Saturday, August 12, 2017

R.I.P. New Mexico

The new population figures are in, and since the 2010 census, the population of New Mexico has grown by a staggering 1%.  Or perhaps a better term is stagnation.

Most of the states surrounding New Mexico, the remaining states of the Southwest, had robust growth.  Texas grew by over 10%, Arizona by more than 8%.  While official numbers do not exist, it is rather obvious that if you discount immigration from Mexico, the population actually shrank.

The news gets even worse:  While roughly the same number moved out of the state as into it (about 50,000 people), the only age groups that are growing are the retired and the young adults (ages 20-24).  Working age (which you should read that as "tax-paying age") New Mexicans are shrinking in number--and the situation is not likely to improve soon.

New Mexico is losing its seed corn--well, it’s losing the young working-age adults, ages 25-40)--and way too many of them are college-educated young professionals.  New Mexico goes to great expense to educate these young people, with fine public colleges and then we lose them.

There are so many college graduates leaving that, despite the large graduating classes of the numerous state universities, in some recent years the total number of graduates residing in the state actually decreased.

Over the years, I have asked the students in a number of my classes how many of them planned to leave the state after graduation and the answers were always depressing.  Except for a few non-traditional students (that’s educationalese for "older students")--many of whom were already retired--and a few married students with extensive local family connections, the answer was overwhelmingly in favor of emigration to find jobs.  The most popular destinations were Texas, Colorado, Arizona, and California.

When you consider that tuition covers only a small part of the cost of educating a college student, it is commendable that a poor state continues to pay such a large amount (some estimates put it as high as $56,000 a student) to educate workers who promptly leave New Mexico. 

It is possible that the most expensive export crop from New Mexico is not our green chile, our pecans, or even the mountains of ugly turquoise we sell to tourists:  It is our educated young--our seed corn.  

As the population of New Mexico continues to age, the need for social services and health care will continue to rise, continually increasing the drain on state funds while, paradoxically, the number of tax payers will actually shrink.  Will the state government raise taxes forcing more businesses to leave the state?  Would the government dare to cut programs?

Unemployment in the state is rising, and new employment in the traditional industries is unlikely to rise.  Our largest employers are the research labs, the military bases, state agencies, the state education system, and hospitals--all of which depend on tax revenues.  In the face of shrinking budgets, some of these employers have already started laying off employees.

Obviously, the state needs to attract new employers so that we can create jobs.  New Mexico has a business income tax higher than any of our neighbors have, and while the state has started to lower the tax, this was done--predictably--in small steps.  While the rate has been lowered a little, we will not be competitive with any of the other states in the Southwest until 2018, at which time we will be slightly lower than…Oklahoma...but still much higher than the rest of the states.

I doubt the remaining tax decreases will ever happen.  Already, politicians are proclaiming that the experiment has failed:  “Taxes were lowered and no new jobs appeared.”  There are already cries to raise business taxes to help balance the budget.

It is very hard to determine what effect cutting business taxes have actually had on the economy of New Mexico.  The tax cut was small, recent, and occurred while the state had large fluctuations in the prices of oil and natural gas.  This is a small state, with a population equivalent to Houston's.  As the price of oil and gas fluctuates, so does the New Mexico economy.  When the price of oil dropped in 2016, the state coffers ran dry.  As the price has recovered slightly this year, the economy has improved--marginally.

There are lots of proposals on how to attract employers to the state, all of them made by politicians who have never employed anyone.  Among the suggestions are expanding high-speed internet, increasing spending on education, increasing intercity rail traffic, legalizing marijuana, and providing more job training.  The state has a long history of promoting unorthodox schemes to boost revenue:  We have built a deserted Spaceport, we have an empty tourist train, and we have loaned millions to Hollywood producers who will never pay this money back...All to no avail.

I’m sure that all of these innovative proposals might be attractive to some prospective employers, but I have a simple question I would like answered before the state spends the money on the next get-rich-quick scheme.

Why are there so many employers in El Paso?

Thirty miles south of New Mexico along Interstate 10, is the city of El Paso.  This will never be my favorite city, as it is dirty, crowded, badly laid out, and seems to be run by politicians too stupid to even be allowed in the New Mexico legislature. 

If you drive south from New Mexico, as you enter Texas, the highway is almost continuously lined with warehouses, factories, and businesses.  If any of these had located in New Mexico, it would have been big news.  Our governor recently made a speech because Facebook is building a facility in the state that will employ a hundred people.  If they were to hire two hundred people, we might declare a state holiday.

El Paso does not have high-speed rail, super-fast internet, or any more job fairs than New Mexico does.  They also do not have a Spaceport.  My university classes were full of Texas students for two decades, and they seemed intellectually on par with those from New Mexico.  While I support education, if there is a lack of it in New Mexico, it is not the reason there are no employers rushing to the state.

I'd like to offer three suggestions to attract employers.  First, finish lowering business taxes.  They are currently at 6%:  I would lower them to 4.5% to match Colorado, which is notoriously business friendly. 

Second, New Mexico needs to be a Right to Work State, like Texas, Arizona, Utah, Oklahoma, and Nevada.  This state strongly protects union jobs that the state has never had and since closed shop states rarely have expanding industrial bases, it only makes sense to stop being a closed shop state.  Since the only large unions in the state are all for public employees, perhaps we could compromise with the unions and allow those for government employees to remain closed shops.

The last suggestion is almost impossible to achieve, because it is simply not in the nature of New Mexico.  However, since I have already suggested the near impossible, why not ask for the moon?

