Plutocracy & Democracy: A Diary of the Dialectic

Goldman Sachs Spins Gold from Top Brass Woes

2008-11-17T11:18:00.000-08:00

Goldman Sachs, which has lost nearly 70% of its value this year and recently fired 3,200 employees, may be showing signs of late developing wisdom. Sunday they announced that the firm’s top seven executives had requested that they not be awarded any bonus for their work in 2008. Silk purse and sow’s ear come to mind, but kudos to the firm and its top executives for making a virtue of necessity and getting out in front of an issue that AIG got so horribly wrong. Given the grilling that US Treasury officials received last week over AIG executive bonuses during Congressional hearings about the $ 700 billion bail-out that it had authorized, there was no question that major investment firms and banks were going to have to seriously scale back or completely forgo annual bonuses. But GS, by getting out there early, and making it appear to be an act of voluntary contrition, have spun gold from thin air.

http://www.nytimes.com/2008/11/17/business/economy/17goldman.html?_r=1&dlbk&oref=slogin
http://www.news.com.au/business/money/story/0,25479,24664120-462,00.html

Fear not for Goldman Sachs top execs, nor for their families’ Christmas plans. While they will not rake in the average $50 – 100 million bonuses that the seven received at the end of 2007, they will probably be able to eke by with their $600,000 base pay salaries. Unfortunately for those who really did get out in front of the issue like Morgan Stanley chief, John Mack, who took no bonus in 2007 after a 4th quarter loss but has steered the company through a profitable, if dismal, 2008, there will be intense pressure to also say “no thanks” to an end-year bonus. But having taken money from the Government as part of the bail-out program, Morgan Stanley now finds strings attached to its limbs and the tune being called by the likes Representative Henry Waxman (D- CA), that paragon of self-righteous, grasping, interventionist, big-governmentalism.

http://www.house.gov/waxman/
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/14/AR2008111403045.html?nav%3Dhcmodule&sub=new

But back to Goldman’s text-book stuntsmanship. The fact is that given the firm’s dismal performance and its acknowledged (however squirmishly) role in the financial crisis, there was no way that mega million bonuses were going to be passed out to top executives anyway. By “voluntarily” forgoing said bonuses early and loudly, they have not only, enhanced the GS image but they have relieved the pressure that Waxman and others of his ilk might exert over how the next tier of employees are paid, and retained. Issuing the news on Sunday delivered them top line heralding on traditionally slow news Monday and substantially increased the organic media bang of their announcement, delivering a lot of positive spin. Other banks and investment firms are going to have to make similar decisions. They can’t go first since Goldman Sachs has already stolen their thunder, but they can still gain kudos or mitigate further damage to their image and investor confidence with a very loud mea culpa. America loves when the mighty have fallen, but they love contrition and public confession almost as much. By acknowledging their roles in the financial crisis and showing their pain by giving up the mega million bonuses that they aren’t going to get anyway, the nation’s hedge fund managers and investment bankers can somewhat redeem themselves in the public eye.

The Bloated Plutocrat is indignant. “Giving up their bonuses! It’s a wonder they haven’t been pulled from their offices and lynched in the night by angry homeowners (or former homeowners) wielding pitchforks and torches. The problem with all these jumped-up bank clerks is that they expect millions just for showing up. At best they make conventional decisions during market up-turns and do limited damage during cyclical down-turns. At worst, they imagine that their ability to move markets is a good thing. They’re lucky to have their heads, let alone their base pay”.

The Bleeding Heart however felt that it was a sign of change in America’s financial institutions. “Change has come. Change has come in Congress and to the White House. And it looks like the unregulated robber barons on Wall Street can read the writing on the wall, finally. Fed on a banquet of tax cuts for the ultra-wealthy and habituated to the blind eye of regulators over the last eight years, I am surprised at their ability to see the shift in the wind and get with the program. Other financial institutions and recipients of bail-out funds had better follow Goldman Sachs lead or they will find themselves at the receiving end of a Congressional inquiry”.

Regardless of the motivation, Goldman Sachs announcement yesterday was well done, well timed, and has been well received.

Detroit Metal or Washington Muddle?

2008-11-12T12:57:00.000-08:00

To bail or not to bail, that is the question.

No, not an effort to address surfer-speak, but a question about the auto industry’s pleas for government aid (or subsidies to the more plain-spoken). Will President Bush push money at ailing auto makers in his waning days? Will President Elect Obama act early in his administration to put a shot in Detroit’s arm? Speculation seems to favor the latter. So what are America’s car and truck manufacturers saying about their woes and asking for in terms of help?

http://articles.moneycentral.msn.com/Investing/Dispatch/Staggering-news-for-US-automakers.aspx
http://articles.moneycentral.msn.com/Investing/Extra/general-motors-and-chrysler-on-the-brink.aspx
http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/06/if-detroit-goes-down-so-do-three-million-jobs.aspx
http://www.autonews.com/

Essentially, they are saying that within the next year some of them may be in bankruptcy or worse. With sagging sales, locked out of tight credit markets due to said sales, millions of jobs on the line, and a seeming inability to rapidly adjust to volatile fuel prices and their impact on consumer purchasing behavior, America’s Big Three are running out of money. And according to an industry trade association, there are approximately 3 million jobs at risk. It doesn’t take a very clever flak to begin assigning these 3 million jobs to specific states and Congressional districts as they mount the pressure for an auto industry bailout likely to carry a $25 – $50 billion price tag (MSRP, dealer fees may apply). And it’s not just at home that they are seeking help. Ford and GM have both asked Chancellor Merkel in Germany for assistance in order to avoid job losses there. This rather pointed game of “give us money or we’ll fire thousands of people” is apparently international. And Chrysler, only recently spurned by Mercedes Benz, is shamelessly flirting with all comers, including the likes of Hyundai. Their stories are backed up by balance sheets showing that even when hard decisions are made and matched by hard work, a narrowing of losses is the best they can currently hope for. And Kerk Kerkorian feels their pain. The billionaire investor and casino mogul has lost almost $700 million on the just over 6% stake in Ford that he took back in June.

http://news.yahoo.com/s/afp/20081112/ts_alt_afp/financeeconomygermanyautoaidcompanyford;_ylt=AkBwnwrFZM.eWs.X_r0Z23WyBhIF
http://blogs.moneycentral.msn.com/topstocks/archive/2008/10/21/he-lost-700-million-in-four-months-and-it-gets-worse.aspx

Their goal: money and legislative/regulatory changes that will encourage new car purchases and improve their competitive position versus foreign automakers. Specifically, Big Three executives, along with United Auto Worker union leadership, have asked for at least $25 billion in “loans to bridge the current financial crisis” along with an additional $25 billion for “health care coverage and other retirement costs” for retired workers. In addition, measures such as allowing taxpayers to deduct interest on car payments from the taxable income and providing a financial incentive to consumers to scrap older vehicles have been floated. Democratic leaders Nancy Pelosi and Harry Reid have said that they are committed to some kind of bail out for the car manufacturers. The Bush administration has also made favorable noises but claims Congress’ authorization for the current $700 billion bailout package does not allow them to divert aid to the auto makers. Meanwhile, Democratic Michigan Governor Jennifer Granholm is claiming that 10% of all US jobs are dependent on the auto industry and thus, at risk. President Elect Obama seems to be in favor of some kind of aid and assistance, but would probably prefer that President Bush carry the water on this one. And, Treasury Secretary Paulson insists that any measures aimed at aiding the auto industry must improve car companies’ “viability”, while many House and Senate Republicans, reeling from the $700 financial bailout package, are likely to make moves by Democrats and a lame duck administration difficult.

http://news.yahoo.com/s/ap/20081112/ap_on_go_co/auto_bailout
http://news.yahoo.com/s/bloomberg/agbpgvcbma84;_ylt=AqA75bRIEX_ZuZwUqEiyYjKMwfIE
http://money.cnn.com/news/newsfeeds/articles/djf500/200811071659DOWJONESDJONLINE000740_FORTUNE5.htm

Pundits accuse GM at least of “playing chicken with the government” in its bid to portray bankruptcy as “not an option” vs a government bailout. Yet despite the transparent nature of their doom and gloom messaging, there are few serious voices being raised against some sort of aid. The kicker is obviously the jobs argument. That is clearly working with Governor Granholm whose claim of 10% of all US jobs dependent on the auto industry is farfetched, but delivered with gusto. As a former purveyor of economic impact studies aimed at influencing public policy, my guess is that the 3 million jobs cited by the Center for Automotive Research study is inflated to the absolute extent that industry lawyers will stomach. But even if the real number is 2 million, or 1.5 million, can the country afford to lose those jobs? What about the knock-on effect of those lost jobs? This is Detroit’s most potent argument and it has traction inside the beltway.
Our learned commentators, freed from recent political commitments, are back with us to analyze this issue. The Bleeding Heart, recently returned from Chicago (and no doubt pursuing a patronage job in the Obama administration) was quick to back Congressional Democrats. “Eight years of failed Republican policies have driven us to these dire economic straits and the American people have responded, giving President Elect Obama and the Democratic Party a mandate to use the powers of government to resuscitate our economy, regulate industry, and repair our nation. That means a bailout for automakers whose jobs are critical throughout the Midwest”, he said, sounding remarkably Press Secretary-like.

The Bloated Plutocrat, called away from secretive GOP rebuilding sessions, was less certain. “And then what? Given the commitments that the Big Three have, through UAW, to retired workers, the line between company and care provider is blurred. Will an injection of billions of taxpayer dollars into ‘companies’ that can’t seem to shed the fat needed to compete effectively really solve their problems? They are encumbered with legacy issues that make them more social institution than employer. Maybe the time has come when cars just can’t be made profitably in this country?” The Bloated Plutocrat is not amused.

Car-makers are making potent arguments by focusing on potential job losses that would further set back the economy and add to the challenges facing a new Executive and Congress. If they can remain effective, it seems very like that more of your money will be headed via the Treasury to Detroit’s coffers.

Where's Mine?

2008-09-23T07:51:00.000-07:00

Your Genteel Moderator feels that he should reward his loyal readers. Consequently, below you will find a document that should help all of you to claim a share of the proposed $700 billion “bail-out” plan proposed by the President last Friday and currently under debate in Congress. The Bloated Plutocrat and the Bleeding Heart are unfortunately unable to comment this week as they are busy working on their own plans…

Strategic Plan for MyCo Inclusion in Government Bail-Out of Financial Industry

Background:
On Friday, September 19, 2008, the President and Treasury Secretary Paulson announced that they would seek Congressional approval for a $700 billion + bail-out of troubled US financial institutions suffering from the home mortgage crisis and related financial woes. It is as yet unclear what criteria will be used to define “troubled financial institutions” eligible for bail-out.

Objective:
Ensure that MyCo benefits from the bail-out and receives substantial sums of cash from the federal government. The specific monetary objective is four times 2007 earnings.

Strategy:
1. Develop evidentiary support for claim that MyCo has been damaged by the credit crisis and is at risk of bankruptcy;
a. Exchange outstanding bad debt for defaulted mortgages to ensure consideration as bail-out candidate;
b. Hire large number of employees (target: 25,000) and back-date employment to 2007 to ensure their employment status factors into evaluation criteria;
c. Do not pay employees and claim this is because of credit crisis and not the company’s fault.
d. Indentify and fire middle management scapegoat for “mismanagement” of funds;
e. Use employee pension fund to buy stock in financial institutions likely to be bailed-out showing MyCo is clearly inter-linked to troubled financial institutions;

2. Seek opportunities on high profile media (ie CNN, CNBC, MSNBC etc.) for MyCo senior management to explain company’s plight and the importance of federal bail-out ;

3. Activate Harvard and Dartmouth Alumni Association contacts to lobby Paulson on MyCo’s behalf;

4. Provide form letters/e-mails to MyCo employees to contact relevant Congressional Representatives and Senators urging action on their behalf;

Issues for Consideration:
Although MyCo has no current exposure to defaulted mortgages or any of the major financial institutions filing for, or at risk of, bankruptcy, the actions listed under Step 1 above should ensure that MyCo is able to show need by the time any legislation is approved by Congress;

MyCo’s track-record of consistent profit over its lifespan was originally considered a possible hurdle to consideration for bail-out, but review of companies already named as likely bail-out candidates suggest that this is immaterial;

Senior management bonuses may be negatively affected by such a bail-out and the potential for increased government oversight in the future, therefore back-dating mid-year bonuses at a higher than average rate should be considered;

In relation to above, it is possible that MyCo senior executives may at some future date be required to explain what it is they do to merit such large salaries and bonuses. At this time, we have been unable to elicit any comprehensible responses from MyCo senior management.

Annex: Additional Background Information on Bail-Out Plan
http://www.msnbc.msn.com/id/26787984/
http://www.marketwatch.com/news/story/bernanke-urges-fast-action-congress/story.aspx?guid=%7BE1F27722-6231-4007-8F49-F33F2493C076%7D&dist=msr_1
http://www.treas.gov/press/releases/hp1153.htm
http://www.marketwatch.com/news/story/us-futures-drift-lower-before/story.aspx?guid=%7BDAA80FCF%2DADE2%2D45D2%2D9052%2D5677DC3EADA8%7D&dist=TNMostRead
http://firstread.msnbc.msn.com/archive/2008/09/23/1435286.aspx
http://www.ustreas.gov/organization/bios/paulson-e.html

Russia’s Georgian Adventure: Whither an Economic Cold War?

2008-08-28T13:13:00.000-07:00

I remember the arcane science of ‘Kremlinology’; sifting through the tea leaves in an attempt to understand the USSR’s objectives and motivations. An East – West studies major at the end of the Cold War at Georgetown’s School of Foreign Service, we were still very much focused on such matters. Within a year of graduating, the paradigm had begun to drastically change with the break-up of the Soviet Union and Warsaw Pact. Within four years, Your Genteel Moderator was writing speeches for pro-market economy politicians in formerly Communist controlled countries and working to acquire privatized companies in Poland, Hungary, [then] Czechoslovakia, the Ukraine, and Russia. The latter was open for business and despite the enormous difficulties of doing business there, from legislative uncertainty to serious issues with currency, foreign direct investment was flooding in at the multi-billion dollar level. One theory, much touted by the Clinton Administration and one of my former professors of “Kremlinology”, Secretary of State Madeleine Albright, was that such investment would so entwine Russia in the global economy as to ensure its commitment to the principles of free-market democracy. I must say, I was dubious after spending time in Russia (including a forced stay in Moscow during the aborted Coup d’Etat in the summer of 1991) and dealing with the Russian government.

http://secretary.state.gov/www/albright/albright.html
http://www.russiansabroad.com/russian_history_307.html

Fast forward through the chaos of the Yeltsin years when “bizness” generally meant the expropriation of any state assets one could lay hands on and the swelling of numerous Swiss bank accounts. Pass more slowly through the pendulum reaction of the Putin Presidency when the supremacy of the State, and the Head of State, were reestablished creating an “etatist” economy that closely entwined government, political cronies, and economic strategy, fueled (literally) by ever increasing oil and gas revenues. Arrive at the farce of “President” Dimitry Medvedev’s election and subsequent appointment of Vlaidmir Putin as “Prime Minister” with a substantially increased portfolio of overt powers to bolster his continued de facto control of the State. Russia is a powerful, re-armed, aggressive regional power with substantial wealth, and major leverage (in the form of natural gas sales) over Germany and other Western European nations. Rightly or wrongly perceiving NATO expansion into Central Europe and potentially further east (Georgia’s abortive candidacy was ill-advised to say the least), Russia is using US preoccupation with Iraq (and irony of ironies) Afghanistan to reassert its political and military hegemony over the former USSR states. It certainly doesn’t appear that investment by US and Western European companies has entangled Russia in the global economy to the extent necessary to force more responsible and less hostile activity. The question one has to ask is whether substantial investment in Russia and its littoral states has in fact diminished the US and Western European appetite for confronting such aggression and reverting to a traditional policy of containment?

http://www.themoscowtimes.com/article/1010/42/370482.htm

Despite protestations from both Russia and the West that we are not seeing a return to the Cold War, it is very hard to view this in any other light. Reemerging from a period of military and political weakness Russia perceives the West (and particularly the US) pursuing a policy of encirclement. Its old nemesis NATO is on its western and southern borders with a vastly diminished ring of “buffer states”, the US military is conducting extensive operations along its soft southern underbelly, and a US anti-ballistic missile system threatens to neutralize its strategic nuclear threat. The West is no better. Viewing the inevitable return of authoritarian government in Russia (who could imagine anything else?) as necessarily a threat to security and stability in Europe and Central Asia (granted, with good reason), it has put the boot in with abandon wherever it could from the Ukraine, to former client states like Tajikistan, Turkmenistan, and Kazakhstan, and finally to its courtship of Georgia, all the while decrying the conduct of the Russian government domestically. For Russia, expansion and the creation of buffer states has been an historic imperative from a security standpoint. For the West, containing that expansion and mitigating Russia’s (in whatever guise) influence and power farther afield has been a basic policy since the mid 19th century. Re-emergent Russia means resuscitation of containment in one form or another.

