Philadelphia Reflections

The musings of a physician who has served the community for over six decades

1 Volumes

Rt. Angle by Years
The history of Philadelphia"s finest men's club.

Right Angle Club 2008

A report, to the year 2008 shareholders of the Right Angle Club of Philadelphia, by the outgoing president, Neale Bringhurst...


REFERENCES


The Right Angle Annual Reports 2008 George Ross Fisher MD Ross and Perry Inc.

RIGHT ANGLE CLUB PRESIDENT'S LETTER

Dear Fellow Members of the Right Angle Club,

{Picnic}
Picnic
The best "President's Letter" is one that says very little but points instead to the actions of fellow Club officers and Board of Control members. A president's tenure is only as good or as bad as the members' accomplishments he is privileged to be part of. The President should be more of a Chairman, a bit of fine-tuning here and there, but letting the Officers do what they have been elected to do. Rather than dream up non-existent accomplishments as President, let me instead thank my fellow officers: 1st VP: Buck Scott: who didn't want to become President but was always there to lend a helping hand;
{Jack Nixon}
Jack Nixon
2nd VP: Jack Nixon: who, in addition to pioneering new ground for social events, was always available to answer an email with sage advice;
{Dan Sossaman}
Dan Sossaman
3rd VP: Dan Sossaman: who has provided us with excellent and provocative speakers all year; and, last but not least,
{Presidents Dinner}
Presidents Dinner
4th VP: Bob Reinecke: who, with total dependability, presided over honest raffles (he never let me win even once).
{Rod Rothermel}
Rod Rothermel
Treasurer: Rod Rothermel has provided an honest and steady hand on our finances.
{Lunch}
Lunch
My advice to every Social Event officer is "Let's run it by Rod first." Corresponding Secretary: Jack Hinckle, always witty; always on time. Thank you, Jack.
{Alan Lawley}
Alan Lawley
Recording Secretary: Alan Lawley: He has executed the unenviable task of translating Board of Control minutes from the American language into her Britannic Majesty's English AND provided an oasis of sanity in helping me to translate Board of Control ramblings into coherent minutes for future action. Archivist: Alle Lamphier: Delighted that your health is now back to normal, and we'll keep those files up to date. Board of Control non-officer members: I have been delighted to work with you all, in spite of our frequent splitting oif hairs over changes in the Constitution and By Laws.
{Rosie}
Rosie
If there is any legacy involved here, it is that I had long felt that the Board of Control was too large and unwieldy. It had become a smaller social club within a larger social club, but not always the best vehicle for transacting the business of the Club itself or of inviting new Club menbers into playing a larger role in the Club's affairs. We were approaching the greatest danger of any club, i.e., self-perpetuation. In addition to Alan and Jack, I would like especially to thank Otis Erisman, Esq. for re-drafting portions of the Constitution and By Laws with his fine legal hand. Cheers and best wishes to our new President, officers and board members, Neale

Pakistan and Democracy

{Pakistan's Democracy}
Pakistan's Democracy

The Philadelphia Right Angle Club has mainly local speakers, so topics tend to concentrate on the Philadelphia scene. Recently, a Philadelphia resident was asked to speak, and chose the intriguing topic of the lack of democracy in Pakistan. Explaining, to general surprise, why that lack may be inevitable in all undeveloped countries, and therefore not to be criticized too harshly in this one.

As a starting generalization, he pointed out that democracy is almost never found in countries where the average annual income is less than $6000, and almost universally found in countries where income is above that level. The main exception is India, which was described as having a "sham" democracy. Historical exceptions like ancient Athens and Iceland were not elaborated upon, so perhaps it might be better to say poverty is a hindrance to democracy, and let it go at that. The general idea is that Pakistan needs to get more prosperous, and particularly needs to get rid of the things making it less prosperous. When that's accomplished, democracy will establish itself without help. At the very least it cannot be expected to establish itself before then. One subtle jibe at the British (and the American Democrat party) is the point that it helps establish democracy if everybody is a taxpayer, not just the filthy rich. Democracy is helped to emerge when universal taxation provokes a demand for universal representation. Even a second historical echo might have been hidden in our speaker's pointing out that because much of Pakistan is in the feudal hands of two hundred families; the poor serfs of their fiefdoms invariably vote as their owner wishes, thus leading to a small political oligarchy. Americans were not twitted, but might have been, whether the Pakistan constitution should have imitated our own provision for 3/5 votes for slaves.

To go back to poverty itself, it is probably possible to editorialize that other main factors hindering democracy's development could be viewed as expedients evolved to sustain a functioning society in the midst of poverty, or are inherent limitations of poverty. Like lack of education, overpopulation defined as a ratio of population to resources, ethnic enclaves organized around religious leaders, feudal systems of self-defense, and vulnerability to invasion leading to overspending on defense. Even the suppression of women can be viewed as a poor, weak society's way of sustaining the number of soldiers while cutting the number of people needing costly education by half. These are not congenial concepts for Americans, but it must be granted they have importance if you adopt our speaker's central thesis: the military government of Pakistan may be the least bad choice now available to that country. At least two other epigrams touch the same conclusion: survival may temporarily seem more important than democracy, and/or democracy may be unachievable until prosperity is first achieved by authoritarianism. That last one is really uncomfortable, because it may imply that revolution is the second step in a three-step process.

Meanwhile, we have to be sympathetic with Pakistan's struggle with a problem any fair-minded person would agree is not an easy one. Their country is a series of valleys between some of the highest mountains in the world, with the rest of the countryside either desert or in contention with India. Pakistani must police a border cut down the middle of the mountains by the British, separating two portions of the same tribe who share the common bond of survival in the harshest climate in the world. They are in constant international contention with India, both sides brandishing nuclear arms. The bitterness of the Israeli-Palestine conflict inflames religious sentiment. America pursues its international interests within Pakistan's borders and against some who are regarded as fellow tribesmen, certainly co-religionists. The opium trade from Afghanistan infiltrates the borders. The nation is composed of five feudal states, united only in their annoyance with Moslem immigrants from India who are better educated than the locals, and who offend the local cultures with jarring dissimilarities. And finally, Bin Laden and his fellow Wahhabi zealots are in their midst, funded with vast amounts of Saudi money to pursue worldwide disruptions, hotly pursued by Americans who are not of their religion and not particularly careful of local sensitivities. Under the circumstances, perhaps our demand that they adopt a perfect democracy, and right now, is understandably exasperating.

www.Philadelphia-Reflections.com/blog/1524.htm

World Finance, Columbus Day 2008

{Prime Minister Gordon Brown}
Prime Minister Gordon Brown

WITH voters watching three weeks before the 2008 American presidential election day, finance ministers and their political masters met to decide a basic question: dare they risk disaster to save the existing system, or play it safe by sacrificing small banks to rescue big ones? That is, guess if the situation is so bad only strong rowers can be allowed in the lifeboat, or whether things are really manageable enough to try to save everybody but at the risk of worse consequences for failure. For example the credit default swap mystery; there are $60 trillion notional value insurance policies in existence to cover $20 trillion of bonds. Is that massive double-counting, or an actual disaster so severe it makes every other consideration trivial? Answer quick, please, the ship looks like it might sink. At first, it seemed strange a Labor government in England would propose saving only the strong until you realize that Prime Minister Brown is protected from his Left, while the Democrats in America want to use a fairness argument to win their election. A Republican lame-duck president must do the deciding, a man who has been shown to be both a tough politician and a fearless gambler; playing things safe is not his style. The Dow Jones average soared a thousand points in a day's trading on the prayer that things were finally under control. But take a look around.

Little Iceland and Switzerland are proud to house some enormous banks. But if those banks approach failure, their homeland treasuries are far too small to bail them out.

On the other hand, little Hungary has a negligible banking system, so Hungarians commonly borrow money from foreign banks. The national currency devalued by half in this crisis, so most Hungarian mortgages doubled in price. Reserve systems based on national governments suddenly look obsolete.

Try another approach. Little Ireland went ahead and guaranteed all deposits in its financial institutions. Money from England and the rest of Europe immediately poured in to enjoy that guarantee, forcing other grumpy nations to match the unwise Irish offer. There's a sense that nations are losing control of their affairs.

Europe consists of 27 nations, of which fifteen are in the Euro zone. There are common currency and a constrained central bank, but can this gaggle of geese possibly agree on concerted action in this crisis? America was once in this situation under the Articles of Confederation, but even after almost losing the Revolutionary War, George Washington was nearly unable to get the colonies to form a union. Even after this experience, the Southern Confederate States later adopted the same system of a central currency without a central government and really did lose their war.

Are we to infer from Prime Minister Brown's attitude toward banks that he might soon suggest ditching little nations in order to save bigger ones?

www.Philadelphia-Reflections.com/blog/1525.htm

John Head, His Book of Account, 1718-1753

{American Philosophical Society}
American Philosophical Society

Jay Robert Stiefel of of the Friends Advisory Board to the Library of the American Philosophical Society entertained the Right Angle Club at lunch recently, and among other things managed a brilliant demonstration of what real scholarship can accomplish. It's hard to imagine why the Vaux family, who lived on the grounds of what is now the Chestnut Hill Hospital and occasionally rode in Bentleys to the local train station, would keep a book of receipts of their cabinet maker ancestor for nearly three hundred years. But they did, and it's even harder to see why Jay Stiefel would devote long hours to puzzling over the receipts and payments for cabinets and clock cases of a 1720 joiner. Somehow he recognized that the shop activities of a wilderness village of 5000 residents encoded an important story of the Industrial Revolution, the economic difficulties of colonies, and the foundations of modern commerce. Just as the Rosetta stone told a story for thousands of years that no one troubled to read, John Head's account book told another one that sat unnoticed on that library shelf for six generations.

{Colonial Money}
Colonial Money

The first story is an obvious one. Money in colonial days was mainly an entry in everybody's account book; today it is mainly an entry in computers. In the intervening three centuries, coins and currency made an appearance, flourished for a while as the tangible symbol of money, and then declined. Although Great Britain did not totally prohibit paper money in the colonies until 1775, in John Head's day, from 1718 to 1754, paper money was scarce and coins hard to come by. Because it was so easy to counterfeit paper money on the crude printing presses of the day, paper money was always questionable. Meanwhile, the balance of trade was so heavily in the direction of the colonies that the balance of payments was toward England. What few coins there were, quickly disappeared back to England, while local colonial commerce nearly strangled. The Quakers of Philadelphia all maintained careful books of account, and when it seemed a transaction was completed, the individual account books of buyer and seller were "squared". The credit default swap "crisis" of 2008 could be said to be a sharp reminder that we have returned to bookkeeping entries, but have badly neglected the Quaker process of squaring accounts. As the general public slowly acquires computer power of its own, it is slowly recognizing how far the banks, telephone companies, and department stores have wandered from routine mutual account reconciliation.

http://www.philadelphia-reflections.com/images/johnhead.jpg
John Head's Account Book

From John Head's careful notations we learn it was routine for payment to be stretched out for months, but no interest was charged for late payment and no discounts were offered for ready money. It would be another century before it became routinely apparent that interest was the rent charged for money and the risk of intervening inflation, before final payment. In this way, artisans learned to be bankers.

And artisans learned to be merchants, too. In the little village of Philadelphia, chairs became part of the monetary system. In bartering cabinets for the money, John Head did not make chairs in his shop at 3rd and Mulberry (Arch Street) but would take them in partial payment for a cabinet, and then sell the chairs for the money. Many artisans made single components but nearly everyone was forced into bartering general furniture. Nobody was paid a salary. Indentured servants, apprenticeships trading labor for training, and even slavery benignly conducted, can be partially seen as efforts to construct an industrial society without payrolls. Everybody was in daily commerce with everybody else. Out of this constant trading came the efficiency step for which Quakers are famous: one price, no haggling.

