GrimReader

Design Piracy Protection Act II - Rise of the Fashion Patent Trolls

2009-06-06T19:13:00.012-06:00

I don't have much new to say about the Senate's second attempt to enact Diane von Furstenburg's wet dream of a law, the Design Piracy ~~Prohibition~~ Protection Act. DvF, for those of you who don't know, is a big time designer who currently heads the Council of Fashion Designers of America (CFDA). CFDA includes other tiny little "independents", like Oscar de la Renta and Donna Karan.

The DPPA, whose earlier incarnation I wrote about here, is a Three Card Monte tour de force. First they show you the money card, trademark piracy. Oh, the poor designers, having their precious Designs copied by unscrupulous, probably brown-skinned, sweatshop owners who copy the garments right down to the logos and trademarks. Then, they elicit your support, since nobody is in favor of people having their ideas stolen, much less their branding. When you look under the card, though, what you find is that the Act actually establishes clothing design as intellectual property, something only enforceable by civil action.

Back up a second. As I noted here,

First of all, note that this law protects designs, not branding. [Counterfeiting as is practiced on Canal Street in NYC] is ALREADY ILLEGAL UNDER EXISTING LAW, which are not enforced.

Second, THIS LAW DOES NOT ADDRESS THOSE ISSUES. But it will put independent designers out of business. Stop and ask yourself a few questions:

1) Who is more likely to have access to the necessary patent attorneys, independents or big designers? You are going to need lawyers to do patent searches [and applications] and to enforce claims.

2) Given that anyone in the supply chain can be sued for infringement, will you be able to hire pattern makers, cutters, etc.? Only if you can prove that you already own the design.

The biggest supporter of this law is knockoff artist Diane von Furstenberg, who recently got caught knocking off a Mercy jacket design.

This law will protect the big guys, squash what little innovation there is, and wreck US apparel manufacturing.

And another thing ... This is going to lead to patent trolls, the same way patents have in every other field. A patent troll is someone who patents all possible variations on a design theme simply so that they can control market share or set themselves up to be able to threaten potential market entrants with litigation and corner them into lucrative settlements.

Yes, the high end French fashion industry has protection. Have you ever noticed how much attention French fashion shows receive? Do you know why? It's because as soon as the show is over, designers in the US are poring over photos so they can knock them off. The industry thrives on copying, but mostly by copying the high end, not the low end. This law -- and people offering their support -- is advertised as helping the little guy, but it will actually help the big guy, who will go on knocking off the designs of the little guy because they can't defend themselves.

It's f-a-s-h-i-o-n. Everyone is looking to copy what everyone else is doing so that they can lay claim to being fashionable. At present, it's all Open Source. That's about to change. We're about to shift from GNU/linux to Windows 3.11 in the fashion industry.

Branding and logos have nearly killed the industry; no need to have innovative design if you can pass off t-shirts with collars and focus grouped pseudo colors as style. All you have to do is to associate the logo (the Swoosh, the Alligator, the Polo Player, FUBU, the name: Hillfiger, Mossimo) with a certain set of lifestyle choices in the mind of the ~~mark~~ consumer. Then you can pass off whatever crap you want to them at substantial markup.

Kathleen is going to have lots more to say about this, but you can start with these:

Proposed law to destroy 90% of design businesses
Fashion copyright: the death of us all

In the first one, she implores you to "Send emails. Sign the petition." Please do. Not like that has done any good in getting the attention of Congress or the MSM with regards to CPSIA, but at least we have a chance of killing this Golem before it becomes a law; there is little to no chance afterwards.

Hattips to Boing Boing and Walter Olson (Overlawyered).
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Note: If this law passes, I intend to patent the popped collar, enforce it against infringement, but refuse to actually make use of it. Perhaps this kind of thing can be stopped.

Things I have learned

2009-04-18T08:09:00.003-06:00

This is a true story.

Once, ~~in band camp~~ I was out at a restaurant with a friend and his (now ex-) wife and she talked us into going to Hooters. Seriously. She offered to pay for the beer, how could we resist?

So we walk into Hooters and the place is packed. Everyone is in there watching TV, so I note that it is a NASCAR race. The only seats available were out on the porch. On the way there, we pass three tables together: at the middle table were seated two middle-aged couples, the table to the left featured their kids (we knew that because they were asking if they wanted more), and the table to the right was two older couples who were apparently their parents ("Dad, you want some more hot wings?"). I had a revelation: If you take your kids, and your parents, to Hooters, to watch the Pepsi Cola 500, you just might be a redneck.

(Grrr, something wrong with ftp)
(From this photo set)
Not that there's anything wrong with that.

What is the point of government science?

2009-04-01T21:18:00.005-06:00

Until this morning, I had been operating under the assumption that the ban on phthalates contained in the CPSIA was (1) scientifically justified, and (2) not supported by the earlier legislation that guided the CPSC's actions. Guess I was wrong.

It's not that I have done the research on either point. On the science, I did just enough to see that this was likely to devolve into one of those smear campaigns that one sees in Global Warming or Second Hand Smoke debates. You know: every argument degenerates into an ad hominem because the scientist in question works for a university that once accepted money from a (pick one: oil company, tobacco company, chemical company, government agency) and therefore cannot be right about anything. On the legislation, I just accepted the special interest groups' claim that this legislation was necessary. I felt I should do that because this wasn't fertile ground for argument. My approach has always been that the CPSIA does not take into account the particulars of the industries regulated, so there are predictably unintended consequences (an oxymoron or not?).

If this NPR report (Public Concern, Not Science, Prompts Plastics Ban) is any guide, it turns out that career science staff at the CPSC found problems with two types of phthalates (DEHP and DINP) and got them restricted 25 and 10 years ago. Otherwise, there simply is little ground (according to their research) for concern. If the CPSC science is good, babies simply do not keep these things in their mouthes long enough to get a large enough dose. Congress' take on it?

Sen. Dianne Feinstein (D-CA) said the ban was needed because phthalates had been "linked to serious reproductive defects."
Rep. Jan Schakowsky (D-IL) talked about "potential harm to testosterone development and the male reproductive tract."

Yes, this is the same Jan Schakowsky who threatened my wife.

I'm still not interested in the science: I'll stipulate to the dangers. But one has to wonder about the utility of government scientists when the people who insist that we must have them to provide data free of conflicts of interest also refuse to accept their conclusions. I must once again conclude that the special interest groups -- US PIRG, Public Citizen, Consumer's Union -- control Congress, this time with one-sided and dubious "science" and "facts". Perhaps it's the allure of truthiness, a quality apparently not limited to the Bush Administration or Republicans despite their well-documented war on science.

And having stipulated to the science, it appears that the CPSC already had some leverage (link, caveat emptor, but also listen to the NPR story linked above):

In the United States, the Consumer Product Safety Commission (CPSC) and the Toy Manufacturers of America (TMA) agreed upon a voluntary limit of DEHP at 3% in pacifiers and teethers in 1986. Later in 1998, the CPSC asked toy manufacturers to voluntarily withdraw vinyl teething rings and rattles containing the phthalate DINP from the market.

Nancy Nord summarizes the problem nicely in a letter to the POTUS today:

Upon joining the CPSC, the new chairman will be presented with a law that curtails the agency's ability to prioritize its regulatory activity based on an assessment of risks, the magnitude of those risks, and the actual consequences of those risks.

Not to mention a hostile Congress that refuses to listen to its constituents or to the career scientists whom we pay to advise the representatives we elect to ignore us.

Astroturf

2009-03-28T07:34:00.010-06:00

Given that we've already heard from US PIRG and Public Citizen, it should not be surprising that another Nader organization has decided to weigh in on the CPSIA debate. This time, it's a front organization for Big Law, the Trial Lawyers, called the Center for Justice and Democracy, and their pet blog, the Pop Tort.[1] They are dredging up the same arguments that David Arkush and Rachel Weintraub have already trotted out to the applause of The True Believers:

There is no problem with CPSIA, the CPSC has all the power it needs to make broad exemptions for small businesses, etc. The real problem is Nord, she needs to go. [paraphrasing]

I think we've already exploded that several times over. It flies directly in the face of Rachel Weintraub's statements before the committee during the hearings for the CPSIA (pdf) (HR 4040):

Unfortunately, the CPSC's ability to be proactive has been thwarted by a shrinking budget, a lack of aggressive leadership within the agency, and statutory provisions that create obstacles to the effective prevention of product risks.
...
Before proceeding to a detailed explanation of our recommendations, we wish to emphasize the importance we place on four particular issues -- Section 6(b), independent third-party testing of children's toys and products, the need to include whistleblower protections, and language clarifying the reach of CPSC's authority regarding the preemption of common law claims in any CPSC reform package.

Her recommendations then begin with an entire section -- headlined in boldface, "1. Strengthen CPSC A. Increase Budget" -- which has since been dropped by all of the pro-CPSIA crowd as an issue. CPSIA increased the budget authority, but Congress has not allocated the actual resources. Nevermind that the same people who passed the law still control the Congress, or that they have sent hundreds of billions to Wall Street, Detroit, and various other places.

After expressing support for a number of other measures designed to increase the size and scope of the CPSC, Weintraub then began to discuss lead in children's products. The boldfaced headline once again makes it clear that she wasn't talking about reasonable measures that take into account then actual risks: "Ban Lead from Children's Products". Nevermind whether or not the children can actually access the lead, or whether they are likely to come into contact with it, or whether they can actually absorb it (all of the things you would need to prove in applying for an exclusion, see below).

But the really interesting bit is this:

Lead has been found in products made by large manufacturers, as well as in those made by smaller companies. We support a ban on lead in all children's products, which currently does not exist.

They don't want a small company exemption. They are telling people that the CPSC can offer such an exemption, but the careful reader may observe that they never support their assertions with citation of the relevant portion of the law. Even their favored Chairman Moore has come out strongly against small companies (as noted below).

They don't want reasonableness. In her testimony, Weintraub said this:

We recommend that the language be preceded by the following statement, which is included in S. 2045:
"the prohibition contained in section 2(A) shall apply without regard to whether the lead contained in such children's product is accessible to children."

What about exemptions for inputs (cloth, dyes, components) or component testing versus final product testing? Again, Weintraub is against any compromise:

To assure that products are safe when they enter the American and global stream-of-commerce, safety must be infused into the earliest stages of the supply chain. For this reason, independent third-party testing of final products, as well as components, must be required [emphasis added]. Third-party testing entities must be independent from and have no financial relationship with the manufacturer producing the product. Testing must be conducted to identify design flaws as well as violations of existing regulations [emphasis added], such as those governing the use of lead paint. Components and final products must be tested at numerous stages of production and tests must be conducted randomly throughout the manufacturing process [emphasis added]. Products should also be certified that they meet the appropriate standards and should bear a label indicating that they are certified.

Testing for design flaws? Who will judge that, and by what standard? This is a statement that effectively places all decisions on design within the federal government as advised by Ralph Nader and his devoted followers, Rachel Weintraub (Consumer's Union et al), Ed Mierzwinski (US PIRG), David Arkush (Public Citizen) and Joanne Doroshow (Center for Justice & Democracy). Dissenters need not apply.

More recently, Weintraub reacted to reports that CPSIA is seriously flawed with what has become the party line: "Nord has to go. The law has to stay. And don't worry, they will address your concerns." Compare these new sentiments to her older comments quoted above:

"The most important issue right now is to ensure that there is strong, effective leadership at the helm of the Consumer Product Safety Commission," Weintraub said.
She emphasized that new leadership is vital in order to begin implementation and enforcement of the CPSIA -- which, among other things, mandates lead-testing for certain products intended for children--with "a common sense approach consistent with the law."
Weintraub acknowledged industry concerns about the law, particularly those having to do with the costs of testing products for compliance. However, she decried efforts to have the law revised as attempts to have it "opened, gutted and weakened."
The law as written, according to Weintraub, already addresses "almost every common sense concern," including those related to children's clothing and books. "Textiles that are 100% fabric ... and books printed after 1985 do not contain lead," and do not need to be tested.

An exemption for testing of textiles that are 100% fabric essentially means "togas". Except for togas, no final products consist of 100% fabric: diapers, sheets, and other "simple" products also contain thread and various other components such as interfacing and dye. Is she now endorsing component testing and opposing the random testing, in-process testing, and final product testing that she earlier claimed "must be required"? I doubt it. These are appeasements intended to shut down -- or shut up -- the opposition.

In a particularly nasty posting containing a variety of outright lies, and ironically entitled, "True Lies: Debunking A Major CPSIA Myth [2]", the also ironically titled CJD asserts that the CPSC already has already asserted its own power to issue the small business exemption. As evidence, they cite the "Children's Products Containing Lead; Final Rule; Procedures and Requirements for a Commission Determination or Exclusion". All such rules contain a statement regarding compliance with the Regulatory Flexibility Act (RFA) which requires agencies to consider the compliance cost on small businesses. Their interpretation of that statement in the linked document is:

Here, the agency decided the CPSIA's impact on small businesses wasn't bad at all. Why? Because of its authority to issue exemptions to small businesses from the CPSIA!

The actual statement?

The Commission's Directorate for Economic Analysis prepared a preliminary assessment of the impact of relieving certain materials or products from the testing requirements of section 102 of the CPSIA. The Commission preliminarily found that the proposed rule would not have a significant impact on a substantial number of small entities. The procedures and requirements would allow certain businesses, including small businesses, the ability to seek determinations and exclusions which would allow these entities to continue to manufacture their products without the continuing cost of testing the materials for the presence of lead. Based on the foregoing assessment, the Commission certifies that the rule issued today on procedures and requirements would not have a significant impact on a substantial number of small entities.

