Effects of Economic Inequality

It seems to me….

Ill fares the land, to hastening ills a prey,
Where wealth accumulates, and men decay.” ~ Oliver Goldsmith[1].

Every previous civilization has been destroyed by the unequal distribution of wealth and power. The more advanced the community, the greater the intensity. Wages and interest fall while rents rise. The rich get richer, the poor grow helpless, the middleclass is swept away.

The U.S. has become a society in which a growing share of income and wealth is concentrated in the hands of a small number of people and these people have huge political influence. Inequality has risen in most advanced economies but is most pronounced in the U.S. Economists have listed many causes for the rise of inequality: technology, education, globalization, decline of unions, a falling minimum wage… but changes in culture and values have also played a major role. Economies are more successful when there is only a minimal gap between rich and poor and growth is broadly based. A successful economy also depends on meaningful opportunities for work for everyone who wants a job.

Trend lines indicate a clear direction in which our economy is moving – a direction resulting in an increasingly bifurcated economy where educational attainment closely correlates with income: higher education, higher income; less education, less income.

We as a nation have chosen to prioritize tax shelters over minimum wages, subsidies for private jets over robust services for children to break the cycle of poverty. And the political conversation is often not about free rides by corporations but about free rides by the impoverished.

It is unfortunate that some commentators still write as if poverty were simply a matter of values, as if the poor just make bad choices; that all would be well if they adopted middleclass values; that the poor cause their own poverty and could easily escape if only they acted like members of the upper middleclass. That might have been a sustainable argument four decades ago but, at this point, it should be obvious that middleclass values only flourish in an economy that offers middleclass jobs.

The high U.S. Gini coefficient, which has continued to climb over the past few years, should be a warning of rising dissatisfaction among those disaffected. The U.S. middleclass has been decimated in recent years providing those less well-off with little prospect of self-improvement. It is unfortunate that in our bifurcated economy that the people responsible for change are insulated from the effects of their poor policy decisions. The cost of our recent economic recovery following the last recession is that while gains from growth, low inflation, and technological productivity have been broadly spread across our entire population, the jobs lost and wages reduced are concentrated among a smaller lower-income group of our country.

When individual incomes are flat or declining, wealth inequality becomes politically divisive. Preferably, that dissatisfaction brings about political change but if the political system responds only to the benefit of the wealthy, it can become a direct threat to political stability. Those perceiving themselves to be excluded may resort to non-political remedies or candidates posing a threat to liberal democracy. The recent increase in alcohol and drug addiction and suicide especially among non-Hispanic middle-aged Caucasians in all probability is at least partly attributable to a perceived decline in social and wealth opportunity.

When the disparity of conditions increases, democratic elections make it easy for populists to seize the source of power. Many feel no connection with the conduct of government. Embittered by poverty, they are ready to sell their votes to the highest bidder or follow the most blatant demagogue. Unequal distribution of wealth inevitably transforms popular government into despotism[2]. It is the voices of these people who are understandably angry who are primarily responsible for electing trump.

That’s what I think, what about you?

[1] Oliver Goldsmith was an 18th century Anglo-Irish essayist, poet, novelist, dramatist, and eccentric.

[2] George, Henry. Progress and Poverty, Published 1879.

Posted in Demagogue, Demagogue, Despotism, Economy, Education, Elections, Employment, Employment, employment, Gini Coefficient, Inequality, Inflation, Jobs, Jobs, Jobs, Low-Income, Middle Class, Middle Class, Middle-Class, Middle-Income, Populism, Poverty, Productivity, Recession, Trump, Wages, Wages, Wealth | Tagged , , , , , , , , , , , , , , , , , , , , , | 1 Comment

Human-Level AI

It seems to me….

By far, the greatest danger of Artificial Intelligence is that people conclude too early that they understand it.” ~ Eliezer Yudkowsky[1].

Development of human-level artificial intelligence (AI) is inevitable: it is basic in human nature to continually improve or create whatever is feasible. Computing technology has already developed rudimentary AI to the point where most people now carry such devises in their pockets. AI agents such as Siri and Cortana will continue to be improved year after year until they are smarter than we are – at which point they will begin to improve themselves at an ever-increasing rate. There is no denying this probability. We know that mere matter can give rise to what is called “general intelligence”, an ability to think flexibly across multiple domains. Intelligence can develop from a specific organization of molecules – we have the human brain as an example. Atoms are atoms and if we continue to build systems of atoms that display increasing levels of intelligent behavior, we eventually will build general intelligence into our machines. Development will have then reached what is referred to as the “technological singularity”.

The technological singularity is where capabilities of such an intelligence are impossible to comprehend; it is an occurrence beyond which events are unpredictable or even unfathomable, everything that comes after it is therefore totally unknowable and any predictions are total speculation.

Development of general AI has the potential to eliminate war, disease, poverty, permit space exploration, etc. and will be the greatest development in human history. It could result in a utopia; it also could be the end of all life. Up to now, we always had the opportunity to repeatedly try something until we eventually got it right. The initial development of general AI must be absolutely correct the very first time – we will not have any second chance. There is a significantly high probability that AI will either destroy us or inspire us to destroy ourselves.

The next century could therefore be the most dangerous humanity has yet faced as progress in science and technology become an ever-greater threat to our existence; Stephen Hawking, Elon Musk, Bill Gates, and many other eminent scientists have warned of its threat. Even without possible menace from AI, the chances of disaster on planet Earth will statistically rise to a near certainty within the next one thousand years. Most of the threats humans now face come from advances in science and technology, such as nuclear weapons and genetically engineered viruses. We very likely will not establish fully self-sustainable colonies in space improving our chances for survival for at least the next hundred years. This is the interval when life as we know it is most vulnerable.