One other thing jumps out at the modern reader from this book of account. No taxes. When taxes came, we had a revolution.

www.Philadelphia-Reflections.com/blog/1517.htm

Webpage Printing

This site offers a Print button for all Reflections and Topics. Formatting the text on the pages to print nicely works quite well; but how to specify what to do with images remains a bit unclear (as of August 2006). Although 95% of users employ Internet Explorer because Microsoft supplies it free with new computers, IE is just about the worst browser to use for printing. Safari is much better, and Firefox is pretty good. Opera is also satisfactory, but Internet Explorer is not recommended. The other browsers are free; find them in Google and download them. For the usual user, that's all you have to know.

If you are curious about the technicalities, read on. The "trick", if it can be called that, to special print formatting is the media attribute for CSS styling. The main stylesheet for this website is called in a LINK statement as follows:

<link rel="stylesheet" type="text/css" media="all" href="stylesheets/reflectionsLayout.css">

The media attribute tells the browser to use this sylesheet for all media types, i.e., for screens and printers. In the pages that are formattted to print is a stylesheet that cascades below the main stylesheet and therefore supercedes it. This stylesheet controls the printing. IE seems to have its own views on font size so we use some conditional comments to coax it to our way of thinking.

Here and there throughout the website are pages that contain onscreen navigation ("jump to top" and that sort of thing). We hide them when printing by saying class="navstrip" which you can see will result in those elements being hidden.

The specification of

<body onload="window.print()">

(all lower case for XHTML purposes) is what forces the print dialog to appear.

The remaining problem is how to specify CSS formatting for images so that text flows around them as we want. The formatting seems to work on screen for all browsers but only on some browsers for printing.

<style type="text/css" media="print">

  body        { margin: 0; padding: 0; width: 100%; }				
				
    #wrapper    { margin: 0; padding: 0; width: 100%; }
		
      #center     { margin: 0; padding: 0; }

      #content    { font-size: 11pt; line-height: 100%; font-family: "Times New Roman", Times, serif; }

        .navstrip   { visibility: hidden; }
				
</style>

<!--[if IE]>
<style type="text/css" media="print">

      #content    { font-size: 14pt; }
				
</style>
<![endif]-->

(my thanks to http://centricle.com/tools/html-entities/ for HTML encoding)

Securities Trading Across Time Zones

Almost every day, stock market averages take a sharp jump, either up or down, a few minutes before closing time. Two explanations are usually offered. Regulations require brokers (but not banks, unfairly) to "mark to market", which is to reveal their newly calculated positions based on market prices, whether they traded or not. Those whose assets changed market value are aware of it, and may see an opportunity to speculate on the market's reaction prior to opening their own Kimonos. Mutual funds settle their accounts with customers based on end-of-day prices, but often fill their orders based on prices prevailing during the day; it's one of the advantages of exchange-traded funds (ETF) over index funds that they trade and settle at the same time. Short sales and hedges often wait to the last moment to close their positions; hedge funds and quantitative traders may lie in wait for this to happen and take advantage of it. Some quantitative traders use computers to transact tens of thousands of trades in an hour. The sums of money involved can often be considerable, and it wouldn't matter what different time was selected for a closing hour; the phenomenon would simply shift its timing to match. A second main reason for this explosive end of day activity is the New York Stock Exchange rule that members of the exchange must transact all business in listed stocks during business hours on the floor of the exchange. The self-serving motives behind that rule are evident to all; so a growing proportion of trades, possibly a majority, are transacted on other exchanges five minutes before the New York exchange opens and five minutes after it closes.

When some world-shaking event takes place after the closing bell, it is possible to watch the reaction of the world's stock exchanges moving around the world hour by hour, time zone by time zone. Announcing major financial news is often intentionally delayed until the New York markets are closed, as was the case with the forced merger of Bear Stearns into JP Morgan Chase. Other markets are open, however. The Japanese markets, in this case, responded with a 3% drop, and it was followed all night by a 3% drop every hour in each successive time zone until finally, the New York markets opened unchanged the next morning. After that big Kahoona had its say, all littler markets then scuttled back into line.

With electronic exchanges and trading becoming increasingly common, there is no technical reason why all exchanges worldwide could not remain open every day of the year, twenty-four hours a day. To make that work, however, all trading would have to be conducted by the machines without reference to human opinion. The machines can respond to sales volumes even better than floor traders can, but they would not respond to contingent orders on the specialists' books, or to the opinion of floor traders that hysteria was somehow getting out of hand. With some adjustments, even this could be handled, but the customers would resist. Customers have to get some sleep, even if machines do not; customers want to be able to change their minds in response to market action. Modern portfolio management theory suggests these customers might be better off if the whole thing were on auto-pilot. But just try to tell that to the customers; even the little old ladies would shake their umbrellas at you if you suggested it.

That doesn't mean the public is ready to go back to the Buttonwood tree, once a week. In France, the government has responded to the public clamor by shortening the work week to thirty hours, with plenty of long weekends. Where a holiday falls on Thursday, Friday is automatically a holiday as well. When it falls on Saturday or Sunday, Monday is a holiday. France isn't very religious, but is intensely respectful of scads of Saint's days. That happens often enough that there are quite a few five-day weekends.

Philadelphia's Global Interdependence Center was recently touring Paris during one of those five-day weekends, on a Friday. The Americans were the only people in a town of five million people who were wearing ties and jackets, and the natives at the sidewalk tables didn't need to hear our accents to know who we were. A visit had been arranged at the Bourse, for a nice lunch with the marketing folks and a sales pitch by an official of the stock exchange. With masterful diplomacy and graciousness, we were told interesting stories about the history of the place, ending up with a description of their deep sorrow that so few Americans list their stocks on French Exchanges, or even trade their European holdings in France. After all, Paris is only a one-time zone away from London.

"It isn't the time zone, sir", spoke up one American unaccustomed to wine with lunch. "It's the five day weekend."

www.Philadelphia-Reflections.com/blog/1483.htm

Vote Counting, Past and Future

{Greg Harvey}
Greg Harvey

The Right Angle Club was recently fascinated to hear Greg Harvey, a Montgomery McCracken expert on election laws, discuss the snarled Florida situation in the 2000 Presidential race, and the prospects for similar problems in upcoming elections. With the aid of retrospect, candidate Al Gore deserves much of the blame for his own loss, and the U.S. Supreme Court does seem to have terminated the uproar without affecting the final result.

A consortium of major newspapers funded an extensive investigation of the Florida election and were forced to agree that George W. Bush would probably have won that election no matter what. The central issue in these contests is the 35-day time limit to contesting elections. It is true that right or wrong, the country needs to settle its elections promptly and get on with its business. Furthermore, if a national election is so close that it takes months to decide the winner, there can't be a great deal of difference between the candidates, so who cares.

{Al Gore}
Al Gore

Looking back at the 2000 election with the leisure of time and appreciable resources, it is possible to see that Al Gore might have won that election if he had made several lucky choices in contesting its result. But it seems highly unlikely that anyone in his position would have been able to identify the winning combination of choices -- within the 35 day time allowed for pursuing them. He had to guess that ballots with two candidates marked ("over balloting") would pick up more Gore votes than ballots without an indicated choice ("under balloting"); he guessed wrong. He had to decide whether challenging late ballots from absentee military was worth the unpopularity of pursuing such a technicality to the disadvantage of soldiers serving overseas. His ticket-mate Joe Lieberman urged him to avoid that touchy issue which did prove to cost him some votes he needed. The decision was one to be proud of but is the main reason why his party faithfuls later turned rather viciously against Lieberman. A second wrong guess was to fail to go after the software mixup on invalidating the ballots of convicted felons. He might have picked up a couple of thousand votes, but only if willing to have the world learn that convicted felons are overwhelmingly pro-Democratic voters. The one decision he made that makes him look rather sappy to professional pols was to challenge ballots in the districts where he was already very popular.

{Privateers}
Vote

Vote counters and poll watchers tend to be strong political partisans, usually drawn from the local district. When votes are ambiguous, these people lean in the direction of their party. Therefore, most party insiders would know immediately; if you challenge districts, challenge the districts which favor your opponent. Choices like this do have to be made. The thirty-five-day rule makes a challenger run out of enough time to look elsewhere if early guesses prove wrong. So, although it is possible in retrospect to construct for Gore a winning strategy for selective challenges, the newspaper consortium and the Supreme Court which pondered the choices before him rightly concluded he was destined to lose.

{HAVA}
HAVA

Some of these lessons are enduring ones, but future elections face unexplored difficulties. A new election law (the Help America Vote Act, or "HAVA") sought to reform the election system by prohibiting the use of punch card ballots, requiring states to use auditable vote records and provisional ballots in doubtful cases, stricter voter identification methods, and statewide voter registration databases. In response to these record requirements, many states opted for complicated data in code, sequence-scrambled to prevent individual identification. In the event of a challenge, however, deciphering these records will be time-consuming, and the potential is created for the candidate who is initially ahead to stretch out the process until the challenge effort collapses at the 35-day time limit.

Several states, including Ohio, are thought to have the potential for very close 2008 results. In that particular state there are some complicated rules about voting in the "wrong" district, that is, to be registered in one district, but attempting to vote in another. It would not seem difficult to do a little of this on purpose, either as a voter, or an election registrar. It seems unlikely that very much challenge among the three possible culprits could be accomplished within thirty-five days of a contested election. So the challenger in Ohio would be faced with the same sort of impossible snap decisions that faced poor old Al Gore, surrounded by excited partisans shouting at the top of their voices.

So perhaps Greg Harvey's law school classmate Appellate Judge Richard Posner has a sustainable position on this. It was his judgment that the 2000 election was essentially a tie. Letting the Supreme Court decide it wasn't the worst possible choice.

www.Philadelphia-Reflections.com/blog/1515.htm

The Trigger and the Cliffhanger

Our own John Fulton recently told the Right Angle Club the market gossip about just who did what, and to whom, in the March 2008 beginning of the investment banking collapse. It begins to look as though Merrill Lynch had quite a bit to do with the mechanics of starting this impending market melt-down, although lots of other people helped.

Bear Stearn

Going back to 2005, Merrill was late to the securitized debt party and stretched to catch up. The broker reportedly sold large quantities of mortgage-backed securities (CDO) to the two hedge funds run by Bear Stearns. A buyer was able to convince himself such securities might pay as much as 20% income if leveraged up -- so attractive that Merrill independently decided to keep a lot of them for its own account. Nevertheless, the primary business of any broker is to buy and resell quickly, holding as little inventory as possible. Such sales, especially to hedge funds and institutional investors, were largely on margin. When suddenly the price of CDOs started to fall -- the rumor is that some unknown European bank started unloading them -- someone at Merrill made the decision to issue a margin call, that is, ask for cash to replace the loans. Bear Stearns reportedly asked for extra time to get the money together, but Merrill was adamant. So, Bear Stearns had to sell some of the CDOs in question to raise cash, dropping the market price. (this had not been the case seven months earlier when a bewildering market saw good stocks being dumped to cover losses in bad stocks.) But remember, in addition to the securities sold to Bear Stearns, Merrill itself had acquired huge quantities of similar CDOs; the internal coordination of Merrill has to be doubted. So the market value of what Merrill held declined, too, quickly forcing Merrill to announce an $8 billion mark-to-market write-down of its holdings, eventually followed by write-downs approaching $100 billion. In time, its own losses greatly exceeded the debt it was forcing Bear Stearns to pay. Merrill had shot itself in the foot.

