tomorrowland

Death by HR: The Great Enrichment to the Great Slackening

We’re going to talk about the Great Slackening and Human Resources (HR’s) role in damaging team effectiveness, and thus hamstringing business productivity and growth. But first we need to see the even bigger picture: the Great Slackening comes after a long period of powerful growth and change which started in Europe but swept most of the world, transforming stagnant, poverty-and-disease-ridden societies into a thriving, world-spanning technical civilization — the Great Enrichment. We refer to the culture that laid the foundation for this miracle as Western Civilization — though it’s not especially Western now as many elements have been adopted in the East.

As wealth has grown, those protected from life’s harsher lessons by being born to great wealth and privilege have turned to sabotaging the very freedom and free markets that created that wealth — but that is nothing new in the world, where it has long been folk wisdom (“clogs to clogs in three generations”[1]) that the first generation of family wealth is generated by driven and productive founders, the next by not-so-driven conventional maintainers, and by the third generation, wealth is dissipated and pampered decadents run the family business into the ground if they are still in charge. Something similar happens to entire cultures unless leadership transfers to newer and hungrier elements as older generations grow wealthy and forget hunger, and the Great Slackening can be viewed as the consequence of the clinging to power of a wealthy elite who unconsciously act to keep down threats to their status from the new fortunes that might arise if free enterprise is allowed to grow unchecked.

Human status is relative, and those unwilling to work hard to keep their already-high status tend to rely on keeping down threats from nouveau riche others, which requires nothing more than political contributions and unthinking support of the status quo administrative state, which will happily regulate away threats of competition. This is certainly bad for hard-working, newly-middle-class strivers, but it’s also bad for society as a whole, stifling those who might have created the new technologies and businesses of a brighter future.

Economist Deirdre McCloskey has written some great books summarizing the culture that produced the Great Enrichment. Her latest, Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World,[2] recaps the cultural features that allowed billions of people to escape poverty in the last few centuries. Her paper “The Great Enrichment: A Humanistic and Social Scientific Account,” summarizes:[3]

From 1800 to the present the average person on the planet has been enriched in real terms by a factor of ten, or some 900 percent. In the ever-rising share of places from Belgium to Botswana, and now in China and India, that have agreed to the Bourgeois Deal — “Let me earn profits from creative destruction in the first act, and by the third act I will make all of you rich” — the factor is thirty in conventional terms and, if allowing for improved quality of goods and services, such as in improved glass and autos, or improved medicine and higher education, a factor of one hundred. That is, the reward from allowing ordinary people to have a go, the rise at first in northwestern Europe and then worldwide of economic liberty and social dignity, eroding ancient hierarchy and evading modern regulation, has been anything from 2,900 to 9,900 percent. Previous “efflorescences,” as the historical sociologist Jack Goldstone calls them, such as the glory of Greece or the boom of Song China, and indeed the Industrial Revolution of the eighteenth century in Britain, resulted perhaps in doublings of real income per person—100 percent, as against fully 2,900 percent since 1800.

What needs to be explained in a modern social science history, that is, is not the Industrial Revolution(s) but the Great Enrichment, one or two orders of magnitude larger than any previous change in human history. If we are going to be seriously quantitative and scientific and social we need to stop obsessing about, say, whether Europe experienced a doubling or a tripling of real income before 1800, or this or that expansion of trade in iron or coal, and take seriously the lesson of comparative history that Europe was not unique until 1700 or so. We need to explain the largest social and economic change since the invention of agriculture, which is not the Industrial Revolution, not to mention lesser efflorescences, but the Great Enrichment.

In explaining it, I have argued, it will not do to focus on capital accumulation or hierarchical exploitation, on trade expansion or class struggle. This is for two sorts of reasons, one historical and the other economic…. Historically speaking, neither accumulation nor exploitation nor trade or struggle is unique to the early modern world. Medieval peasants in Europe saved more, in view of their miserable yield-seed ratios, than did any eighteenth-century bourgeois. Slave societies such as those of the classical Mediterranean could in peaceful times see a doubling of real income per person, but no explosion of ingenuity such as overcame northwestern Europe after 1800. The largest trade until very late was across the Indian Ocean, not the Atlantic, with no signs of a Great Enrichment among its participants. Unionism and worker-friendly regulation came after the Great Enrichment, not before. Thus world history.

Economically speaking, capital accumulation runs out of steam (literally) in a few decades. As John Maynard Keynes wrote in 1936, the savings rate in the absence of innovation will deprive “capital of its scarcity-value within one or two generations.” Taking by exploitation from slaves or workers results merely in more such fruitless capital accumulation, if it does, and is anyway is unable to explain a great enrichment for even the exploited in the magnitude observed, absent an unexplained and massive innovation. The gains from trade are good to have, but Harberger triangles show that they are small when put on the scale of a 9,900 percent enrichment. Government regulation works by reducing the gains from trade-tested betterment, and unions work mainly by shifting income from one part of the working class to another, as from sick people and apartment renters to doctors and plumber. Thus modern economics.

What then? A novel liberty and dignity for ordinary people, among them the innovating bourgeoisie, gave masses of such people, such as the chandler’s apprentice Benjamin Franklin, or the boy telegrapher Thomas Edison, an opportunity to innovate. It was not capital or institutions, which were secondary and dependent. It was the idea of human equality. Egalitarian economic and social ideas, not in the first instance steam engines and universities, made the modern world. One history of Western politics,” writes the political philosopher Mika LaVaque-Manty, citing Charles Taylor and Peter Berger (he could have cited most European writers on the matter from Locke and Voltaire and Wollstonecraft through Tocqueville and Arendt and Rawls), “has it that under modernity, equal dignity has replaced positional honor as the ground on which individuals’ political status rests.”

Out of common-law Northern European traditions, then, came the rule of law and equal treatment of all, at first just landholding men, but then every citizen of all stations, sexes, and races. Hard-won freedoms and respect for the individual gave each person enough security in their person and property to motivate them to work harder, since they could retain the fruits of their labors and hope to advance themselves and their heirs with less fear of theft by the powerful. This is related to the decline of the “Culture of Honor” (which relied on aggression and violence to maintain individual property and status) and its replacement by the “Culture of Dignity,” which replaced violence and theft with the rule of law and property rights.[4] No longer could a higher-status warrior simply kill and confiscate the property of a lesser-status person who had blocked his path or insulted his status; disputes were resolved peacefully by compromise, or taken to court to be judged by law.

Now there have been many earlier civilizations which had the rule of law and at least some theoretical rights for citizens — those who weren’t slaves, at least. But until the 17th century, no Great Enrichment occurred because kings, nobles, clergy, or warriors could rewrite contracts and restrain trade as needed to keep others from rising to threaten their power. As McCloskey says:

Liberty and dignity for all commoners, to be sure, was a double-sided political and social ideal, and did not work without flaw. History has many cunning passages, contrived corridors. The liberty of the bourgeoisie to venture was matched by the liberty of the workers, when they got the vote, to adopt growth-killing regulations, with a socialist clerisy cheering them on. And the dignity of workers was overmatched by an arrogance among successful entrepreneurs and wealthy rentiers, with a fascist clerisy cheering them on. Such are the usual tensions of liberal democracy. And such are the often mischievous dogmas of the clerisy.

