What's going on in the world?

I attended a beer tasting event last week put on by Hoperatives. After a couple of porters, a fellow attendee admitted she was not able to keep on what was going on in the world through our local fishwrap. In particular, she asked if we were still involved in Libya.

First the US and then NATO has convinced themselves that a country of 679,362 square miles (source: National Geographic) can be tackled with merely airpower. Even in the 21st Century, aircraft are not a persistent presence and minus that regime change is difficult. Add the large land mass of Libya and airpower alone will not win the conflict.

Libyans have a saying, "mia, mia" which literally translates to "100 percent". They are found of saying that now indicating more of a "everything is just fine" even after months of bombardment to target one man. NATO is claiming "significant advances" according to a CNN article that you can find at the end of this entry.

Pro-Ghadaffi forces have been hammered (along with innocent bystanders) for months. NATO does not have the long logistical tail of the United States and can't keep bombing Libya indefinitely. Victory has to be declared before NATO forces run out of bombs (the British have come dangerously close to running out of cruise missiles). NATO may be wanting to call it a day more than any real gains through its air campaign.

The question still remains who wanted regime change? By all accounts, Gaddafi has done a fantastic job over the last 40 years in preventing even the merest hint of opposition. If Gaddafi is asked to step down, then who has the political infrastructure and savvy to takeover?

Elsewhere as the American press continues to inundate us with pictures of President Obama's bus tour, another Middle Easter nation continues to rip its own throat out. Anti-government protestors have been fired upon by Syrian authorities. Several videos have been put up by CNN showing the attacks and a horrifying image of a young girl killed by a bullet through her eye. If Gaddafi is worthy of a sustained air campaign, certainly Syria is worthy of some kind of military intervention? I've posted a link to Al Jazeera that details the violence from a Middle Eastern perspective. Syria and Turkey are also shooting at each other and the last time I checked, Turkey is still a member of NATO. What happens when the alliance (NATO in this case) gets attacked? Perhaps this is why NATO is trying to quickly declare victory in Libya.

The S&P dropping of the US from AAA to AA+ bond rating caused most news outlets to ignore a truly amazing story. Oil giant Royal Dutch Shell on Wednesday accepted responsibility for two devastating oil spills in the Niger Delta which lawyers say have destroyed the livelihoods of a fishing community. (Source: Yahoo News).

Americans watched in horror as the Deep Water Horizon spewed millions of gallons of oil into the Gulf of Mexico in 2010. What most Americans don't know is in 2008 and 2009 there were oil spills off the coast of Nigeria that made ours look like a picnic. Nigeria produces 2.2 million barrels a day (source: CIA Factbook) ranking it as the 14th oil producer in the world. Despite that production, less than 20 percent of the profits produced from oil is received by Nigeria. Most of the profits go right to Royal Dutch Shell.

While looking up data on Nigeria, I discovered the the world leader in oil production is....not a Middle Eastern country (or even Venezuela). The world leader in barrels per day of oil is Russia. A little known story is the amount of oil that is produce in Azerbaijan. In 1898, the Azerbaijani oil industry exceeded the U.S. oil production level. At that time, approximately 8 million tons were being produced. In 1901, Baku produced more than half of the world's oil (11 million tons), and 95 percent of all Russian oil.

This long history may explain why Putin has decided to pursue a Eurasian economic union. Basically it is a re-imagined Soviet Union based on capitalism. There are good to be traded and Putin is rightly concerned, in my opinion, about the emerging Chinese economic juggernaut. The American and European economies are stalling and Putin knows he has the one thing China needs, oil. Creating a Eurasian economic union is the only way to keep Russia relevant economically relevant in the future.


Libya

Syria

Nigeria

Russia

US Will Be the World's Third Largest Economy

Amidst the turmoil in North Africa and the Middle East, it is easy to overlook a global trend that has been happening for some time. China is on track to become the world's largest economy. India will quickly assume the number two spot. This means for the first time, Asian countries and not European or North American will dictate the world economy. The shift will be unlike anything we have seen. Americans have smug about our economic power since post-WWII industry put the United States squarely at the top. The US manufacturing base is gone and nothing has replaced it. As a result, the United States has become a huge debtor nation. Our educational system is not producing minds with the ability to restart the economy. Our modern healthcare system, love it or hate it, enables an increasingly unfit, medicated dependent population to live longer adding to our debt. The North American Free Trade Agreement sent the remaining manufacturing jobs South and in return we crime. The

Willem Buiter at CitiGroup has constructed a "3G index" to measure economic progress; 3G stands for "Global Growth Generators" and is a weighted average of six growth drivers that the Citigroup economists consider important:

A measure of domestic saving/ investment
A measure of demographic prospects
A measure of health
A measure of education
A measure of the quality of institutions and policies
A measure of trade openness

Using that index the nations to watch over the coming years are Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, the Philippines, Sri Lanka and Vietnam. The United States is notably by its absence. Even if his model is off, you cannot deny the rising influence of China and India. A question my students always miss is; what nation has the largest Muslim population? The answer is Indonesia. Given the United States perception amongst Muslim nations, and the rise of pan-Islamism, the future looks to be quite different.

