jobs at the VA filled by nonveteran union members.[3] Very few veterans are actually employed by the VA, because the true rulers of the agency are unions and upper-level bureaucrats who aren’t that interested in what Congress or veterans want or require — and why should they be, when Congress does nothing to change the underlying civil service and union control over VA staffing?

Current Federal civil service rules require only the minimum qualifications suggesting an applicant will be capable of competence in a particular job, which is a long way from aiming for the best candidate. Merit has been replaced by “good enough,” with even that low bar lowered further to allow affirmative action targets to be met. Since almost no one is fired for incompetence, affirmative action candidates are almost guaranteed to be hired and promoted to above their level of actual competence. Which means a large percentage of Federal civil service employees are now unable to efficiently and competently perform their duties; all they need to do to succeed is show up, write some reports, and collect their paychecks. And there are many cases where even failing at those minimal efforts did not result in termination, as in this egregious EPA case:

A former high-level official at the Environmental Protection Agency admitted Friday that he stole nearly $900,000 from the government by pretending to work for the CIA in a plea agreement that raised questions about how top agency managers failed to detect the scheme since it began in 1994. John C. Beale duped a series of supervisors, including top officials of the EPA’s Office of Air and Radiation, disappearing from the office and explaining his absences by telling his bosses that he was doing top-secret work for the CIA and its “directorate of operations.”

He lied about contracting malaria (he didn’t) while he served in Vietnam (all his military service was in the United States) to obtain a parking space reserved for the disabled that cost the EPA $8,000 over three years. He took personal trips to Los Angeles for which he charged the government more than $57,000, according to new court filings.

In all, Beale was paid for 2.5 years of work he did not perform since early 2000 and received about $500,000 in “retention bonuses” he did not deserve for nearly two decades, according to court papers and interviews.

“To our knowledge, prior to [current EPA Administrator] Gina McCarthy expressing her concerns, no one at EPA ever checked to see if Mr. Beale worked for the CIA,” said Assistant Inspector General Patrick Sullivan, who led the investigation that included interviews of 40 people. Only one, an executive assistant, suspected Beale’s story of working for the clandestine service. Nor did EPA personnel compare Beale’s travel vouchers, which said he was in places such as Boston and Seattle, with hotel receipts for the same dates that showed him in Bakersfield, Calif., where he has family. Even during the probe, which began in March, Beale continued to insist that he could not be interviewed because of his work for the CIA, Sullivan said. Only when investigators offered to question him in a secure room at the agency’s Langley headquarters did he admit he had no connection to the CIA, Sullivan said.[4]

Many local government special services like police and firefighting now have certification requirements, with courses and testing designed to assure that candidates have the abilities to succeed in their jobs. Women and minorities continued to struggle with these, and the pioneers were often harassed and held back by those running the certification courses; many lawsuits later, in some locales even those standards — which allow special coaching and assistance for those having trouble meeting them — have been waived.[5]

But most positions in the bureaucracy involve administering the regulations of the administrative state, essentially office jobs involving reading, writing, and paralegal work. Specialized technical knowledge is required in some parts of some federal agencies, like the EPA, while in others like the Social Security Administration only simple accounting and managerial skills are needed.

College degrees and certifications are no guarantee of skill or common sense in regulation. The EPA, for example, is notoriously unscientific in its estimation of risks, setting low standards in some areas and unreasonably high standards in others, with stacked cost-benefit calculations that ignore outside expertise and economist’s studies to reach politically-desirable goals, like the umpteenth announcement of tightening in pollution standards, or the finding that carbon dioxide qualifies as a pollutant which the EPA claims the legal authority to control.[6]

Wilson’s ideal of a dedicated corps of technically competent staff, in contact with the needs and wishes of the citizenry and able to wisely decide regulatory issues, has been betrayed by the decline of competence as the highest value in these agencies. Staff who refuse to compromise science and economic sense to give their masters what they want are harassed and isolated, and the remainders share a progressive mindset that tends to undervalue the vitality of the business and industry that citizens depend on for their livelihoods. Seeing a host of theoretical dangers, but protected from the consequences of their edicts to those trapped in the wasteland of flyover country, a bureaucrat goes along to get along and finds what justification is needed to provide another press release for the politicians running the agency.

Civil service exams aimed at finding the best candidates were outlawed some time ago when courts determined the exams were excluding minority candidates disproportionately. For example, the PACE exam for mid-level (GS-5 and GS-7) positions was abandoned by court decree in 1981, during the Reagan administration:

On November 19, 1981, the United States District Court for the District of Columbia resolved a class-action suit that was filed in 1979 (http://archive.opm.gov/luevano_archive/luevano-archive.asp). The suit alleged that the Professional and Administrative Career Exam (PACE), which the Government used to fill approximately 110 occupations at the GS-5 and GS-7 grade levels, had an adverse impact on the selection of African Americans and Hispanics.

The resolution of the suit (known as the “Luevano consent decree”) ended the PACE examination and required the use of alternative assessments for those occupations at the GS-5 and GS-7 grade levels that were once subject to the PACE exam.[7]

Today, Federal Civil Service regulations are a complex maze of assessments, requirements, pay grades, and rules governing everything about employment, more convoluted than even the largest corporation’s system. Internal management efforts to recruit the most effective employees are often blocked, and the level of effort required to remove an incompetent employee of any class, but especially of an EEOC-protected class, is enormous. More commonly, deadwood is transferred away or allowed to accumulate in forgotten departments not critical to the agency’s mission. We call upper-level federal bureaucrats “mandarins,” but the original Mandarins of Chinese Imperial service would not recognize some of the uncultured and incompetent people now elevated to high management positions by a system that rewards conformity, mediocrity, and racial and sexual minority status.

Here are the current OPM guidelines on use of testing:

D. Written and performance tests — Occupational series/positions with written and/or performance test requirements are identified in the section entitled test requirements. Written and performance tests are to be used as follows:

Initial appointments — Tests are required for some occupational series, either for all applicants or for those applicants who do not meet specific requirements indicated in the standard. If a test is required, applicants who are subject to that test must pass or have previously passed it to be eligible for initial appointment. This includes competitive appointments, and appointments under most noncompetitive appointing authorities.