{New York Stock Exchange}
New York Stock Exchange

At that point, suddenly no one would write Merrill insurance against price declines through the Credit Derivative market, so it's stock price declined on the New York Stock Exchange, further reducing the amount it was allowed by regulators to lend. Because Bear Stearns was a major bookie in the Credit default swap market, both the insurers and the insurees were at risk; doubled-up "counterparty risk" was so enormous the Federal Reserve and U.S. Treasury felt they had to bail the situation out, even though other failing institutions of comparable size had been allowed to disappear. At a minimum, two parties were at risk, at worst, a whole daisy chain of companies insuring other overlapping companies multiplied the risks to much more than the loss that originally triggered the chain reaction. At $62 trillion, the Credit Derivative market is so much larger than other markets that anything to calm it seemed an urgent necessity. (As a matter of fact, when the swaps were sorted out they canceled each other by at least 90%) Every bettor had seemingly felt justified in betting the ranch, because some other bettor stood behind them, and then another and another; hard though it is to believe, that was nearly the case. Since Bear Stearns held thirty times as much debt as its total stockholder equity -- quite a different situation--, an average price drop of only three percent was enough to wipe them out. When margin calls went out to people who themselves had to issue more margin calls to pay the bill, the chain reaction did indeed bring markets to a precipice.

Until better gossip surfaces, this is the description now in circulation for the details of the slide which got going in March 2008. A larger view might be that things were starting to get ugly in 2005, and Merrill should never have entered this particular market at all.

{Fanny Mae Freddy Mac}}
Fanny Mae Freddy Mac}

We are definitely not out of the woods. John Fulton pointed out the next crisis is that Fannie Mae and Freddy Mac are best regarded as insolvent. But since the credit crunch dried up the other half of the CDO market for mortgages, only Freddie and Fanny now remain to support housing transactions, with $5 trillion at risk in the market. That's about the size of the national debt, so when the Government assumed the risks of these two corporations, the national debt was effectively doubled. That could potentially send the dollar into a tailspin, along with U.S. Treasury bonds, while sending the price of oil skyward. So far, the Chinese have been remarkably cooperative, and Ben Bernanke and Hank Paulsen have been remarkably sure-footed.

So, what do we do if we fall into this abyss? Well, one thing debtors usually consider when threatened with insolvency is to walk away from either their debts or their creditors. In the nation's case with its debts, one major victim would be our system of entitlements. The national debt is now effectively $10 trillion. The unfunded entitlements are about $52 trillion; this is much the larger problem. Is it really true? Are we really saying these things?

John did indeed keep us awake, which is the major duty of a Right Angle speaker. .

www.Philadelphia-Reflections.com/blog/1509.htm

Turtles and Bananas

{Snapper Turtle}
Snapper Turtle

Snapper soup, the old Philadelphia stand-by, probably got its name from snapping turtles. But for a century or two, the ingredient turtles came from the Caribbean or even further south. The huge tortoises of the Galapagos were once picked up by whalers, stored alive in the hold of the ship, to be used as needed by the sailors. Only the paws were edible. In time, the more usual imported turtle had a diameter of two feet and was picked up on South American voyages. By the end of the nineteenth century, the steamship trade was dominated by Moore-McCormack, United Fruit, and the Grace lines, who all sailed much the same kind of steamship, carrying a few passengers and a lot of cargo. Generally speaking, the cargoes going out of American East Coast ports consisted of machinery, while the cargoes coming back were bananas. If a ship carried more than twenty-five passengers it was required to have a physician on board, so passengers were either just a handful or about a hundred in number; it made for two general classes of vessel.

As a throwback to the Galapagos business of the sailing-vessel era, United Fruit would always bring home about fifty live turtles in the hold for the Waldorff in New York. It's now unclear who supplied Bookbinders and the Union League in Philadelphia, but it was apparently the same sort of arrangement: turtles came back with the bananas. It's getting hard to find snapper soup anymore; the explanation is probably mixed up with disturbances to this historical source.

www.Philadelphia-Reflections.com/blog/1481.htm

Urban Bridges

{Privateers}
Reverend Mary E. Laney

The Reverend Mary E. Laney recently told the Right Angle Club about her experiences in an Episcopal mission church, along with the history behind this innovation, and the establishment of a 501(c)(3) organization to help the idea on a national level. That may mean no more to readers of this site than at first it probably did to the Right Angle Club, before Mary Laney made it all come alive. It was quite moving.

{Bishop Alan Bartlett}
Bishop Alan Bartlett

During the 1980's she asked Bishop Alan Bartlett, at that time the Bishop of Eastern Pennsylvania for the Episcopal Church, if she might be assigned to an urban mission. As ethnic and religious population migrated around the Philadelphia landscape, quite a few Episcopal churches have been stranded in economically depressed neighborhoods, unable to afford a full-time pastor. The concept of a mission church was developed as a designation for churches that had dwindled to the point where only a handful of parishioners were left and were assigned to a category in which the Bishop would appoint a part-time Vicar to be in charge of what then needed financial support from the main church. Although in a sense Bishop White started the idea two hundred years earlier, there were no mission churches in Philadelphia in colonial times, but there are now over fifty of them, a quarter of the Episcopal churches in the region. Reverend Lancey was assigned to St. Gabriel's at the corner of Front Street and Roosevelt Boulevard, and stayed there fifteen years. She is now with St. Christopher's in Gladwynne.

The initial concept was to identify eight lead mission churches, build them up to be self-sustaining, and then replace them with eight new ones. With all good will and hard work in the world, this concept failed, largely because the social conditions of the poor at that time also depressed their educational level, and had instilled in them a culture of constant failure. In one telling episode, the parishioners said there was no hot water in the church. As a matter of fact, the pilot light of the hot water heater had gone out, and the parish was so sunken in the mindset of failure and despair they had not even looked into it. Mary Laney decided something had to be done to change the model.

What seems to have worked was the creation of a 501(c)(3) organization called Urban Bridges. The original idea behind this organization was that since the Constitutional separation of church and state precluded government grants to church no matter how struggling, but perhaps a tax exemption would make it possible for private donations to accomplish what was needed. There was, in addition, the sad experience that whenever the constitution barriers had somehow been overcome by circumvention, the many layers of bureaucracy usually consumed the money. It had proved disheartening to see four or five years go by after a government grant, with not a cent getting to the programs and all consumed by consultants, advisers and supervisors.

Meanwhile, the poor parishioners continued to base their hopes on this sort of relief, while neglecting things which might be more effective.

The Urban Bridges program evolved from a primarily fund-raising organization into a system of partnerships between prosperous suburban churches and the struggling urban missions. The suburban churches proved to be inspired with a wish to help but frustrated by a lack of means to do anything effective. It thus evolved that the suburban Episcopal churches supplied what was really most needed: practical examples of leadership on a local level, combined with visible evidence of successful effort. Literacy courses, drum and bugle instruction, computer tutoring and a variety of other spontaneous activities led to the example of leadership, and in the long run, was a far more effective fund-raising tool than printed appeals and button-holing. Even in the case of crime, it was the leadership that made the difference.

{Privateers}
St. Christopher's Church

The story was told of a drug dealer in the neighborhood who dominated the streets with dogs and blocked access to schools unless the children agreed to sell drugs for him. Local police had proved unhelpful, and hopelessness was rampant. What would prosperous suburbanites do in such a situation? Obviously, suburbanites would not stand for such a situation and called in the Federal Drug Enforcement Agency. The crook was promptly deprived of his dogs and now resides in jail. That may not be wholly in the spirit of peaceful reasoning, but it's the American Way, all right. This was what seemed to be missing in the culture of poverty. It's the determination that whatever the cost, intolerable things will not be tolerated, combined with absolute faith that the system does provide ways to be effective without becoming either lawless or wards of the state. This is America, right?

The Corinthos Disaster

Oil Tanker on Fire

Fire, huge fire. The Corinthos disaster of January 30, 1975, was the biggest fire in Philadelphia history, and one hopes the biggest forevermore. Its immensity has possibly lessened attention for some associated issues which are nevertheless quite important, too. Like the issue of punitive damages in a lawsuit, or the need to balance environmental damage with a national need for energy independence. And the changing ways that law firms charge their clients. We hope the relatives of the victims will not be offended if the tragedy is used to illustrate these other important issues.

On that cold winter day, two big tanker ships were tied up alongside the opposite banks of the Delaware River at Marcus Hook. The Corinthos was a 754-foot tanker with a capacity of 400,000 barrels of crude oil, tied up on the Pennsylvania side at the British Petroleum dock with perhaps 300,000 barrels still in its tanks at the time of the disaster. At the same time, the 660-foot tanker Edgar M. Queen

Edgar M. Queeny

with roughly 250,000 barrels of specialty chemicals in its hold, let go its moorings to the Monsanto Chemical dock directly across the river in New Jersey, intending to turn around and head upstream to discharge the rest of its cargo at the Mantua Creek Terminal near Paulsboro. Curiously, a tanker is more likely to explode when it is half empty because there is more opportunity for mixing oxygen with the combustible liquid sloshing around. A tug stood by to assist the turn, but the master of the Queeny felt there was ample room to make the turn under her own power. With no one paying particular attention to this routine maneuver, the Queeny seemed (to only casual observers) to head directly across the river, ramming straight into the side of the Corinthos. Actually, the Queeny had engaged in a number of backing and filling maneuvers, and the sailors aboard were appalled that it seemed to lack enough backing power to stop its headlong lunge at the Corinthos. There was an almost immediate explosion on the Corinthos, and luckily the Queeny broke free with only its bow badly damaged. Otherwise, the fire might have been twice as large as it proved to be with only the Corinthos burning. The explosion and fire killed twenty-five sailors and dockworkers, burned for days, devastated the neighborhood and occupied the efforts of three dozen fire companies. A graphic account of the fire and fire fighting was written by none other than Curt Weldon who was later to become Congressman from the district, but was then a volunteer fireman active in the Corinthos tragedy.

There were surprising water shortages in this fire on the river because the falling tides would take the water's edge too far away from the suction devices for the fire hoses on the shore. The tide would also rise above a gash in the side of the burning ship, floating water in and then oil up to the point where it would flow out of the ship onto the surface of the river. Oil floated two miles upstream from the burning ship and ignited a U.S. Navy destroyer which was tied up at that point. Observers in airplanes estimated the oil spill was eventually fifty miles long. All of these factors played a role in the decision whether to try to put the fire out at the dock or let it burn out; experts continue to argue which would have been better. There were always dangers the burning ship would break loose and float in unexpected directions, that the oil slick would ignite for its full length, and that storage tanks on shore would be ignited. The initial explosion had blown huge pieces of iron half a mile away, and the ground near the ship was littered with charred, dismembered pieces of flesh from the victims.

, Of course, there was a big lawsuit. When a ship is tied up at a dock it certainly feels aggrieved when another ship crosses a river and rams it. The time-honored principle of admiralty law holds that the owner of an offending ship is not liable for damages greater than the salvage value of its own hulk, which in this case might have been about $3 million. The underlying assumption is that the owner has no way of knowing what is going on thousands of miles away, no control over it, no power to respond in a useful way. Enter Richard Palmer, counsel for the Corinthos. Palmer was aware that the National Transportation Safety Board collects information about ship maintenance inspections in order to share useful information for the benefit of everyone. His inquiry revealed that the inspections of the Queeny for four years before the crash had repeatedly demonstrated that the stern engine had a damaged turbine, and was only able to drive the ship at 50% of its rated power. Why this turbine had not been repaired was now irrelevant; the owners of the ship did have relevant information and had failed to act in a timely safe fashion. The limitation of liability to the salvage value of the hulk now no longer applied if the negligence was judged relevant. The defendants, the owners of the Queeny, decided to settle. While the size of the settlement is a secret of the court, it is fair to guess that it approached the full value of the suit, which was $11 million. Mr. Palmer, by using his experience to surmise that maintenance records might be available at the Transportation Agency, and recognizing that the awareness of the owner might switch the basis for the compensation award from hulk value (of the defendant's ship) to the extent of the damage (to the plaintiff's ship), probably tripled the damage settlement.

