Do We Still Need Unions?!

Those of us who grew up during the Cold War experienced more than our fair share of capitalist propaganda. Communists were the enemy, and capitalism—more than democracy—was positioned as its antithesis. Reaganomics and Thatcherism promoted the idea that the only thing better than Capitalism was capitalism unfettered by unions and government regulations. With the advent of offshoring, this was done one better by dispensing with niceties like human rights, by moving jobs to countries where democracy didn’t spoil the fun!

As a child of the 80’s I bought into this propaganda, and didn’t notice the prejudice that I, and those around me, had developed against unions, and the people who belonged to them. When I entered the working world, it was common to hear people say proudly that they did not—and would never—belong to a union. The word ‘union’ had transformed from noun to derisive adjective.

First-in-last-out, pay based on tenure, constant labour strife shutting down productive capacity, and strikes timed with good weather, all seemed to undermine the idea that unions still had a place in a Darwinian capitalist system. The best that supporters of the labour movement could do was point out that they were to thank for the 40-hour work week, and weekends.

Sure, but what have you done for me lately?! 
It turns out, not much.
 
So why don’t we just get rid of them? We can, as long as we can answer ‘no’ to all of the following questions:

Do jobs exist where people trade their productive capacity for money? Does worker safety come at some cost? 
Is anything other than profit a desired outcome?

For people who have knowledge-based jobs, they are inevitably paid to continue learning. Every job becomes an opportunity to add to the résumé, and increase their value to the market. But there are still many jobs—and notably, jobs that can’t be offshored—where there is a straight trade of money for time, with the worker becoming less valuable with each passing day. Does a delivery person become more or less valuable as the years advance? How about someone working in a mine? Chances are, their market value is dropping as they work, which exposes them to being exchanged for younger, perhaps more energetic, and lower paid replacements. Also, when unemployment rates rise, these types of jobs are prone to salary erosion dictated by market forces; if there is always someone willing to do it cheaper, it’s a race to the bottom.

The profit motive is the basis of capitalism. Profit and the interests of the worker are often at odds, as is usually the case when it comes to worker safety. We’re not sending foreign workers into railway tunnels with unstable explosives anymore (I think), but there continues to be lots of skilled and unskilled work in environments where cutting corners to save a buck will cost lives, or the quality of them. Without a mechanism to counteract the profit motive, it will win out over safety every time.

For some jobs, it is pretty easy to calculate a worker’s value. How many quality widgets did he produce? How much did she sell? How many billable hours did they contribute? Many others are more qualitative than quantitative. Has a balance been stuck between patient health, and the cost of health care? Are students being adequately prepared for the world? Are the interests of the public being prioritized over political expediency? In these cases, it is a great advantage for a worker to have protection, when pressures such as cost, profit, and perception could lead to bad outcomes.

Until someone comes up with something better, unions still have a role to play when workers trade their value for money, worker safety comes at a cost, and we desire more than just profit.

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I See Four Lights!!

Fans of Star Trek TNG will undoubtedly remember the episode where an alien captures the captain (Cpt. Picard played by Patrick Stewart) and attempts to break him by torture. The simple test used to determine if Picard’s will has been broken, is to ask him if he sees 5 lights when there are actually 4.

Even against increasing physical pain and mental torture he maintains, “There are FOUR lights!!”. To this day this is one of the only episodes I remember, because Stewart’s incredible acting, and because of his comment to his rescuers at the end (paraphrasing): “Just for a moment, I could see five lights”.  This indicated to me that even the best amoung us can be convinced of something false, given enough mis-information under duress.

Politics today has way too many layers. I think politicians are trying to convince us there are 5 lights on one side, and sometimes 3 by the other side. If one side uses rhetoric, the other side must reply with the same, like two sides trying to barter to a final price. Trouble is, what comes out from both sides is only so much crap, and sometimes people actually are listening.

I choose to see 4 lights regardless of what crap they throw my way.

Transit Strike: A Silver Lining

I saw Ottawa Mayor Larry O’Brien in the Starbucks today, and I almost went up to him to say ‘Hi Larry, I know you are probably taking a lot of flack for the length of the transit strike, but I for one am quite happy about it!’.

I decided not to, for the same reason that I leave other celebrities I see alone:  I am sure they get quite enough of people coming up to talk to then when they are trying to enjoy some down time.

Before I get into my rationale for this statement about the transit strike, and draw the ire of those significantly inconvenienced by it (who I feel for), I want to state that I am pro-public transit, as long as it isn’t me that is using it!  😉

Some reasons why I am enjoying the transit strike:

  • Route 151, which runs right past my house every half hour, no longer ruins the peace and quiet with the loud roar of the bus engine (why do they have to be so damn loud??)
  • Lanes previously reserved for buses only, are now opened up to all traffic, allowing much greater flow of car traffic during off-peak hours
  • I haven’t noticed any change to my morning commute in terms of more traffic, or longer transit time
  • In a time when city budgets are getting strained, and tax hikes are imminent, it seems that one way to save money is not to run buses!
  • The taxi drivers, who until recently were under duress due to high gas prices, now have gas prices halved and more business than they can handle!  They should be happy with this as well!