The threat is not from some super-intelligent malevolence as usually depicted in movies; it is from an entity more competent than us having the slightest divergence between its goals and our own not being hesitant to destroy us. We do not intentionally harm most other life and normally even attempt to not injure anything but we will eliminate without hesitation whatever might seriously conflict with our goals. Anything more intelligent than us can be anticipated to behave similarly.

Admittedly, artificial entities capable of human-level general intelligence do not currently exist and most likely will not within the very near future. In fact, much of what today is usually referred to as AI is only a combination of clever algorithms and brute-force computing rather than actual AI. But if intelligence has developed in the past, it obviously can – and will – again.

The primary key AI technological threshold is the one where AI becomes capable of strong self-improvement. There isn’t any way to predict when this will be achieved as its actual difficulty cannot be known or estimated. Many estimates are based on continuous exponential improvement but this is fully applicable only to hardware; software advances typically occur on a more random-step basis. Exploring better unsupervised learning algorithms is a crucial key towards human-level AI.

For machines to truly have common sense – to be able to figure out how the world works and make reasonable decisions based on that knowledge – they must be able to teach themselves without human supervision. There have been numerous recommendations concerning propositions related to the automation of decision-making processes associated with the uncertainty about whether both the AI system’s operating environment and its internal representations can be fully retained rather than prematurely pruned[2]. It still remains difficult to quantitatively identify causal connections between data components.

Though it cannot be predicted how long such development might take, regardless of the rate of progress, it eventually will be achieved. Once given human-level intelligence, electronic circuitry operating at speeds about a million time faster than human biochemical circuits could perform thousands of years of equivalent human-level work within a week. While human-level intelligence is constrained; there isn’t any comparable constraint on electronics.

One of the threats of general AI arises from the realization that none of us are saints yet we must develop entities that approach perfection – an impossible expectation. While it would be highly desirable to require any such development to incorporate some set of human moral behavior, such dependence to prevent malevolent behavior is misguided as some developer, whether researcher or government, could bypass such constraints as easily as some biologist developing a virulent pathogen. There always will be human moral deviants bent on social disruption or government sponsored development intended to provide individual advantage.

We do not have to wait for development of general AI; the effects of limited AI are not sometime in the future, they are occurring right now – e.g., there isn’t any certainty to the extent to which current development will impact employment. It has been widely stated that jobs are not automated, that only tasks are; those tasks that are repetitive, well defined, or have clear-cut goals are the ones most likely to be automated. However, recent AI advances are demonstrating a capability to also perform tasks previously considered impossible to automate such as vehicle operation. While correct that tasks involving a variety of activities, solving novel challenges in chaotic or challenging environments, or the authentic expression of human emotions are more difficult to automate[3], those tasks frequently can be divided into multiple simpler less challenging sub-tasks. Nothing should any longer be considered certain.

Past technological advances have always automated tasks that required human effort; primarily replacing muscular labor. Now tasks being automated increasingly involve mental effort. This level of automation is unique in that respect and it is impossible to accurately assess future employment impact. Society in the past always has responded to automation by eventually creating new, different, and an increased number of jobs but historically this transition can require substantial time. It is not clear if modern society can tolerate that level of disruption.

AI systems currently are unable to understand spoken or written information, unable to pass a standard eighth-grade science test, or perform tasks of which typical 10-year-olds are capable but hardware-dependent improvement in any of these areas is exponential rather than sequential: humans are extremely poor at estimating exponential development, especially once it reaches the “second-half of the chessboard[4]”. We can only surmise development could occur much sooner than we anticipate.

While current AI capabilities are very limited and we haven’t any way to predict how long it might take to develop human-level intelligence, the difficulty in predicting any rate of development is it involves, though not directly dependent upon, exponential growth. Development of general human-level intelligence still remains subject to the laws of exponentiation with each improvement/advancement occurring at an ever-rapid rate. We assume artificial entities capable of independent thought will not occur until quite some time in the future but we cannot be sure as we move onto the second half of the chessboard. The singularity might be much closer than we realize.

That’s what I think, what about you?

[1] Eliezer Shlomo Yudkowsky is an American artificial intelligence researcher known for popularizing the idea of friendly artificial intelligence.

[2] Azevedo, Carlos R. B. Five AI grand challenges and the rise of Anticipatory Multi-Objective Machine Learning, LinkedIn, https://www.linkedin.com/pulse/five-ai-grand-challenges-rise-anticipatory-machine-learning-azevedo, 20 June 2016.

[3] Kaplan, Jerry. Artificial Intelligence: Think Again, Communications of the ACM, http://cacm.acm.org/magazines/2017/1/211103-artificial-intelligence/abstract, January 2017, pp36‑38.

[4] Wheat And Chessboard Problem, Wikipedia, https://en.wikipedia.org/wiki/Wheat_and_chessboard_problem#Second_half_of_the_chessboard.

Posted in AI, AI, AI, Algorithm, Algorithms, Artificial Intelligence, Artificial Intelligence, Automation, Automation, Bill Gates, Chessboard, Cortana, Cortana, Disease, Elon Musk, Employment, Exploration, Human-Level, Intelligence, Intelligent Entity, Pathogen, Poverty, Siri, Space, Stephen Hawking, technological singularity, Technology, Threats, War | Tagged , , , , , , , , , , , , , , , , , , , , | 3 Comments

Smart Cities

It seems to me….