Inservice placement —

(1) Tests required by OPM. There are a few occupational series for which a test is required by OPM for inservice placement. For such series, agencies must use and applicants must pass the appropriate OPM test. Occupational series with such requirements are also identified in the Test Requirements section.

(2) Tests required by agencies. For positions for which OPM does not require a test, agencies may develop and use tests without OPM approval, as long as the test is part of a comprehensive set of assessment procedures used in ranking employees. The use and appropriateness of such tests are the responsibility of the agency. Agencies cannot, however, use existing OPM tests for such positions, unless specific approval has been received from OPM.

(3) How inservice applicants can be examined. In occupations other than those where OPM requires a test for inservice placement, if an agency prefers to use alternatives to testing (e.g., evaluation of training and experience, interview, performance appraisal) to measure qualifications, it can do so, or it may use a test as one of several tools in evaluating applicants. Tests can be used to determine basic eligibility (i.e., on a pass-fail basis) or as the sole basis for ranking inservice placement applicants, only when specific approval has been received from OPM.

(4) Performance tests. As a general guide, performance tests (e.g., typing proficiency tests) can be used to evaluate inservice placement applicants when, within the past 3 years, they have not performed successfully in a position that required proficiency in the skills needed for the position to be filled.[8]

Penetrating the bureaucratese, testing, while it is still used in qualifying some hires, is minimally important in advancement past entry level. Management promotions depend on politicized and subjective evaluations of communications skills and management ability, and office politics are as important as competence. In a private company, upper management will strive for efficiency and try to employ the most productive workers, and if management does a poor job, the company will suffer and eventually fold, releasing the resources it uses to other firms which may use them better. In government, agencies tend toward the eternal, with the occasional scandal resulting in minimal change in management and almost no change in the rest of the staff. Monopoly government agencies cannot die or be superseded by other firms, and when there is a threat from private business, the agency will fight back — as when the Postal Service tried to enforce its monopoly on the mail, set up by the Private Express Statutes[9] in 1792:

Over the last three years the United States Postal Service has collected more than $500,000 in fines from companies that sent “nonurgent” mail by private couriers like Federal Express or DHL… The Postal Service has fined 21 companies for violating the 1872 law that established the Postal Service monopoly on mail delivery. A 1979 amendment to the law broke the monopoly on urgent mail, establishing as the definition of urgent, mail that must arrive by noon the next day or lose its value. The Postal Service has the right to decide what is urgent and what is not.[10]

US states have their own civil service systems modelled on the federal system, but some retain more of the original merit selection and testing features; for example, California has over a hundred different exams for various special skills and technical jobs.[11] But in general, states and cities have similarly politicized employment systems and affirmative action programs, and suffer similarly by having more than a few incompetent employees and the public employee unions that prevent their removal. And since there is limited reward for competence and little downside for incompetence, morale of high-achieving employees suffers and many of the best leave for private industry.


[1] “METRO NEWS BRIEFS: CONNECTICUT; Judge Rules That Police Can Bar High I.Q. Scores,” New York Times, Sept. 9, 1999

[2] “Airport job insecurity / When feds take over, many Filipino screeners will be unemployed,” Annie Nakao, San Francisco Chronicle, 3-18-2002
http://www.sfgate.com/news/article/Airport-job-insecurity-When-feds-take-over-2863780.php
[3] “VA Manager Says ‘Thank God’ They Don’t Have To Hire Veterans,” Daily Caller, Luke Rosiak, 04/13/2016
http://dailycaller.com/2016/04/13/va-manager-says-thank-god-they-dont-have-to-hire-veterans/
[4] “Ex-EPA official pleads guilty to theft, pretended to work for the CIA.” By Ann E. Marimow and Lenny Bernstein, Washington Post, September 27, 2013 https://www.washingtonpost.com/local/crime/ex-epa-official-expected-to-plead-guilty-of-theft/2013/09/26/2c95166e-2708-11e3-ad0d-b7c8d2a594b9_story.html
[5] “Woman to become NY firefighter despite failing crucial fitness test.” New York Post. Susan Edelman. May 3, 2015
http://nypost.com/2015/05/03/woman-to-become-ny-firefighter-despite-failing-crucial-fitness-test/
[6] “How Carbon Dioxide Became a ‘Pollutant’.”
By Keith Johnson, Wall Street Journal, April 18, 2009
http://www.wsj.com/articles/SB124001537515830975
[7] OPM “FAQ: Assessment Policy”
https://www.opm.gov/FAQs/QA.aspx?fid=a6da6c2e-e1cb-4841-b72d-53eb4adf1ab1&pid=796dd1e8-3069-4aaf-860e-2710cbb32360
[8] OPM: “Classification and Qualifications: general Schedule Qualification Policies.” Viewed 4-15-2016. https://www.opm.gov/policy-data-oversight/classification-qualifications/general-schedule-qualification-policies/
[9] https://en.wikipedia.org/wiki/Private_Express_Statutes
[10] “Private Couriers and Postal Service Slug It Out,”
New York Times, February 14, 1994. http://www.nytimes.com/1994/02/14/business/private-couriers-and-postal-service-slug-it-out.html
[11] California Dept. of Human Resources: “Take or Schedule an Exam,” accessed 3-15-2016. https://exams.spb.ca.gov/exams/exam_start_submit.cfm


Death by HR: How Affirmative Action Cripples OrganizationsDeath by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations,  available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

 


More reading on other topics:

Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
The Great Progressive Stagnation vs. Dynamism
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Corrupt Feedback Loops: Public Employee Unions
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Selective Outrage
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour

On Affirmative Action and Social Policy:

Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism

The greatest hits from SubstrateWars.com (Science Fiction topics):

Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Selective Outrage
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

