Germany and the Fourth Reich

With the rise of Hitler in the 1930’s Germany attempted to establish the Third Reich militarily as it crushed all of Europe except Russia, which it left devastated. With the fall of the Third Reich the Europeans led by France attempted to constrain Germany while striving to return France to greatness. This effort to control Europe led to the creation of the Euro-zone and the Euro as the common currency. Alas as usual the arrogance of the French created a situation that instead of containing Germany and increasing French power, it has had the opposite effect. The European governments are socialist with populations that are not driven by a strong work ethic but with a strong expectation that the government will take care of them. This has given the hard working Germans a tremendous advantage as they work and make money while the rest of Europe vacations and wallows in their socialist giveaway programs.

Following WWII the Europeans treated Germany as a defeated foe and exploited Germany as Germany rebuilt but this exploitation was mostly financial as they used Germany’s financial growth to gloss over the growing problems with their socialist economies, mostly led by the French whose idea of sacrifice was to work more than 32 hours a week. The Germans accepted this situation for a long time but with the cost of Germany reunification and the end of the cold war Germany began to reassert itself and ask why they were carrying most of the financial burden for the Euro-zone? In fact the current financial crisis in Europe has made several things abundantly clear. First there is no central control and the European Congress is more show than effect. Secondly the only economy in Europe strong enough to exert control and influence financial policy is Germany, and finally, there is little prospect that the weaker European countries will be able to recover financially without some external control and the only logical country to exert that control is Germany.

The French led the charge for the Euro Zone thinking that they would be in charge and would dominate Europe, but they didn’t anticipate what happened when the Euro was introduced. The Maastricht Treaty created a common currency but it also allowed for national control of finance, banking, and fiscal policy. This meant that the countries had their own tax policies but would not share banks but would share interest rates. While the Euro-Zone would share a common currency there was no one in charge of the economy or to set central fiscal policy. But while Europe had been living off of Germany for years they simply assumed that Germany would just continue supporting the rest of Europe financially so there was never any attempt to curtail spending or to align taxes to all of those expensive socialist programs. While that was bad enough it seems that with the lower interest rates – due to the shared interest rates in Maastricht – some of the Euro-Zone members – like Greece – went on a borrowing spree as interest rates dropped and the cheap credit flooded the Euro-Zone.

But now the Germans have had enough. They have had to cut back on many of their socialist programs to maintain Euro-Zone fiscal stability. But they no longer feel that they should support and pay for the fiscal irresponsibility of the Euro-Zone members while they are having to sacrifice to subsidize this irresponsible behavior. The result has been the creation of the European Financial Security Facility (EFSF) which raises money on the bond market and funnels that money to the weak Euro-Zone members, but the EFSF is run by Germany and it is the Germans who call the tune – not the French or the Euro-Zone members. Under the EFSF the financially stressed Euro-States can now access the needed funds but only with German permission, because this is not under the control of the European Union. In fact the EFSF can act independently of the EU in any future financial crisis. The reality now is that any distressed European State can get any money they may need but by doing whatever Germany tells them to do.

The reality now is that any Euro-Zone state who accepts financial assistance from the EFSF means ceding financial control of their economy to Germany. This means that these countries will be forced to accept German austerity programs but the fine print shows that the conditions imposed by Germany don’t have to strictly be financial. In effect Germany now controls the Euro-Zone economy and with that control they can now dictate policies that extend beyond the financial -- if they choose to do so. Failure to accept German direction simply means that Germany can cut off the flow of money which would devastate the weak socialist governments. Germany has attempted to establish control over Europe militarily with the last attempt being Hitler’s Third Reich but now it seems Germany has established control over Europe without firing a shot. Rather than out shooting the French and the rest of Europe they have simply out worked them. Welcome to the Fourth Reich

Love and Marriage

Marriage seems to be on the decline as more and more people opt to “move in together” and act like they are married. Of course this is just a euphemism for no strings attached sex. When challenged regarding why not get married the response – usually from the man – is there is no need because those are just words that have no meaning and won’t change anything. Of course the rebuttal to that is “if the words have no meaning then why not say them?” Obviously the answer is they do have meaning not just morally and legally but psychologically as well. It is true that the marriage vows are just a verbal contract but they might be the most binding contract anyone will enter into and that is the reason why the “lets live together” bunch avoid it, because it is a firm commitment that closes their option to just walk away when they become unhappy.