But for the first time, thank God—and thank the Levellers and then Locke in the seventeenth century, and Voltaire and Smith and Franklin and Paine and Wollstonecraft among other of the advanced thinkers in the eighteenth century—the ordinary people, the commoners, both workers and bosses, began to be released from the ancient notion of hierarchy, the naturalization of the noble gentleman’s rule over hoi polloi. Aristotle had said that most people were born to be slaves. “From the hour of their birth, some are marked out for subjection, others for rule.” Bishop (and Saint) Isidore of Seville said in the early seventh century that “to those unsuitable for liberty, [God] has mercifully accorded servitude.” So it had been from the first times of settled agriculture and the ownership of land. Inherited wealth was long thought blameless compared with earned wealth, about which suspicion hung. Consider South Asia with its ancient castes, the hardest workers at the bottom. And further east consider the Confucian tradition (if not in every detail the ideas of Kung the Teacher himself), which stressed the Five Relationships of ruler to subject, father to son, husband to wife, elder brother to younger, and—the only one of the five without hierarchy—friend to friend. The analogy of the king as father of the nation, and therefore “naturally” superior, ruled political thought in the West (and the East and North and South) right through Hobbes. King Charles I of England, of whom Hobbes approved, was articulating nothing but a universal and ancient notion when he declared in his speech from the scaffold in 1649 that “a King and a Subject are plain different things.”

The ability to freely question old ways, and to improve a trade or production process by innovation then drive out the old ways of doing things — and the old fortunes — by outcompeting them, trading the new products to distant lands, is what started the Great Enrichment off with the bang of the Industrial Revolution. Printing, steam power, mass production, standardized parts, and engineering science made it possible to innovate, spread the new ideas broadly and preserve them in libraries around the world, and invest the profits from innovation into even more innovation. The explosive growth of productivity allowed billions of people to escape hardscrabble rural subsistence farming for urban living and increased the number of people wealthy enough to think about science, art, and design instead of short-term survival.

Thomas Piketty’s Capital in the Twenty-First Century[5] (2013) was a best-seller promoting a fashionable theory that the rate of return on capital had been greater than economic growth in recent years, which automatically increased concentration of wealth and therefore inequality. Seized on by redistributionists to justify new taxes on wealth and new subsidies for the poor, it seemed to mechanistically explain increasing inequality as the result of automatic processes which could be counteracted by redistribution without harming the engine of growth.

Piketty’s explanations were disputed, and MIT economist Matthew Rognlie demonstrated that most of the excess capital accumulation — the enrichment of the wealthy — that Piketty had discussed came from outsized real estate price increases around the world, due primarily to elite control over land development that artificially increased the scarcity and price of prime real estate, notably housing.[6] A more recent paper from the IMF demolished Piketty’s claim that inequality increased in step with excess capital accumulation. Piketty’s theories were no longer as useful to promote larger government, since government control of real estate development and regulation of other economic sectors like energy and healthcare began to look like the sources of the increasing inequality. The heretical notion that it was control by the elites of the commanding heights of government that was actually raising prices and squeezing out the middle class began to spread….

Is the Great Enrichment over? Certainly it continues to expand into newly-opened territories like China and India, where the old Communist Party and Indian bureaucracies are giving ground to freer enterprise and mass movement of rural folk into the cities is transforming life. But in the developed countries which once led the world in innovation, countervailing forces of regulation and central planning are slowing and stopping growth.

This is now being called the Great Stagnation, or as I’m calling it in its corporate form, the Great Slackening. The rise of the administrative superstate in the US and the EU has given the already-powerful a tool to suppress threats from below, and under the guise of protecting the people, it’s making the people poorer and more dependent while limiting their freedoms.

—

[1] Clogs to Clogs in Three Generations https://en.wiktionary.org/wiki/clogs_to_clogs_in_three_generations
[2] Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, by Deirdre McCloskey, Univ. of Chicago Press, 2016.
[3] “The Great Enrichment: A Humanistic and Social Scientific Account,” by Deirdre Nansen McCloskey, 2016. http://deirdremccloskey.org/docs/pdf/McCloskey_ASSA2016.pdf
[4] See “Men of Honor vs Victim Culture,” by Jeb Kinnison. https://substratewars.com/2015/09/09/men-of-honor-vs-victim-culture/
[5] Capital in the Twenty-First Century by Thomas Piketty, 2013. See https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century
[6] “Deciphering the fall and rise in the net capital share,” by Matthew Rognlie. March 19, 2015 Brookings Papers on Economic Activities. https://www.brookings.edu/bpea-articles/deciphering-the-fall-and-rise-in-the-net-capital-share/

Death 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:

Death by HR: Good-Enough Cogs vs Best Employees
Death by HR: EEOC Incompetence and the Coming Idiocracy
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
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

California Dream Choo-Choo Lives On: Bay Bridge Lessons Ignored

New eastern span of the Bay Bridge – photo SF Chronicle

See the lovely bridge above? It cost about $13 billion dollars.

To update last week’s post about California’s disastrous high speed rail project, Regulation Strangling Innovation: Planes, Trains, and Hyperloop, the Obama administration has just given the already-failed project another four years to throw taxpayer money at connected consultants and contractors, delaying a halt to the boondoggle and recognition of its failure until long after Jerry Brown and Barack Obama are out of office (and then its waste of $billions will be blamed on “Republican intransigence”– which is rich in a one-party state.) The inept and corrupt process for building any large government project, especially in California, is more to blame.

First we’ll take a look at the mismanaged and endlessly-delayed project to replace the eastern half of the San Francisco-Oakland Bay Bridge, which had been damaged by the Loma Prieta quake of 1989. After the quake, temporary repairs reopened the old bridge to traffic but it was clear the span needed to be replaced as soon as possible.

The Atlantic’s Citylab summarizes the disastrous Bay Bridge saga:

The first cost estimates, released in 1995, figured both east and west spans of the bridge could be upgraded for a cuddly $250 million. By the time the new east span opened in September 2013 the price tag for that span alone had reached a reported $6.5 billion, with a B. Just your run-of-the-mill rise of 2,500 percent.

Cover: Remaking the Bay Bridge – Amazon

UC Berkeley planning scholar Karen Trapenberg Frick meticulously chronicles the reconstructed bridge in a new book, Remaking the San Francisco-Oakland Bay Bridge. With Frick and her book as guide, CityLab tracked bridge expenses over time to get some sense of how the project that Herbert Hoover once called “the greatest bridge yet constructed in the world” became yet another example of a major public works project in which the cost ended outrageously higher than it began — and some ideas for what to do about it.

$250 million (1995)

Following the earthquake, the California Department of Transportation (which goes by Caltrans) assembled a board to advise on a seismic retrofit of the Bay Bridge. The agency’s initial estimate for fixing both east and west spans came to $250 million…

$1 billion (1996)

In the blink of an eye, the Bay Bridge cost quadrupled. “I remember one day I woke up and it was a $1 billion estimate,” says Frick, who was working at the Metropolitan Transportation Commission (MTC) at the time. “Here you tell the public in ’95: we can do the whole thing for $250 million. They vote on a bond measure that allows them to fund this plus other retrofits in the state. Then they come back and go, actually it’s $1 billion.”