Is this a small business exemption? No. It says that small businesses can apply for the "determinations and exclusions" which were the subject of the ruling. In that regard, they are no better off than large manufacturers. It does not grant them a "small business exclusion", it grants them the same right to apply for exclusions as large businesses by the following method:

For products that exceed the lead content limits prescribed in section 101(a) of the CPSIA, any requests seeking an exclusion must submit documentation based on the best-available, objective, peer- reviewed, scientific evidence showing that lead in such product or material will not result in the absorption of any lead into the body, taking into account normal and reasonably foreseeable use and abuse by a child, including swallowing, mouthing, breaking, or other children's activities, and the aging of the product, nor have any other adverse impact on health or safety. This is the standard by which the Commission will review such requests for exclusions. A justification submitted by an interested party for an exclusion should provide:

A detailed description of the product or material and how it is used by a child;

Representative data on the lead content of parts of the product or materials used in the production of a product;

All relevant data or information on manufacturing processes through which lead may be introduced into the product or material;

Any other information relevant to the potential for lead content of the product or material to exceed the CPSIA lead limits that is reasonably available to the requestor;

Detailed information on the relied upon test methods for measuring lead content of products or materials including the type of equipment used or any other techniques employed and a statement as to why the data is representative of the lead content of such products or materials generally;

An assessment of the manufacturing processes which strongly supports a conclusion that they would not be a source of lead contamination of the product or material, if relevant;

Best-available, objective, peer-reviewed, scientific evidence to support a request for an exclusion that demonstrates that the normal and reasonably foreseeable use and abuse activity by a child (including swallowing, mouthing, breaking, or other children's activities) and the aging of the material or product for which exclusion is sought, will not result in the absorption of any lead into the body, nor have any other adverse impact on health or safety. This literature should support a request for exclusion that addresses how much lead is present in the product, how much lead comes out of the product, and the conditions under which that may happen and information relating to a child's interaction, if any, with the product; and

Best-available, objective, peer-reviewed, scientific evidence that is unfavorable to the request that is reasonably available to the requestor.

All I can conclude about "Joe Consumer" [henceforth known as Paid Shill for Big Law in accordance with this site's policies regarding symmetric comment policies] at Pop Tort is that if his assertions were due to an honest mistake, he can and should correct that blog posting; otherwise, I can only conclude that if these people at CJD are lawyers, they aren't very good lawyers, or they are very unethical lawyers.

The rest of the Pop Tort "debunking" is about as nutritious and wholesome as its quasi-namesake, consisting of anti-Nord smears and a few other false statements. One of those is that the Commission should have already completed issuing rulings on testing protocols, but still has not done so. Recalling even Rachel Weintraub's statements about the lack of staff and underfunding, it is worth noting that in addition to having to enforce the CPSIA and its aggressive set of required rulings, the CPSC has also been saddled with the Children's Gasoline Burn Prevention Act of 2008 and the Virginia Graeme Baker Pool and Spa Safety Act of 2008. These latter two laws are arguably much more important than CPSIA because actual children have actually died from gasonline burns and pool drain issues, while nobody has died from lead poisoning from a garment. Even so, no, the CPSC could not have issued final rulings because of the heavy schedule imposed by the CPSIA and the continuing limitations of staff and budget due to Congress, not Nord (alternatively, we could conclude that Nord, Moore, Weintraub, and others were incorrect or lying about staff and budget back in 2007 and 2008, but I doubt the Naderites would be willing to adopt that argument). Eight (8) CPSC rulings were mandated by law between 8 August 2008 and March 2009 and seven (7) more are required by August 2009, in addition to six (6) sets of Test Procedures and Accreditation requirements, and numerous rulings not specifically required, such as findings on the retroactivity of the lead ban, findings on the retroactivity of the phthalate ban, and defending the latter in court against special interest groups who advocate a hard-line interpretation of the rulings with exemptions for nobody, regardless of their public statements about the ease with which CPSC can make hardship exemptions. The final rulings on lead testing are not required until August 2009. Incidentally, several of the standards change in August 2009, so all testing done until now will be null & void unless manufacturers -- who still have not been granted any exemptions or stays from the requirements to comply with lead levels -- have been testing at the more stringent level.

To see what the CPSC really thinks of small businesses -- regardless of what the Naderite puppetmasters are saying publicly -- one need only look at the statements of Thomas Moore, the "good" commissioner, upon the announcement of the stay of enforcement. He said,

Many of the smaller businesses do have legitimate concerns about how they will comply with the new law and the cost of the new testing and certification requirements. However, their fears are being fueled to some extent by others who, through an aggressive misinformation campaign, are trying to create a groundswell of panic that will lead to the repeal of the testing and certification requirement entirely.
The goal of the testing and certification provision is a sound one: to make sure every manufacturer of a children's product, no matter their size [emphasis added], regardless of where they are located, knows the standards that apply to their products and takes the appropriate steps to ensure compliance with those standards before the products are put into the hands of consumers. The closer we get to that goal, the fewer recalls our agency will have to undertake and the fewer injuries we will see to children.

Note first that he is ambiguous on the point of whether their concerns are legitimate or fueled by misinformation. He was parroting the party line of the special interest groups at that time: "there are no problems with the law, there is only a misinformation campaign conducted by some nebulous and nefarious group out there." He is offering to note their concerns and at the same time to dismiss them; the former to make them think that he gets it, the latter to assure his handlers that he isn't swayed.

Note second that it does not offer any exemption related to business size. The rest of Moore's letter emphasizes the ways in which small business might be able to comply, but no size-based exemption is in the offing. The game continues.

This rhetoric is a classic shell game, a bait & switch. The Naderite grifters are running this game brilliantly: here they offer a chance of component testing, there they pull it away; here they offer a small business exemption, there they pull it away. In their official statements before Congress and the courts, it is all hardline, take-no-prisoners, "safety vs. profits", while in their press releases intended to appease the legitimate concerns of small businesses, they talk about exemptions and the possibility of "reasonableness". The legislation was intended to remove the reasonableness and lattitude the CPSC had in enforcing the existing statutes (including the Flammable Fabrics Act), but you wouldn't know that from their non-binding public assertions. It's the iron fist in the velvet glove.

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[1] The title is a reference to the practice of creating organizations which have the appearance of grass-roots organizations, but are not. Many of Nader's organizations are front-groups for the enrichment of Ralph Nader, while others (CJD) are front-groups for Trial Lawyers and other special interest groups. They are actually very small groups of people who work with each other in interlocking groups to give the appearance of being a much larger "movement". See Walter Olson's earlier work to expose the inappropriately named Center for Justice & Democracy.

[2] Incidentally, you can try to comment on the post at Pop Tort, but they won't publish it unless they can put you in a bad light. I commented, nothing. Kathleen commented, nothing. Kathleen commented on their asymmetric commenting policy (they commented on all of the CPSIA reform blogs) and that one he published. This is the same policy enforced on the US PIRG blog (which Rick Woldenberg has noted).

Insull

2009-03-24T20:52:00.001-06:00

Forrest McDonald's biography of Samuel Insull strikes me as an unreliable source of information. I can't put my finger on it exactly, but it is striking that all of Insull's enemies and competitors just happened to be either corrupt or incompetent. I suppose it's possible, but I think perhaps Mr. McDonald overlooked some of Insull's less stellar moments.

My interest in the book has to do with seeking out the origins of public utility regulation. I had once read that Insull, like AT&T's Vail, was a great advocate of natural monopoly theory and actively sought it. While McDonald mentions this a few times, he does not try to document or substantiate the claim. He notes that Insull's English upbringing left him regarding monopolies as benign, and his association with German Henry Villard left him believing in the benevolence of regulated utilities. However, it does become apparent from the narrative that the electric industry was not exactly the wild and wooly unregulated market one might suspect from reading other sources about the period.

Insull's empire was built on at least two other types of government regulation that pre-dated the Public Utility Holding Company Act (PUHCA). The first was the patent, and the second was existing public utility regulations. Insull started his career as a secretary for Thomas Edison, and eventually worked his way up to become an executive in the Edison General Electric Company (the forerunner of the modern GE). When the Morgan group forced out Henry Villard, Insull went to seek his fortune outside the electrical equipment manufacturing industry and found a little generation company.

Edison (and, to a lesser extent, others) had started into the electrical generation business by selling two different types of generators: central station and isolated power. The latter was easier to sell since the objective was to provide power for a single building; the infrastructure was either pre-existing or easily installed; and for the most part, these provided power to the new-fangled elevators. The former, however, was the route by which economies of scale could be obtained if you could only build up the distribution infrastructure and subscribership.

One could only obtain the machinery required to run a central station from about 4 companies at that time: GE, Thomson-Houston, Westinghouse, and Siemens. Each enforced a regional sales strategy, so the only way to obtain rights to buy from Westinghouse was to either be the first to make a deal with them, or to enter into partnership or to buy someone who had. So all Insull had to do was to acquire ownership of 4 of the "central" stations in Chicago and he had a lock on the whole region. So the means was institutional failure, right? Well, not really. The real issue here was patent protection: only four manufacturers existed because innovating companies like GE learned to aggressively defend their patents (from Edison's experience with the light bulb), and companies like Thomson-Houston existed for the primary purpose of buying up patents to defend (patent trolls).

At the time Insull entered the business, many cities already had a history with gas lighting companies. It didn't take long for politicians in places like Chicago to realize that they could charge them franchise fees and use the money to run their political machines. So when a new upstart -- including electrical generators -- showed up, it was relatively easy to use this machinery to keep them out, and when that proved unworkable, to aim it at the newcomers. And once the newcomers showed themselves to be reliable campaign contributors, it didn't take long for them to realize that they could employ the politicians to keep the public on a leash on one side, and competitors on the other.

By the end of the story, we learn that Insull was a generous man (who fired people for failing to say good morning) who contributed much to the war effort (in support of his native England). During WWI, he developed a powerful propaganda machinery which he put to private use after the war. At a high school reunion one time, I asked a classmate who now works for a big power company why they wasted their money on advertising since they are, after all, a legal monopoly. He said he had pointed out the same thing at a cost-cutting meeting one time, but got shot down. I think I know the answer now: the PR machinery needs to stay limber in case the public decides to bring out the torches and pitch forks and starts talking about public ownership. It is all based on Insull's war propaganda example.

Another interesting factoid: just prior to Insull's great downfall, England approached him to ask for his help in setting up their national grid. The entire national system was based on Midwest Utilities. After the collapse, for which Insull was found not guilty (not easy, given the times and the public persecution), the TVA was said to be founded on the public English example instead of the corrupt capitalist systems. Yep, they traveled across an ocean to look at a copy of the original instead of basing it on the original which itself lay in their own back yard. But propaganda isn't just for utility operators.

Gymboree

2009-03-23T20:07:00.002-06:00

Incidentally, regarding Jon Stewart's point regarding the lack of any accountability in business reporting, anyone remember this video interview with Hitha Prakhabar a couple of months ago? Remember that she said that appliques and trinkets have been tested already? Or that she said, "even though this law is gonna be passed [sic] it's not going to affect the children's clothing industry that much"? Or that the interviewer said, "you mentioned The Children's Place, Gymboree, these retailers will be fine" and Hitha confirmed, "while Gymboree and The Children's Place have probably tested their stuff already and the pieces that are on the clothes, it's not going to have a major effect."

Well, Hitha, I'm sorry dear, but it seems to have had a major effect, if, by "major effect", we mean a 40% drop in Gymboree's stock:

BANGALORE, March 4 (Reuters) - Gymboree Corp (GYMB.O) forecast a bleak first quarter as regulatory changes related to product safety significantly weigh down on the children's clothing retailer, slamming its shares down 40 percent in aftermarket trading.

...

Gymboree said regulatory changes related the Consumer Product Safety Improvement Act (CPSIA) passed by the Congress in August 2008 will impact sales and gross margins in the first half of 2009.

The Act required the Consumer Product Safety Commission (CPSC) to begin enforcement of new lead and phthalate standards for children's products on Feb. 10, 2009.

In order to comply with the new laws, the company began an initiative to remove any styles in its 800-plus stores that did not meet the new limits prior to Feb. 10, Chief Executive Matthew Mccauley said on a conference call with analysts.

The company had already pulled out products and changed production lines even before a clarification to the law was issued on Feb. 6, Mccauley said.

Separately, the company said a change in safety requirements related to levels of phthalates, a chemical used to increase flexibility in plastics, rendered about 1.7 million of its inventory obsolete.

"This...caused us to pull sleepwear for ages three and under off all of our shelves," said Mccauley.

That seems to be in the neighborhood of roughly pi radians off of the claims made by Hitha.

May I suggest a strategy for all of those would-be industry experts and assorted talking heads out there? If Fox or Forbes asks your opinion on a subject about which you are completely ignorant, you can decline to comment, or you can do some investigation. Just "going with your gut" doesn't work any better for you than it does for any of the CNBC stock jobbers.

Investing in failure

2009-03-23T18:59:00.002-06:00

We've been hearing for months that we need to "invest" in energy security, energy efficiency (y'know, to stop global warming), etc., and that this will require massive re-tooling of the automobile industry. Then, a few days ago, we learned that we had to bail out the existing auto parts industry but no concessions from them or the existing auto makers were required. Today, I learned that bailing out other businesses does cause Dr. Krugman anxiety. The difference? I can't figure it: both seem to be built on unsound business models and don't seem to want to change. Here's to hoping that Krugman salvages his intellectual credibility and remains at least as critical of this administration as the last.

And, I note that I heard on talk radio last week a union member asking why AIG execs should be allowed to keep their bonuses (their property! they had a contract!) but union members should not (what about their property, their contract?). The host was predictably perplexed and evaded the question. I do have to say that most of the neocons I know have at least been equally critical of both the UAW and the AIG execs, but since both have been manufactured crises, they have been largely ignored. XKCD understands.

NPR's hiring choices

2009-02-21T12:04:00.004-07:00

I have gotten to the point where I can almost accept listening to ~~Ellie May~~ Eleanor Beardsley. I only barely expect to hear her talk of President Sarkozy cipherin' down by the ce-ment pond. The illusion is broken by her use of the BBC reporter's "dadadadadadaDA-a" cadence for e-v-e-r-y s-i-n-g-l-e s-e-n-t-e-n-c-e. But Louisa Lim? What were they thinking?