Article Here

Connections

There was a show on PBS called Connections hosted by James Burke. In addition to being a historian, Burke possessed a very dry sense of humor. The show took a unique look at history and showed how different events built on one another over time. Burke’s approach was to avoid the typical linear approach to history and look more holistically at events and exploring some lesser-known connections.

I started thinking about “Connections” the other day while reading about additional lays offs for sheriff’s deputies. The deputies are the latest in a budget cuts resulting from the failing economy and diminishing tax revenues. The sheriff blames elected officials but the public blames the sheriff and elected officials. Neither view goes very far at looking at the causes.

Low tax revenues does not mean low taxes, in fact just the opposite tends to be the case. Ohio has one of the worst tax situations for businesses and explains in part why business chose to locate in other states. Governor Strickland has for some time correctly assessed that Ohio suffers from “brain-drain”, unfortunately he tends to see this as a educational issue and feels developing a state university system is the way to overcome brain-drain. I believe the real reason Ohio is losing “brains” is due to a lack of jobs to employ those brains. I read a few years ago that Ohio had fewer new home constructions in one year than Atlanta. High taxes create a disincentive for businesses, which in turn creates a disincentive for job creations. Fewer business and jobs means lower tax revenues.

High taxes are just one of the reasons that fewer businesses are in Ohio. As industries became deregulated, such as the airlines, larger businesses bought out smaller ones until only a handful of bloated companies are left. United, American and Delta are all that is left of the legacy carriers. They merged and bought out their competition and contrary to the predictions of market economics, newer airlines weren’t able to enter the market. A sort of monopoly was created and without new airlines entering the market, there was not incentive for the legacy carriers to maintain travel perks. There was little incentive to modernize and improve flights in advance of staggering fuel costs. Once crude oil prices skyrocketed, airlines had no choice but pass the cost on to the consumer.

The American auto industry became complacent and was unable to react even while losing $2,000 per every car produced. Now it looks as though Chrysler may not survive through the year even despite the federal bailout. Chrysler provides 80 percent of the cars that make up the Dollar Thrifty fleet. If Chrysler collapses, then Dollar Thrifty (not to mention all of the suppliers and dealers that depend on Chrysler) will fail. Many of these businesses are located in Ohio and the loss of jobs and tax revenues will be devastating.

Tax revenues in Ohio have been decreasing as a result of businesses leaving the state. As businesses leave the ability for the state to receive revenue from taxes decreases. The loss of business means a loss of jobs as well further reducing tax revenues. Job loss increases demand on public services that are funded through tax revenues. People without incomes are forced to turn to public assistance in the best case or crime in worst case. Increased crime rates places more demands on law enforcement and correctional facilities. The lack of tax revenues causes cuts to law enforcement and the closing of correctional facilities.

Going back to “Connections”, we need to make the connection of jobs to the safety and security of our communities. We need jobs and employers to pay taxes to generate the revenue need to fund our communities. Elected officials need to work with business in collaborative way to create communities that are safe and attractive to businesses. In turn, these businesses will create jobs to provide the tax revenues to provide for the safety and well being of the community.

Random thoughts

Anecdotal Evidence

The economy has been on everyone’s mind lately. First mortgages, then the brokerage firms and now the big 3 automakers have all had to go to the federal government for financial bailouts. Locally DHL is pulling out leaving 7,000 people without jobs. Hamilton County may have to lay off 900 employees. The news keeps getting worse. There really is no good time for such events to occur but in the weeks preceding the Christmas holidays is especially difficult for many.

Over the last few days, several acquaintances at work have shared that their homes have been burglarized. No real pattern, these people all lived in different neighborhoods and don’t know each other. I don’t believe in coincidence and see this as symptom of the economic times. People are becoming desperate and in some cases allowing their fears to override civility towards their fellow citizens. Look at the man who was trampled to death by aggressive shoppers on Black Friday. Civility went out the door when people’s concerns for material goods outweighed their concern for another human being.

More than ever, safety and well-being of yourself and your family needs to be at the forefront. It isn’t just remembering to lock your doors; it is making sure your friends and family get home safely. Don’t let a friend go home alone who may be impaired. Check on elderly family members or neighbors. Keep constant vigilance whenever you go outside; keeping thinking about escape routes or places to take cover. Mumbai was only the most recent example of a no-notice threat. Be vigilant at your workplace for suspicious packages; most people have already forgotten about the anthrax that was mailed out after 9-11. The holidays and economy can mean a brutal one-two combination for people with mental health issues. If a co-worker or friend looks like they are having trouble coping, try to get them to talk to someone. If their behavior appears threatening (either to themselves or others), alert the proper authorities.