http://www.fpif.org/papers/russia/index.html
http://themoderatevoice.com/politics/foreign-policy/21953/is-this-the-right-policy-toward-russia/
http://www.america.gov/st/washfile-english/2005/March/200503181737341CJsamohT0.7323572.html
http://www.ntanet.net/KENNAN.html
http://myweb.tiscali.co.uk/kenanderson/histemp/thegreatgame.html

There is however a major twist in this emerging Cold War: a global economy. In the old Cold War, the economic doctrines of Marxist/Leninist Communism in Russia meant that the USSR and its Warsaw Pact satellites were not integrated into an economy that had become increasingly global in scope in the forty some years after the close of WWII. While East – West Trade existed, it was almost always subservient to the political strategies and interests of either party. After 1990, the growth of trade, the substantial inflow of foreign direct investment to Russia, and the substantial capital flight from Russia to investment opportunities around the world contributed the rapid acceleration of Russia’s involvement and participation in the global marketplace. Rising fuel costs in the middle of this decade (driven in part by Russia’s partial success in developing its own economy and, to some extent, by the large expansion in disposable income for a segment of Russian society) have given the country economic muscle and the wherewithal to rebuild its military. Not only has Russia’s emergence as a player in the global economy been one of the forces driving current pressures on commodity and fuel prices, but its control over substantial volumes of commodities as well as its own oil and gas reserves have provided it with leverage over the likes of Germany that even batteries of medium range nuclear missiles couldn’t deliver in the 1980s.

https://jyx.jyu.fi/dspace/bitstream/handle/123456789/13424/9513921786.pdf?sequence=1
http://www.allacademic.com/meta/p_mla_apa_research_citation/2/5/2/5/0/p252504_index.html
http://www.iht.com/articles/1993/06/08/whither.php

What does this mean for “Western” companies with investments, affiliates, joint ventures, etc., in a Russia that appears set on a course for confrontation with the West? Risk. And risk management. The first thing that any high profile companies with transparent investments in Russia and listings on Wall Street needs to do is take stock of its political entanglements in Russia. Despite the Foreign Corrupt Practices Act (FCPA) and the best of intentions in adhering to it, nobody has been doing large-scale business successfully I Russia without some sort of political entanglement. If confrontation escalates or, perhaps, as conflict escalates between the West and Russia, those entanglements – silent partners, minority JV partners, counselors, “friends”, whatever one is calling them these days – will be the cause of pressure. Whether that pressure is from the West over revelations of such entanglements or through them from the Russian government, now is the time to be cutting them loose or distancing the company from that exposure. As time goes by, this will get harder and the cost of doing so will be higher.
Next, take the “New York Times test”. What will the nature of any transactions, investments, or entanglements look like printed on the front page of the New York Times or Wall Street Journal when the next act of Russian aggression or Western provocation results in something more serious than the annexation of unpronounceable territories at the back end of nowhere? Develop scenarios. Will there be a share-price impact? Will such revelations negatively impact business development efforts elsewhere? Finally, develop contingencies and exit strategies starting now – quietly. Better to run the risk of unnecessary planning now than face the Board’s question as to why you weren’t prepared for this later.

The Bleeding Heart does not share Your Genteel Moderator’s gloomy forecast. Over the phone from Denver, sounding like a teenager on ecstasy at a rave, he assured me that all would be well come November. “When Obama is elected, this gloom and doom atmosphere is going to rapidly change. There will be a new optimism in this country and a new respect for America abroad. He’s going to be able to work with the Russians and others because he believes that talking and negotiating are the way to get things done, not unilateralism and provocation. Investment in Russia has been a good thing and has helped to tame Putin’s more aggressive tendencies.” The Bloated Plutocrat was somewhat less optimistic. “The only thing worse than Godless Communism is Russian Capitalism. My family lost a lot when Russia went Red in 1917 and while I have made a good deal of money through investments and transactions in Russia over the last 15 years, I am divesting rapidly. Whether this President or the next does something stupid to set them off is irrelevant. The rules have never been fair and the market has never been free in Russia, but with the return of increasing political and security tension on the geo-political level as well as the significant economic risks, the costs of doing business there are simply going to be too great in the not so distant future”.

To be sure, in any time of political uncertainty there is money to be made. That will be true in Russia for the foreseeable future. What many need concern themselves with is that there is also a great deal to be lost, and it will be the re-emergence of the dialectic between Russia’s urge to expand and the West’s perceived need to contain, with a new global economic twist, that will govern the risk/return ratio in Russia and Central Asia for some time to come.

Cheaper Invasions?

2008-08-12T10:54:00.000-07:00

You are of course well aware of those “evil foreign dictators”, whose “monopoly” control over our oil imports threatens our national security. You must be aware of them, every member of Congress, the Presidential candidates, their operatives, the pundits, and the media meat puppets are constantly talking about them. Sen Chuck Schumer (NY) was going to sue them if his co-sponsored Consumer-First Energy Act was passed back in June. It certainly is an issue of concern: these undemocratic, foreign potentates in distant lands whose nefarious plans to exploit US energy needs threaten the future of the nation. You know: “them”.

http://democrats.senate.gov/newsroom/record.cfm?id=297375

“They” are also a threat to our national security not only because of their “near monopoly powers”, but because of their support for terrorist organizations and the unremitting oppression of their own people, which encourages further resentment and terrorist action against the US. Indeed, their profiteering and price gouging is a major cause of the current economic recession and constitutes a virtual act of war by other means against the country. In fact, as Paul Wolfowitz (subsequently US Deputy Secretary of Defense and a leading “Neo-Con”) noted in 1994, “The United States and the entire industrialized world have an enormous stake in the security of the Persian Gulf, not primarily in order to save a few dollars per gallon of gasoline but rather because a hostile regime in control of those resources could wreak untold damage on the world's economy, and could apply that wealth to purposes that would endanger peace globally.” As of May of this year, the United States had imported 398,714,000 barrels of oil. Indeed, with daily US oil production at just over 5 million barrels/day and it’s oil needs at just over 19 million barrels/day, imports will remain critical for the economy.

http://tonto.eia.doe.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_m.htm
http://www.eia.doe.gov/basics/quickoil.html

The situation is very clear. Foreign control of oil necessary for the economic well-being of the United States represents a clear and present danger to the national security of the country. The only possible response should be the invasion of those countries that pose such a grave threat to the US and the confiscation of their oil resources. But wait, Iraq is only contributing about 600,000 barrels/day of the nearly 14 million barrels/day in imports required by the US – at market prices. There has to be a better solution. From where does the US get most of its foreign oil? Well the top three despotic, monopoly suppliers of oil are: Canada, Saudi Arabia, and Mexico. Saudi Arabia has many of the same problems as Iraq. It’s far away, hot and dusty, and full of people that despise America and aren't opposed to a dynamite vest for the cause. Next on the list is Venezuela at roughly 1 million barrels/day of oil exports to the US. So, Canada, Mexico, and Venezuela combined make up about 3 million barrels/day of US energy needs. Hmmmm….

“Canada's trade surplus widened for a second straight month in June as exports of energy products such as crude petroleum and natural gas surged and car shipments rebounded.

The surplus widened to C$5.76 billion ($5.41 billion) from a revised C$5.22 billion in May, Statistics Canada said today in Ottawa. Exports and imports both rose to records in June, gaining 3.1 percent and 2 percent respectively, and the trade surplus with the U.S. was the widest since January 2006.”

http://www.bloomberg.com/apps/news?pid=20601082&sid=a_Dr3nHwrqQ4&refer=canada
http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html http://www.glasnost.de/hist/usa/1935invasion.html

Hold on. Canada has been a steadfast ally of the US ever since the last time the US tried to invade them in 1812. They are the US’ leading trading partner and a part of the North American Free Trade Agreement (NAFTA). And while they do tend to be a little goody-goody and socialist, ruthless oppressors and supporters of terrorism, they are not. There’s always Mexico. Almost every night, CNN anchor Lou Dobbs, that paragon of intellect, is on television urging that the US go to war with Mexico, right after the hundreds of millions of illegal Mexican immigrants (most of whom are saboteurs infiltrated by the Mexican government) are gathered up in concentration camps. Mexico is currently good for almost 1.5 million barrels/day and, under occupation, they could certainly be counted on for up to 5 million barrels/day without truly undue suffering by the civilian population. And there is a history of invasion and successful annexation of Mexican lands between the US. The problem is that not only is Mexico a member of NAFTA and, Lou Dobbs aside, a friend and ally, they are rather fond of their independence. And, as General Pershing noted following his 1915 invasion of Mexico, the Mexicans are rather good insurgency fighters.

http://vivirlatino.com/2005/10/13/lou-dobbs-beef-with-mexico.php
http://web.mit.edu/c12abn/www/pershing.shtml

Ah, Venezuela. In 2007 it averaged 2.4 million barrels/day production and should be relatively easy to bump up above the 3 million barrels/day mark. Lead by the loveable Hugo Chavez, the Neo-Communist and attempted dictator-for-life who aspires to Fidel Castro’s mantel, here is a country whose leadership does indeed oppress its people, that certainly supports organizations with a professed antipathy to the United States, and whose arms dealing with Iran might be stretched to support for terrorism. Certainly, with a little creative writing by the intelligence community, Chavez could be shown to be in search of WMD. Chavez’ relationship with Iranian President Mahmoud Ahmadinejad, himself involved in nuclear arms proliferation, would certainly lend credence to any such claims, while the fact of his conventional arms build-up, his aggression toward US ally Colombia, and his support for allegedly socialist but clearly anti-US political movements across Latin America and the Caribbean, all help make the case.

http://www.economagic.com/em-cgi/data.exe/doeme/paprpve
http://www.truthout.org/article/chavez-ahmadinejad-solidify-iran-venezuela-ties
http://www.foxnews.com/story/0,2933,312161,00.html
http://www.globalresearch.ca/index.php?context=viewArticle&code=20060729&articleId=2854

So, Venezuela it is! Or….perhaps there are some things that might be considered before such an invasion to alleviate the energy crisis and improve the US economy. Maybe some improved deficit management to strengthen the dollar? Maybe some diminished government expenditures? Maybe steps towards a realistic alternative energy policy based on rewards for sustainable energy alternatives to oil imports (as opposed to incentives to pursue energy objectives and strategies set by Congress). Food for thought?

The Bleeding Heart thinks so. “Hugo Chavez is the replacement for an ailing, and possibly already dead, Fidel Castro in the iconography of Neo-Con ‘boogey-men’ created by this administration. The real issue is not how to get cheap oil by invading yet another country, but how to reduce dependence on imported oil, whether imported from friend and ally or foreign despot. The market simply doesn’t work and Congress needs to be allowed to deveolop an effective energy policy that incentivizes sustainable types of energy production.”

The Bloated Plutocrat is less certain. “Congress is the last refuge of the scoundrel and the incompetent. Their idea of energy policy is to spin the ‘wheel of populist nonsense’ and see where the dart lands – that’s the new energy policy this week. The market does and will work. If Congress wants to break with tradition and do something useful, providing tax credits and other rewards for initiatives that provide measurable, sustainable offsets against oil imports may be helpful. Mostly, they can stop talking nonsense about the price of gasoline being the result of oil company speculation.”

Let us hope that further military adventure is not seen by this or coming administrations as a viable mechanism for alleviation of the so-called energy crisis. Perhaps the market can find solutions. This, for example, may not be the answer, but at least someone is thinking: http://www.pickensplan.com/

============================================

NOTE: Your Genteel Moderator apologizes for the dearth of postings in recent weeks but work, travel, and holiday schedules have made coordination with the Bleeding Heart and Bloated Plutocrat impossible. Now, your Genteel Moderator himself heads to Portugal’s beautiful Algarve for several weeks and will not be available to write. Please enjoy the last of our summer weeks and look forward to new and more consistent posting in September.

InBev, in Bid for Bud, Courts Community

2008-06-18T12:13:00.000-07:00

It really ought to be called “uncommon sense”. While it may seem that InBev are doing what any company pursuing an unsolicited takeover bid should do by prosecuting a charm offensive with stockholders, the community, and government, you may be surprised how few companies get it right. The sale of the largest US brewer and its iconic Budweiser brand to Brazilian controlled, Brussels based InBev is not sitting well with US lawmakers or many in St. Louis. However, the proposed $65/share offer, that could result in a $57 billion total takeover bid with assumption of debt, should be sitting well with shareholders who have seen little positive share movement in recent years as Bud’s share and historic pricing control over the US market have been eroded by the massive expansion of small micro-breweries, rising imports, and the search by many beer drinkers of the elusive “anti-Bud”.

http://www.iht.com/articles/ap/2008/06/17/business/NA-FIN-US-Anheuser-Busch-InBev.php
http://www.washingtontimes.com/news/2008/jun/13/lawmakers-irked-over-inbevs-bid-for-busch/
http://www.stltoday.com/blogzone/mound-city-money/mound-city-money/2008/06/inbev-ceo-says-hes-a-bud-drinker/

It would of course be crazy for law makers and community leaders to comment favorably on the proposed transaction. Nobody likes change and a change that sees the country’s leading brewery, and its leading brand, Budweiser, sold to the Brazilians, is not going to be popular. InBev gets this. This is not the first time the company has faced local hostility during its massive expansion and they have learned much over the years. In addition to a charm blitz aimed at wooing the St. Louis media, community opinion leaders, and Missouri’s Congressional delegation, InBev has set up a website to promote the acquisition by providing reassuring facts and grist for the media mill. This is a very smart move and, again, while it will strike most people as common sense, it is not something done with the regularity necessary to make it “common”.

http://www.globalbeerleader.com/home.php

If anyone hadn’t previously noticed the global shift in economic power that is taking place and gaining momentum during the first decade of the 21st Century, this should do it for you. Anheuser-Busch is not a company in trouble. It is not a company without global reach. It is however a tasty target in the on-going consolidation of global brewing that has seen US number two, Miller, become part of South African Breweries to make the world’s current largest brewer, and the nation’s third largest brewer, Coors, merge with Molson of Canada in 2004 to become the world’s fifth largest beer company. Indeed, that consolidation, and the subsequent merger of SABMiller and Molson Coors operations in the US and Puerto Rico just over six months ago, helped make the InBev takeover bid possible by putting further competitive pressure on Anheuser-Busch.

http://www.altria.com/media/02_00_NewsDetail.asp?reqid=301102
http://promomagazine.com/news/Coors_Molson_0727/
http://www.nytimes.com/2007/10/09/business/worldbusiness/09cnd-beer.html

So, when the 'Show-Me State' gets all worked up about Anheuser-Busch being sold to foreigners, they may care to note that there aren’t really any US owned mega-brewers left but Anheuser-Busch. And even if the company somehow survives the InBev takeover bid, its Missouri roots will likely be diluted by the merger of Anheuser-Busch with Grupo Modelo of Mexico (maker of Corona), in which Anheuser –Busch already has a 50% stake. While this strategy is being discussed a means to make a hostile takeover by InBev unpalatable, there is substantial speculation that InBev may like to swallow the Corona maker in the deal anyway. While InBev chief Carlos Brito seems opposed to further upping the deal, it seems unlikely that he would really balk at the opportunity.

http://www.bizjournals.com/milwaukee/stories/2008/06/16/daily2.html
http://www.marketwatch.com/news/story/story.aspx?guid=%7B0183FDF6%2DC113%2D4F71%2DAD83%2DD1C150E8AB47%7D&siteid=rss

The bottom line is that InBev is doing all the right things and making all the right noises. While politicians can volubly declare their opposition to the deal, the fact is that there’s really not much they can do about it as there are no substantial regulatory hurdles to such an acquisition. If Anheuser-Busch shareholders like the offer, that should pretty much be that. The Busch family controls less than 5% of the stock while Warren Buffett’s Berkshire Hathaway Inc., owns over 5% of shares and stands to make some USD $600 million on a three year investment in the company. The largest single shareholder, Barclay's PLC, with over 6% interest in the company, is unlikely to oppose a tidy profit.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aYia.xjx.L7k&refer=home