The cost increase was the result of detailed engineering studies conducted during the year or so after the initial estimate was released. Among other things, soil testing in the Bay had revealed that bridge pilings would need to be anchored “deeper into bedrock than expected,” she writes. The public, of course, wasn’t pleased. In the book, one Caltrans manager recalled the immediate reaction:

“The numbers we put together (on the bridge costs) at lunchtime on Tuesday became the main front-page heading in both the San Francisco Chronicle and the Los Angeles Times on Wednesday morning.”

$1.3 billion (1997)

In 1997, Caltrans offered a range of cost estimates for various retrofit designs to the east span. Ultimately the state legislature agreed to fund the bridge to the tune of $1.285 billion.

There was still the big question of what the bridge would look like. Governor Pete Wilson expressed official preference for a basic “skyway” — a straightforward viaduct unadorned by a tower. He said if Bay Area residents wanted “an aesthetically enhanced bridge,” they should pay for it themselves.

That didn’t sit well. Pulitzer-winning architectural critic Allan Temko blasted the skyway option as “dull” and likened it to “an outsized freeway ramp.” MTC head Mary King said of the skyway: “While we appreciate the governor has offered vanilla ice cream, we want chocolate sauce on top.” One Oakland resident wrote that since the Bay Area was full of such creative types, “I think each of us should draw our own bridge” and send it to MTC for consideration….

$2.6 billion (2001)

When Caltrans released new estimates for the east span in April 2001, the cost had roughly doubled to $2.6 billion. The agency gave two main reasons for the rise. Construction costs were way up with a strong economy — steel and concrete prices, in particular, spiked 18 percent from 1999 to 2000. Caltrans also blamed the two years of delay associated with selecting the final single-tower design.

Despite a cost increase of a couple billion dollars in just six years, Caltrans was confident in its new figure. “We’re pretty comfortable with these numbers,” said its director in 2001. The legislature passed a new law to fund the bridge in October. It included a $448 million rainy day provision that one state senator said “insulates us from what we were worried about—open-ended cost overruns.”

$5.5 billion (2005)

Famous last words. In August 2004, a new cost of $5 billion was announced, with the tower alone expected to cost at least twice the estimated $750 million. Caltrans blamed the rise on three factors: elevated insurance rates in the wake of 9/11, a 50-percent rise in steel costs related to China’s boom, and greater staff needs owing to so many bridge projects going at once. A state auditor added one more to the list — poor cost management.

“People like to blame the tower,” says Frick. “Well, the whole span increased cost, and the other bridges increased cost, too. We really have a problem of cost-estimating in addition to a challenge of doing a design at this magnitude in earthquake country. That’s what gets lost in the story.”

In late 2004, Governor Arnold Schwarzenegger tried to terminate some of the costs by suggesting the bridge didn’t need the tower at all. (“Without thinking that there’s a ton of engineering and that this has actually been designed as a whole structure,” says Frick.) The following year he relented and signed a law to cover the new costs — with a provision that any further overruns be the region’s responsibility….

$6.5 billion (Current)

In April 2006, a consortium involving American Bridge and Fluor won the tower contract. It was built in China to save money — a decision that carried its own costs when inspectors later found poor welding and busted bolts at key points that required fixing. [Ed. note: there are still suspect welds and parts of the bridge understructure that may fail in a quake the bridge was designed to survive — investigations are ongoing.] Frick says the current $6.5 billion total is a rough estimate, and that it doesn’t include interest or financing costs.

With those costs included, some expect the total price to double yet again—to

$13 billion.

At least the state got a functioning half-bridge for its $13 billion, though hidden defects may end up causing it to fail or need more expensive repairs. But an entire cross-continent standard 4-lane Interstate highway could have been built for that — the usual figure cited for rural Interstate construction costs is $4 million per mile, so one could have built 3,000 miles of Interstate with enough left over to handle suburban bypasses. Did the state learn any lessons from the bridge fiasco?

Not really. Because of the long drawn-out nature of these boondoggles, voters can find no single politician or legislator to bring to task for failures. Meanwhile, politicians can promise new projects and collect campaign contributions from interested unions and contractors. Voters are inclined to turn down big bond issues for infrastructure as a result, rightly suspecting they are being sold a fantasy budget for projects which will end up costing more and doing less. But they weren’t cynical enough to dodge the bullet train… which voters authorized in 2008 with passage of Proposition 1A.

Eight years have passed, and the goals of the project have been downsized: from the original promise of routine and fast passenger service from downtown LA to downtown San Francisco, to maybe a line from San Jose ending in the Central Valley. Speeds are down, costs are up, and ridership estimates and operating costs are far from the goals promised. Yet California courts have refused to halt the project, and it lives on through a drip of federal funds and California carbon credit subsidies — another tax weighing down state industry. The most recent Republican candidate for governor got some traction by labelling the project the “Crazy Train,” but not enough to overcome California’s preference for Democrats:

An attempt to get enough signatures to put an initiative on the ballot to shift some of the bullet train money to water supply and storage projects has been postponed until 2018.

Now the struggling project has received an extraordinary lifeline from the Obama administration:

The Obama administration threw the California bullet train project another lifeline Wednesday, extending the schedule by four years for construction of 118 miles of rail through the Central Valley, according to congressional officials.

The extension came through modification of a $2.5-billion grant that originally required completion of a segment of rail structures from Madera to Shafter by 2017.

The changes also allow the Department of Transportation to extend a cash advance to the state, which potentially means the California High-Speed Rail Authority can continue spending long after the original deadline that was set in 2009 under the American Recovery and Reinvestment Act.

The change brought an immediate attack by Republican critics, who said the Transportation Department and its Federal Railroad Administration awarded the project an unprecedented concession. “This is the oversight agency that is supposed to monitor taxpayer money,” said Rep. Jeff Denham, (R-Turlock) chairman of the House rail subcommittee and a longstanding critic of the project. “For them to give a blank check and authorize a cash advance is a clear conflict of interest.”

…The Obama administration has made five previous modifications of the grant in recent years, including one that allowed the state to provide required matching funds after first using the federal money. Normally, grants require states to match federal funds on a dollar-for-dollar basis as they are spent….

A Federal Railroad Administration spokesman said the agreement will not amend the 2017 deadline for spending the grant, but acknowledged that it would allow the state to make its required match several years later. Denham believes the amendment may also attempt to allow spending the federal dollars after the deadline.

The project was supposed to be “shovel ready” when it received the grant in 2010, but has been hobbled by a series of political, legal, environmental and financial problems. One original purpose of the project was to help the nation recover from the Great Recession, which officially ended long ago.

In addition to the stimulus grant, the California project is receiving about $500 million a year from state greenhouse gas fees and an additional $1 billion federal grant approved in 2010. But it faces an estimated $43.5-billion shortfall to complete the San Francisco to Anaheim system by 2029.

The rail authority has had difficulty acquiring property since early 2013, when it claimed publicly that it was going to start construction by that summer even though it hadn’t bought a single piece of land. Even today, fewer than half of the parcels it needs for the 118 miles are in hand. The Central Valley was supposed to be the easiest section of the 500 miles system to build, but has proven to be a virtual minefield.

The delays have forced contractors leave to equipment idle, which is likely to result in multimillion-dollar claims of losses. Some outside construction experts are projecting the first 29 miles of construction alone could be as much as $400 million over budget.

