The World has Lots “More” Now What?

From at least 10,000BCt to the 15th Century AD Humanity at it’s most advanced level was organized on a strictly top-down basis. Agriculture involving most people underpinned of these societies. Highly labor intensive, agriculture needed organization. When to plant, when to harvest and where and how to store the harvest called for certain retained knowledge. As we have pointed out in this series on “More”, a society can only get “More” in three ways, take it from somebody else, trade for it or innovate. Once the easy areas were planted only innovations such as irrigation and better tools, akin to the plow, axes and saws could bring more land under cultivation. Unfortunately, major innovations were few and far between. For instance, the wheel came into use at about 3,500BC, but as a potter’s wheel, not for transportation or carrying burdens. That came even later. The wheelbarrow dates only from 600 BC in Greece. That left it for trade and taking stuff from others as the preferred ways to get “More.”

Settled agrarian communities with seemingly abundant food and fiber, couldn’t help but attract those looking to relieve them of the fruits of their labor. The protective organization was a necessity. Military and policing needed leadership, organization and a means to pay for it. Accumulated knowledge had to be preserved and passed down. Who keeps the calendar? Who makes and enforces the laws.?

Trade, the other means of acquiring “More” also had its requirements. Exchanging goods need central protected markets and routes. It’s no wonder towns and cities combined administration, religion and markets in a protected area.

Laws, religion (often the same), administration and trade then all needed ways to preserve and tally. Fortunately, civilizations learned to write, read and compute. Sadly, for most of history, this was laborious, costly and limited. Even if you could read and write cuneiform, can you imagine War and Peace written on clay tablets? As a result, literacy was severely limited. As of late 1475 BC, literacy was 5% in France and 1% in Sweden. Out of necessity, a narrow group of literate elites filled the upper clergy, government administration, military and those in mercantile endeavors across all civilizations. Heredity in most cases played a major part in the makeup of these elites. The other more than 90% of the “civilized world” was an illiterate mass, mostly tied to the soil. Whether they were called peasants, serfs, slaves, coolies or some other name denoting those at the bottom, they, for the most part, led mean short lives, partaking in little or none of the “better things of life.”

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Simple Interest

In our 1/2/18 post “2018” we suggested that the only group that could supply new funds to push the stock market higher was the public at large.  The figures for December and January are in they show this group’s participation was the greatest since the “Great Recession.” They bought pushing the market to the stratosphere. Unfortunately, with no more new money available, the market was set up for a change of direction.  The reason given for the subsequent sharp down move was rising interest rates.  The bulls argue the market hadn’t had a correction for an abnormally long time and was overdue. In any case interest rates are historically low. Even the recent rise and the projected Federal Reserve moves should be easily handled by worldwide growth. After all, economic expansions in the past faced much higher rates and still thrived.  In the US profits will be greatly enhanced by the recent tax revisions.  Wages and optimism are rising.  Solid reasons for expecting the economic expansion to continue accompanied by rising profits.  This should be reflected in higher stock prices.

On the surface this makes a lot of sense but what if the recent interest rate rise even from such low levels is indicative of a much more dangerous situation?  In our series the Long Journey to “More” the post Free Capital to Finance “More”  attempted to show how the world’s central banks led by our Federal Reserve had caused massive distortions to the traditional risk pyramid.  Instead of a base of relatively safe assets tapering up to high risk, we had a pyramid of mostly risky assets.  With so much risk already, investors might really be reluctant to go after the really high risk/high reward ventures.  We thought this might help explain the tepid growth throughout the era worldwide “Quantitative Easing.”  The theory behind the central bankers move to zero or negative interest rates was to drive up the value of risk assets giving their owners gains resulting in a “wealth effect.” This would result rise in greater consumption driving growth.  Some economists claim this indeed added to growing  GDPs.  The consensus in the US is that it added about 1/2% to our GDP.  Even granting this might be true, it has left investors far and wide with horribly unbalanced portfolios.  Across the board they’re out of line with normal risk tolerance.

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How to measure “More”

How do we measure “More”? Or some ask what is “More”?  We get these questions so let’s see if we can just simplify it.  Let’s imagine entity A taking inventory as of a certain date. The total we’ll label X. We leave the components and their value in the inventory to the entity.  Why not use GDP? We and others have problems with GDP and for that reason wouldn’t be so presumptuous to dictate method to any entity. After all, different entities may value things differently. Take leisure time. One entity may value it highly but another may not value it at all. All we ask is consistency.  At a future date we repeat the inventory and we label it Y. Then compute Y-X=”More”(or “Less”). We hope for a positive result but that isn’t always true.

