The United States Postal Service as a Symbol of the Nation

In 1985 scientist and science fiction writer David Brin published a post-apocalyptic novel entitled The Postman. If you are not a reader of science fiction you might be more likely to remember the movie directed and starred in by Kevin Costner in 1997. During the early weeks of the pandemic shutdown back in April, when Trump first started making noises about undermining the U. S. Postal Service, I decided to re-read the book. 

The key idea of The Postman is that the United States Postal Service is more than simply a service to deliver mail and packages, it is a powerful symbol of our united nation. So much so that in a fragmented post-apocalyptic world,  men wearing the uniform of the USPS and carrying mail from community to community can be enough to jump start the economic, social and political unification of a country. 

The U. S. Postal Service provides enormous practical benefit to Americans regardless of their economic or social standing. In fact the lower your economic and social status is the more you may benefit from the USPS. Every address and community, no matter how small or rural must be served by the USPS.  If you don't get home delivery and can't afford a post office box you can still get your mail general delivery at your local post office. We may not be big senders of cards and letters in this age of digital communications, but we still do business by mail, pay bills by mail, get checks by mail, get medications by mail. 

However, the real point here is that far above and beyond the practical benefits of the U. S. Postal Service is the symbolic role it plays in our sense of all being citizens in one nation.  There are several examples that highlight this. One is the degree to which Americans have mythologized the Pony Express, a service that lasted a mere 18 months (April 3, 1860, to October 24, 1861), that tied the eastern United States to the relatively new state of California.  For something that lasted such a very short time, the Pony Express lives in the American psyche as the epitome of nationhood - physically linking states together across a wilderness. Another is the beloved Christmas movie Miracle on 34th Street in which the U. S. Postal Service delivers bags and bags of mail addressed to Santa Claus to Kris Kringle in the court room. If the mighty U. S. Postal service, an official government agency  could recognize Kris Kringle as Santa Claus, then that was enough for the judge. 

All those people salivating with dollar signs in their eyes, over the prospect of carving up the business of the Post Office and distributing it to for-profit corporations, miss this very important fact about the U. S. Postal Service. It is far more than a set of services, it is part of the fabric of America, and it is a symbol of our national unity. 

If we lose the United States Postal Service we lose our national soul. 

Thoughts on the Senate Passage of the Tax Cut Bill

The mechanics of an advanced capitalist economy hold a number of important contradictions within them that make it likely that economic growth (in this country) will continue to slow down, that fewer workers will be desired (here) by capitalist enterprises, more mechanization, computerization will replace workers, that wages will continue to stagnate or even decline. These changes are embedded in the essential nature of unfettered capitalism, and can only be altered by choosing to modify capitalism, to make decisions based on human welfare and NOT on profit (the essence of capitalism). 

There is also an essential contradiction between the need for a capitalist enterprise to grow, expanding markets and demand, and the finite nature of material resources. Moreover, that growth and expansion coupled with short-term profitability decisions, increasing the level of waste and its attendant pollution. Growth is an inherent requirement of capitalism and it cannot continue forever in a finite reality. So, therefore, capitalism cannot continue forever in a finite reality. 

Somewhere in our countries future we will hit a series of "walls" - a point at which standards of living have eroded past what is tolerable to maintain a free society, where environmental degradation (including global warming) will begin taking an even greater toll than it already does (wildfires, floods, hurricanes, extreme weather events). 

If we were to moderate our economic system now, make progressive changes that provide more (rather than less) support for the poor, the middle class, improve health care access, improved educational access, put people to work doing things that need doing rather than just what is profitable for investors (like we did during the Great Depression), we might possibly create a people and a society that will have the resilience needed to survive the shocks that our economy and environment will inevitably throw at us. 

But instead we have a government today, that is engaging in firesale tactics. We're stripping away supports and safety nets, not enhancing them. What I fear is that even if years from now we do elect people with a better vision, it will be too late. We will hit those "walls" full speed, head on and be smashed to bits as a society. 

That, unfortunately, is my vision for this countries future.

Zombie America - Installment 7

It appears that economists have finally glommed on to something that sociologists have been talking about for 30 years: the middle class is disappearing and there is a great divide between haves and have-nots in America. 

MIT economist Peter Temin is getting rave reviews for his new book The Vanishing Middle Class: Prejudice and Power in a Dual Economy. While Temin certainly has some updated data, the phenomenon he is describing- the hollowing out of the American middle class and the increasing divide between affluent and those scraping by - has been in progress for decades at least since the deindustrialization of American began in earnest in the late 1970's. Sociologist Katherine Newman aptly described the early stages of the decline of the middle class in Falling From Grace: Downward Mobility in the Age of Affluence in the 1980's.

Many social scientists, policy makers, and politicians have noted the decline of the "rust belt," but blithely assumed that new industries (especially in high tech fields) would replace the older manufacturing centers. They offered up condolences to industrial communities devasted by the closing of steel mills, automobile factories, and coal mines, but have done little of substance to change the decline of those communities.  The old economy workers who cannot be retrained for the new economy are members of the "unnecessariate" - disposable people who do not figure as workers in the new economy but become the fodder for the careers of law enforcement, prison guards, social workers, doctors, and therapists.  It is not terribly surprising that so many of them voted for the one politician that appeared to care about them, speak to them directly, and tell them they were worth something.

The cavalier abandonment of so many small cities and towns in America, who have not made the transition to the new economy is a major indicator of the rot in our society.  However, the real problem is that the new economy itself is divisive and destructive to American society.

Seattle with its booming tech/internet economy is an excellent example of how economic success contributes to the increasing divide in American society. Not all of the jobs of the new economy are "good" jobs - lots of lower paid, dead end warehouse and service sector jobs come out of the same economic developments that provide high paying tech jobs. Moreover, influxes of higher paying jobs can push up housing costs, tax rates, strain transportation, and other public services, increasing the cost of living on those who do not have the "good" jobs.  Nestor Ramos, a Boston Globe reporter describes the benefits and pitfalls of a booming high tech economy. An article intended as a cautionary tale to those communities that might be bidding for a new Amazon headquarters.

The Sky Is Falling: Beyond the Myth of Moral Decline

Recently several of my Christian Facebook friends shared and liked blog post The Christian Myth of America's Moral Decay by John Pavlovitz. Pavlovitz basic thesis is that in terms of individual behavior and action people are no more immoral and wicked than they have ever been;  inhumane, intolerant and hateful behavior is no more common than in the past, and corruption and injustice has been with us always. Pavlovitz suggests that what makes today different is that we now have the technological means (cell phones with cameras and video and an internet) to bring all the human nastiness to light and make everyone continuously (24/7) aware of the dark side of human behavior.

Moreover, there is substantial sociological evidence (real hard, historical data) to go even further and say that violence, crime, and physical brutality are actually on the decline in America. Although flawed in a number of ways (including being overly psychological), The Better Angels of Our Nature by Steven Pinker provides ample data to show that this decline is a long term one world wide. So as I read Pavlovitz piece, I sat nodding my head in agreement with his argument:

"I’m out here every day and I see heroic, compassionate, reckless acts of beauty all the time. I see and speak to lots of inherently good people doing their best; slipping and then getting back up again. We’re all flying and failing simultaneously; gaining and losing ground and doing it again and again. I reject the myth of our downward spiral because I know how hard I and so many others are working to get this life right and to love well. I don’t believe I am in personal moral decay and I imagine the same is true for you, which is the point."

The problem is Pavlovitz prefaced the statement above with "I don’t believe we’re all slowing sliding off into the abyss, despite what some religious people say."  There I have to disagree, because we are all slowly sliding off into the abyss. At the very end of the piece Pavlovitz states: "Look up, the sky is not falling." And once again I disagree, because the sky is falling.