Reflections on the extraordinary benefit to the client from a comparatively short period of work by the lawyer leads to a discussion about the proper basis for lawyers fees. Senior lawyers feel that the computer has revolutionized lawyer billing practices, and not for the better. Because it is now possible to produce itemized billing which summarizes conversations of less than a minute in duration, services for the settlement of estates can be many pages long, mostly for rather routine business. Matrimonial lawyers are entitled to charge for hours of listening to inconsequential recriminations; lawyers can bill for hours of time spent reading documents into a recording machine, or sitting wordlessly at depositions. Since the time expended can now be flawlessly measured and recorded on computers, there is little room for a client to remonstrate about their fairness. Discomfort about this system underlies much sympathy for billing for contingent fees, where the lawyer is gambling all of his expenses and effort against a generous proportion of the award if he wins the case, nothing at all if he loses. This latter system, customary in slip and fall cases and justified as permitting the poor client to have proper representation, undoubtedly promotes questionable class action suits and often leads to accepting personal liability suits which should be rejected for lack of merit. The thinking underlying personal injury firms is widely said to be: most insurance companies will settle for modest awards in cases without merit because the defense costs would be no less than that amount, and occasionally a personal liability case gets lucky and extracts a huge award.

Listen to one old-time lawyer describe how legal billing used to be. After the case was over, the lawyer and the client sat down to a discussion of what was involved in the legal work, and what it accomplished for the client. A winning case has more evident value than a losing one, provided the lawyer can effectively describe the professional skills that helped bring it about. The whole discussion is aimed at having both parties leave the discussion satisfied. To the extent that both parties actually are satisfied with the value of the services, the esteem and reputation of the legal profession are enhanced. And the lawyer is a happy and contented member of a grateful community. If he can occasionally claim a staggering fee for a brief but brilliant performance, as in the case of the explosive fire on the Corinthos -- well, more power to him.

It does not take much familiarity with oil refineries to make you realize that cargoes of crude oil are a very dangerous business. We are accustomed to hearing jeers at those who protest, "Not in my backyard", and we deplore those who would jeopardize our national security to protect a few fish and trees in the neighborhood of potential oil spills. Since we do have to import oil and we do therefore have to jeopardize a few selected neighborhoods to accomplish this vital service, the opponents are sadly destined to lose their protests. But that doesn't mean their concerns are trivial. The shipping and refining of oil are dangerous. We just have to live with it and be ready to pay for its associated costs.

Reading Books Compared With Computer Viewing

{Privateers}
Ebooks Vs. Paper

Old folks fumble with computers and are afraid of them, but even the younger generations brought upon the use of computers generally prefer the ease and eye comfort of books. Fortunes await entrepreneurs who first overcome the technical resistance to the coming inevitable disappearance of paper books.

Electronic books are better than paper ones, not just cheaper. They are easier to search; their contents are available to the whole world, and can even be automatically translated. For browsing and scanning, everyone prefers to browse pictures, and here the Internet offers an unbeatable price advantage; color pictures in a book are prohibitively expensive, while any child with a point-and-shoot camera can broadcast pictures of his dog to the world. Movies are coming along fast, cheap sound reproduction is already available.

In the here and now present, if you have both a paper book and an electronic version available to you, which would you choose? The answer depends on how old you are, but it also depends on the age of the book. Old classics were written for paper books, while electronic books are written to exploit plentiful colored images, sound, movies and search potential. What's so far missing is a publishing industry for electronic books, offering to take the text manuscript from an author and add all of the bells and whistles. At the moment, a technical problem holds that back: electronic books are too easy to counterfeit. The genius who invents a way to prevent electronic book piracy, in a technical way that cannot itself be pirated, would sweep all lesser objections away. The protection cannot rely on patent protection alone; just think how patents could not have protected Gutenberg right up to the present struggle. The protection of paper book printing rested and still rests, on the enormous cost of high-speed, quality, printing presses.

What follows are a few observations on the current technicalities, added in the hope that understanding the issue will make some reluctant readers less timid about it.

www.Philadelphia-Reflections.com/blog/1485.htm

South Amboy Explodes

{Privateers}
Explosion

South Amboy, New Jersey, is a waterfront industrial town on a remote promontory behind Staten Island, jutting into lower New York Bay. It's across the Raritan River from historically important Perth Amboy, but it's fair to say that few people ever heard of South Amboy until sunset on May 18, 1950, when they suddenly heard a lot. An entire freight train, five lighters, and a railroad pier suddenly exploded and disappeared. About twenty-five people were never seen again; the largest piece of metal from the explosion was only about a foot in length. A significant part of the town was leveled, steeples were knocked off churches, and windows were broken in five surrounding counties. Considering what caused it, it seems remarkable that so few people were killed. The explanation usually given is that the explosion blew straight up and straight down; the distant windows were smashed by pressure implosion.

When Pakistan split off from the rest of India, there were bloody migrations in which millions of people died. So Pakistan bought the rights to the design of certain land mines to protect its new borders and contracted with a firm in Newark, Ohio to manufacture the mines. Two trainloads of these explosives were shipped from Ohio to a railroad pier owned by the Pennsylvania Railroad in South Amboy, to be lightered out to a waiting cargo ship and sent to Pakistan. The first of these two shiploads sailed off uneventfully, and on May 1, 1950, the second shipment had already left Ohio and was underway, when the Coast Guard suddenly declared the South Amboy pier to be closed and forbidden. As the train chugged slowly eastward, frenzied negotiations took place with Admirals in Washington. There was plenty of time, because the train moved very, very slowly and it was detoured over six different railroads to Wilmington Delaware, where the Hercules Powder Company had packed two freight cars with dynamite, which were to be hooked onto the end of the train as it inched its convoluted way to South Amboy.

{Privateers}
South Amboy Explodes

The method of packing the land mines was of some importance during the huge litigation which inevitably followed. Land mines were packed in cardboard boxes about six feet long, divided into six compartments. Our own Army regulations about such things state that never, never should fuse be packed in the same carton with the mines. However, this particular shipment had five mines to a carton, with the fuses in the sixth. It was later argued that this particular arrangement proved harmless in the first of the two Pakistan shipments, but there was the testimony that defective fuses were removed from those boxes and passed back up the line, where those deemed satisfactory were re-packed in the cartons which were in this, the second shipment. A fuse, by the way, does not quite describe these objects, which were screwed into a hole provided on the bomb part. They contained a spring and a steel ball in a tube; when the gadget was cocked it was held by a hare-trigger. The idea was that the pressure of stepping on the mine shot the steel ball into the ball of explosives, and boom.

The railroad ammunition pier, for some reason called The Artificial Island, consisted of two rail lines extending a quarter mile from land, but no structures. Stevedores transferred the boxes from the train to the lighters, and then five lighters took the partial shipments out to the anchorage where the ocean freighter was waiting. The deck of the lighters was lower than the train tracks, so a wooden ramp was laid from the freight car to the lighter, resting on several mattresses on deck. It all worked on the first shipment, didn't it?

Well, it didn't work this time, and we have no way of knowing who stumbled or dropped something; we only know it all went sky-high. For this, the ship-owners were delighted because it is a well-established principle of Admiralty law that unless the ship was in contact with the owners, their liability is limited to the value of the damaged vessel. Under conditions of total disintegration, that means the lighters had a liability of zero. But there were six railroads, the Pakistani government, the Coast Guard and the two manufacturers of the explosives available to sue. Everybody had insurance, so a dozen insurance companies were involved. All of the victims and hundreds of people with property damage, all had lawyers; everyone agrees that many lasting friendships were established among lawyers who were milling around. Finally, the judge declared this case just had to be settled, or else it would continue for the rest of everybody's lifetime. The total amount of the claims submitted came to $55 million. Obviously, the settlement would be for less than that, but settlements are kept secret and you are not supposed to know how it turned out.

So, the question that remained was this. If everybody was insured, why not let the insurance companies haggle about who owed what to whom. Why did all of those railroads have lawyers hanging around? Well, the answer is a lesson for all of us. You need a lawyer to watch your insurance company's lawyer, because once a claim action begins, you and your insurance company develop a conflict of interest.

www.Philadelphia-Reflections.com/blog/1482.htm

China Bubble

{Foreign Money}
Foreign Money

China's rise to prosperity is the biggest, fastest industrial revolution in human history. Arriving two hundred years late, naturally, it has disruptive effects on the rest of the world. The Chinese want most to avoid a revolution, but also want to prolong the bonanza phase of their cycle. America must first avoid getting swamped by this tidal wave of foreign money. After that, adjust to an inevitable outcome: a more powerful China, but one with far slower growth, maybe a recession or two. Their wages must rise so our wages may rise; a future difficulty for both countries, with hyperinflation a danger. The Pacific Ocean may not prove as peaceful as we hope, but first, we must get through the Straits of Magellan.

Although the financial storms had been brewing ever since Richard Nixon visited China, the violent arrival of these issues first burst in on the American public during vacation, in the middle of sunny August, 2007.

www.Philadelphia-Reflections.com/blog/1486.htm

Federal Reserve Changes Its Business Model

Americans generally do not begrudge the success of neighbors; the achievement of someone else takes away nothing from me. In that spirit, we like to see developing countries rise up out of poverty. A more prosperous world is a safer one.

{Federal Reserve Bank of Philadelphia}
Philadelphia Federal Reserve

Rising international prosperity can, however, disrupt matters. When developing countries become producers, they can get inflation if they suddenly have more money than they know how to spend. Sudden wealth can come from discovering oil or gold or copper; slowly learning how to manufacture something is a safer way to prosper. Inflation and huge internal income disparities often lead to revolutions, so the wiser countries sterilize local money by exporting it. Coups and dictatorships are what happens if a developing country doesn't export its inflation; sudden wealth gives the appearance of being underserved. Conversely, our recent dot-com and Sunbelt real estate bubbles show what happens to the neighbors if developing-world inflation gets dumped on them. Eventually, of course, developing countries eventually balance their new production with new consumption, and the world settles down to a new balance. Never mind denouncing the rubbish the newly-rich decide to consume; its only problem for others lies in using up the world's resources faster. Developing countries commonly export inflation to other nations in the form of commodity inflation. The neighbors can soon have a commodity bubble on their hands; when any bubble bursts, a sharp recession can quickly follow, and after that, some other kind of bubble appears. What is new and disruptive is not oil or gold or copper; it is too much money.

With luck, these disruptions consequent to a neighbor's prosperity are soon overcome by improvements in productivity. But productivity itself can create a bubble. One huge productivity windfall for America is the astonishing thirty-year extension of longevity we have experienced; in time, we will surely devise occupations for retirees more productive than thirty-year vacations. Such balancing adjustments right now seem most likely to grow out of electronic productivity, using home sites as work sites.

So in short, America must read just like everyone else and one systematic readjustment has just surfaced at the Federal Reserve. The flood of money from China and the Persian Gulf sought an outlet in our economy, adopting the device of shifting American credit sources from banks to Wall Street ("securitization"). Cheap money once derived from bank deposits in local banks; since it now often originates abroad, it now must travel through the "carry" trade and similar innovative channels for foreign surpluses to get to Wall Street investment banks, which in turn distribute the money ("credit") to American businesses which can use it more productively than the developing countries can. Through securitization (turning loans into securities), Wall Street was able to make home mortgages directly, with only token involvement of local banks. Credit markets froze up because the new procedures had neglected to enlist local bankers in the process of checking the credit-worthiness of borrowers. So long as Wall Street can continue to find new sources of cheap money, this upheaval of finance is likely to be permanent because it is desired by both sides. Access to cheaper loans and access to safer investment harmonize the needs of the haves and the have-nots. Because in its haste this new development precipitated a banking crisis, there is some danger that Congress will overreact by prohibiting securitization rather than correcting its flaws. In every participant's eyes, it's cheaper and more efficient, but new efficiency threatens old inefficiencies. This one threatens the old deposit-based banking system, and since the Fed's control of the currency is based on its control over the depository banks, it threatens the Federal Reserve. That's the real driving force behind the Fed seeking control of non-traditional credit sources; that's now where the money is.