The Central Valley segment had been running about two years behind schedule, based on the start of construction last summer. But this year, the rail authority said that under its new business plan, that segment would begin service from San Jose to Shafter in 2025, about three years past the previously scheduled start.

…Denham said he is alarmed by the potential for Transportation officials to advance far more than that just before the 2017 deadline, allowing the state to bypass the normal process under which grant recipients submit invoices after spending the money….

Without the cash advance and the grant modification, Denham asserted that the state rail authority would have been unable to spend all $2.5 billion by the 2017 deadline and would have forfeited it back to federal treasury.

The rail authority had spent only $1.1 billion of the $2.5-billion federal grant as of February. If it had not received the grant modification, it appears the rail authority would have had to spend nearly $3 million of the federal money and a similar amount of required state matching funds every calendar day through June 30, 2017. That $6 million per day burn rate would be far higher than any transportation project in U.S. history.

Bridge supports for high speed rail under construction in the Central Valley – LA Times photo

Starting in the 1970s, California gave veto and delaying power over all development projects to its politically-powerful attorneys and environmental groups, including local NIMBYs who delay or stifle most for-profit development. This litigious atmosphere now extends to all government projects as well, and it is nearly impossible to bring in a project on budget and on time. Rare exceptions to typical multiyear delays occur only when politicians cut the red tape of contracting and environmental assessments, as in the rebuilding of the Santa Monica Freeway in LA after the Northridge quake of 1994:

Less than three months after the Northridge earthquake knocked down two sections of the world’s busiest thoroughfare, Gov. Pete Wilson announced Tuesday that the Santa Monica Freeway will reopen next week, ending frustrating delays and bottlenecks for thousands of commuters.

State officials hope the final cleanup of construction work can be completed early April 12 in time to let rush-hour traffic inaugurate the two new freeway bridges at La Cienega and Washington boulevards.

Spurred by the promise of an extra $200,000 a day for every day work was completed ahead of schedule, the contractor, C. C. Myers Inc., will finish the project 74 days before a June 24 deadline and rack up a $14.5-million bonus for the company.

The high-speed construction was made possible by crews working around the clock, seven days a week, and by state officials cutting through red tape.

So it’s not that infrastructure is inherently complicated and slow to build; when voters demand action, they can get it. But such a quick project timetable doesn’t allow for all the padding and white-collar lawyering and consulting that returns a fraction of contract dollars as campaign contributions.

A high speed rail line through dense urban areas and mountains was always going to be a difficult project. But pie-in-the-sky projects pay off when you can direct money to your political supporters preparing for it, get back some of that as campaign contributions, and retire from public life before the public realizes they got nothing for their tax dollars. As in all these Bootleggers and Baptists stories, the “bootleggers” — politicians, unions, and contractors — pushed the project through fully aware the proposal was a fantasy and sold the dream to idealistic voters. Having foolishly voted for the bonds, the voters will never be allowed another vote to stop the project.

—

Update: Funding through sale of carbon emission credits has evaporated, and one of the contractors pointed out the system would never be likely to be self-funding (since nowhere in the world is such high speed rail profitable) — Update: California High-Speed Rail Nearly Dead

Death 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:

Regulation Strangling Innovation: Planes, Trains, and Hyperloop
Who Killed Prince? Restrictions on Buprenorphine
The Great Progressive Stagnation vs. Dynamism
Captain America and Progressive Infantilization
FDA Wants More Lung Cancer
Corrupt Feedback Loops: Public Employee Unions
Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
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):

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

Regulation Strangling Innovation: Planes, Trains, and Hyperloop

Let’s start by looking at some examples of innovation delayed and strangled by overly-cautious regulation, a problem especially prevalent where agencies are charged with protecting lives. The outcome of a mistake in approving something which turns out to be deadly is an immediate and sharp punishment for the regulators, while delay, increasing costs, and overly cautious blocking of a valuable new product directly hurts only those promoting it — the people who might have benefitted from the innovation tend to be unaware of what they have lost when it’s turned down, an effect also seen with housing, where local residents veto new development but the people who might have wanted to live in the new development get little say.

I have two good examples: the delay of the Valkyrie Co50, a sexy and innovative airplane that has $50 million in advance orders but can’t get timely approval because it is too innovative; and Titan Pharmaceutical’s Probuphine, a lifesaving implantable form of the anti-opioid-addiction drug buprenorphine.

The Valkyrie Co50 is faster and safer than existing light planes:

The Valkyrie Co50 can fly at up to 260 knots (roughly 299 MPH), significantly faster than other single-engine aircraft, which typically cruise at a max of roughly 242 knots. The plane stands at 30 feet long and 10 feet high, with a wingspan of 30 feet. Its unusual design, forward stabilizer and rear-positioned engine promised an usually smooth ride with, even in low altitudes, little-to-no-chance of a stall. According to Cobalt, 30% of fatal aircraft accidents are in low altitude stalls, a claim supported by the Air Safety Institute’s 2012 general aviation accidents study.

The company quickly racked up a reported $50 million in orders for a $749,000 aircraft that won’t arrive until 2017, if Cobalt and its customers are lucky. The hold-up? FAA Type Certificate process, which Cobalt describes as long, cumbersome and expensive…. The French entrepreneur and pilot understands the need for certification, “because it’s good for the safety of everyone,” but he contends that the process is needlessly slowing down the industry and increasing costs.

For example, when Loury was designing his planes, he found a $30 fuel valve — one that’s typically used in tractors — would work in the Valkyrie. However, according to Loury, when sold as a certified aviation part, the same valve costs $3,000.[1]

This is the same paperwork and certification problem that results in ballooning Defense Dept. costs, like $2,000 for an aluminum sleeve that would normally cost $10[2] and cost overruns for every major weapons system in the past few decades. The Israelis pioneered cheap, reliable drones for surveillance and warfare, but the US DoD versions cost orders of magnitude more because they have to be designed and built by defense contractors under bureaucratic bidding rules and without cheaper off-the-shelf parts.

The Valkyrie is beautiful:

Cobalt Valkyrie X – Photo: Cobalt

…But the new plane can’t be sold for commercial use without FAA approval, and the requirements are more time-consuming and costly because the plane is so innovative.

Regulators can’t keep up with what the aircraft designers are doing, said Loury, and, worse, the FAA continues to add new regulations — usually in response to air disasters.

Loury contends that, on Cobalt’s end, especially for things they cannot test in the air like a “ground vibration survey,” it takes “six months of work and thousands of dollars for one [certification] paragraph.”

The company is already selling an experimental version which is less regulated, but is barred from commercial use. Just getting its application ready requires years of expensive tests. The FAA notes that they cannot be faulted for delay because they have not received an application for the plane yet, but:

It’s true, Cobalt is still working its way through satisfying all the regulations before they submit their application to the FAA.

When Cobalt does finally submit the Valkyrie Co50 for certification, the FAA could grant it in three years, but it might also take four or more years. It’s a question everyone asks Loury. He really doesn’t have an answer. “I keep pushing because we have no reference…in how long it takes.”

And this is a well-capitalized company which can afford to wait out the lengthy approval process while being unable to sell their plane in the larger market. How many small companies might have accelerated development of new planes if they didn’t face a regulatory buzz saw and years of delay before being allowed to sell?