“That Buffett is a clever chap. I haven’t been in beer shares for some time. With the economy on the way down, your booze portfolio should be in hard liquor. Beer may be relatively more affordable, but ‘liquor is quicker’ as they say. I can’t see Anheuser-Busch staving this bid off. A Grupo Modelo merger may put InBev off temporarily if they only have Board approval for a purchase in the $50 billion range, but Anheuser-Busch has not grown as aggressively as it should have internationally and this is the price it pays”, said the Bloated Plutocrat. The Bleeding Heart is still so angry with your Genteel Moderator over last week’s Big Oil vs Big Government post that he would not file written remarks. When I did speak with him over the phone, he insisted that “this is all because of NAFTA”. When I explained that the proposed InBev deal had nothing to do with NAFTA, he became very distraught and screamed that I didn’t understand international trade and that this was all just another unwanted side-effect of a free-trade policy. This is of course partly true. But if Anheuser-Busch were buying Tsing-Tao, I somehow doubt the Bleeding Heart would be railing against free trade…

Big Oil vs. Big Government

2008-06-12T06:51:00.000-07:00

Nobody likes oil companies, except the Bloated Plutocrat of course. They are environmentally unfriendly. And they make way too much profit. Well, right now at least. The last “oil crisis” that I witnessed was rather different. In 1998 I was living in Dubai and the price of a barrel of oil dipped below $20. Persian Gulf governments were in a tizzy over the massive revenue shortfalls and falling budgets they were facing. There was talk of suing EU governments for the disproportionately high taxes that they imposed on the retail selling price of gasoline! North Sea rigs were set to shut because they couldn't produce at that price. Oil companies were losing money then. But ever since then they have made OBSCENE profits according to Barack Obama and his Senate Demagogues, sorry, Democratic colleagues, that introduced a piece of political hustle called The Consumer-First Energy Act of 2008, largely comprised of a 25% windfall profits tax on U.S. oil companies. While I agree that Exxon-Mobil’s first quarter earnings of $10.9 are pretty much obscene, it seems that over the past ten years, Exxon-Mobil and other US oil companies have reaped profits on par with the rest of US manufacturing companies – approximately 8 cents on the dollar invested. Oh. Fortunately the Bill is going nowhere.

http://www.bwcitypaper.com/Articles-i-2008-06-12-221658.112112_No_Profits_No_Oil.html
http://abcnews.go.com/Business/IndustryInfo/Story?id=4749343&page=1

Oil prices are high because the US won the Cold War and discredited Godless Communism, the economic aspects of which have been chucked out the window everywhere but North Korea and the London School of Economics, even if China and others maintain the political aspects of Marxism-Leninism that keep the ruling oligarchy in power. Meanwhile with even “socialism” a dirty word outside the retrograde South American countries that Venezuelan President Chavez has purchased with oil revenues, China and the formerly bumbling socialist India, Russia, and most of its former satellites are all witnessing strong economic growth rates based largely on the benefits of a free-market economic system and freer global trade regime that the US has championed pretty much since its independence from Britain. Gasoline costs $4.00 a gallon in the US because you bought that Made in China 64” Plasma Screen TV last year. The plant that made that TV has expanded fivefold in the last 9 months and the shift supervisor when your gargantuan teletheater was produced (he’s now Director of Operations) has upgraded from moped to Toyota sedan. Both these developments mean that more fuel is being used elsewhere in the world (as oposed to the 25% of global oil consumption in the US), driving up your pump prices at home. So when Senator Charles Schumer of New York spews lickspittle while screaming about oil company profits, it begs the question as to whether he, or any of his colleagues in the Senate, understands basic economics.

http://omrpublic.iea.org/
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2174rank.html
http://marketplace.publicradio.org/display/web/2008/06/10/oil/?refid=0
http://www.oilweek.com/news.asp?ID=16586

Mind you, McCain isn’t much better, but he’s marginally more honest about his grasp of economics. He and Senator Clinton’s proposals for a Federal gasoline tax holiday represented the worst kind of pandering. With McCain one hopes that it was at least partly driven by an orthodox view that cutting taxes is never a bad idea. He was at least honest when he almost, sort-of, admitted he was tax-cutting for votes. Clinton was just desperate, but compounded pandering with stupidity by proposing another windfall profits tax on Big Oil to fund her vote-soliciting gas tax holiday. But both of them should have realized that the best they could hope for would be that gasoline retailers would split the difference with consumers, resulting in a massive 9 cent per gallon price reduction (while prices are climbing). Offering gasoline retailers a potential 18 cent per gallon windfall wasn’t very smart. But it didn’t raise serious questions about the mental health of either Senator. Not so for the sponsors of The Consumer-First Energy Act of 2008. Oh, and Obama was opposed to the gas tax holiday. But he was in favor of it before he was against it. (In 2000, he supported a Bill in the Illinois legislature that would have temporarily suspended the state gas tax).

http://www.msnbc.msn.com/id/24120727/
http://www.nytimes.com/2008/04/29/us/politics/29campaign.html?partner=rssnyt

Who do you think would be victorious in the battle of wits between the Seven Mental Dwarves of the Senate (all of them named "Dopey") that sponsored this Bill and the Finance, Taxation , and Law Departments of America’s oil companies? Would such paragons of virtue as Sen. Harry Reid prevail as a latter day Mr. Smith against the rapine oil companies? Or would a 25% tax hike on US oil companies simply be passed on to the consumer, further driving up gas prices? I know which way I would bet. But Sen. Chuck Schumer was particularly irate that the authorization for the US Attorney General to sue OPEC producers for their “monopoly” powers included in the Bill should be voted down. The fact that the US remains one of the worlds Top Five oil producers (number 2 after Saudi Arabia by some measures) and that its single largest source of imported oil is Canada (not an OPEC member to the best of my knowledge) seem to have eluded Chuck.

http://www.marktaw.com/culture_and_media/politics/GlobalOil.html

Can we go back to Economics 101? Supply and Demand. Right now, demand for oil is extremely high at just under 87 million barrles per day. This is higher than markets had envisaged, but already showing signs of falling. New oil fields (and oil fields are being discovered as I write) as well as oil sources that are not profitable at lower prices (Canada’s Athabasca Tar Sands, for example) take time to come on line and meet this higher demand. Similarly, high fuel prices create inflation and slow economic growth as well as discourage oil consumption, which in turn brings down demand for oil. Within 18 months from now, the price of a barrel of oil will be back in the $90 - $100/bbl range. Perhaps the Seven Mental Dwarves who sponsored The Consumer-First Energy Act of 2008 should instead draft Senate guidelines requiring that members of the Senate have obtained a basic educational level that includes passing Econ 101. That of course would thin the Senate out considerably AND substantially diminish eligible candidates. Supply and Demand.

http://www.heritage.org/Research/EnergyandEnvironment/1950.cfm
http://democrats.senate.gov/newsroom/record.cfm?id=297375
http://www.nytimes.com/2008/05/14/business/14refine.html

Sadly, the Bleeding Heart refused to speak with me or provide written remarks for this piece. He said that Your Genteel Moderator had gone too far, and that accusing Senate Democrats of stupidity (which I do, but do not believe is confined to the Democrats) and the high price of gas to the failure of Communism (which I do, but he resents, having done a junior year abroad at LSE) was “absolutely unacceptable”. The Bleeding Heart believes that his hybrid SUV is the answer to the oil crisis. The Bloated Plutocrat was unable to file comments. He is at an Exxon-Mobile Board meeting and invitational golf tournament…

PS – Your Genteel Moderator must confess to a degree of bias in this matter. I dislike oil companies. In early 1990 while still at University but looking for a job, I went to interview with Occidental Petroleum in Los Angeles. That day they let go more than 10,000 people. This was because oil prices were low and they were scaling back exploration and refining activities. They didn’t offer me a job.

Uh-Oh, Airline Re-regulation?

2008-06-05T18:28:00.000-07:00

With jet fuel prices soaring and almost nothing left for airlines to cut (removing the seats altogether appears to have been too much for the FAA), it looks like it’s routes and jobs under the knife now. United announced substantial cuts earlier this week, grounding its 737 fleet, following previous moves by American some two weeks ago, and Continental is following with plans to cut routes and jobs as well. Expect similar moves from other US and international carriers in the near future. United has announced it will shed roughly 15% of its domestic seats on offer and American and Continental are in a similar range. Airline analysts have long talked about the need for domestic carriers to drop nearly 20% total seats on offer to regain profitability, so further cuts could be in order. So far, going back to Delta’s cuts at the end of 2007, most carriers have cut in the 12% - 15% range, but with fuel costs up over 80% in the last year, those cuts are likely to be seen as insufficient.

http://www.myfoxny.com/myfox/pages/Business/Detail?contentId=6701486&version=1&locale=EN-US&layoutCode=TSTY&pageId=4.9.1
http://www.voanews.com/english/2008-06-04-voa42.cfm
http://online.wsj.com/article/SB121262649119247029.html?mod=googlenews_wsj

Despite the economic downturn/recession, demand for flights remains high, at this time. This means one thing. Expect rising fares on remaining routes. Of course should these fare increases work in tandem with further recession, we may see falling demand at some time in the future. That of course may lead to further route cuts, getting to a point where we have very limited service and high expense on a number of routes. But wait, we’ve been there before. Thirty years ago de-regulation was promoted to increase competitiveness in the industry and produce increased service and lower prices. Now after thirty years, and the coming and going of some 200 airlines in the US, the question of regulation is again under discussion.

http://money.cnn.com/news/newsfeeds/articles/djf500/200806031804DOWJONESDJONLINE000559_FORTUNE5.htm

Is it more regulation or less regulation that is needed to pull the airlines out of their slump? There’s definitely room for debate. On the one hand, deregulation did spur competition and lead to increased airline capacity and lower prices. This was undoubtedly good for consumers. Unfortunately, a lot of short-lived, predatory competitors emerged under de-regulation, rising on the scene under-capitalized, extracting fairly painful concessions from unions with a promise of a brighter future, slashing prices to generate passenger trial (and drive those stock prices up in the short term), and then going out with a whimper after being unable to sustain operations at rock-bottom prices. In the meantime, they succeeded in slashing total industry profitability and causing real pain at the major domestic carriers. If you think about it, have the US carriers ever been “well” since the so-called crisis of the First Gulf War? Of course, one of the major complaints inside the industry is over the 25% limit on ownership by foreign interests of domestic airlines. There is a view that these limits have diminished investment in the industry and contributed to the death by a thousand cuts inflicted by the small-cap, fly-by-night (had to work that in there somehow) come-and-go airlines.

http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-Airlines_26bus.State.Edition1.3b50a7a.html
http://blogs.courant.com/travel_columnists_leblanc/2008/06/airline-regulation-no-thanks.html

“Limited re-regulation is the only long-term solution for an industry that is continually seeking government assistance," Robert Roach Jr., an executive with the International Association of Machinists and Aerospace Workers, said at a recent Senate Commerce Committee hearing on the state of the airline industry. James Little, international president of the Transport Workers Union of America, believes that to save the faltering airline industry, "I think the time has come for some kind of re-regulation… For labor, we need some kind of transition program, so that pension plans can be saved if there are mergers and acquisitions." With employees having born a substantial cost in the fight for competitiveness over the last decade, this call for some form of “re-regulation” will come as no surprise. Certainly few would argue that while de-regulation brought with it more flights at cheaper rates, it also brought diminished in-flight service and, overall, a less pleasant flying experience.

But hold on a minute. What is it that people want? Lot’s of cheap flights with admittedly Aeroflot levels of service, or fewer, more expensive flights pitched more at the Singapore Airlines level of service? Obviously what consumers want are cheap flights with fantastic amenities, but recognizing that this scenario is unrealistic, the answer is that what the country wants is lots of cheap flights. And in the post de-regulation era, that’s what it got. The result was a massive expansion in airline travel by Americans. According to the Bureau of Transport Statistics (please see last week’s Blog), in 1977, people paid for 149.5 million flights on US domestic airlines. In 2007, that number was 769 million. That growth (five times as many domestic seats sold in 2007) cannot be accounted for by population growth – or growth in corporate travel budgets. The fact is that America got what it wanted: cheap flights. The price it paid was horrible service, massive congestion, under-investment in infrastructure, and vicious competition.

http://www.bts.gov/

The industry itself is not convinced that re-regulation is an answer, although government measures to limit competition under any other name would be most welcome. They would love to see higher barriers to entry for new airlines (diminishing the number of one route wonders that slash major carrier profits before disappearing in a Chapter 11 cloud), and would likely welcome measures that effectively establish minimum prices on certain less profitable routes (provided it isn’t actually called price controls). But mostly one hears about more deregulation: a freeze on government fees (have you looked at the fees and taxes section of you airfare lately – there’s a healthy tax-farming business afoot if nothing else); a reduction in fuel taxes (unlike the average motorist, a break on Avgas would add up); easing competition rules on airline M&As, and most of all; the removal of the 25% limit on foreign ownership of US airlines.

http://www.forbes.com/logistics/2008/06/02/aviation-airlines-investing-biz-logistics-cx_tm_0603aviation08_malan.html

It is a point well made. There is virtually no other sector of the US economy in which this limit on foreign direct investment exists, certainly not one as mundane as cattle carting. The fact is that that sometime in the next year or so, Emirates Airlines of Dubai will become the world’s largest passenger carrier. Look at booked sales for Boeing and Airbus – the Middle East and Southeast Asia are leading the charts. If consolidation of the domestic industry is generally seen as a bad idea, then direct foreign investment or acquisition is the likely answer. There really are no legitimate security concerns and, before screaming blue murder, the unions should consider that most European airlines are used to much more costly deals with labor than the US unions can even imagine.

http://aviationblog.dallasnews.com/archives/2008/05/state-official-says-us-is-open.html

Predictably, the Bleeding Heart and Bloated Plutocrat had strong and widely variant views on the matter. “De-regulation was just another excess of the 80s. We saw the folly of big hair, shoulder pads, and Boy George, why can’t we accept that airline deregulation was a Gordon Gecko fantasy gone wild. The unions have been bled dry by successive agreements that saw them paying for bad corporate planning. With the fuel crisis and economic downturn, it’s time to reestablish a regulatory framework for the airlines that will ensure good service for consumers, better safety, and decent wages for airline employees”, said the Bleeding Heart. “Well, I’m torn”, noted the Bloated Plutocrat. “I’d love to get rid of all the commoners who fly and return to the days when flying was an enjoyable experience for the select few that could afford it. But it won’t happen. There’s no turning back the clock. All we’ll end up with is an inefficient, slightly expensive system in which large people in clothes that are too small for them continue to fly. No. Open the doors to foreign investment. When Singapore and Emirates are operating the New York – LA route, we’ll at least have a jolly good First Class service!”