Civil Service: Woodrow Wilson’s Progressive Dream

President Woodrow Wilson - Campaign Button

President Woodrow Wilson – Campaign Button

Until the victory of Andrew Jackson and his hoard of uncouth Democrats in the presidential election of 1828, the relatively tiny Federal government and its agencies were staffed largely by genteel men connected with the Eastern establishment. The Jacksonians came out of the expanding Western and Southern states, which resented the high tariffs imposed by the Eastern establishment to benefit manufacturers, and the new Democratic Party practiced the spoils system of patronage appointments — government jobs were filled by political supporters, and the promise of a government job was often the motivation for campaign workers. While today many see election contributions as corrupting, it was far more wasteful and corrupt to have government jobs turned over to barely competent campaign workers. This turnover on the election of a new administration did remove staff who might not implement the new administration’s policies, but it also broke continuity and allowed for more corruption. This was not terribly harmful to the newish country since federal agencies had limited scope and power over commerce — after Jackson’s inauguration, 10% of government officers were replaced by new appointees, but that was 919 replaced out of less than ten thousand employees total.[1] For comparison, if postal workers are included, there are now around 2.8 million Federal employees.[2]

Corruption scandals were frequent, and the reform movement to bring in a professionalized meritocratic civil service at the Federal level succeeded with the passage of the Pendleton Act in 1883, which created a bipartisan Civil Service Commission to fill positions by merit and protect current employees from political interference. The number of jobs so protected expanded with each administration as they moved to shield their own political appointees from removal at the end of their terms, until all but the most senior policymaking positions were covered. Today, political appointees have to deal with a permanent bureaucracy under them, which can successfully resist needed reforms as well as corruption.

The idea of a civil service originally came from China, where for a thousand years positions in Imperial service were filled through difficult examinations covering Confucian doctrines, poetry, and calligraphy, which while not directly relevant to most bureaucratic work, at least selected for competence in writing and thought. While in theory such exam systems would allow anyone of any class to demonstrate merit and move into a powerful position, in practice only the children of the landed gentry had the time and resources to study for the exams, but at least their system kept out those whose only qualification was a powerful patron.

As an interesting side-note, the Chinese idea of meritocracy goes back at least 2300 years. The recent discoveries of writings on bamboo from that era revealed considerable philosophical ferment, with the idea of rulers abdicating their power to successors selected by merit as the proper action of a wise ruler:

The manuscripts’ importance stems from their particular antiquity. Carbon dating places their burial at about 300 BCE. This was the height of the Warring States Period, an era of turmoil that ran from the fifth to the third centuries BCE. During this time, the Hundred Schools of Thought arose, including Confucianism, which concerns hierarchical relationships and obligations in society; Daoism (or Taoism), and its search to unify with the primordial force called Dao (or Tao); Legalism, which advocated strict adherence to laws; and Mohism, and its egalitarian ideas of impartiality. These ideas underpinned Chinese society and politics for two thousand years, and even now are touted by the government of Xi Jinping as pillars of the one-party state.

The newly discovered texts challenge long-held certainties about this era. Chinese political thought as exemplified by Confucius allowed for meritocracy among officials, eventually leading to the famous examination system on which China’s imperial bureaucracy was founded. But the texts show that some philosophers believed that rulers should also be chosen on merit, not birth—radically different from the hereditary dynasties that came to dominate Chinese history.[4]

The Chinese Imperial civil service was widely admired by Europeans and was the inspiration for civil service reforms in the British Empire, where posts had previously been handed out by patronage or directly sold. The British East India Company College was founded in 1806 to train bureaucrats for their Indian civil service, and the idea of merit and examinations to select the best employees for government service spread through Europe and to the US.

Before he was elected president, the Progressive academic Woodrow Wilson wrote “The Study of Administration,” an essay setting forth his ideas on how public agencies should be organized. In 1886, his ideals of eternal, professional bureaucracies expanding enlightened government control over every service may have sounded achievable:

There is scarcely a single duty of government which was once simple which is not now complex; government once had but a few masters; it now has scores of masters. Majorities formerly only underwent government; they now conduct government. Where government once might follow the whims of a court, it must now follow the views of a nation.

And those views are steadily widening to new conceptions of state duty; so that, at the same time that the functions of government are every day becoming more complex and difficult, they are also vastly multiplying in number. Administration is everywhere putting its hands to new undertakings. The utility, cheapness, and success of the government’s postal service, for instance, point towards the early establishment of governmental control of the telegraph system. Or, even if our government is not to follow the lead of the governments of Europe in buying or building both telegraph and railroad lines, no one can doubt that in some way it must make itself master of masterful corporations. The creation of national commissioners of railroads, in addition to the older state commissions, involves a very important and delicate extension of administrative functions. Whatever hold of authority state or federal governments are to take upon corporations, there must follow cares and responsibilities which will require not a little wisdom, knowledge, and experience. Such things must be studied in order to be well done. And these, as I have said, are only a few of the doors which are being opened to offices of government. The idea of the state and the consequent ideal of its duty are undergoing noteworthy change; and “the idea of the state is the conscience of administration.” Seeing every day new things which the state ought to do, the next thing is to see clearly how it ought to do them.

This is why there should be a science of administration which shall seek to straighten the paths of government, to make its business less unbusinesslike, to strengthen and purify its organization, and to crown its duties with dutifulness. This is one reason why there is such a science.

Wilson looked to European models (as Progressives still do):

But where has this science grown up? Surely not on this side [of] the sea. Not much impartial scientific method is to be discerned in our administrative practices. The poisonous atmosphere of city government, the crooked secrets of state administration, the confusion, sinecurism, and corruption ever and again discovered in the bureaux at Washington forbid us to believe that any clear conceptions of what constitutes good administration are as yet very widely current in the United States. No; American writers have hitherto taken no very important part in the advancement of this science. It has found its doctors in Europe. It is not of our making; it is a foreign science, speaking very little of the language of English or American principle. It employs only foreign tongues; it utters none but what are to our minds alien ideas. Its aims, its examples, its conditions, are almost exclusively grounded in the histories of foreign races, in the precedents of foreign systems, in the lessons of foreign revolutions. It has been developed by French and German professors, and is consequently in all parts adapted to the needs of a compact state, and made to fit highly centralized forms of government; whereas, to answer our purposes, it must be adapted, not to a simple and compact, but to a complex and multiform state, and made to fit highly decentralized forms of government. If we would employ it, we must Americanize it, and that not formally, in language merely, but radically, in thought, principle, and aim as well. It must learn our constitutions by heart; must get the bureaucratic fever out of its veins; must inhale much free American air…

…in spite of our vast advantages in point of political liberty, and above all in point of practical political skill and sagacity, so many nations are ahead of us in administrative organization and administrative skill. Why, for instance, have we but just begun purifying a civil service which was rotten full fifty years ago? To say that slavery diverted us is but to repeat what I have said — that flaws in our constitution delayed us.