Where I  part ways with Pavlovitz is that while I agree that the notion of moral decay is a myth, as a sociologist I see potentially insurmountable problems facing American society that are not problems of individual morality, but rather problems of social structure. Those problems are many and wide ranging. We have an economic system (abetted by the political system) that often rewards businesses for using non-renewable resources over those that are renewable, and the increase of pollution over its minimization. By design our economy encourages businesses push the costs (in the form of health hazards and environmental degradation) out onto workers and communities, while retaining the benefits (profits) for themselves. Moreover, individuals as consumers are by design, encouraged  to use more, waste more, spend more and save less. 

We have an economic system in which there is a growing divide between the employment opportunities for those with and without an education. We have fewer and fewer employment opportunities that can sustain a person  much less a family for a lifetime without substantial educational investment. 

Our economic system is structured (with lots of help from the political system in the form of the tax structure, trade agreements, etc.)  in such a way that there are substantial rewards cost cutting - especially labor costs - and little reward for expanding employment domestically. 

Blogger Anne Amnesia of More Crows than Eagles coins a new term for all the people who are being left behind by our current economic system: the unnecessariat.  The unnecessariat are the jobless refuse of our economic system. They are the one who have been pushed out of the labor force because their labor is unnecessary to the pursuit of profit. However, as Anne Amnesia so aptly puts it "there’s certainly an abundance for plans to extract value from them." The unnecessariat become legs that make the drug distribution networks,  the incarcerated bodies that mean profit for private prisons, the communities where prisons or toxic waste facilities can be located. 

So we try to funnel more people into a higher educational system for which they are inadequately prepared and often unsuited. The educational system is unprepared and increasingly underfunded to deal with their deficiencies, their needs and their desires. Worse than that many people who are prepared and engaged educationally, who actually make the educational investment do not recognize economic or financial rewards - especially when they live in communities that have fallen by the wayside (I think everyone gains something from engaging in the learning process and gaining knowledge but that's a different article).   

Over the past 240 years Americans have built a society that makes some types of choices easier than other types of choices, that favors some actions over other actions, and makes some outcomes more likely than other outcomes.  

This does not mean that people lack free will. It does not mean that we are not responsible for our decisions. It does not mean that we cannot and should not make different choices. 

What it does mean is that each individual, each family, each business, each government decision-maker finds that some choices are easy both to see and to act upon. They are the choices pointed out to us over and over again by family, school, media, leaders, etc. These are the choices that our high school guidance counselors know about, the choices that are represented by the majors at our local community and state colleges, the choices offered in our local stores or easily accessible on-line, the choices presented by our local and state government.  Other choices always exist, but they are not visible, audible to us. Some alternatives are deliberately blocked by a multitude of obstacles. We may learn what other people in other countries do, but are told that it is unAmerican, anti-capitalist, immoral, and unthinkable. We risk ostracism, intimidation, threats, and worse if we make some choices. 

So not by moral decay, but by the pressures of social structures that shape our decisions, American society is not on the brink but rather has already slid over the precipice. We are sliding downward already. The unnecessariat is growing  - they have already gone over the cliff. As for the  "precariat" Guy Standing's term for the

" multitude of insecure people, living bits-and-pieces lives, in and out of short-term jobs, without a narrative of occupational development, including millions of frustrated educated youth who do not like what they see before them, millions of women abused in oppressive labour, growing numbers of criminalised tagged for life, millions being categorised as ‘disabled’ and migrants in their hundreds of millions around the world. They are denizens; they have a more restricted range of social, cultural, political and economic rights than citizens around them."

They are dangling by a thread ready to follow the unnecessariat over the edge. 

We are seeing whole communities, even whole regions that are losing or have already lost the battle. This shows in myriad ways: rising death rates for white rural men and women, the physical erosion of community physical infrastructure (think Michigan cities like Detroit and Flint which are merely the canaries in the coal mine), the political gridlock of Congress, and so much more. 

We are fraying at the bottom and the edges, and those in the middle know if even if unconsciously. They realize that they are vulnerable if not why. The causes are complex, multifaceted, involving multiple social systems, and cannot be solved by simple slogans or by a single new leader.

But wait, it gets worse. Because global warming is real. The earth's climate is actually changing. The consequences are already affecting us, and are going to become increasingly disruptive of our economic and social systems.  Just one little example to make my point - weather related power outages have been on the rise for the past twenty years. Some of the responsibility goes to increasingly extreme weather events (a consequence of climate change) and some of the responsibility to the fraying of community infrastructure (declines in public and private spending on shared infrastructure). The picture is pretty clear: 

There will come a point, when climate related changes will over-come our capacity to cope. That time is likely to come sooner rather than later, because we are also eroding the decision-making capacity of our governments, and creating larger and larger populations of people who do not have the resources to cope with catastrophe. 

Why the Rich Hate Obama

This morning I ran across an article "The Best Worst President Ever" by Mark Morford in SF Gate.  Morford observes a wealthy beneficiary of the economy under Obama proclaim Obama the "worst president ever." Morford then proceeds to give a litany of economic facts that provide ample evidence that this wealthy individual is almost certainly benefiting greatly from the economy during Obama's presidency. In the end Morford just laughs, and shakes his head at the "bizarre lament" of these crazy rich bastards. His only explanation is simple racism - rich white guys can't stand it that a black guy could actually run the country, so they'll simply deny that he has done so. 

I think that Morford and almost all the other defenders of the Obama presidency are missing something truly important, something that the wealthy feel in their bones, even though few of them can allow themselves to recognize it consciously. There has been a seismic shift in this country during the Obama presidency, one that has nothing at all to do with Obama's actions as president, but everything to do with what a black man in office means to American people. It is not what Obama has done, but what Obama has inspired (including fear) that makes him "the worst president ever." 

The seismic shift to which I refer is the cosmic decline in the legitimacy of the existing American social system, in all its economic, political and social dimensions, in the minds of Americans. The fact of an Obama presidency, the presidency of a Harvard educated, progressive black man of mixed racial and cultural heritage is the catalyst that turned the already existing cultural divergence of America into a chasm of Grand Canyon proportions. It is not about what Obama has done or will do, it is all about who he is and what he represents to the various factions in America. 

Obama of course represents quite different things to those on the left and those on the right. For those on the left, Obama's presidency offers hope (yes that "hopey changy thing") that real change and reform can happen. If a black man can get elected in America, than perhaps real, progressive economic reforms are possible too. By raising expectations, Obama's presidency undermines the legitimacy of a Congress stalled in the morass of partisan bickering, and of a corrupt and massively unequal economy.  Decades ago historical research on revolutions suggested that the greatest danger for revolt occurred not when conditions were the worst in a society, but when small improvements gave people hope, but change did not come quickly enough to satisfy those hopes. 

Obama's presidency has done something that nothing before has been able to do: the fact of a black man in the highest office in the land has led masses of ordinary conservatives to question the legitimacy of government and law enforcement. Suddenly "law and order" conservatives are on the side of armed vigilantes protecting a law-breaking rancher (Bundy) in Nevada, who casually aim weapons at local, state and federal law enforcement officials. 

The most class conscious, educated members of the rich are fully aware of the disintegrating legitimacy of capitalism and the vastly unequal distribution of wealth and income in this country. A tiny handful of these economic elite think that it is possible to re-establish legitimacy as was done during the Great Depression by Roosevelt. Warren Buffet speaks openly and often about the need to reform the tax system to address rising inequality. Bill and Melinda Gates focus on pouring their wealth into reforming education with a goal of reducing inequality. Far more common however, is the headlong rush to accumulate more and more, claiming the moral superiority of capitalism (or getting toadying academic economists to do it for them), and blaming Obama for the rising numbers of Americans who seriously question the both  legitimacy of extreme inequality and capitalism. 

Their hatred of Obama is based not on anything that he as actually done to effect inequality, because in point of fact, Obama's actual policies and actions have fueled the growth of wealth and inequality.  Rather it is based on the fact that an Obama presidency has fueled more and more open disaffection with the existing order of things, and shaken the legitimacy of both government and economy. Their hatred is greater because they have more to lose. 