Do we have to endure four more years of "Wuisa Wim wepoowting on Hiwwawy Cwinton's visit to Kowea"? Can one not think of Giwda Wadnew doing Baba Wawa? Now my choices are between BBC reporters in "Asier", "Chiner", "Kore-er", "Indier", and "Australier" or Wouisa tewing me about Pwesident Obama's Secwetaway of State? God help us if she has to empwoy shuttew dipwomacy between Noowth and south Kowea, which, as you know, wie in the wegion between Manchuwia and acwoss fwom Japan. Evewy singeew wepoowt wiw weeqwuire Wouisa to pwonounce Hiwwawy Cwinton. Dear God, please have her report from Sweden or Mexico (where the letter requires a completely different part of the naso-labio-lingo-glotto-region).

From what I can recall, Amanda Beardsley seems to be a good reporter. But I cannot listen to the content of Louisa's reports because the pronunciation problem is such a distraction. Why didn't someone encourage them to go into newspaper or magazine reporting? Why radio?

Incidentally, I have no problem with Bailey White, Andrei Codrescu, or others with even stronger accents. Context is important.

Notes on Social Contract Theory

2009-02-19T19:58:00.003-07:00

1) It is an analogy. As such, it is fun to take out and play with, but the map is not the territory.

When dealing with Social Contract Theory, you will no doubt encounter the standard example of the restaurant[1]. You don't sign a contract with the restaurant, but most people would consider your order and consumption of food to be sufficient evidence that you are willing to enter into an implied contract. Also, the taking of the order and delivery of the food are sufficient evidence that the restaurant is willing to enter into the same contract. Note that each controls the contract at the appropriate stage of negotiation: the customer orders only what he wants, and pays only for that (or, in the case of a cover charge, decides whether he wants to enter or not). After he orders, the restaurant decides whether or not to fill the order. This would be so whether it was on the moon, in the desert, anywhere. You nearly never have to resort to a policeman, a judge, or any other state apparatus. In fact, I would suggest that it is so automatic that people pay even when they could get away with not paying (really busy restaurants, for example). And, it seems reasonably universal.

But the decision to enter a restaurant or not, to order or not, to pay or not, are nothing like deciding to live in a country. I can choose one of several restaurants at no more cost than the time it takes to make the decision. My choice is not between a restaurant in this town or one in a location that requires me to move my family and stuff hundreds or perhaps thousands of miles away to a place that probably has a similar restaurant situation. Also, the restaurant doesn't explicitly charge me for stuff eaten by other patrons far in excess of my own bill (though they may subsidize some food at "happy hour"), nor do they tell me that my only option is to order the filet minon when I would be perfectly happy with a soda and crackers. And even if they did those things, I could choose to go next door.

Besides these arguments against the validity of the restaurant scenario as equivalent to the country scenario, we now have the bizarre situation of an analogy (the restaurant) used to justify another analogy (the social contract) used to justify an idealized version of reality (a government as contractual "fee for service" provider). Let's back up a second.

The government here is treated as an actor with which you the citizen is engaged in a market transaction. This particular market transaction is riddled with institutional failure:

The government is a monopoly.
It is so large that you must face a wealth of principal-agent problems - there is little likelihood that what you want and what they want are aligned, and no way for you to supervise efficiently
Moral hazard (or opportunistic breach): when you have committed enough assets to the agreement, they unilaterally change their terms and your best option is to accept the new terms even though the transaction is less than efficient, i.e. there is a net loss
asymmetric information - there is no way you can know if they are really providing what you contracted for
There are externalities to the transaction, i.e. every time the government delivers to the majority, the minority is deprived of what they want
wealth effects, where wealthier "customers" are able to negotiate better deals than everyone else
Network effects - you and all of your associates chose this, and now *all* must leave in order for it to be worthwhile for one to leave

Oddly, no remedies are suggested by the people who use the restaurant analogy even though they are frequently second best cheerleaders, i.e. people who justify increasing government intervention on the basis of the mere existence of institutional failure. Indeed, these problems with institutional failure of the state are frequently denied or justified, frequently by resorting to yet more analogies. In almost any other context, they would argue strongly against the strength of the "revealed preference" argument, but in this case, they resort to it exclusively without even attempting a comparative analysis.

Now, it's fun to say, "okay, moving is expensive, but you do have a choice and the market doesn't have to produce exactly what you want in order to still be a market." True enough, but then, I always have the option of ignoring the restaurant altogether and eating at home, a choice involving neither expense not already incurred nor impossible wants. Not so with the government: I don't have the option of ignoring them with no other expenses to be incurred.

In many ways, the use of the restaurant analogy demonstrates James' rules for arguing with a libertarian (though I'd note that libertarians are not immune from these). For example, the analogy stops with comparing a non-explicit contract in a restaurant with living in a country. But what else works in analogy-space?

I can choose any of a number of restaurants at no additional cost (the transaction costs are zero).
I can choose not to eat at a restaurant at all.
Restaurants' sovereignty ends at their door.
Restaurants differentiate from each other, offering me a real choice.
However, there are no restaurants that sell, for example, toys instead of food.

Mapping this onto real-space, we get

I can choose any number of countries without incurring any transaction costs ... no, the analogy fails.
I can choose an anarchist region ... no.
Governments' sovereignty ends wherever they say it ends ... no.
There are real choices between governments ... yes!
There are no governments that aren't really governments ... yes.

Unfortunately, these don't all go the way intended by the person invoking the restaurant analogy; the analogy fails in the wrong places, and succeeds in unfortunate ways for the invoker. The point of choosing an analogy to argue an analogy instead of arguing the real world is that the real world argument leads social compact fans down roads they don't want to travel, and the social compact similarly leads to results they don't want. They have shopped around until they found an argument that leads only to the results they want, but if you try to point out other problems with this analogy, you are likely to face a good deal of sophistry that only takes you further from the real world (for example, you might learn that, contrary to my experience, regulated insurance rates are never raised and public utilities are examples of markets).

2) Besides being an analogy, the social contract is inconsistently defined. The original idea was that citizens contract with one another: we will give up the right to use retributional force and some small fee in exchange for protection from criminals. The contract was between citizens, and the government was created by that act. It is more frequently asserted by modern authors that the contract is between the citizens and the government in the form of "we will pay taxes and you will give us stuff". Who is the government? And how did it acquire the bargaining position? Both questions cannot be answered with either the classical contract or the modern contract; you get the classical form for the first question, bait & switch to the modern form for the second question.

Then there is the problem of the act of making the contract: on one hand, it is asserted that some founding document (Magna Carta, Declaration of Independence, Articles of Confederation, Constitution) is the contract, an explicit contract. All fine and well, but then we face the problem of how this could be legally binding on future generations. No problem, say social contractualists, because now we shift to the implicit contract which is upheld simply by the person's presence in the sovereign territory or by some petty and symbolic act, such as pledging an oath of allegiance. Do we continue to abide by the original document? Not really, because now -- say the contractualists -- the original contract is irrelevant and outdated. Original intent is unknowable, so we must have a "living constitution" (another lovely analogy). Again, you are offered one form, which is now on one hand denied to be relevant while on the other hand asserting that every oath affirms its relevance; people substantively pledge an oath to a nonexistent contract.

What about people who would, in the world preferred by people making these arguments, not be able to enter into such agreements because they lack the ability to understand them, e.g. children, people with mental disabilities, etc.? "Too bad," comes the answer: in fact, if your parents chose citizenship for you, then you're stuck with it. "You aren't against parents deciding for their children are you?" comes the disingenuous argument from people who in fact are against parents -- or anyone else, for that matter -- deciding for themselves (after all, they have obligations to the collective under the terms of the contract). They aren't likely to take that analogy into the child's transition to adulthood, or deal with the issues of institutional failure now confronted by the child who has invested a lifetime of capital development (learning the language, culture, laws, etc.) and now has to face an opportunistic breach by the government which no longer abides by the original documents and will not give him the opportunity to renegotiate the deal.

3) So, what are your choices? We are facing a situation where you must exploit your "voice" or "exit" options. Voice, as noted by Buchanan, Tullock, and Olson (Mancur), is fraught with problems, especially in a "restaurant" the size of the US. Exit, in the form of "voting with your feet", is not the same as it means in every other circumstance, where you simply stop participating in the activity, because exit in this case means having to physically relocate to a place that has your preferred government (including "none"). Returning to the restaurant analogy, restaurants know about voice and exit and do their best to facilitate the move from other restaurants by differentiating from the others and advertising the fact, or by incorporating suggestions from their customers. Moving to another nation, even for those who can afford the expense, is at best a decision to choose between other variations on the same franchise. To the extent that this tells us something generally about governments and their benefits, this is the argument of functionalism: institutions exist because they serve a purpose.

Functionalism seems as riddled with holes. Among other things: If things exist because there is a purpose for them, how does change come about? Where do new purposes come from? Or is it possible that there are some needs that are not meant by an existing institution? Is it not therefore possible that some institutions exist without an actual need because needs go away as well as arise? Also, cannot there be a difference between purposes as stated and purposes in fact? The stated purpose for Davis-Bacon was fairness: the purpose in fact was to prevent low bidders who hired African-Americans from being able to win contracts. The stated purpose for farm subsidies is to preserve the family farm; the purpose in fact is to sustain factory farms. The stated purpose for government was to protect citizens from criminals; the purpose in fact is to facilitate behavior that might otherwise be criminal (dress it up in all of the demagoguery you want). Is it possible that an existing institution is only one possible answer to the need? And that something besides need -- say, power -- may sometimes come into play in selecting among the possible institutions? Or are we to confine our inquiries within a Panglossian functionalism?

One further aspect of this is occasionally introduced in an effort to trap the novice. That is the assertion that the "market" for nations is an ideal free market. There is no government to control the market for countries of residence. This is a transparent trick that confirms the notion of governments as organized criminal gangs who control territory by a quasi-stable mutual arrangement between the criminal gangs. But note again the reality behind the analogy: governments are not stall-keepers, each hawking his own wares to mobs of customers in search of a nation. And while there may not be an overarching government ready to supply force to dictate choice, each government is itself ready to supply that force. Restaurants are not toy stores, governments are not not-governments. The analogy uses the trick of suppressing the frame of reference to try to distract from the fact that a government is a government whether or not there is another government above it. You might as well argue that businessmen who hand over cash to strangers threatening arson are not really being extorted, they are voluntarily choosing to give money to firebugs. But that would be answering a bad analogy with another one.

4) I think there is entirely too much question begging required to support social contract theory.

If the contract is between the state and citizens, where does the state get its right to negotiate? From the social contract? That's circular.
If the contract is between citizens and citizens, where do they get their right to negotiate for others? And where does the state get its right to change the contract unilaterally, given that under this scheme it is the result of, not a party to, the contract?
If the contract is an explicit one, such as the Constitution, why are we no longer honoring many of the provisions? Because there is an implicit contract? If so, how do we know what is required of either party or even who they are?

-------------------------------
[1] See for example Steve Kanga's essay.

USPIRG:Hanlon's razor meets its match, part II

2009-01-25T18:33:00.015-07:00

Part I, the sleazy background, is here.

UPDATE: If you are coming here from Etsy looking for "The Answer", it ain't here. If you are coming from the link that says I am USPIRG, please go back and note the retraction; it should be obvious that I am not. This post is not "about" rabbithorns, who is simply an example of the kind of real misinformation that is out there (as opposed to the strawman kind that US PIRG keeps positing). If you want to know more about CPSIA, you can click the CPSIA tag at the bottom of this post, or go over to www.Fashion-Incubator.com where Kathleen has been posting about it for several months, and where many of us have been trying to disseminate real, useful information in the forums. Finally, if you think that I am calling Etsyists "misinformed", "ill-informed", or "yahoos", please read carefully. I am saying that there is misinformation at Etsy. I give a specific example of it. In general, it is the innocent error of people desparately trying to cling to their chosen livelihood. Does that mean I think all Etsyians are misinformed? No. Does it mean that even a significant percentage are? No. As anywhere, many of the worst offenders there get the most attention.
GenerationTieDye, thank you for your patience. Apologies for not having noted your retraction, that was irresponsible of me.

Continued from part I ...

But no matter, because the United States Public Interest Group (USPIRG) is here to save the day and strike the anti-CPSIA misinformation movement at its roots! They apparently intend to do this by a campaign of malicious disinformation, much of which matches in sheer wrongness the non-malicious misinformation which comes from the free-wheeling rumor mills at Etsy [1]. In a letter received by one of Kathleen's many minions, USPIRG included their own FAQ which stands as a monument to bad writing (in both senses).

The document starts out innocuously enough: they stress the purpose of the CPSIA, which "requires what many consumers already thought was law--that certain children's products must be tested for safety before they are sold. This is one of the most significant steps leading to a safer marketplace for our children." Let's see how well they pay attention to this as they proceed, but not without noting that the purpose of their FAQ is to clear up "a lot of unnecessary fear and incorrect information circulating about the CPSIA and its new requirements." Let us also see how they do with that.

Question 1
They introduce the canard that they apparently think will take them out of the mess they helped create. Yes, it's the "natural materials exemption" -- they even link to the proposed rule! Now, let's see, where did that Request for Comments at the CPSC website go to? Oops, perhaps this is a new regulation that has apparently been suspended by the incoming administration? Hmm.[2] Well, anyhow, let's think about their phrase, "natural clothing" for a second. I'd like to know who asked that since I have never heard that phrase. Natural materials, natural fibers, but "natural clothing"? It must have escaped their attention that nobody makes clothing that is made of 100% undyed natural fibers, much less "precious gemstones, wood, ... as well as certain metal alloys". If they did, I'm afraid it would look much like this (but without the bright colors):

Question 2
In question 2, they attempt to ignore a question regarding the unintended consequences of the act by pointing out that the intent and goal of the law did not intend to create unintended consequences. Well, that is in effect what they say. The question is, "[As it stands now], will this law result in the big getting bigger and even more of our toys coming from China?" The first answer is to state that this is not the goal or intent. Duh. Then it makes the non sequitur argument that since everyone has to test, the playing field is level. Apparently, they have never heard nor thought about "economy of scale" or the differences between "fixed costs" and "variable costs" and what those mean to small businesses. Which you would think would be important considerations when discussing the differential effects of this law on small and big businesses. But just to make sure the questioner didn't go away feeling insulted or confused, they drop in another non sequitur, "Domestic toy companies, irrespective of their size, can make and sell safe toys." Actually, this was never in question, but now they seem to have forgotten that "one of the most significant steps leading to a safer marketplace for our children" is that "certain children's products must be tested for safety before they are sold."