New Mexico needs a stable legislature--one that will not reverse itself every two to four years.  The state needs to project the image of a state that will not, on a whim, pass legislation repealing the law of gravity, or making pi equal to 3.0 so it will be easier to teach to children.  Our state government needs the type of maturity and stability that will reassure potential employers that shortly after a new business opens here, the state will not decide on a whim to outlaw electricity or to allow businesses to be open only three days a week.  Getting the "Land of Mañana" to that point will take some time, so we need to get started (yesterday)!

Saturday, August 5, 2017

Venezuela and the Dutch Disease

You would be excused for believing that riches mean wealth.  Not always...In the case of Venezuela, her abundance of oil has made her poor. 

Two terms describe Venezuela: Rentier and the Dutch Disease.  A "rentier" state is one in which the country receives so much income from the export of petroleum, that the leadership becomes autocratic, ignoring the needs of society.  This so obviously describes the governments of the late Hugo Chavez and Venezuela’s current madman, Nicolas Maduro, that it really needs no further explanation.  But, what is the Dutch Disease?

Forgive me, for as a historian, no explanation is possible without a little back story. 

Venezuela has always had oil.  Long before the Spanish arrived, the oil seeped to the surface, particularly around the area of Lake Maracaibo.  The natives called the floating oils and accumulated asphalts mene and used it to make medicine, torches or caulk for the seams of their canoes. 

After the arrival of the Spanish, the uses of the seeping oil pretty much stayed the same.  The boats got larger, and some of the thick oil was used to waterproof canvas sails, or lubricate the ship’s cannons.  The first documented petroleum export from the new world was a single barrel of oil that was shipped from Venezuela back to Spain as medicine to treat Emperor Charles V for gout in 1539.

Note.  Not that this has anything to do with Venezuela, but the story is just too creepy not to discuss.  How, the reader will ask, do we know that Emperor Charles V actually had gout?  Well, the kings of Spain are taken after death to a vault deep under the castle, El Escorial, and left to rot for decades before the bones are moved to a burial vault.  Even as you read this, a dead king, and his wife have been rotting away there for a couple of decades.  In Charles’ case, before his corpse was placed in—and I swear I’m not making this up—The Royal Rotting Room, one of his fingers was cut off and saved as a Holy Relic.  Recently, the Church was convinced to part with microscopic traces of the bone examined.  Yep, King Charlie had gout.  The results of the test were published in the New England Journal of Medicine—which for some mysterious reasons—did not even mention The Royal Rotting Room.

Even when oil began to be refined and used commercially, Venezuelan oil was ignored.  For most of the 19th century, Standard Oil of Pennsylvania supplied almost all of the world’s need for refined petroleum products.  The only thing Venezuela exported was asphalt.  The first paved roads in America were covered with Venezuelan asphalt.  If you dig down deep enough in front of the White House, you will find the first layer of asphalt on Pennsylvania Avenue came from Venezuela. 

Little changed until the First World War  As late as 1900, the entire Venezuelan government ran on the export duties primarily garnered from coffee.  The wealthy elite of the agricultural country depended on the incomes they received from their vast cattle herds on the lowland plains.  What little industry existed in the country was clustered in the coastal towns.

Oil, long ignored, was affected by laws very different from those in America.  By law, the underground oil belonged to the state—it was not the property of the owners of the land above it.  Second, the president of the country had exclusive rights to lease or sell the rights to that oil.  These laws had long-lasting impacts on the oil industry.

Since Standard Oil believed it had limitless resources in North America, it was left to Europeans to begin development of the Venezuelan oil reserves.  It was the Royal-Dutch-Shell conglomerate that first began exploring the oil fields around Lake Maracaibo.  The difficulties were enormous:  There were no roads, no settlements, no power plants, no trained workers. There was, however, an overabundance of mosquitoes.  In addition, deep-draft vessels could not enter Lake Maracaibo. Neither did the lake's  seaports have developed harbors.  Still, the potential profits were enormous, so the oil companies slowly continued to explore.

On December 14, 1922, at a depth of only 1500 feet, drillers hit an enormous pool of oil.  The gusher blew the drilling rig apart, blasting heavy crude oil 200 feet in the air, flowing at 200,000 barrels a day.  It took 9 days to cap the flow.  From that point on, the Venezuelan oil boom never slowed down.

Immediately, vast sums of money flooded into the country, changing the economy forever.  Workers left agriculture for better paying jobs in the oil industry.  With a flood of foreign cash, it was easier to buy foreign manufactured goods than to produce them domestically.  Industry—and the jobs it provided—simply dried up.  With cash pouring in, the Venezuelan government no longer had to tend to the needs of the populace, of whom only a small minority was employed by the oil industry.  The government became increasingly corrupt and dictatorial, culminating in the disastrous governments of Hugo Chavez and Nicolas Maduro.

With an ever increasing amount of money competing for a shrinking supply of goods, prices invariably rose.   Increasingly, the country was dependent on foreign imports, not only for manufactured goods, but even for food.  Today, Venezuela imports almost everything, including a large variety of distilled petroleum products.  As prices spiraled upward, the government imposed price controls, decreasing incentives to produce and worsening the shortages. 

The flood of foreign money also collapsed the exchange rate of the Bolivar, the Venezuelan currency.  If you use the official exchange rate, the most expensive city in the world to live in is Caracas.  The black market exchange rate is roughly 1% of the official rate.

This condition is called the Dutch Disease, after the economic collapse the Dutch experienced after basing their economy on a single commodity, natural gas.

For the rest of the 20th century, the wealth continued to pour in.  Venezuela was one of the founding members of OPEC.  During the boom years, while oil commanded high prices, Venezuela borrowed money, built lavish public works, and greatly expanded its military.  But, the country was completely dependent on the price of a single export commodity. 