Zombie America - Installment 5 UPDATED!

America, the zombie nation that ONLY appears to be alive.  

Excellent article about how economic reality on the ground of everyday life for most Americans contradicts the economic fantasies theory of economic and political elites who argue for more tax cuts for "job creators," also known as voodoo "trickle down" economics.

See succinct article in Buzzflash  http://www.truth-out.org/buzzflash/commentary/trickle-down-economics-and-climate-deniers-face-an-insurmountable-challenge-reality

This is not debatable data: it is reality, like seeing rain gushing from the sky as proof that the sun is not shining. You can spin this reality, as The Wall Street Journal and The Financial Times - among other pro-Wall Street media - do but you cannot deny the facts of what is occurring. The US has two economies: a soaring stock market and wealth for the plutocracy, and a declining standard of living, lower pay, increasing debt and long-term joblessness for the rest of the United States.

This disparate reality breeds anxiety and fear in the ordinary person, who recognizes the inherent instability of their lives, families and communities, but doesn't fully understand the source of that instability. 

Media messages, from advertising to pundits to pulpits, send a message that nothing is wrong with the basic system of industrial capitalism, it is merely the presence of some out-group - socialists, immigrants (legal and illegal), "takers" (translate: "people different from me"), non-Christians (especially Muslims), and the poor in general - who need to be eliminated, controlled, sent home, or simply disenfranchised so that capitalism can get back to doing what it was designed to do.  The problem however, is that capitalism was always designed to increase capital. It was never designed to create jobs or build communities. 

--
Update: June 2014

An excellent AlterNet article http://www.alternet.org/economy/overwhelming-evidence-half-america-or-near-poverty provides links to sound research and statistical data that show that half of all Americans - yes, HALF! - meet the criteria for being "low income;" almost half of American's have zero (zilch) wealth; half of Americans lack the resources to survive even three months without income. 

roots of anti-intellectualism in recent years

In the wake of this November's election of Barack Obama, dozens of media commentators have heralded this as a welcome respite in the anti-intellectualism that has dominated American society and American politics for the past thirty years.

One media pundit (sorry I can't remember who) has said that Obama, unlike other presidents of the last forty years is "openly intellectual." Sure Clinton was a scholar during his college years, but he down played his scholarly background behind a folksy southern persona, leading voters to think that he just might be a "red-neck." [By the way, if Jeff Foxworthy is right, I too just might be a red-neck, since the instructions on how to reach my house include "and then you turn off the paved road" and my house originally came with wheels].

It is tempting to say that the roots of anti-intellectualism in American politics come from the simple lack of brainpower of the common man (or woman). They aren't so smart so they mistrust anyone who is openly interested in the life of the mind and intellectual ideas. Given that Obama, "openly intellectual" as he is, garnered the largest percentage and larger number of the popular vote in recent history, suggests that such a simple explanation is not sufficient. Perhaps that is the motivation of a few individuals here and there, but it doesn't help to account for the way in which anti-intellectualism is structured into our society, especially into our educational system. Also it doesn't explain why Republicans candidates and voters are more likely to exude contempt of intellectual accomplishment even more than Democrats do.

The key to understanding anti-intellectualism is found in our economic system and its current troubles. It is clear, beyond doubt, that our economy depends upon people buying things. When consumer confidence goes down, and people cut back on their purchases, our economy tanks. Regardless of all the sanctimonious sermons about people spending more than they earn, and going into credit card debt, the reality is, that our economy has been built on people spending beyond their means.

In troubled times like these, the rational choice for individuals is to save their money and not spend it, but what makes sense for individuals is exactly opposite what is needed to recharge the economy. Certainly there are economic systems that do exist and have existed that do not rest on consumerism and credit, but ours is not one of them.

When the health of the economy depends upon ordinary people spending and consuming larger and larger quantities of material goods, society must provide incentives to make people desire to spend beyond their means. One important tool in doing this is to attach cultural and social values to material things. Advertising is one means of doing this. Through advertising values of family, success, achievement, sexiness, love, and many others, are attached to material products.

More than a hundred years ago, Thorsten Veblen coined the term "conspicuous consumption" to describe the role of consumption in establishing status. The only thing that has changed since Veblen's time is that the use of consumption of luxury goods has been pushed further and further down the income scale. As a result, even low income teenagers will pay $36-$46 dollars for an Abercrombie & Fitch logo t-shirt, rather than $4-$6 for a similar quality blank t-shirt at Walmart. Where the wealthy rely on their peers knowledge of designers style (if you couldn't recognize a Chanel suit, a Lily Pulitzer frock, or an Dior gown, on sight your opinion hardly mattered), lower middle class and working class young people rely on large graphics of "high class" names spread across their chests, backs and down their arms.

When consumption is the bedrock of the economy, and appeals to status are crucial to encouraging continual consumption, there is little room to tolerate alternative, non-consumption based sources of status. Intellectual, creative and artistic pursuits -- except to the degree that they represent monetary exchange -- need to be actively discouraged since they can distract people away from consumption.

Degrees are fine, especially if they come from expensive schools, its knowledge and thinking that are viewed as bothersome. About fourteen years ago, the commencement speaker at the public four year college where I was then employed was a politically appointed state bureaucrat in a Republican administration. He congratulated the graduates on receiving their degrees, and then offered himself as an example of someone who had managed to get a college degree "without letting college change" him, or his beliefs and opinions in any way. This young Republican bureaucrat was proud of the fact that he had come through four years of college unscared by any troublesome knowledge that would undermine in any way the prejudices and attitudes with which he had entered college.

Similarly, art that commands high sale prices is fine, but art for art's sake is not. Negative attitudes toward the National Endowment for the Arts, and the artists that it supports demonstrate this latter view. Conservatives consider the only good art is that which has commercial value. The only artistic value is the value of the market place.

The ordinary individual who expresses distrust, fear and contempt for intellectualism or artistic creativity, is not thinking about promoting consumerism, but there are those in positions of leadership and influence, in government and the media, who are consciously undermining non-commercial sources of status and life satisfaction such as intellectual and artistic endeavor.

Spreading the wealth $257 dollars at a time

Salon.com has a wonderful, satirical piece, dripping with irony, by a mythical "Bob the Banker"

"The numbers don't lie. So here they are.* So, as I said, I make $280,000 annually after business expenses. I'm married and filing jointly. Under Obama, my itemized deductions would actually increase slightly — I'd get $49,420 in itemized deductions, while under McCain I'd get $48,975. But my personal exemptions would increase slightly under McCain — he'd give me $6,911, whereas I'd only get $6,132 from Obama. That leaves my taxable income at $213, 766 under Obama, $213,433 under McCain. Now we have to factor in the bracket cutoff, which for 2009 is $208,850. Anything below that figure for married couples filing jointly is taxed at the fourth tier, 28 percent. Any income above it, until you get up to near $400,000, is taxed at the fifth tier. And this is where the raving income-redistribution scheme of Barack Robespierre Obama kicks in. As you can see, my taxable income is about $5,000 higher than the cutoff. McCain is going to tax that $5,000 at the current rate, which is 33 percent. But Obama's crazed plan calls for raising that rate to — get ready for it — 35 percent. And here's what this means. Under McCain, my total tax bill would be $48,254. Under Obama, it would be $48,511. That's a difference of $257. I'll say it again: Two hundred and fifty-seven dollars. That's not two hundred and fifty-seven dollars I, or America, can afford. Things are tough right now. Average working Americans like me are really struggling. They're angry. And when they see the effects of Obama's spread-the-wealth lunacy on an average angry struggling American like me, they'll be even more angry, average, and struggling. Let me lay it out for you. Right now, I take home about $19,000 a month after the government skims off its share. And I don't have to tell you that $19,000 a month isn't what it used to be. Take my Jaguar. Do you have any idea how much it costs just to have that thing tuned up? It's like a BMW repair bill on steroids. We're talking $500 just to open the hood. The hard times are taking a toll on my family life, too. My wife has had to completely cut out having her colors done, and her personal shopper is threatening to walk if we keep cutting back on her hours. We're tightening our belts, but you can only tighten so far before there's no more room to pull. Then there's food prices. All across America, families are angry and struggling as they try just to get by. We're in the same boat. It's getting harder and harder just to put food on the table. We're only eating filet mignon twice a week, and under Obama's crazed far-left regime, we may have to completely give up Maine lobster and Macanudo cigars. And those are just a few examples. I could go on and on. The point is, under Obama Big Government is going to take $21.40 out of my pocket every month — money I could use to start another business, help the economy grow, or watch a couple of softcore porn movies on demand." *All figures about the comparative tax bills under Obama and McCain come from an interview with Gerald Prante, an economist at the nonpartisan Tax Foundation.