Smart cities are those who manage their resources efficiently. Traffic, public services and disaster response should be operated intelligently in order to minimize costs, reduce carbon emissions, and increase performance.” ~ Eduardo Paes[1].

Many cities are experiencing exponential growth as people move from rural areas in search of better jobs and education[2]. The urban population is growing with nearly two-thirds of Americans and 54 percent of the world currently living in cities. And this number is increasing: by 2050 75 percent of the human population will be urban dwellers[3]. Some changes are necessitated as cities are responsible for 70 percent of global carbon dioxide emissions. Urbanization is an issue with which all cities must necessarily deal and many of them are seeking ways to better serve their constituents.

Cities’ services and infrastructures are being stretched to their limits in terms of scalability, environment, and security as they adapt to support population growth. Urban visionaries and planners are seeking to develop a sustainable economy to improve energy efficiency and minimize carbon-emission levels. Along with cities’ growth, innovative solutions are crucial for improving productivity (increasing operational efficiency) and reducing management costs.

While the definition of a smart city remains somewhat imprecise, it basically is an ultra-modern urban area that is addressing the needs of its businesses, institutions, and especially citizens. While the objective of both a smart city and smart urbanism is the same – the life of its citizens – there are primary difference. Historically, architects of ancient cities did not take into consideration long-term scalability; e.g., housing accessibility, sustainable development, transport systems, and growth; there is no scalable resource management that may be applied from one decade to another.

Not every city will have the same goals and needs to become a smart city; the technologies a smart city needs vary based on the region and the country. Considerable planning is necessary as just implementing various technologies simply because they exist is not sufficient. Even if an implementation is successful in one location, it does not guarantee it will be equally successful elsewhere.

Smart city planning is being able to adapt and be significantly more agile than in the past utilizing IoT sensors and technology to connect components across the city to derive data and improve the lives of citizens and visitors. Leveraging advances in smart infrastructure, information, and communications technologies combined with data analytics can help cities as well as energy, water, telecom, and transportation companies meet their goals to becoming “smarter”. If not planned for, there isn’t any way to take advantage of the opportunities afforded by technology, the opportunities that are being revealed through data, and the opportunities afforded by having different city systems work together in a much more interconnected way.

Citizens are demanding more out of their cities than in the past. Not only are cost savings and efficiency important, they’re expecting the same services and opportunities from cities that they receive from leading technology and service providers. An improved customer experience, cost efficiencies, resiliency enhancements, or sustainability improvements are not possible without smarter planning.

Simply inundating smart city projects with data does not work due to access, analytics, availability, and the ability to turn big data into insights. It’s important to break down urban silos so that each department within a city knows on what the other is working. Data also needs to be unconstrained as it moves between systems with due attention to intellectual property, security, and privacy concerns. Privacy issues must balance the need to provide sufficient information to improve service while preserving personal confidentiality.

Data collection and analysis is a key component of a smart city to provide predictive analytics. Sensors, especially IoT sensors, actuators, and technology are necessary to connect components across the city and they impact every layer of a city from under the streets to the air its citizens breath. Examples are support for multi-modal transportation, smart traffic lights, and smart parking as well as overall energy usage using smart grids and smart meters.

The massive amounts of data collected must be quickly analyzed and patterns derived from the collected data. Open data portals are one option that some cities have chosen in order to publish city data online so anyone can access it and use predictive analytics to assess future patterns.

Initiatives are underway in numerous locations in many different countries. Cities across the U.S. have begun to draw on the reams of data at their disposal – about income, burglaries, traffic, fires, illnesses, parking citations… – to tackle many of the problems of urban life. President Obama in 2016 announced a “Smart Cities” federal initiative to research and leverage more than 25 new technology collaborations to help local communities tackle key challenges such as reducing traffic congestion, fighting crime, fostering economic growth, managing the effects of a changing climate, and improving the delivery of city services. Cities are finding more ways to use the considerable amounts of data at their disposal.

Cities are caught between the proverbial rock and a hard spot: most are experiencing substantial budget constraints, unable to adequately maintain schools or infrastructure (water, sewer, transportation…), while attempting to increase operating efficiency by investing in expensive technology without any guarantee of success. They must attempt to plan and implement an integrated solution maximizing the economy, society, environment, and welfare of its communities and that facilitates supporting the shift towards more sustainable behavior among all stakeholders: users, companies, and administration.

The only reasonable way for cities to reduced public spending is to increases their efficiency and quality of services but in addition coping with financial constraints, many also encounter political opposition from departmental Balkanization protecting internal fiefdoms – data and operational silos. Even many constituents accepting the advantages of system implementation seek to delay investment believing current critical priorities must be resolved prior to what they consider to be non-crucial expenditures.

To reap the benefits of the smart cities movement requires the U.S. to get “smart” in more ways than one. At stake is not just greater livability and sustainability but the jobs and investment that accrue to communities at the cutting edge of innovation.

That’s what I think, what about you?

[1] Eduardo da Costa Paes is a Brazilian politician who is the former mayor of the city of Rio de Janeiro.

[2] Khatoun, Rida, and Sherali Zeadally. Smart Cities: Concepts, Architectures, Research Opportunities, Communications of the ACM, August 2016, pp46-57.

[3] Urban Population Growth, World Health Organization (WHO), http://www.who.int/gho/urban_health/situation_trends/urban_population_growth_text/en/.

Posted in Analytics, Barack Hussein Obama II, Carbon Dioxide, Cities, CO2, Communications, Data, Economy, Environment, Illness, Information, Infrastructure, Internet of Things, Internet of Things, IoT, IoT, Obama, Population, Privacy, Security, Sensors, Smart City, Urban, Urbanization | Tagged , , , , , , , , , , , , , , , , , , | 1 Comment

Automation and Human Labor

It seems to me….