For the last five years, the price of oil on the international market has been dropping.  The price for Venezuelan oil has dropped by more than 50%, and the Maduro government is strapped for cash. 

Ironically, Venezuela, the country with the largest oil reserve in the world, is going bankrupt.

Saturday, July 29, 2017

The Military as a Social Experiment

It is an overused expression that the purpose of an army is to "kill people and break things".  While it is undeniably true that this is the main purpose of the military, throughout history armies have done much more for the societies they defend. 

This week, there is an ongoing argument about whether transgendered people should be allowed to serve in the military.  One of the arguments against their serving is that the military should not be the place for social experimentation.

While I have NO pertinent data about the transgendered in the military, I can tell you that contrary to popular opinion, armies have always been the laboratory for societal experiments and the leading edge of cultural change.

Military service has always brought together people from different locations, backgrounds, and economic conditions.  Think of any war movie made during the 1940’s—there is always a scene where the recruit from the Bronx, the hillbilly from the Ozarks, and the tall lanky kid from Texas all meet in the barracks.  Culture shock is the norm for the newly-enlisted.

This could be called social experimentation, but military leaders since the time of the Roman Republic have learned the value of creating legions with troops in a balanced mix of age, class, and wealth.  Polybius, writing in 150 B.C., said that to insure that each legion contained a proper mix, all recruits were gathered together in one place, then tribunal officers took turns selecting men in rotation, as if they were picking softball teams in a schoolyard.

Historians have long speculated that one of the reasons the fledgeling United States quickly created a sense of nationalism was the binding effect of soldiers from different colonies serving together during the Revolutionary War.  Julius Caesar certainly understood this effect, since he took great pains to settle retiring soldiers in towns of captured territory. 

The bond formed by men serving together during war is so strong that some historians have theorized that it delayed the American Civil War by at least a decade. 

In the United States, the military has always been an important part of the melting pot that assimilates immigrants.  Though rarely shown in movies, during the Civil War, a third of the Union Army were foreign born.  Even today, more than 8,000 immigrants annually enlist in the US Army, where they usually do very well.  Immigrants in basic training have a 10% smaller “wash out” rate than the native born.  And immigrants are more likely to complete a term of service than the native born.  Today, the military is actively trying to recruit immigrants, finding that cultural diversity adds value in an increasingly global mission.

The American military was also the first to break racial barriers.  Long before President Truman ordered the integration of the services, military duty offered opportunities for racial minorities.  The Revenue Cutter Service—one of the forerunner agencies making up today’s Coast Guard—allowed African-Americans to be hired as early as 1831.  By 1887, an African American, Captain Michael Healey, commanded the cutter Bear.  Healey went on to retire as the third highest ranking officer in the cutter service. 

Long before women were accepted in a number of occupations in civilian life, they had access to these jobs in the military.  During both World Wars, women entered the work force due to labor shortages, and after both wars, the number of women working outside the home failed to drop to pre-war levels.  It was during wartime that women were accepted as  nurses, as truck drivers, and even as pilots.  It wasn’t just men who refused to “go back on the farm” during peacetime.

Historically, the military has been a laboratory of social experimentation for new technology and medical procedures.  During the Revolutionary War, George Washington was criticized for experimenting on his troops by having them inoculated for smallpox.  This radical new procedure was considered risky, yet by the end of the war it proved to be wildly successful.  Vaccinated troops had a better chance of surviving to the end of the war—even though they were serving in combat—than did non-vaccinated civilians who avoided combat.

The needs of feeding large numbers of men during wartime resulted in dietary experiments, too.  Canned and preserved food exist because the French government offered a cash prize to anyone who could develop a way of preserving food on French warships.   The experiment was successful and was soon adopted by civilians. 

The first steps towards understanding the dietary requirement for vitamins came from the military.  The Egyptians, after examining the bodies of Persians following the Battle of Pelusium, in 525 B. C., noted that the skulls of the Persians, who habitually wore turbans, suffered more cranial fractures than the Egyptian soldiers who wore no headgear.  The Egyptians correctly attributed this to something beneficial of the sunlight.  Today, we know that exposure to sunlight enhances production of Vitamin D.  The Egyptians also noted a link between the ability to see at night and the consumption of liver, a natural source of Vitamin A.

Thousands of years later, it was the British Navy that realized that scurvy could be prevented if sailors consumed citric acid.  The term “limey” originates from the British naval custom of adding lemon juice to the sailors' daily grog.  (Early in the 19th century, the word lime could be used interchangeably to describe either limes or lemons.)

It is the military that frequently first introduces new technology into society.  Perhaps the best example is the electronic computer.  It might be impossible to find an American home without some form of digital computer today, but in 1946, the world’s only electronic computer was the 27-ton ENIAC in Philadelphia.  ENIAC's development was funded by the Army to calculate artillery firing tables.

The list of technological innovations that came about to fill military need is practically endless:  From velcro to interstate highways, from radial tires to jet transport, from penicillin to the earliest days of plastic surgery, it is the social experiments of the military that have brought change to the civilian world.

The main goal of the military is not social experimentation, but maybe—just maybe—we need to rethink this:  Perhaps it should be.

Saturday, July 22, 2017

A Living Wage

Yesterday, while working at a small apartment complex I own, a young man came by and applied for a job.  I say, "young", because he was in his twenties.  He was trying to find work, in order to pay for college tuition this fall, as he needs one more year to graduate.  Evidently, the state lottery scholarship is loath to support students beyond four years of studies.

Several things about the young man have stuck in my mind all day today.