Anyway, that is my take on the silver lining of this… may the flames commence…

TED: A Great Resource for New Ideas!

Want an opportunity to see videos by some of the biggest thinkers in the world for free?  My friend Catherine tipped me off to the website TED.com.  “TED” stands for ‘Technology, Entertainment & Design’ which was the original scope of the conference when it started in 1984, but since has become much broader.

The concept of the talks is that each speaker is given 18 minutes to give the talk of their lives.  Here is a description of the conference from TED:

The TED Conference, held annually in Long Beach, is still the heart of TED. More than a thousand people now attend — indeed, the event sells out a year in advance — and the content has expanded to include science, business, the arts and the global issues facing our world. Over four days, 50 speakers each take an 18-minute slot, and there are many shorter pieces of content, including music, performance and comedy. There are no breakout groups. Everyone shares the same experience. It shouldn’t work, but it does. It works because all of knowledge is connected. Every so often it makes sense to emerge from the trenches we dig for a living, and ascend to a 30,000-foot view, where we see, to our astonishment, an intricately interconnected whole.

Here is a selection of some of my favourite videos so far:

Malcolm Gladwell on why you can’t just listen to your customers (or where chunky spaghetti sauce comes from):

Stephen Levitt on why crack dealers still live with their moms:

Tony Robbins on ‘Why We Do What We Do” (he actually steals an extra few minutes):

Martin Seligman on positive psychology:

Finally, Sir Ken Robinson asks “Do Schools Kills Creativity?”:

And there are 100’s of others! Enjoy!

Prediction Markets: Its Not Just the Republicans that Think Palin was a Bad Choice!

It seems there are now a lot of Republicans attacking McCain’s selection of Palin as a running mate after the election loss.  This is a bit of a change of heart since, on the day of the election, 71% of Republicans surveyed said McCain had made the right choice of running mate.  But I guess 29% of Republicans is still a lot of potential naysayers.

I have a great interest in the powers of prediction markets.  This was triggered by reading a book by James Surowiecki called “The Wisdom of Crowds“, which (amoung other things) convinced me that prediction markets are a very powerful way to predict likely outcomes.

So when Daniel Pink, another author I enjoy, presented the Iowa Prediction Market’s 90% chance of a Obama victory on the eve of the election, I had look at the chart that he provided:

What really struck me was the precipitous drop in the Republican’s chances that appears to start at the very end of August.  I did a quick Google search to try and figure out what could possibly have triggered this steep decline, that you can see at the far right of the graph above.

It didn’t take me long to put 2 & 2 together… McCain oficially announced Palin as his running mate on August 29th, 2008, which aligns exactly with the cliff-like drop in the GOP’s chances in the prediction market data.  McCain, considered a very leftward leaning Republican, was probably advised to pick Palin – a Bush-esque ignoramus – to appeal to the Republican ‘base’ and also increase the chances of attracting women (disaffected by the Dem’s choice of Obama over Hilary Clinton) to the republican ticket.

It sounds like a pretty sound strategy, but the prediction market data clearly shows that this one decision triggered a massive drop in the GOP’s chance of victory, and was certainly the single biggest factor in the Republican loss.

If you believe prediction markets…

Credit Cards: The Real Culprit in the Credit Crisis

It seems that the US Government, and many others, are finally realizing that giving out credit to people who aren’t disciplined about spending might be a bad idea. Wow…

Unfortunately, none of the measures they are putting in place really appear to be a solution to the problem, they are just a salve for the symptoms.

Bailing out banks with taxpayer money doesn’t change behaviour of people, which means the problem will still exist when the banks are back to making huge profits.

Some examples of credit culture:

  1. Credit cards are allowed to charge 20% interest, which is criminal considering that this money is loaned to them at rates below 5%!  Keep in mind that they already make 2-5% directly from the retailer for every purchase you make.
  2. Looking for a mortgage on my FIRST house, several banks informs me that I can get a mortgage so large, that I would be ‘house poor’ for the rest of my life.  Some may argue the bank is just trying to help me ‘fulfill my dream’ but I think this is just irresponsible.
  3. Watching CNN (I know… first mistake) their sage advice for their viewers is to “pay off more than their minimum payment on their credit cards”.  This isn’t exactly the kind of training people need to keep themselves financially healthy!
  4. How many times have you seen ‘buy now, pay later’ as part of an advertisement?  By the way… OAC means, ‘On approved credit’… which always seems to be approved…
  5. Do you ever remember, at some point in your youth, being required to sit down and understand the banking system, credit cards, compound interest, RRSPs, or any of a large number of other topics that impact your financial well being?  I don’t.  Our mandatory schooling does nothing to train us to live within our means within this credit-based society.
  6. Once the credit rating of people has been beaten to the point where a bank will no longer touch them, new opportunists pop up to take even more of what little is left.  This makes it even harder to climb back up the credit ladder!  Ever notice that you can identify low-income neighbourhoods by the appearance of a ‘Money Mart’ or similar shop that will charge you a fortune to get access to your cash?