Enough said.

Answering a students question

Recently, one of my students asked what sociology might make of the current financial crisis. As I explained in the class, the current financial crisis is multidimensional, and has a number of different causes. The housing collapse of the housing market and the housing financing market is just one of several threads in the situation, but it helps illustrate some sociological principles of interest to us -- such as the distinction between use value and exchange value.

The use value of a house is that it protects its occupants from the elements, from cold or heat, rain or sleet. The use value includes the functionality of its bathrooms and kitchens. Its use value also includes the pleasure the owners get from privacy or from enjoying the way their house looks or feels. Moreover, ownership versus renting housing adds use value through the ability to make changes, alterations, and modifications to the home, the freedom to have pets, put up fences, and outbuildings that might be restricted by leases or rental agreements. The use value of a house can decline -- wiring and plumbing can break down, roofs can leak, paint can fade and crack, families can grow larger and the space may no longer be adequate, or undesirable "neighbors" can move in next door (like a strip mine)and lessen the pleasure or privacy derived from the home. But declines in use value tend to be slow and incremental. The decline in housing value over the past year or two has been a decline in exchange value, not use value; a decline in what one can sell one's home for (exchange it in the market place). The recent plunging market or exchange value of houses across the country has little to do with the use value of homes. Moreover, the rise in housing costs over the past two decades, had little to do with increases in the use value of housing. So why did housing prices rise so much, and why have they now crashed? How does the housing market and the financial market interconnect?

Let's begin with talking about the rising cost of housing. First, the facts on how the cost of housing has risen. In 1970 the median (mid-point) family income was $7,550 a year, and in 1965 the median (mid-point) price of a new home was $23,300. So the cost of the average, mid-point house was only 3.1 times the income of the average (mid-point) family's income. By the year 2000 the median (mid-point) new housing cost was $169,000, while the 2000 median (mid-point) family income was $41,990, making the average, mid-point house 4 times the average (mid-point) family's income. In other words it was a whole lot harder for the average family to afford the average house. Thing were even worse by 2007. In 2007, the median price of a new home had jumped to $247,900 while the median family income had only risen to $50,233, making the average, mid-point new house 4.9 (or almost 5) times the average, mid-point, family income.

Why did the cost of housing rise so much? For one thing, there was increased demand for housing, population grew. But even more important was that the age structure of the population changed. Beginning in 1965, a big "boom" of young people (the Baby Boomers who were born beginning in 1945) began to hit their 20's and begin looking to start families and buy houses. There was a huge flood of new home buyers moving into the market in the late 1960's and early 1970's. But these were mostly young people with young families, and they did not have large incomes, so even though there was a demand for new houses, the cost of those houses remained modest to meet the incomes of the young families that needed them. By 1990 and 2000, however, the number of young couples and young families looking for housing was fewer than the numbers of middle aged (40's and 50's) Baby Boomers looking to purchase housing (either to upgrade as they received promotions or to change due to their children growing up and leaving home). These middle aged Boomer house hunters had high incomes and were interested in more luxury in their homes. Luxury is to some extent related to use value; some of the greater cost of luxury items comes from them being longer lasting, more durable, more reliable, or just working better. But some luxury is purely a matter of exchange value (a result of supply and demand). The luxury good may not be more functional or useful, and is some times actually less so, depending upon the needs of the houses residents. For example, a synthetic Corian counter top will probably last longer, resist stains better, and require less maintenance than a marble slab counter top, but has a lower exchange value.

Home developers and builders were far more interested in providing homes for these more affluent buyers than they were in providing homes for the smaller number of young couples and young families with less money to spend. The reason is that there is more profit to be made from an expensive, high end house than there is from a smaller lower cost house. For example, if a developer can make a 20% profit (over costs) on a new house (a modest estimate just for arguments sake, profits are sometimes higher and sometimes lower), then the developer makes $20,000 on a $100,000 house, but $100,000 on a $500,000 house. The developer can only build so many houses, and the amount of time to build a house $100,000 house is not much less than to build a $500,000 house, so clearly the preference would be to build $500,000 houses, if you can find buyers for them.

Rising costs of housing were beginning to price a larger percentage of Americans out of home ownership in the 1980's and 1990's. Those lower income Americans wanted homes and had few choices at the low end of the price spectrum (since developers prefer to build higher cost houses). The percentage of families being home owners began to drop in the 1990's. What should have happened when home purchasing began to slide was that builders should have started to offer more lower cost housing. But they didn't do that, because developers and builders really wanted more buyers for their higher end houses. At the same time financial sector was looking for new opportunities for profit(in the interest they charged on loans). The interests of the building sector and the interests of the financial sector coincided, and focused on trying to find ways to expand credit to new customers, and make more people able to afford the rising cost of housing.

Between 1980 and 2007 the financial industry turned to the federal government to have the government remove some of the controls and regulation that limited lending practices. Lobbying by the banks and other financial institutions contributed to the repeal or overturn of several key laws that had existed to regulate the financial industry, giving banks and financial institutions more freedom to loan money to people who previously would not have qualified either because they were borrowing for risky projects (like "flipping" houses) or because their income or credit history was not suitable. Some of these changes made by Congress began in the 1980's but most took place between 1999 and 2004.

The financial sector, freed from controls over lending practices developed some new types of loans, such as new types of Adjustable Rate Mortgages that reset to much higher rates after a period of time, and "interest only" loans that require payment only of interest for an initial period before principle payments kick in. The lenders begin to target people who have been priced out of the housing market, with loans that looked affordable or at least the initial few years of payments look affordable, but which are actually well beyond the means of the consumer. As a result, people making the median income of $50,000 a year, were buying median houses of $200,000, because the banks and other lending institutions were making the first few years of payments something that was affordable. [A family with $50,000 income should not be purchasing a home worth more than $100,000, and even that's pushing it -- but the number of homes less than $100,000 are few and hard to find and often not large enough for young growing families].

So a housing industry (developers and builders) looking for more profits and a banking/finance industry looking for more profits (and allowed to make more risky loans by removal of regulation), offered loans to speculative borrowers and "subprime" (lower income) borrowers, loans that those borrowers could not really afford in the long run. Speculative borrowers are people who buy a house they can't really afford to pay for in the long run, in order fix it up and sell it for a higher price, and make a profit. Called "flipping" the buyer of the house is not planning on living in the house and can only afford to make a few months worth of payments. Their plan is to remodel the house and make it attractive to high end buyers, in homes of making $50,000 to $200,000 in profit in a couple months time.

The banking and finance industry had argued that it was okay to make loans that would have low payments initially and after some years would reset to higher payments because (so the argument went) people's salaries and earning went up as they got older, and the economy expanded over time and wages and salaries increase. The problem is that while it was true that salaries and wages had increased during the 1990's (from 1993 to 1999), the same was not true from 2000 to 2007. Wages and salaries stagnated, and did not keep up with inflation. In recent years, the increasing costs of petroleum and energy caused inflation to rise much faster than wages and salaries.