He wanted a job.  But, he was very "particular" about the kind of job he wanted.  He did not want a job doing yard work, or maintenance, or anything else that might actually have been useful.  He wanted an "indoor" job, with air conditioning...preferably a job with computers.  The entire Sweaty Arms estate is a whopping six apartments so, unfortunately, there was currently no open position on the managerial staff.  (Something that should have been clear since I—the President, CEO, and All-Around-Head-Flunky of this sprawling real estate empire—was repairing the mailbox while we talked).

He did not want to work in fast food.  When I mentioned that the nearby Golden Arches had a sign on its marquee indicating that it was hiring…well, that wasn't the kind of job he wanted.  The young man didn't think he could learn anything at such an establishment.  I'm pretty sure he was right, but I'm not sure this young man could learn anything at any job.  The idea that he was above such work was rather amusing, since he was applying to work at an establishment owned by someone who has done just about every job you can think of in fast food, and I am grateful for the experience.  I have learned more while wearing an apron than while I sat in some graduate seminars I have taken. 

I vividly remember the night I spent in a motel kitchen, learning to bake apple pies.  Armed with a paperback copy of the Betty Crocker Cookbook, I ruined an amazing quantity of apples and more than one bag of flour before I had something remotely edible, but I had learned a valuable lesson:  If the motel you are running has a neon sign reading “Fresh Apple Pie”, don’t fire the drunken cook until you find a replacement.  That was more than forty years ago, and I still make a mean green apple cinnamon pie. 

He wanted a living wage.  The young man valued his skills highly and he wanted a wage sufficient to enable him to save money for his coming year of college.  While he did not tell me exactly how much he expected, he did mention a "living wage".  Somehow, despite the fact that it was none of my business how this young man lived, it was assumed that it was my responsibility to provide for it.  He was, unfortunately, more concerned with what he deserved than what he could earn.

He was very particular about his hours.  He wanted to keep his weekends free because he was a member of a bike team that raced on the weekends.  There were several matches lined up this summer and he couldn't miss them.  And while he was willing to work after classes began in August, his work hours would have to be flexible to meet the needs of his classes.  And while he didn't have his fall class schedule yet, he was pretty sure he would be available to work on Mondays, Wednesdays, and Fridays.

He had no work experience.  None.  Somehow this young snowflake had managed to become old enough to vote and drink without doing a single day's work.  With no experience at all, he was more than ready to start in management.  Perhaps I could be his assistant.  At least on the three days a week he was willing to work.  Indoors.  In air conditioning.  On a computer.

He had no skills whatsoever.  Well, that's unfair.  He was very active in band and he was taking French.  While this probably qualified him to be a field grade officer in the French army, it didn't mean a damn thing at the Sweaty Arms.  I tortured the young man at length, asking about such arcane skills as plumbing, small engine repair, carpentry, etc.  He couldn't drive a forklift (and I  certainly didn't have one if he could!) maintain swamp coolers, or replace a washer in a leaky faucet.  As an employee, he would have made a perfect Slinky Toy—the best way to use him would be to push him down a flight of stairs.

His college major was bull.  If things went well, the young man would graduate next May with a degree in a field so incredibly worthless as to make any chance of gainful employment in his field so unlikely that it practically guaranteed that, at some future date, he will try to find work in Education.  I have no idea why students continue to major in fields that offer almost no hope of employment.  There are probably more students currently majoring in Choir at Enema U alone than can be absorbed into the job market for the entire country over the next five years.

He didn't really want the job.  At least he didn't try very hard to impress me.  He was neither dressed nor groomed for work, so that it appeared that he was actually hoping no one offered him a job.  His parents were unwilling to pay for another year of college unless he at least tried to find a job.  They probably wanted him out of their house...and I would bet you steak dinner and fresh-baked apple pie that they will still be wanting him out a decade from now.

I didn’t hire him—Oh, I probably should have, just so I could run him around in circles for a week and then fire him.  The experience might have been good for him, but I’ve already raised my own boys.  What’s-His-Name and The-Other-One (Both of whom have worked in fast food and have done various kinds of repairs at the Sweaty Arms.) are grown and gone, and I no longer feel paternal towards fools.

I have a suggestion for Enema U and all the other universities in the country:  When students signs up for a major, hand them a form that lists the average starting wage in the professions their major will likely qualify them for.  Tell them the likelihood they actually will find work in their chosen field.  In other words, be honest with them. 

This just might save a few universities from future lawsuits.  And it might also save the rest of us from thousands of overeducated children clutching Sociology degrees.

Saturday, July 15, 2017

The Mona Lisa Variant

The old canard that truth is stranger than fiction is routinely tested by fictional accounts that are so good and so perfect, that they replace reality.  Such is the case with the tale of a theft and a swindle so often repeated that it has been widely accepted as reality. 

The Facts

Prior to the Monday morning of August 21, 1911, the Louvre in Paris was just another art museum, and while already one of the great museums of Europe, it was not exactly crowded with tourists.  In one of the galleries, seldom noticed was the Mona Lisa, Leonardo da Vinci’s portrait of Lisa del Giocondo.  The painting, generally referred to as La Gioconda, was far from famous and generally known only to art historians.  It wasn’t even the most famous painting in the gallery, much less in the museum.

The popularity of the painting changed dramatically after one of the museum’s workers, Vincenzo Peruggia, removed the work of art from its protective wooden and glass case, wrapped the painting in his white work smock, and simply walked out of the museum.  Since the Italian handyman had been employed to enclose the paintings in their protective cases, it was relatively easy for him to remove it.  Peruggia took the painting home and hid it in the false bottom of a wooden chest.

While the Louvre had over 400 guards, it also had over 200 rooms, and this was long before burglar alarms were common.  No one even noticed the theft for 24 hours.  Only when an art student who was working on a painting showing the entire gallery (with all the paintings as miniatures), asked when the missing painting would be returned did the museum realize that it had been stolen.