For some reason more and more people seem to think they have a right to happiness-not just occasionally but permanently – they think they should never be unhappy and if things and circumstances make them unhappy they feel free to just walk away and find some one else who makes them happy. Of course this is an unreasonable expectation as anyone who has been married longer than a few years can tell you. Marriage is filled with highs and lows as well as compromises and sacrifices, but in the end it is worth everything if you just stick it out. Marriage begins with passion, fun, adventure, and the expectation that this will go on forever and it does for a while. But that passion and excitement is not love and the fun and adventure quickly fade and become routine. And as that routine sets in things change – for some it changes for the better but for others it becomes boring which in turn leads to unhappiness and divorce due to the expectation that they should never experience unhappiness or sacrifice. These people never really experience love because they cannot separate sex, passion, and excitement from love. The problem seems to be that people get confused about love and think that movies portray love – they don’t.

Every day and in many ways husbands and wives show their love. Every time a man squashes a bug or disposes of a mouse or just takes the trash out, he saying “I love you”. Every time the wife picks up the dry cleaning, prepares a meal, or insists you see a doctor for that scratch she is saying “I love you”. Marriage is all about love – real love – where the other person’s health and happiness comes before your own. Where you can sit quietly with the other person and say nothing but can’t sit alone without knowing where the other person is. Love is when nothing can be fully enjoyed without sharing with the other person. Love is not Hollywood just as it is not constant excitement and romance – love comes quietly and sustains you through the bad times just as it magnifies the good times. The words in the marriage vow mean something and will bring lasting love and happiness when they are followed.

Living together is not marriage and does not represent any sort of commitment and no matter how long this arrangement lasts it will never yield the level of love that marriage provides, because it never shows any commitment to be there during the bad times. But once married and willing to stay through the bad times the effort and sacrifices are worth it and yield a life time happiness because the marriage rests on a foundation of love.

Rome and The US And The Roots of Decline

History And Realpolitik

Sometimes it is truly frightening to watch world leaders make decisions and take actions that history clearly demonstrates are doomed to failure. In 2002 a book was published “Warrior Politics” which was an essay on “Realpolitik” In this short book the author uses historical references gleaned from some of the worlds great thinkers and philosophers to put the 20th century into perspective. Certainly the 20th Century will go down in history as a pivotal period. It included the rise of Communism and its ultimate failure. A failure still not recognized by many academics and politicians who still think Socialism and Communism are viable political structures but previous failures were not due to any inherent flaws but because the implementers were incompetent. The 20th Century saw genocides on massive scales, not just in Germany but in Asia, Eastern Europe, and Russia as well.

Without doubt two of the most important events in the 20th Century were the two world wars but it is worth noting that these two wars parallel the Punic Wars between Rome and Carthage. In the second century BC Carthage was the dominant power in the Mediterranean but that power was being challenged by Rome After the first Punic War Rome imposed an unjust peace on Carthage which directly led to the succeeding wars which were costly in lives and treasure. This is precisely what happened in the 20th Century. Germany was a newly minted country and a rising power in Europe. This drive for power brought it into conflict with France and England and gave rise to WWI. But the allied powers failed to see the parallel with the Punic Wars and imposed the unjust Treaty of Versailles. But the allied powers failed to see the parallel with the Punic Wars and imposed the unjust Treaty of Versailles Germany. This treaty led directly to WW II.

But these are only the most obvious lessons to be gleaned from history and as the 20th century fades into history we find the 21st Century leaders repeating the mistakes of history. We find the US – much like Rome – embroiled in a seemingly endless series of wars. The Pax Romana taxed the Roman Empire just as the Pax Americana is taxing the American Empire – and for many of the same reasons. America is engaged in Afghanistan, Iraq, Libya, Palestine, Syria, Egypt, China, India, and Pakistan. But for what purpose and for what advantage to America? The glib answer of course is that these are necessary to protect America both economically and militarily, which of course would have been the response of any of the Caesars. But there are no specific answers coming out of Washington, because there are no concrete advantages to America. Why is the US subsidizing Palestine (Hamas) when they are clearly the group who are the aggressors against Israel and have never shown even the slightest indication that they want peace. In fact the only thing they want is for Israel to vanish and all Jews (and Christians) to be driven from “Arab Lands”. We entered Afghanistan for the purpose of capturing Osama bin Laden, that is accomplished but once it was clear he was no longer in Afghanistan what was the purpose of us lingering there? An even larger question is why didn’t the US kill all of the poppy fields? The answer has been this would have turned them against us – are they for us now? Aren’t these fields the source of much of the drug trade throughout the world and the revenue source for the Taliban? At least the Romans could justify their military excursions on the basis that conquests generated greater revenues for the state, but for the US these military adventures are costly.