It’s often asked why we don’t have the flying cars and jetpacks envisioned in the 1960s of Tomorrowland:[3] the answer is that regulators and tort lawyers made it so slow and costly to innovate in the transportation sector that the rate of innovation has declined precipitously since 1970. As Glenn Reynolds writes:

1970 marks what scholars of administrative law (like me) call the “regulatory explosion.” Although government expanded a lot during the New Deal under FDR, it wasn’t until 1970, under Richard Nixon, that we saw an explosion of new-type regulations that directly burdened people and progress: The Clean Air Act, the Clean Water Act, National Environmental Policy Act, the founding of Occupation Safety and Health Administration, the creation of the Environmental Protection Agency, etc. — all things that would have made the most hard-boiled New Dealer blanch.

Within a decade or so, Washington was transformed from a sleepy backwater (mocked by John F. Kennedy for its “Southern efficiency and Northern charm”) to a city full of fancy restaurants and expensive houses, a trend that has only continued in the decades since. The explosion of regulations led to an explosion of people to lobby the regulators, and lobbyists need nice restaurants and fancy houses.

Maybe it’s just a coincidence that progress suddenly slowed down, but I don’t think so. Indeed, the Obama administration’s brilliantly successful policy for promoting private spaceflight ventures (basically one of benign neglect) can be seen as evidence that we can actually get the kind of progress we used to get, when we regulate lightly, like we used to. Who knows, if we regulated pharmaceuticals like we did in the early 1960s, perhaps we’d get as many major new drugs as we got in the 1960s. (“The time for a new drug candidate to gain approval in the United States rose from less than eight years in the 1960s to nearly 13 years by the 1990s,” notes Hanlon.)[4]

US-based light plane manufacturers boomed in the 1970s, but were nearly driven out of business by litigation and insurance costs between 1980 and 1993:

Following the recession in the early 1970s, production rates began to increase very rapidly, from 7,466 units in 1971 to 17,000 in 1977 – an increase of more than 125 percent in six years. Production in recent years is a trickle when compared to the heyday of general aviation. The numbers are compelling: Since reaching a peak of 17,811 shipments of light aircraft in 1979, U.S. production plummeted to 811 units in 1993, a decline of 95.5 percent. Other measures of general aviation activity in the United States are equally dismal. The number of private pilots fell 32.1 percent, from a high of 357,500 in 1980 to 288,078 in 1993. In 1980, there were twenty-nine U.S. manufacturers of piston aircraft and fifteen foreign producers. Today, there are sixteen U.S. and twenty-nine foreign manufacturers.

American manufacturers historically supplied most of the world’s general aviation aircraft and exported about 20 to 30 percent of the general aviation aircraft produced here. However, the nation lost this important contribution to its trade balance. Imports of general aviation aircraft, which include commuter airliners, exceeded the value of general aviation exports for the first time in 1981. By 1988, the trade deficit in general aviation aircraft soared to $700 million. The volume of exports plummeted from 3,395 units in 1979 to 440 in 1986. American aircraft accounted for a full 100 percent of the single engine piston aircraft sold in the U.S. in 1980. Today, American aircraft account for less than 70 percent. It is important to remember that this apparent surge in foreign competition is more an artifact of dramatically lower domestic production of single-engine aircraft, not a sign that the foreign firms were capturing sales that would otherwise go to American manufacturers hampered by product liability claims.
[5]

To revive the industry in the US, laws were passed at both state and Federal levels[6] to limit airplane manufacturer liability. Light planes manufactured in other countries had taken most of the market, since they faced much lower regulatory and legal costs. North Dakota tried to bring the industry back to its state in 1995:

The North Dakotans propose something new: an agreement before the accident, rather than a fight after it. The root of the problem, they maintain, is the ascendancy of torts over contract law. In the small-airplane market, for example, the buyer and the seller rarely hammer out their financial risks in a contract. Instead, the manufacturer, fearing suits, buys enormous liability insurance, then charges the buyer for it indirectly by marking up the price of the plane, often doubling it. These high prices, manufacturers say, have driven 20 of 26 small-aircraft manufacturers from the business in the past 20 years.[7]

These liability-limiting laws did help bring some light plane makers back to the US, but much of the industry was permanently lost. The US had dominated small plane manufacturing until the cost crisis, but today is a small player, and has lost even mid-sized airplane manufacturing to Canada’s Bombardier and Brazil’s Embraer. Legal and regulatory overhead tore down the big advantage of US firms — and once lost, the network of expert workers and subcontractors cannot be rebuilt easily.

Credit: Wikimedia

Note the zooming cost of airplanes beginning in the late 1970s, and the weak recovery in numbers shipped after liability-limiting laws were passed in 1994. What had been a booming market was strangled by rising costs — anyone planning to build a flying car could read the tea leaves; they would never get a foothold as a mass-market product like ground cars given the multiplying costs.

Now central planners dream of a continent-spanning high speed rail network, and in California money is being spent at a rapid clip to build 1960s transport today, a multi-billion-dollar line from nowhere to nowhere that doesn’t in any way meet the goals of the project California voters approved and will cost hundreds of dollars per ticket sold in additional operating subsidies. The fantasies of Europhile statists who fail to understand how big the US is compared to Europe, where such lines can make financial sense, result in bizarre proposals like this one:

US High Speed Rail System – proposed by Alfred Twu

I created this US High Speed Rail Map as a composite of several proposed maps from 2009, when government agencies and advocacy groups were talking big about rebuilding America’s train system.

Having worked on getting California’s high speed rail approved in the 2008 elections, I’ve long sung the economic and environmental benefits of fast trains.

This latest map comes more from the heart. It speaks more to bridging regional and urban-rural divides than about reducing airport congestion or even creating jobs, although it would likely do that as well.

Instead of detailing construction phases and service speeds, I took a little artistic license and chose colors and linked lines to celebrate America’s many distinct but interwoven regional cultures.[8]

So festive! How about a line to Yellowstone, wouldn’t that be great?—This romantic Progressive choo-choo dream, free of any tedious thoughts of engineering and economics, would shackle the US to a costly, inconvenient, backward-looking rail system when an updated FAA, with better GPS and more sophisticated air traffic control systems, would allow air passenger service that is faster, cheaper, and serves all destinations. Because the FAA is a hidebound government agency, though, innovation has been slow and costly, and air traffic is held down by antiquated software, scheduling issues and TSA hassles.

This particular accounting-challenged dreamer bills the total cost of his entire system at $40 billion per year for 30 years — that’s $1.2 trillion. Meanwhile, the slightly-less-deluded dreamers of Jerry Brown’s California high speed rail project — which will never be built from LA to SF as originally proposed unless helicopter money starts raining down on Sacramento — have budgeted $64 billion. Soon we’ll be talking about spending real money….

The Economist recently reviewed the California project (“Taxpayers could pay dearly for California’s high-speed-train dreams,” Mar 27th 2016):

The suit brought by Kings County Board of Supervisors and two Central Valley farmers accused the rail authority of violating restrictions imposed by a ballot held in November 2008 (Proposition 1A) that approved a $9.95 billion bond issue to help pay for the high-speed railway. Voters were told at the time that the project would cost no more than $33 billion, with the federal government stumping up $3.2 billion and private investors chipping in the balance. So far, such private investors have been conspicuous by their absence.