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Thinking about government’s relationship to its citizens especially in these times, we remembered some memorable lines Marlon Brando spoke as Mexican revolutionary  leader Emiliano Zapata in the movie “Viva Zapata”

….You’ve always looked for leaders.  Strong men without faults.  There aren’t any.  They’re only men – like yourselves.  They change, they desert, they die.  There are no leaders but yourselves.  A strong people is the only lasting strength! …..That’s how things really change – slowly through people.  They don’t need me anymore.  A strong man makes a weak people.  Strong people, don’t need a strong man.

We have had the good fortune through our inherited English common law and our constitution for individuals in the United States to enjoy the protections and freedoms that have enabled us to bring about unprecedented “More”.  An expansive open home market and “Yankee” traders abroad led to a rising standard of living. Never perfect (for instance just think about slavery), we have moved forward in our irregular fashion enhancing the abilities of each and every individual to achieve the best that’s in them. While this may always be a work in progress, we must first avoid backsliding while implementing ways to ever strengthen individuals.

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Time is Money and Does it Pencil Out

In 2014, Doug Ducey  a former CEO won the Governor’s race in Arizona with the slogan “government at the spreed of business.” Slogans rarely illuminate a problem,but this one hit the nail on the head. Before the 16th century, government and commerce moved at somewhat the same pace, glacially slow. Since then the private world has been gaining speed much like a bolder rolling down hill. Government has failed miserably to keep pace. This widening gap is causing great friction slowing our progress to “More”. In the real economy “time is money”. Wasted time hits right in the profits. Indeed, improper time management can and does lead to business failure. The Japanese kicked American butts using just in time inventory control and manufacturing to lower costs and gain flexibility, until we adopted better practices. Americans needed to remember time and motion study began here with combining the time studies of Frederick Winslow Taylor with the motion work of Frank and Lilian Gilbreth (the couple best remembered  by their children’s Frank B. Gilbreth, Jr., and Ernestine Gilbreth Carey’s 1950 book “Cheaper by the Dozen” and the very successful movie based on it. We recommend both for the whole family). This recognition of time value unfortunately fails to rule in the world of most governments.

How can we bring something close to the time discipline of the marketplace to the government rule makers?  First we have realize governments and their bureaucracies have totally different incentives. The greater the perceived work load the the larger the bureaucratic fiefdom. Quick action on whatever is before a bureaucracy actually works against their interest. Consider a government entity with ten projects before it. Five new projects per month are received on average. Let’s say one agency clears 5 per month and another clears just one. In the first instance there is no reason to add resources. In the second the work load demands expansion. The inefficient are rewarded, the exact opposite of private industry. How else can you explain the great growth of governments across the globe while they actually are completing less work per capita? Ideas are needed to bring this bureaucratic bloat under control. We’d like to present some ideas and invite any others that might help.

How can we speed the approval of proposed projects without taking undo risks? If a project is presented to the authorities, it might expire while waiting for approvals. How many horror stories have we heard about proposals endlessly bouncing between bureaucracies until they just give up. Even if  they finally get approved it comes at a high cost. Large Established businesses have the staffs, experience,relationships and lobbying to navigate the bureaucratic maze. This gives them an unfair advantage over new innovative enterprises. The more bureaucratic an entity is, the greater the space for crony capitalism. Let’s say you want to start an internet retail business requiring a warehouse to store and ship product. According to the World Bank, it takes half the time to form the business and a quarter the time to obtain the permits for the warehouse in Singapore as opposed to the US. Obviously some of our locales are better than others,but if you run up against a special interest such as environmental, animal rights or Native Americans all bets are off. No wonder since 2009 we have gone from the top ten business friendly countries to falling out of the top top 20 according to the Forbes 2015 Annual list.  More than 150 new major regulations have been added since 2009 at a cost of $70 billion, according to the Heritage Foundation. How can we regain our competitive edge while keeping reasonable protective rules?