One of the major reasons for the ultimate decline of Rome was the rampant corruption at the top. The Justice system was corrupt as the politicians bought votes, and the politicians were engaged not just in power struggles but in lining their own pockets. Does any of that resemble the US Congress today? The voter roles are clearly corrupt and this is so widely accepted that it is a joke. Key politicians pay no taxes (unless caught) and enact legislation to enrich themselves and to pander to special interests. The Justice system may not be for sale but it certainly is out of control. The courts have begun to act as a legislative branch via their interpretation of laws which has given us rules that are totally counter to the majority will.

The result is American prestige is declining just as America has entered into a decline. Any sense of shame or moral authority is gone via Court decisions that permit everything in the name of free speech. People increasingly look to the government for help and support rather than rolling up their sleeves and taking care of themselves and their families. The Congress has lost any sense of fiscal responsibility as they spend money on special interests while borrowing money to give away. Rome was not conquered it rotted away and there is a message there that should not be ignored by our Congress or the American People.

China and Economics

The idea that China is rapidly taking over the world economy is a widespread belief, but like so many things related to Socialism and Communism the realities are frequently ignored by pandering press. Currently the focus is on Greece and Europe where all of those socialist dreams are rapidly becoming an economic nightmare as it becomes apparent that government spending cannot exceed tax revenues. But there are other socialist countries where the stark reality of economics is beginning to rear its ugly head and China is one of those.

China – like so many other nations including the US, unleashed a flood of “stimulus” money in 2008 for the purpose of stimulating its economy which had been hard hit with the global decline. This stimulus money mostly went to local governments with the intent that this money would be spent on the infrastructure. This money vanished but with no real improvement in the infrastructure and by 2010 the local governments were $1.6 trillion dollars in debt, mostly in bank loans with a substantial portion of those loans being bad debt. Many of those infrastructure projects are sunk in debt and incomplete and those that have been completed have done little to stimulate or support China’s economic growth as they are simply “bridges to nowhere”. The reality is that no government can continue to make loans that are not paid back because eventually you run out of money. Greece and Europe (and soon the US) are in the throes of that reality and China is not far behind.

Cart Water’s and American Investment Banker and a specialist in China, points out that 55% of the Chinese GDP was from infrastructure investment – meaning bank loans which in a Communist country means the government. But governments do not make a profit and this is true even in communist countries and the collapse of the USSR is an example of how governments cannot run anything at a profit. So the Chinese government is trying to shore up its economic house by shifting much of the local government debt off of their books while the state owned banks re-capitalize using state guaranteed profits generated by the spread between interest rates on savings and interest charged on loans. Chinese law allows the banks to roll over their bad debts indefinitely so they can gradually pay down these debts. This is a communist country where the government controls everything so it is easy for the government to rig the system, which is just building a house of cards that cannot stand forever.

Of course in a rigged system the banks make money no matter if the loans are bad loans but the reality is those loans don’t go away and as that debt load grows the government will find it harder and harder to lend more money for investment in the infrastructure necessary to maintain their economy. That economy is highly dependent on the industrialized coast cities and their industries which are government subsidized. But China remains a largely rural economy and the disparity in income between the interior and the coastal region is creating unrest and demands for infrastructure and quality of life improvements that the government cannot meet in its leveraged state.

But the work force in the Industrial cities is demanding higher and higher wages which is placing the government into a difficult position. A failure to meet the demands for higher wages will cause the workforce to become even more restive than it already is but raising the wages reduces China’s competitiveness in the world labor market while reducing their ability to satisfy the rural area’s demands for improvements in infrastructure and quality of life. The government has made some attempt to increase wages but this has caused some manufacturers to abandon China and move to lower cost labor markets. This migration out of China is causing unemployment and empty factories which is having an impact in the rural areas because the government can’t fund the necessary improvements in the countryside and those unemployed workers were sending money to their rural families but that has ceased adding to the unrest. There have already been riots and unrest which the government is attempting to keep out of the public eye but they recognize the gravity of the situation.

Socialism and communism alike cannot and do not work in the long term. Europe is nearly bankrupt and faced with the reality that their extravagant government benefits cannot be sustained in the face of higher costs and greater longevity of their populations. Attempts to reduce these benefits even slightly had resulted in riots and instability. This is a lesson not wasted on the Chinese but the fear that China is going to take over the world seems unfounded.