Oh yeah, ... the testing.

So, then they're off on a lecture about the importance of testing. They seem to forget that the question had to do with the differential effects of the testing requirement on small and large companies. Or perhaps they wanted you, dear misinformed reader, to forget that. "We're talking children's safety now, never mind the unintended consequences!" They end this rant on one of those instances of really poor writing: "Any exception or exclusion from testing requirements, as included in the CPSIA must be based on the principle that the product will not harm consumers by causing the absorption of lead." Aside from the sheer awkwardness of that statement, it is wrong. Products don't cause the absorption of lead: biochemistry does. Products may make the lead available in the environment to be absorbed, but ... ah well, you get my point.

Question 3
The third question asks them to respond to the HTA claims that small, home-based toy makers cannot afford $4000 testing. They begin their answer to this with a dose of condescension: "Let's not forget common sense." Too bad they forgot common sense when they sat in front of Congress and told them to expand the applicability of the law to all children's goods intended for kids 12 and under, and when they insisted on final unit testing. But then their answer goes off the rails. It makes an appeal once again to the as-yet nonexistent "natural materials exemption", and then compounds this by introducing the claim that you can use tested materials. This is "component testing" and at this time it is not allowed. Many people have argued that it should be, but the PIRG representatives that testified before Congress wanted both component and final product testing.

This answer ends with yet one more expression of their doubt over the cost of testing. Over and over, they have been in the press and cyberspace claiming that the expense of testing has been overstated. It would seem to be a simple matter for them to find a manufacturer, offer to help him in the testing process, and then produce the invoices. They haven't, we have, they are wrong, we are not. Unfortunately.

Question 4
In the answer to Question 4, they assert "U.S. testing laboratories typically charge about $50 to test for lead." This once again demonstrates their utter lack of knowledge about manufacturing or testing. While the $50 is close (I have seen quotes from $5 to $90), this is only part of the story. As we have explained ad nauseum, if you have a child's onesie with snaps, tag, and decorations (a different type of fabric or ribbon around the neck, arms, legs, etc.), you may have to conduct 5 different tests (fabric, thread, snaps, ribbon, tag). If you furthermore run that same article in 5 different colorways, you cannot use the tests for the snaps on the first unit for subsequent tests. So your bill for a line of onesies in 5 colors may be more on the order of 5 x 5 x 50 = $1250. And we haven't even started talking about surface lead testing or phthalate testing, much less the testing required on special products like children's sleepwear (flammability). And this is a relatively simple item.

So, who is doing the misinforming here?

Question 5
In Question 5, they tackle testing by retailers. It's difficult to understand what the point is -- who is really asking this question? It seems that the point of this is to give them a platform for the second half of their question, which is irrelevant and pedantic. In any case, the first part isn't much better than the other "answers". Their answer that retailers don't have to test is factual, but it doesn't help retailers who cannot get their vendors to test or even to recognize that they need to test. 2/3 of the hundreds of retailers Kathleen surveyed say that their vendors do not know of the law, or that they believe it does not apply to them. Retailers are stuck in position of (A) sending it back and hoping to get their money back from judgment-proof vendors, (B) testing it themselves, or (C) burning what hasn't sold by 10 February. Walmart and other large chains have the leverage to force (A) on their vendors; everyone else is going to try (B) before they try (C). So while the USPIRG may be literally correct in saying that as a matter of law retailers don't have to test, USPIRG is wrong because as a matter of survival they have to test. But we should expect USPIRG to let a little thing like survival stand in the way of safety.

Question 6
The PIRG's answer to question 6 is beautiful! They are asking the reseller question. Their answer is multiple part:

1) No, you don't have to test.

2) Don't worry, they won't enforce the law when it comes to you. Go ahead and flout the law!

3) Besides, you were already responsible for obeying the law before, so why worry now?

4) Back to Congress' intent: they didn't mean to put you out of business.

So, despite their note at the beginning of their FAQ about the importance of testing, and repeated warnings that nobody should be given a pass when the safety of our children is at stake, they're going to give resellers a pass. Because their products are inherently safe? No! Because the CPSC said they weren't concerned about them. USPIRG neglects to point out that in their press release, CPSC was careful to warn that despite not having to test, resellers would still be held accountable for selling illegal products:

The new safety law does not require resellers to test children's products in inventory for compliance with the lead limit before they are sold. However, resellers cannot sell children's products that exceed the lead limit and therefore should avoid products that are likely to have lead content, unless they have testing or other information to indicate the products being sold have less than the new limit. Those resellers that do sell products in violation of the new limits could face civil and/or criminal penalties.

But don't worry if you're violating the law -- USPIRG says you don't need to worry! And besides that, they say that you were supposed to comply before (with laws that didn't require documentation of testing, much less testing), so that should help you sleep easier at night. And besides, they didn't mean this and as we all know, intent counts more than actual outcome.

Question 7
Finally, in Question 7, USPIRG poses the obvious question about how useful the natural materials exemption will be. What good is plain, undyed cloth except as a toga? Their answer: "We don't know." Actually it is, "Any further details, explanation, or guidance on this issue can only -- and should soon -- come from the CPSC." Which amounts to, "We don't know."

Summary
So let's look back and see how they did at clearing up the misinformation and remembering that the testing is the most important part of this law.

Q 1: Offer the as-yet non-existent natural material exemption (which has the side benefit that testing won't be necessary)

Q 2: Offer the intent and goal of the law in place of an answer to the concerns about economy of scale. Incorrectly assert that the playing field would be leveled by this law. Forget to note that testing was the problem, not the ability to domestically manufacture toys. Emphasize testing as the basis.

Q 3: Another appeal to the natural material exemption. Suggest component testing, something else not currently allowed. Doubt the expense of testing.

Q 4: Claim that testing costs $50.

Q 5: Note (correctly) that stores don't have to test.

Q 6: Tell resellers they don't have to test. Tell them not to worry, they can break the law because the CPSC is not coming after them despite strong language by the CPSC that they may not sell illegal items. Tell resellers things are no different than they were before.

Q 7: Tell everyone that they don't know anything about the implication or utility of the natural materials exemption.

By my count, they got 5 and 7 correct (stores don't have to test, and CPSC is responsible for answering these questions, not USPIRG), but mislead on 1, 2, 3, 4, and 6. They were ambiguous about their commitment to testing; in Q1, they offered a way around it. In Q 2, they forgot about it, then came back to it in an apparent attempt to misdirect. In Q 3, they mislead about the types of testing allowed. In Q 4, they showed how little they know about the most important part of CPSIA, the testing. In Q 6, they told resellers not to worry about testing -- not because they were on the side of the law, but because the CPSC has indicated it might just wink at them. Somewhere in that answer, they forgot to address the, uh, what was it? Oh yeah, the children and their safety and the only thing that would deliver the latter: testing.

So I ask: are they doing this out of malice? Or should we apply Hanlon's razor and conclude they are merely incompetent? Either way, I think we can agree on the results:

USPIRG: FAIL

------------------------------------------

[1] Just to give you an idea of how bad Etsy can be, consider this thread. It begins with this bit of misinformation:

The authors of the law have already conceded they intended for it to be applied to imports mainly, not small home businesses in this country.

Plus just because something is law, doesn't mean anyone is APPLYING the law. It has to then go to its regulatory agency, which in this case might be the FDA. But that also hasn't been decided yet. Then the FDA(whoever) decides how and to whom this will apply. So the law has no body of jurisdiction until it is assigned to a regulatory body.

For the unitiated, let me point out what all is wrong with that. First, nobody has conceded any such thing about imports; the law is clearly intended to apply across the board. Second, the law is explicitly designed and assigned for enforcement to the Consumer Product Safety Commission (CPSC); indeed, the second half of the Act (Title II) is mostly about reforming CPSC, but CPSC is mentioned prominently and repeatedly throughout Title I. The FDA has nothing to do with it. The poster (rabbithorns) goes on to say several posts later,

HipMelon, if you get hauled off to court I will represent you for free. (depending on what state you're in - I can't practice everywhere because that's the law...)

Yes, tiptopapplesauce, I will ignore THIS law. Why? Because NO ONE knows how it will be applied and to whom it was actually targeted until its regulatory agency decides that. Technically, according to the legislative process, it's not really an applicable law yet.

That was posted 23 Jan 2009, 5-1/2 months after the CPSIA was passed. What lawyer in the world would advocate this? But then, what lawyer in the world would be stupid or arrogant enough to assert that people could determine on their own if they should test their products based on a "relevant risk" test that does not appear in the law itself?

[2] To be fair, if you know that the document has something to do with "lead content limits on certain materials", you can hunt around until you find a link to a pdf page out of the federal register. No, that's not a terribly descriptive name, is it? But the document which lists the questions has gone missing from the comments section.

PIRG: Hanlon's razor meets its match

2009-01-25T17:22:00.006-07:00

I don't know what you know about USPIRG and the rest of Ralph Nader's Empire of Opacity, but they make it difficult to tell whether they act out of planned malice or simple stupidity.

Before I go on about their latest contribution to the CPSIA saga, please consider some background. According to their annual report, their money comes largely from individuals and grants, with only a small portion of it from "State PIRGs". However, this is at least a little suspect. For one thing, you don't get an actual tally in dollars of what their revenues and expenses were; it's only in percentages. For another, since about 10% of each chapter's revenues go up to the USPIRG mother organization, and they are known to take in a fairly large haul (more in a minute), then these individual donors must really be forking it over by the wheelbarrow.

How do the chapters get their money? This is among the many questionable aspects of USPIRG. The chapters go out among the local universities and arrange to have a new fee attached to the rest of the "student activity fee" charge. This is the ubiquitous and inconsipcuous add-on that consists of $6 or $8, ostensibly to cover things like free concerts and the like. In this case, it is used to siphon money out of the pockets of students and their parents straight up to a very partisan 501(c)(3) lobbying machine. As Radley Balko notes in this very good article, Ralph Nader: Public Shakedown Artist,

Yes, the same man who rails against corporate welfare - because it coercively takes money from taxpayers and funnels it to corporations - has set up a rather ingenious, if underhanded and manipulative, way of coercively taking money from college kids - and funneling it to Ralph Nader.

...

The scams vary from campus to campus, but it basically works like this:

Each time your kid registers for classes, the local PIRG chapter has arranged with the school to tack a fee on to his/her tuition. On most every campus, the PIRG chapter has made attempts to make this "contribution" as secretive and misleading as possible. Just how secretive and manipulative the method depends on how much resistance each chapter has met in trying to get the scheme implemented. At most schools, they first attempt to make the fee both mandatory and nonrefundable. If that doesn't work, they lobby for as underhanded and sneaky a scheme as the school will allow.

...

On about 1/3 of the state college campuses in New York State, a student's PIRG contribution is mandatory and nonrefundable. The University of Wisconsin and University of Oregon also require mandatory, nonrefundable contributions to PIRG.

You want to go to one of these schools? You pony up to Ralph Nader.

At other schools, such as Trinity College in Connecticut, students not interested in supporting the local PIRG are required to go a Bursar's office or a student activities office, fill out a form, then take the paperwork to a campus PIRG officer to get a refund. That's quite a bit a work for three or five or eight dollars - and that's assuming the student ever notices the charge on his tuition statement to begin with. Not surprisingly, most PIRG chapters don't go to great effort to publicize the refund option. They rely on college student indolence, and they're making a killing.

...

And about 10% of campus-collected money goes to the national chapter, USPIRG.

...

Rucker estimates that PIRG chapters on at least 70 college campuses have some sort of funding scheme that's either mandatory, or puts the onus on the student to pursue a refund.

PIRG chapters are operational on at least 140 campuses nationwide, and if not funded by mandatory fees, most either employ deceptive sign-up campaigns similar to the one used at Indiana, or lobby usually left-leaning student government bodies to grant them disbursement from more general "activities funds."

Like most of Ralph Nader's puppet and satellite organizations, state PIRGS are notoriously reluctant to divulge financial information (more on that below), so an exact figure on just how much they're collecting is tough to compute. Nevertheless, Rucker estimates that PIRG chapters nationally manage to collect somewhere between $10 and $20 million dollars from college students to advocate for Ralph Nader's causes.

So, if the annual report is right in estimating 10% comes from state chapters, and the 10% and $10 million figures from Balko's article are correct, then USPIRG must rake in about $1 million from students, and another $9 million from their other sources, about half of which was "citizens". Eye-balling their donors list, I'd guess I could add up about with about $150,000 or so among the people who did not donate more than $1000, and guessing those above gave $10,000 (a very generous estimate), another $230,000. Where did the other $4.1 M come from? And what about these "grants"? And why are all annual reports prior to 2005 inaccessible? This scam has been going on for a long time, as this 1999 Reason article shows.

Anyhow, for an organization that demands accountability and transparency from everyone else, their own operation lacks those characteristics. The same is true of Ed Mierczinki's "consumer" blog, the blog that consistently shows "Comments (0)" despite the fact that Rick Woldenberg, Kathleen, and I have been submitting comments which are all then "held for approval". Unfortunately, the story about these astroturfing organizations gets worse: apparently, Ralph Nader does not tolerate unions in his front groups:

According to Nader, "Public interest groups are like crusades ... you can't have work rules, or 9 to 5." Shorrock, with his "union ploy," became an "adversary" according to Nader. "Anything that is commercial, is unionizable," but small public interest organizations "would go broke in a month," Nader says, if they paid union wages, offered union benefits and operated according to standard work rules, such as the eight-hour day.