Lies, Damned Lies, Statistics, and the CPI…

2008-05-28T16:50:00.000-07:00

If statistics are the highest order of lies in this phrase about the three types of lies commonly attributed to 19th Century British Prime Minister Benjamin Disraeli, then the US government’s Consumer Price Index (CPI), compiled by the Bureau of Labor Statistics (Minicrap for the Orwell aficionados), is the celestial be-all and end-all of lies. Your Genteel Moderator begs your indulgence as he addresses what to some may be an arcane matter of economics. But the continued use by the government of a CPI based on the price of treacle and fairy dust demands our attention.

http://www.bls.gov/CPI/
http://www.victorianweb.org/history/pms/dizzy.html

But why, you may ask? Because, unless you happen to live in Never-Never Land, you may have noticed that treacle and fairy dust do not make up a substantial portion of your monthly expenditures. Off the top of your head, estimate the top 10 costliest expenditures by month that you and your family incur. Would fuel be one of them, perhaps? Do you then imagine that an index compiled to measure the relative increase in the cost of living and from which the inflation rate is essentially derived should reflect that relative weighting? Many people would share your views, but apparently not the Bureau of Labor Statistics. Because they believe that fuel (gasoline and diesel for motor vehicle use) accounts for just under 5.5% of your monthly expenditures. In fact, according to today’s CPI formulation, energy costs account for less than 10% of your total monthly expenditures. That may be so for the Hollywood glamoratti and the Greenwich Hedge Fund Manager, but for rather more ordinary people, not so much.

http://www.bls.gov/cpi/cpihe00.htm
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiri05-06_2007.txt

The easiest way to calculate annual inflation is by using the CPI in the same months from two consecutive years, subtracting the base year from the second year, dividing the result by the base year and multiplying by 100. For example, the CPI for April 2007 was 206.686 and for April 2008 was 214.823. Therefore, CPI derived inflation year-on-year to April was 3.93%. Of course that’s based on a CPI weighting that puts gasoline costs at less than 5.5% of your expenditures and total energy costs at less than 10% of total expenditures. Let’s look at the price of gasoline for the same period. According to the US Energy Information Agency the average price of regular gasoline across the country has increased by just under 73 Cents in the past year (as of May 26). Using the same method of calculation as CPI derived inflation, then average US price for regular gasoline has increased by 22.68% in the past year (although I would like the Energy Information Agency to show me where I can get gas for $ 3.93 a gallon!). We could run through home heating oil as well but suffice it to say that that too has increased, if not as dramatically. For diesel fuel, a significant distribution cost driving food and other price increases, the increase is much more dramatic at 67.66%. That means at least a two thirds increase in the cost of getting goods to market (unless you distribute by sailboat of course). The point is that with gasoline prices having risen by nearly 23% (and diesel by nearly 68%), the CPI derived inflation rate of 3.93% is nonsense.

http://www.inflationdata.com/inflation/Inflation_Articles/CalculateInflation.asp
http://www.eia.doe.gov/oil_gas/petroleum/data_publications/wrgp/mogas_history.html
http://tonto.eia.doe.gov/oog/info/wohdp/diesel.asp

There have been and continue to be numerous criticisms of the CPI based on everything from sound economic theory to politically based tinkering. A quick review of internet based resources alone will give you more information on the subject than you could possibly want. But it is difficult to argue with the fact that a year on year inflation rate of 3.93% seems absurdly low in view of sky-rocketing energy costs. Add to this picture the falling value of the USD (which by some measures has fallen by more than 30% since 2000) driving up the cost of imports (i.e. virtually every manufactured good that you buy these days) and what we have is the portrait of an economy in real crisis. Add to this the substantial decline in relative liquidity, i.e. the widely touted “credit crunch”, and we have a potential Perfect Storm brewing, and certainly a rather sticky conundrum for monetary policy.

http://mykindred.com/cloud/TX/Documents/dollar/

In any event, not only are gasoline prices painful and inconvenient, they are also having a multiplier effect on the much discussed recession that the government is vastly understating through a highly distorted CPI. The Bloated Plutocrat had this to say. “If you are relying on government statistics to understand the economy old boy, you are going to lose your shirt. Run for the Swiss Franc and Gold Bullion. The equity market is a total bear and the bond market is going to be flooded with punters and prats! Nothing’s going to change in the near term and neither one of the esteemed Senators likely to be elected in November have the intellectual capacity or political power to do a damned thing about it. Aside from the global shift in economic power away from the US in general, we are looking at conditions that bear some resemblance to the late 1970s, but without a Ronald Reagan to convince us that everything is going to be just fine.” The Bleeding Heart was somewhat less enlightening. “I suppose that the fuel / energy cost weighting in the CPI should be substantially increased, especially as those costs are disproportionately impactful on lower income groups. I know that fuel costs are definitely driving up the cost of tickets on the Martha’s Vineyard Ferry this summer!”

A CPI that weights total energy costs at less than 10% of one’s total monthly expenditure is at best inaccurate and, at worst, fraudulent. Were these costs more appropriately accounted for, adjusted inflation would likely be upwards of 5%, a level that is extremely disconcerting when looking at interest rates. Nevertheless, don’t expect a change in the CPI basket any time soon, the BLS think it works just fine…

http://www.bls.gov/cpi/cpigm697.htm

Starbucks – Pretty Good After All…

2008-05-14T18:24:00.000-07:00

Whether you love them, or love to hate them, the caffeinated equivalent of the fictional Fox Books (You’ve Got Mail) coming to destroy your neighborhood, or provide good coffee where the thrice-boiled muck beaker has reigned supreme, commands an opinion. Whether that opinion is entirely positive or of the more negative nature, the fact is that the company is firmly entrenched in pop culture and has transformed the ritual of morning coffee for millions around the world. The sin of over-expansion has moved from the realm of pundit commentary to a Wall Street factoid and has management pursuing a new strategy of closing down some outlets in oversaturated markets. Despite the slowed openings and some closings, the company has managed to stand by its commitments to the coffee growing community that while not exactly earth-shaking, are tangible.

http://www.guardian.co.uk/business/2008/jan/08/retail
http://www.businesspundit.com/falling-star-bucks-crisis-in-suburbia/
http://news.bbc.co.uk/1/hi/business/7219458.stm
http://www.google.com/search?q=starbucks+boycott&btnG=Search&hl=en

Your Genteel Moderator is no fan of corporate social responsibility reporting. While occupying armies of people and consuming vast resources and time within a company, they have little to no impact on critics, and the rest of the world would rather make incisions in their own eyeballs with dull and rusty razor blades than read through the politically correct drudgery of such reports. Having attended, and even spoken at, a number of conferences dedicated to the topic of corporate social responsibility, it is my humble opinion that this is a field of activity so self-indulgent, self-congratulatory, and self-fulfilling as to rank right up there with the great Y2K consulting hoax. Nevertheless, serious companies that are willing to endure the horrors of the process, and the reasonable questions from their shareholders about the expense involved, and have their reports reviewed and verified by credible third parties, as Starbucks have done, do deserve some recognition for their efforts. It is reasonably certain that such recognition will not translate directly into share price increases, but they may have some positive impact on consumer off-take, and the congratulatory tone of some obscure blog will undoubtedly assuage any queries from the Board about the expense…

http://www.csrwire.com/News/12055.html
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=996683

The Bloated Plutocrat was derisive. “I don’t know which so called ‘management consulting' firm invented this corporate social responsibility lark, but I’d like to buy their shares. They may have more fluff to sell. On the other hand, I better not hear about any companies in which I have a Board voice spending money on this nonsense. If people want to know whether companies are socially responsible or not (and why this should matter is beyond me – it should be profitability that they focus on), they should read the newspapers. Those bone-idle twits that call themselves journalists are forever harping on about the evil done by companies, except of course when they’re falling over themselves to print the bumpf fed to them by the PR agencies of the same companies!”

The Bleeding Heart was typically conflicted. “I do love a venti machiatto in the morning. But Starbucks is so ubiquitous and we certainly don’t want them running the little bakeries and coffee shops in Fairfield County into the ground. I suppose that as long as they are paying top dollar to coffee growers they are acting responsibly, but I wish they would keep the Pumpkin Latte on the menu year round…”

The fact is that any company that relies on CSR reporting to shore-up an image damaged by irresponsible business practices will have wasted time and money for either little result or a substantial backfire. If one is going to trumpet one’s own responsibility, it had better be reflected in the company’s core business practices. Regardless of the pundit opinions about Starbucks’ community impact, its pricing, whether it promotes homosexuality, is for or against Israel, or whether its logo is crypto-sexual, (people really have too much time on their hands) the biggest issues at the core of Starbucks business (besides sustained profitability) are its treatment of employees and the ethics of its coffee bean purchases.

http://www.msnbc.msn.com/id/9344634/
http://brandautopsy.typepad.com/brandautopsy/2007/01/the_starbucks_e.html

The fact of the matter is that on both these issues the company does well enough to merit an above expectations conclusion. With the cost of healthcare benefits for its employees exceeding its total green coffee purchases, and a majority of those purchases being Fair Trade Certified (and, on average, some $0.20/pound higher than the Fair Trade mandated minimum), Starbucks has some empirically verifiable data to make the case that they are indeed acting responsibly in the daily conduct of their business. So, the next time you’re in a Starbucks, have paid your $7.50 for a bizarrely named mix of coffee and milk savagely beaten into a froth that occupies nearly half of your grande, and decided not to plump for a wireless connection, take a moment to read the treacle-sweet summary of their annual CSR Report. If you are able to stay-awake and/or quash the feelings of suicidal rage that it will produce in most people, perhaps you should consider a well-paid career in social reporting. If that doesn’t sound interesting to you, then simply note that while it is easy to take pot-shots at Starbucks, it turns out that they are pretty responsible when it comes to the things that really matter.

http://www.globalexchange.org/campaigns/fairtrade/coffee/

Colgate-Palmolive Won’t Wash Hands of Sharpton Award

2008-05-08T09:37:00.000-07:00

The well known maker of cleaning, health/beauty products, and toothpaste holds its annual shareholders’ meeting in New York City today, a city that the Rev. Al Sharpton, activist and President of the National Action Network (NAN), a national civil rights organization, has vowed to shut down with protests over the not guilty verdict in the Sean Bell shooting case. The National Legal and Policy Center (NLPC) is an ostensibly non-partisan, but decidedly conservative, NGO promoting ethics in the public and corporate sectors. This morning it denounced a response from Colgate-Palmolive Chairman, Reuben Mark, to its April 14 letter urging the company to “repudiate” a National Action Network Corporate Excellence Award for “fostering diversity in the workplace”. The response was a very politely worded “thanks for sharing”.

http://www.colgate.com/app/Colgate/US/HomePage.cvsp
http://investor.colgate.com/ReleaseDetail.cfm?ReleaseID=308031&ReleaseType=Company&ReleaseDate=%7bts%20
http://www.nationalactionnetwork.net/
http://topics.nytimes.com/top/reference/timestopics/people/b/sean_bell/index.html
http://www.nlpc.org/view.asp?action=viewArticle&aid=2508
http://www.nlpc.org/pdfs/ColgateReply.PDF

NLPC, which has a history of campaigning against Al Sharpton and Jesse Jackson, another well-known and sometimes controversial civil rights activist, wrote to the Colgate-Palmolive Chairman on April 14 demanding that he repudiate the award from NAN because, according to NLPC President Peter Flaherty, “Receiving a ‘corporate excellence’ award from Sharpton is a dubious honor indeed. His organization, the National Action Network, has been beset by legal and accounting problems for years, prompting a number of investigations. Moreover, recent media reports indicate that Sharpton may soon be indicted by a grand jury. Colgate-Palmolive received the award for fostering an ‘inclusive workplace.’ But who is Sharpton to be handing out such an award in light of his involvement in hoaxes such as the Tawana Brawley episode and the Duke rape case? Sharpton is not a legitimate civil rights leader.”

http://www.nlpc.org/jjackson.asp
http://www.rainbowpush.org/FMPro?-db=RPOfrontpage06.fp5&-format=rainbowpush/frontpage06/results.htm&-lay=front&constant=1&-find

“Strong words and a tough stance by NLPC, but if being ‘beset by legal and accounting problems for years’ and ‘pending grand jury indictments’ were to become barriers to corporate engagement with politicians, it would mean the end of corporate lobbying on Capitol Hill.”, said the Bloated Plutocrat. “Colgate-Palmolive are shrugging off their extortion payments to NAN. This should come as no surprise to anyone. But with every pressure group out there, including the loony enviro-thugs, doing the same thing, the cost of doing business is being driven up sharply and tax write-off corporate philanthropy that would have gone to the arts or other good causes are being diverted to fill the coffers of every activist/stuntsman with enough media-savvy to carry off a ‘donate or pay’ scheme” he added. The Bleeding Heart was beside himself over the NLPC. “These right-wing hit-men hide behind the veil of ‘ethics’ when all they really are is another wet-work character assassination unit for the vast right-wing conspiracy that stole the White House for George Bush and dragged us into war. I’ll bet that Flaherty and his minions are out there digging away trying to fabricate some story about Sen. Obama at this very minute.”, remarked the Bleeding Heart.

While there is no question that NLPC has unearthed real issues of concern with regard to transparency and accounting rules in Sharpton’s dealings, this effort to force a “repudiation” of the NAN award that Colgate-Palmolive received looks a lot like the very type of NGO extortion to which the Bloated Plutocrat refers. The fact that NLPC chose to wait two and half weeks after receiving Mark’s response for the day of the Colgate-Palmolive shareholder meeting to comment on the letter is a transparent act of PR stuntsmanship lacking in both subtlety and good sense. Sharpton’s arrest yesterday during the protests he arranged to “shut down the City” will certainly generate more news coverage than NLPC’s press release and additional NAN organized protests blocking traffic today will cause more inconvenience and annoyance to the company than NLPC criticism. Colgate-Palmolive were recognized by a leading, if controversial, civil rights organization for doing a good job of fostering diversity in the workplace. Why should they repudiate that?

http://www.nydailynews.com/news/2008/05/07/2008-05-07_hundreds_protest_sean_bell_verdict.html

On the other hand, as Flaherty notes, they don’t seem that proud of it either. Perhaps it’s just a case of poor website management, but the NAN “Corporate Excellence Award” is not listed alongside the many other awards for promoting diversity in the workplace given place of honor under the rubric “Awards” on the company’s site.

http://www.colgate.com/app/Colgate/US/Corp/Awards.cvsp

ABSOLUT DISASTER

2008-04-30T13:14:00.000-07:00

Your Genteel Moderator apologizes for taking so long to address this issue, some three weeks after the campaign, run in Mexico, was pulled. As good as Absolut’s marketing has been, this really does go to show how even the best can get it horribly wrong from time to time, and recover. The really important question is how much Absolut was consumed prior to or during the marketing review in which the ad was approved, or whether it was a local decision fueled by contraband tequila in the Vin & Sprit (Absolut’s parent company) offices in Mexico City?

“I would just like to thank the bright eyed boys and girls at Teran/TBWA here in Mexico City for creating yet another brilliant iteration of the Absolut campaign with this witty pun on the Reconquista, US immigration policy, and border security during a US Presidential election year”, said Sven Svenson, Director of Marketing for NAFTA at Vin & Sprit, just before downing another shot of tequila. No he didn’t, and to the best of our knowledge there is no Sven Svenson at Vin & Sprit (and if there is, ursaekta, Sven). But some poor sod did review and approve the Teran/TBWA ad a month or so ahead of the March 31 announcement by Pernod Ricard that it would acquire 100% of Vin & Sprit, thereby putting itself on a nearly equal footing with Diageo, the leading beverage alcohol company in the world. It seems unlikely that he or she will have prospered under the subsequent acquisition.

http://www.pernod-ricard.com/en/pages/2800/Press-releases/Pernod-Ricard-acquires-Vin-Sprit-and-becomes-the-co-leader-of-the-global-wine-and-spirits-industry.html

http://www.foxnews.com/story/0,2933,343409,00.html

These things happen, and they almost never happen because someone in senior management with a “big-picture overview” evaluated the risks and decided to pull the trigger anyway. These types of bad decisions are almost always made by well-intentioned, intelligent people who really didn’t understand that something as simple as a “funny ad” could end up costing them their jobs. Your Genteel Moderator recalls a similar, albeit smaller scale, issue when Maori (as in the indigenous people of New Zealand) was used in a promotional campaign for L&M cigarettes in Israel. The Maori were not amused, but the twenty-something year olds who put the campaign together for the Israeli market couldn’t understand how it came to be an international issue virtually overnight, or why Altria’s Chairman was being questioned about it by Maori representatives at the company’s annual shareholder meeting. It becomes an issue when a global brand icon or industry leading company that is supposed to “think globally and act locally”, skips the thinking part.

http://www.tobacco.org/news/222865.html
http://www.abc.net.au/worldtoday/content/2006/s1626384.htm

On the other hand, Vin & Sprit were quick to act when it became apparent that there were numerous people north of the Rio Grande who failed to appreciate the wittiness of the ad. There was indeed an extensive outcry with a number of bloggers leading the charge and I can assure you that it was not a fun couple of days in the external affairs function at Vin & Sprit. Jeff Moran, Director of Public Relations and Events at Vin & Sprit’s Absolut Spirits Company Inc., based in New York, had a very bad week as his e-mail address and telephone numbers were quickly published across the web. If reports of his responses to inquiries by the public are to be believed, he didn’t handle it very well. Conservative columnist Michelle Malkin led a very effective charge on the issue, albeit rather heavier on the righteous indignation than might be seemly, and posts on her site suggest Moran was somewhat peeved:

"I called Jeffrey Moran at the number you show, & was surprised that he was the one who answered the phone. I simply told him the Mexican ad was horrendous & that I would never buy any Absolut products & he should be fired. He said it wasn’t his idea, & hung up.
Larry PitetSheridan, WY "

Leading Moran no doubt to avail himself of some medicinal samples from the office product display….

http://michellemalkin.com/2008/04/04/absolut-arrogance-and-the-advertising-agency-behind-the-reconquista-ad/
http://www.absolutads.com/?p=815

Nevertheless, the company did act relatively quickly to pull the ads and within days of the campaign being launched had closed down the campaign and apologized for any offense it may have caused in the United States. There really isn’t much more the could have done and the fact that they did so in a relatively timely manner probably saved them from allowing pundits to develop a potentially serious consumer boycott. Of course, being Swedish helps. It’s hard for even the most vocal critics to work up serious invective. “This is just the latest example of Sweden’s vicious hatred for and intolerance of America, like when they called the Swedish Bikini Team home early, or made Volvos”. It just doesn’t work. If only it were “Absolute pays de la France”…

http://www.signonsandiego.com/news/mexico/20080408-1813-mexico-absolut-.html

The Bleeding Heart was amused. “The ad was silly and it appears that only the haters and anti-immigration scare mongers were able to get themselves worked up about it. It says a lot that conservatives are so desperate to find some way to keep these myths about illegal immigration alive that they whipped this up into a tempest in a shot glass. No educated person can doubt that the Mexican –American War was an entirely American provocation and a bald land-grab. Nor can they be surprised to find that Mexicans would rather the American Southwest still belonged to them. I bet this had Lou Dobbs choking on his Schlitz! In any event, Absolut will most definitely be on the menu at our Cinco de Mayo Party!”

http://www.vivacincodemayo.org/history.htm

The Bloated Plutocrat was apparently caught short, however. “What a bunch of nonsense! Who’s getting worked up about some booze ad? Everyone needs to calm down about this Reconquista nonsense. What we need is a functional guest worker program in this country. If you kick out 15 million illegal Mexicans, who's going to train the Hondurans to do the gardening? Besides, Vodka is a Bolshevik drink. You don’t think Molotov was mixing gin Martinis, do you?” Mind you, it was quite late last night when I finally spoke to the Bloated Plutocrat and, even over the phone, I thought I could detect the faint smell of a peaty single malt on his breath.

