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Sunday, November 6, 2011

IS THERE A MANUFACTURING CANIDATE?

Mitt Rommey-- kicked of his campagin at the very symbol of American manufacturing-- Greenfield Village
he is the first true manufacturing canidate since William McKinley

As President, he pushed for reciprocity arrangements through treaties in the 1897 Dingley tariff. Debated at the time, reciprocity gave protectionist America a perception of fairness. Many conservatives were concerned that McKinley’s reciprocity arrangements would lead to an erosion of protectionism, but McKinley believed it was necessary for the future. American surplus was becoming an issue, and McKinley wanted to allow for a boom in exports. In his last speech at Buffalo, McKinley defined his vision: “A system which provides a mutual exchange of commodities is manifestly essential to continued and healthful growth of our export trade. . . Reciprocity is the natural outgrowth of our wonderful industrial development under the domestic policy now firmly established . . . The expansion of our trade and commerce is a pressing problem. Commercial wars are unprofitable. A policy of good will and friendly trade relations will prevent reprisals. Reciprocity treaties are in harmony with the spirit of the times; measures of retaliation are not.”
Statistics for the 1890 to 1900 decade support the conclusion of McKinley’s success that prices came down, profits rose, capital investment went up, and wages held or slightly increased (real wages clearly rose). Average annual manufacturing income went from $425.00 a year and $1.44 a day in 1890 to $432.00 a year and $1.50 a day in 1900. The average day in manufacturing remained around 10 hours a day. Heavily protected industries such as steel fared slightly better with wages. The cost of living index fell during the decade from 91 to 84 or about 8 percent. The clothing cost of living dropped even more from 134 to 108 or 19 percent. Food stayed about the same but the cost of protected sugar dropped around 25 percent. The bottom line is that real wage (adjusted for cost of living) index rose from $1.58 a day to $1.77 a day in 1900 or about a 12 percent increase. Invention flowered during the period as companies invested in research and development to meet congressional oversight of profits. The success of this period of managed trade depended on government oversight, business cooperation, and labor support. The list of companies that built their foundation and expanded included Libbey Glass, United States Steel, Standard Oil, ALCOA, H. J. Heinz (there was a 40 percent tariff on pickles) and Bethlehem Steel to name a few.
http://www.amazon.com/William-McKinley-Apostle-Protectionism-Quentin/dp/0875865771/ref=sr_1_17?ie=UTF8&qid=1320587757&sr=8-17