At that time, La Jaconde, as the painting was known in France, had been hanging in the Louvre for 114 years.  (Except for the brief period when she hung in Napoleon’s bedroom.  It’s good to be the emperor!)

Only when the small painting on a thick wooden panel was missing did it became famous: newspapers around the world carried the story on their front pages.  The Paris police ransacked the museum in the hopes that the missing painting had been hidden, and more than sixty detectives followed up on every lead.  The homes of museum employees were searched—including Peruggia’s—without success.

Paradoxically, attendance at the museum increased dramatically as people stood in line to view the four iron pegs where the painting had once hung.  To this day, the painting is the chief draw for the museum.  Without a doubt, it is the most famous, most copied, most valuable painting in the world—chiefly due to the theft.  Leonardo would be astounded.

With no concrete leads, worldwide speculation went crazy.  American industrialist J. P. Morgan, the Tsar, and the Kaiser were blamed.  Pablo Picasso was questioned by the police.  The famous writer Guillaume Apollinaire was jailed for five days.  The police set up roadblocks on every road out of Paris.  When the German liner Kaiser Wilhelm docked in New York, it was exhaustively searched.

Despite the proliferation of wild rumors, there were few clues and no leads.  Only after the Titanic sank did the story finally vanish from the newspapers of the world.  (But there was some speculation that the painting had sunk with the ship.  While there was indeed priceless art on the doomed ship—including a bejeweled copy of the Rubaiyat of Omar Khayyam—the painting was still safely hidden in Peruggia's rooming house in Paris.)

Why it was still there is a good question.  Few people throughout history had been in sole possession of the painting.  Leonardo, Francis I of France, Louis XIV, Napoleon, and Vincenzo Peruggia are the only men to have had the painting to themselves.  Is this why Peruggia waited so long to try to sell the painting?

After two years, Peruggia smuggled the painting to Italy, tried to sell it to an Italian gallery, and was promptly arrested.  After spending seven months in jail, he was released in time to serve in the Italian army during the first World War.  Twenty-eight months after the theft, the painting was returned to the Louvre.

The Myth

When questioned about his motives for stealing the work of art, Peruggia gave confusing and conflicting answers, usually stating that he wanted to return the “stolen” painting to Italy.  Since it was Leonardo who had taken the painting to France some 400 years earlier, this was likely a calculated appeal to the court in Florence, where he was tried and convicted.

Today, the popularly accepted reason for the theft is an elaborate swindle known as the Mona Lisa Variant.  Supposedly, an Argentine con man, Eduardo de Valfierno, was the mastermind behind the theft.  Valfierno hired the famous French art forger, Yves Chaudron, to make six flawless copies of the Mona Lisa.  These were then smuggled into America before Peruggia stole the original from the Louvre.  This is an important detail, since as we have seen, it would have been difficult to smuggle the forgeries out after the theft.

Valfierno then arranged with rich American art lovers willing to buy the painting, if and when it could be stolen and smuggled out of France.  Once the potential buyers were lined up, Valfierno arranged to pay Peruggia $50,000 to steal the painting. 

Now here is the genius of the plan:  Valfierno didn't run any risk of trying to sell the original.  Nor did he have to attempt to smuggle the painting out, all he had to do is stall paying Peruggia until the forgeries had been sold.  Once the six forgeries had changed hands, it wouldn't matter if Peruggia were caught or the original painting were returned, since the swindled buyers couldn't  complain to the authorities without admitting they'd conspired in the theft of the original. 

Variations of this brilliant swindle have been used in countless movies and television shows, from Dr. Who to Sherlock Holmes

The Reality

The tale of Valfierno, Chaudron, and the six Giacondas first appeared in a Saturday Evening Post story in 1932.  The author, Karl Decker, claimed to have learned of the details from a 1925 interview with Valfierno, who had confessed in exchange for Decker's promise not to publish until after Valfierno’s death.

Ignoring the fact that Decker already had a reputation as a newspaperman who never let the facts get in the way of a good story, there are a few problems with the tale.

Where are the six forgeries today?  After more than a hundred years, not one has surfaced.  If one of those forgeries could be located today, it would be valuable, probably selling for more than the price Valfierno had received.

A bigger problem for the story is the fact that no forgery of anything by Chaudron has ever surfaced.  This raises the question: How can you be a "famous" forger if none of your forgeries has ever been discovered?  I can’t prove there aren’t forgeries just waiting to be discovered, and no one else can prove there are any.

Nor is there much evidence for the existence of a con man named Valfierno.  While Decker published a photo, no police records exist for a con man by that name.  You might argue that a good con man might never be caught, but if you are never, ever caught, how do you become known as a con man?

The Mystery

No one knows exactly why Vincenzo Peruggia held onto the stolen painting for so long.  He could have returned her and still avoided a prison sentence.  France was so desperate for the return of the painting that enormous rewards were offered—rewards large enough that the poor Italian workman could have lived in comfort for the rest of his life. 

We will never know why.  I like to think of Vicenzo coming home from his menial job to his tiny boarding house room, where he locked the door and carefully removed the painting from its hiding place in the false bottom of the trunk each night.  I can picture him as he hung the painting on a wall, moved a chair so that he could sit in front of the masterpiece, and in solitude, admire the woman with the enigmatic smile.

Over time, I think Vicenzo Peruggia became a strange reverse victim of the Stockholm Syndrome.  He couldn’t accept one of the proffered rewards for the return of the painting for a simple reason:  He had fallen in love with her.