On March 16, 2008 things came to a head with the impending collapse of Bear Stearns, a Wall Street investment bank heavily involved in Credit Derivatives. There are rumors the rescue plan implemented over a weekend had actually been devised and held ready long before then. Many imperfections now surface with experience, but at least the plan had likely been explored as thoroughly as logic without direct experience ever allows. For example, the dispersal of manufacturing around the globe favored making pieces of a product and selling them to an assembler, rather than enveloping the whole process of making a product in one giant corporation. It's cheaper, that's why they do it. But the process of buying and selling pieces to other companies greatly expanded the need for short-term credit. Therefore, it was quite unexpected that Lehman Brothers, which specialized in such short-term loans, suddenly went bankrupt for lack of quick access to capital. In the panic, it is unfortunate that Lehman apparently concealed its situation from investors. There is a danger that Congress will draw the wrong moral and somehow block the globalization of manufacture.

The Federal Reserve Act was passed by Congress in 1913, and most observers believe the Fed's inexperience in 1932 repeatedly made matters worse in that formerly greatest of all bank panics. The new plan of 2009, therefore, had to step around some limitations imposed by Congress in the past, the political pressures generated by an impending presidential election, and the powerful resistance from private industries whose future was affected. The adroitness with which such a complex matter was handled over a weekend will surely become legendary, but maybe not soon. Probably because of existing legal roadblocks, three "lending facilities" were created, but a single device was at the heart of it. Instead of lending money, the Federal Reserve offered to swap securities with new non-bank managers of retail credit. The investment banks held massive security for loans which could not be sold in paralyzed markets but could be swapped or used as security for a loan, particularly if the government stood behind the innovative transactions. Wall Street in a word had plenty of wealth, but could not turn it into money fast enough to pay its bills. So sidestepping the legal constraints, instead of giving Investment firms money as a lender of last resort, the Federal Reserve swapped Treasury Bills for the "frozen" assets held as security for mortgage loans. The securities had been "caught in a loan" as the expression goes. There isn't much difference between Treasury bills and cash, or between exchanging bonds and selling them. But the new approach could be quickly and legally accomplished, and once done, the Federal Reserve was the master of investment banks. It became effectively their lender of last resort. A great deal of advance thought must have gone into devising this readjustment to the reality that over half of loans were not backed by bank deposits, but by the securitized debt of foreigners. Regulations will ensue, hearings will be held and laws passed, but the Fed has regained control of the money supply if it can manage to make this maneuver understandable by the public.

There was a moral hazard in this; the presence of a lifeguard tempts swimmers into deeper water. It was somewhat inflationary in the midst of an inflation threat. No doubt the Federal Reserve regards these negatives as prices worth paying, and they probably are. The decisive remaining issue is not whether the initial shape of this transformation is exactly correct; it surely isn't. Just as was true in 1932, what will ultimately matter most will be whether, with this altered stance, the Fed will adjust quickly and appropriately to future difficulties. And whether politicians will even permit it to do the right thing, assuming anybody then knows what the right thing might be.

www.Philadelphia-Reflections.com/blog/1465.htm

Volunteerism Needs a Business Plan

{Alexis de Tocqueville}
Alexis de Tocqueville

The visiting Frenchman Alexis de Tocqueville was struck most by the volunteerism he found everywhere in the young American nation; in his view, the first reaction of 19th Century Americans to a problem was to create a volunteer organization to fix it. Benjamin Franklin, who created dozens of such initiatives, was held up as its great exemplar. But de Tocqueville visited us at the beginning of the Industrial Revolution, and we are now well past that into the Information Revolution; volunteerism has noticeably declined. Not only have the great volunteer organizations like the Masons and the Red Cross suffered, but it is far more difficult to enlist the help of others to form a pick-up group to attack some issue or other. It is in that sense the general spirit of volunteerism has declined. The likely difficulty is not selfishness, but the helplessness of people to control their own time.

When volunteer groups to assemble, they are mostly composed of self-employed people like plumbers and dentists, free to be somewhere else during "normal business hours", which although shorter than they once were, seem extended by commuting time and by chores pushed aside during workplace confinement. To some extent longer commuting distances make it physically impossible to do personal chores in the vicinity of the workplace. But constrained personal time is also related to increased control behavior by management. A successful big business has to employ strategies to get employees with cell phones to stick strictly to business while the employer is paying for their time. Now that so many women are going out to work, the family unit needs to struggle to coordinate everyone's work time so there will be some remaining opportunity to conduct family life. When a working couple shares the home tasks and babysitting, the preempted time now extends to two working partners, and what is left is called "quality time". A probably temporary elaboration of this time competition is the need to chauffeur teenagers to their resume-enhancing activities. For the time being, you don't pick a college, the college picks you, and parents desperately labor to assist their children on a career path. Quite obviously, America needs to evolve better ways of trading work at home for more flexibility in the actual workplace, and we also need to build more first-rate colleges, but those issues are not the present topic. To summarize: It's awfully hard to assemble a group of volunteers simultaneously because employers have so successfully assembled their time. Failing to appreciate the tradeoffs inherent in commuting time is a secondary but still important factor, somehow related to the recent housing/schools mania.

Consequently, volunteer organizations increasingly tend to regard their chores as something you hire someone else to do if it proves impossible to dump them on someone who is retired or unemployed, or too timid to refuse. Even nominal volunteers are reluctant to step forward. This leads to recruitment lectures along the line that naturally you must sacrifice if you really truly believe in the goals of the dear old Whatsis Association, surely just a coercive speech pattern. That claptrap was never heard during the age of universal volunteers; volunteering was just one of those things everyone expected to do to get community activities accomplished. We're losing something important if we continue to endorse this attitude. Sometime during the first twenty-four hours in military service, for example, someone will surely advise the new recruit -- never volunteer.

For a penniless non-profit to adopt the solution of hiring staff when there is no revenue stream to pay them, is the first step toward the dissolution of the organization. Essentially, the non-volunteers are ordered to contribute money if they choose to be draft-evaders, and eventually, the officers and staff begin to look back at the organization members as cows to be milked. A class of people who are only making a living is substituted for those who understand and promote the goals, and it just goes downhill from there.

Instead, all volunteers really must each do some unpaid work, and the officers and directors must set an example of it. What an organization does next is crucial. Individual members, either anonymous or hoping to remain anonymous, must be approached with the suggestion they accept responsibility for a task. The wild-eyed response to this approach is quite familiar, like the lame excuse that there is no time. A counter response that I'm busier than you are, does not improve the conversation because it suggests the refuser is merely a selfish shirker. Instead, initial requests must take the following form: They should be for a simple, limited task without any obligations stretching to infinity. Almost everyone will be glad to bake a cake for a party, but almost no one will agree to be chairman of the cake-baking department unless the boundaries of that commitment are more reliably limited than they usually are.

In modern times, any major undefined volunteer responsibility is seen as potentially leading to an unthinkable conflict with gainful employment or else its ill-considered outgrowths like commuting. Since that's the basic problem, all-volunteer invitations must respect the true issue and devise workable ways to circumvent it. Role models certainly help if you have any.

www.Philadelphia-Reflections.com/blog/1448.htm

Gettysburg

{General Robert E. Lee}
General Robert E. Lee

It's quite a long drive from Philadelphia to Gettysburg, but General Lee was attempting to disrupt supplies to the "Arsenal of the North" by capturing the railroad center at Harrisburg. Furthermore, Philadelphia reacted as if Lee's advance was aimed straight at us, creating hysterical preparations for an invasion which had to be stopped before it got here. And finally, George Gordon Meade, the Union commander, was a Philadelphia home town boy. So, regard the Battle of Gettysburg as part of Philadelphia history, please.

{General George Gordon Meade}
General George Gordon Meade

Major (ret.) Lawrence Swesey is a West Point graduate and currently Administrator of the 1st City Troop; because of his enthusiasm for the subject, he runs a tour agency which specializes in battlefields, especially Gettysburg. From him, the Right Angle Club recently learned much that made the whole episode comprehensible. Such as Lee's purpose in going there, which appears to have been based on the growing recognition that the South was likely to lose the war, and desperately needed some major victory in Northern territory, both to take the pressure off the Southern homeland and to improve whatever terms might be extracted at a peace negotiation. To fight successive battles against a larger enemy, with larger economic resources, was to doom the South eventually as resources and men were depleted with no hope of replacing them. Sooner or later, some Union General like Grant would settle down to a grinding unrelenting assault, with the willingness to trade one death for another, until only the larger side was left standing. That's quite different from guerilla warfare of the type Washington fought, where the way to win was simply to avoid losing until the stronger side lost its civilian support. Lee could feel the South beginning to lose its nerve to fight on indefinitely, without any visible route to victory. Although Grant eventually did defeat him by attrition, Grant's own opinion appears to have been more personalized. In every war, he was later to say, there comes a time when both sides want to quit. The side that wins is the one with a general who keeps fighting for no particular reason until the other side finally quits and he wins the war.

Major Swesey emphasizes that rifles were available, but they cost four times as much as smooth-bore muskets which were only effective for twenty or thirty yards. Rifles were reserved for sharpshooters, and the enemy at a distance was bombarded by artillery as the two sides approached. So, in Pickett's famous charge, most of the casualties took place in the last fifty yards. Pickett's men had to contend with trudging stoically through an exploding field of cannon fire, unable to fire effectively at the Union men behind a stone wall, who were also supposed to lie passively on the ground while the Confederate artillery pounded at a stationary target. Somehow, most of the Southern artillery fire went over the Union heads and landed beyond the crouching line; in many ways, this was the main factor in the Union victory.

As the waves of attackers got within musket shot of the wall, they formed into three ranks. Since it took about a minute to reload the musket, a more or less continuous fire could be maintained by rotating three successive volleys rank by rank, at more or less point blank range. Then, fix bayonets, and the real slaughter became a hand to hand, in the blazing heat of summer.

www.Philadelphia-Reflections.com/blog/1436.htm

SCORE

{Mark Maguire}
Mark Maguire

Frank Pace, formerly Secretary of the Army, founded SCORE, the Service Corps of Retired Executives, in 1964. Philadelphia was one of the main founding chapters but tended to dwindle as business large and small dwindled after the bombing of West Philadelphia by the then-Mayor; former executives living in the suburbs lost interest. In December 2006, Mark Maguire took charge and gave SCORE a new direction. This former executive of Rohm and Haas is not related to the baseball home-run king, but at least his name is easy to remember.

The new sociology of center city demanded that more small businesses be started by minority residents, who have very little family and cultural experience in this sort of activity, which nevertheless is recognized as the main source of job creation in any area. It turns out that the main source of energy in the minority community is among minority women, who are particularly unfamiliar with the problems of small business. So, SCORE needs to dispel a number of misconceptions and unrealistic ambitions, and familiarize these budding entrepreneurs with the tax and regulatory headaches ahead of them, and teach them to be watchful of common traps and obstacles, learn to cope with fair competition, and how to recognize the signs of fraud before it happens to them.

The usual vehicle for teaching these elements of commercial life is to induce the writing of a detailed business plan, which executives can criticize for lack of realism or inadequate capitalization, suggesting ways to succeed in a field that experiences 50-60% failure in the best of circumstances. Some of this requires face-to-face discussions, lectures, and required reading. But much of it can be handled with weekly email consultations, a favorite tool of Philadelphia's SCORE chapter. Much of it can be addressed by referring the client to the proper agency or service business, or bank. SCORE has a strict ethical code for its volunteers, including a prohibition of becoming a vendor or participant in the business.