Of course all reasonable preference would declare for this English and American course of politics rather than for that of any European country. We should not like to have had Prussia’s history for the sake of having Prussia’s administrative skill; and Prussia’s particular system of administration would quite suffocate us. It is better to be untrained and free than to be servile and systematic. Still there is no denying that it would be better yet to be both free in spirit and proficient in practice. It is this even more reasonable preference which impels us to discover what there may be to hinder or delay us in naturalizing this much-to-be-desired science of administration.

We may find his technocratic idealism tragic and misguided, since we know his efforts did not result in that decentralized, responsive American-style civil service he had envisioned. Wilson admired the Prussian social welfare state, and the implementation of many of its features — government healthcare, government pension schemes, and centralized public schools to train good workers amenable to state guidance — became the Progressive program for the succeeding decades, with today’s Progressives continuing to promote universal pre-K and government-run healthcare as central goals over a hundred years later. Wilson blamed that stodgy old Constitution for holding back progress, which he thought could be achieved through “scientific administration” of government which would leave citizens “free in spirit and proficient in practice.” Where, in practice, implementation of his ideas created an underclass of citizens so unproficient as to lose their freedom to dependency and addiction.

Wilson responded to critics who argued civil servants would be unaccountable:

And let me say that large powers and unhampered discretion seem to me the indispensable conditions of responsibility. Public attention must be easily directed, in each case of good or bad administration, to just the man deserving of praise or blame. There is no danger in power, if only it be not irresponsible. If it be divided, dealt out in shares to many, it is obscured; and if it be obscured, it is made irresponsible. But if it be centred in heads of the service and in heads of branches of the service, it is easily watched and brought to book.

I know that a corps of civil servants prepared by a special schooling and drilled, after appointment, into a perfected organization, with appropriate hierarchy and characteristic discipline, seems to a great many very thoughtful persons to contain elements which might combine to make an offensive official class, — a distinct, semi-corporate body with sympathies divorced from those of a progressive, free-spirited people, and with hearts narrowed to the meanness of a bigoted officialism. Certainly such a class would be altogether hateful and harmful in the United States. Any measure calculated to produce it would for us be measures of reaction and of folly….

But to fear the creation of a domineering, illiberal officialism as a result of the studies I am here proposing is to miss altogether the principle upon which I wish most to insist. That principle is, that administration in the United States must be at all points sensitive to public opinion. A body of thoroughly trained officials serving during good behavior we must have in any case: that is a plain business necessity. But the apprehension that such a body will be anything un-American clears away the moment it is asked, What is to constitute good behavior? For that question obviously carries its own answer on its face. Steady, hearty allegiance to the policy of the government they serve will constitute good behavior. That policy will have no taint of officialism about it. It will not be the creation of permanent officials, but of statesmen whose responsibility to public opinion will be direct and inevitable.

Bureaucracy can exist only where the whole service of the state is removed from the common political life of the people, its chiefs as well as its rank and file. Its motives, its objects, its policy, its standards, must be bureaucratic. It would be difficult to point out any examples of impudent exclusiveness and arbitrariness on the part of officials doing service under a chief of department who really served the people, as all our chiefs of departments must be made to do. It would be easy, on the other hand, to adduce other instances like that of the influence of Stein in Prussia, where the leadership of one statesman imbued with true public spirit transformed arrogant and perfunctory bureaux into public-spirited instruments of just government….

The ideal for us is a civil service cultured and self-sufficient enough to act with sense and vigor, and yet so intimately connected with the popular thought, by means of elections and constant public counsel, as to find arbitrariness of class spirit quite out of the question.

In hindsight, we know that accountability has been almost completely lost, with the recent failures at Federal agencies resulting in nothing more punishing than transfers or brief suspensions. We’ll go over how this came to be in the later chapter on public employee unions, which have made punishment of negligent or criminal employees, merely difficult under civil service rules, near-impossible. And as a result, there is close to zero response to efforts from above to make bureaucracies function efficiently and responsively. Public anger over scandals at the VA and the IRS have resulted in little or no reform and bureaucracies have grown larger and less responsive as their functions have multiplied until no one — not even Congress — can control them. Similarly, already heavily-regulated banks and mortgage agencies were nationalized (in the case of Fannie Mae and Freddie Mac) or heavily fined after the financial crisis of 2008, but only one banker spent time in jail. Bankers as a class had become as immune from prosecution as civil servants.

And our politics are now dominated by a government Leviathan supported and supporting “a distinct, semi-corporate body with sympathies divorced from those of a progressive, free-spirited people, and with hearts narrowed to the meanness of a bigoted officialism” — unaccountable regulators, civil servants, unionized public employees, and regulated big businesses protected from upstart competition.

Progressives had good intentions — directed by Science and molding flawed human beings into more virtuous citizens by edict and government training, the enlightened Administration would shepherd the flock to a brighter, healthier future. The Progressive causes — Prohibition, eugenics, antitrust, the Federal Reserve system, centralized public schooling, Social Security and Medicare — have all been implemented, and while the most flawed (Prohibition, eugenics) were quickly abandoned and renounced, many remain with us, rooted so deeply in our society that major change seems impossible. Too many vested interests and public employees depend on them, and voters are more and more likely to be dependent as well, and so unwilling to risk voting for any reforms. But as Herb Stein said, “If something cannot go on forever, it will stop,” and the current worldwide debt crisis will forcibly dismantle these systems as the money to support them in their current form evaporates. This seems to be the inevitable result of universal laws of bureaucratic growth in democratic systems, the kind of systemic corruption the Founding Fathers warned against when they set up what they hoped would remain a limited republican government.

[1] https://en.wikipedia.org/wiki/Spoils_system
[2] https://en.wikipedia.org/wiki/United_States_federal_civil_service
[4] “A Revolutionary Discovery in China,”
Ian Johnson, April 21, 2016. The New York Review of Books.