According to the Proposition 1A Bond Act, the high-speed rail project has to be financially viable; trains have to operate (without subsidy) every five minutes in either direction during the day; and funds for each segment of the route need to be identified before work on the leg in question can commence. Above all, trains have to make the 520-mile (840-km) journey between the Los Angeles basin and the San Francisco in two hours and 40 minutes, reaching speeds of 220 mph (350 kph). As for ridership, the rail authority reckoned some 65m to 96m passengers per year would be travelling the route by 2020. The basic fare was to be $55 one way.

That was all pie in the sky, a way of selling the deal to voters in 2008. A review in 2011 put ridership at a more realistic 30m passengers a year, with an end-to-end ticket price of $89. Meanwhile, the overall cost of the project had soared to $98 billion. And instead of going into service by the end of the decade, the high-speed railway would not be ready until 2033.

The uproar that ensued prompted a shakeup along with some hurried rethinking. The cost was subsequently pegged at around $68 billion for the first phase of the network, with an opening date in 2029 — almost a decade later than originally promised…. The draft 2016 business plan has now trimmed the cost of the first phase to $64 billion.

While private funds have shown little interest, at least the project’s finances are no longer quite as gloomy as they were a year or so ago. Jerry Brown, California’s govenor and a stalwart supporter of the high-speed train, strong-armed the legislature in Sacramento into allocating it 25% of the state’s annual “cap and trade” proceeds from auctioning off carbon credits to big polluters, which are currently worth around $1 billion a year. As a result, the rail authority has now identified the $21 billion required for building the project’s initial leg (San Jose to the Central Valley). It still needs a further $43 billion before it can start work on extending the line north to San Francisco and south towards Los Angeles.

With the rail authority’s finances resolved for the time being, opponents have focused instead on the project’s legal requirement to cover the distance between Los Angeles and San Francisco in two hours and 40 minutes. The rail authority claims (optimistically) that such a time remains doable, though cost-saving measures have forced the high-speed train to share tracks with slower-moving freight and commuter services in the Los Angeles basin and the Bay Area.

What also remains in doubt is just how many people will actually ride the high-speed network. In revising its revenue model, the rail authority has incorporated findings from surveys on rider preferences, along with forecasts of California’s likely population, housing and employment growth. The data were then crunched using Monte Carlo simulations to minimise the risks of being wrong. The analysis suggests that, based on a confidence level of 50%, the service will have some 28m passengers by 2029, generating $1.3 billion of revenue. However, as thorough as this analysis is, unanswered questions remain.

Above all, what is it that California’s railway planners know that their Japanese counterparts do not? The former state-owned Japanese National Railways and its partially privatised regional replacements have struggled for decades to make their high-speed Shinkansen (“bullet train”) routes profitable. Japan’s eight Shinkansen lines have little in the way of competition, thanks to over-crowded roads, expressways that charge exorbitant tolls and limited air services. Even so, only one Shinkansen service—JR Central’s 550-km line between Tokyo and Osaka—makes anything like a decent enough operating surplus to cover its costs, make necessary investments and pay a modest dividend.

It does so for one simple reason: the volume of traffic it carries—some 140m passengers a year. The Tokyo plain (Kanto) is home to 42m people, while greater Osaka (Kansai) has 23m. Between these two huge population centres reside a further 10m people in conurbations like Hamamatsu, Nagoya and Kyoto, all served by the Tokaido Shinkansen. At peak hours, trains leave Tokyo Station bound for Shin-Osaka and beyond on average every four to five minutes, and every seven to eight minutes for the rest of the day. The latest Nozomi (limited stop) service whisks passengers between Tokyo and Osaka in two hours and 22 minutes.

Compare that with California. As sprawling as it is, the Los Angeles basin has a population of just 18m. The nine counties surrounding the Bay Area have a little over 7m residents between them. The farming communities astride the proposed high-speed rail line through the Central Valley have a combined population of around 1m. In short, California’s high-speed railway is attempting to do what the Tokaido Shinkansen does, but with a third of the number of potential passengers, on a route that is half as long again. California’s taxpayers will pay dearly for Mr Brown’s high-speed legacy.[9]

Two notable new developments in transport, self-driving cars and the Hyperloop[10] (a passenger capsule propelled through a partly-evacuated tube by linear induction motors at up to 760 mph) have both managed to make progress by staying under the radar and working with the states before going to Federal regulators. One reason, of course, is that (especially in the case of Hyperloop) the risks of accidental death and destruction at high speeds are just as great, but the FAA is not involved because neither ever leaves the ground. And for self-driving cars, people are relatively used to carnage on the roads and it appears to most researchers that these cars will reduce accidents and deaths substantially.

The Hyperloop is especially glamorous (see the video of a test run here), and if the billions being spent on California’s high speed rail were instead spent on a Hyperloop line from LA to San Francisco, the result would be a technology-leading, tourism-generating marvel, not a has-been-technology, almost-as-good-as-French train. But the graft is already in politicians’ pockets, and it’s likely billions more will have been spent before the California high speed rail boondoggle quietly dies.

The Hyperloop technology has problems of its own, as the Economist article points out:

Everyone involved now accepts that Mr Musk seriously under-estimated the cost of building a Hyperloop between Los Angeles and San Francisco—probably by a factor of ten or more. There are few illusions, too, about the engineering difficulties involved. Fabricating an air-tight steel tube hundreds of miles long, with solar-powered linear motors providing propulsion while supporting passenger pods on air-bearings or by magnetic levitation is challenging enough. A bigger hurdle is overcoming the “pistoning” effect, caused by air in the tube (even though it would be at only a thousandth the pressure of that outside) piling up in front of the pod and slowing it down. Calculations done by NASA suggest the tube would have to be at least four times wider than the pod to prevent even the tiny amount of residual air within it blocking the pod’s passage. Mr Musk budgeted for tubes only twice as wide.[11]

In Bootleggers and Baptists terms, neither conventional high speed rail or Hyperloop are much of a threat to incumbent airline companies, and self-driving cars would be built by existing manufacturers, so they too are more likely to be allowed to prosper.

In an age of business meetings by Skype and telepresence, one would guess the market for costly long-distance passenger transportation would shrink, or at least not grow as quickly — flat demand is already observed in many business routes. More-efficient jets and updated air traffic control can limit emissions growth, while the pie-in-the-sky continental high speed rail and Hyperloop ideas would take a vast amount of capital, at least when built by government contracting rules where much of the money goes to law firms and environmental studies before anything is even built. But if California is to spend $billions on a boondoggle, let it be an interesting boondoggle which could probably attract passengers going from nowhere to nowhere.