In addition to the changing nature of new small businessmen, there is a changing demographic of the volunteer executives who do the advising. Over 80% of them describe themselves as retired, but in fact, it is rare for one to be totally retired from all business activity. These guys really like to work, and a thirty-year vacation is not their goal in life. Just by acting as an example, they are establishing an important goal for the young businessmen and women who look to them for guidance. Work is how you accomplish something in life, and work, believe it or not -- is fun.

www.Philadelphia-Reflections.com/blog/1430.htm

Onward, Christian Soldiers

Among the ten largest cities in the United States, Philadelphia at 24% has the highest poverty rate. Why that should be so, and what should be done to change it, are questions for another article. Meanwhile, many helpless hopeless people need immediate help with problems of daily survival. No doubt, Philadelphia's long history of practical charity has acted as a magnet for victims of social problems caused elsewhere, and many of our locals who deserve some blame have moved away to more promising environments. For those who remain and want to help the immediate need, these things don't matter, just so long perhaps as emergency measures do not interfere with long-term solutions.

{William Booth}
Salvation Sign

Among many private relief efforts, the Salvation Army is widely acknowledged to be the most efficient and most effective, as well the largest. Before the big event in 2004, it had a $3 billion budget and 3 million volunteers; an army, indeed. Except for Quaker charities, which mean to spend nothing on solicitation except through their own example, the Army spends a notable record of 91% of its budget for direct relief. In Philadelphia, they have 9 community centers, 8 residential centers, and 2 children's shelters. This is the largest charity in the United States, with branches in 110 other countries. There are 65,000 homeless people sheltered, every night.

{William Booth}
William Booth

A moment should be spent on the history of the Army. It was founded by William Booth, who was a London pawnbroker before he became a Methodist minister. Sir Arthur Sullivan wrote "Onward, Christian Soldiers" in 1871 a decade before it became so aptly associated with the Salvation Army, and indeed before it became attached to the words of Sabine Baring-Gould . Originally the music had to do with St. Gertrude. The militarism of the organization has offended some people, even elders of the Methodist Church, and the Christian emphasis offends non-Christians. United, or Community, Funds are miffed that the Army usually will not agree to limit its solicitations to their umbrella, and modern sophisticates scorn the 19th Century traditions of Christmas Kettles, and such like. Since the main emphasis of the Army has been on relieving the problems of the Industrial Revolution, like alcoholism, drug addiction, prostitution, some see an implied criticism of modern progress, or of capitalism, or the entertainment business in general. Some people don't like the fact that most of the causes of poverty could be described as self-inflicted. You simply can't satisfy everybody. But when the rehabilitation of alcoholism and drug addiction generally carries a success rate of 25%, the Salvation Army approach -- no matter what you may think of its symbols -- is able to defend the claim of 65% success. If you don't like "Human Needs in Jesus' Name", just try "Practical Success in a Difficult Field" for a subtitle.

{Privateers}
Joan Kroc

It thus becomes understandable that when in 2004 Joan Kroc, the widow of the founder of McDonalds Hamburger chain, decided to leave her estate of $1.5 billion to relief of the poor, she chose the Salvation Army to run things for her. Her interesting will divide the country into four parts, with 28 cities to receive $36 million grants for the construction of community centers, plus an equal amount for the endowment to run them. The size of the grants was calculated to force the local cities to match them (Philadelphia still has $20 million to go) and the endowments specify no income to be derived if the amount falls below the original $36 million, or otherwise to be limited to a 5% spending rule. She was perhaps optimistic that investment advisors could regularly produce a 17% return, and really truly optimistic if she believed our government could restrain inflation within those bounds. But a sharp business mind shines through these covenants, a very necessary ingredient of successful philanthropy.

{Privateers}
Salvation Workers

Mrs. Kroc wanted these centers to be located in the areas of worst need; that explains the choice of a 12-acre plot in Nicetown, at the corner of Wissahickon and Hunting Park Avenues. The area now surrounding a former factory for the Budd Company has a 35% poverty rate. But after 2009 it will have an aquatic center of several swimming pools, gyms and fitness centers, a computer laboratory, arts and performing theater centers, and other more traditional Salvation Army facilities. It will also have 27 other American cities with comparable centers to share experiences with, to compete against, and to be put to shame by Philadelphia's superior ideas. We hope.

www.Philadelphia-Reflections.com/blog/1425.htm

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Commercial Academic Think Tank

{Stephen P./ Mullin}
Stephen P. Mullin

Stephen P. Mullin recently addressed the Right Angle Club of Philadelphia about assorted economic subjects; he is certainly qualified. He was once the only Republican in Mayor Rendell's cabinet, acting first as Finance Director and then as Commerce Director. At first, he doesn't appear extroverted enough to be a politician but quickly demonstrated that he knew the first names of more of the members of the club than the president did, so maybe he does have the innate talents of a politician. Urban political machines don't usually respond cordially to graduates of Exeter and the Wharton School of the University of Pennsylvania. A number of University professors are consultants to the firm, which offers statistical economic advice to the many law firms in town, to philanthropic organizations considering public-interest projects in the region, to government agencies faced with regulating unfamiliar activities, and very likely to anyone else willing to pay for the service of academics, statisticians and analysts. It certainly sounds like a service that governments and philanthropies need, and which the region needs to avail itself of. In a way, it is probably something the University needs, as well. A friend of mine is now retired, but at one time I commuted on the train with an academic administrator of the Wharton School, who was quite obviously disturbed by handing diplomas to students who promptly took jobs which paid those graduates more than he was paid himself. Obviously, such a system cannot persist very long without creating a brain drain, so income supplementation by commercial consulting is a necessary and valuable support for academics. There are, of course, probably some negative features as well.

{Privateers}
The Wharton School

It is interesting to hear from Steve how Philadelphia can be variously described. We have, for example, significantly less foreign immigration than other cities. New York, by contrast, has net immigration of about 700,000 persons a year; such forces can quickly transform a city in a variety of ways. The bombing of West Philadelphia during the Goode Administration was news for a while, then vanished from the papers. But it had a shattering effect on Philadelphia commerce, leading to a period of 8 or 9 years when there was essentially no private investment in the city. Philadelphia indeed now needs to have its municipal bonds issued by the state bonding authority, because our own bond rating is so low the extra cost of municipal debt is a significant one. And there is the cost of invisible shifting of power to Harrisburg. An unexpected result is that sales and real estate transfer taxes escalated to make up for property taxes which they could not possibly be raised as much as inflation. Real estate was in big trouble; whether ingenious strategies like the 10-year tax abatement for a new property will be successful in rescuing the real estate industry, remains to be seen. New office towers have been built, but they drain off tenants from older office buildings. We're seeing a massive conversion of older office space into residential apartments, an apparently successful maneuver. But that drains the older residential areas, which leads to -- well, who knows what it will lead to, but it could be slums.

{Privateers}
Mayor Michael Nutter

The traditional hostilities between Philadelphia and its neighbors can be defined in a new way, too. For a century, Philadelphia contributed more tax money to the rest of the state than it received in state services. But in the past 20 years, Philadelphia city has become a net importer of an annual billion dollars -- from the rest of the state. Two or three billion go to the schools, which the rest of the state regards as a deplorable waste in view of the quality of the product. And yet, the most hopeful feature of the situation is the vigor and ingenuity of the attempts being made to rescue the situation. In a certain sense, Mayor Nutter is the candidate of the Wharton School. He may well have some innovative ideas, and academic places like the Wharton School will surely suggest others. It remains to be seen whether Nutter can combine idealism with sufficient ruthlessness to make the city function. Cynical oldtimers will grumble that a mayor has to employ a moderate amount of deception and corruption in order to accomplish his mission. Maybe that overstates things, but it is very certain he must be tough. He's dealing with construction unions who will certainly be tough, and whose interest in sacrificing their own agendas in order to help the schools or street crime -- always fairly small -- is even further impaired by the econometrics that 70% of them live in the suburbs. We wish our new mayor all the best, since he seems smart enough to know what needs to be done, and is definitely smart enough not to drop any bombs on houses. He's smart enough to see that extra city revenue derived from gambling might permit the lowering of wage taxes, and hence an urban business recovery. But is he tenacious enough to stay in office long enough to achieve the balanced result; or will the forces of evil simply kick him out of office before wage taxes can be lowered and gambling discontinued? He won't break his promises, but will they break them for him? Beyond being competent, a city mayor needs to be tougher than the convivial but very mean friends he needs to associate with. He must, for example, decline to run for national office, the traditional way that city machines rid themselves of pointy-headed reformers.

Report Identity Theft to the Secret Service

The Internet provides new blessings, but new problems as well. Identity theft has now ballooned from a rarity to a fairly serious issue. After initial turf confusion, the issue has been assigned to the U.S. Secret Service. If it happens to you, that's where you make your anguished call. (1-877-ID-THEFT) or www.consumer.gov/idtheft

There's a certain logic to regarding identity theft as a modern form of counterfeiting, which has been with us since the days of William Penn. Shirley Vaias, representing the Philadelphia regional Secret Service, recently addressed The Right Angle Club of Philadelphia on the topic. It makes sense to learn the Service is headquartered on Independence Mall, across from the Mint. The crude forms of printing in the 18th Century made counterfeiting easy, and ever since the early days, there's been a race between improvements in technology and improvement in counterfeiting. We now have a paper with little red fibers in it, watermarks, serial numbers, color-shifting inks, microprinting of secret messages in the portraits, special magnetic strips, and probably lots of other clever things we aren't told about. The Bureau of Printing and Engraving is changing the currency, one bill at a time, and recently there was a new ten-dollar bill. A counterfeit version was in circulation within six hours.

ATM machines are equipped with counterfeit-recognition devices, and special gadgets are provided for banks and retail stores, but one detection device traditionally catches most fake bills. After handling huge amounts of currency, bank tellers catch a counterfeit just by the feel of the paper. Color photocopiers are getting better and cheaper, but of course, they can't change the serial numbers, so they aren't as smart as they seem. About one-hundredth of one percent of the currency in circulation appears to be fake, so you are pretty safe, but the possessor of a bad bill is deemed to be the one out of luck. The consequence is that many citizens suspect a bad bill, take it to a bank and have it instantly confiscated without recourse. That would seem to discourage reporting a counterfeit, encourage passing it off to an unsuspecting friend, and overall seems terribly unfair; but it results from the wisdom of the ages. Experience shows honest citizens are indeed tempted to try to pass the money on. While the banks don't enjoy being policemen, the effect is that counterfeits will circulate until they hit a bank, and thus confiscation is fairly comprehensive.

As the printing of money gets more complicated, the special presses needed to produce good money has become a monopoly of certain German companies, who sell the machines to other countries. Some of the American presses thus got into the hands of some Russians, who sold them to the North Koreans. So for a while at least, the North Korean government was printing American currency. It provoked vigorous countermeasures, the nature of which is confidential.

A bill of any denomination costs the government about half a cent to produce and lasts about four years in circulation. When tons of old bills are retired from circulation, the serial numbers are recycled; to an outsider, that sounds like an impossibly tedious job, but they say they do it. There's also the issue of seignorage, a term for the profit the government makes when the paper currency gets destroyed in one way or another, costing less than a cent to replace. Just how profitable the currency business is, cannot be accurately determined, because a lot of it is buried or hidden in mattresses and might someday resurface. But there is a substantial profit, which like any shrewd businessman, the government weighs against the cost of detection. Bail bonds and casinos are big sources of bad money, as could be readily imagined, and hence it is in their interest to get pretty sophisticated (and extremely unpleasant) about detection. On balance, however, it can be expected that legalized gambling in Philadelphia will promote more counterfeiting in the local economy, and hence is an offsetting cost of the tax revenue.