A Revolutionary Discovery in China


Death by HR: How Affirmative Action Cripples OrganizationsDeath by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations,  available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

 


More reading on other topics:

Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
The Great Progressive Stagnation vs. Dynamism
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Corrupt Feedback Loops: Public Employee Unions
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Selective Outrage
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour

On Affirmative Action and Social Policy:

Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism

The greatest hits from SubstrateWars.com (Science Fiction topics):

Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Selective Outrage
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy

Bootleggers and Baptists

Prohibition: Sheriff Dumps Bootleg Booze

Prohibition: Sheriff Dumps Bootleg Booze

When a campaign is underway to regulate a business or a product, it’s usually easy to identify two groups promoting increased regulation: “Bootleggers” (people who will benefit because the regulation hobbles a competitor) and “Baptists” (people who sincerely believe the new regulation will help others.) The Baptists naively think goodness will come from outlawing bad things, while the bootleggers are aware of unintended consequences and second- and third-order effects of the proposed regulation that will benefit them personally, but pretend to join the Baptists on a moral crusade. Marching together, they agitate for more laws and less freedom of choice.

“Bootleggers and Baptists” is a catch-phrase invented by regulatory economist Bruce Yandle for the observation that regulations are supported both by groups that want the ostensible purpose of the regulation, and by groups that profit from undermining that purpose.

For much of the 20th century, Baptists and other evangelical Christians have been prominent in political activism for Prohibition and Sunday closing laws restricting the sale of alcohol. Bootleggers sold alcohol illegally, and got more business if legal sales were restricted. “Such a coalition makes it easier for politicians to favor both groups. … [T]he Baptists lower the costs of favor-seeking for the bootleggers, because politicians can pose as being motivated purely by the public interest even while they promote the interests of well-funded businesses. … [Baptists] take the moral high ground, while the bootleggers persuade the politicians quietly, behind closed doors.

Strongly-motivated minority interest groups can move the political process toward satisfying their demands, as Prohibitionists did when they succeeded in getting the Eighteenth Amendment passed outlawing alcoholic beverages in the US, a ban which lasted from 1920 to 1933 before it was repealed by the Twenty-First Amendment. It took a decade of rising organized crime and disrespect for the law to finally rouse the great middle of the electorate to demand repeal.

Similar battles still take place on smaller scales. In a recent example,

Arkansas liquor stores have allied with religious leaders to fight statewide legalization of alcohol sales. The stores in wet counties don’t want to lose customers. The churches don’t want to lose souls. Larry Page, a Southern Baptist pastor and director of the Arkansas Faith and Ethics Council, which traces its roots to the Anti-Saloon League of Arkansas in 1899, [also recalled]. . .when his group joined with feminists to oppose pornography and cooperated with Mississippi casinos to fight gambling in Arkansas.

The selfish motivations of the bootleggers hide behind the naive but high-minded feelings of the Baptists. How can a politician oppose Goodness in the form of legislated morality?

Here are some other examples of the phenomenon:

Universal pre-K: Who can be against the education of young children, especially those growing up in poor environments for early learning? Surely extending public school to even earlier years will help underprivileged children catch up! And parents can use even more public-funded daycare to ease their burden, right?

While it’s common to see articles and editorials accepting the positive benefits of pre-K programs without question, the evidence is thin and suggests that some children can benefit from very high-quality programs, but that such benefits disappear after a few years. The Head Start federal program targeting poor children has been expensive and disappointing, with recent studies demonstrating little permanent improvement in outcomes in the long term.

As often happens, proponents start a few pilot programs, recruit highly-motivated staff and parents, and find significant positive benefits. When expanded and managed via the standard education bureaucracy and with less-motivated, unionized staff, benefits to the children shrink or disappear completely, with some programs actually worse for children than being left in a standard private preschool or home setting.

A well-regarded and funded program in Tennessee was studied by a grant-funded group of social scientists and educators at Vanderbilt who had every reason to bias the study to favor the state’s pre-K program. The result? (Emphasis added):

By the end of kindergarten, the control children had caught up to the TN‐VPK children and there were no longer significant differences between them on any achievement measures. The same result was obtained at the end of first grade using both composite achievement measures. In second grade, however, the groups began to diverge, with the TN‐VPK children scoring lower than the control children on most of the measures. The differences were significant on both achievement composite measures and on the math subtests. … In terms of behavioral effects, in the spring the first grade teachers reversed the fall kindergarten teacher ratings. First grade teachers rated the TN‐VPK children as less well prepared for school, having poorer work skills in the classrooms, and feeling more negative about school. It is notable that these ratings preceded the downward achievement trend we found for VPK children in second and third grades. The second and third grade teachers rated the behaviors and feelings of children in the two groups as the same; there was a marginally significant effect for positive peer relations favoring the TN‐VPK children by third grade teachers.

The constant drumbeat of publicity promoting Universal pre-K is motivated by the desire of teacher and public employee unions to employ more staff who will provide more revenue and political power for them. They are the bootleggers in the coalition pushing for Universal pre-K at local and federal levels, and the disorganized voices of those who would be hurt by such programs — operators of private preschools, parents of children who want to choose which daycare they pay for or handle pre-K nurturing themselves — are rarely heard, while the propaganda from the government PR offices and unions is well-funded by tax dollars and compulsory union dues.

Free College For All: Bernie Sanders is currently promoting a plan for free tuition at public colleges and universities for everyone. “Education” (in the form of conventional regimented schooling) is a sacred cow, and the belief that everyone is better off being sent to college after high school has been promoted by politicians for years. We’ll cover the pernicious results of policies based on that belief later in the chapter on Higher Education, but we’ve already seen what happens when you make subsidized student loans available to everyone: you get millions of deeply-indebted former students, both those who failed out because they should never have been admitted in the first place and those who learned little of value to the job market. You also get a high rate of inflation in college costs, as these loans allowed colleges to expand and compete for students with less concern for costs or outcomes.

The Baptists in this case are all those well-meaning people who believe everyone should go to college and get a professional white-collar job. The bootleggers are all of those college administrators and employees who benefit from increased funding and enrollment, the prospective students who want to have a free ride, and the politicians who rely on the support of academics. The scribes and government workers who are products of academia themselves write all the narratives in our society, and blue-collar workers and nonacademics who would be taxed to pay for this freebie get no taxpayer funding to tell their own stories.

