Iraq Not Rebuilt – $Billions Wasted

On By southwerkIn business ethics, Capitalism, ethics, Government Failure, Privatization

Just wonderful! Of course, it’s not much of surprise, there were already news stories and photographs of disastrous building projects and corporate contractual malfeasance. But here we are, billions in the hole, no doubt costing American lives as the Iraqis looked around and waited for us to fulfill promises our private contractors had little intention of doing in the first place. As long as the money rolled who cared about results. Here’s the lead in from the AP report –

A $40 million prison sits in the desert north of Baghdad, empty. A $165 million children’s hospital goes unused in the south. A $100 million waste water treatment system in Fallujah has cost three times more than projected, yet sewage still runs through the streets

As the U.S. draws down in Iraq, it is leaving behind hundreds of abandoned or incomplete projects. More than $5 billion in American taxpayer funds has been wasted — more than 10 percent of the some $50 billion the U.S. has spent on reconstruction in Iraq, according to audits from a U.S. watchdog agency.

That amount is likely an underestimate, based on an analysis of more than 300 reports by auditors with the special inspector general for Iraq reconstruction. And it does not take into account security costs, which have run almost 17 percent for some projects.

Business ‘Ethics’ Wrong Focus – Really?

On By southwerkIn business ethics2 Comments

Thomas DiLorenzo writes an article in which he explains that those teaching business ethics tend to emphasize a few bad apples which implies that all businessmen are corrupt. What’s wrong with greed, he says. We’ve always had it. The real problem is with government.

Okay, I get tired of this. I never teach that all businessmen are corrupt but I strongly suggest that those that are do incredible damage to this country and I can prove my point.

There are a lot of things like greed and pride and avarice and sloth, but that they’ve been around a while doesn’t mean they are acceptable.

I have to notice that the American economy (and the world economy) were nearly destroyed by Mr. DiLorenzo’s “greed.” I do not believe that the government is the source of all evil and I have more faith in an organization in which the American People have some kind of input (not as much as I want) than a giant financial company with a proven record of manipulation, overpayment and use of government influence to protect itself from the actual economic consequences of its misbehavior.

I am a business ethics teacher. That’s a lot more than a apologist for corporate malfeasance and a radical who has discovered the source of evil as American self government.

James Pilant

Business Ethics NEWS – Governor Rick Perry Has Accumulated A Cool Million During Twenty Years Of Government Service?!

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

How do you do that? I guess you could be really clever. Or you could take some ethical shortcuts. I remember reading Milton Friedman, he says you are supposed to make the maximum profit for shareholders within the rules of the game. Now, I find ole Miltie utterly contemptible. However, that phrase “within the rules of the game” has always troubled me. What does that mean? Here is a situation in which the rules appear to be very flexible. What’s more – How vigorously can you fight or maintain the public interest with such “close” friends?

The Houston Chronicle suggests it might be like this –During two decades of full-time government service, Gov. Rick Perry has accumulated a net worth of about $1 million – perhaps through good investment timing.

However, almost everyone who steered Perry to his money-making deals has seen rewards from Texas government.

Six received key state government appointments or jobs. Two benefited from government actions that had the potential to enhance their real estate holdings. Another was poised to get a state grant for his business until the deal fell through.

The bottom line is, all of the real estate deals that made Perry money occurred because of an insider’s tip. The profits mostly go into a blind trust outside of public view or scrutiny.

“Every transaction I have been involved in has been at arms length, has been transparent and it has been reported on so many cotton-picking times that, if there was something there, it would have been reported on,” Perry said recently.

Southern Methodist University political scientist Cal Jillson said Perry’s real estate deals remind him of the story of Texas oilman Sid Richardson hiring future governor John Connally as a lawyer. Richardson told Connally his salary would not be big, but “I’ll put you in the way to make some money.”


Chinese Corruption

On By southwerkIn Capitalism

Russell Flannery covering the China beat for Forbes has an interview with Chinese ethicists. This is an excerpt from the article. This is only the introductory part I recommend you read the rest.