—

[1] “Is the Valkyrie Co50 a test case for the FAA’s willingness to innovate?” – Mashable, Lance Ulanoff, Feb 21, 2016
http://mashable.com/2016/02/21/cobalt-valkyrie-co50-faa-analysis
[2] “For Pentagon, the price isn’t right” – By Lawrence Korb, Alvaro Genie, The Hill, 07/23/14

For Pentagon, the price isn’t right

[3] “Tomorrowland: Tragic Misfire,” Jeb Kinnison, Oct 31, 2015

“Tomorrowland”: Tragic Misfire

[4] “Why we still don’t have flying cars” – USA Today, Glenn Harlan Reynolds, May 12, 2016
http://www.usatoday.com/story/opinion/2016/05/12/technological-progress-stagnation-regulatory-explosion-1970s-column/84225066/
[5] “The rise and fall of general aviation: product liability, market structure, and technological innovation” – Truitt, Lawrence J., and Tarry, Scott E. Transportation Journal, 6/22/1995
http://www.freepatentsonline.com/article/Transportation-Journal/17572867.html
[6] Notably the General Aviation Revitalization Act of 1994: https://en.wikipedia.org/wiki/General_Aviation_Revitalization_Act
[7] “Clearing A Runway For Planemakers” – Bloomberg Businessweek, Stephen Baker, March 19, 1995
http://www.bloomberg.com/news/articles/1995-03-19/clearing-a-runway-for-planemakers
[8] “A US high speed rail network shouldn’t just be a dream,” by Alfred Twu, The Guardian, 6 Feb 2013
http://www.theguardian.com/commentisfree/2013/feb/06/us-high-speed-rail-network-possible
[9] “Taxpayers could pay dearly for California’s high-speed-train dreams” – The Economist, Mar 27th 2016
http://www.economist.com/news/science-and-technology/21695237-taxpayers-could-pay-dearly-californias-high-speed-dreams-biting-bullet
[10] https://en.wikipedia.org/wiki/Hyperloop – Hyperloop One, one of several startups working from Elon Musk’s technology proposal, did a full-scale demo May 11, 2016: see video at https://youtu.be/vbtNrpkHmpA
[11] “Taxpayers could pay dearly for California’s high-speed-train dreams” – The Economist, Mar 27th 2016
http://www.economist.com/news/science-and-technology/21695237-taxpayers-could-pay-dearly-californias-high-speed-dreams-biting-bullet

Death 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:

The Great Progressive Stagnation vs. Dynamism
Captain America and Progressive Infantilization
FDA Wants More Lung Cancer
Corrupt Feedback Loops: Public Employee Unions
Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
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:

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

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

The Great Progressive Stagnation vs. Dynamism

In the US, the decades after WWII were marked by high growth and technological innovation. Rebound from recessions was quick, and reforms like the deregulations of the Carter era (trucking, railroads, airlines, interest rates on savings, and the breakup of the AT&T monopoly on phone service) and the tax simplifications of the Reagan administration lifted growth. Waves of labor-saving innovations grew productivity — computers first eliminated most manual record-keeping, then automated processes and streamlined production and logistics.

But each successive wave of recovery growth from recession has been weaker. This graph from the Center for Economic Policy Research charts the recoveries from the recessions of 1981, 1990, 2001, and 2007.

Recession Rebounds Compared – US Census Data

The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth.[1]

Economist Tyler Cowen has coined the term “The Great Stagnation” for this gradual decline in growth and economic dynamism. His book The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better[2] was published in 2011, after the shaky recovery from the recession of 2007, but before we knew the stagnation would continue for many more years.

His major point was that the US post-WWII took advantage of one-time advantages and opportunities: most of the industrialized world had been crippled by war, and unskilled unionized workers could take advantage of their position to win seemingly stable, high-paying jobs while the technologies developed in the Depression and WWII decades were rapidly incorporated into production processes. When the rebuilt rest of the world began to catch up and compete directly, much of the easy profits for both US companies and workers were competed away, and technologies developed since have been adopted around the world quickly. The backlog of new technology waiting to be incorporated into production is gone, and meanwhile the overhead of law, regulation, and the web of intellectual property (patents, trademarks, and copyrights) has grown complex, to the point where innovation in products may be retarded by legal tangles.

Here’s the blurb for his book:

America is in disarray and our economy is failing us. We have been through the biggest financial crisis since the Great Depression, unemployment remains stubbornly high, and talk of a double-dip recession persists. Americans are not pulling the world economy out of its sluggish state — if anything we are looking to Asia to drive a recovery.Median wages have risen only slowly since the 1970s, and this multi-decade stagnation is not yet over. By contrast, the living standards of earlier generations would double every few decades. The Democratic Party seeks to expand government spending even when the middle class feels squeezed, the public sector doesn’t always perform well, and we have no good plan for paying for forthcoming entitlement spending. To the extent Republicans have a consistent platform, it consists of unrealistic claims about how tax cuts will raise revenue and stimulate economic growth. The Republicans, when they hold power, are often a bigger fiscal disaster than the Democrats. How did we get into this mess?Imagine a tropical island where the citrus and bananas hang from the trees. Low-hanging literal fruit — you don’t even have to cook the stuff.In a figurative sense, the American economy has enjoyed lots of low-hanging fruit since at least the seventeenth century: free land; immigrant labor; and powerful new technologies. Yet during the last forty years, that low-hanging fruit started disappearing and we started pretending it was still there. We have failed to recognize that we are at a technological plateau and the trees are barer than we would like to think. That’s it. That is what has gone wrong.The problem won’t be solved overnight, but there are reasons to be optimistic. We simply have to recognize the underlying causes of our past prosperity—low hanging fruit—and how we will come upon more of it.

Cruft (a term from MIT hackers for useless, complicated leftover materials that have accumulated) has grown around our laws and practices, with vested interests blocking change through legal means and bureaucracy. New technologies continue to change our lives and speed up work, with the internet and web starting in the late 1980s and mobile apps and smartphones now connecting people on the go. Yet productivity does not appear to be increasing, and while there is a lot of improvement in living standards that doesn’t show up in GDP (no one enjoyed waiting in teller lines at the bank, for example!), all of that freed-up time is going somewhere else, and most people’s working hours aren’t shrinking, and their incomes aren’t rising much.

Occasionally a sector will be disrupted (the current buzzword for innovation that suddenly makes a stable sector of the economy unstable) and the efforts of the rent-seeking status quo defenders become more obvious, as with Uber and other ride-sharing services, which had cut into the business of cab companies in many cities before the taxi industry roused itself to try to outlaw them. Few understood the taxi system as it had been, with its taxi commissions, high-priced medallion licensing, and cabbies forced to rent cabs from medallion holders who made the lion’s share of the money. The taxi medallion system started in New York City in 1937 as another attempt to limit competition during the New Deal and spread elsewhere in following decades, originally justified as necessary to keep gypsy cabs and jitneys — low-priced, unregulated, and occasionally dangerous — from serving the needs of the poor and incidentally crowding the streets of Manhattan, where a free market in taxi services would have resulted in a tragedy of the commons in the form of continuous gridlock. Taxi commissions supposedly protected the safety of passengers, but they also restricted the market for local transportation, raising the price and reducing service. Medium-sized cities, low-income and low-density suburban areas adopting taxi regulations tended to end up underserved. In most places the benefits of Uber-like services were so apparent so quickly that politicians were forced to bow to Uber’s fait accompli, and the prices of taxi medallions giving the owner the right to operate a city-approved taxi fell dramatically:

To own a cab in New York, you need a medallion—a metal shield displayed on the vehicle’s hood—and there are a fixed number issued by the New York City Taxi & Limousine Commission (TLC). Until very recently, medallions were a good thing to have a lot of. In 1947, you could buy one for $2,500. In 2013, after a half-century of steady appreciation, including a near-exponential period in the 2000s, they were going for $1.32 million.