Let well-known philosopher of labor Mike Rowe explain this:

Consider the number of college graduates today, who can’t find work in their chosen field. Hundreds of thousands of highly educated twenty-somethings are either unemployed or getting paid a pittance to do something totally unrelated to the education they borrowed a fortune to acquire. Collectively, they hold 1.3 trillion dollars of debt, and no real training for the jobs that actually exist. Now, consider the country’s widening skills gap – hundreds of thousands of good jobs gone begging because no one wants to learn a useful trade. It’s madness. “College For All” might sound good on the campaign trail, but in real life, it’s a dangerous platitude that reinforces the ridiculous notion that college is for people who use their brains, and trade schools are for people who use their hands. As if the two cannot be combined.

Universal Healthcare: The Baptists here are well-meaning people who think everyone should get good healthcare, and because they have been told by propagandists that everyone in Europe and Canada has free, quality healthcare that costs their government far less, they can’t imagine why the US shouldn’t have it, too. Which ignores the major differences between such programs — only Canada has single-payer without a parallel private-pay healthcare system, and even that is changing, while the Canadian provinces vary in costs and coverages, as well as waiting periods for nonemergency care. Meanwhile, European countries have systems that vary from Britain’s NHS, a completely government-owned and run healthcare system with enough problems that its breakdowns are daily news fodder, to Swiss and French programs that are really public-private insurance plans with cheaper basic options. “Medicare-for-All” as proposed by US universal healthcare proponents would expand the Medicare system, which is already headed for financial disaster as the population ages, to cover everyone. It’s never acknowledged that rising costs will then require rationing and onerous cost controls that would make the US system start to resemble Britain’s NHS — cheaper but lower quality, with worse outcomes for cancer treatments and limited access to more advanced care.

Who are the bootleggers? The ACA co-opted the big health insurance and drug companies to guarantee them a captive market with higher revenues in return for turning the private insurance market into a kind of regulated utility that everyone would be forced to join, which allows regulations to essentially tax younger and healthier people to subsidize the costs of the older and sicker without regard to ability to pay. We now have lower-middle-class working families paying much more than they would in a free market so that wealthy people with pre-existing conditions can get insurance at subsidized rates. While many pre-existing conditions were unfortunate accidents, some were acquired because of poor life choices and self-indulgent health and dietary habits — so now the rich couch potato who drank and ate himself to diabetes and heart problems suffers no penalty, at least financially, since some group of healthy families is paying extra to subsidize his care.

Single-payer, Medicare-for-All is another step toward micromanagement of both citizen lifestyles and medical procedures. The politicians are dreaming of more dependent voters who will always support them, as in Britain, where voters are continually told they can have a “better” NHS by voting in the right people. The problems of the British NHS cannot be solved by a change in administrations because they are due to its structure as a socialized service, with unionized civil service-style employee protections and the accompanying limited accountability for poor service and failure. Once in place, such systems are very difficult to repeal, and their bureaucracies, like today’s federal HHS and Medicare bureaucracies, provide a good place for political supporters to collect a paycheck while serving as the party of government’s permanent supporting class.

Climate Change: The Baptists here are citizens who believe that not only is global warming a man-made phenomenon resulting from increases in greenhouse gases in the atmosphere (that much is probably true), but that its onset will be rapid and severe enough to justify virtually any costly program proposed to limit the threat (which appears untrue, or at least unproven, as the simplistic early climate models have failed to correctly predict the amount of actual warming.) What price would you pay to save the planet? Even questioning the cost of proposed programs is viewed as heresy by true believers.

The bootleggers are the rent-seeking part of the coalition to “do something,” which began when the danger was first popularized and resulted in large increases in research funding for the small number of climate scientists who specialized in climate change research. As momentum built and more governments funded research and activism in the field, whole labs and careers depended on finding the danger to be as large as possible, to justify ever more research funding. Stoking popular fear, politicians could appear to be protecting citizens by promising more and more measures to slow greenhouse gas emissions. It became clear, though, that vested interests would not allow the least-cost, most economically-sound means of reducing emissions: research on solar and nuclear power generation and low, rebated carbon taxes which would allow businesses and citizens to gradually reduce emissions over time without sacrificing current plants and arrangements.

What happened instead: complex emissions credit schemes which allowed politicians to favor some interest groups over others while raking in hidden taxes from consumers; mandates requiring utilities to pay much more to purchase ever-increasing percentages of “green” power, generated at high cost from subsidized windmills and solar power plants which proved to work poorly or have limited service lives; and command-and-control regulations that shut down existing plants and closed down coal mines.

Each of these schemes had bootleggers waiting to profit: politically-connected investors in solar power schemes like Solyndra (bankrupt in 2011, with $535 million in federally-guaranteed loans and $25 million in California tax credits lost) and the Ivanpah steam-solar project ($2.2 billion, obsolete and unable to generate its designed power since the day it opened.) Both Ivanpah and Solyndra were huge bets on the wrong technologies, with standard photovoltaic panels falling in price so much that these huge investments were rendered uncompetitive shortly after they were funded. Ivanpah received $1.6 billion in loan guarantees from federal taxpayer funds, covering investments by its owners, BrightSource Energy, NRG Energy, and Google. The company has delayed payment on its loans and in late 2014 requested an additional $539 million in funding via a federal tax credit program.

Spain’s Abengoa, a multinational alternative energy company, has filed for Chapter 11 protection in the US, and in March of 2016 filed for bankruptcy. The federal loan guarantees for $1.45 billion for the Solano solar plant in Arizona and the $1.2 billion for the Mojave solar project in California now appear to be US taxpayer losses. Again, enormous sums of taxpayer money built scaled-up projects with obsolete technology which could only produce power at many times the cost of natural gas plants.

In parts of Europe and the US, poor and middle-class ratepayers pay much more for electricity because of these state-required green energy programs, while many wealthy consumers avoid paying the inflated rates by installing subsidized solar panels.

Other bootleggers include the large number of government staff now employed to work on climate change issues and propaganda in governments around the world, with the many UN climate meetings in cities like Paris and Copenhagen serving as luxurious junkets for tens of thousands of functionaries.