China and Economics

The idea that China is rapidly taking over the world economy is a widespread belief, but like so many things related to Socialism and Communism the realities are frequently ignored by pandering press. Currently the focus is on Greece and Europe where all of those socialist dreams are rapidly becoming an economic nightmare as it becomes apparent that government spending cannot exceed tax revenues. But there are other socialist countries where the stark reality of economics is beginning to rear its ugly head and China is one of those.

China – like so many other nations including the US, unleashed a flood of “stimulus” money in 2008 for the purpose of stimulating its economy which had been hard hit with the global decline. This stimulus money mostly went to local governments with the intent that this money would be spent on the infrastructure. This money vanished but with no real improvement in the infrastructure and by 2010 the local governments were $1.6 trillion dollars in debt, mostly in bank loans with a substantial portion of those loans being bad debt. Many of those infrastructure projects are sunk in debt and incomplete and those that have been completed have done little to stimulate or support China’s economic growth as they are simply “bridges to nowhere”. The reality is that no government can continue to make loans that are not paid back because eventually you run out of money. Greece and Europe (and soon the US) are in the throes of that reality and China is not far behind.

Cart Water’s and American Investment Banker and a specialist in China, points out that 55% of the Chinese GDP was from infrastructure investment – meaning bank loans which in a Communist country means the government. But governments do not make a profit and this is true even in communist countries and the collapse of the USSR is an example of how governments cannot run anything at a profit. So the Chinese government is trying to shore up its economic house by shifting much of the local government debt off of their books while the state owned banks re-capitalize using state guaranteed profits generated by the spread between interest rates on savings and interest charged on loans. Chinese law allows the banks to roll over their bad debts indefinitely so they can gradually pay down these debts. This is a communist country where the government controls everything so it is easy for the government to rig the system, which is just building a house of cards that cannot stand forever.

Of course in a rigged system the banks make money no matter if the loans are bad loans but the reality is those loans don’t go away and as that debt load grows the government will find it harder and harder to lend more money for investment in the infrastructure necessary to maintain their economy. That economy is highly dependent on the industrialized coast cities and their industries which are government subsidized. But China remains a largely rural economy and the disparity in income between the interior and the coastal region is creating unrest and demands for infrastructure and quality of life improvements that the government cannot meet in its leveraged state.

But the work force in the Industrial cities is demanding higher and higher wages which is placing the government into a difficult position. A failure to meet the demands for higher wages will cause the workforce to become even more restive than it already is but raising the wages reduces China’s competitiveness in the world labor market while reducing their ability to satisfy the rural area’s demands for improvements in infrastructure and quality of life. The government has made some attempt to increase wages but this has caused some manufacturers to abandon China and move to lower cost labor markets. This migration out of China is causing unemployment and empty factories which is having an impact in the rural areas because the government can’t fund the necessary improvements in the countryside and those unemployed workers were sending money to their rural families but that has ceased adding to the unrest. There have already been riots and unrest which the government is attempting to keep out of the public eye but they recognize the gravity of the situation.

Socialism and communism alike cannot and do not work in the long term. Europe is nearly bankrupt and faced with the reality that their extravagant government benefits cannot be sustained in the face of higher costs and greater longevity of their populations. Attempts to reduce these benefits even slightly had resulted in riots and instability. This is a lesson not wasted on the Chinese but the fear that China is going to take over the world seems unfounded.

A Review of Management

With unemployment high and manufacturing increasingly moving off shore American products and unions are under attack for high costs and low productivity. Union labor is viewed as unmotivated, illiterate, and giving a great deal less than a days work for a day's wage. Productivity is low and growth in productivity is either non-existent or modest. Labor unions continue to demand high wages and benefits while an increasingly ineffective management structure seems to be confused, inept, and unable to come to grips with the death grip unions have on both government and industry. The once formidable American management teams which dominated world markets are now struggling to maintain themselves in those markets which they once dominated.

What is the problem?

Why do so many American businesses seem to be operating out of control?

I believe the chaos which now pervades American business is caused by years of ineffective management, rigid union practices, and an outdated business model. The contemporary American business model was founded on a Socio-Political model which has been in vogue throughout history and it has only been recently that this model has shown itself to be seriously out of step with industry, business, and society.