Whew -- that's a page right out of the ACORN book!

The Obama Presidency: A Retrospective

2009-01-25T12:54:00.002-07:00

I swear people have lost their minds. Although I have not actually read anything with the same title, I have read several articles on how much Obama has done for us in his short time in office. Oh, ~~the change!~~ Sorry, I mean, The Change! So much has changed in the last ~~week~~ ~~6 days~~ 144 hours. He plans to close down Guantanamo! Or at least to study it, and maybe put the prisoners on trial ... or something. He plans to leave Iraq ... when they can figure out how. This is so radically different than what went before! Exclamation!

CPSIA - size doesn't really matter

2009-01-19T17:10:00.006-07:00

UPDATE: Also, don't miss this and this at Overlawyered.

I have been hammering on one aspect of this CPSIA fiasco for some time now. In reaction to the sanctimonious "defenders of the public good" at USPIRG, PC, UCS, KID, etc., I have been trying to point out that they have supported a law which favors mass production and economy of scale even as they speak out against "Big Business". But now it's time to look at other angles; it's a complex mess, so there are many to choose from. [1]

First, there seems to have been a failure to distinguish what is meant by "large" and "small" manufacturers. I have probably been guilty of this myself whenever I was making reference to economy of scale and mass production. There is no "bright line" rule to distinguish the large from the small, the mass produced from the merely large production run, no answer to the Sorites paradox. There will be a temptation, I think, to use arbitrary numbers like "sales greater than $1M" or "fewer than 5 employees," but these will be less than satisfactory.

The million dollar level brings to mind rich people running sweatshops, but it is commonplace to generate sales figures like that with a reasonably small company of happy employees and -- while generating a comfortable living -- without making anyone fabulously wealthy. That is the beauty of entrepreneur capitalism (as opposed to finance or the "other" kind): it generates jobs and meets consumer demand without generating a great deal of inequality. Setting an exemption for companies smaller than some arbitrary size like this is going to have negative repercussions on both the jobs and consumer fronts.

One of those repercussions is the devastating impact it is going to have on the companies which, while big enough to be regulated, are still smaller than the rest. Their sales may fluctuate from year to year, so it may not always be clear to them if they are going to have to test in any given year. If they tend to compete with manufacturers below the line, they have a cost disadvantage because the other guys don't have to test. If they tend to compete above the line, they have a cost disadvantage with companies with large production runs. The middle will tend to get squeezed more than either end, and will therefore collapse.

The second repercussion will be a cyclical problem. As the middle clears out (everyone either gets big or fails), consumer choice will deteriorate. Consumers will start finding the smaller manufacturers making interesting stuff. Those smaller manufacturers will see demand skyrocket and will attempt to meet it. They will grow rapidly, probably making it to the level of the bright line rule. Suddenly, they will have to change their game to incorporate product testing into their production processes. Many of them will respond in one of several ways: either they will manage it well; manage it well but face a change in their pricing structure leading to a drop in sales; manage it poorly and see their costs quickly overtake their revenues; or manage it poorly by hoping to get away without testing.

Is the latter a big deal? We have been watching the tweets and posts of Jennifer Taggart, a lawyer who owns her own XRF gun (anyone remember Paladin?) and has been posting some of the interesting results. It is interesting how many bits of hardware -- mostly bling -- that fail the lead tests. So far, she has found the following:

(1) Vinyl is often stabilized with lead. So, I've found lead in fake leather, vinyl purses (particularly children's and doll purses), vinyl or fake leather shoes, vinyl raingear, diaper changing pads, diaper pages with built in changing pads, vinyl changing pad covers, vinyl mattress covers, etc.

(2) Fake pearl, fake shell or opalescent buttons. Almost universally. [also, she recently tested sequins with the same result]

(3) Fake inexpensive pearl decorations attached to clothing or in children's jewelry.

(4) Some red dyes in textiles.

(5) Lots of those decals on the front of t-shirts. I'm not a fabric industry person, so I don't know if they were ironed, heat transfer, screened or what. They seemed not to be silk screened but I don't have the vocabulary to be accurate.

(6) Crystals. The lead may not be accessible but the lead is generally well above 600 ppm.

(7) Charm like decorations attached to clothing.

At the risk of slaying the sacred cows of some of the really small manufacturers, many of them tend to buy blanks -- unadorned t-shirts, onesies, and so on -- to decorate. This is one of the many easy ways to enter the industry. Unfortunately, they seem to think that since they aren't buying anything that says "Big Al's 100% Pure Lead Geegaws", since they aren't a big name manufacturer, and since they sew at home and don't have employees, then obviously they aren't violating the law (and in some cases have decided that they aren't even a manufacturer). At the risk of getting off topic, many of them are WAHMs (Work at Home Moms) or "Mom-preneurs" and believe that the fact that their bodies spontaneously (or nearly so) grew and then shed an independent life somehow gives them an aura of saintliness and whatever they produced by gluing lead crystals to a t-shirt blank therefore has a patina of perfection. This attitude is at least as dangerous as what might happen at the opposite end of the scale, if not more so.

At the other end of the production scale, large producers work directly with mills and hardware manufacturers to create custom ensembles of products. Also, they are an easier target for lawsuits both because of their visibility and their deeper pockets. Your kid swallows a lead pendant from Reebok, they settle for an undetermined amount; your kid swallows a lead pendant from some unknown working in her garage, you never find her or, if you do, you win a suit and will be lucky to see the funeral costs covered (I think they call such defendants "judgment proof"). The large producers may be more motivated and able to make sure that nothing enters their production stream that would fail a test. May be: Mattel didn't.

So we will find a constant problem with small companies growing into the range of the bright line rule delineating "big" from "small" and then finding that they have to do things that they never had to before. Some will be successful, others will not.

In fact, one really difficult problem will be determining during the course of a year whether or not you meet the new rule. Say I ended last year with $999,999 in sales. I don't have to test, right? But in October or so of this year, I sail through the $1M mark. Now, do I have to go back and test everything I made this year? Or do I see it coming and lay everyone off in September? Same thing with hiring employees: rules that kick in at some level usually force such companies to avoid maximum efficiency: they opt to avoid growing, hire temps, or they outsource.

Another aspect to this is the fact that it is not just manufacturers who are affected, but also distributors and retailers. They are not going to want to risk confiscation, fines, or jail, and will therefore insist that everyone -- large and small -- deliver the GCC documentation. For one thing, they can't advertise products as safe unless they can back up the claim. So small producers will have to produce the GCC and therefore pay for the testing even if the government exempts them. It isn't what Nanny Sam wants, it's what your customers want. In this case, your customers are retailers, and they're afraid of Uncle Sam. In fact, Wal-mart isn't just asking for GCC's, they're asking for the test results.

There is a further differentiation between retailers and manufacturers. Fly-by-night manufacturers can set up sweatshops and produce without giving a single thought to compliance. They can forge test results and GCCs. They can sell their products through traveling reps, at trade shows, and so on. When they get raided, they shut down one facility, incorporate under different names, and start up a new one. Location doesn't matter to them. That is absolutely not the case for retailers: if they aren't in the same location under the same name day after day, they never get the foot traffic to make sales possible. Retailers have more reason to be paranoid and therefore most strict about enforcement.

So everyone who thinks that a small business exemption will solve your problems, think again. Small business will not be able to sell into any meaningful venue. I'm not sure how this plays into the dynamic of the rapid growth of some of those small businesses: it makes it more difficult and so possibly means that only the better business managers will succeed in getting to the higher level and will therefore be okay, but on the other hand it makes it more difficult for anyone to get larger.

---------------------
[1] Which is why it should be repealed so we can start over.

Meet the new boss

2009-01-15T21:34:00.005-07:00

The status quo ante, as they say, was as follows up until August 2008:

You could not sell children's products with an excess of 600 ppm lead content.
You did not have to test to determine that.

And that, as they also say, was the source of all of our problems in the past few years. In her prepared remarks before the Subcommittee on Commerce, Trade and Consumer Protection of the House Committee on Energy and Commerce (the Rush Committee), Rachel Weintraub said

To assure that products are safe when they enter the American and global stream-of-commerce, safety must be infused into the earliest stages of the supply chain. For this reason, independent third-party testing of final products, as well as components, must be required. Third-party testing entities must be independent from and have no financial relationship with the manufacturer producing the product. Testing must be conducted to identify design flaws as well as violations of existing regulations, such as those governing the use of lead paint. Components and final products must be tested at numerous stages of production and tests must be conducted randomly throughout the manufacturing process. Products should also be certified that they meet the appropriate standards and should bear a label indicating that they are certified.

Shorter Rachel: You must test. No, you must pay someone to test. They must test the components, the intermediate products, the final products. You must test and test and test. Then they should be certified that they are tested.

Shorter shorter Rachel: No test, no safety.

And she wasn't alone in this opinion.

This was all very alarming for resellers of children's products. Since every item was unique, or at least since they couldn't possibly tie them all to any reasonable lot number, they would have to test everything. That's prohibitive, to say the least. This was effectively a ban on selling used children's goods [1].

Fortunately for them, the CPSC stepped forward with the following clarification:

The new safety law does not require resellers to test children's products in inventory for compliance with the lead limit before they are sold.

Woohoo! Problem solved, right? Well, ...

However, resellers cannot sell children's products that exceed the lead limit and therefore should avoid products that are likely to have lead content, unless they have testing or other information to indicate the products being sold have less than the new limit.

Oh.

Those resellers that do sell products in violation of the new limits could face civil and/or criminal penalties.

Uh-oh.

Maybe the CPSC's former spokeswoman, Julie Vallese, can clarify? At 4:23 or so, "If they have a level of confidence that those things that they are selling is not in violation of the new lead limit, then they by all means can continue to sell those products." Simple, right? Because of your previous career as a chemical engineer, your "confidence" is an unusually accurate way of determining lead content. For the rest of us, does someone have a confidensometer? Later in the video (5:404ish), she says, "they could call the manufacturer and ask them whether or not there is any lead used in the manufacture of the product." Wow, even though manufacturers themselves cannot use this method? Or "they could use XRF technology"; well, until August, and if you have the $40,000 for a gun. Perhaps the Magic 8-ball would be as valid? "Does this product have lead ... 'Ask again later.' I guess this one goes back into the warehouse." Now that you have Vallese's non-test-based testing mastered, perhaps you would like to learn about missile guidance systems?

But many of the people who are claiming that there is no problem with this law are looking at this clarification as a triumph of the process. "See?" they are in effect saying, "You don't have to test. Just don't let us catch you selling anything illegal. All of the people talking about the expense and stupidity of this law are just exaggerating." Wow, they were so smart.

For resellers, here is the status quo post, or however you say, "from here on out" [2]:

You can not sell children's products with an excess of 600 ppm lead content.
You do not have to test to determine that.

Yes, this is much, much better than the way it used to be, way back in '07. This law is practically perfect in every way. Not absurd at all.

--------------------
[1] But not burning them. A law mandating an increased carbon footprint? Go figure.

[2] Until they drop the lead limits. And have we talked about bonding?

I am a Baptist [1]

2009-01-13T20:36:00.006-07:00

Yes, it must be true. After all, people from Public Citizen and/or US Public Interest Research Group [2] would never lie, would they?

First, we had this unfounded and nebulous accusation from Director of Public Citizen's Congress Watch, David Arkush:

There is a lot of misinformation on the CPSIA floating around. It looks to me like a deliberate campaign by some large manufacturers who know better, but are whipping up fear and hysteria among smaller manufacturers for political purposes -- sounding alarms about high costs and bankruptcies as a way of using the current economic crisis to renew the fight they lost last summer against a good product safety law. Maybe I'm mistaken, but that's what it looks like. In any event, if there are real mistakes in the law, then they can be fixed. But I haven't heard a single legitimate concern yet. Just misunderstandings.

Can we have some names, please? Who are these large manufacturers? What is the misinformation, exactly? I've seen a lot myself, but most of it coming from scared and confused mom & pop operators who can't afford high-hat lawyers like yourself to explain this monstrosity to them.

And this business about real mistakes in the law: I wonder if you might elaborate? And perhaps describe how they can fixed? Because we have been trying and having little success.

Well, let's see. The only people I have dealt with as we have been running this campaign are

Rick Woldenberg, Chairman of Learning Resources. Ever heard of them?
Kathleen Fasanella, author and operator of www.fashion-incubator.com and www.NationalBankruptcyDay.com. One woman business.
Several other designer-entrepreneurs (apparel business owner-operators)
and dozens more coming into the fashion-incubator forums from Etsy.

Then, the conspiracy theorists at USPIRG, Public Citizen, Consumer Federation of America, Consumers Union, Kids in Danger, Union of Concerned Scientists, and National Research Center for Women & Families make essentially the same accusation in an open letter to CPSC Chairwoman Nord:

Our groups, representing consumer, scientific, and public health interests, write to urge the Commission to provide guidance and clarity and to immediately dispel misinformation now circulating among entities regulated under the Consumer Product Safety Improvement Act (CPSIA). ... The vacuum of implementation information, as well as the proliferation of misinformation regarding actual testing requirements and the cost of testing is leading to confusion and fear.

Wow! "immediately"! "misinformation"! They wouldn't be completely clueless upper middle class lawyer policy wonks without the slightest knowledge of what they are talking about, would they? No! They represent consumer, scientific, and public health interests. And therefore I must be part of the ... is it a cabal or a coven? We can't decide. And they finish with this crescendo:

While certain segments of industry are raising valid questions about the new safety testing requirements under the law, other industry statements and reports about the impact of the law overstate and/or misstate important aspects of the requirements of the new law. The CPSC can - and must - address valid concerns, and act to quell misinformation surrounding the new testing requirements. Congress has spoken clearly, and now the CPSC has the responsibility to use the tools already provided to it by the legislation and provide the necessary, accurate and important guidance to all interested parties to further the timely and effective implementation of the CPSIA.