Thursday, September 29, 2011

Al Gore created the interent is closer to truth than man-made global warming

ARPAnet (Earliest Internet) Formed 1969
The Advanced Research Projects Agency Network (ARPAnet) set the infrastructure that would become the Internet. ARPAnet began as a network of connected university computers. The ARPAnet was funded by the Defense Advanced Research Projects Agency. The original basis was to develop a network for military command and control after a nuclear attack. The computer network was based on telephone lines and required a new technology known as packet switching to move data on telephone lines between computers. After its startup in 1969, ARPAnet evolved into several innovations in the early 1970s such as email, a file transfer protocol, which allows data to be sent in bulk, and a remote connecting service for network computers. This network grew to connect universities across the nation with defense funding. When the Defense Department pulled out of the project in 1990, it had laid the groundwork for today’s worldwide Internet. Universities continued the old network as NSFnet as it expanded to individuals with the advent of the Personal Computer.
The roots of the ARPAnet go back to the funding of the Defense Advanced Research Projects Agency (DARPA) formed in 1957 as a response to the launching of Sputnik. DARPA was created as a very special research group for the Department of Defense. The name was changed in 1958 to Advanced Research Projects Agency (ARPA). ARPA had an annual $12 million budget and much flexibility on spending it. Its first project was to look at a communications network that could operate after a nuclear attack on the United States. This bombproof network would allow distant military centers to communicate. ARPA adapted the early work of the 1960s of Paul Baran of the Rand Institute. This early network research had been financed by the Air Force. Baran’s work was on a packet switching system that would allow information to be routed on any available electronic lines such as telephone lines. The packet switching concept of Paul Baran was a revolutionary idea of breaking data or messages in packets to flow along available lines and then be reassembled at the designation machine. This differed from a traditional phone call that used circuit switching to form a dedicated circuit for the duration of the communication session. Packet switching allows data to flow on a fractured network unable to develop a dedicated or “direct” hook up. Packet switching is a special computer protocol allowing computers to exchange information (network control protocol).
Baran’s packet switching network offered another possibility of connecting universities involved in research for the Defense Department. At the time computers even in the same room could not talk to each other let alone at different universities. Packet switching along telephone lines would be a necessity to move large blocks of research data. These connections would allow huge amounts of data to be transported between universities. Beyond packet switching, some hardware to handle the messages had to be developed. Since ARPA was a small core group, it contracted out the work to BNN Technologies. To connect distance computers, each location required a gateway computer known as an Interface Message Processor (IMPs or routers as they are known today). The first IMP was built by Honeywell and could service four local computers. The first network connected computers at UCLA and the Stanford Research Institute in September of 1969. UCLA and Stanford both had SDS computers. Initially after typing “login,” the system shutdown, taking another month to work out the bugs for a message, which was ultimately sent at 10:30 p.m. October 29, 1969.
By the end of 1969, an IBM 360 at the University of California, Santa Barbara, and a DEC at the University of Utah were added to the network. MIT was added to the network in March of 1970. In 1971, the first e-mail was sent; and by 1973 with over 40 sites, e-mail made up 75 percent of the traffic, which augured the future of the Internet. To send a message on the ARPAnet required a computer to break the message into packets using an Internet Protocol (IP). The packets also received a digital identification because individual packets might take different paths. Individual packets are routed based on traffic. When the individual packet envelopes reach the destination computer, Transmission Control Protocol (TCP) reassembled the message in correct order. The network was slow running at 50 to 200 kbit/second. The year 1971 also brought the use of a Terminal Interface Processor (TIP) capable of adding over 60 slave terminals to the host computer. By the mid-1970s, huge databases were being passed between universities using File Transfer Protocol (FTP). The ARPAnet had achieved its goal and was supporting both military and civilian research applications. In 1983, the ARPAnet was split into National Science Foundation network (NSFnet) and the classified military network (MILnet).
ARPAnet continued as a communication system between certain research pockets at various universities until most of the IMP routers became obsolete in 1989.
The NSFnet used Local Area Networks (LANs) to link whole universities internally and externally. The NSFnet started to look for more funding as the ARPAnet shutdown in 1990. In 1991, Senator Albert Gore crafted and the Congress passed the High Performance Computing and Communication Act. The bill created and funded a super information highway for research, which evolved into the Internet of today. Today’s Internet is made up of the same infrastructure of routers and protocols. The Internet, regardless of its government origins, remained firmly rooted in the private industry.

Saturday, August 13, 2011

American Capitalism is not exceptional but Different


Much has been written of the source of capitalism, but that was the capitalism of the Great Enlightenment and Scottish philosophers such as Adam Smith, not American capitalism. American capitalism was that of the Scottish bastards known as the Scotch-Irish. American capitalism was never an ideology or philosophy; it was a quest for opportunity and economic rewards. It embodied furs, ginseng, tobacco, and whiskey for cash and required rivers and trails to bring these resources and cash together. It brought the Indians, frontiersmen, bankers, plantation owners, and Europe into a global market. For them the exploitation of nature created money, not the other way around. They wanted this exchange to be unfettered by government. It was similar to the capitalism of Smith in that it was self-serving on an individual level, but it differed in that it was also self-serving on a national level. American capitalism was not anti-government, but viewed government as a facilitator not as a regulator or generator. A simple democratic thought that government should serve the people, in this case frontier capitalists and plantation owners.
These Scotch-Irish and other colonists saw capitalism not as part of democracy but a result of it. Few knew of Adam Smith and likewise Adam Smith knew little of these frontiersmen, colonists, and settlers. Smith saw capitalism through the profitable British merchants and wholesalers of Glasgow, which had the world’s best resources of finance, technology, and education. The American capitalists were hands on forced to create their own finances, technology, and education. They wanted the freedom to prosper and were self reliant for their needs and government was to aid in obtaining these goals. It is not surprising that the capitalism of aristocratic Europe evolved differently that of democratic America. American cared little for theory, philosophy, or economic policy and would change all for prosperity. The early New England colonists had shown this flexibility in government to support prosperity. To that extend it was even more greedy than that of European capitalism.
American capitalism not only absorbed the politics of the country but its religion as well. They were greedy but not heartless. The pursuit of prosperity was elevated to a right. It challenged the rights of kings to inherit prosperity. If you had the right to prosper, it appeared that all other rights had to be in place. The right to prosperity runs so deep that some used religion as a justification for their unabashed pursuit of money. This view of economic freedom was the real idea of America. It would put individual motivation above the mechanics of economics. Allow Americans to prosper and they would build their government on that foundation. They not only broke from England but also within the first years of the new American government challenged it with resistance on a tax on whiskey, known as the Whiskey Rebellion. Americans with all their virtues to this day vote more often their pocketbooks.