It was this socio-political model which gave rise to the labor movement and established the concept of "Labor versus Management" which has characterized western industrial societies from their inception. It was this model which Karl Marx referred to when he spoke of exploitive capitalists and predicted the inevitable death of capitalism. There has always been this conflict between the governed (labor) and the governors (management), but how it has contributed to the decline in the American economy can best be seen in retrospect. When we look backward we can see that the symptoms and danger flags have been there for a long time.

• The separation of management from the work force, both physically and philosophically.
• A business focus, which has largely ignored any but financial issues.
• A persistent and longstanding antagonism between management and labor
• A high cost labor force governed by seniority and not performance
• A labor force with ever increasing demands for wages and benefits
• Failure by management and labor to recognize globalization and its impacts

The effect of these factors has been cumulative over a long period and the results are now becoming apparent. We are seeing reductions in quality, lower productivity, and increasing unemployment as jobs move overseas to lower labor markets. Much of this malaise is attributed to high labor costs, a declining work ethic, waste, mismanagement, and a wide variety of other reasons. However, rather than being the problem, these may be symptomatic.

The problem may be that as our culture and markets have changed, our management model has not. It has continued to follow the authoritarian form it has had since the beginning of the industrial revolution. Western business is founded on a business model whose roots are in 18th century cultural concepts rather than those of the 20th Century much less the 21st. Only recently have the cultural conflicts inherent in the American model, become obvious.

American management has consistently failed to recognize the underlying source of worker dissatisfaction or to deal with it in any effective way. Historically this dissatisfaction was glossed over with higher wages, improved benefits, and other concessions. Only rarely were these concessions tied to any increase in productivity or quality. Labor negotiations and concessions were oriented toward rectifying surface problems associated with worker dissatisfaction rather than coming to grips with the basic causes of the problems.

The result was an upward spiral of costs factored with lower quality and productivity. American management failed to recognize that the underlying source of worker dissatisfaction was tied to the authoritarian model and its failure to incorporate the worker into the business process. The worker was kept out of the "decision process" and pacified with increased benefits. As these costs increased they were simply passed on to the consumer. This simple solution was an endless spiral until foreign manufacturers began to provide serious competition with higher quality goods at equivalent or lower prices. Suddenly management and labor were confronted with a completely new set of circumstances which they were ill prepared to face because the current American industrial model pits labor against management. Therefore the possibility of establishing a partnership between labor and management, as a solution to the crisis, has never been seriously considered.

It is the union labor contracts that have driven American Labor out of global competition. When management made it clear those productivity improvements, fewer job classifications, and reduced wages and benefits were necessary the unions refuse to cooperate. This resistance left management in the position of finding ways to improve productivity and profits without the support of Labor, which caused management to turn to off shore suppliers and technology as a solution. However, it quickly became apparent that productivity increases due to technology required more than capital investment and off shore work came with some significant quality and management issues.

To be competitive the American Management Team found that this new work force had to be more educated and more computer literate which did not describe their unionized work force. This new labor force was made up of technicians rather than craftsmen and efforts made by management to convert the existing labor force to technicians were rebuffed because the union craftsman ratings were hard earned and represented lifetime achievement for many. Failing to convince unions that retraining was in their best interest management began to recruit new and more educated employees.

These new technically trained workers were not union oriented and certainly not satisfied with the autocratic management style employed with unskilled workers. These new workers were less loyal to the company and expected to have a greater voice in the process of operating the business. Initially management failed to understand this aspect of this new work force but they also had problems coming to grips with a work force where the workers frequently knew more than their managers, and wouldn’t tolerate being patronized.

As the work force changed from unskilled to skilled the union leaders saw their membership decline because these new technical people had even less patience with them than they did with management. The result of this failure of labor and management to recognize the changing environment has been a growing irrelevance of labor unions and a management structure that seems increasingly unable to cope with the competitive situation. This has resulted in a chaotic situation which is due, at least partially, to the continuation of a model which has failed to reflect the changes in the labor force and our society. Many of the managers, who are experiencing this confusion today, recognize the failure of the old ways to solve today's problems and are grappling for a solution.

The failure of Theory X, Theory Y, Theory Z, and Managing by Objectives has led to a mini-revolution in management. Gone or going is the centralized workplace and increasingly the workers are working from home offices spread around the globe. This means the organization has become virtual and the managers must manage based on metrics and milestones. The labor unions continue their decline because virtual workers in a virtual organization have little interest or need for a union. Of course this requires a completely new management style but this is increasingly the management style of the 21st Century.