Then came Uber. Since the arrival of the car-by-app service… taxi ridership is down, daily receipts have declined, and drivers are idling—or going to work for Uber. Add it up, and desperate medallion sellers are trying to fob off their little tin ornaments for as little as $650,000.[3]

But that kind of disruption is rare and only happens when the public comes to understand the benefits of the innovative business before the vested interests can strangle it in the crib. More and more economic activities have come to be regulated and new entrants are kept out by the need for government approvals. Products and services from our most heavily-regulated industries — healthcare, education, energy utilities, cable and broadcast entertainment, housing, and finance — have seen outsized price increases without much increase in quality in recent decades, with government regulations either limiting competition or subsidizing consumption (or, as in the case of education and healthcare, both.) Routing around these government controls is starting to happen — household solar panels, Internet entertainment streaming, and homeschooling with online instruction from the likes of the Khan Academy[4] show what is possible when freed from monopoly providers. But breaking the grip of the vested interests in some of these sectors — like the NIMBY restrictions on new housing in the cities controlled by Progressive political machines, or the failed public K-12 schools in urban districts — will take more time and effort.

Virginia Postrel’s book, The Future and Its Enemies: The Growing Conflict Over Creativity, Enterprise, and Progress (1998)[5] set two opposing philosophies against each other: stasists, who prefer a regulated and controlled status quo offering predictability in a society mostly closed to new thinking, and dynamists, who accept instability, innovation, and change allowing higher growth and creative achievement. Her website has this blurb:

Postrel argues that these conflicting views of progress, rather than the traditional left and right, increasingly define our political and cultural debate. On one side, she identifies a collection of strange bedfellows: Pat Buchanan and Ralph Nader standing shoulder to shoulder against international trade; “right-wing” nativists and “left-wing” environmentalists opposing immigration; traditionalists and technocrats denouncing Wal-Mart, biotechnology, the Internet, and suburban “sprawl.” Some prefer a pre-industrial past, while others envision a bureaucratically engineered future, but all share a devotion to what she calls “stasis,” a controlled, uniform society that changes only with permission from some central authority.

On the other side is an emerging coalition in support of what Postrel calls “dynamism”: an open-ended society where creativity and enterprise, operating under predictable rules, generate progress in unpredictable ways. Dynamists are united not by a single political agenda but by an appreciation for such complex evolutionary processes as scientific inquiry, market competition, artistic development, and technological invention. Entrepreneurs and artists, scientists and legal theorists, cultural analysts and computer programmers, dynamists are, says Postrel, “the party of life.”[6]

Where are the jetpacks and the flying cars dreamed of in the 1960s? Disney’s Tomorrowland[7] suggested our shared pessimism had slowed progress and endangered the future, but it failed to address the source of the exhaustion and defeatism — the many regulations that now prevent an energetic entrepreneur from putting his or her new idea into practice in the world. People who tried to do something differently have found their way blocked, and their lives are often destroyed by vested interests using the legal system to delay their projects and drain them of energy and capital. Every effort to build something new becomes a political effort requiring that you not only interest customers, but pay off politicians and rent-seekers who see their interests threatened. The compliance overhead in growing from a small business to a large business is now so large that most people who might try are discouraged and stick with what already works for them. It’s far safer to work for a government or big corporation than to strike out on your own. The result for our economy is stagnation and declining growth.

The decline in new business formation and business dynamism from 1978 to 2011:[8]

Startups and Dynamism In Decline – US Census Data

It’s ironic that the free world outcompeted and ultimately broke the Communist central planning systems of the USSR and China, with both Russia and China now authoritarian mixed kleptocracies with at least some freedom for private industry, yet the US is now tied up by central-planning bureaucrats and regulations that are crippling growth and favoring larger corporations that support politicians through favor-trading and campaign contributions. Every small loss of economic freedom and increase in corruption has been accompanied by government-funded propaganda to explain how much it benefits The People. And The People have awakened to a hangover of enormous debts and poor job prospects, having been slipped a mickey of miseducation and dependency.

The French have a term to describe their tendency to let a centralizing state control business activity: dirigisme, “to direct.” Progressives have gradually molded the US population to more closely resemble the French in looking to the state to decide economic matters, and borrowed many of the ideas of the welfare state and public education from German models. The bureaucracies they spawned tend to grow, and those employed to write regulations will never run out of ideas for new and more detailed specifications of how everything should be done. Because Progressives believe wise rulers (themselves) can make better decisions on every choice less enlightened citizens might make — and it’s their duty to improve society by improving people, for their own good. As C. S. Lewis said:

My contention is that good men (not bad men) consistently acting upon that position would act as cruelly and unjustly as the greatest tyrants. They might in some respects act even worse. Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. They may be more likely to go to Heaven yet at the same time likelier to make a Hell of earth. This very kindness stings with intolerable insult. To be ‘cured’ against one’s will and cured of states which we may not regard as disease is to be put on a level of those who have not yet reached the age of reason or those who never will; to be classed with infants, imbeciles, and domestic animals.[9]

While this book will touch on overregulation and bureaucracies, there are already quite a few studies and books on each of the affected industries — books on the failures of public education alone number in the hundreds. This book is primarily about labor regulations and their costly and productivity-draining intrusion into hiring and employment practices. Employer fears of exposure to lawsuits led to extensive delegation of control over hiring and firing decisions to HR departments. Government-enforced unions, Civil Service rules, and increasing efforts to require equality of outcome while denigrating excellence are reducing growth now and may doom us to a second-rate future as other countries not so crippled outcompete us. The US can return to a high-growth, lower-inequality path, but only if these sectors are unlocked and allowed to innovate in both process and personnel. Freedom to work and trade as we choose — and not as Washington dictates — will keep us free, and give our children the future we dreamed of.

[1] “Falling Investment and Rising Trade Deficit Lead to Weak First Quarter” – Dean Baker, Center for Economic and Policy Research, April 28, 2016
[2] The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better, by Tyler Cowen. Dutton (January 25, 2011) http://amzn.to/1pTybdh
[3] “The Struggles of New York City’s Taxi King” — by Simon Van Zuylen-Wood, Bloomberg, Augist 27, 2015 http://www.bloomberg.com/features/2015-taxi-medallion-king/
[4] https://www.khanacademy.org/
[5] The Future and Its Enemies: The Growing Conflict Over Creativity, Enterprise, and Progress, Virginia Postrel, Simon and Schuster, 1998 http://amzn.to/1SFodo7
[6] From Virginia Postrel’s web site.
https://vpostrel.com/future-and-its-enemies
[7] https://substratewars.com/2015/10/30/tomorrowland-tragic-misfire/
[8] “The Rate of New Business Formation Has Fallen By Almost Half Since 1978: America’s declining ‘business dynamism’ has affected all 50 states and nearly every single metro area.” Richard Florida, Citylab, May 5, 2014
[9] From C.S. Lewis’s essay anthology “God in the Dock” (1948), viewed 4-28-2015 at http://www.wsj.com/articles/SB10001424052702304527504579170134126854254

—

If you have a good story or anecdote from your organization, please email it to jebkinnison@gmail.com. I can use a few good tales (anonymized, of course) to illustrate the problems.

Death 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:

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

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

Jeb Kinnison

Writing About Life and Love

tomorrowland

Death by HR: The Great Enrichment to the Great Slackening

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$250 million (1995)

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