Of course, some of the blame has to go to the consumers who borrowed more money than they could really afford. They were sometimes pressured by banks and loaning institutions to do so, and were not always given all the information that they needed to make good decisions. But do hold some responsibility for taking on more debt that they could afford. Substantial responsibility lies on the banks and financial institutions that saw loaning to subprime and speculative borrowers as a way to make more money in the short run, because they should have and could have foreseen what would happen. Some responsibility lies on the builders and developers who were unwilling to construct more affordable housing and accept slightly lower profits. Everyone was short sighted, they went for the big bucks up front, and ignored the high likelihood of big losses down the road.

Why does a problem like this in the home building/ home financing area of our economy have so much spill over into other areas? One reason is that the home construction industry is a huge purchaser of goods from other industries -- from raw materials (lumber, steel, glass, plastic), to manufactured products (carpet, appliances, furnaces, doors, counter tops, etc.). Also new home owners also spend a great deal of money themselves on new furnishings (furniture, drapes, lamps, etc.). This has always been true about the housing industry. However, one very new thing, that makes the problem with the housing and finance industry in 2008 a more serious problem is changes in the rules governing financial institutions.

In 1933, the Glass-Steagall Banking Act was passed that said that banking (taking people's money in checking and savings deposits, and making home loans and small personal loans), and that neither banks nor insurance companies could do "investment" (using their own capital to invest in business as well as helping connect people with capital to invest with businesses looking for capital to fund their activities). Banking, is an activity that the government insures, so that people know that their money is safe, and "banks" are required to hold on to a certain percentage of the money deposited to have it on hand at all times to meet depositors needs. Investment businesses make no promises at all about customers money, they take the money and place it in investments, the money is not insured, and there is no requirement to keep cash on hand, and no promise that investors will get any of their money back; although most of the time investors get more money back than they put in, there is no guarantee that this will happen -- banks on the other hand guarantee that every penny you put in you will get back, and insurance companies guarantee that if you pay your premiums without fail and you have a qualifying disaster then you will get more than your money back.

So the 1933 Glass Steagall act, said these businesses, which have very different purposes and very different requirements in dealing with money should not be allowed to be merged together in a single company. In 1999, that law was repealed, and this allowed banks, insurance companies and investment companies to all merge together into large financial institutions. This allows problems in one area of finance to spill over into other areas of finance -- for housing loan problems to affect business investment and vice versa.

restructuring the economy

Current U.S. Department of Labor figures show that in July 2008, the number of involuntary part-time workers (in jobs formerly full-time but cut to part time due to "Slack work or business conditions") was 4,174,000 compared to only 2,693,000 one year ago (July 2007). While the change from 2007 to 2008 was unusually large, it is part of a longer historical trend to a greater reliance on part-time and temporary workers across the economy.

The trend to greater reliance on part-time workers is one for which high education has unfortunately been in the forefront. Universities, colleges and community colleges have shifted more and more of their teaching responsibilities to adjunct faculty, who teach part-time, have few if any benefits, who frequently are given no office space and who have little contact with students other than in the classroom. Community College's in particular have grown more and more dependent on part-time adjunct faculty. Research by Grace Banachowski shows the trend:

According to Lombardi (1992), part-time faculty constituted 38.5% of the instructors in 698 junior colleges in 1962. This number increased moderately to 40% in 1971, and three years later grew to nearly 50%. By 1980, nearly 60% of the faculty in two-year colleges were employed part-time, and 65% in 1993 (National Center for Education Statistics in American Association of Community Colleges, 1995).

As community colleges deal more and more often with under prepared students needed extensive developmental (or as they used to be called remedial) course work to be ready for college work, the trend towards relying on adjunct faculty is troubling.

Yesterday (August 7) was the annual first meeting of the Kentucky Community and Technical College System (KCTCS) Faculty Senate. Representatives from the 13 college districts around Kentucky gathered at the KCTCS offices in Versailles, Kentucky. At the end of the morning general sessions there was an unscheduled appearance by the KCTCS president Michael McCall. McCall offered general remarks of encouragement and optimism for the upcoming academic year, then opened the floor for questions.

The first question from the assembled faculty and academic deans dealt with the rising percentage of instruction being done at KCTCS college's by part-time adjunct instructors. The speaker raised concerns about the impact this was having on the quality of instruction. McCall's response was vague and general, full of platitudes about serving students and maintaining quality. McCall ended his response with a suggestion that individual colleges within the system would need to "examine" the balance between full-time and part-time instruction. [Notice this says nothing about changing the balance, or reversing the trends, only "examining" the balance.]

The next question Dr. McCall fielded was about on-line instruction and the new KCTCS Virtual Learning Initiative (VLI). The VLI is working to translate several KCTCS degree programs into a format in which all courses are offered in self-guided modules. Each course would be divided into smaller units, that could be taken in a week or two. Entry into modules would be 7 days a week, 365 days of the year, on demand from students. Because courses in the VLI program are detached from the traditional semester structure, and offered for fractional credit, all instruction for the program will be done by part-time instructors. Even full-time faculty who decide to participate as instructors will do so as overloads to their normal loads, but the plan is that most of the staffing will be done by new, part-time instructors, who will be paid on a per student per credit basis.

McCall's response to the question made it clear that he believes that this new model of on-demand education should replace all other forms of education in the KCTCS system. While he noted that we would have to wait to see how successful it the Virtual Learning Initiative was, he expressed the belief that it would be successful and that this model was preferable to the traditional model based on semesters.

Given McCall's response to this second question on the Virtual Learning Initiative, it is likely that when he said that KCTCS college's should "examine" the balance of full-time to part-time instruction, he really meant that they should be thinking in terms of moving entirely to part-time instruction!

Musing about the Future, Part II

Rising fuel prices are bringing some reversals to globalization trends, and bringing some traditional forms of manufacturing back to the United States.

I would like to say "I told you so," but apparently I didn't. After careful perusal of my archives it appears that many of the thoughts I've had about the future of energy and global markets never made it to the electronic page. So far, only my husband, and my colleagues on the Technology Committee have had to listen to those ideas, which were prompted last summer by reading Thomas Friedman's The World is Flat

Today, the New York Times has a piece "Shipping Costs Start to Crimp Globalization" which documents that changes I was predicting for the future have already begun. Globalization, the dispersion of economic activities across the world is driven by the search for cheaper and cheaper labor, and considerations of monetary exchange rates, tax policies, and environmental restrictions. Globalization has been made possible by cheap transportation and the global spread of instantaneous digital communications. Friedman and others have viewed the globalization process as moving in one direction only, to greater and greater integration of all localities into one world-wide economic web.

Thomas Friedman's description of what happened to the world up through 2006 is excellent. However, as I read The World is Flat last summer, it occurred to me that Friedman's predictions for the future did not take into consideration what would happen when the cost of fuel made transportation a more important cost than labor. That was in July 2007, when the cost of oil was approximately $70 a barrel. The cost of oil yesterday, August 1, 2008, was $125 a barrel an increase of seventy-nine percent - and this is nearly $10 less than the all time weekly high of $134 a barrel last month (July 2008).

Since cutting costs is the driving force behind globalization, it seemed to me logical and reasonable, that as the cost of moving goods across oceans become more expensive this would offset other costs (such as labor, taxes, and environmental controls) and make production of goods closer to end consumers more appealing. Moreover, a rise in transportation costs seems inevitable given the finite nature of the primary transportation fuel - petroleum.

As much as oil prices have risen (and with expanding economies in Asia to blunt any declines in consumption from the U.S. and other advanced industrialized countries) traditional economic theory would predict rises in world oil production. Albeit that many oil producing nations (especially within OPEC) are not market economies, even state owned industries are not completely immune to the pull higher prices can have on production levels. However, the Energy Information Agency of the U.S. Department of Energy gives oil production figures that show only small increases in world production in recent years, and even small declines in early 2008.