I see robotic technology getting rid of the dangerous, the dirty, and the just plain boring jobs. Some people say, ‘You can’t. People won’t have anything to do.’ But we found things that were a lot easier than backbreaking labor in the sun and the fields. Let people rise to better things.” ~ Rodney Brooks[1].

The U.S., with the rest of the advanced nations closely following, is on the verge of an unparalleled social evolution which many conservatives prefer to deny. The current extent of economic transformation, primarily due to technology change, exceeds that of all previous cultural advances and is potentially the greatest economic and social threat we face. Our economic model is in a rapid transition but most conservatives just don’t get it. It is unfortunate that real change normally only occurs as a result of some crisis but now is the time to begin to adjust our national economic model for a post-manufacturing world.

An important lesson from the industrial revolution is that as traditional jobs disappear, it is necessary to ensure that people of all ages are sufficiently educated to prepare and take advantage of the new emerging roles in their immediate future. Ignoring these trends and continuing to prepare children with skills for roles that will no longer exist is definitely not the answer. Clinging to business models of the past or attempting to recreate the good-old days is equally disadvantageous. These changes demand new skills, new mindsets, new competencies, and new institutions.

Human labor is currently indispensable in manufacturing but similar to equine labor a century ago, as robots grow increasingly nimble, humans are appearing more vulnerable. Humans still remain far more cognitively adaptable than industrial robots but a parallel to the fate of the horse must be considered as a possibility.

Increased robot density has not correspondingly resulted in increased employment among any group of workers, even those with university educations, though automation should yield savings to both manufacturers and consumers which could then be spent on other goods or services; labor liberated by technology should gravitate toward tasks and jobs in which humans retain an advantage[2].

Instead, automation has resulted in a reduction of human wages necessitating some reallocation of workers. Each additional industrial robot per thousand workers has reduced wages across the economy by 0.5 percent. Real wage growth in many rich economies has been disappointing for much of the past two decades. An overwhelming share of the growth in employment in rich economies over the past few decades has been in services, nearly half in low-paying fields like retail and hospitality. Employment in such areas has been able to grow, in part, because of an abundance of cheap labor.

Low pay leads to policies that complicate labor-market adjustment. Instead of eliminating excess labor, wealthy economies provide some social support: unemployment benefits, social security or disability payments, and assistance with housing and food.

The growing demise of middle-skill jobs could cause employment polarization where lower paid workers serve the more affluent without any opportunity for upward mobility. As technology continues to pervade every aspect of human life, change, both within us and around us, will remain the only constant.

Two-thirds of Americans believe it likely that in 50 years robots and computers will do much of the work currently done by humans[3]. Despite their expectations that technology will encroach on human employment in general, most workers believe their own jobs or professions will still exist throughout that 50-year period. Only 10 percent of workers fear the possibility of losing their current jobs due to workforce automation; competition from lower-paid human workers and broader industry trends pose a more immediate concern.

Education, training, and research will be key to future economic well-being. For those unable to complete the increasingly difficult academic challenges, alternatives such as infrastructure maintenance and improvement provide potential employment alternatives. It is highly doubtful that a permanently unemployed social class would ever be tolerated by the U.S. electorate so suitable available alternatives will be increasingly necessary as automation and computerization progressively eliminate many current employment opportunities.

Though an increase in immigration is usually not considered beneficial to employment opportunities, immigrants historically have created a disproportionate percentage of new companies and corresponding employment with either no effect or an increase in native-born wages or opportunities. U.S. immigration is slow, complex, inefficient, and highly bureaucratic but relatively simple steps still could be taken including elimination of the annual cap on H1-B visas, automatically providing H1-B visas to all foreign students receiving an advanced degree, and offering a special “startup visa” category for any potential immigrant entrepreneurs who provide verification of venture capital funding.

There isn’t any mystery to the recommended course of action to respond to increasing computerization and automation. The correct response is stated in almost all ECON-101 textbooks – politicians just need to go back to school rather than blindly attempting to enact measures based on political ideology rather than well-proven facts. If they would like some recommendations for basic economics texts:

Mankiw, Greg. Principles of Economics (conservative)
Samuelson, Paul. Economics: An Introduction to Analysis (liberal)

Commonly advocated recommendations for responding to these threats do not change regardless of whether the economist is a conservative or a liberal. Problematically, regardless of party affiliation, politicians typically reject proven advice preferring either the simplest solution or to ignore it and hope it goes away. But that no longer is sufficient.

There is much that can be done. The best response is to provide free higher educational access, at least through the Bachelor’s degree level or alternatively at community colleges to obtain program certification or vocational training for those not otherwise admitted to college programs.

Infrastructure upgrades to our nation’s roads, bridges, tunnels, electrical grid (renewable energy), water and sewer, railways, air transport, waterways… would provide significant positive long-term fiscal benefits to both federal or state governments. Improved infrastructures result in rapid overall productivity growth and a stabilization (or even reversal) of the recent large rise in income inequality. Establishment of a National Infrastructure Bank would enable greater private sector co-investment in infrastructure projects and also allow for the rigorous analysis required to direct support to projects with both the greatest returns to society and the long-run economic benefits that can justify up-front investments. Additionally, infrastructure projects provide employment opportunities for those not able to qualify for higher education or vocational training.