Over the centuries, governments have learned how to cope with counterfeiting, and there is actually much less of it than a century ago. You win some and you lose some; life just goes on. With internet identity theft, however, the criminals are developing techniques faster than governments have learned to combat them, and it is governments who struggle to catch up. Unfortunately, everybody takes a business-like approach to the matter, asking whether the precautions cost more or less than the losses. It would seem that if money continues its migration from paper currency to bookkeeping entries, it will eventually seem unsatisfactory for only one party in a transaction, a bank let us say, to keep the books while the public simply trusts them. Eventually, each individual will be forced to seek the protection of some sort of computerized system keeping the counter-parties honest, on behalf of the public, and to prevent a paralysis of commerce. Identity theft is getting expensive enough to warrant the effort.

Just how to do all that is not too clear. So, in the meantime, just let the Secret Service figure it out.

Detroit Makes, Philadelphia Takes

{Privateers}
Junk Yard

Let's look at the economics of a junkyard in a business-school way. Derelict auto bodies worth $80 a ton at current prices can be profitably converted into $235 worth of scrap metal, provided the cost of doing so can be kept below $155 a ton. The Camden Iron and Metal company are able to do so for $115 in expenses, and so reaps a profit of $40 a ton. That's not to mention the relief the owner of a useless car feels when the derelict hulk is taken off his hands, or the relief the City feels in ridding itself of thousands of vehicles abandoned in various alleys and public places. Or the worth to the steel mills of being able to produce new metal at a reduced price compared with starting with iron ore and limestone. Or the benefit to our balance of trade from being able to export the motor blocks and transmissions salvaged intact from the wrecks, leading to foreign motor cars of a quality that may, or may not, withstand impartial examination..

Camden Iron and Metal, Inc. is crawling with engineers who help cope with the currently dwindling steel content of contemporary autos, and the consequent increase in non-ferrous metals, glass, plastic and whatever. The most profitable component of the salvage company thus lies in a subsidiary, Innovative Recycling Products, Inc. The copper content of scrap used to be a headache, but is now a revenue center, for example. There once was a time when scrap iron was chopped up and buried in landfills. Nowadays, people are getting rich digging up such landfills and mining the scrap metal. There are other problems you probably wouldn't imagine, such as the disagreeable discovery that lots of those crushed auto bodies have dead dogs locked in their trunks.

It's big business, where a single crane, of which this company has a great many, costs $1 million, and the grinding mills and purifiers cost much more, last only a year, and must be maintained or replaced. There is an increasing plastic content in cars, so that stuff is ground up, pulverized, and burned to produce energy to run the shredding operation. Trucks bringing in a scrap for processing typically run all night on the highways, which reduces the public profile of the salvage operation but increases its 24-hour efficiency. When metal is torn apart, internal friction creates 2000 degree heat, cooled by water, producing huge clouds of steam. The closing of the Bessemer Steel Works reduced the local market for scrap steel, prompting more exports of scrap, and stimulating more search for ways to salvage other ingredients of the scrap. Increasingly, the purification of the raw material has thrust the scrap processors into the role of a pre-processing step in the steel industry. Just as slaughterhouses used to boast of using all of the pig except the squeal, hardly anything is now left of the bodies of discarded autos except for the unattractive scrap heap. Hey, if every housewife admires the idea of household recycling, maybe they can grow to love auto body recyclers.

And then, friends, this is Philadelphia so politics enters in. It has come in the form of visits from the Governor who wants the shredder to move to the waterfront, but who also has a struggle with New Jersey over dredging the river channel to balance in his mind. So, sometimes expensive relocation proposals are made, partially implemented, and then suddenly abandoned for reasons best known in Harrisburg and Trenton. It's conjectured that a central issue in this scrap iron struggle is the high price charged for electric power by New Jersey utility monopolies, tending to drive the scrap salvagers over to Pennsylvania. Since macing utilities is a central feature of modern urban political financing, it's equally possible that Pennsylvania power is produced at a subsidized loss in this struggle, or that New Jersey is concealing its tax burden within electric bills. One would have to know more facts to form an informed judgment, in a situation where facts are hard to come by.

Port of Philadelphia

{Privateers}
Ports of Philadelphia

When federal appropriations are doled out, it is a great advantage for the Port of Philadelphia to appeal to six U.S. Senators. However, the overlapping control of port operations can come close to paralysis. In short, we may have less chance of agreement on what we want -- but a greater chance of getting it. Right now, the ports of the world are struggling to adjust to revolutions of containerized cargo and gigantic oil tankers, plus political pressure from concern about the environment.

Some of the main arenas of our gladiator fights are as follows:

DRPA: The Delaware River Port Authority operates several large bridges, the PATCO high-speed subway line, and the cruise terminal, all leading to control of potentially large sources of revenue. The 1992 Congress expanded its charter to include the economic development of the port region.

SJPC: The South Jersey Port Corporation owns two marine terminals in Camden, and is planning a third in Paulsboro.

DSPC: The Delaware State Port Corporation operates the Port of Wilmington, DE.

PRPA: The Philadelphia Regional Port Authority has little to do with city politics, but is an arm of the state government of Pennsylvania, operating 7 marine cargo facilities, and planning more.

In addition, every county, city, and town along the riverbank has some degree of authority. Every business and union involved in regional or international trade is desperate to protect its interest in the politics of port regulation. Lately, the Homeland Security Agency has taken a large role. Scientists, engineers, fishermen, oil refinery operators, economists, and others abound. The news media convey their own opinions and the opinions of others. Opinions abound because most issues about ports are important.

In addition to the traditional cargoes of coal, petroleum, iron ore and forest products, which are mostly declining in importance, the rising cargoes include meat, cocoa beans, and South American fruit. General, or casual, cargo tends to be more valuable than bulk cargo, but greatly complicates the Homeland Security risks. The ratio of imports to exports is important because it is expensive to have a ship return empty. Shippers will, therefore, favor a port where there are expectations of return cargo. Oil tankers are particularly likely to return empty since their ballast is mostly river water; but, who knows, perhaps global warming will make dirty river water seem valuable to some tropical oil producer. A quirky problem is that most of the crude oil entering East Coast ports are currently coming from Nigeria, a notoriously corrupt nation. This has led to a thriving business of car-jacking in the Philadelphia suburbs, with the stolen cars promptly packed in empty containers returning to Africa.

Of the 360 major American ports, the Delaware River ranks second in total tonnage shipped, and eighth in the dollar value of the cargo. Every year, 2600 ships call into our port, which claims to employ 75,000 people. According to Bill McLaughlin of the PRPA, the future of the port will depend on the settlement of three major disputes:

1. Deepening the Channel. The historical natural level of the river is 17 feet, artificially deepened to 40 feet up to the level of the Walt Whitman Bridge. It sludges up by two or three feet every few years, so dredging is a continuous issue. The enlargement of tankers and container ships has led to a need to deepen the channel to 45 feet. It is true that the Wissahickon schist pokes up at Marcus Hook and will have to be blasted out, but mainly the issue is dredging up the gunk on the river bottom, and hauling it away somewhere. In Delaware Bay below Pea Patch Island, the bottom is sandy and hence valuable. The State of Delaware has plans for riverfront development, and would actually like to have the 8 million tons of sand, so no problem. The 7 million tons of clay and silt which must be dredged out of the upper Delaware River channel for a 45-foot depth is more of a problem, but users can be found for most of it. Or so the Pennsylvania representatives maintain; the New Jersey representatives led by Congressman Rob Andrews say it would be an environmental disaster to dump a thimbleful on New Jersey. Feelings get pretty hot in these things. The Haddonfield representative is portrayed as selling out his district in order to further his own state-wide aspirations, acting on the orders of North Jersey politicians who dominate New Jersey politics, who want to lessen competition with the Port of New York, which also shares a border with New Jersey. Feelings are not soothed to see the Port of New York deepening its channel to fifty feet while resisting forty-five in the Delaware port.

The document currently at the center of this interstate dispute is called PCA, the Project Cooperation Agreement. New Jersey won't agree to sign the proposal, which contains clauses to remove the DRPA from authority and replace it with PRPA(essentially transferring control and revenues from Philadelphia to the State of Pennsylvania) as the "non-federal sponsor". PRPA would then enter into a contract with the Army Corps of Engineers to get the work done.The price, probably low-balled, is $219 million, to be compared with the Port of New York's dredging price (probably high-balled) of $50 billion. There are, of course, a great many features of this political negotiation which are unlikely to appear in print.

2. Southport. The grand plan for the Philadelphia Port is to center on an intermodal complex of piers, railroads, and highways which would extend as a continuous terminal from the Walt Whitman Bridge to the old Naval Yard. No doubt this idea is linked to the round-the-world concept of Philadelphia as a way station from India to Vancouver, overcoming the empty return cargo problem by never looking back. Good luck.

3. Monetizing the Port. Like the turnpikes, ports could be sold to private investors. Of course, that could extend to selling the property to foreign investors, triggering the nationalist reaction readily observed when port management was once offered to Abu Dahbi. It could well give a new meaning to the expression, being sold down the river, but who knows maybe it's a good idea. When you criticize motives it never bothers real political pros, because it's simple to say you don't have such motives, and who knows. But the people seriously involved in government finances say they most fear that the do-gooders will be allowed to sell or lease publicly-owned facilities to improve the financial balance sheet. And then the pros will just take the money and use it to pay interest on more borrowing.

WWW.Philadelphia-Reflections.com/blog/1337.htm

Chester: To the Dark Tower

{Privateers}
William Penn

Chester is the original word for Castle in old English, and accounts for towns called Manchester, Lancaster, Dorchester in the Midlands of England. Although much is made of his Welsh ancestry,William Penn grew up and lived in the neighborhood of Manchester. When he first landed in his new colony, he named the place Chester before deciding to move upriver to be above the mudflats and snags at the abrupt turn of the river where we now have an international airport. On several occasions, this protection from pirates and invaders made it possible to remain rich and prosperous without abandoning Quaker pacifist principles. As a further bit of history, the second public reading of the American constitution took place in the courthouse at Chester. During the industrial revolution, Chester became a mighty industrial town somewhat in advance of Philadelphia. The industry has, sadly, abandoned Chester.

Chester repeats the age-old tradition that slums are created when towns are abandoned, making cheap housing available. There's even a particular Chester twist to this principle: the old Sun Shipyards have been turned into a casino. Now, that will create poverty if anything will.

{Amtrak's Northeast Corridor}
Amtrak's Northeast Corridor

Peter Barrow is a local real estate man who is determined to lead a revival of the old Chester, and certainly makes a good case for its future. Although much of the city was abandoned, the infrastructure remains. The roads, sewers, water supply, railroads, port facilities may be old but they are essentially intact, making revival much cheaper. Chester is still served by the R2 train from Philadelphia to Wilmington, and is on the main line of Amtak's Northeast Corridor. It's now near the airport, and near the electronics industry developing in Chester County along Route 202. Those things are economic drivers, and they are social ones, too. The old Chester urban Democratic machine and the rural Delaware County Republican machine can no longer afford to remain ossified in perpetual denunciation, in the face of new residents with new outlooks on things. So, there's agitation for reforms and both votes and discontent to propel it forward.

Given a magic wand, the one thing Mr. Barrow would change would be education. The public schools are undisciplined and unsafe, and mobilized by the teachers' unions to resist charter schools no matter what. Things have even gone to the point where Widener University is thinking about starting a charter high school, and the more graduates of charter schools the more momentum builds up for still more charter schools. Hidden in this struggle are two less defensible issues: parochial schools and vocational schools, pro, and con. The struggle over church schools goes back to the founding of our country in the sixteenth century and firmly resists any objectivity about whether parochial schools are better schools, or not. For them, that's not the point. The other tradition at play here is the historic opposition to vocational schools by trade unions. This one might be a little easier to work with since resistance to the development of more plumbers and carpenters was understandable enough during the industrial days of the city, but really is no longer relevant in an era when we now must import illegal immigrants to serve our needs in the mechanical trades.

Chester seems to have a chance to get its act together. Success or failure of this important the struggle could well depend on one or the other of the entrenched political machines, urban and suburban, seeing an opportunity -- and grabbing it.