The Cows are Drunk and My Beer Tastes like Cow Patty…it Must be Earth Day!

2008-04-24T08:20:00.000-07:00

It has come to the attention of Your Genteel Moderator that some of his refined readers believe he has been unkind in consistently taking companies to task for greenwashing, i.e. spinning their actions or processes as environmentally friendly when there is at least some evidence to the contrary. Having reviewed past Blogposts, there has certainly been a good deal to say about corporate greenwashing, and little have I focused on those actions by companies that do indeed act in ways that represent real, meaningful and effective commitment to the environment. It is therefore with great pleasure that I stitch together this post which covers two of my favourite things: Vermont and Beer.

http://www.msnbc.msn.com/id/21134540/vp/24278118#24278118
http://www.cnbc.com/id/24262297/for/cnbc
http://www.businessweek.com/ap/financialnews/D9075PKO0.htm

Looks like those Down East Yankees at the Long Trail Brewing Company have got the green coming and going. The privately held Long Trail Brewery of Bridgewater VT doesn’t release detailed financials but with nearly 90,000 barrels of installed capacity, they stand solidly in the upper ranks of America’s independent craft brewers, have grown solidly and steadily since their 1989 debut, and were just this month ranked (by sales) 22 out of 1,406 small, independent craft breweries across the country. With 19 years of successive growth, expansion plans telegraphed by permits the company has obtained, and continuing rumors of some kind of Anheuser-Busch link-up afoot, we can safely say that this is a business-savvy and successful company, if perhaps another Ben & Jerry’s corporate sell-out in the making.

http://blog.oregonlive.com/thebeerhere/2008/04/brewers_association_releases_t.html
http://www.beerscribe.com/news.html

So when a company like Long Trail (the largest to yet do so) signs on to Central Vermont Public Services “Cow Power” program and begins utilizing electricity generated by the same cows that it flogs the hops and malt leftovers from beer production to as feed, we really are moving into an area of seemingly solid green economics and science. Because not only does electricity generation from the methane released from cow manure represent use of a “green” fuel, it also helps diminish a significant source of so-called greenhouse gas. According to an Earthsave report (ah, those wonderful environmental campaigners unhindered by inconveniences like the truth), animal agriculture is the single largest source of human activity related methane gas emissions. The EPA suggests that it is the third largest such source, following landfills and natural gas systems. In any event, according to multiple sources animal agriculture is a major source of methane, a leading “greenhouse gas”, so diminishing the emission of methane by using cow manure as fuel to generate electricity must be beneficial (even if it simply replaces methane with CO2). Finally, there is a substantial benefit simply from consuming the manure as fuel. You can only spread so much muck on your fields and maintenance of manure slurry is a major environmental issue, and cost, for dairy farmers, so much so that foreign dairy farmers are moving to the US to benefit from less severe environmental regulations, among other things.

http://earthsave.org/globalwarming.htm
http://www.epa.gov/methane/sources.html
http://www.cvps.com/cowpower/How%20It%20Works.html
http://www.google.com/search?q=cow+manure+slurry+management+environment&hl=en&start=0&sa=N
http://findarticles.com/p/articles/mi_qa4051/is_200712/ai_n21185482

Long Trail Principal Andy Pherson must presume that demonstrably and seriously going green will in fact attract more customers and sell more beer. Coming from a small, independent, Vermont craft brewery, this has the intuitive ring of truth to it. Long Trail’s portfolio of ales are not trading on a price proposition. Building increased energy expenditures into the premium charged for their beer, or at least mentally (let’s not toss around any GAP contravention allegations) writing some portion of those costs off to marketing expenditures makes good sense for a company that has long cultivated an independent, eco-friendly image. And there’s the rub for most larger companies. When the Long Trail Brewery of Bridgewater VT does something green like contract for premium electricity (it will allegedly raise the electricity costs by some $ 10,000 per annum), it sounds credible, whether the company has a track record of environmental commitment (and Long Trail does), or not. When Shell puts a number of earthy-crunchy scientists on its TV ads saying how much the company cares about the environment, well, I think they are contributing more methane gas to the environment.

http://www.ecobrew.net/ecobrew.html

The difference between greenwashing and actually generating positive investor or consumer reaction to meaningful green action seems directly related to the company’s “methane meter” reading. The credibility of the green activity has to be solid. Virgin Airways flying from Amsterdam to London on 20% babassu nut bio-fuel ( see March 5 blog entry) may well advance the development of aviation bio-fuels, but it doesn’t make Virgin “green” and it has the wafting scent of another palm oil environmental disaster in the making. When a company has a comprehensive program in place aimed at diminishing its environmental impact, and the doing so costs them money, it becomes credible and tangible.

http://www.cspinet.org/new/200506021.html

The Bloated Plutocrat was not interested. “Beer? I don’t drink beer and unless Vermont miraculously develops a credible wine industry anytime soon, I’m not very interested in the state either. There was that charming Bing Crosby movie of course, but the skiing is much better in the Rockies in any event. As for CVPS creating electricity from cow manure, well Bully for them!” The Bleeding Heart on the other hand hasn’t been so pleased since the civil union legislation went through in Vermont. “ This is exactly what we mean when we talk about “the green economy”! This is the type of change that Senator Obama is talking about – changing the way we do business, changing the way we live, and changing our purchasing behavior. I do hope that I can find Long Trail beers in Fairfield County.”

Your Genteel Moderator must admit to bias in this matter. Having spent a good deal of time in Vermont, where our family has had roots since the middle of the 19th century, and being somewhat fond of Long Trail’s IPA, rather than question the real impact of manure driven electrical generation, I will focus on further study of the company’s portfolio and remind my respected readers to be careful of the carousing beer fed cows (let us hope that Central Vermont Kobe beef is not next on the menu) in the greater Bridgewater area…

Guns Before Butter

2008-04-16T11:06:00.000-07:00

That was the title of a discordant, angry song by the Gang of Four, a band that I quite liked in my misspent youth. They were loosely paraphrasing Otto von Bismarck, the effective founder of modern Germany, and suggesting a militaristic preference for the one over the other. On the other hand, ‘butter’ is a part of the well known phrase referring to basic food goods, ‘bread and butter’, and one’s source of income. Well, this week Wal-Mart, the largest seller of firearms in the US, appeared to put voluntary restrictions on the sale of guns ahead of the bread and butter of sales. Given the Presidential campaign, recent jibes about gun-owning, and the landmark case (Heller v. District of Columbia) regarding the District’s restrictions on gun ownership pending in the Supreme Court, Wal-Mart’s decision made a lot of noise. What was the buzz about?

http://www.lyricsmode.com/lyrics/g/gang_of_four/guns_before_butter.html
http://www.msnbc.msn.com/id/24114145/
http://www.southbendtribune.com/apps/pbcs.dll/article?AID=/20080415/Biz/759288949

Wall Street appears to have approved because Wal-Mart gained $1.12 as one of the DJIA leaders on the first day of trading following the announcement. “Mayor’s Against Illegal Guns”, led by New York City Mayor Bloomberg and Mayor Thomas Menino of Boston, approved, with Wal-Mart announcing its decision in association with the Bloomberg funded coalition of Mayors in favor of gun control. The Brady Campaign to Prevent Gun Violence approved, as did other organizations in favor of gun control. Both groups applauded Wal-Mart’s adoption of a 10 point plan to strengthen background checks on buyers and its employees who sell guns with measures that include, among other things:

· Creating a record and alert system to record when a gun sold at Wal-Mart is later used in a crime. If the purchaser of that gun later tries to buy another gun at Wal-Mart, the system would alert the sales clerk of the prior buy and could refuse to make the sale.

· Retaining the recorded images of gun sales in case law enforcement wants to view them later as part of an investigation.

· Expanding background checks of employees who handle guns and expanding inventory controls.

http://finance.yahoo.com/q?s=WMT&d=t

The National Rifle Association did not approve. “I view it as a public relations stunt that stigmatizes law-abiding firearms purchasers exercising their freedom under the Constitution,” said NRA CEO Wayne LaPierre. He further said that if politicians were serious about reducing gun crime they would worry less about legal sellers and buyers and get tougher criminal sentences for illegal gun dealers. “I honestly think it’s a corporation trying to curry favor with politicians as opposed to doing anything meaningful about stopping crime,” said LaPierre.

There’s certainly something to be said for LaPierre’s point of view. It is highly likely that currying favor with politicians was somewhere on Wal-Mart’s decision tree, along with litigation risk prevention. On balance, for the company and its shareholders, this would appear to be a smart move. Outside Alaska, the company only retails rifles and shotguns (in Alaska it does sell handguns). As handguns are statistically more likely to be used in crimes Wal-Mart has already managed its litigation risk to some extent. Furthermore, citing falling revenues from gun sales in many outlets, two years ago this very week the company ceased rifle and shotgun sales in about 25% - 30% of all its mainland US outlets. Given these facts, it seems unlikely that sales revenues will be significantly affected by the new voluntary restrictions (a fact that Wall Street seems to agree with) while at the same time, the company has improved management of its litigation risks and, yes, curried favor with politicians in major urban centers where it wants to open new outlets and where such moves have previously met with substantial opposition. Wal-Mart has undoubtedly got this one right.

http://www.nytimes.com/2006/04/15/business/15walmart.html?ex=1302753600&en=cbf12029eb32b929&ei=5090&partner=rssuserland&emc=rss

But what of the NRA’s criticism? Doesn’t LaPierre have a point in saying that these types of restrictions will stigmatize law-abiding firearms purchasers? Yes and no. Given the Malthusian proliferation of state and municipal gun laws that have emerged over the last two decades, those with a broad view of the Second Amendment, like the NRA, have a valid argument that more and more restrictions may indeed serve to “stigmatize” law-abiding purchasers of firearms by making exercise of their Second Amendment rights not dissimilar to the purchase of pornography, a shady and shameful thing. And most people could probably agree that a father taking his son to buy his first deer rifle should not have to undergo a shady or shameful experience.

http://www.csmonitor.com/2008/0319/p25s07-usju.html
http://www.mcclatchydc.com/homepage/story/30795.html
http://www.nationalcenter.org/2008/03/on-eve-of-dc-gun-ban-supreme-court-case.html
http://www.foxnews.com/story/0,2933,338282,00.html

But the Supreme Court seems poised to make a decision affirming a lower court’s ruling that the District of Columbia’s near total ban on handgun ownership is illegal and contravenes the Second Amendment rights of those like the six DC residents who originally brought suit against the DC law. So LaPierre and others with a broad view of Second Amendment rights need to rethink their strategies. If the DC ban is indeed overturned by Supreme Court decision, there will be substantial jurisprudence in favor of an individual’s right to keep and bear arms and it will open many other state and municipal gun laws to challenge. This will be a dangerous time for gun owners, and gun-owner advocacy groups. Gloating may see them snatching defeat from the jaws of victory.

“Hell hath no fury like a Liberal scorned”, writes the Bleeding Heart. “If the Court overturns the DC law banning handgun ownership in the District, we will mobilize en masse to oppose further erosion of the rights of state and municipal governments to create reasonable and appropriate laws aimed at diminishing gun violence and gun crime in our cities. This will not stand as an open invitation to every crazy gun-owner to stock up on Glocks and Magnums so that our children can be put at further risk”.

The Bloated Plutocrat was more subdued in his reaction to the subject. “I can’t imagine why anyone would be buying shotguns from Wal-Mart in any event. I had a lovely set of Purdeys made for me several years ago and that’s what you want. Nothing beats a bespoke gun. As for the Second Amendment, I never viewed it as the ‘Deer Hunting Amendment’. I always understood it as protecting a law-abiding individual’s right to keep and bear arms in order to protect himself and his community from both foreign invaders and domestic tyranny. In fact, less hunting is what we should be after. When I go grouse shooting, I don’t want to have to share the woods with a bunch of yahoos in camouflage waving around Wal-Mart shotguns. Hunting is a gentlemen’s sport and should be reserved for gentlemen.”

LaPierre and others who favor a broad view of the Second Amendment should take note of the Bleeding Heart’s words. If the Supreme Court affirms overturn of the DC handgun ban, gun control advocates will go ballistic. Compromise is best made from a position of strength and, while the NRA has battled on behalf of gun-owners for decades, it will be interesting to see whether it can make reasonable compromises on behalf of gun-owners as well. LaPierre may want to take a lesson from Wal-Mart about doing the right thing at the right time.

Love is in the Air........somewhere.

2008-04-07T17:50:00.000-07:00

Ah, the wafting scent of tear gas in the air, police klaxons blaring, the sounds of rocks hitting plexiglass shields, riot police with arms linked marching through the streets. It must be Paris in the Spring.

I know. It’s not particularly sporting. Anyone can have a pretty good go at the French. This, however, is a return to a subject covered some weeks ago when unrest in Tibet first broke out and we explored both issues that corporate sponsors of the games may face and some strategies for dealing with these challenges ( See March 17 blog entry). Today’s efforts by thousands of protestors in Paris to extinguish (or steal?) the Olympic torch on its way to Beijing not only marks the French equivalent of Opening Day of the baseball season (protesting, sanctions violating, and slander being the national sports), it also suggests that there will be a real and sizeable community seeking to politicize the games and draw attention to China’s human rights record. Since the chances of China responding to French protests or any other type of criticism are slim, the ante has just gone up for Olympic sponsors.

http://nbcsports.msnbc.com/id/23978408/

Despite the government mobilizing some 3000 police, protestors so disrupted the running of the torch across Paris that the torch was indeed extinguished several times as it was ferried from area to area on a bus, and eventually the run was abandoned altogether. In a remarkable break with tradition, the French even stood up to a foreign force in their country. According to AP, “Outside, a few French activists supporting Tibet had a fist-fight with pro-Chinese demonstrators. The French activists spat on them and shouted, ‘Fascists!” What, instead of welcoming them with open arms, champagne, and dates with their sisters? How bizarre. “Le Monde” reported at least twenty arrests.

http://news.yahoo.com/s/ap/20080407/ap_on_re_eu/olympic_torch;_ylt=AjtVxxFYkXwC3Q3uK3HhKuvNaMYA

So, what now for the companies that have sunk millions into sponsorship of the games and built entire marketing campaigns and product launches around the games? Withdraw support and face an angry board-room and being shut out of the world’s largest potential consumer market? Stick it out with tired lines like Omega’s “We don’t get involved in politics”? With French protesters actually showing some spine, the likes of VW, a Beijing games sponsor, have to be getting increasingly nervous. At the Eiffel Tower, Green Party activist and politician Sylvain Garel commenced today’s fracas by lunging at the torch shouting “Freedom for the Chinese”. Later, some 35 legislators shouted “Free Tibet” outside Parliament as the torch passed. The Green Party is a serious force in VW’s home market, a reasonably strong movement across northern Europe, and influential with a lot of 70mpg diesel VW Polo buyers. When mainstream politicians are saying things like, “It is inadmissible that the games are taking place in the world's biggest prison”, things are getting tricky indeed. Socialist Party spokesperson Julien Dray said that the games were” turning into a sinister farce before they had even begun” and attributed the disturbances in Paris today “entirely to the Chinese government which has not seized the opportunity it was offered to show its desire for democracy and recognition of civil liberties”. He also called on the International Olympic Committee to announce that a boycott of the games is possible unless the Chinese government makes concessions on human rights.

http://www.bostonherald.com/track/star_tracks/view.bg?articleid=1079650

http://www.lefigaro.fr/actualites/2008/04/07/01001-20080407ARTFIG00439-la-flamme-olympiqueest-partie-de-la-tour-eiffel.php

http://www.lemonde.fr/sports/article/2008/04/07/la-flamme-olympique-est-dans-les-rues-de-paris_1031689_3242.html#ens_id=1020806