Basic research is the seed corn of future innovation. Support for science and engineering research needs to be increased as this will be the primary source of tomorrow’s jobs. Economists have agreed for decades that spending on science is one of the best ways to generate jobs and is a major component of modern economic growth. Basic and applied R&D that the private sector is unlikely to sufficiently support requires sustained direct funding by the Federal Government to create a knowledge base of potentially transformative ideas that are the critical building blocks of innovation. Federally funded academic R&D is instrumental in creating and sustaining a world-class higher education system that prepares the next generation of U.S. scientists and engineers. It also is a primary means of attracting and training high-ability international students, researchers, and faculty.

Business startup assistance is necessary as new and small businesses employ a disproportionate number of employees compared to large established corporations but they require regulatory simplification and deregulation. The main goal of commercial development is improving the economic wellbeing of communities through efforts that entail job creation, job retention, tax base enhancements, and quality of life. Business incubators help new and startup companies to develop by providing services such as management training or office space.

Low-interest loans are necessary to help businesses purchase land, refurbish buildings, and obtain new equipment. Bond programs help lower the cost of borrowing for a business; interest on a bond is much lower than on traditional bank loans. Tax credits and increased use of preferential zoning is essential to encourage/discourage desirable and undesirable business expansion and retention. Low-cost workforce training provided for businesses and industries enabling them to remain competitive can be provided through a variety of county or state programs. Business cluster group strategies are increasingly also used to assist business retention and expansion by sharing concerns such as infrastructure, zoning, and quality of life enabling a more powerful voice to be heard influencing business climate improvement. One-stop permitting centers enable businesses to quickly begin or expand operations.

A formal means of facilitating prospective employee/job position matching should be created. Currently many seeking employment rely on word-of-mouth referrals but a local, national, and even global job opportunity database would be beneficial along with local job fairs and counselors providing search assistance.

Whether fully accepted or not, the U.S. is transitioning to a post-industrial economy. Without proper planning and foresight, the process could be unnecessarily traumatic. The opportunities it presents are extensive but will require social change and investment if its potential is to be fully realized.

That’s what I think, what about you?

[1] Rodney Allen Brooks is an Australian roboticist, Fellow of the Australian Academy of Science, author, and robotics entrepreneur most known for popularizing the actionist approach to robotics.

[2] Will Robots Displace Humans As Motorised Vehicles Ousted Horses?, The Economist, http://www.economist.com/news/business-and-finance/21719761-probably-not-humans-have-lot-learn-equine-experience-will-robots?cid1=cust/ednew/n/bl/n/20170330n/owned/n/n/nwl/n/n/na/19950/n, 1 April 2017.

[3] Smith, Aaron. Public Predictions for the Future of Workforce Automation, Pew Research Center, http://www.pewinternet.org/2016/03/10/public-predictions-for-the-future-of-workforce-automation/, 10 March 2016.

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Resurgence Of Racism

It seems to me….

Hatred, racism, and extremism have no place in this country.” ~ Angela Merkel[1].

The last fifty years have been an unprecedented period of human rights progress in the U.S.: civil rights, women’s rights, minority rights, and sexual acceptance. Unfortunately, while having always lurked just beneath the surface, there has been a recent resurgence of bigotry as shown by recent events in Charlottesville, VA, and elsewhere.

How can anyone be so debased as to advocate the indefensible? 750,000 Americans died in the Civil War. That rebellion is a historical fact to be acknowledged but it was fought over an immoral and repulsive issue: slavery. To support symbols of the Confederacy or its primary protagonists is to lend affirmation to the belief of racial inferiority. Just as the Federal Republic of Germany disavows any overt display associated with the Nazi era, it is well past time to move on and eliminate explicit reminders of that chapter in our history from public exhibition or dialogue. It is unfortunate that such obvious festering symbols of institutional and personal animosity and exclusion were ever erected.

No one should in any way equate the indignation and righteous response of those outraged by the advocacy of debased beliefs to those espoused by white supremacists, neo-Nazis, the Ku Klux Klan, or similar organizations. Trump has erroneously attempted to conflate our nation’s founders with rebels who fought to divide it. To compare the memory of George Washington or Thomas Jefferson for having been slave owners with current racist extremism is delusional. Such groups and their supporters should be labeled as to what they actually are: domestic terrorists.

While violence was provoked by both demonstrators and protestors in Charlottesville, VA, something never acceptable, it also is incorrect to equate the expression of hate and inferiority with standing for equality and self-respect. There isn’t any equivalence of principles expressed by alt-right demonstrators and those who oppose them. White supremacy deserves to be treated as what it is: a scourge upon our nation whose existence must be collectively recognized in all its various forms of expression as repugnant, condemned, and any remaining vestiges and symbolism eradicated.

The U.S. is a nation of immigrants – a composite of races, nationalities, beliefs, orientations… – it is our very individual uniqueness that characterizes us as a nation. To afford any segment special privilege or importance above another is to disparage all of us. Undeniably, Caucasians have in the past been privileged; African-Americans, especially, have been denied equality.

Some Caucasians feel they are being bypassed by structural changes in the economy that are narrowing their options. The heart of their grievances appears to be based on class frustrations, not race. While minorities provide a relatively easily identifiable target, if the white demonstrators want to blame someone, they ought to point their fingers at the wealthy whites on Wall Street and in Washington, not on blacks and other minorities. There were very few people of color on corporate boards in the 1980s when manufacturing was being off-shored. They were not among the executives in Detroit when the auto industry acted to destroy public transit systems. They were not attending business schools graduating MBAs teaching predominantly white students to move operations to countries where labor was cheaper. They were not extolling the virtues of businesses like Walmart decimating entire Main Streets across small-town America. They were not on educational boards cutting funding to inner-city and predominantly black neighborhoods. It is not people of color indorsing politically motivated disenfranchisement.