Even businessmen in the petroleum industry will surreptitiously support green activist organizations they believe will harm competitive fuels more than theirs. Aubrey McClendon, who made and then lost a huge fortune pioneering the fracking production of natural gas in the US, “secretly gave $25 million to the Sierra Club for the Sierra Club’s ‘Beyond Coal’ campaign, for the obvious reason that it would benefit his natural gas company if coal were squeezed by new regulation.”:

But as the Sierra Club and other environmental groups have made clear, once they’re done killing coal they’re going after natural gas next. Did McClendon think they’d spare him? He was a perfect example of Churchill’s description of an appeaser as someone who feeds the crocodile hoping he’ll be eaten last. I lost all respect for McClendon when this news leaked out, and it was a great embarrassment to the Sierra Club as well. He was rent-seeking bootlegger. A lot of them died in high-speed crashes back during Prohibition, usually being chased by the law.

Internet Gambling Prohibitions: This is closer to the coalitions against alcohol, with many religious and social organizations concerned about gambling addiction (the Baptists) joining with casino magnates, Indian tribes, and state lotteries (the bootleggers) to try to outlaw a competitor — easy gambling on the Internet. In 2015, Sheldon Adelson, billionaire head of the Las Vegas Sands and numerous hi-revenue casinos worldwide, promoted a bill in Congress (The Restoration of America’s Wire Act, or RAWA) intended to prohibit Internet gambling at the federal level, superseding state authorizing laws. He hired a lobbying firm, Steptoe and Johnson, which was then also hired by fantasy sports companies — which would be exempt under the proposed Act. By outlawing some forms of online gambling but exempting others, the proposed law would preserve casino monopolies and take control away from states.

Tobacco: Vaping equipment, or e-cigs, provide the appearance of cigarettes and a dose of the nicotine smokers crave in a delivery format (evaporated carrier with nicotine and flavoring) that is much less harmful to smoker’s lungs. Many experts recommended smokers switch to e-cigs immediately, since harm to their health would be much reduced. But e-cigs threaten both the makers of the highly-regulated and taxed legacy cigarettes and the makers of smoking cessation products like nicotine gum and patches — often the same companies! So paid “medical authorities” and lobbyists began to work hard to promote the view that the new and untested e-cigs were just as hazardous — if not more hazardous, since their long-term effects were unknown! — than traditional cigarettes. Cato’s Regulation put out a good paper on the bootleggers-and-Baptists pattern in this new propaganda war:

Now consider the situation with electronic cigarettes (e-cigs) and their incumbent competitors: tobacco companies that produce and sell traditional cigarettes and drug companies that produce nicotine replacement therapies (NRTs). The U.S. cigarette market has been regulated, one way or another, since colonial times. Along the way, federal regulation—coupled most recently with the state attorneys general Master Settlement Agreement (MSA, about which we say more later)—effectively cartelized the industry, bringing increased profits to the industry and higher cigarette prices and reduced cigarette consumption throughout the nation. Falling cigarette consumption gladdened the hearts of health advocates, who fought for the elimination of tobacco products, while higher industry profits brought joy to tobacco company owners.

This happy Bootlegger/Baptist equilibrium is now threatened by the exploding sales of e-cigs, a new technology for delivering nicotine to all who want it without simultaneously bringing the harmful combustion-induced chemicals associated with burned tobacco. Today, there are many e-cig producers and numerous small shops selling e-cigs and customized nicotine-dispensing products. It is a rapidly evolving market that has been relatively open to new entrants and innovation in product design. Given the quick growth in e-cig use (much of which comes at the expense of cigarette sales), previous political deals that stabilized tobacco industry profits are at risk. The major tobacco companies are understandably not sitting idle. They, too, have entered the e-cig marketplace and are responding in other ways to the new competition.

The major pharmaceutical companies have not been idle either. The makers of smoking cessation products, including NRTs such as the nicotine patch and nicotine gum, are major players in the politics of tobacco and nicotine. The producers of traditional nicotine delivery devices and NRTs are at work trying to stop the disruptive e-cig producers. These Bootleggers are joined by health advocates (Baptists) who raise questions about unknown potentially harmful effects that may be associated with e-cig use. Both groups—cigarette and NRT producers on the one hand, and health advocates on the other—would like to stop new e-cig producers or severely crimp their ability to compete.

Lawfare between the tobacco industry and state attorneys general was settled in 1998 with the MSA (Master Settlement Agreement), which set the payments due to the states to compensate them for the additional Medicare and Medicaid costs states would bear because of tobacco products. The agreement was carefully designed to send money to the states while protecting the incumbent manufacturers from competition, allowing them to raise prices more than required to pay the fines.

Again from Cato’s paper:

The heart of the MSA was the promised payment of $206 billion by the four participating cigarette companies to the participating states. Those payments would be tax deductible and the costs would be paid by consumers in the form of higher cigarette prices. (Because cigarette consumption is highly price inelastic, the cost of the price increase was largely borne by consumers rather than producers.) The MSA presented state legislatures with a simple choice: either accept the MSA, in which case they would be able to spend their state’s share of the billions of dollars raised from smokers, or reject the proposed statute and their states’ smokers would still pay the higher prices necessary to fund the deal but they would lose their claim on the money. Not surprisingly, every state legislature took the money.

Responsibility for the payments was allocated among the cigarette companies in proportion to their current market share, thereby reducing the incentive for the participating cigarette companies to engage in price competition to increase their respective market shares. The structure of the MSA thus provided a powerful incentive for each company to be satisfied with the status quo.

The MSA also attempted to protect the major cigarette companies from new competition. At the time of the agreement, the four participating cigarette companies accounted for about 99 percent of domestic cigarette sales. Increasing cigarette prices to pay for the settlement risked a loss of market share to marginal competitors or new entrants. Therefore the MSA provided that for every percent of market share over 2 percent lost by a participating cigarette manufacturer, the manufacturer would be allowed to reduce its payments to the states by 3 percent, unless each participating state enacted a statute to prevent price competition from non-participating manufacturers (which each state did). The statutes require nonparticipating cigarette producers to make payments equal to or greater than what they would owe had they been participants in the agreement, to eliminate any cost advantage.

The MSA also included restrictions on cigarette marketing practices agreed to by the participating producers. The advertising limits were portrayed as a public health measure because they reduced advertising that could influence young adults and teens. The limits also reinforced the anticompetitive nature of the MSA by making it more costly for new brands or entrants to secure market share through promotional efforts.