And what of the IOC? Spokeswoman Giselle Davies said, “We respect that right for people to demonstrate peacefully, but equally there is a right for the torch to pass peacefully and the runners to enjoy taking part in the relay,” she said. IOC President, Jacques Rogge, a Belgian, shook off today’s reaction by the French saying "there was no momentum for a boycott of the games". This despite French Foreign Minister Kouchner reiterating President Sarkozy’s earlier statement that he would reserve the right to do so "depending on conditions". In Beijing at an IOC meeting, and well aware of China’s increasingly furious response to criticism over its handling of unrest in Tibet (the government announced that the first group of people charged with “inciting unrest” will go on trial this week,) Rogge called for the “rapid, peaceful resolution of unrest in Tibet”, the first time he has done so and a sign that the pressure is mounting on the IOC.

http://www.ndtv.com/convergence/ndtv/story.aspx?id=NEWEN20080046119

http://www.rttnews.com/sp/todaystop.asp?date=04/07/2008&item=34

The Beijing meeting was doubly tough with Rogge under pressure to issues guidelines on athlete conduct with regard to their views on China and the games. Patrick Hickey, President of the 49 member group of European Olympic Committees and a substantial IOC power-broker said, "We just want him (Rogge) to tell us straight out where athletes cannot give their opinion or make demonstrations. There will be absolutely no gagging whatsoever of our athletes. We just want to be absolutely clear, and the only one to hear it from is the IOC president." Rogge will allegedly reveal those rules during a Thursday meeting. Expect more fireworks.

http://www.heraldextra.com/component/option,com_contentwire/task,view/id,35738/Itemid,53/

Time to review strategies, sponsors. “Masterful Inactivity” is looking less and less like a winning approach, although the Bloated Plutocrat seems to still favor it. While he has a good deal to say about the undervalued Yuan, he has been remarkably silent on this subject. Speaking to me this afternoon, he said, “It’s bad for business, all this fuss and noise, not what we need now. It’s not like the Chinese intervened when all those long-haired hippies and yippies were getting knocked on the head in Chicago in ’68, so people need to calm down and let the Chinese handle this. With recession afoot and the amount of US debt that China holds, some discretion is in order”. The Bleeding Heart could not be reached. Apparently he is in San Francisco, where today activists draped the Golden Gate Bridge in pro-Tibet banners. He did send Your Genteel Moderator an e-mail calling for everyone “to come together and love one another right now”, along with some star-struck saga about meeting Richard Gere. It sounds like he was revisiting some rather dubious Haight-Ashbury locales…

http://today.reuters.com/news/articlenews.aspx?type=newsOne&storyid=2008-04-07T085928Z_01_SP232964_RTRUKOC_0_US-CHINA-TIBET.xml&WTmodLoc=NewsArt-R1-MostViewed-3

A boycott of the games is not what sponsor companies need fear most. In fact, for those with good risk management and aggressive insurance policies, a large scale boycott could help extricate them from an increasingly difficult situation by providing them a relatively face-saving way out. The games going forward against the backdrop of an increasingly truculent China and a growing movement of consumer boycotts against sponsor companies is the scenario that should be causing sleepless nights. Especially in Europe, politically and socially motivated consumer boycotts over the last decade have been extremely well organized and largely effective in forcing changes in corporate behavior. Without getting out in front of such boycotts, companies face the increasing likelihood that down the road they will have to choose between angering China or angering their shareholders (and in some cases both!).

April Fools or Working Class Heroes: The Independent Truckers’ Strike

2008-04-01T09:19:00.000-07:00

Your Genteel Moderator begs your indulgence in this departure from genre as he addresses the rumoured independent truckers’ protest against high diesel prices and low fuel surcharges, the means by which they recoup fuel costs. Independent truckers pay full price at the pump for diesel fuel and filling up a semi’s tanks can run to more than a $1000 at the more than $4.00/gallon diesel has been running at for some two months, up between 30% - 40% vs. last year. Despite recent declines in the price of gasoline towards the $3.00 gallon mark for regular, diesel has been headed north. The answer as to why diesel is so much more expensive than gasoline, when the reverse was true for decades, is complex.

http://blogs.usatoday.com/ondeadline/2008/04/calls-for-truck.html

A leading factor is the increased cost of producing ultra low sulphur, so-called “clean diesel”, fuel mandated by Federal law for 2009. Indeed according to the Energy Information Administration, diesel refining costs in February went up to 18% of the price of a gallon of diesel vs. 8% for gasoline. This exacerbates a tax differential of $0.06 more per gallon on diesel ($0.244) than gasoline ($0.184). This tax differential is both inexplicable and unacceptable in application to Ultra low sulphur diesel and the fact that, per gallon, there is more energy in diesel than in gasoline making it effectively more efficient. The price is further confounded by seasonal demand for heating oil (a refining and distribution competitor for pump diesel) which coincides with the steep divergence from gasoline prices since October 2007. Finally, according to some pundits, growing world demand for diesel is a factor. Your Genteel Moderator is stumped by this last explanation. As a distillate of crude oil, increasing global demand for diesel should have an impact on the overall price of crude oil, but it is counterintuitive that it should drive diesel prices up vs gasoline prices in the US, especially as diesel engines have yet to make significant inroads in the passenger vehicle market. Refined diesel is not being transported from Europe or Asia to the US, so US distributors are not directly competing with growing diesel demand on either continent. My learned colleagues and I would greatly appreciate information from our readers addressing the mystery demand increase in the US that is allegedly a driving factor in diesel prices.

http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp

http://tonto.eia.doe.gov/oog/info/wohdp/diesel.asp

But back to the truckers. Rumours abound, fueled by CB chatter and internet banter, that an independent trucker protest/shutdown is being organized for this week, with some reports suggesting it will start today. News outlets from TV and Radio to the internet have been touting April 1 as the date for an alleged “Truck-Out” with the modus operandi described as anything from a complete shutdown to trucks simply driving at the minimum posted speed (a fuel saving measure?). A quick check of Route 95 showed no obvious decrease in tractor-trailer traffic and a scan of Channel 19 on a CB turned up references to, but no evidence of, any widespread shutdown today. There is however a good deal of confusion about when this poorly organized, “grass roots” protest is to start, with dates from April 1 to April 23 being stated in various media. There is also a history of previous failed protests dating back to August 2005 when just the same buzz was in the air.

http://overtimetruckers.com/index.php

http://wbztv.com/local/truckers.strike.diesel.2.688598.html

http://www.kxii.com/home/headlines/17177421.html

The Bloated Plutocrat had a somewhat complicated view on the matter. “ Fuel prices are too high and are generating inflationary pressure without a doubt. Adventurist foreign policy and poor management of national resources are of course leading factors in driving up fuel prices but so is rising global energy demand. Little can be done about the latter that won’t come home to roost in our pseudo-recessionary economy. But as for those Bolshevik truckers, send out the Pinkertons’ and round them all up. We can’t have every Tom, Dick and Harry in a truck shutting down traffic and stirring up trouble. If Kerensky had had more spine we could have saved all that money wasted on the Cold War!”

Meanwhile the Bleeding Heart also seemed trapped in contradictions. “The truckers certainly have a reasonable concern. Were it not for the administration’s total inability to handle the Middle East and its ‘Might Makes Right’ approach to diplomacy, fuel prices would never have risen so high. Having said that, high fuel prices are a blessing for the environment and to the extent that they help curb emissions and save polar bears, we should be thankful rather than considering protests!”

Your Genteel Moderator must admit to ownership of a diesel vehicle and sympathy with the truckers over the highly divergent prices of gasoline and diesel fuel. One would have thought that excise tax equalization between Ultra low sulphur diesel and gasoline (at $0.184/gallon) would be an immediately appropriate action, followed by diversion of some of the enormous ethanol funding to incentivize increased Ultra low sulphur diesel refining capacity, as well as increased funding to support biodiesel development would all be sensible things that Congress could act on immediately…

Toyota for the Birds?

2008-03-28T12:03:00.000-07:00

The Audubon Society announced this week that a recent Toyota grant of USD 20 million, the largest that the 103 year old organization has ever received, will fund its “TogetherGreen” programme for five years. “TogetherGreen” is a nationwide Audubon program to fund conservation projects, train environmental leaders, and offer volunteer opportunities to significantly benefit the environment according to the Society. TogetherGreen is about giving people the knowledge, the support and the opportunities they need to truly make a difference," said Audubon President John Flicker. "We will engage people of all ages, from every community and all walks of life to help shape a healthier future."

http://web1.audubon.org/news/pressRelease.php?id=400

Toyota has garnered substantial kudos from environmental groups for its environmental commitment and, among other things, its Prius car, a high profile hybrid suspected of substantial greenwashing about both its performance data and its real environmental impact (see Tesla Motors article below). Toyota has said it will engage its 36,000 U.S. employees and invite its business partners to join with others through TogetherGreen as conservation volunteers to take the individual steps that will add up to significant conservation results. And the company’s commitment to environmental responsibility is pretty hard to shake a stick at either internationally or inside the US. Its environmental initiatives and auditing are rigorous by any standards.

http://www.toyota.com/about/our_commitment/environment/index.html

Teaming with Audubon should come as no surprise. The Society is not only one of the oldest conservation organizations in the country, it has historically been one of the most sensible and well run. Not only is the Society well organized on a national basis and at the local level with strong grass-roots organizations, it has a history of rational action behind an unassailable cause. From a corporate perspective, there is very little risk exposure in an association with Audubon and considerable benefit. Birders are much more likely to be interested in Toyota sedan and SUV hybrids than the sort of young environmental activists that are associated with the seemingly more militant environmental organizations. Your Genteel Moderator congratulates the Audubon Society for not only its preservation and conservation work but for its excellent positioning and communications which have made it an ideal beneficiary organization for corporate giving. And hats off to Toyota for putting its money where its mouth is; $20 million is real money in any vocabulary. Mind you, it isn’t all smooth sailing for the company. It has taken criticism from environmental groups over the poor fuel economy of its brand portfolio and its carefully crafted green image is not above suspicion.

http://www.toyota.com/about/news/community/2007/12/20-1-FoundationGrants.html

http://www.reuters.com/article/environmentNews/idUSN1140338120071012

http://seattletimes.nwsource.com/html/nationworld/2002579445_webtoyota23.html

http://hybridreview.blogspot.com/2007/10/truth-about-toyota.html

The Bleeding Heart could barely restrain himself. Forgetting or forgiving his perceived slander of the Prius in earlier posts, he waxed lyrical about Toyota’s social and environmental responsibility and went on in great detail about some type of swallow that he examines in apparently great detail on the grounds of his Connecticut country digs. The only comment that seemed noteworthy above all the gushing was “Of course, Toyota needs to carry its commitment to the environment through to increase fuel efficiency and emissions reductions across its car and SUV range”, a potentially telling remark. The Bloated Plutocrat was more circumspect. He writes, “ Well, I would have rather seen this money and some of the other fortunes that they are giving away issued in the form of dividends, but I suppose the tax deduction is in order. I don’t particularly mind birds, other than those d***ed pigeons, and I do like a good pheasant shoot, so on balance I take it that this is no bad thing.”

Blinded with Science?

2008-03-25T10:08:00.000-07:00

Am I the only adult in the Western world who doesn’t quite understand how so many leading financial institutions got themselves in so much trouble and why that trouble seems to be accelerating as of late? Reading the newspapers, it certainly seemed so, but it appears that I am not, at least in this case, suffering from a substantial intelligence deficit. Instead it appears that arcane, indeed near mystic, arts applied to the business models of many leading financial institutions may be the issue. Not that they will admit to it of course. The problem, according to the great Wall Street firms, all stems from foolish consumer borrowing. On the plus side, this has the ring of credibility since most people regard “others”, at least in the abstract, as entirely capable of vast degrees of foolishness. However, if the borrowing was so obviously foolish, why were the Wall Street titans buying the debt?

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/23/AR2008032301416.html

http://www.reuters.com/article/businessNews/idUSN0135773520070812

Apparently there is a case to be made that the Wall Street kingpins may not have entirely understood their exposure. This may also be a leading reason why there is little explanation from the likes of Citigroup and Bear Stearns about “how it all happened”. Rick Bookstaber’s seemingly prophetic 2007 “A Demon of Our Own Design”, did much to outline how the increasingly specialized and sophisticated financial constructs, akin at times to the spice dependent navigational techniques of the Spacing Guild in Frank Herbert’s “Dune” series, are creating substantial risk that few other than the “quants” that construct such devices can begin to understand.

http://www.consilientinvestor.com/articles/169.htm

http://www.wallstreetandtech.com/electronic-trading/showArticle.jhtml?articleID=204805477

http://www.financetech.com/showArticle.jhtml?articleID=184417510

In summary, it looks like the alchemistic formulae employed by Wall Street to develop ever more specialized financial instruments may have multiplied inherent and widely understood market risks, added debt loads beyond what investors would generally deem entirely prudent, and minimized the number of people who may understand the level of risk being developed. That’s nothing new. Those of us of a certain age remember similar critiques applied to Neolithic junk bond traders, and even more recently there was a collective head-shaking around the so-called “dot.com bubble”. But Wall Street's great trading houses are doing little to allay fears of further failures and, in failing to explain in terms that even network news anchors can understand what led to their over-exposure and how they intend to mitigate that risk, are encouraging increased fear and more talk of recession.

To help me better understand the cause of these current difficulties and what was likely to happen next, I turned to the Bloated Plutocrat, whose recent harumpfing on the subject suggests that he has not been negatively impacted by the credit crunch or the gargantuan debt write-offs on the Street. His take was not entirely candid however. “The problem with the golden youths who imagine that they move markets today is that their experience amounts to a drop of water in New York harbor. The simple fact is that there are simple ways to make money that virtually anyone can understand. “Buy low, sell high” is not just some t-shirt aphorism. If you don’t understand what you’re investing in, the chances are rather good that you will soon be shirtless. Investing in mechanisms that require a greater knowledge of higher math than use of common sense will yield results accordingly”. From this, I took it that the Bloated Plutocrat had gotten out of mortgage heavy mutual funds and other instruments some time before mid 2007 and was feeling particularly smug about doing so.

The Bleeding Heart was not much more helpful. “The teetering house of cards made up of our Wall Street financial institutions has brought this plague upon themselves and were it not for the many small investors who will pay the price for their arrogance, I could care less. This situation highlights the need for greater regulation and oversight by the government. What these quantitative analysts call “innovation” is no more than a somewhat ritualized form of gambling – with other people’s money! Now is the time that Congress should intervene and, following intensive investigations into the cause of these failures, develop a raft of new regulatory measures aimed at diminishing the negative impact of these highly speculative financial transactions on the common man." From this, all I could really gather was that the Bleeding Heart was unhappy about recent developments in the adjustable sub-prime mortgage that he had used to buy his Connecticut dream home with in 2006…

It seems that what the Street needs right now are fewer math geeks and more oily flaks. The Street can’t reverse the losses caused by its speculations in the mortgage markets, but if they would at least put some glad handing, smooth talking flaks out there to calm investor fears and mitigate the multiplying media frenzy, they might arrest the headlong run towards “recession” that the media and pundits seem hell-bent on getting.