White nationalism isn’t simply an extremist political ideology[2]. It is in some ways an alt-religious movement providing its adherents with its own twisted version of what all religions supply to adherents: a personal sense of who they are, a social sense of where they belong, and a spiritual sense of why their life matters. When faith communities do not provide these healthy life-giving human needs, then death-dealing alt-religions will fill the gap. But white supremacists are blaming the wrong slices of society for their angst. Racial divides are not what’s plaguing vast stretches of white America – deepening class divides are. The national economy and sense of well-being are on a downward slide that has accelerated in recent decades. Almost everyone who is not living in wealthy enclaves – usually coastal cities or inland hubs – is facing a descending spiral that’s been decades in the making. These are the same stretches of suburban and rural America that elected Trump, elected the right-wing House Freedom Caucus, where hate groups are concentrated, and where many of those arrested in Charlottesville came from.

Rather than uniting us as a single nation, Trump has fanned the flames of separation with his psychopathic egocentricity. Gone are any lingering hopes of unifying an increasingly bitterly divided nation. He has repeatedly refused to moderate his demagogic impulses in deference to the office he now holds.

Now, Americans are increasingly sorted into think-alike communities that reflect not only their politics but their demographics[3]. We have assigned ourselves into camps separated not only by ideology but now by unacceptance of each other’s facts. We impugn each other’s motives, doubt each other’s patriotism, denigrate each other’s news sources, and hold different value systems in our core institutions of religion, marriage, and education.

Even Robert E. Lee said the time had come to put aside the Confederate flag. Lee was so sensitive during his final years with extinguishing the fiery passions of the Civil War that he opposed erecting monuments on the battlefields where the Southern soldiers under his command had fought against the Union. He wrote “I think it wiser moreover not to keep open the sores of war, but to follow the examples of those nations who endeavored to obliterate the marks of civil strife and to commit to oblivion the feelings it engendered”.

While best to have never been initially permitted, all remaining monuments and symbols of that unfortunate time in our history should be removed and racism in all its many forms condemned.

It is stated in the Declaration of Independence, “We hold these truths to be self-evident: that all men are created equal; that they are endowed by their Creator with certain unalienable rights; that among these are life, liberty, and the pursuit of happiness”. Isn’t it time we lived up to that ideal?

That’s what I think, what about you?

[1] Angela Dorothea Merkel is a German politician, leader of the Christian Democratic Union since 2000, and Chancellor of Germany since 2005.

[2] McLaren, Brian D. The ‘Alt-Right’ Has Created Alt-Christianity, Time, http://time.com/4915161/charlottesville-alt-right-alt-christianity/, 25 August 2017.

[3] Taylor, Paul. The Demographic Trends Shaping American Politics In 2016 And Beyond, Pew Research Center, www.pewresearch.org/fact-tank/2016/01/27/the-demographic-trends-shaping-american-politics-in-2016-and-beyond, 27 January 2016.

Posted in African-American, Alt-Religion, Bias, Bigotry, Bigotry, Caucasian, Charlottesville, Civil Rights, Civil Rights, Civil War, Confederacy, Detroit, Donald Trump, Economy, Education, Employment, Employment, Equality, Extremism, Extremism, Extremists, George Washington, Germany, House Freedom Caucus, human rights, Ideology, Immigrant, Inequality, Inequality, Jobs, Jobs, Ku Klux Klan, Ku Klux Klan, Michigan, minorities, Minority Rights, Nazi, Off-Shoring, Protest, Race, Race, racial bias, Racism, Religion, Robert E. Lee, Segregation, Sexual Acceptance, Slavery, Thomas Jefferson, Trump, Virginia, Walmart, Women’s Rights | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

The Problem With Renewable Energy

It seems to me….

The more successful you are in increasing renewables’ penetration, the more expensive and less effective the policy becomes.” ~Rolando Fuentes[1], The Clean-Energy Paradox.

There are several projects attempting to develop “smart” technology that will bring the energy grid into the 21st century while delivering reliable, efficient, affordable power to homes and businesses[2]. These would support feeding extra power from home solar collectors, for example, into the grid without throwing it out of balance and triggering potential outages. While extensive progress has been made, much more remains necessary.

Conversion has wide support: 65 percent of Americans are in favor of developing alternative energy sources compared to only 27 percent who would emphasize expanded production of fossil fuel sources[3]. About eight-in-ten (81 percent) Democrats and independents who lean toward the Democratic Party favor developing alternative sources instead of expanding production from fossil fuel sources. Republicans and Republican-leaning independents are closely divided: 45 percent say the more important priority should be developing alternative sources while 44 percent say expanding production of oil, coal, and natural gas should be given higher priority.

Renewable energy sources, primarily from photovoltaic systems (solar) and wind turbines, are growing faster than any other energy source and their falling costs have now made them competitive in many areas with fossil fuels. It can be expected that renewables will account for half of the growth in global energy supply over the next 20 years: the world is entering an era of clean, unlimited, and cheap power[4].

It is imperative that we convert our existing power generation capability from carbon to one based on renewable energy and to do so relatively quickly. This is justifiable not only in response to global-warming but also from an economic perspective: it creates entirely new industries and corresponding employment opportunities. Future energy generation should primarily be distributed throughout existing structures rather than concentrated in large generating facilities as now. Unfortunately, many recommendations overly-simplify how this can be achieved failing to consider the many problems involved in its actual accomplishment.