Oil production from Saudi Arabia where oil is state owned rose from August 2007 to January 2008, and then declined slightly in the first quarter of 2008. In Russia, where major efforts have been made to privatize and modernize oil production, saw small but steady production declines from August 2007 through April 2008. The overall pattern of world oil production in this time of rising prices suggests that oil is becoming more difficult and more expensive to find and produce. The easing of oil prices (and the price of gasoline at the pump) in the last three weeks, does not signal a long term return to cheap fuel, but a short term adjustment to the downturn in demand in the U.S. The long term outlook is for fuel prices to continue to rise.

The NYTimes article provides some specific examples of industries that have already bucked to the globalization trend due to increased costs. One of particular interest to people in central Appalachia were I'm located is a return of furniture manufacturing to the region.

Until recently, standard practice in the furniture industry was to ship American timber from ports like Norfolk, Baltimore and Charleston to China, where oak and cherry would be milled into sofas, beds, tables, cabinets and chairs, which were then shipped back to the United States.
But with transport costs rising, more wood is now going to traditional domestic furniture-making centers in North Carolina and Virginia, where the industry had all but been wiped out. While the opening of the American Ikea plant, in Danville, Va., a traditional furniture-producing center hit hard by the outsourcing of production to Asia, is perhaps most emblematic of such changes, other manufacturers are also shifting some production back to the United States.
Among them is Craftmaster Furniture, a company founded in North Carolina but now Chinese-owned. And at an industry fair in April, La-Z-Boy announced a new line that will begin production in North Carolina this month.

The U.S. steel industry is another that has seen resurgence due to rising transportation costs, while steel imports from China have been steadily declining in recent years.

The assumption by Friedman (and others) that all industries would eventually move into "just-in --time" supply lines that span the globe, is likely to run afoul of rising transportation costs and greater uncertainty of fuel supplies. The NYTimes article gives a few specific examples of industries opting for local suppliers for components in their products, which hints at a future in which more localized neighborhood based integration of groups of producers and suppliers may reappear in the American landscape.

This does not mean that there will ever be a complete retreat from global trade. As Brian Fagan discusses in The Great Warming even during the unpredictable precipitation in the Sahara Desert during the "medieval warm period" camel caravans carrying a variety of goods continued to be regular feature of northern Africa's economy. However, it does mean that the future global economic landscape may not be as "flat" as it is today.

The $2.99 gas boondoggle

Recent Chrysler adds encourage car buyers to purchase certain new Chrysler/Dodge vehicles and receive three years of gasoline at $2.99 guaranteed. Given that gasoline prices are currently a dollar higher than this, hovering around $4 a gallon across the nation, this may seem to some like a good deal. But is it?

The official rules for the Chrysler program are rather complex. First of all, you must have a VISA or MasterCard credit card account to participate. Chrysler then provides the buyer with a special card (see graphic) to be used only for gasoline purchases that is tied into that credit card account. This special card provided by Voyager Fleet Systems, which is honored at many types of stations, but not all. So the purchaser will need to know which stations will honor the card and which will not. In my region, a large number of the gas stations on the major north south route have been bought out by the Valero chain; a chain that does not honor the Voyager Fleet Systems card.

If you are one of those people who pay off his/her entire credit card balance each month, then this will have little effect on the cost. But for those who carry balances, using credit cards means adding to balance upon which interest is calculated. Since many people have credit cards with interest rates of 18% or higher, this raises the actual cost of gasoline at least a few cents per gallon (3 to 4 cents) each month above the $2.99.

Secondly, Chrysler has established in advance the amount of gallons it will cover at $2.99 for each type of vehicle, based on average estimates of vehicle fuel efficiency and on the 12,000 miles per year driven by the average American. For example, Chrysler has estimated that the Dodge Durango SUV will get 15 miles per gallon fuel efficiency. Using 12,000 miles per year, Chrysler calculates total gasoline consumption for a year as 800 gallons, and allots for the three years 2400 gallons of gasoline. If the purchaser drives more than 12,000 miles in a year, or gets less than 15 miles per gallon on average, he/she will have to pay full price (using some other method of payment) for any gasoline purchased above the allotted 800 gallons per year. Consumer Reports has tables to show many of Chrysler's estimates of gas mileage efficiency are above those found by their own testing teams.

Third and perhaps most importantly, one can purchase vehicles with greater fuel efficiency, that will cost less to operate even over the first three years, and certainly cost less over the longer life of the vehicle (unless one plans to buy a new more efficient vehicle at the end of 3 years). Simple comparison: purchase a 2008 Dodge Durango SUV that gets on average 15 miles per gallon at an estimated Kelly Blue Book Price range between $25,211 and $33,110 (depending upon trim, options, etc.) or purchase a 2008 Ford Escape Hybrid SUV which gets an average 32 miles per gallon (more than twice as much) for an estimated Kelly Blue Book Price Range between $27,577 and $29,312. At 15 mpg for 2400 gallons over three years, and $2.99 a gallon the Dodge Durango will cost the buyer $7,176 for gasoline. At 32 mpg for 1125 gallons (more fuel efficient), and let's say an average of $6.00 a gallon (let's hope not, but who knows), the Ford Escape purchaser will pay only $6,750 in the same three years.

So in the first three years, while the $2.99 gas program is in place, the Dodge Durango purchaser will actually pay more for gasoline than the purchaser of the more fuel efficient Ford Escape Hybrid. The initial cost of the two vehicles is very similar. So who got the better deal? The real kicker of course comes in that fourth year, when the $2.99 gas is all gone, and now the 15 mpg Durango owner will be paying the going rate for gasoline ($6+ ??), and be hit by a much larger fuel bill than the Escape owner who still has a vehicle that gets 32 mpg. Consumer Reports has made several such comparisons on the relative costs of owning various Chrysler/Dodge vehicles versus more fuel efficient equivalent vehicles. Unfortunately, unlike my own comparisons, Consumer Reports uses only the price of fuel at the time the article was published (in May 2008) which was about $3.68, and does not take into consideration increasing cost of gasoline (as my own comparison above does).

Of course, the really prudent vehicle purchaser might opt for the Toyota Yaris, a conventional gasoline powered subcompact, that also gets 32 mpg, but costs between $12,856 and $15,007. Thousands of dollars saved up front, and years of lower gasoline costs.

So, putting completely aside for the moment, any discussion of environmental issues, the $2.99 promotion by Chrysler does not make good personal economic sense for the individual consumer.

The following 1994 video clip, tells us that V. P. Cheney knew what would happen in Iraq. So what happened in the next 9 years to cause him to decide that the "price" would be worth it -- at least to him?

One theory advanced by William Clark is that Saddam Hussein "sealed his fate when he announced in September 2000 that Iraq was no longer going to accept dollars for oil being sold under the UN’s Oil-for-Food program, and decided to switch to the euro as Iraq’s oil export currency." It is worth noting that, by June 2003, Iraq oil transactions had been switched back to U. S. dollars despite the dollars' falling value.

Ideas worth spreading

Thanks to a post by John Hodgman, I was introduced yesterday to TED.com. TED (which stands for Technology, Entertainment, Design) is an organization that focuses on finding new, inspiring, cutting edge ideas in science, business, the arts and the global issues facing our world, as well as technology, entertainment and design and once found spreading those ideas freely as widely as possible. So there are many videos on this site, that are free for download. This is a great resource for educators.

Specific ideas for change

Lester R. Brown's Plan B 3.0 lives up to its name; it is a detailed plan (complete with budgets) on how to transform our world's economies and societies so that they will be both environmentally and socially sustainable. The genius of the plan developed by Brown and the scientists at the Earth Policy Institute is that it relies solely on what is already technologically possible today and what is economically feasible. Brown argues that the changes proposed in Plan B 3.0 are necessary to slow (and reverse) population growth, end poverty and hunger, and protect the resources and ecosystems on which modern, civilization depends. He acknowledges that Plan B is not necessary what is politically acceptable.

