Resource Curse

If West Virginia isn’t a good example of having a valuable natural resource and getting not much more than pain from it, there isn’t one. I’ve predicted no effective sanctions for the company that polluted the water of 300,000 people for weeks. I stand by that. Sometimes, an industry gains control of a regulating body. We call that a “captive” agency. In West Virginia, the government is held “captive” by the coal industry. They own that place. The coal industry is going to do pretty much what it wants there.

How sad it must be to live literally on top of billions of dollars of a mineral resource and know you are never going to get much out of it and what you get is likely to be more pain.

It would seem to me that basic ethics would dictate that a state would find a way to distribute profits more equitably from the people’s land.

James Pilant

West Virginians say they don’t fault coal industry for water crisis | Al Jazeera America

Some analysis of how the coal industry has affected the economy of West Virginia shows that it likely contributes to poverty rather than its alleviation, and that most counties where poverty reigns in the region are also those that rely the most on coal mining.

Two economists, Stratford Douglas of West Virginia University and Anne Walker of the University of Colorado Denver, published an analysis in December comparing 409 counties in Appalachia for trends in poverty and education stemming from the “resource curse” of coal.

“The ‘resource curse’ occurs when a region’s resource wealth makes its people poorer,” Douglas told Al Jazeera. “Some places, like Norway and Texas, are richer because of their resources. Some other places seem to be poorer because of their resources, and our study indicates that these may include the coal-mining counties of the Appalachians.”

While it can apply to many kinds of natural resources, from oil and gas to minerals and timber, the resource curse involves steep levels of inequality, high poverty and environmental degradation in places whose economies rely on one resource. The promise of the commodity also comes with the economy having to rely on its price, often leading to a cycle of boom and bust.

“No doubt, coal mining provides opportunities for relatively high-wage employment in the region, but its effect on prosperity appears to be strongly negative in the long run,” the economists wrote in their analysis.

One of the biggest problems, the analysis stated, is that the coal industry does not provide enough high-paying jobs to people who obtain college degrees. These people leave the state, contributing to economic decline over the long term.

In addition to taking steps to diversify the economy, the authors suggested that Appalachian authorities try the tactic that wealthy Norway has, charging higher dues on companies that mine coal in the area.

The authors noted the recent rise of hydraulic fracturing, or fracking, of shale gas deposits in the region, and said it wasn’t an antidote. 

“The shale gas industry, like the coal industry, shows a strong tendency toward boom and bust.”

via West Virginians say they don’t fault coal industry for water crisis | Al Jazeera America.

Dimon Screwed Up, Got a Raise Anyway!

I apparently misunderstand the theory of the free market. I thought that successful performance was to be rewarded. And that disastrous or failing performance was to be penalized. But I am mistaken. For Jamie Dimon, failure is not failure, disaster is not disaster, life is good all the time – great job if you can get one!

Business ethics!! Do you reward constant business ethics violations? If you count settling multiple regulatory settlements in the billions of dollars as business ethics violations which apparently JPMorgan’s board does not, it might make you uncomfortable. Apparently in the mind of JPMorgan, business ethics is a matter of opinion, right?

Once again, I have another negative example to show my students. Instead of virtue being rewarded I have an example of rampant misconduct involving incredible amounts of money being rewarded. It makes my job more difficult.

But it’s not just me. Everyone who values justice, everyone who believes in right and wrong, everyone who believes in the value of business ethics, is being slapped in the face by this decision.

It is a blatant reward for misconduct and incompetence. It’s wrong. It’s destructive. It’s the wrong example for every human being on this planet.

Do we live in such a morally bankrupt system that not only do we have to suffer massive financial lawbreaking but watch it being rewarded too?

James Pilant

Jamie Dimon gets raise despite JPMorgan’s massive regulatory fines – Salon.com

JPMorgan Chase’s “punishment” was short lived. Last year, following the egregious “London Whale” scandal — a multibillion trading loss by the bank (which led to $1 billion in regulatory fines) — Dimon’s salary was cut in half to a measley $11.5 million.Wall Street memories are evidently as short as its pockets are deep. Dimon is getting a raise again. The New York Times reported:

JPMorgan’s board voted this week to increase Mr. Dimon’s annual compensation for 2013, hashing out the pay package after a series of meetings that turned heated at times, according to several executives briefed on the matter.

… JPMorgan’s directors may have decided that Mr. Dimon, as his peers may, should get a raise, but to ordinary Americans — and possibly to regulators — the decision to increase his compensation may seem curious given the banner penalties that federal authorities have extracted from the bank. It is not unheard-of for chief executives to lose their jobs when their companies have been battered by regulators.

via Jamie Dimon gets raise despite JPMorgan’s massive regulatory fines – Salon.com.