Right. I have 2 dozen quotes from actual manufacturers who got them from actual, CPSC-approved test labs. Bureau Veritas (you oughtta see this, what did someone call it? "Museum of Bureaucratic Incompetence exhibit"), Intertek (some from China), Consumer Testing Labs, EMT, IMR Test Labs, CMA, Vartest, NSL Analytical, and various applications of XRF guns, including in-house testing with a rented gun, and of course TheSmartMama, Jennifer Taggart (oh, I forgot she was in the ... juncto? Another multibajillion dollar toy manufacturer). These prices range from $45 to test baby booties to one for over $18000. And we already knew about Rick's $24000 telescope and $6000 kindergarten project kit.

The baby booties are an interesting problem. She gets about three pair from a ball of yarn. Thus, every three pairs constitutes a batch. Thus, she must eventually track and tag each batch along with its $45 test results. Anyone want to buy a set of $25 booties? Because that's what they're going to have to cost by the time you throw in her time, the yarn, and the testing.

So, I have my information. It's time for you "representatives" to put up or shut up, or risk being called liars. Who are the Bootleggers for whom I am working? What is "mis" about this information?

Because I also have my theory. It is that the Hasbros, Mattels, and other real giants in the children's toy, apparel, and other industries stand to gain from CPSIA. If you make 100,000 Tickle Me Elmos, t-shirts with Mickey Mouse, or any other branded item, the testing costs can easily be folded in. The problem that you law school genii haven't figured out is that most apparel companies are small: 68% have fewer than 20 employees. And then there are the retailers who sell their stuff, the reps who shop it around, the vendors who supply the cloth and hardware, the contractors who supply the services. There are hundreds of thousands of people employed in small companies in this and related industries who are facing unemployment. And when they do find themselves unemployed, consumers will find their choices limited, and the prices for those branded, mass-produced products will go up. I will blame you.

I will blame you, Rachel Weintraub, not only for the mess this has already caused but for the parts of the mess to come that we haven't talked about, like bonding and the opportunities for Big Law to use this program to as a profit generator, all of which you applauded in your testimony. Were you also one of those who believed that the law needed to be expanded from 6 year old kids up to 12 year old kids?

I will blame you, Janell Duncan, Donald Mays, and Ami Ghadia, for supporting this law without considering its consequences; for accusing us of spreading misinformation in one forum (above) while your organization tells half-truths in another: "Consumers Union, along with a half dozen other public interest groups, has urged federal regulators to immediately provide additional guidance and clarity to help address those concerns." Right, blame the CPSC, not the law, and nevermind the FUD campaign?

I will blame you, Ed Mierzinski, who doesn't even have the courage to print my or Rick's comments on your blog, who first accuses the HTA of being a "grassroots effort of 'small' toy companies" without realizing that they are a grassroots effort of small (no scare quotes) companies, and then calling them responsible seekers of clarification (if, by clarification, you mean broad exemptions and/or repeal).

I will blame you, David Arkush, serial conspiracy theorist, arbiter of what's a legitimate concern when your livelihood isn't on the line, and you, Elizabeth Hitchcock, who spent most of the pre-Christmas runup telling everyone about the "dangerous toys" that CPSC is allowing to remain on the shelves without once (that I could find) explaining the difference between "being lead-free" and "being tested and certified as lead-free". Perhaps you are a little fuzzy on this yourself? Because I spent weeks going along behind your stories trying to clear up the confusion that consumers had on that point.

Celia Wexler and Diana Zuckerman? Except for being signatories to this rearguard action letter, I'm going to let you off the hook.

You are the real Baptists. The Bootleggers don't have to lift a finger with you people around.

--------------------------
[1] As in "Baptists and Bootleggers".

[2] They're basically the same group, as you can find by looking up any of their signed public letters. It's basically the same dozen people climbing on board each other's bandwagon. There's even a term for it: astroturfing.

Man on Fire

2009-01-11T18:54:00.003-07:00

This is awesome. Go read it now. Here's a clip, but just go read the rest of it now.

How shall we deal with this complex situation? The first step is obvious - read the law. We did, we read the CPSIA. It says everything's illegal, all the things that we make, unless we prove they are legal. OMG, you're kidding! No, wait, somebody told us that the CPSC has written some "implementing rules". We look there, and somebody spots a rule on page 7 that says wood and certain fibers are okay. Yippee, that's something at least! And there's another one on page 18 and we think this one paragraph on page 37 might do us some good (you know the one, subparagraph 1513.3(a)(ii)(C)(IX)). . . . We hear from a customer that there was a FAQ . . . so we download every FAQ since 2007 and scrutunize them with four lawyers at our side.

Read the comments too. Read his other entries. Watch the movie. Collect the whole set. Rick Woldenberg is my hero. He may soon be looking for a job; I am thinking either "best-selling author" or "bomb-throwing anarchist". He is qualified for the former, he is being accidentally trained to be the latter.

What are profits?

2009-01-10T09:01:00.002-07:00

I'm detecting a thread of misunderstanding while looking through various reactions to the CPSIA. Many commenters are framing this as "profits vs. safety" without thinking about what they mean.

Are profits always and everywhere a bad thing?

Keep in mind that the producers who are going to be harmed the most by this law are people for whom profits are "whatever is left over after you subtract costs from revenue". In most cases, this means their income since many of them do their own production and are their only employee. Wages, pure and simple. I have received enough information from many of them to know that we aren't talking about $Millions or even $hundreds of thousands, but rather somewhere in the $14k-$80k range. In other words, a decent living, a living wage -- you know, the kind of thing ACORN wants for everyone except their own employees. Of the few who have million-dollar businesses, they are typically providing employment to a few people and still find themselves getting not much more income out of the business than those employees. We're talking strictly middle class, not John Rockefeller.

The people who benefit the most from this law are large manufacturers who can spread the cost of testing (and litigation!) over thousands or millions of like products. These are the companies who traded in their "manufacturer" hat for a "branding" hat; they practice the GM style of management where intellectual property and marketing are the core areas of their business and manufacturing labor is a variable cost to be eliminated; the profit on the next quarterly statement is the goal (and with it the management bonus); manufacturing is a necessary evil. I'll note that Hasbro sat in front of the subcommittee, testifying in favor of some of the key (and most expensive) provisions (prepared remarks - pdf!):

Hasbro supports mandatory third party testing.

How, you might ask, did Hasbro know about this at least four days before the committee hearing in November, 2007? And get an invitation to speak? So, accuse me of approaching this like a Marxist, but the beneficiaries are the ones who are earning an excess profit, and it is this definition that the "safety vs. profit" commenters are implying, but clearly Hasbro sees profit in this brand of safety.

So "safety vs. profit" is a false choice. If there is a choice, it is between entrepreneurial profit on one hand (aka wages), and state capitalist profit on the other (aka returns on capital). Each has their own safety issues, but overall I would assert that safety is more likely to come out of the former than the latter, especially if we were to compare systems based on those models.

But that's not really as catchy as "safety vs. profit", is it? Oh well, with Jon Stewart, Jay Leno, and Bill O'Reilly in charge of our infotainment and Al Franken in the Senate, we are entering the era of governance by one-liner.

Telling

2009-01-03T22:20:00.005-07:00

The first four comments on this post about progressive intellectuals are instructive:

1

The left has always had the intellectual advantage. Where the left is weak is in getting persons of like mind elected and/or in decision-making positions that can implement some of the left's ideas.

All these folks are fine. I like em all. I've no complaint with any of them, but if our pols continue to be pro-corporate centrists (aka DLC-type Dems) who entertain the intellectuals and puff up their egos by "listening" to what they have to say but who then follow the same, failed, tired line of centrist incrementalism that screws the average American while primarily serving the interests of the wealthy and powerful, what difference does it really make? Eh?

As you state, the problem isn't with liberal intellectuals, it's the corrupt political system that infests all government from federal to local school boards. Between uncaring citizens and the two (essentially one) party system of good ole boys & girls and special interest pay offs, I fear our great experiment in democracy an abject and irredeemable failure.

It's also a problem that liberals want to be intellectuals instead of gain political power.

Exactly!

So, to summarize:

A. We're smarter than everyone else and history is on our side.
B. The problem is that we don't have enough power.
C. In part, that is because of a lack of party discipline, i.e. too much independent thinking. Also, our politicians get power and then ignore our smart guys (?) while steadily serving corporate interests instead of ours, i.e. not enough independent thinking.
D. What we need is more power. Then we'll get serious. And find the right setting for independence of thought.

Questions:

I) When is the amount of power currently held in Washington enough? Bonus question: How come you only recognize the principal/agent problem when looking for an excuse to regulate?
I) Has it not occurred to you that your obviously superior intellectuals have actually gotten everything they have demanded, and the current system is the result? I mean, your guys had Congress for 40 years, lost it for 8 years, got it back for 2. You had the White House for about half of that time.
II) What happens if/when the other team gets their hands on that power?

If you're really sincere about this approach, history suggests that you might try setting the Capitol building on fire shortly after passing some kind of ... I dunno, a "law that enables the president", but you'll have to come up with a catchier title.

What the mutualist world looks like

2009-01-02T07:16:00.004-07:00

Without introduction:

From here. I'm particularly interested in her discussion of open-ended toys. Hard to believe kids played before branding.

While you're watching this, keep in mind that what she is doing is going to be a criminal activity next month. By criminal, I mean fines of $100,000 per violation up to a total of $15,000,000 and incarceration of up to 5 years.

Also, these are amusing:

and

I don't know of any evidence to support his claims that Big Box retailers were behind this, but se non vero e ben trovato (even if it is not true, it is well conceived). From what I can find, this legislation was passed on the recommendation of US PIRG, Public Citizen, Fear, and Shameless Pandering. If Walmart is the bootlegger to that Baptist cabal, well, all the more shame to be heaped on the Naderites' heads. It works out for those larger companies and retailers in much the same way that the large meatpackers were aided by the moral cover provided by Upton Sinclair's The Jungle and the resulting ~~meatpacker's competition reduction act~~ Meat Inspection Act. It makes it more expensive for small producers, and turns potential torts against retailers into a federal law enforcement problem. The costs are socialized, dispersed, and hard to see; they consist of unemployed small producers and their employees, fewer selections for consumers, and higher prices. The gains are privatized, concentrated, easily seen; they consist of higher profits for mass producers. The professed goal -- greater safety for children -- is probably nonexistent and possibly thwarted, since this works to increase the market share of the same mass producers who were responsible for the problems in the first place.

The products recalled in 2007 were already out of bounds of the Federal Hazardous Substances Act, so rather than enforce that law, we made a new one that grants lots more power to the state. To think that the people behind this drew votes away from Al Gore ....

Rabbitzilla

2008-12-27T16:18:00.002-07:00

It's that time of year where I'm making sure I have given my tithe. So I'm going through the Heifer website to pick out stuff: goats and water buffalo and chicks and such, when I come across this photo:

Pure genius. They apparently crossed a rabbit with a water buffalo. I mean, that thing can pull a plow, can't it? I'd be afraid to let it to close to the young 'un for fear that it won't be herbivorous anymore. Better have the Holy Hand Grenade of Antioch nearby when you have one of these in the village, knowwhutImean?

Legislation also creates special interests

2008-12-25T13:12:00.002-07:00

One interesting aspect of working to counter the CPSIA is how it is changing the perceptions of people directly affected. Many of the people I know in the apparel and related businesses are left wing; some of them are right. There have been a few instances of trying to tie this fiasco to lib-rals or Bush or even Obama, but there is no getting around the fact that the opposition to this law was miniscule. It passed with only 1 vote in the House and 3 in the Senate against. So it is a bipartisan disaster, and people have for the most part reoriented their attention on Congress (who remain ignorant to the problems and determined to stay that way) and the ignorant elite who pooh-pooh any mention of the downside.

The forces primarily responsible are "children's advocates". [1] What distinguishes Public Citizen or PIRG from other people who are also "children's advocates", usually known as "parents", is that they don't live in the real world. These are people whose jobs are securely upper middle class, many of them are young, unmarried, and childless. They don't have to live on a budget. Also, they have lots of access to Congress.[2]

Now we have this law that is going to put the parents of children out of business. When some of those businesses go under, they will lay off other parents of children. Many parents who like to buy safe toys will find their choices curtailed, leaving them with the option of making toys or buying the mass-produced plastic junk that started this train wreck. The children of those parents don't count; their poverty, or stress, or hunger, or lack of choice is their problem. For their next trick, perhaps David Arkush or other elites at PIRG and PC will note that we would all be so much richer if we would break windows and put glaziers to work.

Incidentally, one child has died of lead poisoning from a toy in the last two years. That's one child too many, but it is impossible to say what the consequences of this law will be. Parents who were running a business from home now have to find work in a bad economy. Some of them will succeed, and put their kids in daycare. What are the long-term negative consequences of that? Others will not succeed and will have other problems. I doubt that unemployment and children's health are compatible. School science programs will be unable to obtain microscopes and telescopes (and goodness knows what else, those are just things of which I am currently aware). What are the long-term costs of that? The delay of the discovery of a cure for some disease? How many illnesses and injuries should we tolerate to avoid one death? Is this a horrible question to ask? I assert that it is not: resources are finite, and mandates of this type lead to tradeoffs. This question should have been asked before the law was passed; the fact that it was not shows a lack of humanity or realism on the part of the special interest groups and Congressmen who took us down this path without asking the right questions of the right people.

The upshot of all of this is that small businesses who were previously unaware of their need to keep one eye on Washington have suddenly become partisans. Instant special interest group. Not because they are in favor of lead and phthalates, but because they need to keep from getting screwed by activist groups who don't care about that which cannot be seen. Mark Riffey nails it in his "Vigilance, Wooden Toys and Evil Realtors"

It's difficult to say when the handmade child products industry realized they were in trouble. The Handmade Toy Alliance appears to have been formed in October or November 2008 -- after the bill became law (their website was registered Nov 23, 2008), but that's just one of the affected industries. Digging around on Google, there's barely any activity on this issue before November.