WWW.Philadelphia-Reflections.com/blog/1322.htm

Doing Well, Doing Good.

{Lynmar Brock}
Lynmar Brock

Lynmar Brock is a Quaker, so what he does is surprising. He lives on a farm, but is Chairman of the Board of a food distribution corporation. He's also chairman of several other boards. He's written several books, and among them, a novel Must Thee Fight? relates the tribulation of one of his pacifist ancestors who nevertheless became a soldier at the Battle of Brandywine. The theme of this emotional conflict parallels the author's own struggle over being a conscientious objector who ultimately volunteered for the Navy because he felt he could not stand by while others fought his battles for him. The face of the soldier with a musket on the book jacket is his own.

{Rotary Seal}
Rotary Seal

When American forces recently entered Afghanistan, a great many people were forced to become refugees. Lynmar Brock was on the board of Rotary International, where a decision was made to provide relief for the refugees, and Mr. Brock flew over to lead the effort on the ground. Rotary raised $2 million almost immediately, and the task was to translate the money into something the refugees really needed. Since "shrinkage" is a common fate for refugee shipments, Rotary bought locally. They were able to distribute 83,000 pairs of shoes, 53,000 blankets and similar quantities of a number of other basic needs. Ultimately, the three-year effort raised $115 million and distributed items in the millions. It was important to give the goods to the local tribal chief, who then redistributed to the members of the tribe. To give it directly would undermine the authority of the chief, very likely provoking him to interfere with it. Accordingly, it is essential for relief workers to make friends with the chieftains, and it is essential to avoid the appearance of being a sap. All of the clothing was stamped with a big indelible yellow Rotary Seal; if it turned up in the black market, it would still be obvious what its source had been. At the same time, it was essential for donors not to appear to be soldiers. One of the missions of the group was to show the Afghans that Americans were real people who cared, and not all were soldiers. That they were successful in this way was brought out by one tribal chief coming forward and saying, "Teach us English. It's the language of the world."

Some influential Rotarians are active in American ophthalmological circles, and arranged to have American eye surgeons extract a great many cataracts from Afghans otherwise destined to a life of blindness. Since the Taliban routinely poisoned the wells, it was vital that farmers like Lynmar Brock were able to show how to repair or replace the local water supply. It might have been better to replace opium farming with tomatoes, but a compromise was made to replace opium with marijuana. That's an improvement, of sorts. The danger inherent in this work must not be shrugged off. All vehicles of foreigners were preceded and followed by at least six local soldiers. As the cavalcade moved from one tribal area to another, the soldiers were changed for soldiers of the new tribal area; their loyalty just had to be trusted. And, indeed, the co-chairman of the committee was mysteriously murdered one day.

The Rotarians return home full of praise for the U.N. field workers, mostly European, who are actually engaged in foreign relief work. The headquarters staff back home at the U.N. are described with only a shrug that speaks volumes, but it is useful for us all to keep the distinctions in mind.

Lynmar says it's great to be home. In his busy life there's work to be done on the farm, and in his corporation, and writing another novel. And there is supervision also needed for the Rotary efforts in the Ivory Coast. It's not completely certain, but sometimes he actually gets some sleep.

Quaker Efficiency Expert: Frederick Winslow Taylor 1856-1915

{F.W. Taylor}
F.W. Taylor

For at least seventy-five years after Fred Taylor turned it down, any rich smart Philadelphia Quaker attending Phillips Exeter would have been automatically admitted to Harvard. We don't know why he did it, but instead F.W. Taylor just walked a few blocks down the hill from his Germantown house and got a job at the Midvale Steel Company as an apprentice patternmaker. During the twelve years, while he rose to become chief engineer of the company, he took a correspondence course for a degree in mechanical engineering at Stevens Institute and invented a process for making tungsten steel, called high-speed steel. That made Midvale Steel rich, but Taylor was going to make Philadelphia rich, and after that, he was going to make America rich. When he died, he was widely hated.

Evidently his lawyer father greatly admired German efficiency, having sent little Freddy to a famous Prussian boarding school where he was in attendance at the time of the

{General von Moltke}
General von Moltke

Battle of Sedan. General von Moltke had used Prussian efficiency and discipline to defeat those indolent lazy French, and Fred Taylor evidently absorbed and retained these stereotypes for the rest of his life. Whatever he was looking for at Midvale Steel, what shocked him most was to find workers "soldiering on the job". That's a Navy term, by the way, invented by sailors to describe the useless shipboard indolence of any Army they were transporting. Taylor later went to Bethlehem steel, reduced the number of yard workers from 500 to 180, and was promptly fired. It seems that most of the foremen at the plant were owners of local rental houses, which were emptied of tenants when Taylor reduced the workforce. Even management came to mistrust Taylor. When the railroads wanted a rate increase, Louis Brandeis defeated them with the argument that they wouldn't need higher rates if they adopted Taylor's system of efficiency. In his later years after he became enormously rich, he toured the country giving speeches without fees, promoting the doctrine of finding the one best way and then doing everything that way.

{Louis Brandeis}
Louis Brandeis

Over time, Frederick Taylor had come to see that the industrial revolution had proceeded to the factory stage by merely bringing craftsmen indoors, each one treasuring his little trade secrets. Bringing the point of view of the company's owners onto the shop floor, Taylor could see how vastly more profitable the steel company would be if all those malingering tradesmen would stop soldiering on the job. No doubt the young Quaker soon learned that little was to be accomplished by remonstrating with workers, just as bellowing foremen had learned that bullying was also useless. Out of all this familiar scene emerged Taylorism, the idea of paying financial incentives to those who produced more, splitting the rewards of efficiency with the management. It sort of worked, but it didn't work enough to satisfy F.W. Taylor. When he walked around with a stopwatch, he collected the data showing how much more might be produced if the workers were perfectly efficient. Not only did that create the stereotype of the stop-watch efficiency expert, but it also provoked Congressional hearings and federal law against stopwatches which stayed on the books from 1912 to 1949. Although management responded by forming dozens of Taylor Societies to honor the approach, the unions invented the term "Taylorism" and bandied it about as the worst sort of epithet. Curiously, the Taylor approach proved to be enormously appealing both to Lenin and Stalin, who applied it as a central part of their five-year plans and general approach to industrialization. As we now all recognize, the Communist approach was a two-tier system instead of the three-tier system that was needed. It isn't enough to have a class of comrades called planners and another called workers; you need a layer of foremen, sergeants and chief petty officers in the middle. In addition to the elaborate time and motion studies leading to detailed written procedures, there needs to be an institutional memory for the required skills of the trade. In a funny sort of way, Fred Taylor the Quaker may have organized the downfall of the communist state before it was invented.

{Herbert Hoover}
Herbert Hoover

Another peculiar outgrowth of Taylorism may be the partisan lines of our own political parties. If you trace the American ideological divide to the 1932 election of Franklin Roosevelt, you can see we are still fighting the battles of the depression. It happens that Herbert Hoover, another Quaker, was totally captivated by Taylorism. Not only that, he was adamant that to get rid of the depression all the country needed was to return to self-reliance, individual responsibility, and hard work. Those were qualities Hoover himself had in superabundance. One telling remark that he probably regretted saying but nonetheless firmly believed was, "If a man hasn't made a million dollars by the time he is forty, he can't amount to much." Franklin Roosevelt had the million all right, but his family had given it to him. The Cadburys and Clarks could have given it to Fred Taylor, too, but he chose to make it himself.

www.Philadelphia-Reflections.com/blog/1296.htm

Very Good Work.I Appreciate this.
Posted by: Bilal   |   Mar 1, 2009 11:01 PM

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25 Blogs

Pakistan and Democracy
A former resident of Pakistan loves Democracy, but explains why it has been unsuccessful in Pakistan.

World Finance, Columbus Day 2008
Europe's leaders met in Paris, while finance ministers met in Washington over the three-day weekend in October 2008. Should nations chance total collapse to save the whole system, or sacrifice the weak to save the strong? Unfortunately, the source of the answer may not be financial but political.

John Head, His Book of Account, 1718-1753
The equivalent of the rosetta stone for colonial commerce had been sitting on George Vaux's shelf for six generations.

Webpage Printing
Webpage printing is supported on this site. It seems to work pretty well except for text flow-around for some browsers.

Securities Trading Across Time Zones
Closing the securities markets for any reason causes disruptions. Patchwork solutions are often devised. But continuous global 24-hour trading is an idea which conflicts with the need for everybody to get some sleep.

Vote Counting, Past and Future
Voting law changes followed the contested 2000 Presidential election, but U.S. Supreme Court still comes out looking pretty good. Close elections will always cause problems, some of them brand new ones.

The Trigger and the Cliffhanger
It was inevitable that someone would pull a trigger, and market gossip is now shaking loose who actually did. The cliffhanger to come is the insolvency of Fannie and Freddy.

Turtles and Bananas
Snapper soup can be made from snapping turtles, but the historical source of the ingredients has been shipped from the Caribbean.

Urban Bridges
The Episcopal Church has found a practical way for its prosperous suburban branches to form partnerships with struggling urban parishes.

The Corinthos Disaster
We hope the 1975 Corinthos disaster proves to be the worst fire in Philadelphia history; it's hard to imagine a bigger one.

Reading Books Compared With Computer Viewing
Authors universally compose their work on personal computers. Much more resistance to reading books on computers comes from readers, who dislike the glare of computer monitors on their eyes, the extra cost, and the cumbersomeness, and the trouble to learn how. However, storage is cheaper on servers than libraries, marketing is easier and maybe cheaper online, and technology will inevitably increase the advantages of computers. Right now, computers are ruining the book trade, not sweeping it aside.

South Amboy Explodes
On May 18, 1950, South Amboy, New Jersey blew up, breaking windows of five counties in its neighborhood.

China Bubble
Poor nations don't know how to spend their money, so they save it. When they eventually spend their money it inflates prices and wages and destroys their competitive advantage. To prolong their happy period of prosperity, the Chinese government exported their savings -- and their inflation -- by buying U.S. Treasury bonds. Their inflation became our inflation, our bubbles, and our disrupted banking system.

Federal Reserve Changes Its Business Model
On March 16, 2008, the Federal Reserve stepped in to stop an impending bank panic. It also changed the rules of the game, rather significantly.

Volunteerism Needs a Business Plan
Volunteerism has declined in recent years because of conflicting demands made by gainful employment. The spirit of volunteerism has not diminished, it just needs a different business plan.

Gettysburg
The strategy of both sides in the Battle of Gettysburg was shaped by the type of weapons in use.

SCORE
The Service Corps of Retired Executives has taken a new turn in Philadelphia, primarily serving minority start-ups, a majority of which are founded by black women.

Onward, Christian Soldiers
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Commercial Academic Think Tank
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Report Identity Theft to the Secret Service
Identity theft is now under the jurisdiction of the U.S. Secret Service.

Detroit Makes, Philadelphia Takes
The heap of crushed auto bodies at the foot of Philadelphia's Platt Bridge is an important part of the regional economy.

Port of Philadelphia
The Port of Philadelphia has access to six U.S. Senators from its surrounding states, but the price to be paid is endless political wrangling.

Chester: To the Dark Tower
The ancient town of Chester struggles to revive..

Doing Well, Doing Good.
A board member of Rotary International recently ran an Afghanistan relief program and wrote a novel about the Battle of Brandywine. He's a Quaker, lives on a farm, and is chairman of the boards of several organizations.

Quaker Efficiency Expert: Frederick Winslow Taylor 1856-1915
A rich Germantown Quaker boy became the world's symbol of the efficiency expert with a stop-watch, hated by Labor Unions but admired by Lenin and Stalin. He enriched the Midvale Steel Company with his invention of high-speed steel but was fired by Bethlehem Steel for eliminating too many employs. 000..0ees. Peter Drucker placed him in the class of innovators beside Darwin and Freud.