Tesla Motors – More Greenwashing in the “Green Economy”

2008-03-19T09:19:00.000-07:00

Are power plant emissions from burning fossil fuels substantially less harmful to the environment? I still don’t know. After trawling through cyberspace and having read through a number of scientific papers that purport to offer the answer to just that question, it seems that electricity generation may deliver less CO2 than the equivalent power generation by a gasoline powered car engine. However, when you add the emissions from the power plant used to generate the electricity that powers Tesla Motors sporty 125 mph top speed electric Roadster to the emissions generated in building the car and throw in the higher energy cost and carbon footprint impact of disposal of an electric vehicle drivetrain, over its lifetime a ¾ ton low sulphur diesel pick-up truck comes out ahead on environmental impact. The recent defeat of a Toyota Prius by a diesel BMW 520 in an mpg showdown underlines the real green-power of clean diesel. In fairness to Tesla Motors, they claim to have already identified a company that will recycle the lithium-ion battery packs after their intended 100,000 mile life-span and built the recycling cost into the vehicle’s MRSP of approximately $ 100,000.

http://www.teslamotors.com/
http://driving.timesonline.co.uk/tol/life_and_style/driving/used_car_reviews/article3552994.ece

The vehicle has received DOT approvals and passed all Federal Motor Vehicle Safety Standards, although Tesla have not released information on how it faired in these tests other than Vice President of Vehicle Integration, Malcolm Powell rather aptly noting, "I always find it interesting when people say, 'Isn't it dangerous carrying all those batteries around?' Well I don’t know about you, but I’d rather carry a load of relatively inert battery cells than 10 gallons of highly volatile, flammable liquid". Exactly 6,381 lithium-ion battery cells, of the same sort that you will find in your laptop or mobile phone, will power the car. The car will allegedly have a 200 mile range on an estimated 3.5 hour charge. Producing some 248 HP, peak torque from a standing start right up through 13,000 rpm, and a top speed of 125 mph, this two-seater loosely based on the Lotus Elise will make the Toyota Prius look like what it is, the car of dweebs.

http://www.dailytech.com/Teslas+Initial+Batch+of+100+Electric+Roadsters+Sold+Out/article3817.htm
http://www.dailytech.com/article.aspx?newsid=11123

But is it “green”? Tellingly, the company was the brain-child of Silicon Valley dotcom start-up uber-geeks, Martin Eberhard and Marc Tarpenning, who allied themselves with Elon Musk, of PayPal fame, back in 2003 to form the company. Neither Eberhard nor Tarpenning are still with the company but the dotcom bravado marketeering that has made successful IPOs out of so much hot air has served Telsa well. After substantial delays in production and a shake-up last year that saw CEO Eberhard replaced by Ze’ev Drori, the company has allegedly sold the first 100 vehicles that it will only begin making this month, despite the fact that they will be produced with “temporary” transmissions that substantially diminish performance. The Roadster has been successfully pitched to the media and public as “green” and, based on the claim of $ 10 million in sales prior to production starting, it may well make Musk, Drori and others plenty of green, regardless.

http://www.edmunds.com/advice/alternativefuels/articles/117264/article.html

The Bloated Plutocrat is enthusiastic. He writes, “Smart little car. 248 HP chucking 2700 lbs of sportscar around corners sounds like fun to me. Glad to see a group of entrepreneurs building a business that also makes environmental sense. That’s the way to save the environment. Let the markets lead the way. It’s democratic and rational. It’s not like these unwashed, ill-shaven hippies running around screaming about the Kyoto Treaty and all that nonsense. When people believe that new technologies and new products will deliver positive environmental change, they will adjust purchasing habits accordingly and the markets will deliver. It won’t exactly hurt the coal and oil stocks with fossil fuel still firing the power grid, but if it makes some people happy and other people money, there can’t be much harm in it.”

The Bleeding Heart has a different take on the issue, and almost refused to comment after my posting The Times article about a BMW 520d beating the pants off a Toyota Prius, but he is pleased about news of Tesla beginning production. “Given the government’s collusion with automakers, oil companies, and the tri-lateral commission, it’s amazing that Tesla ever got its Roadster off the drawing board, let alone into production. I can only imagine the merry dance they were led on trying to meet what were undoubtedly the moving goalposts of Federal Motor Vehicle Safety Standards as a last-ditch effort to stymie production of this revolutionary vehicle. With more of these vehicles in the pipeline, soon we can end our dependence on foreign oil, reduce greenhouse emissions, reverse global warming, and change the world!"

Cool ? Yes. Green? Well,.....maybe

Will the Tibet Crackdown Put a Kink in Corporate Sponsorship of Beijing Olympics?

2008-03-17T06:42:00.001-07:00

With Chinese troops in the streets of Lhasa and an estimated 50-80 already dead while unrest spreads to ethnic Tibetan enclaves in the Sichuan and Gansu provinces, more violence can be expected. George Clooney was already making news in the run-up to the Olympics about pressing Omega, the company that he promotes watches for and a 2008 Olympics sponsor, to “talk” to China about the Sudanese government’s policies in the Darfur region. Long-time Tibetan campaigner Richard Gere is already making the circuit backing the Dalai Lama’s calls for an investigation by the international community into what he terms China’s policy of “cultural genocide”. Mind you the airtime won’t hurt Gere’s fading career either. Meanwhile, International Olympic Committee President Jacques Rogge issued a statement expressing concern about the Chinese government’s crackdown in Tibet and calling for [I kid you not] “an appeasement as soon as possible”. Let’s hope that’s a translation issue. Nevertheless, he was quick to forcefully reject any talk of a boycott of the games to be held in Beijing later this year.

http://www.thetimes.co.za/PrintEdition/Sport/Article.aspx?id=727723
http://canadianpress.google.com/article/ALeqM5hJJfyHsrrUJHJiag2avOh_W1OtbA
http://en.beijing2008.cn/90/53/column211995390.shtml

This is going to make things tricky for Olympic sponsors in a way that the Darfur issue hadn’t yet. Clooney and Spielberg making noise over the Chinese government’s unwillingness to confront client state Sudan over its human rights abuses is one thing. Scenes reminiscent of the 1989 Tiananmen Square protests - and don’t think that B roll isn’t coming out of the can this week - while the Nobel Peace Prize winning Dalai Lama talks about the oppression of his people is going to be quite another. So are the likes of McDonalds, Omega, Visa, GE, Kodak, Coca Cola, Johnson & Johnson, etc., ready to address the pressure they may come under in coming weeks? Omega doesn’t look ready. In response to their own spokesman Clooney’s call to action, the company issued a statement saying its policy is “not to get involved in politics”. That might have held water over the Sudan, but it isn’t going to cut it over Tibet.

http://www.bostonherald.com/track/star_tracks/view.bg?articleid=1079650

So what can they do? Let’s assume that withdrawing from the games is not a viable option at this time. Unless things get considerably worse in China, there will be no boycotts and sponsors with millions in sunk costs are not going to walk away from the Olympics. But they face the prospect of several months of dancing around China’s issues and, potentially, facing consumer boycotts over their failure to address those issues head on.

Here are some strategies that the non-Chinese sponsors of the games should consider:

“Safety in Numbers”. Were a large number of the non-Chinese sponsors (nobody can seriously expect the Chinese companies to act, can they?) to adopt the same approach, the safety of the herd would likely protect them from the wrath of Beijing. A joint appeal, rather than demand, to the Chinese government to use the games as a platform for making a more robust commitment to human rights both at home and abroad could be worded in such a way so as to appease most of their Western consumers and critics while not overly provoking the Chinese government. Of course, Beijing has traditionally not reacted well to this sort of pressure and signature sponsors run the risk of alienating a billion Chinese consumers. This approach would likely work well if a sufficient number of sponsors opted in. Without support by a substantial number of sponsors, it is unlikely that any smaller number of sponsors or single company would feel secure enough to undertake what Beijing would likely view as confrontation.

“Do the Hustle”. Well, not literally. But in the great tradition of politics, when criticized about a specific instance of poor judgment, a transgression etc., dance around it while talking about all the other great work one has done. In this instance, companies would acknowledge and “express concern” about China’s human rights record, state that they do not involve themselves in politics, and then go on at length about their own social responsibility programmes and initiatives. Provided things don’t get much worse with Tibet between now and the games and provided there are no well-organized consumer boycott campaigns, this strategy is the safest bet. Listening to corporate flaks drone on about corporate social responsibility is so boring that the media are likely to turn down the heat on sponsors just so they don’t have to endure the experience.

“Smoke and Mirrors”. A variation on “the Hustle”, this is essentially about buying absolution. If a company can’t afford to anger the Chinese government, there are plenty of governments that it can. Now may be the time for example to divest from unprofitable operations in Colombia over allegations that right wing factions with government connivance are targeting union leaders for intimidation or worse. Setting up a fund to help soon to be unemployed workers there and making a big donation to a civil society organization in the country of choice would all allow the company to talk about its serious commitment to human rights while dodging the China issue with “…one country at a time, we’re involved in a serious course of action in Ruritania right now and don’t want to diminish focus on that critical process at this juncture”. It would certainly get them through the games.

“Masterful Inactivity”. A time-honoured classic and the default mode for most large organizations, it could also be named “toughing it out”. Companies don’t actually “do” anything about criticism over sponsorship of the 2008 Olympics and hope that media and consumer pressure never mount to a level where any action is required. As a sort of pressure release valve, they formulate some bland language about how their “engagement” in China will contribute to the further development of civil society and improved human rights, how “criticism from afar is unlikely to produce any results” and how their support for the games and increasing involvement in the Chinese economy “will ultimately give us a stronger voice at the table”, without suggesting what words that voice might utter. Unless things do deteriorate further in Tibet over the next week or so, or unless another big issue emerges in the coming months, this strategy is a pretty safe bet. Of course, if things do get worse and criticism mounts, “masterful inactivity” puts a company behind the curve and could exacerbate a problem that a somewhat more proactive approach would have been able to manage.

Unfortunately neither of my learned commentators was available to join in today’s post. The Bleeding Heart is apparently in an ashram somewhere in Northern California spinning prayer wheels at a frantic pace, while the Bloated Plutocrat is allegedly busy at a board meeting…..in Shanghai.

Sea Shepherd International: 1, Japanese Whalers: 0. The Whales? Whatever…

2008-03-12T07:56:00.000-07:00

Your Genteel Moderator must disclose his admiration, bordering on awe, for the PR prowess of environmental campaigners. Their fierce self-righteousness, unswaying conviction, and utter disregard for inconvenient truths and facts make them the best, if not always the most effective, campaigners. Add to that their studied ‘activist chic’ style sense, Gobbelsesque flair for mythology creation, and ruthlessly provocative stunstmanship, and they are a news generation and fundraising machine extraordinaire!

http://www.seashepherd.org/

The Sea Shepherd Conservation Society is among the ‘best’ of such campaign organisations. From the renaming of one of their ships – sent to harass the Japanese whaling fleet in the Southern Ocean below Australia and New Zealand – to the allegations of being shot at by the Japanese Coast Guard, to their declaration of “Mission Accomplished” at least three weeks before the whaling fleet is scheduled to leave the killing grounds, they have had a whale of a season (the Bleeding Heart is not amused by the admittedly poor pun) creating crises and manufacturing drama on the high seas. On the other hand, if their claims are true, they have also severely limited the killing of whales by Japanese ships during the Southern Ocean season.

http://www.seashepherd.org/migaloo/campaign_updates.html

Whaling is entirely unnecessary, is in no way justified by the tawdry fig-leaf of ‘research’ that the Japanese government seeks to hide behind, and is repugnant to even the hardest of hearts. Why, even the Bloated Plutocrat appeared somewhat teary-eyed when drafting his remarks on this topic. Why does Japan defend and promote whaling, the rounding up and slaughtering of dolphins (e.g. the annual Taji dolphin cull), and all other manner of pointlessly cruel sea mammal slaughter ? Well, it isn’t about consumer demand.

“Current demand for whale meat in Japan is abysmally low. Even in a town like Ayukawa, a coastal community with a century-old whaling tradition, officials are struggling to preserve the tradition of eating whale meat by serving it in classroom lunches. Whale nuggets stewed in ketchup was on the menu on a recent Friday.” Norimitsu Onishi, IHT 13/3/07 http://www.iht.com/articles/2007/03/13/news/whale.php

Most analysts believe that this obstinate insistence on killing sea mammals stems from a nexus of nationalist pride and the country’s concerns about food source security. Essentially what it boils down to is that the Japanese government opposes regulation by the international community that would diminish the country’s ability to harvest the seas, while the Japanese people, who appear to favour whaling but don’t much like whale meat, just don’t like foreigners telling them what they can and cannot eat. And, for PR at its worst - of a sort not seen since tobacco company “social cost” studies - check out Japan’s “Institute for Cetacean Research” whose motto, translated from Japanese, reads something like:

“We Just F^*?ing Hate Whales, okay?”

http://www.icrwhale.org/generalinfo.htm

Meanwhile, Greenpeace, Oceana, Sea Shepherd, etc., can thank the Japanese for providing the kind of spectacles that keep the focus on their issues and the donations rolling in. Environmentalists clashing with “armed Japanese Coast Guardsmen” on the high seas while interdicting whalers? This is as good as it gets for the environmentalist image without serious consequences such as the death of Greenpeace photographer, Fernando Pereira. He was killed in Auckland (NZ) harbour when the French security services mined and sank the Greenpeace flagship "Rainbow Warrior" in 1985 prior to its sailing to the French held Muroroa Atoll to protest nuclear testing there.

http://news.bbc.co.uk/onthisday/hi/dates/stories/november/3/newsid_2538000/2538099.stm

As previously mentioned, the Bloated Plutocrat was nearly teary over the subject. “These ‘sea shepherds’ should take a bath, shave, put on some proper clothing and get jobs, instead of sky-larking around the oceans creating a risk to navigation. These youngsters are undoubtedly more highly motivated by the chance to booze it up and engage in sexual escapades with their fellow activists than they are in saving the whales. But the Japanese are being foolish. It’s one thing to tell the hippies off about all that Kyoto Treaty nonsense they allowed to be cooked up over there, but killing Flipper? Well, that’s just not cricket.”

The Bleeding Heart had to be sedated before I could elicit comments that could, in decency, be published. “Murder. Whaling is murder. We cannot sufficiently thank the likes of Sea Shepherd, Greenpeace and others who have done so much to raise awareness about the continuation of this barbaric slaughter by the Japanese. Thousands of sentient beings are being slaughtered for no other reason than the inhumane traditions of a handful of profiteering commercial fishermen in Japan. It’s on a par with genocide, I say”.

Well as the “Steve Irwin”, Sea Shepherd’s recently renamed anti-whaling ship, wends its way back to Australia, running low on fuel, and drink no doubt, Your Genteel Moderator can only express a degree of admiration for any success in diminished whale kills that they may have had, and yet again, a sense of awe at their campaigning prowess and powers of exaggeration.

http://www.seashepherd.org/editorials/editorial_080308_3.html “Gunfire on the high seas!”… or, maybe just a light http://www.icrwhale.org/gpandsea-img.htm

Apparently there are some things even PR agencies won’t do…

2008-03-10T13:52:00.000-07:00

During questioning before a House of Commons select committee on public administration last week, Bell Pottinger http://www.bppa.co.uk/, agency head, Peter Bingle, announced that the agency had backed out of negotiations with the government of Zimbabwe (timing undisclosed) to “advise” it on public affairs. The London agency, arguably the leading UK public relations and public affairs firm, is part of the Chime Communications group, chaired by former Prime Minister Baroness Margaret Thatcher’s press adviser, Lord Bell. Bingle explained to the select committee (holding hearings on the subject of regulating lobbying yet again) that “We will turn down clients. We had a call from Zimbabwe asking to advise Zimbabwe. We said thank you very much, but no. It would have been a fairly malign campaign if someone had run it.” Of course Zimbabwe is also a conveninet throw-away in such a context. It’s unlikely that the Zim government would respond to a House of Commons request for verification of the Bingle claim…

http://www.prweek.com/uk/home/article/789404/Bell-Pottinger-talks-Zimbabwe/

It is not that Bell Pottinger doesn’t represent some controversial and potentially unsavoury clients. According to wire stories released last July surrounding the detention in and deportation from Katanga Province, Democratic Republic of the Congo (is it the Congo again?) of Billy Rautenbach, a well-known business associate of Zimbabwe President Robert Mugabe, Bell Pottinger was at that time representing either the Province of Katanga or the Government of the Democratic Republic of the Congo. The firm has, like many other successful agencies, represented any number of high profile and controversial individuals, companies, and government entities. But apparently, there are those it will not represent. As Bingle explained, when considering offers from a foreign government “we would talk to the [UK] foreign office, take a view, look at whether we would want to work for that type of country or company”. Myanmar can scratch Bell Pottinger off their short list then.

http://thesouthernafrican.com/news2/index.php?option=com_content&task=view&id=1591&Itemid=37

So, is public relations not as blind as justice? Defense attornies often argue that even guilty clients require representation to ensure that their rights are respected. Does the PR profession not believe that even repugnant clients like Mugabe deserve good PR representation?

The Bloated Plutocrat thinks not. “Mugabe is a thug. Regardless of whether Bell Pottinger backed off representing Zimbabwe because of pressure, direct or percieved, from the Congolese or other African clients, or because they were doing the right thing, it was the right decision. To do so would have been bad for business. It would have put them in their own PR pickle and would have soured things with their friends in high places in both Houses of Parliament and the Government.”

The Bleeding Heart is equivocal. “Mugabe has made horrible mistakes and has undoubtedly betrayed some of the democratic goals of the liberation movement that he led, but he was the leader of a hugely important liberation movement and there is no doubt that much of Zimbabwe’s ‘bad press’ is the result of sour grapes and bias on the part of the British media. There’s no good reason that Bell Pottinger should not have worked to help the government of Zimbabwe. After all, they worked for the Coalition Provisional Authority in Iraq. There is no reason except that it would have complicated their lobbying efforts at home in the UK where President Mugabe is vilified out of all proportion. The US has North Korea, Cuba, and Iran as its bogeymen. The UK is stuck with poor Zimbabwe.”

