William K. Black: The Lethal Lemons on the Road to Bangladesh

I wrote yesterday about the "control frauds" (in which the person controlling a seemingly legitimate entity uses it as a "weapon" to defraud) that target purchasers of bad quality goods ("lemons") and employees. The example I used to explain these concepts was the collapse of the building housing garment factories in Bangladesh.


As I write, there are terrible reports indicating that the death toll is far greater than currently reported. Again, the initial reports from a disaster often prove inaccurate in important ways so I urge caution and the need to confirm whether the newer reports are accurate.


The higher death toll is not what prompts this article. I write to discuss the intersection of control fraud, austerity, globalization, labor "reform," and economic development.


The Road to Bangladesh


The most interesting event I have participated in is the Kilkenomics Festival in Kilkenny, Ireland held in early November. It is an economics festival in which people with expertise in finance (dressed in jeans) partner with professional comics (dressed in suits) to discuss serious economic issues. The organizers sell roughly 3,000 seats to non-wonks from Ireland and Europe. The comedians keep us honest and minimize the jargon.


I appeared in six or seven events last November, including interviews with the BBC and Ireland's Pat Kenny on RTE. One of the subjects we discussed repeatedly was the intersection of austerity, "free trade" and labor "reforms." I made the point that the EU had a single game plan for the Eurozone's southern periphery. They inflicted austerity, forcing the Eurozone into a gratuitous second recession and the southern periphery into an über-Depression with unemployment rates significantly worse than the largest European economies generally suffered during the Great Depression. (Cynically, and the EU is a past master in cynicism, the EU refers to the result as a "mild recession." It also avoids the word "austerity" like the plague and calls it "pro-growth.")


What is far less well known in the United States is that Berlin has also demanded (successfully) that the "troika" (European Commission, the European Central Bank (ECB), and the IMF) insist that the nations of the periphery engage in labor "reforms." "Reform" is a word chosen for its positive connotations and its generality. There is certainly some variant of a labor "reform" that would be desirable in any nation. Unfortunately, what the troika means by labor "reform" is sharply lower working class wages.


The excuse for forcing lower working class wages is that doing so is essential to increase exports. The troika's recipe for the periphery's recovery is for every nation of the periphery to become a significant net exporter.


A nation with a sovereign currency can use three strategies to speed its recovery from a recession or a depression. The three strategies are not mutually exclusive. The nation can adopt fiscal stimulus, an aggressive expansion of the money supply, and it can devalue its currency (which makes it far easier to become a net exporter). A nation that adopts the euro, however, must give up its sovereign currency and its ability to employ any of these recovery strategies. It cannot employ a significant stimulus program because doing so would violate the (oxymoronic) "Stability and Growth" pact. It cannot expand the money supply because the ECB is controlled by German principles, which are based on the assumption that hyper-inflation lurks behind every corner. It cannot devalue its currency because it no longer has a sovereign currency.


The only strategy left in the tool chest for a nation that adopts the euro and is mired in recession or depression, therefore, is to become a substantial net exporter. There are two obvious problems with this sole remaining strategy. One, not all nations can be net exporters. One nation's export is the other nation's import. The more Germany is a net exporter the harder it is for other euro nations to be net exporters.


Two, the way for a nation to gain a competitive advantage in exports and increase its chances of becoming a net exporter is either to have a far more skilled workforce producing high value exports or to slash working class wages. Northern Italy can export luxury goods created by skilled craftsmen and designers. Spain, Ireland, Portugal, Southern Italy, and Greece have to out-compete poorer nations with far lower working class wages. The troika is actively encouraging each of these nations to lower working class wages. The problem I pointed out when I was in Kilkenny is that Ireland is trying to cut working class wages enough to out-compete Italy, but Italy is trying to cut working class wages to out-compete Spain, which is trying to out-compete Portugal, which is trying to out-compete Greece, which is trying to cut wages to out-compete Turkey. I argued that slashing working class incomes makes recessions worse, that it was impossible for everyone to be a net-exporter, and that this "race to the bottom" of working class wages would produce grotesque inequality and poverty in what used to be the developed world. I called the race to the bottom strategy the "Road to Bangladesh."


But, wearing my criminology "hat," I added that encouraging the "Road to Bangladesh" is criminogenic. As firms are forced by "free trade" to force lower wages on their workers if they wish to stay competitive with their competitors who manufacture goods in nations like Bangladesh, and as firms in Bangladesh engage in the same competition to constrain wages, the result can be murderous. The least ethical firms that are most willing to steal from their employees (e.g., by failing to pay overtime) and place their lives and safety at risk in the workplace gain market share can produce a "Gresham's dynamic" in which bad ethics drives good ethics out of the workplace. As I explained in yesterday's article, they will also degrade the professions, regulators, and elected officials by suborning them to overlook the unsafe plants and the thefts from workers.


But here's the sting in the tail of my story about Kilkenomics. When I criticized the "Road to Bangladesh" strategy the conservative economists, I was appearing with rushed to praise Bangladesh as the model for successful economic growth through exceptionally low wages. They responded that if Portugal was in fact on the Road to Bangladesh it was actually on the road to success. Neo-classical economic dogma is intensely criminogenic.