Last week brought a reminder of China’s troubling business ethics landscape when the government was forced to investigate reports that infants who consumed milk powder supplied by Nasdaq-listed Synutra International had premature breast growth. The Ministry of Health cleared Synutra, yet the allegations recalled the sale of tainted infant formula in 2008 and a long list of product safety and other problems involving business ethics  in the country.
Ultimately, what can be done to improve business ethics in China? I talked to two professionals working at the front line of research and education here, Professor Hengda Yang and Stephan Rothlin from the Center for International Business Ethics at the University of International Business and Economics in Beijing.  Yang is the author of a pioneering Chinese book about business ethics, “The Conscience of Business.”   Rothlin is also associated with the University of Zurich and the Insead Business School in Singapore.

Wikipedia has an entry on Chinese Corruption. Below is an excerpt.

The People’s Republic of China suffers from widespread corruption. For 2008, China was ranked 72 of 179 countries in Transparency International’s Corruption Perceptions Index. Means of corruption include graft, bribery, embezzlement, backdoor deals, nepotism, patronage, and statistical falsification.

Cadre corruption in post-1949 China lies in the “organizational involution” of the ruling party, including the regime’s policies, institutions, norms, and failure to adapt to a changing environment in the post-Mao era. Like other socialist economies that have gone through monumental transition, post-Mao China has experienced unprecedented levels of corruption, making the ruling Chinese Communist Party (CCP) “one of the most corrupt organisations the world has ever witnessed,” according to Will Hutton. Public surveys on the mainland since the late 1980s have shown that it is among the top concerns of the general public. According to Yan Sun, Associate Professor of Political Science at the City University of New York, it was corruption, rather than democracy as such, that lay at the root of the social dissatisfaction that led to the Tiananmen protest movement of 1989. Corruption undermines the legitimacy of the CCP, adds to economic inequality, undermines the environment, and fuels social unrest.

Since then, corruption has not slowed down as a result of greater economic freedom, but instead has grown more entrenched and severe in its character and scope. In popular perception, there are more dishonest CCP officials than honest ones, a reversal of the views held in the first decade of reform of the 1980s. China specialist Minxin Pei argues that failure to contain widespread corruption is among the most serious threats to China’s future economic and political stability. Bribery, kickbacks, theft, and misspending of public funds costs at least three percent of GDP.

Corruption as a key factor in the collapse of the former Soviet Union and its Eastern European client states. While there are no numbers to tell us the gravity of the problem in economic terms, it would a reasonable to conclude that only the rapid growth of manufacturing, the huge quantity of national resources, and the highly favorable media portrayal of China have prevented an accurate perception of the problem.

But there are stories of economic corruption in real estate and manufacturing. There are troubling accounts of disasters both natural and artificial concealed from the West and unreported in China itself.

I predict that by the end of this decade, corruption in China will become a brake on foreign economic investment.

James Pilant

Sunday – All Day Dungeons And Dragons Game

On By southwerkIn Uncategorized

I went up two levels from 8th to 10th and led a 700 man recon force in a successful defensive battle. Be back posting tomorrow. jp

My son’s cat marched up and down his keyboard [it likes to hear the beeps] and totally crashed his system. It took me close to three hours to reload his programming, so it wasn’t all fun.

The Number One New Story In Australia!?

On By southwerkIn ethics1 Comment

That’s right, click over to News.com.au and Paris Hilton is the lead story. Good Grief, they are in the aftermath of an historic election.

They’ve got a guy who held a another guy as a slave turn himself in. If you want gaudy, strange news, isn’t that good enough? They have a nuclear reactor that spewed poison gas for hundred of miles from Sydney to Melbourne, and Paris Hilton is the top story. (By the way, they didn’t tell the public about the poison gas for fear of causing alarm. I don’t guess it would have been a big deal anyway. After all, the citizen of Melbourne who went to the internet for news would have had to read about Paris Hilton before he drifted down the page to the headline, Poison Gas Drifts Toward City.)