Trained as an economist, Brown realistically assess how much each of the proposals would cost, and how those costs can be covered. Most proposals pay for themselves over time (e.g., energy savings), can be paid for by reducing subsidies on destructive behaviors (like existing subsidies for virgin timber, coal production, and oil production), or are equivalent in cost to more destructive investments that they would replace (e.g., wind power for coal fired electricity generation, especially when direct and indirect costs of coal mining are taking into consideration).

Two chapters of particular interest to readers of Blue Island Almanack are Chapter 11 Raising Energy Efficiency and Chapter 12 Turning to Renewable Energy. The entire chapters are available on-line, and down loadable in pdf format. Excel files with links to all the major data sources for the chapters is also available for those who like to play with the numbers themselves.

In Chapter 11, Brown argues that it is technically possible and economically feasible to completely offset increases in energy demand between now and 2020 with improvements in energy efficiency. He lays out the major areas -- lighting, appliances, buildings (both new and renovated), transportation, manufacturing and re-manufacturing, materials use, and lifestyles -- in which energy efficiency can be improved given existing technology and knowledge. Everything he proposes is something that is already in use somewhere in the world, and has already demonstrated the capacity to reduce energy use. Brown provides dozens of specific examples from countries, cities, and corporations around the world who are already using these techniques and technologies for energy and cost savings.

In Chapter 12, makes a compelling case that we are technologically capable of increasing the contribution of renewables (wind, rooftop solar, solar electric plants, solar thermal, geothermal, biomass, and hydro-power) by nearly 600 percent between now and 2020. Combined with efficiency gains (outlined in Chapter 11), continued use of nuclear power (at the same level as presently -- about 15 percent of the world's power), Brown argues that the use of hydrocarbons (coal, oil and gas) could be nearly eliminated. Brown acknowledges that

"The Plan B goals for developing renewable sources of energy by 2020 that are laid out in this chapter are based not on what is conventionally believed to be politically feasible, but on what we think is needed to prevent irreversible climate change."

Moreover, Brown demonstrates that these proposals are technically possible, by providing example after example of specific existing, successful projects around the world. For example, already in China 40 million rooftop solar water heaters have been installed, and there are 2,000 Chinese companies manufacturing solar rooftop units, at a purchase cost of the equivalent of $200 installed. Many remote villages in China that still do not have electricity, now have hot water readily available. The city of Beijing along, already has plans to increase its 124 million square meters of rooftop solar collectors to 300 million by 2020.

Brown makes an excellent case that transforming out energy economy away from hydrocarbons through energy efficiency and sustainable, renewable power sources is technologically possible. The only question is whether or not we have the political will to do so. There in lies the rub.

Politics in Kentucky demonstrate how difficult the political battle can be. Just yesterday (Wed. May 21, 2008), the Lexington Herald-Leader commented ("State Can't Afford Coal Propaganda") upon the decision by Kentucky Governor Steve Beshear to divert "$400,000 from tax coffers into public education efforts by Kentucky coal industry groups." This comes at a time when sharp cuts are being made in the vast state programs, including higher education, and the state is failing to fully fund retirement programs and other future commitments. The coal-education money is going to foundations run by the Kentucky Coal Association and two smaller coal associations in Eastern and Western Kentucky. The editorial view of the Lexington Herald Leader: "some of the information the associations have put out -- including gushing, unequivocal praise for mountaintop-removal mining -- is more propaganda than objective fact."

Let's face it, coal is still King in Kentucky, and it will take strong external political clout -- such as national legislation banning new coal-fired plant construction, and serious carbon taxes -- to bring sanity and renewable energy to Kentucky.

Open Letter to Barack Obama

Please do not write off eastern Kentucky and the rest of central Appalachia. There have been two excellent pieces in the last few days, by West Virginian dawnt on the daily kos and by Dee Davis of Whitesburg, KY on Salon.com about the need for Obama to include central Appalachia in any campaign for the presidency. Both writers explain why it is a huge mistake to write off this region of the nation. Appalachians can be won over. We just have to be asked -- in person -- for our support.

Appalachians are the last American ethnic group that it is socially acceptable to negatively stereotype. While I'm not suggesting that no basis exists for some of the stereotypes, the stereotypes blind people (inside and outside the region) to the reality of the rich human tapestry here.

Folks living here in Appalachian include affluent business owners, educated professionals, solid middle class white collar workers, technical and health care workers, hard working skilled blue collar workers, dedicated factory workers, minimum wage workers who scramble to make ends meet for their families, retired folks on social security, and poor folks on SSI and temporarily on welfare. Yes, the percentage of elderly, disabled, and poor are higher here than suburban America, but they are not the majority.

We may live in "hollers," and the red-lining practices of banks may make manufactured housing ("trailers") easier to obtain than "built" houses, but folks here lavish care on their homes as much (or maybe more) than folks anywhere. [All photos are of homes in my "holler" in Hemphill].

People in Appalachia care about the same issues as other Americans: Health care, the economy (jobs and prices), the war in Iraq, the environment. In fact, I would argue that each of these issues is even more important to us here, since there are fewer jobs that provide health insurance, lower median incomes mean that economic uncertainties hit harder, a higher percentage of our young people are likely to enlist, and the nasty consequences of strip mining have immediate impacts on us here.

One of the most damaging stereotypes that has been brought up in this election is of Appalachians as racist. Sure there are racist folks here, as there are in Chicago, Philadelphia, New York, Washington, D.C., Eugene, Oregon, etc. But there are also African Americans who live and work peacefully along side whites in Appalachia. There may not be many African Americans in eastern Kentucky, but there also aren't any ghettos in eastern Kentucky. In Letcher County, there are black teachers, administrators, sanitation workers, surgeons, ministers, housewives, coal miners, secretaries, and many other occupations.

Moreover, being a lower income region, a very higher percentage of the physicians in this region are from the middle east and the Indian subcontinent (and many of whom are Muslim and Hindu). A brief perusal of the physicians listed in this region includes names like Ahmed, Alam, Alchureiqi, Ali, Ambalavanan, Appakondu, Bajwa, Chandarana, Chandrasheker, Chaturvedi, Garimella, Guindi, Gutti, Ghazal, Khater, Khouzam, Mehrpouyan, Mohmand, Narola, Pampati, Paliwal, Podapati, Quddus-Roopani, Rahman, Sahay, Singh, Abubakar Tidal, Valavalkar, Yalamanchi. These are highly respected members of the professional community. For example, folks around these parts swear by Dr. Tidal. I can't even begin to count the number of times in the past 12 years, that one of my students has said started a sentence with "Dr. Tidal says..." Until I did this little search for this post, I had no idea that Dr. Tidal wasn't an native born American of European descent.

I believe that most folks in Appalachia would welcome Barack Obama if he'd just take the time and come and visit with us face-to-face. We like to judge people as individuals, on their character, but we're folks who want to make those judgments in person. We need to see and talk to folks to decide whether or not we trust them. We don't like to depend on media images or stereotypes.

Blue Island Almanack

If you have found Sociological Stew of interest you might want to check out the new group blog Blue Island Almanack to which I contribute. Blue Island Almanack was the brainchild of blogger e.r. dunhill, and is a group effort involving e.r. dunhill, myself, and bloggers Progressive and Panhandle Poet.

As the name Blue Island Almanack suggests, the one thing all four of the contributors share is a concern about this blue ball in space that is our home. The blog description is:

Humans share a great and contentious resource in our collective home, this blue island in space. This blog is a place for authors and readers to explore the collective connection of economy, education, environment, and ethics through articles, essays, and debates.

The bloggers in our little crew are politically diverse, from conservative to centrist to liberal, although none of us are too comfortable with labels. We've started out as we hope to continue, with lively -- but respectful -- debate. All too often, especially in the blogosphere we only read and listen to those with whom we agree. Blue Island Almanack hopes to remedy that in the months to come.

Costs of Owning a Car?

A regular reader and astute commenter, e.r. dunhill, on Sociological Stew posted a series of responses to the "Politics of the damned?" that I've decided require a follow-up post.