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MAYFLOWER, Ark. (AP) — Officials say it will be weeks before some Mayflower residents who had to leave their homes because of a leak from an Exxon Mobil Corp. oil pipeline can return.


More than 20 homes were evacuated after the March 29 leak from the pipeline flooded a neighborhood with crude oil.


The Unified Command responsible for cleanup says ExxonMobil and environmental regulators will conduct air monitoring and sampling in the homes. The state Health Department will make final recommendations on when residents can return. Officials say residents will have to take certain steps to prepare their homes to be checked.


Officials say heavy debris removal is nearly complete in the cove in Lake Conway where the oil spilled. Testing shows no oil drifted into Lake Conway.






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Russian billionaire Alisher Usmanov sees an opportunity in Apple's stock price freefall over the few months and is betting $100 million that the company will turn things around.


"I believe in the future of this company even after Steve Jobs," Usmanov told Bloomberg. "When the company lost $100 billion of its market value, it was a good time to buy its shares, as the capitalization should rebound." Usmanov's brash bets have paid off in the past — he made a 10-fold return on investment on Facebook. Usmanov didn't make his estimated $19.8 billion via tech, but rather through mining and lumber operations and investments. Read more...


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In a move reminiscent of the Alec Brownstein experiment Snickers and AMV BBDO created a way to make bad typers recognize why it is that they were unable to spell.


Snikkers Googel worked to bid on misspellings of common search terms. Each time someone misspelled a word, (which was probably often, since people generally rely on the search engine to correct the terms for them), they got tailored ads asking them to "Grab yourself a Snikkers," because "Yu cant spel properlie wen hungrie."


According to the agency, the campaign reached 500,000 people in three days of launch. It proved a smart way for Snickers to not only reach bad typers, but also those who type "LIkE diS" for absolutely no reason.


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Airbnb

If you want to continue using Airbnb, a site that lets users book stays at other users' homes, you'll now need to provide either a photo ID or answer a series of personal questions.


Beginning today, Airbnb will notify 25% of U.S. users that they need to go through the Verified ID process, a requirement that will soon be rolled out to the rest of Airbnb's global user base. You can go ahead and jumpstart the process by visiting Airbnb's website.


Once you arrive at the verification page, you'll have the option to upload a passport, photo ID card or driver's license, or share a few personal details. For the latter, I was asked for my name, address, birthdate, last four numbers of my social security number, the state I lived in in 1990 and to identify the streets and cities of two former addresses. Read more...


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The Rhino Stamp Project



Advertising Agency: TBWA\Worldwide, New York, USA

Executive Creative Directors: Adam and Matt

Art Director: Shane Forbes

Copywriter: Charles Pantland

Designer: Kerry Moralee







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The Rhino Stamp Project



A campaign designed to invade borders. There are 29000 rhinos left in the world. South Africa is home to 75% of them. Their horns sell on the black market for more than $60000 per kilogram, to be ground and used as a hypothetical cure for cancer or a vitality tonic for the wealthy. South Africa faces a massive challenge, an almost impossible one, in protecting one of our national symbols, one of our big five. Despite abundant petitions and awareness campaigns, the numbers of our rhinos killed continue to soar. We needed to find a way to talk directly to those responsible for creating the demand and show them what they were doing. So we reinvented age-old postage stamps and turned them into our new medium. But they aren’t ordinary stamps. The usual breathtaking imagery of our animals has been replaced by the carnage that poachers leave behind. Each stamp includes a message in Chinese, Vietnamese or Thai reading: “say no to rhino horn.” Letters with our stamps on them, will not only be sent straight to the perpetrators, but will also speak directly to them. We created a way to take the fight out of our vast bushveld and put it in the hands of those who are ultimately responsible. We then used our stamps to create posters that will be put up countrywide, rallying the South Africa public to attach one to all letters leaving our shores for China, Vietnam or Thailand. We have also created stamp booklets that will handed out used as inserts and direct mailers, making sure that each and every stamp sent becomes a direct mailer from us to them. We hope this campaign will start a serious conversation and will continue to do so during it’s roll out and so that we’ll see less of our rhinos being killed. The only way to end the slaughter is to end the demand.


Advertising Agency: TBWA\Worldwide, New York, USA

Executive Creative Directors: Adam and Matt

Art Director: Shane Forbes

Copywriter: Charles Pantland

Designer: Kerry Moralee







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The New York Times increased daily circulation by 18% in the most recent reporting period, vaulting it past USA Today to become the second-largest U.S. newspaper, according to figures released today by the Alliance for Audited Media.


The Times' average daily circulation rose to 1.87 million in the six-month period ending March 31, the alliance said in a statement. News Corp.'s Wall Street Journal remained the No. 1 paper in the U.S., with its circulation climbing 12 % from the period a year earlier to 2.38 million. The Gannett Co.-owned USA Today, which introduced a redesign last fall under new editor Larry Kramer, dropped to third after daily readership declined 7.9% to 1.67 million.


The New York Times has seen a surge in online subscribers since the company instituted a so-called paywall in 2011, prompting readers to pay for online access. The Alliance for Audited Media's daily circulation figures include people who read the paper on a range of devices, including Amazon's Kindle. USA Today does not charge for online access, relying entirely on advertising for digital revenue.


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Advertising Agency: Casa Darwin, Brazil

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Art Director / Illustrator: Mariana Coelho

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