New York Times Uses Creative Math

Is fact checking so hard? Is it ethical to portray yourself as a world class newspaper used by policymakers around the world and then, just make stuff up? That’s not business ethics.

James Pilant

1.5 Million Fracking Jobs? Is Legalized Marijuana Affecting the NYT | Beat the Press

Whereas about 1.5 million fracking jobs have taken place in the United States, only 2,500 have occurred in Australia, according to the Victoria report.\”

It\’s not clear where the NYT got the 1.5 million jobs figure, but it\’s a safe bet that it is not from the Bureau of Labor Statistics (BLS). The December, 2013 jobs figure for oil and gas extraction 48,400 higher than the December 2007 number, before the impact of both fracking and the recession. The figure for mining and support activities is up by 98,400. If we assume that this is all due to fracking then the total increase in employment is 146,800, less than one-tenth of the NYT\’s number.

via 1.5 Million Fracking Jobs? Is Legalized Marijuana Affecting the NYT | Beat the Press.

Income Inequality at the Extremes

Read below and see if the numbers don’t startle you. How can you have a functioning democracy with even a handful of these people in your country? Each one has more money than the total budget of most American states and good number of small nations. How do deal with that kind of concentration of economic power?

We have lived in a nation that has created more and more people like these. During this time, wages have stagnated or declined, the poor have multiplied and jobs are harder to find while education spirals in costs. What right do these people have to call themselves job creators when the evidence shows that it is a vibrant middle class supported by government policy that creates and maintains good jobs?

Our democracy is not threatened from abroad. It is threatened by an incredible wall of political money which makes the middle class and poor inconsequential in the making of policy. That’s not democracy.

James Pilant

The World’s 85 Richest People Own as Much as the 3.5 Billion Poorest | TIME.com

The world’s 85 richest individuals now own as much as the poorest half of the 7 billion global population, according to a report released by Oxfam on Monday.

The leading anti-poverty charity called on the global economic elite gathering in Davos this week for the World Economic Forum to “counter the growing tide of inequality” and prevent a static future in which only the rich have access to the best education and healthcare.

“It is staggering that in the 21st century, half of the world’s population own no more than a tiny elite whose numbers could all sit comfortably in a single train carriage,” said Winnie Byanyima, Oxfam Executive Director.

via The World’s 85 Richest People Own as Much as the 3.5 Billion Poorest | TIME.com.

Chris MacDonald Discusses Religious Accomodations

Chris MacDonald, a celebrated expert in business ethics, discusses the ethics of religious accommodation. As always, his posts are well worth reading, and I believe you will find his site educational and relevant.

James Pilant

When is Accommodating Religious Requirements Unethical? | The Business Ethics Blog

Two questions arise.

First, should religious requirements be accommodated at all? There is broad agreement, I think, that reasonable efforts should be made to accommodate religious belief and practice. It would be a bad thing, in a society that believes in freedom of religion, to tell people that adhering to their religions means exclusion from university or healthcare or for that matter from employment. It is generally (though not universally) believed that religious commitments are particularly deep and meaningful ones, central to a person’s self-identity, and so limiting someone’s expression of their devotion to their religion is significantly worse than, say, interfering with their interest in watching their favourite TV show.

Second, if we are willing to accommodate religion, what specific kinds of requests ought not be accepted? The usual route is to say that only “reasonable” accommodations must be made — not ones that disrupt operations, or that impose onerous costs, or that jeopardize safety. So, modifying dress codes to accommodate religious dress requirements is generally OK. Allowing people a few minutes during the day to pray is OK. And so on. But anything that would jeopardize health and safety (e.g., a religious head covering that precludes the wearing of a safety helmet) doesn’t have to be accommodated.

When is Accommodating Religious Requirements Unethical? | The Business Ethics Blog.

College Graduates Punished by Economic Policy

Make no mistake about it, college graduates aren’t getting the short end of the stick just because of the economy. The policies of the Federal Reserve and the rest of the government are designed to create wage discipline, a fancy term for downward pressure on wages. This wage discipline as a deliberate policy is now more than thirty years old and the results are easy to see. We have college professors paid slightly more than McDonald’s workers. We have airline pilots who make a little more than twenty thousand dollars a year while flying as much as seventy-two hours a week. I’m sure you can think of more examples.

But these crippling salaries are just the beginning of problems. Studies show that when you start out working beneath your education, your salary never recovers.

And so, it seems, that today’s generation is less likely to make as much as their parents regardless of education or ability.

Is that really what we want for our young people and our nation?

James Pilant

College Graduates Are Increasingly Likely To Work Low-Quality Jobs | ThinkProgress

Today’s recent college graduates are more likely to work in jobs that don’t require a degree, pay little, and are part-time than in the past, according to new research by the Federal Reserve Bank of New York.