Monday, May 23, 2011

The World's Most Forgotten Major Invention

The Owens Automated Glass Bottle making Machine 1904

Edward D. Libbey’s Toledo Glass Company was the developer of the automated bottle machine. Michael Owens gets the credit (rightfully so for the invention), but its full development and implementation required the organization of Toledo Glass, and Libbey gets credit for that. Glass making had hardly changed in three thousand years until the invention of the bottle-making machine. The automatic bottle-making machine would be a true manufacturing revolution compared to the Eli Whitney’s cotton gin in the cotton industry. Even more, the bottle machine changed society and culture. A fifteenth century Venetian would have felt right at home in an 1870 glass house prior to the automation of Libbey and Owens. The automatic bottle machine led to a revolution of packaging such as milk bottles, beer bottles, pop bottles, baby bottles, and glass jars. Business friends, Libbey Adolphus Bush and H. J. Heinz, were pioneering glass packaging in beer and vegetables but lacked volume glass bottle suppliers. The first costs of production using the bottle machine was around 10 cents a gross (144 bottles) versus $1.52 per gross for hand production of bottles. The lowered costs quickly opened up new markets for the use of glass bottle and jars. The automated bottle machine led to automated filling machines in industries such as ketchup making. The bottle machine guaranteed standard and equivalent weights and measures, paving the way for the Pure Food and Drug Act of 1906. An ancillary effect was the eventual elimination of child labor in the glass industry.
Libbey built Toledo Glass to do development work, and without it, Michael Owens could not have made the bottle-making machine commercial. Libbey hired the draftsmen, mechanics, and engineers needed to build the machine. Michael Owens, working from a model he developed while at the Chicago World Fair of 1893, functioned as project manager. The bottle machine was every bit an organizational triumph as an engineering triumph. It required an army of technical experts and Libbey’s leadership.
The bottle machine had near 10,000 individual parts, while the 1907 Model T had less than 3,000 parts. These parts had to be designed and manufactured. Every part required a two-dimensional blueprint, so it could be machined or cast. Amazingly, Michael Owens could not read blueprints. If more than one machine was to be made, it would require standardized parts, blueprints, and processes. Blueprints allowed Libbey to standardize his parts supply chain. Owens was incapable of such an engineering task, but Libbey supplied the necessary engineering backup. It was a huge undertaking beyond that of any individual. It was Libbey’s organization and Edward Libbey the CEO that allowed for the invention of the bottle machine to progress. Libbey not only held the organization together but also funded the vision when the board of directors wavered. The bottle machine as well as later inventions were the first real team inventions. It marked the end of the lone Victorian scientist making a breakthrough. Edison had an organization as support, while Libbey had a true developmental organization integrated into the effort. Libbey approached research and development as a craft, with engineers being innovation craftsmen. Libbey’s developmental company would become the model for corporate development in years to come.
The development of the automated bottle took years from 1898 with Michael Owens’s first semi-automated machine. The semi-automatic process could make bottles at 75 cents a gross (144 bottles). The commercial version in 1905 known as machine A could produce twelve beer bottles per minute or 17,280 in a 24-hour period. Compare this to hand production of 2,880 per day using a crew of six men and boys. Such production capacity and lower costs quickly opened up the beer and ketchup bottles markets. The national market in 1900 was about three million bottles of ketchup alone. These were hand blown bottles, and since ketchup was sold in barrels as well, the potential market was probably near seven million bottles. The beer bottle market in 1900 was about twice that size. Libbey made the decision not to become a machine manufacturer or bottle manufacturer, but developed a different business of forming a company manufacture and lease machines to end users. Leasing was a revolutionary business model, which Libbey perfected.