Why am I picking on credit cards in particular?  Unlike mortgages, that allow you to purchase a home likely to appreciate at or above its interest rate, credit cards are given to people when they are young, the interest rate is very high, and the products purchased are likely to DEPRECIATE quickly.  Once you get your first credit card (I think I was 18) there is no training that comes along with this deadly credit weapon.  We should instill in people that the credit card is to carry temporary credit only, and to be paid off immediately, before it destroys your credit rating, and puts you in the downward spiral of credit dependency; this just isn’t being done.  Its credit cards that set the tone in the relationship between people and their credit at an early age.

Lets look at some ideas that may actually change things:

  1. Instead of the sage advice offered by CNN above: Suggest getting a line of credit large enough to pay off all your credit cards, lock it in at a fixed payment with your bank, cut up your credit cards and learn to live on money you have already made, not the money you MIGHT make in the future.
  2. The government should restrict the size of a mortgage that someone should be able to get, at least for their first mortgage.  This way, people can learn to live within their means before they get in over their head.  This also means that they should limit mortgages to 25 years instead of the rest of your natural life.
  3. Remember how useless high school was for learning about things in the real world?  Well, how about mandating some financial planning courses?  Use math class to illustrate the downward spiral of 20% compound interest on a credit card!
  4. Fundamentally change the credit card system.  I can’t argue with the convenience or even the safety of using credit cards, vs. carrying around cash or the risk imposed upon a vendor when a check is used.  I really like getting my 1% kickback on my Starbucks Visa.  Suggestion: Legislate that the credit cards to be linked to a bank account that the balance has to be paid of every month.  If there isn’t any money left in the bank, the card doesn’t work until there is.

Why is this unlikely to happen:

  1. I suspect Visa, Master Card, American Express, Diners Club and others have fairly good lobbyists, or soon will.
  2. The current size of our economy is based on credit.  Why have cars, homes, and other big ticket items become so expensive over the years?  Easy access to credit, and the prevalence of dual income families (more on that last point in a later post).  If this credit supply was to be limited, the economy would slow down significantly.  This is exactly what the government is trying to STOP by propping up the credit providers!
  3. Our system seems to be based on the financially smart taking advantage of the financially stupid.  Its not in the interest of those with the knowledge (banks, credit companies, financial planners) to reduce the amount of money you spend.  There is also the poor ‘Money Marts’ to worry about.
  4. We would have to accept a few years or even decades of hard times to adjust to the new system where there is less cash available.  North Americans are pretty soft, especially me, and aren’t willing to give up their ‘rights’ to credit irresponsibility.

Hopefully some of the more intelligence economists -those that have been warning for years of this credit crisis- will be able to get more attention for their ideas on how to fix the illness and not just the symptoms.

The Works of Ayn Rand

I recently signed up to a new Audible.com gold account which allowed me to buy expensive audiobooks cheaply, which justified me picking up the two massively tomes ‘Fountainhead’ and ‘Atlas Shrugged’ by Ayn Rand.

The two books, which I bought unabridged, totalled 80 hours of reading time which has kept me busy for the last couple of months. I read Fountainhead first, followed by Atlas. I really enjoyed both, with the caveat mentioned below*.

Rand uses characters which represent either extreme of ‘supermen’ like Howard Roark in Fountainhead and Hank Reardon in Atlas Shrugged, or the ‘seconds’ (people that only survive by leaching off and controlling others) like Peter Keating/James Taggart.

The main protagonist is female in both cases, and struggles with an increasing self awareness of where they fit in this polarized world. Also common to both works is the love quadrangle where this female protagonist finally decides on the most ‘super’ of supermen.

*I wouldn’t recommend reading them back to back, as I did, since the themes are very similar, and can even get quite tedious after a while:

    • The benefits of pure capitalism
    • The evil of religion (somewhat indirectly)
    • You do yourself a great disservice when living your life for the benefit of others
    • The only purpose of government should be military, police and courts
    • The purpose of life is to use your mind to create
    • Socialism/collectivism is bad

I am sure I am forgetting a few, but I have to say I agree with her point of view for the most part.

She is a little too radical when it comes to the line between where government should and should not get involved. For example, health care would definitely fall into the private domain, where I -as a Canadian- believe in universal health care. There is a big difference between someone who chooses to live off of others vs. someone who has dependence thrust upon them by bad health or accident.

I took the time to read Ayn Rand because I always like to find a balance in what I am reading. After reading Naomi Klein’s shock doctrine, I needed something pro-capitalist, and this hit the spot. As usual my opinion is in the grey zone somewhere in between.

As a final note, it is very likely that Ayn Rand’s work will soon experience a Renaissance, with Angelina Jolie slated to play the role of Dagny Taggart (good choice) in a film adaptation of Atlas Shrugged. It is currently slated for 2009, but turmoil over the director of the project may change this significantly.

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