While it is common for graduates to work lower quality jobs right out of school and move up the longer they keep working, the share who find themselves in this position has risen while the quality has dropped. The underemployment rate, or the rate of graduates working jobs that don’t require a degree, has risen since 2001 and jumped sharply after the recession to the point where 44 percent were in these jobs in 2012. This “suggest[s] that it has become more difficult over the past decade for recent college graduates to find jobs that utilize their degrees,” the authors note.

Even worse, these non-college jobs are more and more likely to pay poorly. Well paid jobs that don’t require a degree, such as electricians, dental hygienists, or mechanics, are those that pay an average of $45,000 a year. Low-paid jobs, on the other hand, such as bartenders, food servers, and cashiers, pay below $25,000 on average. The authors report that “the share of underemployed college graduates in good non-college jobs has fallen sharply, while the share working in low-wage jobs%

via College Graduates Are Increasingly Likely To Work Low-Quality Jobs | ThinkProgress.

Banks Get 60%, Retirees get 20%

And the banks helped create the problems through one sided deals with the Detroit. If anyone deserves a smaller cut, it’s the people who harmed the city not those who made life bearable for the citizens.

James Pilant

Judge Rules Detroit Is Trying To Give Banks ‘Too Much Money’

While the $300 million debt involved in Thursday’s decision is a tiny fraction of the city’s overall debt burden, the specifics of the debts involved here make this deal central to emergency manager Kevyn Orr’s plans for bringing Detroit out of bankruptcy. They come from a deal made by corrupt, jailed ex-Mayor Kwame Kilpatrick (D). Kilpatrick entered into risky deals that went bad, and because Kilpatrick used revenue from the city’s casinos as collateral for the loans, the banks have been able to keep Detroit from making use of casino money throughout the bankruptcy proceedings. A deal to resolve the interest rate swaps with UBS and Bank of America would bring that casino cash back into city hands, potentially financing much-needed quality-of-life improvements for city residents.

Orr first tried to pay the banks roughly 80 cents on the dollar to clear the debts. When Rhodes rejected that deal, Orr’s team came back with a revised proposal to pay 60 cents on the dollar for the debts. The same group of decision makers has proposed paying the city’s retired workers less than 20 cents on the dollar of what they are owed in pensions and health care benefits. Retirees told ThinkProgress that the health care cuts Orr proposes would leave some of them choosing between food and prescription medications, while others have%2

via Judge Rules Detroit Is Trying To Give Banks ‘Too Much Money’.

Unpaid Internships, A Career Pathway for the Wealthy

The scourge of unpaid internships must stop. It’s give an enormous advantage to those with the money to live without income. It’s a slap in the face to every highly skilled motivated American who has to pass on these opportunities they lack inherited wealth or well placed families.

These are jobs, period. Most of us can’t work for no money. But these jobs provide vital contacts for later careers specifically politics and lobbying.

Essentially these are an extension of the charmed lives of the children of the wealthy, you know, the pompous fools proclaiming they got everything they have through hard work and intelligence when their every move was cushioned by private and public wealth. It is an ongoing somber warning to the 99% that you are not a player in this game.

It’s time for this practice to end and that the Obama White House continues to do it is not surprising. This administration is just as wired into the system of the malefactors of great wealth as any previous administration.

Let’s have a real system of interns made up of the best and brightest of those in our colleges and universities. Ability and competence are common characteristics among this great people, the Americans. Surely we can set up a program where college students can compete on the basis of ability not birth.

James Pilant

How the young elite rise in Washington, D.C. – Salon.com

What do you call an employer that refuses to pay its workers any salary at all? Answer: The White House.

President Barack Obama has called for an increase in the U.S. minimum wage. And yet his administration expects hundreds of young people each year to work at the White House for an hourly wage of zero.

…

The Obama administration, like previous administrations, allows rich parents in effect to buy résumé-enhancing jobs in the public sector for their upper-class offspring. The sale of public offices to rich families was one of the abuses of the Ancien Régime that helped to inspire the French Revolution. Like that corrupt premodern practice, unpaid internships are an inherently aristocratic institution. If you are in your late teens or early twenties, and you don’t have a personal trust fund or rich parents who can fund your living expenses as an unpaid intern in Washington, D.C., New York or San Francisco, then you are out of luck.

When I say rich kids, I mean really rich kids. We’re talking One Percenters. Even many upper-middle-class parents with professional jobs might not be able to subsidize children with unpaid internships at the White House, Washington think tanks or New York publications and media enterprises.

Because my own parents were not rich, in my twenties I could never have afforded a job as an unpaid or poorly-paid intern at any of the magazines for which I once worked in my thirties as a writer or editor — the New Republic, Harper’s Magazine or the New Yorker.  Indeed, it was my unscientific impression that the interns at these publications were much richer, in their twenties, thanks to family wealth, than most of the middle-aged editors and writers. An intern at one magazine had a party for the magazine staff at her two-story Midtown Manhattan apartment.