Has all news got to be on the level of short attention spanned five year old?

James Pilant

A Brief Comic Strip Explaining CDO’s And How The Banks Use Them

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

Go to this web site.

Banks Created Fake Demand To Keep Home Sales Going

On By southwerkIn business ethics, Capitalism, Economic measurement, ethics, Government Failure

Back in 2006, when the housing market began to slow banks began to have difficulty moving their CDO’s (collateralized Debt Obligations). So, they created an artificial demand by selling them to each other.

Tens of billions of dollars in deals were exchanged between the banks. The CDO’s were becoming increasingly risky as solid mortgage investments disappeared. But the banks had strong influence over the managers who created the CDO’s and how couldn’t they? A billion dollar CDO made the manager a millionaire off that once transaction.

Without these deals keeping demand high and luring new investors into the game, the housing market would have slowed much earlier with much less damage.

Investment firms like Merrill Lynch cultivated the CDO managers –

As the head of Merrill’s CDO business, Ricciardi also wooed managers with golf outings and dinners. One Merrill executive summed up the overall arrangement: “I’m going to make you rich. You just have to be my bitch.”

The mortgage debts varied in risk, so the banks kept the top 80% and marketed the high risk bottom 20%. But bizarrely, the banks bought each others CDO’s. That’s right, the bottom 20%. But remember, a one billion dollar deal results in five to ten million in fees. That’s a lot of incentive to make bad deals. Bad for your bank but very, very good for you.

The banks were so successful in creating this artificial demand that in 2006, the amount being traded doubled in spite of the cooling real estate market reaching a value of 226 billion dollars.

These were the kind of toxic assets the banks were holding. The banking industry would have you believe that home buyers got in over their heads looking for easy loans. How does that figure when the banks are buying each others’ mortgage investments? How does that work when the banks are creating artificial demand?

And you know the end of the story, how the federal government used tax money to buy those toxic investments which the banks bought from each other knowing they were toxic investment. Do you feel good?

This is isn’t about overenthusiastic home buyers, this New Depression is the result of financial mismanagement and naked greed.

James Pilant

Not Quite Equal Yet!

On By southwerkIn ethics, Government Failure5 Comments

This memo from the Nettleton Middle School divides student offices by race.

The more things change, the more they stay the same.

(There are new reports that two of the four school administrators are black and they are saying it was a misguided attempt at affirmative action.) I’m not buying it. Limiting the blacks to a handful of seats and determining the race by the race of the student’s mother are not the elements of affirmative action. And, in particular, the fact (at least according to the news) that some administrators are black has no effect in my mind on whether or not it’s discrimination. Someday, people are going to have to wake up and decide that blacks have actual individuals in their midst who have their own points of view, do bad things, do good things, believe wonderful things, believe moronic things and just generally do that human being thing. That a black person says something about other blacks does not make it okay. That a (fill in the blank) says or does something that involves the (fill in the blank) race does not make it okay. Got it?

James Pilant

High Performance

On By southwerkIn ethics2 Comments

One of the things that keep me in a perpetual state of outrage is the self help movement particularly the self esteem part of it, you know, affirmations, think positive, the “secret,” and other crap.

You feel good about yourself when you accomplish things, when you do actual work and when you have concerned yourself with living in harmony and joint support with other human beings.

But that’s difficult. That’s hard. That would mean you would have to have some kind of perception of responsibility or, gasp, duty.

So, we tape stuff to the mirror, convince ourselves that our thoughts draw money, love and other goodies to us, and a host of other activities designed to make us feel momentarily content without justification.

I was reading an article by a fellow named Tony Schwartz. This is what he says:

In work with thousands of people, we’ve found that it’s possible to build any given skill or capacity in the same systematic way you do a muscle: regularly push past your comfort zone, and then rest. We’ve seen people dramatically improve skills ranging from focus, to empathy, to creativity, to summoning positive emotions, to deeply relaxing.

He then lists the six elements of achieving success.

You might give his short essay a read. Of course, you could always tape something to the fridge.

James Pilant