The first license of the machine was with Baldwin-Travis (Thatcher Manufacturing) in September of 1904. Thatcher was licensed to make milk bottles only. It cost Thatcher $250,000 for the license. The payment was made in $150,000 cash, $50,000 in preferred stock, and $50,000 in common stock. Royalties were based on a per bottle calculation of labor savings from the machine. One-half of the savings would go to the Owens Bottle Machine Company. Libbey would select companies exclusively for beer bottles, ale bottles, wine bottles, soda pop bottles, brandy bottles, etc. The royalties in 1904 were 50 cents a gross for Thatcher. The Thatcher machine required modifications for their thick walled square bottle. In addition, Libbey would supply Michael Owens to help in the machine start-up and installation. Owens quickly became a thorn in the side to a broad segment of the glass industry.
Licensing was the most important of these strategic issues of Libbey. Libbey personally took to selling licenses. Robotics companies are using the Libbey model of licensing and leasing today. Libbey and Owens believed the machine had a major advantage in longneck bottles favored by beer bottles. Iron City Brewing in Pittsburgh had been one of the first to come to Toledo to see the machine. In 1903, Libbey was in negotiations with a group of Pittsburgh beer bottle manufacturers but was getting nowhere. The group had negotiated as a group, fearing that the machine would give anyone of them an unfair advantage. Libbey secretly approached one of them, Edward Everett, after negotiations broke down. He started a secret letter exchange of letters using fictitious names. Libbey and Edward Everett joined together to take over three bottle plants in Ohio (Newark, Massillon, and Wooster). The new company became Ohio Bottle Company. Ohio Bottle Company was then given exclusive license for beer, porter, ale, and soda bottle bottles. This company would be the major supplier to Pittsburgh Brewing Company (Iron City Beer). So by 1905, Libbey controlled a complex web of glass companies, which had avoided the image of a monopoly.
Libbey would become America’s most adept monopolist, controlling the bottle market, while the government seemed unable to understand his control. Leasing gave him market control, which he could sell as a premium to companies. Once a company had first leasing rights such as Thatcher in milk bottles and Heinz in Ketchup bottles, Libbey refused to lease to their competitors. With Kent Machine as his manufacturing company, Libbey had started a process of vertical integration controlling the supply chain, but his horizontal integration of markets was overwhelming. In 1905, Libbey had control of the cut glass, bottle, and container markets. In the bottle and container markets, he was in a position to control pricing and production. He realized that the automatic bottle machine had the potential to cause disarray in the marketplace. Libbey chose to slowly change the market while maintaining price levels. This would also allow for an orderly transfer of skilled glass blowers and gathers to machine operators. Still, Libbey’s tactics were every bit as monopolistic in nature as those of J. P. Morgan. Libbey, in fact, had the power to decide segment winners because he sold exclusive rights in segments such as beer bottles, vegetable jars, milk bottles and other segments.
Libbey also moved quickly on expanding licensing to Europe with trips in 1904 and 1905. Owens European Bottle Machine was formed to sell licenses. Beer King Adolphus Busch who had first seen the machine in 1903 became a stockholder in the European Bottle Machine. Other than Busch and Julius Prince of Germany’s Apollinaris Company, the board of Owens European Bottle was the same as Toledo Glass. Owens European had exclusive rights for Europe, Central America, South America, Africa, Cuba, and Australasia. One of the unexpected results of the Owens bottle Machine was a huge reduction in child labor. A typical glass factory might have 100 boys working at low wages to make bottles. Wages were from 30 to 50 cents a day, often with room and board not included. While a boy might make $3 to $6 a week, he might be charged $2 to $3 a week for room and board. Company boarding houses were common in Ohio. Orphans were often shipped from eastern cities to take the jobs in the glasshouses of Ohio where labor was in short supply. The Owens Bottle machine effectively reduced the process to high paid machine operators. In 1910, Libbey would repeat the developmental and marketing process with the invention and application of an automated flat glass machine.
see new book -- Amazon EDMUND LIBBEY http://www.amazon.com/Edward-Drummond-Libbey-Biography-Glassmaker/dp/078646335X/ref=sr_1_8?ie=UTF8&qid=1306157247&sr=8-8