Regardless of Bell Pottinger’s reasons for rejecting a Zimbabwe overture, if in fact they did, it looks like there are some things even PR agencies won’t do. That's nice to hear.

Goodyear Makes Case for Transparency, Wins PR Week 2008 Campaign Award

2008-03-07T07:01:00.000-08:00

Negotiations made public and Goodyear lands award.
http://www.prweekus.com/Crisis-or-Issues-Management-Campaign-of-the-Year-2008/article/104080/

Among the winners of the 2008 PR Campaign Awards announced by PR Week yesterday was Goodyear, in the category Crisis or Issues Management, for its handling of communications around their 2006 labour negotiations and resolution of a strike called by the United Steel Workers. In previous negotiations, management had agreed to a news blackout thereby allowing a small group of union officials to control the flow of information about negotiations to employees. This time around, Goodyear set up a fact based communications network focused on a website accessible to employees, the media, and the general public - http://www.goodyearnegotiations.com/index.html - and backed by regular interaction with plant community media.

The strategy was that of forced transparency. This is a great approach when the strategy driver believes that they have realistic and sensible positions on an in issue and either, other parties to a negotiation/issue are strong on influence and weak on substance, or the decision maker has an agenda it would prefer to be hidden. Critical to such a strategy is that the driver remain factual and credible in all its communications and avoid the temptation to turn such communications into advocacy pieces for its positions. The point is to let the facts speak for themselves and to diminish the ability of other players to manipulate or hide those facts.

USW hardly remained silent. They too spoke out on their excellent website and to the media. However, it appears that they were unable to adjust to Goodyear's change in approach and continued to communicate using confrontational language from yesteryear http://www.usw.org/usw/program/content/3633.php that may have masked the legitimacy of their negotiating positions even to their own members.

The Bloated Plutocrat is bemused. “Negotiations? Transparency? Communications campaigns? What a lot of rubbish. ‘Get back to work or I’ll call in the Pinkerton's is the only communication required in dealing with these Bolshevik labour types.”

The Bleeding Heart is torn. “While one cannot argue with transparency, it seems that the aim of Goodyear’s efforts was to exert undue pressure on union leadership hampering their abilities to negotiate in a robust manner.”

Meanwhile, Your Genteel Moderator believes that the PR Week judges got it right. Well done to Goodyear for a relatively inexpensive and minimalist approach. It looks like the company believed its offer reasonable and appropriate, stuck to the facts, and dragged the issues into the light. USW and Goodyear reached an agreement in December 2006.

Branson's Biofuel Greenwash, a Babassu Nut Boon?

2008-03-05T16:57:00.000-08:00

It is extremely difficult to pass on reviewing virtually anything pitched by marketeering showman Sir Richard Branson. His history of attention grabbing stunts is peppered with case studies in how to generate organic media coverage that adds (ads?) bang for buck to commercial campaigns.

Which one is the babassu nut?

http://www.soaperschoice.com/soapoils/babassuoil.html

His latest stunt sees Sir Richard transforming the airline industry and saving the world through support for biofuels as an alternative or supplement to ye olde JP2 jet fuel. On the 24th of February a Virgin Atlantic Boeing 747 (using GE propulsion ?) traveled from London Heathrow to Schiphol in Amsterdam with one of its tanks allegedly full of a biofuel made of coconut and babassu oils, making it the first airline in the world to use such a "renewable energy source". The biofuel constituted an approximate 20% of fuel used, the rest being conventional jet fuel.

Branson claims that the flight was important for generating data about allegedly decreased emissions from the biofuel mix (the EU claims airline emissions count for approximately 3% of total "greenhouse gas" emissions - but jet fuel particulate exhaust is also a contributor to "global dimming" and, therefore, to global cooling, so the Bloated Plutocrat insists it's a wash) and for demonstrating the possibility of diminished airline dependence on fossil fuels. However, organizations such as Friends of the Earth, Greenpeace, and others had a field day. Greenpeace's chief scientist Doug Parr called the whole thing a "high altitude greenwash". Given that the Amazonian babassu nut is a key ingredient in many soaps, he may be onto something....

http://news.bbc.co.uk/2/hi/uk_news/7261214.stm

Meanwhile, European Federation of Transport and the Environment's Director, Jos Dings, says that biofuel does not equal environmentally friendly. "It depends crucially on what sort of biofuel you use, how much land that biofuel actually uses," he said. "If Virgin would power its entire fleet with biofuel, it would have to use about half of the UK's arable land."

http://www.abc.net.au/news/stories/2008/02/25/2171511.htm

But Branson and his partners in the effort, Boeing, General Electric and Imperium Renewables, do have answers for their critics."Virgin Atlantic will move forward rapidly to produce algae" to make biofuel, said Branson. "We're talking to a lot of sewage plants about setting up algae plants above and using a lot of the CO2 coming off those sewage plants" to feed the algae.

http://www.msnbc.msn.com/id/16190265/

And it's not like he isn't putting his money where his mouth is, committing to invest some $ 3 billion in Virgin Fuels, a commercial enterprise to develop alternative fuels - an enterprise not hurt by Virgin Atlantic's biofueled flights. And a year ago pundits claimed that a biofuel mix couldn't be used for jet propulsion because it would congeal in the ultra-low temp, high altitude operating environment. Problem solved with this initiative.

The Bleeding Heart is impressed. He writes, "Branson is a socially responsible entrepreneur who has repeatedly demonstrated his commitment to fighting global climate change. When commerce genuinely acts in the public interest we should recognize and reward the effort". The Bloated Plutocrat, less so. "Who? That long-haired, furry gobbed gambler? He's no entrepreneur. He's a common showman. No surprise that he's grasped onto this environmental change lark to squeeze a few pennies out of the youth of today".

Regardless of whether you are in the Bloated Plutocrat's or the Bleeding Heart's camp on this, you have to admire Branson's stuntsmanship. Whether this is first and foremost about commerce or the environment, once again he has shown the ability to mix it up, successfully obfuscate, and turn the media spotlight on himself and the Virgin empire.

Commission Common Sense. What Next?

2008-03-05T06:16:00.001-08:00

Despite the Bloated Plutocrat and the Bleeding Heart taking predictably polar stances on the issue, it appears that the Commission's legitimacy in demanding or imposing regulatory transparency on others is questionable. Nevertheless, regulatory measures that increase transparency, public knowledge, media scrutiny, and law enforcement oversight of the groups that communicate and advocate with government, clearly define how they do so, and and require some disclosure of what it is that they advocate, must on balance be viewed as in the public interest. That is provided such regulations do not unduly inhibit the ability of such groups to state their case. Nor should such regulations be deemed at odds with the corporate interest. A level playing field should be the end goal.

And this is where things become very odd indeed. The EU’s Green Paper for the European Transparency Initiative outlines some surprisingly sensible “essential components” that it says must be recognised in developing a regulatory framework for lobbying (p.5, Section II Transparency and Interest Representation):
http://ec.europa.eu/commission_barroso/kallas/doc/com2006_0194_4_en.pdf

1. Lobbying is a legitimate part of the democratic system, regardless of whether it is carried out by individual citizens or companies, civil society organizations and other interest groups or firms working on behalf of third parties (public affairs professionals, think-tanks and lawyers).
2. Lobbyists can help bring important issues to the attention of the European institutions. In some cases, the Community offers financial support in order to ensure that the views of certain interest groups are effectively voiced at the European level (e.g. consumer interests, disabled citizens, environmental interests etc.).
3. At the same time, undue influence should not be exerted on the European institutions through improper lobbying.
4. When lobby groups seek to contribute to EU policy development, it must be clear to the general public which input they provide to the European institutions. It must also be clear who they represent, what their mission is and how they are funded.
5. Inherent in the European institutions’ obligation to identify and safeguard the “general interest of the Community” is their right to hold internal deliberations without interference from outside interests.
6. Measures in the field of transparency must be effective and proportionate.

The Bloated Plutocrat writes: "This is remarkably sensible thinking from the Commission, although one may well take issue with number 3. After all, if I’m paying for a lobbyist, I most certainly want him to 'exert undue influence on the European Institutions', albeit not in a particularly improper way. I wouldn't think very much to one who touted his services as exerting 'exactly the same influence as other lobbyists and not an iota more'! Nevertheless, for such a generally muddle-headed organisation as the Commission, the Green Paper shows a high degree of common sense, suggesting that they have indeed listened to those of us in the business community, for once."

The Bleeding Heart retorts: "Listened to the business community? It appears that the Commission is prostrate in supplication at the alter of special interest! From voluntary codes - and let's face it, regulating lobbyists through voluntary codes is like promoting the withdrawal method as a form of contraception for teenagers - to weak regulations that have absolutely no enforcement mechanism. Even the EU Parliament's unused threat of diminished access - "you boys and girls better be good little lobbyists or we'll take away your hall pass!" - is better than a simple register of interests. If the EU will not simply banish these corporate wolves, then the adoption of a much more detailed and strict regulatory framework is required."

In addressing the issue, Finnish MEP Alex Stubb further breaks with EU politico tradition in his blog by using plain speech and making sense: http://www.alexstubb.com/en/index.php

“I believe that for most politicians, it is the strength of an argument that counts, not how much money is spent on promoting it. Certainly, European decision-makers need information about the sort of organisations that are backing different interest groups…However, debate over practical questions should not mask the underlying principle that whatever method of regulation we adopt, it must apply equally to all. It does not matter if someone comes from Greenpeace or McDonald’s, a trade union or employers’ federation, a think-tank or a firm of lawyers; when they are trying to influence an MEP’s position on a piece of legislation, they are all lobbyists. And if we don’t treat them as equals, we are on a slippery slope towards controlling free speech.”

Surprised by this uncommon sense, the Bloated Plutocrat asks, "What next? Minimum personal hygiene standards for French MEPs?"

In a representative democracy, policy is arrived at through the interaction and balancing of various interests. Representative government necessarily requires that knowledgeable, interested parties present their views and information on subjects under review by the legislature and executive. Is this not already the case in the judiciary? What is a trial but the representation of interests before judge and/or jury?

As a long time interlocutor with governments around the world, I find it simply impossible to adequately convey the shocking levels of ignorance - active and passive – about the issues evidenced by the vast majority of regulators, legislators, administrators, and bureaucrats that I have come across. It should come as no surprise that those elected by the people from the people are no more knowledgeable than the people on almost every subject other than campaign financing. This ignorance is the norm rather than the exception. Without the special interests providing their views and information on many issues, decisions would often be made on no more solid a basis than a coin toss. Good legislators, regulators, and other government decision makers are those willing and able to review input on a subject from the many interests involved and arrive at a sensible compromise.

Having said that, there is a need to regulate the ways in which lobbyists, interest representatives, etc., interact with government, and such regulation requires effective enforcement mechanisms. Your Genteel Moderator suggests that the EU Commission is right in seeking to regulate such activity and notes that its Green Paper shows some very good thinking on the subject. However, effective regulation requires not only that the law be clear and practical, but that it be applied evenly to all and that there be sufficient penalties for non-compliance so as to instill a healthy self-interest in compliance.

The Bleeding Heart remains outraged at the continued Commission stance in favour of regulated lobbying and strongly condemns the Bloated Plutocrat's last statement as an example of "ethnolfactorycentrism"...

Regulatory Legitimacy for Commission? We think not...

2008-03-04T06:52:00.001-08:00

Before further investigation of the merits of proposals by the Commission to regulate "interest representation" ("lobbying" is sooooooo 20th Century) with the aim of greater transparency, it is worth examining the Commission's credentials and legitimacy on the topic.

There is no doubt that increased transparency would be a good thing for European governmental institutions (indeed, government institutions the world over), from the Commission on down. Perhaps the Commission would be on more soild ground regulating the speech and activities of others were itself more transparent. Indeed, many member states, particularly a number of the more recent entrants from Eastern Europe that perhaps having gained democratic government more recently seem to value it more highly, have expressed concerns about the lack of transparency evidenced by the Commission and other institutions in their decision making. Yet, the Commission is colluding with the Member States to substantially diminish transparency and democracy in the EU with regard to ratification of the Treaty of Lisbon, a thinly veiled retooling of the EU Constitution that was defeated by popular referendum a scant few years ago.

While clearly an advocacy position, the following short presentation by Danish MEP Jens-Peter Bonde (in English) on Commission-Member State collusion vis-a-vis ratification is compelling:

http://www.youtube.com/watch?v=8Kr0Foq3CQE

With the bumbling Tories seeking legislation today that would require a referendum on the Treaty in the UK, the Lib-Dems displaying typical waffle, and Gordon Brown's government demonstrating the Euro-manipulation and disdain for the popular will that has characterized New Labour for the last decade, there is considerable popular campaigning by those who want such a referendum:

http://news.bbc.co.uk/2/hi/uk_news/politics/7265502.stm

And of particular interest to public affairs professionals is the adoption of tactics by the pro-referendum movement stolen straight from Greenpeace's own very effective stunt-book. Two men from a group calling itself "We are Change" and affiliated with the "I Want a Referendum" group, last night scaled a crane above the Houses of Parliament unfurling banners demanding a referendum:

http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=524169&in_page_id=1770

There is no indication that Brown intends to reverse opposition to a UK referendum despite results of a so-called "mini-referendum" undertaken in key Parliamentary constituencies (clever that!) that claim to show 88% popular support for a referendum.

BP: "Hah! What ye sow, so shall ye reap! Bully for the protesters. Let the demagogues and populists get a taste of their own poison and remember why representative government was originally designed to be limited in scope to those responsible enough to make policy. When you raise the rabble, be aware that the rabble may raize your house!"

BH: "It is difficult to understand what the anti-Lisbon Treaty people are after. Are they the unwitting pawns of the narrow-minded Euro-sceptics who fail to understand the need for greater integration and stream-lined decision making in the EU. Or, are they misguided democrats so dispirited by the corporatist nature of politics today that they can no longer differentiate between the democratic process of government (ratification by the elected legislature is a democratic process afterall) and its suborning by special interest groups that so often stifle democracy in aid of business interests?"

YGM: Those of the rational and democratic bent would seem to find it difficult to argue against ratification by referendum. But then, the fact that there is apparently not a single readily readable version of the Treaty available to the public would of course make a reasoned decision on the issue somewhat difficult. On balance, it would appear that the Commission's legitimacy as a transparent and democratic institution is open to further question...

European Transparency: Myth or Reality?

2008-03-03T19:56:00.000-08:00

With the Lisbon Treaty, Europe's latest "reform treaty", under ratification process in the member States, the Bloated Plutocrat and the Bleeding Heart are at odds over transparency in Europe's institutions, the Commission's efforts to regulate "lobbying", and the uncommonality of common sense.

Ireland likely to vote NO on Treaty of Lisbon:
http://www.chinadaily.com.cn/world/2007-12/13/content_6319098.htm

Commission Under Pressure to Curtail Lobbying Influence:
http://www.corporateeurope.org/barroso.html

BP:"Is irony dead in Europe as a whole, or simply among the unwashed loony left? Do the "50 civil society groups" touting the restrictions on democracy advocated in their missive not see that should the economic interests of Europe be barred from the exercise of democratic speech with its minimally accountable bureaucrats, clouded in the mists of arcane bureaucracy and often acting solely in the national interests of the member states, so too may a case be made that their own brand of naïve drivel ought be suppressed? Are they further blind to the fact that whither the interests of Europe's economic institutions and industries, so too the interests of those whose employment, livelihood, and extensive tax-funded entitlements are dependent on them? Pish! A plague upon the unwashed whiners!"

BH:"Would that there were 10 civil society groups, let alone 50, on the American side of the Atlantic willing and able to mount such a necessary and well-reasoned argument for curbing the influence of the corporate lobbyists that have so polluted the waters of democratic government. Nevertheless, even this effort falls short of the necessary reforms to reestablish the preeminence of the people in politics. Demands for transparency, regulation and oversight of the hoards of lobbyists, lawyers, PR operatives, and "communicators" fall far short of the need to eliminate their influence altogether. Indeed, without more radical efforts to bar corporate special interests and their operatives entirely from exerting influence on legislators, regulators, and executives, this plea may be seen as nothing more than a job substitution programme, in which the self-same operatives will become modern day Mandarins of a registration and oversight regime for special interest groups damned with its own increasingly opaque transparency as working groups are established, committees formed, and “watchdog bodies” entrenched. No more! Let these corporate assassins of our public good be rounded up and ejected from the arena of government!"

Commission Green Paper on the European Transparency Initiative:
http://ec.europa.eu/commission_barroso/kallas/doc/com2006_0194_4_en.pdf

And the inevitable catfight:
"Commission defiant over lobbying transparency criticism"
http://www.euractiv.com/en/pa/commission-defiant-lobbying-transparency-criticism/article-170299