On the battle field or in a disaster, multiple injuries must be processed as quickly and efficiently. Life and limb literately hang in the balance. In order to process each case expeditiously a triage nurse determines who gets the patient first. Even with multiple maladies the most needed specialty controls. You might think that’s all well and good in life and death situations but what has that to do in the process of say permitting projects? Everyday a multitude of projects show up at permitting authorities often needing numerous agencies to sign off. Someone with a project is faced with where to start first and are often ping ponged back and forth between them. As the days roll into weeks then months and even years, the project might get the final go ahead but at a unacceptable price. Often they just give up and the project dies. Would you direct multiple disaster victims to a hospital with no triage setup? Of course not.They need to be speedily assigned or there would be dire consequences. We don’t want worthy projects to die or be crippled with extra costs either. If we could make process easier and rational we’re bound to have better outcomes. Not every project deserves to be OK’d but they all deserve expeditious handling. Let’s put the triage principle to work.

Let’s say you have a project that needs federal, state and local permitting. Instead of applying to each and everyone, only an application would be made to a triage authority and entered on a public internet register. Upon examination the triage would assign the project to the agency most affected and/or the needed expertise. There a project manager would named. He or she would notify the other agencies involved. Those agencies would be given a short time to report to the project manager the time needed or what additional info would be needed for their part of the permitting. The manager upon having all the needed information,could give the project a timetable for completion of permitting. If an agency asks for an inordinate amount of time, the permitting could be reassigned to a more nimble one.  Checking the register, interested public parties would be able to contact and make their case to the appropriate agency. Instead of dealing with multiple confusing agencies the project would deal with only one person. Under this circumstance they could make a rational decision whether to go forward or not.

How would this actually work in the real world. Let’s take an extreme case. XYZ corp, a foreign or domestic company, wants to build a hyper-loop to move people between LA and NY City. Obviously, a multitude of agencies at the federal, state and local levels would  be involved. XYZ’s proposal would be filed with the triage agency. The agency  would  be put the proposal on the public internet registry and assign a lead agency. Maybe the Interstate  Commerce Commission (or some other), but the one selected would appoint a project manager and he or she would notify all affected agencies requesting their timetables. The manager could consolidate similar agencies under one lead. For instance, all the affected state EPA’s and the National EPA could have hearings dragging  on forever. In that case the manager could order the National EPA to consolidate hearings under their control and timetable to eliminate duplicate hearings. Greenpeace, Sierra Club, Chamber of Commerce, the company itself and all other interested parties would have to make only one presentation. Additional information or clarification requests would be consolidated and coordinated by the lead agency and the project manager. With all the information in on timely fashion, the project manager render a decision. With problems resolved the manager issues all permits. If serious problems remain unresolved the project is rejected. If an agency or anyone else has remaining objections not considered germane by the project manager, they could sue but only on their own money and pay all costs if they lose. We have no idea if a Hyper Loop would pass or not, but they’d deserve a timely decision. An entity wanting “More” must be business friendly enough to respect possible investment with timely professionalism.

What about agency rules either proposed or already in place businesses consider uneconomic? Congress has said  agencies must give assurance that any rule is in fact cost effective. Good theory but in practice agencies either don’t have the capability or desire to do real cost/benefit analysis. They just can put down anything to justify their rule. If congress is really serious about this and they should be, they have the right place to do the job right under their jurisdiction, the Congressional Budget Office. When there is a sharp difference of opinion of the cost/benefit of a regulation, the agency and those adversely affected would simply send  their analysis to the CBO for review. The one who presents the most persuasive argument in in the CBO’s  judgement rules. While the CBO won’t always be right, the non-partisan body crunches numbers for a living. Who better to be counted on to look at two sets of numbers and judge who is closer to the truth. The CBO budget might have to be increased, but that’s a small price to pay if we can eliminate rules with adverse cost/benefit. Compliance costs are enormous. The competitive Enterprise Institute ‘s report Ten Thousand Commandments 2015 estimated that it costs consumers and businesses almost &1.9 trillion-more than  11%of our current GDP-to comply with current federal regulations. That amounts to a hidden tax of nearly $15,000per household each year. It would be nice to know if all these rules pencil out or are we placing uneconomic anchors on our quest for “More”.  Knowing they face rigorous review, agencies would have no choice but to do realistic analysis in the first place. Just as important, congress would’ve asserted control in  this area. Good rules should be able to pass CBO scrutiny, but we simply can’t afford the uneconomic ones.

These are a couple of our ideas to arrest our descent from the top group of business friendly countries to also ran.  We hope they bring forth even better ideas. Whether it’s a foreign company choosing a location to expand or a domestic one deciding to to stay or move abroad, if they decide to go elsewhere no Americans are hired.