Saturday, July 8, 2017

Tale of a Tailgate

The two old cowboys were finishing off lunch at the Buckhorn Cafe.  The older the two men got, the longer they took to finish their meals.  Lately, there seemed to be only a brief work intermission between their extended breakfasts and their lengthy lunches.  Mary Lou, the waitress, was thinking of charging them rent.

This morning, the two ranchers had been quietly arguing for about ten minutes.  As she refilled their coffee cups, she asked, “What’s got you two excited this morning?”

Mike took a long sip of his coffee and answered, “Kent here bought himself a new pickup, and if it wasn’t bad enough that he bought a Chevy, now he’s driving around town like an idiot with the tailgate down.”

“It gets better gas mileage that way, something you’d know about if you didn't drive a Ford,” said Kent.

“Not that again,” said the waitress.  “I’ve heard more arguments about Fords and Chevrolets than about politics.  I would have thought you boys would have settled this by now.”

“It has been settled,” Mike said.  “For over eighty years, Ford has made a better vehicle than Chevrolet.  Why even Bonnie and Clyde said they’d rather steal a Ford than any other car.”

“Nonsense,” Kent snorted.

Neither of the two ranchers noticed as Mary Lou walked off, shaking her head because she’d heard all of this before.

“You can read it yourself.  Clyde wrote Henry Ford a letter praising his cars.  Clyde said he only wanted to steal the best.  You can read the letter yourself, since Ford had it published in the newspapers as an advertisement.”

“Yeah,” retorted Kent.  “And Fords have cost more to insure ever since.”

“That has nothing to do with it.  They made Fords in Mexico, so car thieves used to steal more of them here in Texas to sell as parts south of the border.  Now that they have Chevrolets in Mexico the insurance costs the same.  Not that it would matter to you—nobody’s gonna steal a truck without a tailgate.”

“Ford,” said Kent.  “Fix Or Repair Daily.”

“Chevy,” answered Mike.  “Charged Heavily.”

The two old ranchers were still arguing when the local deputy sheriff came in for lunch and helped himself to a chair at their table.

“What’s the argument today, boys?”

“Same old thing, whether it's better to drive your pickup truck with the tailgate up or down,” said Kent.  “Bob, this stubborn old mule just won’t admit the logic of anything you do to reduce wind resistance is going to increase your gas mileage.”

“You can quit arguing, that’s been settled,” Bod said.

“How so?” asked Mike.

“Think about it,” said Bob.  “You know how the government is pushing the car companies to sell cars with better gas mileage.  Washington won’t be happy until we all drive golf carts with little lawn mower engines.  Hell, if driving a pickup with the tailgate down gave you better gas mileage, Detroit wouldn’t sell a truck with one.”

Not convinced, Kent said, “Bob, that doesn’t prove anything.  Maybe it's on there for safety reasons.  Like those stupid plastic bumpers cars come with.”

“You have to admit those idiot safety bumpers are stupid,” Mike agreed.  “They protect you from a 3 mph accident and get completely destroyed at 5 mph.  Then they cost five grand to replace.”

Bob waved at Mary Lou, then pointed first to Mike’s coffee cup and then to himself.  When the waitress smiled and nodded her head, the deputy turned back to the two old ranchers.

“The tailgate controversy is settled.  Both the highway department and the car manufacturers have researched it and there is no doubt.  You get better mileage with the tailgate up.”

“See!  I told you!” crowed Mike.

“That doesn’t make any sense,” said Kent.

“You ever notice how leaves and trash left in the bed of your pickup truck always slides forward and collects under the cab window?”

Both of the ranchers nodded their heads.

“Well,” the deputy continued.  “As you drive, air circulates in a giant circular bubble in the bed of your truck, air coming over the top of the truck slides off the top of this air bubble.  If you lower the tailgate, the bubble can’t circulate and the air coming over the top of the truck actually pushes down on the truck bed, which slows down the truck and makes it use more gas.  It’s as simple as that.”

“Is that real?” asked Kent.

“Yep,” said Bob.  “According to the highway department, it’s somewhere between 5 and 8% difference in gas mileage.  And it doesn’t work any better for those tailgates made of netting.”

Kent didn’t want to admit that Mike might be right, so he tried one last time to find a loophole.

“Are you sure that’s right?” he asked.

As he stirred sugar into the coffee the waitress had brought him, Bob looked a little embarrassed.

“I didn’t believe it myself when we got the highway department flyer, so I tested it.  I drove two weeks with my tailgate up, refilled the tank and drove for two more weeks with the tailgate down.  After I figured out the gas mileage, there was a clear advantage for leaving the tailgate up.”

“Bob, I didn’t know you had a truck,” Mike said.  “I’ve only seen you in your squad car.  What do you drive?”

“A Dodge Ram,” said the deputy.  “Best truck in America!"

Saturday, July 1, 2017

Creative Destruction

Recently, during an interview with Quartz Magazine, Bill Gates made a remarkable suggestion: that robots and machinery of automation be taxed to replace the missing taxes left unpaid by the laid-off workers the automation has replaced.  Shortly thereafter, Gates made the same suggestion while testifying before the EU parliament in Brussels.

Gates believes that the next twenty years will see an unprecedented rise in the number of workers who are laid off as their jobs are increasingly eliminated by robots—so many that the missing personal income and the resulting loss of tax revenue will disrupt society.

This is an almost perfect description of what economists call “creative destruction”—a belief that new technology or manufacturing process so changes the work environment that it brings more harm than good.

You would think that Bill would know better, since he has been accused of committing the same sin ever since he founded Microsoft.  I can remember when it was widely assumed that microcomputers would all but eliminate secretaries from the work force.  Instead, as computers made the secretaries more productive, demand for their talent increased.  Over the last few decades, the number of secretaries in the workforce has increased faster than the population growth.