Supplanting our current energy system infrastructure will require substantial investment over the next few decades to replace obsolete carbon-based power plants, which still produce over 80 percent of the world’s energy, and to upgrade the pylons and wires that bring electricity to consumers. The downside is that the more solar generation is deployed, the more it lowers the price of power from any source making it more difficult to manage the transition to a carbon-free future. During this transition, it is necessary that many generating technologies, clean and dirty, remain profitable if the lights are to stay on: some industry subsidies will be necessary. Without a new approach, the renewables revolution could stall.

Renewables are intermittent, which means that in systems where the infrastructure was designed before intermittency became an issue – almost all of them, in practice – fossil-fuel, hydroelectric, and nuclear plants are needed as much as ever at times when the sun does not shine or the winds do not blow. If traditional plants are shut out of the market by low-cost renewables, they will not be available when needed.

Investment in supply beyond what the market requires results in excesses and depresses prices. Renewable energy has negligible or zero marginal running costs once operational since the wind and the sun are free. In a market that prefers energy produced at the lowest short-term cost, wind and solar take business from providers that are more expensive to run, such as coal plants, depressing power prices and therefore overall revenues. The higher the penetration of renewables, the more difficult these problems become.

New technology can help remedy the problem. Digitalization, smart meters, and batteries are enabling companies and households to smooth out their demand in several ways such as by doing some energy-intensive work at night which helps cope with an intermittent supply. Small, modular power plants, which are easy to scale up or down, are becoming more popular as are high-voltage grids that can move excess power around the network more efficiently. The bigger task is to redesign power markets to reflect the new need for flexible supply and demand. Policymakers should be clear they have a problem and that the cause is not renewable energy but an out-of-date system of energy pricing.

The more renewable generators there are, the more they drag down prices. At times when renewables can meet all the demand, making fossil-fuel prices irrelevant, wholesale electricity prices collapse or sometimes even turn negative with commercial energy producers paying the grid to eliminate excess power (the power must go somewhere). The more renewables there are in the system, the more often such collapses occur.

The fall in utility revenues is not just bad news for fossil-fuel-era incumbents in generation and transmission businesses, it also is becoming a problem for the renewables themselves requiring efforts to decarbonize the electricity supply that justified their promotion in the first place.

In the long run, and with massive further investments, electrical power grids redesigned for systems with considerable renewable energy could go a long way to resolving this problem. Grids with an abundance of built in storage capacity; grids large enough to reach out to faraway renewables when those nearby are catatonic; grids sufficiently intelligent to help customers adapt demand to supply – all have their champions and their role to play but long-run solutions do not solve short-term constraints. For now, countries with an abundance of renewables need to keep older fossil-fuel capacity available as a standby if only to cover peaks in demand. This often means additional subsidies, known as capacity payments, for plants that would otherwise be uneconomical. Such measures keep the lights on but also means that fossil-fuel production capacity clings on.

When fewer people rely on the grid, there are also fewer left to share the costs. This results in a so-called “utility death spiral”. As more customers generate their own electricity, the more utilities have to raise prices to the existing customers that remain, which in turn makes them more likely to leave the grid.

How this nibbling leads to a system upon which all can rely, and who pays for its various parts that are public, rather than private, remains obscure. The process will definitely be sensitive to politics, because, although voters give little thought to electricity markets when they are working, they can get angry when prices rise to cover new investments – and they scream very loudly when the lights go out. That suggests progress may be slow and fitful and that it possibly could stall if all aspects of the problem are not considered leaving climate risks largely unabated.

Utility companies are entitled to a fair profit on what has been a substantial investment in resources and infrastructure both prior to and during this conversion. It also will be necessary for them to evolve their basic business model to continue providing an acceptable level of customer support. As energy production by customers increases, current power generation facilities will need to be decommissioned. To remain viable, energy utilities will need to change to providing three categories of service: energy generation, energy distribution (the grid), and energy storage. Each represents an opportunity for an industry struggling to enter a new era. While the opportunity is there, the question is whether an established and adverse industry is able to willingly adapt to a future not of its choice.

That’s what I think, what about you?

[1] Rolando Fuentes-Bracamontes is a Fellow at the King Abdullah Petroleum Studies and Research Center, KAPSARC, researching business and regulatory models for the Utilities of the Future.

[2]Bits & Watts’: Integrating Inexpensive Energy Sources Into The Electric Grid, Kurzweil News, http://www.kurzweilai.net/bits-watts-integrating-inexpensive-energy-sources-into-the-electric-grid?utm_source=KurzweilAI+Weekly+Newsletter&utm_campaign=df83f49bab-UA-946742-1&utm_medium=email&utm_term=0_147a5a48c1-df83f49bab-282211389, 25 October 2016.

[3] Two-Thirds Of Americans Give Priority To Developing Alternative Energy Over Fossil Fuels, Pew Research, http://www.pewresearch.org/fact-tank/2017/01/23/two-thirds-of-americans-give-priority-to-developing-alternative-energy-over-fossil-fuels/, 23 January 2017.

[4] Wind And Solar Power Are Disrupting Electricity Systems, The Economist, http://www.economist.com/news/leaders/21717371-thats-no-reason-governments-stop-supporting-them-wind-and-solar-power-are-disrupting?spc=scode&spv=xm&ah=9d7f7ab945510a56fa6d37c30b6f1709, 25 February 2017.

Posted in Carbon, Carbon-Based, Change, Climate, Coal, Coal, Commercial, Distribution, Electric, Electrical, Energy, Energy, Environment, Fossil Fuel, Global Warming, Global Warming, Grid, Grid, Hydro, Nuclear, Nuclear, Photovoltaic, Power, Power, Production, Renewable, Solar, Solar, Solar, Subsidies, Utilities, Utilities, Wind, Wind | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

The Need For Economic Reform

It seems to me….