Tuesday, April 5, 2011

history of income tax

The United States, having been born in part from a tax revolution, was slow to implement any form of taxation. Over 90% of the early federal government was financed by tariffs. The first use an excise tax on whiskey had resulted in a military action in 1794 to enforce it known as the Whiskey Rebellion. The government did expand sales and excise taxes to finance the War of 1812, only to have all of these repealed in 1817. Congress was considering an income tax for the War of 1812 when it ended. From 1817 to 1861, the United States was funded by tariffs on incoming goods and to a small part excise taxes. The Civil War, however, required huge expenditures by the federal government. The Revenue Act of 1861 imposed an income tax on all incomes over $600. The tax rate was 3 percent graduated up to 5 percent for the very few that earned over $10,000 a year. This income tax targeted the very wealthiest of Americans and accounted for only a fifth of the necessary income for the war. This tax was repealed in 1872. During the 1880s, many states passed inheritance taxes, which had popular support. Surprisingly, the inheritance tax and a luxury had the support of wealthy industrialists such as Andrew Carnegie and John Rockefeller.
In 1894, Democrats in Congress were able to pass first peacetime income tax as part of the Wilson-Gorman Tariff. The Democrats reduced tariffs at the same time to help farmers, who complained of the high price of sugar and household products. Tariffs were considered a “tax” on the average consumer who paid more for imported products. This income tax was 2 percent on incomes over $10,000, which addressed less than 10 percent of households. In 1895, the United States Supreme Court, in its ruling Pollock v. Farmers’ Loan and Trust Company, held such an income tax as unconstitutional. The court ruled the income tax a direct tax, which was inhibited by the constitution under Article I, Section 9 that “No capitation, or other direct tax shall be laid, unless in proportion to the census.” With tariff incomes rising in the late 1890s, Congress decided not to challenge the court decision with a new tax initiative. The reduction of tariff rates in the early 1900s and a rising public awareness of the wealthy excesses created pressure again for an income tax. This was consistent with the progressive movement of the time in both political parties. Congress first passed a corporate income tax of 1 percent of income over $5,000 (about $110,000 today). In 1913, there was a clear demand to reduce tariffs and impose an income tax. The Underwood Tariff Act of 1913 ended the protectionist tariffs that had existed since the earliest days of the United States. With popular support, Congress moved to have the 16th Amendment passed by the states.
The 16th Amendment stated: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” Politicians sold the amendment saying it would result on a tax only on America’s wealthiest (a pledge quickly forgotten once the power was given to tax). The 16th Amendment was ratified in 1913 and Congress passed the Revenue Act of 1913. This act levied a 1 percent tax on incomes above $3,000 with a surtax of 6 percent on those with incomes above $500,000. This meant a top rate of 7 percent. At the time roughly 2 percent of the population paid the income tax. The 1916 Supreme Court decision Brushaber v. Union Pacific actually expanded the meaning to profit and gain from any source. The needs of the government to finance World War One quickly caused the top rate to increase to 77 percent. Democrats created an excess profit tax for corporations as well to finance the war. Total tax revenues increased to over a billion dollars in 1918. Popular support eroded as the government began to expand taxation on all fronts for the war, but the genie was out of the bottle.
The government became a series of hundreds of bills over the years to adjust the tax for various groups and types of ‘income.” The first of these created progressive steps of income to be taxed at increasing marginal rates. The top marginal rate was cut to 58% in 1922. From 1913 to 1921, capital gains were taxed as ordinary income. Many argued that this treatment took away the incentive to invest in American stocks. The Revenue Act of 1921 allowed for assets held for two years to be taxed at 12.5 percent instead of top rates of 77 percent. Capital gain taxes were adjusted and excluded with various laws until the present day. These treatments became very complex as economic models used taxes as incentives for government economic intervention. These economic uses of taxes to control behavior were popular with followers of John Maynard Keynes. The 1930s brought more taxation by the federal government, including a progressive tax on business profits.
Major changes came during World War Two when the income tax expanded to the middle class. Franklin Roosevelt also increased the top marginal to 91 percent. The system was still very disorganized and full of tax fraud. Roosevelt increased enforcement as a means to increase revenue. The passage of the Revenue Act of 1942 was considered the most expansive in our history. Congress also enacted payroll withholding with the Current Tax Payment Act of 1943. Congress also increased the base and rates with a “surtax.” Rates ranged from 13 percent on the first $2,000 of income to 81 percent on $200,000 up to a maximum of 91 percent. The withholding tax, while extremely unpopular, greatly increased revenue. It was sold a patriotic sacrifice during World War II. Taxpayers went from 3.9 million in 1939 to 42.6 million in 1945 or 60 percent of households paid an income tax. For the same period collections went from $3.2 billion to $35.1 billion. Politicians wisely called this broad expansion of taxing and rate as a “defense tax.” Corporate taxes were also increased to 50 percent.
Taxes have become a political issue with the tax code used to affect the economy and control consumer behavior. The 1940s saw the expansion of a tax code of exemptions, deductions, and credits making the collection and maintenance of the system complex. With this complexity came business opportunities such as H&R Block to help taxpayers. Today the income tax (Internal Revenue Service) falls under the Department of the Treasury. It represents one of the government’s largest bureaucracies. Today because of the huge government expenditures of maintaining, managing, and enforcing some politicians are arguing for a flat tax on sales. This had actually been considered during the debate over the Revenue Act of 1942.