Some economists believe that the fear of creative destruction has been the biggest obstacle to the creation of wealth in human history.  Actually, new technology creates  prosperity that, in turn, increases employment.  When railroads converted from steam to diesel, the followers of creative destruction focused on the decline in the employment of firemen instead of recognizing the increase in   employment in the petroleum industry.

A great example of the fallacy of creative destruction is the introduction of automated teller machines (ATM) in the banking industry.

While the number of tellers in individual banks did go down, the lower cost of operating a bank branch meant that opening new neighborhood branches became profitable.  As customers demanded more convenient local branches, the number of employees increased.  Today, even with the ubiquitous ATMs, the banking industry employs more people than ever.

Attempting to delay technological innovation rarely works.  And, of course, history gives us a perfect example.

In the last decades of the sixteenth century, the women of England were busy knitting every evening.  Their monarch, Queen Elizabeth, had just decreed that all of her subjects were to wear a woolen knit cap.  (Don’t laugh, remember all the strange crap our government has passed.  I live in a town where it is illegal to walk down Main Street carrying a lunch pail, but no one seems to know why.)

William Lee, the Anglican Minister of Calverton, England, was upset that his wife spent more time with her knitting than with him.  (Some accounts suggest it was actually his mistress whose time he wanted to free.)  Lee wondered if a machine with several needles could work faster than human hands with only two needles.  For years, Lee neglected his church work while perfecting the machine he called the stocking frame knitter.

Finally, in 1589, Lee rented a building in London, set up his machine, and sought an audience with the queen in order to secure a patent.  With the help of his local parliament member, he secured an appointment with a member of the Privy Council, who got him an appointment to demonstrate his machine to Queen Elizabeth I.

Lee’s machine, though it was an early model, really worked.  It could produce a finished product twelve times faster human labor.  (Remember, this was two hundred years before the start of the industrial revolution, which was largely fueled by the mechanization of the textile industry.  Lee’s machine, if it had been adopted, might very well have jump-started the mechanical revolution centuries early.)

Queen Elizabeth was not thrilled with the machine.  “Thou ailmest high Master Lee.  Consider thou what the invention could do to my poor subjects. It would assuredly bring to them ruin by depriving them of employment, thus making them beggars.”

Though the queen recognized the genius of his invention, and the machine offered huge gains in efficiency, profits, and a potentially exportable product, it also threatened creative destruction.  The knitting machine threatened social unrest that would challenge the status quo, so the queen denied William Lee his patent.

Lee needed a patent, or a royal monopoly to attract sufficient investment to begin mass production of his machine.  Since Queen Elizabeth refused him, he took his invention to France, where the king gave him a patent and almost immediately the French monarch was assassinated.  In the political unrest that followed, Lee returned to England.

Undeterred, Lee sought a business partner.  George Brooke would put up the money, and the two men would produce knitted wool by machine, splitting the profits for the next 22 years.  Unfortunately, Brooke was charged with treason—on an unrelated matter—and executed.

Undaunted, Lee continued to improve his machine.  The first model could only produce coarse woolen products with 8 stitches to the inch, but Lee’s improvements enabled the machine to produce silk products with 20 stitches to the inch, at a rate of 600 stitches a minute.  With the improved machine, Lee sought a patent from James I, the successor to Queen Elizabeth.  Once again, the monarch was concerned about out-of-work hand-knitters adding to the growing number of the unemployed. 

Lee took his invention back to France, but Lee died before he could make a success of his invention.  His company went bankrupt, and the machines were sold off in London.  Too expensive for the knitters to buy, the machines were leased out to knitters and though they proved profitable, their use grew slowly.

While Lee was not successful himself, his knitting machines do illustrate something about technological improvement.  Queen Elizabeth passed up an early opportunity for her country to control the textile industry.  Delaying widespread adoption of the machines just delayed the start of a new industry and delayed profits.

English monarchs delayed the mechanization of the textile industry not out of concern for the benefit of the workers, but out of fear that the resulting social unrest would affect political stability, thus endangering their reign.  The monarchs ignored that in the long run, the workers would actually benefit from the lowered cost of woolen products. 

If Bill Gates is successful, and automation is taxed, I can predict the consequences. 

Automation will be more readily adopted overseas, where employment will go up in the expanding manufacturing economy.  As the cheaper products are imported, locally produced goods will lose in the marketplace, resulting in rising unemployment. 

And we will become a nation whose economy is centered around the service industry, one where we sell each other hamburgers...Hamburgers
L made by the new Epson C4L robot, made in Japan.

Saturday, June 24, 2017

Foreign Interference In Elections? Never!

Since November, the United States has been consumed with the idea that Russia tried to influence the recent presidential election.  How dare they?  Free and fair elections are the cornerstone of democracy.  Only occasionally has the press whispered hints about an awful secret:  Why shouldn’t our enemies do what we have been doing for years? 

Yes, America has been hip deep in the political process of other countries.  We have funded and endorsed candidates, denounced political parties, and sent electoral advisors all over the globe.  James Carville, the campaign manager for Bill Clinton, has worked—often on the suggestion of President Clinton—in political campaigns in England, Israel, Canada, Bolivia, Colombia, Afghanistan, Brazil, and Argentina. 

There are dozens of elections all over the world that American has tried to sway, but let’s just look at two in depth.

Don’t Cry for Ballots, Argentina

During World War II, America began to see democracy as synonymous with freedom and that the Allied victory would validate the American way of life.  The idea that other governments might also see the victory as validation of their way of life evidently escaped our leaders.  This thinking certainly colored our relationship with Latin America.