The MSA’s cartel-reinforcing provisions sufficiently suppressed competition to enable cigarette companies to take advantage of the price inelasticity of cigarette demand and obtain record profits. This made it possible for the major cigarette manufacturers to increase prices by more than was necessary to make the mandated MSA payments.

Having made a deal to get big money for states and attorneys while protecting the companies from competition and raising prices more than enough to make the addicted smokers themselves pay the full cost of the settlement, many of the states decided to grab their money immediately by selling municipal (federal tax-free) bonds backed by the MSA payments expected. California alone issued at least $16.8 billion in such bonds, proceeds being used for both immediate expenses and long-term capital improvements. Legislators appear to have forgotten that the supposed purpose of the payments was to cover smoking-related expenses of future medical care for the state’s population, and instead chose to spend the money immediately on unrelated matters while leaving the burden of those health expenses with future taxpayers.

In some cases, however, the bonds are backed by secondary pledges of state or local revenues, which creates what some see as a perverse incentive to support the tobacco industry, on whom they are now dependent for future payments against this debt.

Tobacco revenue has fallen more quickly than projected when the securities were created, leading to technical defaults in some states. Some analysts predict that many of the bonds will default entirely. Many of the longer-term bonds have been downgraded to junk ratings. More recently, financial analysts began raising concerns that the rapid growth of the electronic cigarette market is accelerating the decline of $97 billion outstanding in tobacco bonds…. Lawmakers in several states proposed measures to tax e-cigarettes like traditional tobacco products to offset the decline in TMSA revenue. They anticipate that taxing or banning e-cigarettes would be beneficial to the sale of combustible cigarettes. — Wikipedia on “Tobacco Master Settlement Agreement”

Vested interests, including tobacco companies and the states, now actively seek to suppress e-cigs or at least tax them enough to make up for any lost revenue as they are adopted. This means they are actively working to keep smokers addicted to the most hazardous form of nicotine consumption, with its resultant cancers and other diseases. The original Baptist goal of helping smokers quit the habit to avoid cancer and early death has long since been forgotten.

Minimum Wage: Baptists: voters who want low-paid workers to have better lives and higher incomes, imagining poor families will benefit while businesses will pay the costs. Bootleggers: Politicians needing an issue to show they want to help “working families” and unions who represent some minimum-wage workers, but more importantly represent many more workers who make more than that, who will get even higher wages as a result of existing contracts and the outlawing of lower-paid laborers who might compete with them.

Economically, it’s very clear: minimum wage laws harm inexperienced and unskilled workers by making it illegal for them to be employed at wage rates that reflect the value they can add with their labor. Those workers won’t be hired, and many will be replaced by automation as they are priced out of the labor market. Politicians and union bosses won’t lose their jobs, even as unemployment among the unskilled increases as a result of the new minimum wage law. Most unionized workers make much more than minimum wage now, so they will keep their jobs while outlawing lower-priced nonunion competition. Economists who study the issue tend to agree there is a small negative effect on employment when minimum wages are increased slightly, but the large increases now proposed may do much greater harm by reducing hours and eliminating jobs for unskilled workers. The economists who find no negative effects tend to be labor economists, who tend to be supported by government and labor union funding and so have some conflict of interest in their researches.

Meanwhile, small business owners are ignored when they explain their response to much higher minimum wages has to be reduced hours, higher prices, and possibly going out of business since many have committed to expensive leases and can’t withstand a huge increase in costs:

[Seattle restaurant owner Grant Chen wrote of] his struggles to stay in business as he faces a 61% increase in his labor costs from Seattle’s $15 minimum wage initiative. As I’ve mentioned before on CD, the $15 an hour minimum wage law isn’t really ultimately “a political problem as much as it’s a simple math problem,” as Anthony Anton of the Washington Restaurant Association explained the situation. And Grant Chen and other Seattle restauranteurs like Brendan McGill (owner of Hitchcock Restaurant and Hitchcock Deli) are finding out that the new restaurant math of Seattle’s $15 minimum wage is breaking the system…. a 61% increase in wages from $9.32 to $15 an hour is like imposing an annual tax on restaurants of $11,360 per full-time employee. If you understand that a $11,360 tax per employee (and $113,600 in higher labor costs for every 10 employees) would drive many restaurants out of business, you’ll understand why the “new restaurant math of a $15 minimum wage” is making Grant Chen’s restaurant unprofitable, and why it is driving him out of business.

The Baptists are told hard-working poor families will enjoy richer lives, but it’s rarely mentioned that young people looking for summer work or just starting out will find it much harder to reach that first rung on the career ladder.

As Glenn Reynolds of Instapundit says:

The Los Angeles Times report somehow fails to list union workers among the winners. They earn quite a bit more than the minimum, but many of them have their pay scales indexed to the minimum wage. Unions also give heavily to Democratic politicians who support union-friendly issues like hiking the minimum wage.

And the losers? Anyone whose labor is worth less than $15 an hour, and who is about to learn the hard way that the real minimum wage is always zero.

They Wrote a Book On It: Economist Bruce Yandle (who coined the term “bootleggers and Baptists” in 1983) has a book out with co-author Adam Smith, Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics. Recommended for further study and examples, notably TARP, a $700 billion emergency response to the economic crisis of 2008 which ended up as a field day for bootleggers and rent-seekers.


Death by HR: How Affirmative Action Cripples OrganizationsDeath by HR: How Affirmative Action Cripples Organizations

[From Death by HR: How Affirmative Action Cripples Organizations,  available now in Kindle and trade paperback.]

The first review is in: by Elmer T. Jones, author of The Employment Game. Here’s the condensed version; view the entire review here.

Corporate HR Scrambles to Halt Publication of “Death by HR”

Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.

 


More reading on other topics:

Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
The Great Progressive Stagnation vs. Dynamism
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Corrupt Feedback Loops: Public Employee Unions
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Selective Outrage
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour

On Affirmative Action and Social Policy:

Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism

The greatest hits from SubstrateWars.com (Science Fiction topics):

Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Selective Outrage
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare

More reading on the military:

US Military: From No Standing Armies to Permanent Global Power
US Military: The Desegration Experience
The VA Scandals: Death by Bureaucracy