Overall, it appears that most handmade children's product businesses were not watching Washington.

Normally this sort of thing is done by an industry's national, regional or state trade association, assuming they are being vigilant (noting that vigilant is not the same as blindly partisan). However, many cottage industries haven't organized themselves (or have but not well enough), leaving this work to individual business owners.

No matter what your politics, you cannot afford to assume that Washington and Helena are on your industry's side. You cannot assume that they are aware, much less able to fully consider and understand how the things they write into bills can impact (or destroy) your business.

I suspect you have enough trouble keeping up with all the news and developments in your industry. Try doing it in hundreds of industries. That's the difficult task they're up against.
...
Laws like Do-not-mail make big business the clear winner. They already have market share, a customer list and cash flow to eliminate industry newcomers who have no relationship, no mailing list (and laws preventing use of a purchased list), no way to call or fax, etc.

Watching over policy making bodies for potential impacts they're making on your business is smart business, whether you do it yourself or join a trade organization that does it for you.

Standard political science has this notion that special interest groups arise to engage in political entrepreneurship, or rent-seeking. But the reaction to CPSIA demonstrates that sometimes the reverse is true: special interest groups arise as a result of arbitrary and detrimental government action. In this case, that action arose because of another set of special interest groups who are narrowly focused on things that they don't understand. Actions create reactions.

---------------------------
[1] Children's advocates: This is patent nonsense, "nonsense on stilts". I am amazed at the information-free content of campaign literature that touts a candidate as "pro-family" or "anti-crime". Newsflash: everyone is for children, everyone is against crime. Those are not distinguishing features. The implication is that one's opponents are anti-children and/or pro-crime. Those are not honest debate tactics.

[2] Many of those advocates are trial lawyers who have a vested interest in creating more complex laws. The bill's original sponsor, Bobby Rush, has a running battle between electric companies and trial lawyers for his vote. Does anyone understand why electric utilities - publicly regulated natural monopolies - need to spend money on Congressmen? And then there's this cheerleader.

DailyKos: These people vote

2008-12-15T18:25:00.003-07:00

The children at DailyKos knock one out of the park ... for the other team.

First, Congress passed this law by an overwhelming margin. Then the president signed it. That's how representative democracy is supposed to work, right? Then, CPSC General Counsel Cheryl Falvey, who gave heavily to Friends of Hillary in the 2006 season, is accused of committing a parting shot for the Bush administration.

Her crime? Well, according to people who only read press releases from Barbara Boxer and Dianne Feinstein, and therefore believe that they were the authors of this bill (strange that they weren't sponsors), Ms. Falvey made an error in not making the phthalate ban in the CPSIA retroactive. It does not seem to matter -- indeed it does not seem to enter their analysis -- that Ms. Falvey previously found that the lead ban does apply retroactively.

And of course you will find nowhere that the really eggregious part of the CPSIA law is the mandated testing and documentation procedures. Not only do these provide a huge windfall for the few testing labs out there, but they are cumbersome, complex, expensive, not yet defined (!), and inflexible. The result is that you may no longer see microscopes or telescopes in school science departments. Oh well, just something else the partisans can blame on the other guy.

Incidentally, this crap will all hit the fan just in time for President Obama to take office. Just one more thing the other partisan children can Blame on Obama!

In which 30 thousand small manufacturers square off against mom, apple pie, and Ralph Nader

2008-12-09T17:43:00.003-07:00

Contrary to popular reports, manufacturing is not dead in the United States. Up until the recent troubles (the recession, not the Bush Administration), we were making as much steel and other stuff as ever. I'm too jazzed to go looking up the stats - try the Statistical Abstract.

According to the 2002 Census, there were about 40,000 cut & sew apparel manufacturers in the US. Of those, approximately 68% were small businesses. You are a manufacturer if you make or cause something to be made (i.e. contract it out). That's about 30,000 small manufacturers, small being anything from sole proprietorship (employing yourself) to 19 employees.

In August of 2008, in the wake of many high profile recalls of stuff made in China, Congress passed and President Bush (yes, Bush, not Obama, contrary to some rumors (really!)) signed the Consumer Product Safety Improvement Act (CPSIA). It has some very laudable goals: eliminate phthalates and cut lead to trace levels in all children's goods. Children in this context are anyone 12 and under. This means clothing, toys, electronics, strollers, books, school supplies, school science projects, astroturf (yep), etc. Sounds pretty sweet, huh?

Well, there are some details. You can't just not use lead or phthalates. You can't just point out that you are using undyed organic hemp and wooden toggles. No, you must prove that you are lead- and phthalate-free. How? Well, at $600-2400 per item, you ship it off to a certified testing lab. Plus, it's destructive testing, so kiss 1-12 samples of whatever it is goodbye. Also, you need to make sure that it is a representative lot, so no more repurposing of used clothes. Also, you need to provide this General Compliance Certificate (GCC) to anyone downstream who wants it. At any time. And be sure you can trace it by lot. Also, you may have to put up a bond in case they want to recall your product so that they know you can cover the cost of the recall.

Now, there's something you may not know about apparel manufacture (and you still won't know at the end of this paragraph because I'm simplifying the heck out of it). You start by developing about 20 styles and see what gets bought. Once buyers buy on the strength of the sample, you order the material and start sewing. The CPSIA testing has to be done on the final product (unit testing), not the inputs (component testing). So even though you are using the same organic cotton cloth and 5 different dyes and 3 different buttons, you can't get by with doing 8 tests (the cloth in 5 colors plus tests on each button). Nope, you have to do testing on 20 different styles x 5 different colors = 100 tests. Of which only 5 styles will ultimately go to market. That's a minimum of $60,000 just for the testing, and you haven't even started to sell yet.

By the way, size does not matter in the eyes of this law. Haynes T-shirts? Yes, they have to test. Grandpa's handmade toys that he sells on E-bay? Yep, in fact E-bay and Etsy are already noting that legal compliance is a requirement of their user terms of use. Also, manufacturing location does not matter - whether you make in or contract to China, Los Angeles, or Lancaster County, you have to test.

"But I make handmade dresses from down from angel's wings, blessed by two rabbis, the pope, an imam, and a guru!" Too bad, where's that GCC?

One further thing: On February 10, if you don't have the GCC, you are selling illegally. So that date has been declared National Bankruptcy Day. You can also follow this in the forums and blog posts at fashion-incubator.com.

So, you would think that Congress would realize they made a huge mistake. The successful small businesses in the industry are absolutely in agreement that lead and phthalates are bad things: many of them are moms who got disgusted with the mass-produced junk in Wal-Mart and went into business with a sewing machine, some good ideas, and a determination to to things right, to be the good guys. But no, Congress doesn't even know there's a problem looming. Congress spent 3 hours and 20 minutes debating HR 4040 and whatever the Senate bill was. 3 hours and 20 minutes to debate a 62 page bill. There was one vote cast against it - Brownie points for whoever can guess who it was without look.... ah, hell, it was Ron Paul. Duh.

In fact, Congress is completely clueless about what is coming. In fact, some of them are pissed that the CPSC legal counsel advised that whereas Congress clearly intended the lead standards to go into effect right away (making your inventory worthless), they did not intend that for the phthalate ban. They think they should eat their inventory, which was legal prior to the law's passage, and would probably pass testing afterwards, but on 10 Feb 2009 will not have a GCC. And leading the way for them is Saint Nader's PIRG. NRDC is chiming in, too. They have been planting stories in newspapers, using their annual review of toys to lead parents into thinking that most if not all toys are simply die-cast lead with a sheen of phthalate gloss. Those stories tell you only that phthalates may be on the shelves for years to come. They don't tell you anything about the testing, about the certificates, about the cost, about the effect on small businesses and one-man or one-woman shops. They might as well also point out that dihydrogen monoxide is still legal for all the rigor and truthiness they are applying to this story.

Incidentally, you might want to stock up on interesting children's clothing. This time next year, it will all be the same style and the same color.

Thoughts on Dorfman (2 of 2)

2008-12-02T22:31:00.006-07:00

Continued from previous post ...

4. World economy as zero-sum game

A recurring theme in the book is a brilliant insight. Dorfman repeatedly points out that wealthy characters -- Scrooge McDuck, Bruno in The Lone Ranger's Horse Valley, the Lone Ranger himself -- obtain their wealth through one of two methods. Either the source is mysterious, obscured, shrouded, or they work the land directly. In the first case, we never see factories, laborers, capital, etc., so we are never curious about how they treat their employees or came to dominate their industry. In the second, they literally extract money from the land with their own blood, sweat, and tears, preferably by the happy accident of running a prosperous silver or gold mine. This is an unimpeachable source of wealth since it is literally the mining of money. Thus, the reader is never burdened with any doubts about their moral fiber. It thus allows the wealth to be used as a plot device without getting into any sticky questions of morality.

That said, Dorfman does seem to go too far with his regard for the source of wealth. In one passage, he implies that America's wealth and the poverty in other nations are directly related:

...the development of the United States helped to create the disdevelopment of so many other parts of the world...

This is standard zero-sum theory, the idea that there is only so much wealth in the world and that if some have more, it must be because they took it from someone else. It is the flipside of the very idea against which Dorfman is struggling, the idea that all wealth is earned through superior moral qualities (hard work, frugality, ... the Protestant Ethic [1]).

It is not even necessary to enter into a long argument that the world is not a zero sum game. All I need do is link to this (pay attention to the comparison of the US and Chile at around 6:00) and ask how it can be reconciled with the Zero-Sum Theorem.[2]

5. The confusion over capitalism, industrialism, planning, monopoly, and the State

I divide this objection into three parts: one, the implication of comparative analysis, two, Dorfman's uncritical acceptance of Marxist (perhaps vulgar Marxist) agitprop, and three, Dorfman's refusal to use his analytical methods on his own preferred myths.

5a. Over and over again, we come to phrases such as "products of capitalism" or references to industrialism. At times, they seem interchangeable as Dorfman always uses them pejoratively but never defines what he means by the term (though at least once he seems to distinguish between them when he says, "... capitalism (or is it industrialism?)"). They are, in other words, unspoken assumptions, the very type of thing against which his analytical machinery is directed.

The most offensive thing about these phrases is not the lack of definition: we can (must) guess at that from the context. The context, though, is exactly what his prose intends to evoke. If you say, "A is a product of capitalism", there is an unwritten implication that it is not a product of not-capitalism, or that not-A is not a product of capitalism, and that not-A is a product of not-capitalism. In other words, you are implying a comparative analysis.

	Effect A	Effect Not-A
Cause C	Y	N
Cause not-C	N	Y

If you said, for example, "Humans in capitalist societies must eat food to survive," that would be less than devoid of useful meaning because humans in all societies must eat food to survive. The qualifying phrase "... in [X] societies ... " adds no useful meaning in this context since the statement, "Humans in socialist societies must eat food to survive" is equally valid. When the qualifier adds no meaning, it can only be there as a mistake or to be intentionally misleading. I don't believe he would make a mistake like this repeatedly throughout the book. Especially since his implied expertise is in analyzing the implication of context.

One possible exculpatory interpretation could be that Dorfman is making statements about capitalism which we also know to be true about other, non-capitalist societies in order to show that those societies are also capitalist. For example, he might say, "Capitalism is hierarchical" so that when we think about other hierarchical societies -- chimpanzees, Sparta, the USSR, North Korea, China, Cuba -- we might realize that those are therefore capitalist societies. I don't think he is going there.

So I am left with believing that he believes those things are not true of non-capitalist societies.[3] When he says something like, "Producing heroes is a function of popular literature in capitalism," the implication is that popular literature in socialist countries does not feature hero production as a function. We know that this is not true; even a recent NPR piece acknowledged the reality in China:

The only kind of literature that made it through the government censors -- even long after Mao was dead -- was dry and boring. It had to have a message about the improvement of communist society.

So if we know that both capitalist and socialist literature were agitprop in support of the status quo, what could be Dorfman's purpose for making such statements of implied contrast? Is it to suggest that existing socialism does not produce hierarchy or maximum leaders (at least in theory, right comrade Party Secretary?), heroes (like the New Soviet Man), pollution (Aral Sea, The Black Triangle of East Germany, Poland, and Czechloslavakia), icons (fill in the blanks: hammer and ______ ? The hammer is symbolic of what human endeavor? _____ [4]). Socialism produces only free-thinking people, which sometimes means you have to shut down the infidel presses, radio stations, and TV stations to prevent their minds from being clouded.

Let's take another angle: By saying that "capitalism produces A", he is also implying that capitalism does not produce not-A. In a country in which I can pick up copies of Das Kapital, Mutualism: A Factor of Evolution, The Anarchist Cookbook, What is Property, and other clearly anti-capitalist books, the other possible implication/interpretation of Dorfman's assertions is cut off. Even Schumpeter based his defense of Marx' conclusions on the realization that capitalism tends to tolerate, even support and defer to, the socialist academics who advocate the destruction of capitalism -- in substance doing one better than Lenin's claim that they would sell the rope by which to hang them by subsidizing the socialist rope-makers.

What, then, is the purpose of such statements? Such unstated assumptions either speak to the converted, or they attempt to trick the uncommitted and uninformed into believing something without telling them the whole story. This is the epitome of the type of propaganda which Dorfman is analyzing; it is argument by intimidation, of the form "As everyone knows ..." in which those first three words are left to the readers' imaginations.

5b. Next we have some confusion over capitalism, planning, and monopoly. In one section, as Dorfman is pointing out that heroes such as Superman, The Lone Ranger, and others sprung into existence during the Depression, he falls into a line of thinking that can be attributed to high school civics classes.

The market's automatic mechanisms did not serve to avoid disaster. The State appears as the only one that can, and should, intervene.

This is The Roosevelt Myth, popular among the Right and the Left for different reasons.

According to the Right, the United States was a free country until FDR took over and rammed socialism down our throats. In the period prior to FDR, self-made men like Carnegie, Rockefeller, and Vanderbilt created wealth with their bare hands and genius. According to the Left, the country was governed by laissez faire and monopoly, but then capitalism collapsed. FDR saved us by taking over and fixing what was wrong with capitalism.