In 1946, as Juan Peron ran for the presidency of Argentina, the American Ambassador to Argentina, Spruille Braden, became obsessed with the idea that Peron was trying to build a Fourth Reich and start a third world war.  Braden, the former ambassador to Colombia and Cuba, was employed by, or was a major stockholder in, some of the more notorious international corporations doing business in Latin America.  These included the Braden Copper Company, Anaconda Copper, United Fruit Company, and Standard Oil.  Not for nothing was the very first act of President Somoza his conferring of Nicaragua’s highest decoration on the ultra-conservative diplomat.

Leaving Argentina to become the new Assistant Secretary of State, Braden stepped up his activities against Juan Peron.  Just days before the election, the United States released the 130-page “Blue Book” about Peron’s alleged ties to Nazis and his plans for a fascist South America.  Ambassadors from all over Latin America were given special copies of the book bound with blue covers, and the entire book was published in the pages of a Buenos Aires newspaper.

Undeterred, Peron published his own 130-page book, the “Blue and White Book”.  The name not only mocks the American “Blue Book”, but references the colors of the Argentine flag.  From its very first paragraph, Peron's book attacks the United States as having “intervened in our domestic policy”.  Argentine citizens were outraged by the American attempt to influence their election.

Peron, who ran on a slogan of “Braden or Peron”, won the election by 350,000 votes.  Several Argentine historians have suggested that Peron would have lost the election without Braden.

After the election, Braden soon left the State Department.  Working for United Fruit, he was the point man for the CIA overthrow of the Arbenz government in Guatemala and eventually  went on to be one of the founders of the John Birch Society.

Free Elections, Vietnamese Style

In the early 1950s, as the French began advancing in an alternate direction—one that would take them out of Southeast Asia—America began slowly taking their place there.  At the 1954 Geneva conference, it was agreed to divide Vietnam in half at the 17th parallel.  The communists would go north while the French and their allies would go south until free elections could be held in two years.

Now the US had no intention of allowing those free elections to take place for the simple reason that the side we supported—and this meant anybody but the Communists—would have lost.  In the meantime, we proposed that the South be ruled by the hereditary leader—Emperor Bao Dai—with Ngo Dinh Diem, as his Prime Minister.

For America, Diem may well have been the worst possible choice to lead South Vietnam.  A Roman Catholic and a former minister in the French Colonial Government, he was hated by the Vietnamese people, who saw him as corrupt and ruthless.  Though the French warned the Eisenhower government that the man could not be trusted, we decided to back Diem.  (To be fair, Eisenhower, with his extensive European experience, can be forgiven for rejecting any French advice not involving cheese or wine.)

Since America knew that the scheduled 1956 election would almost certainly result in a victory for the Communists in the North, we held an early election in 1955, in which only those in South Vietnam were allowed to choose between Bao Dai and Diem.  The CIA’s Colonel Edward Lansdale helped organize the election.  Since a lot of the voters were illiterate, colored ballots were used.  Red ballots were for Diem and green ballots were for Bao Dai.

The fact that the superstitious Vietnamese believed that red signified good luck while green forecast bad luck was not a coincidence.  The red ballots showed a smiling Diem in modern dress standing with young people while the green ballots showed a confused Bao Dai wearing old style robes.

The CIA really didn’t need to bother, since Diem controlled the ballot counting.  Despite warnings from Washington, Diem reported that he received 98.2% of the total vote, with an astounding 133% of the votes from Saigon.  Lansdale, who had cautioned Diem to pick a plausible number somewhere  between 60—70%, left Vietnam in disgust.  (He promptly became involved in the ridiculous Operation Mongoose—the absurd attempts to assassinate Fidel Castro with exploding cigars.)

Within days of the election—on November 1, 1955—the United States established MAAG (the Military Assistance Advisory Group) to train the South Vietnamese Army and that date is now recognized as the beginning of the Vietnam War.

The choice of Diem quickly proved to be a mistake.  At times the staunch Roman Catholic seemed to be more at war with his country’s Buddhists than with the Vietminh.   Despite the US's giving Diem $200 million a year, Diem could not seem to bring reforms to South Vietnam.  (This was probably because he spent his time putting over 100,000 of his own people in prison camps, some of whom were children convicted for the horrendous crime of writing anti-Diem graffiti.)

Eventually, President Kennedy commissioned a study on how to handle the Diem problem.  The report, called for the introduction of large scale military intervention, more money, and “advisers” to help stabilize the Diem government.  Unfortunately, it was probably too late. 

On June 11, 1963, Thich Quang Duc, a sixty-six year old Buddhist monk, sat down in the middle of a busy Saigon road. He was then surrounded by a group of Buddhist monks and nuns who poured gasoline over his head and then set fire to him.  One eyewitness later commented:  "As he burned he never moved a muscle, never uttered a sound, his outward composure in sharp contrast to the wailing people around him."  While Thich Quang Duc was burning to death, the monks and nuns gave out leaflets calling for Diem's government to show "charity and compassion " to all religions.

The government's response to this suicide was to arrest thousands of Buddhist monks. Many of those jailed were never seen again.  By August another five monks had committed suicide by setting fire to themselves.  One member of the South Vietnamese government responded to these self-immolations by telling a newspaper reporter: "Let them burn and we shall clap our hands."  Another offered to supply Buddhists who wanted to commit suicide with the necessary gasoline.

In 1963, Diem was assassinated (with the approval of the CIA).  This probably would have caused a lot of Americans to wonder just what the hell was going on in Vietnam, if President Kennedy had not been assassinated just three weeks later.

There are more examples of US "participation" in foreign elections, but you get the idea.  If the United States really wants to stop foreign intervention in elections, perhaps we should lead by example.