There is a need for financial reform along ethical lines that would produce in its turn an economic reform to benefit everyone. This would nevertheless require a courageous change of attitude on the part of political leaders.” ~ Pope Francis[1].

A recent poll conducted by the Harvard Institute of Politics[2] found that only 19 percent of Americans ages 18 to 29 identified themselves as “capitalists”; apparently a majority of U.S. citizens are uncomfortable with their nation’s economic foundation; a system that over hundreds of years turned a fledgling society of farmers and prospectors into the most prosperous nation in human history. The 2016 presidential campaign raised questions of who exactly the system is working for and against, as well as why eight years and several trillions of dollars of stimulus following the financial crisis, the economy continues to grow so slowly.

Despite politically-motivated nefarious comments to the contrary, the U.S.’s economic problems reach far beyond any simplistic quick-fix solutions being more symptomatic of a condition that threatens in equal measure the wealthy and the poor, the conservative and the liberal. The U.S. system of market capitalism itself is broken.

From the creation of a unified national bond and banking system in the U.S. in the late 1790s until the early 1970s, finance took individual and corporate savings and funneled them into productive enterprises creating new jobs, new wealth, and, ultimately, economic growth. Finance; which today includes everything from banks and hedge funds to mutual funds, insurance firms, trading houses, and similar enterprises; no longer primarily serves business. Over the past few decades finance has turned away from this traditional role. Today only a fraction of all the money circulating through financial markets actually makes it to Main Street businesses.

The textbook description of the financial sector, “the intermediation of household savings for productive investment in the business sector”, constitutes only a minor share of today’s banking business. It is estimated that only around 15 percent of capital coming from financial institutions today is used to fund business investments whereas it would have been the majority of what banks did earlier in the 20th century: the role of the capital markets and the banking sector in funding new investment is decreasing.

The financial sector now represents around 7 percent of the U.S. economy, up from about 4 percent in 1980, currently takes around 25 percent of all corporate profits – but creates only 4 percent of all jobs. When finance becomes that large, the economy gradually becomes a zero-sum game between financial wealth holders and everyone else: the average person is losing.

Finance has long been considered to be at the very pinnacle of the economic hierarchy of an advanced service economy that graduated from agriculture and manufacturing but the unintended consequences of this misguided belief now endangers the very system the U.S. has prided itself on exporting around the world.

This economic illness has a name: financialization. Financialization; a big, unfriendly word with broad disconcerting implications; is an academic term for the trend by which Wall Street and its processes have come to reign supreme in the U.S. permeating not just the financial industry but also much of U.S. business. It includes everything from the growth in size and scope of finance and financial activity in the economy; to the rise of debt-fueled speculation over productive lending; to the ascendancy of shareholder value as the sole model for corporate governance; to the proliferation of risky selfish thinking in both the private and public sectors; to the increasing political power of financiers and the CEOs they enrich; to the way in which a “markets know best” ideology remains the status quo.

While this revolution is often blamed on bankers, it was facilitated by shifts in public policy from both sides of the political aisle and crafted by the government leaders, policymakers, and regulators entrusted with keeping markets operating smoothly. The shifts were bipartisan and, to be fair, often seemed like good ideas at the time but also came with unintended consequences. The shift encompasses Reagan-era deregulation, the unleashing of Wall Street, and the rise of the so-called ownership society that promoted owning property and further tied individual healthcare and retirement to the stock market. It now manifests itself in myriad ways: a housing market that is bifurcated and dependent on government life support, a retirement system that has left millions insecure in their old age, a tax code that favors debt over equity….

Debt is the lifeblood of finance. As finance has captured a greater and greater piece of the national pie, it has, perversely, all but ensured that debt is indispensable to maintaining any growth in an advanced economy such as the U.S. where 70 percent of output is dependent upon consumer spending.

In the early 1980s, new companies made up half of all U.S. businesses but the number of new firms as a share of all businesses declined by 44 percent between 1978 and 2012.

Emphasis on short-term share-boosting management is largely responsible for the drastic cutback in research-and-development outlays in corporate America, investments that are the seed corn for future prosperity.

The system is in need of major restructuring. The U.S. needs tax system reform, for the government to take more direct action on job creation and poverty reduction, and to address inequality in a meaningful way. The largest banks need to be broken up; none should be permitted to become too large to fail. The hold of financial-oriented thinking in every corner of corporate America needs to be dismantled. Business education needs to be reformed. A tax system that treats one-year investment gains the same as longer-term ones and induces financial institutions to push overconsumption and speculation rather than healthy lending to small businesses and job creators needs to be changed. We need to rethink retirement, craft a smarter housing policy, and restrain a money culture filled with lobbyists who violate the U.S.’s essential economic principles.

Financial institutions must provide a clearly measurable benefit to the real economy: they no longer do and that must be changed.

That’s what I think, what about you?

[1] Pope Francis, born Jorge Mario Bergoglio, is the 266th Pope of the Roman Catholic Church.

[2] Foroohar, Rana. American Capitalism’s Great Crisis, Time, http://time.com/4327419/american-capitalisms-great-crisis/?xid=time_socialflow_twitter, 12 May 2016.

Posted in Banks, Banks, Business, Business, Capitalist, debt, Economics, Economy, Finance, Finance, Finance, Financialization, Hedge Funds, Housing, Income, Inequality, Investment, Investment, Jobs, Mutual Funds, Regulation, Stimulus, Stock Market, Taxes, trade, Wall Street, Wealth, Wealth | Tagged , , , , , , , , , , , , , , , , , , , , , , | Leave a comment