Friday, February 18, 2011

Read the Pantheon of Capitalism

The Pantheon

The American Pantheon is a result of years of research into the Golden periods of American business and capitalism. It has produced a number of iconic biographies. At the seat of Jupiter is President William McKinley, who developed a managed approach to American exceptionalism in manufacturing and industry. On his right side are business innovators such as H. J. Heinz, George Westinghouse, Andrew Carnegie, and Michael Owens. On the left there are William McGuffey, America’s educator, and Henry Clay Frick corporate organizer. The Pantheon of books includes tributes to the many developers of early industry in general (The Pig Iron Aristocracy, Boys of Braddock, and Iconic Lessons of Operations Management). The many industrial laborers are honored in the book A Genealogy of Greatness. Over twenty of these “gods of business” are interviewed and questioned about today’s problems in the book-Interviews with the Titans of Business.



America’s greatest capitalists and industrialists – can lead the way back to greatness. The literary pantheon preserves the memory for our youth.


Read the full Pantheon
Other Books by Quentin R. Skrabec Jr., Ph.D (The Literary Pantheon)

The Boys of Braddock ISBN 0-7884-2516-1

George Westinghouse: Gentle Genius ISBN 978-0-87586-507-2

The Metallurgic Age ISBN 0-7864-2326-9

Michael Owens ISBN 978 1 58980 385 5

In Search of the Lost Grail of Middle Management ISBN 0-7618-2551-7

Glass in Northwest Ohio ISBN 13 978-0-7385-5111-1

Labor Productivity and Profits ISBN 0-7414-3890-9

St. Benedict’s Rule For Business Success ISBN 1-55753-254-0

Iconic Lessons in Operations Management ISBN 0-7414-2893-8

Saintly Lessons and Divine Concepts for Business ISBN 156072845-0

William McKinley: The Apostle of Protectionism ISBN 978-0-87586-577-5

A Genealogy of Greatness ISBN 978-1-934209-46-2

The Pig Iron Aristocracy ISBN 978-0-7884-4515-6

Interviews with the Titans of Business ISBN 0-7414-4536-0

H. J. Heinz: A Biography ISBN 978-0786441785

William Holmes McGuffey ISBN 978-0875867267

Henry Clay Frick

A Manufacturing Manifesto ISBN 978-0741453310

Edward Drummnod Libbey new at Amozon pre order

Quentinskrabec.com
Theironpantheon.com
Or Search “skrabec” on Amazon.com