Unpaid internships have the effect, if not the intent, of providing the children of the super-rich with major advantages over the children of the lower 99 percent in the job market after college. Imagine what a benefit a White House internship is on a résumé. Too bad that benefit is not available to poor, working-class, middle-class or even upper-middle-class Americans, unless they are lucky enough to find an outside sponsor to pay the wages that the Obama administration refuses to pay.

It’s bad enough that elite institutions like magazines and think tanks ration opportunity by discriminating in favor of the sons and daughters of the One Percent by means of unpaid internships. A president who engages in this practice sends a signal to all other employers in the United States: As long as you call a job an “internship” you are free to discriminate against the majority of Americans who were not born into the upper class.

via How the young elite rise in Washington, D.C. – Salon.com.

Not Sure that New Regulations are Needed?

Remember the old joke about the mule.

A farmer buys a mule. The seller tells him when he wants the mule to go forward to yell, “Go Mule.” The farmer takes the mule out in the field to plow, and the mule refuses to move. He yells “Go Mule” repeatedly with no effect. So, he goes and gets the seller, and tells him the command to move isn’t working. The seller picks up a great big board and hits the mule between the eyes, then he says, “Go Mule,” and the mule goes.

The seller turns to the farmer and says, “First, you have to get his attention.”

How hard do you have to hit the public between the eyes before you get their attention? How can you in the wake of this disaster think that regulations as they stand now are “about right?” And what kind of denial do you live in, if you think there were too many regulations in the first place?

James Pilant

Americans Split On New Regulations After West Virginia Chemical Spill

Fifty-one percent of Americans in the new poll said that the government should do more to regulate companies that use, manufacture and store chemicals, while 30 percent said current regulations on those companies are about right and 7 percent said the government should do less. And 50 percent said the government should do more to regulate the safety of the public water supply, compared to 34 percent who said current regulations are about right and 5 percent who wanted less regulation.

…

The poll comes after 7,500 gallons of 4-methylcyclohexane methanol, a chemical used to clean coal, spilled into the Elk River in West Virginia earlier this month, leading to a prohibition on tap water in nine counties for about a week and forcing schools and businesses to temporarily close.

via Americans Split On New Regulations After West Virginia Chemical Spill.

The Freedom to go Bankrupt?

Freedom Industries, its title apparently a hymn to free market fundamentalism, has decided to cash it all in. It’s a wonderful story of the free market in action. According to free market fundamentalists when a company does “bad” things, its customers will punish it by not buying its product and it will go out of business. This will be far more efficient and effective than government regulation; so, we shouldn’t have any. Just let the free market do its wonderful magic.

Well, this situations is just wonderful! It’s a perfect example. We can actually watch the free market in action, and see how much more effective than silly government regulation it is.

Freedom Industries does some seriously messed up stuff to 300,000 people and is held to account by its customers. Well, actually no, it declared bankruptcy and unless you think that is penalty enough (and I don’t) I’d have to say the free market isn’t doing much for us here. Because under free market fundamentalism, that is the maximum penalty.

Under free market fundamentalism, the company could have killed those three hundred thousand people, razed their homes to their ground and poured toxic wastes on their collective graves, and the company’s demise through bankruptcy would be the punishment.

Does that sound fair to you?

Right now, a poll shows a divided opinion on whether or not we should have more regulation. I don’t get it. What kind of example do you need before you get the idea that if you don’t regulate you get just this situation or worse? Hundreds of thousands of people turned on their faucets and out came toxic waste. Are they of no importance compared to the need of industry to make profit?

Do you know what the name of the company should have been?  – Freedom to Dodge Responsibility, Inc. Now, we, Americans, have to decide if that is where the story ends. Are we going to do more regulation or are we going to close our eyes, and hope the free market fixes things.

How’s the free market solved the problem so far?

James Pilant

Freedom Industries, Company Behind West Virginia Chemical Spill, Files For Bankruptcy

The company behind the massive chemical spill that made tap water unsafe for more than 300,000 West Virginians has filed for bankruptcy, according to documents obtained by The Huffington Post.According to bankruptcy filings, Freedom Industries, wholly owned by Chemstream Holdings Inc., filed for Chapter 11 bankruptcy on Friday. Freedom Industries owns the storage facility responsible for leaking up to 7,500 gallons of 4-methylcyclohexane methanol a coal-cleaning chemical also known as crude MCHM into West Virginias Elk River. Hundreds of thousands of people in nine counties were given orders not to use water for bathing or drinking for days as the company scrambled to clean up, exposing disturbing vulnerabilities in the water supply and a lack of data about hazardous chemicals and where theyre stored. A second site owned by the company was also cited for safety violations shortly after the spill.

via Freedom Industries, Company Behind West Virginia Chemical Spill, Files For Bankruptcy.