We were discussing what kind of changes might be needed to allow modern societies to survive up-coming climatic shifts, and create modern, livable, sustainable societies. erd sited several writers who "advocate a shift toward producers providing services, not selling products. From a design and material-cycling standpoint, this makes excellent sense. But, it means that the end-consumer does not enjoy the economic benefit of ownership; the consumer simply pays ad infinitum."

I questioning the "economic benefit of ownership," using the automobile as an example, suggesting that owners of automobiles still pay "ad infinitum.," and that the value of the automobile was a use value not an economic value. By this I mean that private auto ownership gives an individual control over their movement and schedule and provides a sense of freedom, but does not provide an economic asset. Nonetheless, erd countered that "economic benefit of owner ship is that the first costs ultimately provide the owner with an asset. At the end of making car payments, the owner still enjoys the benefit of using the car. Moreover, the owner may ultimately recover some portion of that first cost by selling the vehicle."

This got me to thinking, and as often happens when I start thinking I do some research. What does it really cost to own a car? I took my research and made a few simplifying assumptions to come up with the following.

Suppose a man, let’s call him Charlie, bought a 2004 model year Toyota Camry LE 4 door sedan in December 2003, with payments to begin January 1, 2004. The Camry is one of the most popular cars made in the last 20 years so that’s a reasonable choice to make. It’s a reliable car, with decent gas mileage – EPA estimate of 30 miles per gallon.

The manufacturers suggested retail price on Camry in 2004 was between $15,900 and $28,500. So let’s take the median between those two prices, and assume a fairly well “loaded” vehicle at $22,200 original price. Let’s say Charlie put $2,000 down, and financed $20,200 at 6 percent over 60 months – this would be a monthly payment of $405. The total amount Charlie would have paid out on this purchase as of December 1, 2007 would be $2,000 plus $19,440.00 = $ 21,440.00. [Click here to see my spreadsheet for interest calculations and payments].

We’re going to assume that Charlie is a normal driver and averages 1,000 miles a month, or 12,000 miles a year, and 48,000 miles for the four years between Jan 2004 and December 2007. Based on data from the U.S. Department of Energy, the exact average price of regular gasoline for all the months between January 1, 2004 and December 1, 2007 is $2.32 per gallon. [You can calculate it yourself from the DOE's Excel spreadsheet -data series 1]. We’re going to use the EPA estimated miles per gallon of 30 mpg (even though this is probably a significant underestimation because most car owners do not drive their cars at the optimum speeds for the highest gas mileage performance). So the cost of gasoline for the four years from January 2004 through December 2007 is $3,712.00.

Charlie is a good car owner has his car serviced every 3,000 miles. The cost of regular service varies around the country, so I’ve made a simplifying assumption that service every 3,000 miles or 3 months, will cost $30. That’s higher than where I live, but much less than urban areas where most people live – Charlie lives in the greater Boston Metropolitan area [yes, gentle readers "Boston Charlie"]. And, I did not include any higher charges as might be made for the 30,000 mile check. So I’ve allowed $450 for regular servicing over the four year period.

Of course there is also insurance to pay on the automobile. Here I’m going to have to do a little guessing (because I can’t get the Progressive site to work for me, and it would only give me the cost right now). We own a 2005 Chevy Cavalier (a substantially less expensive, and less popular car than the Toyota Camry) and pay $78 a month for full coverage insurance. Since we live in an area that has high insurance rates, I’m going to be very cautious and allot $80 a month of insurance coverage for Charlie’s Camry. That’s $3,840.00 for four years of car insurance.

So the total expenditures of our car owner, after four years of ownership are:

Down payment and payments	$21,440.00
Gasoline	$ 3,712.00
Maintenance/Service	$ 450.00
Insurance	$ 3,840.00
Total:	$29,442.00

Notice, that I have not even bothered to include other important costs of car ownership, such as property taxes, registration and licensing costs, which vary considerably from place to place. Then there are also the costs of bridge and road tolls. So this exercise underestimates the true total cost of car ownership.

Suppose Charlie wishes to sell his car right now (December 2007). He has put $29,442 into the car, and still owes, $3,754.00 on the principle of the loan. The current Blue Book value of the 2004 Toyota Camry LE sedan modestly loaded with 48,000 miles – for sales between two private parties (the best deal) is $12,625 on a 2004 Toyota Camry fairly well “loaded” in good condition. If Charlie is successful in getting the full $12,625, and pays off the remaining loan of $3,754, he will have a “profit” of $8,871 to deduct from the $29,442 that they have paid into the car. The net COST of the car to our owner over the period of four years was: $20,571.

As we said earlier our Charlie lives in the greater Boston area -- let's say the town of Lexington (I choose this because I actually have a friend named Charlie who lives in Lexington, MA), and has access to a well developed public transportation system (one of my personal favorites) -- two bus routes #62 and #76 connect Lexington with the MBTA. The MBTA offers monthly bus passes in a range of prices depending upon location. Although I suspect that our Charlie, in Lexington, could suffice with one of the less expensive passes, for the sake of argument let's say he needs the most expensive pass -- the Outer Express Bus, which costs $129/month, and provides "unlimited travel on Outer Express Bus PLUS all Inner Express Bus, Local Bus, Subway, Inner Harbor Ferry, and Commuter Rail Zone 1A." If Charlie purchased the Outer Express Bus pass, and used it for the majority of his work and pleasure travel, over the course of the same four years he would pay $6,192.

Compare $6,192 to the net COST of car owning of $20,571 for the same period, and you can see that Charlie could easily have afforded to rent a car for a weekend or a week, several times, for vacations, weekend trips, etc. He might even have purchased a "share" in a cooperatively owned vehicle by several individuals that would cost less than the occasional car rental.

It might be that Charlie does not live alone (my actual friend Charlie has a wife and two teenage children). While we would need to consider the costs of public transportation passes for all the members of the family, we also have to recognize that nearly all middle class families have more than one vehicle, with teenagers, perhaps three or more vehicles. I recently saw a statistic (sorry can't remember where) that said for every 100 Americans of driving age there were 102 private vehicles on the road. From a strictly economic standpoint, given the figures discussed here, a family of four would save money, by having one automobile, and several public transportation passes.

erd is probably thinking about now, that I didn't address one of his major points -- that one does finally pay off the car loan, and then has an "asset." In my example, I stopped short of paying off the loan (largely because it was easier to get reliable data on 2004 models). The cost of paying off the loan would be another $ 3,853.90 (plus maintenance, insurance and gasoline for another year). Once the loan is paid off, there is still monthly costs of insurance, gasoline and maintenance. The cost of gasoline is now averaging $3.07 and rising, and not the 2.32 average of the past four years, so that will be a increasing cost. The costs of maintenance will rise as more and more things need to be replaced and repaired. The costs of insurance will likely decline. But all-in-all given the costs we've been discussing the monthly upkeep costs of the automobile will continue to be greater than the costs of the monthly public transportation costs. At the same time, the Blue Book value of that car, an the amount of money Charlie could recoup by selling it, will be declining. The Camry keeps its value better than most cars, but even that will decline in value over time.

"Not every one's from Boston, John" [nod to "1776"], and most Americans do not have such well developed public transportation systems available to them. Given the costs of owning a vehicle, from an economic stand point, most Americans would gain financially if they could exchange the ownership of one family vehicle for higher taxes to support comprehensive public transportation in their area. There is nonetheless a very high resistance to public transportation (and to taxes to support it). My primary point here, is that such resistance is based on psychological, emotional and cultural reasons, not economic reasons. If we were all rational economic actors as most economists mistakenly take us to be, then it would be easy for us to exchange our automobiles for comprehensive, public transportation systems. We do not want cars because they make us economically better off. We want cars because we have been culturally conditioned to equate them with adulthood, freedom, independence, convenience and other emotionally laden concepts. There was a some years ago a series of "Mr. Goodwrench" advertisements on TV, that had a very catchy tune, the refrain to which declared "it's not just a car it's your freedom."