Butler County

The county emergency management director, William Turner, is under fire again. During the blackouts back in September, the director was criticized for failures in county preparedness. Now several county police chiefs have a signed a letter point the director’s shortcomings in leadership, coordination, communication, direction, resources for the county. Two county commissioners wrote a separate letter saying, “It now appears to us that Director Turner’s service has become a divisive force instead of a unifying force in Butler County” (note Butler county Commissioner Furmon, who has supported director Turner in the past, did not sign the letter). Many counties are looking to cut their workforce in order to balance their budgets. I hope that however Butler county chooses to deal with Director Turn that they don’t end-up eliminating position. The county emergency management director serves important function and can act as a disinterested third party over fire and law enforcement services. Eliminating the position may unfairly tip the scales in the direction of the fire service or law enforcement to the detriment of the other.

The Economy

It’s the economy, stupid. Two items caught my attention both related to the economy although the items were filed under different headings.

First, there is a summit of college and business leaders today at the University of Cincinnati the brain drain “discovered” by Governor Stickland during a recent visit to Taft High School. Nine out of ten students indicated they would be pursuing academic careers outside of Ohio because that is where the jobs are. I put quotation marks around discovered because this situation should not have been news to the governor. Ohio has one of the worst tax schemes anywhere for business. Business owners get to pay state, county, city and/or township taxes. In addition, businesses pay a variety of licenses. All of this is paid on top of the normal expenditures for employee benefits, insurance, pension funds, etc. There are only so many ways to trim costs and before long the only option left becomes to relocate your business. The Mead Corporation was a homegrown company in Dayton, Ohio but eventually relocated their corporate headquarters. The decision did not have anything to do with an inability to find qualified workers, rather the costs associated with keeping their corporate headquarters here in Ohio (where the Mead family is from) became just too expensive.

Governor Strickland is focused on creating jobs through revamping Ohio’s high educational system. He envisions luring companies to Ohio by having a highly trained workforce in place. A test of his theory has already hit the local area in the form of the DHL closure in Wilmington. Seven thousand jobs have been cut creating a huge pool of employed workers. Many of these workers have technical skills and college degrees, if the governor’s theory is correct then another company should be willing to relocate here and hire the DHL employees. However, I doubt this is likely to occur without revamping Ohio taxes to create incentives for a major employer to relocate to the Wilmington area. The meeting at UC today may provide some great ideas but without also creating economic incentive for business, these will remain just great ideas.

The second issue was on Cincinnati Blogs concerning impending budget cuts in Hamilton County. Typically public sector agencies cut budgets by postponing expenditures on equipment or facilities. Training is cancelled or postponed. Another strategy involves some combination of furloughs, early retirements, hiring freezes, or eliminating positions. These measures are short-term at best, as the requirements for these expenditures didn’t change. Assuming the agency has done due diligence in creating these positions, reducing the workforce may help balance the books but it increases the workload of the employees left on the payroll. Incidence of sick leave, absenteeism or resignations will increase.
Eventually they will become frustrated and eventually may look for work elsewhere. The end result of these budgetary actions is an overall diminished effectiveness of the agency to perform its mission. In Hamilton County, we see the sheriff’s office painting a grim picture of rampant crime as patrols are eliminated and criminals will have to be released due to over-crowding in the jails. I have no way of knowing what analysis the sheriff has conducted to arrive at his decisions. I do wonder if these decisions were made in coordination with the city of Cincinnati to see which agencies could pick up the slack for other agencies? For instance, some of the patrols provided by the sheriff’s office were in the Other the Rhine area which is (I believe) in District 1 of the Cincinnati Police, could these patrols not be conducted by the police? Law enforcement agencies usually have mutual aid compacts in place, could these be modified to augment the reductions by the sheriff elsewhere in Hamilton County? Of course that assumes these patrols are required in the first place, if they are then a compromise of some kind needs to be reached. If they aren’t required, then they can be eliminated and funding used to conduct other critical functions.

Hamilton County is facing a budget crisis in part because of the economy but also because of the loss of tax revenues. I submit that Ohio has some of the highest taxes of any of the states, yet our tax revenues are plummeting. Higher taxes create disincentives to spending which in turn reduces tax revenues. We’ve all heard about business relocating their operations overseas. Wages are often pointed out as the reason which inevitably leads to finger pointing between labor and management. What gets overlooked is the need for workers to be able to earn a certain level in order to pay their taxes. Employers have to not only meet the need for a fair and competitive wages, they too have to pay taxes on their facilities and profits. Combined the situation creates a major disincentive to operate business locally and leads to employers leaving Ohio. Our college and tech school graduates have no choice but to follow those jobs out of the state.

Creating jobs in Ohio leads not only to a better quality of life for our residents, it will lead to safer communities as our public sector agencies (fire, EMS, law enforcement, public works) will have the funding they need to operate.