It is surprising to find Dorfman citing one of these two infantilized visions of history. But then, he has to, because it squares with Marxist theory. My admittedly kindey-garden version of that is: in going from atomistic competition to capitalism, the capitalists incur more and more debt to buy up their competitors at the same time they are cutting costs to gain market share until at some point the market is saturated, they are losing money on every product sold, and they collapse under the weight of the debt incurred in building the empire. At that point, the State steps in and takes over, a step made easier by the fact that the sole remaining company accounts for the entire industry.

That is not what happened or was even likely to happen. The basic problem is in the way a monopoly or oligopoly works. In order to obtain extraordinary profits (rents), you have to restrict output before raising prices. When a monopolist tries this in a free market, competitors undercut and take market share. It is a self-defeating strategy. As we can see from Chandler and Kolko, the actual history consisted first of a wave of attempts to cooperate in cartels like the Western Freight Association, which collapsed because of price shading by uncooperative members. There was then a period of consolidation which peaked around 1900, but which failed because entry was not blocked. As this strategy began to fail, they turned to the federal government as a cartelizing agent.

By the time we got through World War I, the country was a far cry from laissez faire (one could argue that the Revolution was scarcely over before Hamilton began to put in place the foundation for the coming corporatism). Not only had the large industries been built on the services provided by railroads and telecommunications, which in turn relied on state support to overcome problems such as obtaining rights of way, but now they had a federal infrastructure that slowed down the appearance of competitors. The railroads got the Interstate Commerce Act (1877), Elkins Act (1903), Hepburn Act (1906), Mann-Elkins Act (1910), and finally the Transportation Act of 1920. These put the ICC in the position of establishing minimum rates and effectively slowing the competition from the trucking industry. Meat packers got the Food and Drug Act and Meat Inspection Act (1906) to help limit entry to their industry. Bankers got the Federal Reserve Act of 1913, an act which guaranteed federal bailouts (to member banks). Everyone got the Clayton Antitrust Act and the FTC, an agency with the power to stop new entrants from taking market share with "predatory pricing". Then we got the War Industries Board during the administration of Progressive president Woodrow Wilson. The actual policies of FDR drew heavily on the experiences of the WIB and on the ideas of Gerard Swope, President of General Electric.

Which makes Dorfman's comments about planning all the more bizarre. He says,

What the public and the magazine will not do is admit that such phenomena [pollution] accompany capitalism (or is it just industrial society?) like endemic diseases: the need to maximize profits, lack of planning, unbridled competition, and a general lack of restrictions, controls, or specific responsibilities.

If one takes his Marx seriously, one should understand the state-corporate nexus which lies at the heart of historical capitalism (state-capitalism) as "planning". A monopolist goes to great pains to plan. Even Howard Zinn understands that monopolization when he says,

[Teddy Roosevelt] prosecuted the Morgan railroad monopoly in the Northern Securities Case, considering it an antitrust victory, but it hardly changed anything, and, although the Sherman Act provided for criminal penalties, there was no prosecution of the men who had planned the monopoly [emphasis added] - Morgan, Harriman [sic], Hill.[5]

And what could be more exemplary of capitalist planning than the drafting of the legislative acts above -- many of which were drafted not by wild-eyed Progressive reformers, but by lawyers working for J. P. Morgan! --, lobbying in their favor, and then cooperating with and even running the War Industries Board? Capitalism lacks planning? Is Dorfman mad? State-capitalism is planning!

5.c But let us grant for a moment his apparent belief that planning is good [6]. Why then, does he seem to denigrate the Lone Ranger in his role as the State? Who, in Dorfman's preferred world, does the planning if not the State?

It is telling in the opening chapter to find that Dorfman was working for the Allende government as a cultural "advisor". Essentially, he was working for the Ministry of Culture (dare we call it MiniCult?) In that capacity, he expresses hope that they were telling the truth (Minitruth?) and not spreading a different version of propaganda.

Allende's victory gave this enterprise [of the Chilean people and intellectuals gaining a means of producing their own ideas] a real grounding and a vaster dimension ... I was personally involved in producing new comic books, in inexpensive paperback literature sold on newsstands, a series of TV programs, a magazine for adolescents.

The problems the people involved in this undertaking had to solve were gigantic. How to subtly use and change publications, programs, and formats which already had a following; how to create new messages without making them into propaganda; ....

A page or so later, we find that at times he was out until "two or three in the morning from a rayado mural (painting the town's walls with artistic and political slogans)." I don't see how this could not be viewed in Orwellian terms. A member of MiniCult spending the night painting political slogans by night and producing propaganda-free television by day?

The obvious "out" from the problem of being against the State but for planning is to claim that socialist planning is done "democratically". This is not defined anywhere in the book, though it should be pointed out in his defense that the book is not about this. However, in line with Dorfman's own analysis, this is another one of those unspecified assumptions: that "democratically controlled" has a real meaning that is knowable and known.

While I personally would like to see a society in which more worker-owned cooperatives competed head-to-head with privately owned and operated concerns, I have no illusions that such organizations are automatically and everywhere superior. I have worked for a few people in my life who were energetic geniuses; the idea that the organizations that they built should suddenly be subjected to control by the workers, in which the janitor or the receptionist had an equal influence on policies as the company founder, is laugh-out-loud funny. I know of union officers who disagree with their own members and find their voting to be against their own long-term interests. Hierarchy and bare majority democracy to me are mirror opposites, yin and yang, in which the strength of each reflects the weakness of the other.

If the Ranger does what the people want him to do, regardless of whether they voted for him or not, isn't that what the socialist wants? They call it "the people's will" or "the public good". If he didn't do what they wanted, he wouldn't be a hero.

Dorfman demonstrates nothing like nuance on this topic, though. Capitalism promotes hyperindividualism and anomie, socialism doesn't. Capitalists are encouraged to defeat their comrades, socialists aren't. It isn't apparent, then, how socialists would tolerate dissent that might lead to contentious debate and defeat in democratic decisions. In practice, socialism has not tolerated such dissent. We need only look at how Lenin handled the Mensheviks, how Stalin, Mao, and Castro tolerated rivals, how Chavez tolerates opposition radio and TV. Indeed, in a period in which the US was arguably more free market and less state-capitalist, de Toqueville noted Americans' tendency to associate. As I have noted elsewhere, social interaction continues today in market environments. But people living under socialism have had to be wary of what they say and with whom they associate because the State's spies are everywhere: this has been a theme of dystopian novels (1984, Brave New World, This Blessed Day, Fahrenheit 451) as well as the experience of the inhabitants of East Germany.

As the joke goes, three men die a day earlier than planned, so St. Peter grants them a wish to spend 24 hours doing whatever they wish to do: the Englishmen wishes for a walk in the country with his favorite hound, the Frenchmen wishes to spend the day with his mistress, and the Russian wishes to watch his neighbor's barn burn. Truly, in a society in which any dissenting thought potentially puts you in conflict with your neighbor, neighbors probably keep to themselves.

-----------------------------------------------------------------------

So long as I can keep in context the fact that Dorfman does not appear to have turned his analytical engine on himself or his preferred mythologies, and to keep in mind that when he says "capitalism" or "industrialism", he is usually but not always right if you substitute "state-capitalism", this was a remarkable book. I could have only spent this much time criticizing isolated components of it if I found the main course to be so good.

-------------------------------------------------------------------------

I'm still a little baffled by the rant against the tendency of Reader's Digest to show great people being just like everyone else in the midst of doing great things. He is at one time ridiculing this and referring to it as a democratizing effect. What does he mean? Does he want us to always keep great people on a pedestal? That's hardly in line with standard thinking of his intellectual class. Ostensibly his purpose is to knock down Reader's Digest for convincing its readers that they know something about the world without actually having learned anything, for believing that they are the same as Einstein without having accomplished the same things. Sure, okay, a magazine that feeds its readers narcissism is bad, but is it better or worse than an ideology based on that premise? So, which ideology is it that says that Einstein and the janitor should each get an equal vote on how Princeton is run?

---------------------------------

[1] Dorfman makes reference at one point to Weber's "The Protestant Work Ethic and the Spirit of Capitalism" without appearing to be aware that the theory is not without its shortcomings, i.e. finding that many of the same outcomes may be found in Catholic and Asian societies. But let us put nothing in the way of a good polemic against Anything That Is Not Socialism.

[2] One possible way out of this is to cast doubt on what is being measured and how it is measured: it is possible that the choice of the measure of wealth is leaving out critical elements that fail to show the exploitation. But then, one has to wonder what measures can be used to revive the Zero Sum Theorem.

[3] An alternative theory is that he personally may believe those things, but hopes that the readers aren't aware of them. I don't think that's true either.

[4] Sickle, industry/industrialism

[5] This is actually an error on Zinn's part. For one thing, Harriman was working against the Hill interests, a fact which prompted them to attempt to shelter their holdings in the first place. For another, this is an awfully narrow definition of monopoly: the Northern Securities railroads were bounded to the North by the Canadian Pacific and to the South by Harriman's Union Pacific, both of which were heavily subsidized railroads (the Great Northern was the only railroad arguably not subsidized).

[6] By "planning", I suspect that he means "central planning". The planning done by individuals doesn't count as planning for a socialist because it hasn't been cleared with everyone else. How my neighbor's goals can be objectively compared to my own by people who don't know either of us, and who have their own agendas as well, has never been explained to me.

Thoughts on Dorfman (1 of 2)

2008-12-01T19:34:00.004-07:00

On reading Ariel Dorfman's The Empire's Old Clothes, these are a few things that struck me:

1. "my people"

I'm not sure what he means when referring to "his people," since he doesn't explain and none of the obvious alternatives make sense.

- "Working class"? But he's of the intellectual class. "Intellectual class"? That's not very socialistic. There was a reason Gompers kept non-working people out of the union: it was to prevent them from taking over the struggle for workers rights, politicizing it, and turning workers into pawns or dependents. Gompers didn't think workers were children who needed help from intellectuals to figure out their own justice.

- "Chileans"? What does that mean? Europeans in Chile? Europeanized Chile? And to what extent can Dorfman be considered Chilean, anyhow? Ethnically, he is European/Jewish, but was born in Argentina, raised in the US, moved to Chile, and now lives in the US. He speaks English with an American accent (and little or no Latin accent, though I'm sure his Spanish is impeccable). If we travel down this path, we arrive either at a defense of Hispanicized Chile, or we arrive at some nationalist socialism, akin to the Croly/Mussolini ideal, in which nations -- especially second or third tier nations -- must establish themselves as equals with other nations before their inhabitants can achieve true equality with each other.[1]

Whichever path we choose, we find Dorfman guilty of the very thing against which he is railing: cultural imperialism by way of infantilizing non-First World inhabitants (or however you choose to call them: Third World, non-North American, non Anglo-American). Either he is proudly defending his class, a non-worker class that simultaneously glorifies and yet treats as children the working class, or he is claiming to be a member of that class when he is not, or he is using Marxist language and analysis while denying a fundamental tenet of Marxism (that class trumps nationality) and claiming as his own people a nation in which he is an outsider who writes essays warning people to be wary of outsiders who want to impose their own values.

2. Neocolonialism of Babar

It is tempting to see this as obvious, but then it is worth noting that Dorfman originally wrote these essays nearly 40 years ago. To some extent, they would have been more original then and perhaps incorporated into mainstream thinking. I think his approach is what is meant as "Marxist deconstruction".

The basic outline is that Babar is representative of non-European natives (Africans, Asians, Polynesians, etc.) who become civilized by adapting French cultural values. Diana K. Davis gives a more detailed account in her history of the colonization of Algeria, Resurrecting the Granary of Rome. In her telling, the practices of the native herders are first either demonized or ignored. It is claimed that they are destructive of what was once a bountiful region, that the desert is man-made. When they are not being demonized, the practices of the herders are ignored because their effects are not obvious to invaders. Having established the "fact" that natives cannot be trusted to maximize the utility of the land, it is clear that only the French and the "civilized" berbers can be trusted to establish policy and, not coincidentally, ban practices that enable the herding lifestyle (such as the use of controlled fire to clear pastureland or their payment of taxes in kind). Finally, when all of the herders' alternatives are cut off (by, for example, requiring tax payment in cash), they are forced to take wage jobs with the colonial (surprise!) industries. Resistance to any of this is proof of their barbarity and resistance to civilization, and thus justification to jail or kill them.

However, in some instances, Dorfman's discovery of nefarious messages behind the children's stories are so tenuous and/or over the top that one is tempted to point out that sometimes a cigar is just a cigar and sometimes a cartoon is just a cartoon. Why would a French illustrator need to convince his own children that natives in foreign lands need to be treated as children?

3. The uncited assertions

Dorfman says

We are constantly taught that we fail because we didn't defeat others.

Really? I was constantly taught to get along with others and to share. Man is a social animal. Human society, like that of most animals, has its hierarchy and its cooperation. Both serve to perpetuate the species.

What Dorfman and many others fail to understand is that life in a society which allocates goods through free market transactions (and here I am distinguishing from state-capitalism, though he lumps them all together) is nothing but cooperation. The number of people who have to cooperate through countless transactions even in an emerging market society is staggering. The simple production of a pencil is the classic example of this. There is planning and cooperation everywhere; but Dorfman doesn't consider it planning or cooperation because nobody has acted in loco parentis and told them, "You do this, you do that, and then you share the mutual gains with each other, okay? And don't make me come in here and have to spank you!" That is the essence of the society he seems to prefer, but he doesn't see the infantilization inherent in that system.

But this is just one of the assertions that he makes in the book without reference, citation, or support. These are usually in the form of folksy, "as everyone knows ..." so that it comes across as common sense. Did I mention that he states up front that he is out to challenge what passes for common sense? I guess it all depends on whose sense you are taking to be common.

More later.

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[1] See Herbert Croly's The Promise of American Life or Joshua Muravchik's Heaven on Earth