Saturday, June 1, 2013

Chomsky & Anarcho-Syndicalism

A correspondent checks in from Paris with an article interviewing Noam Chomsky on anarcho-sandicalism.  Chomsky is another one of those Marxists who gets his facts right when he writes.

I've written on anarcho-syndicalism before, and it has much to recommend it, especially as a sort of order-from-the-chaos variety.  Here again, anarchists are not against government, as long as it is voluntary.

Chomsky gets his critique of America and capitalism right, but he could have gone farther in his examples.  There is a working model of anarcho-syndicalism flourishing today, Mondragon.

Chomsky has actually reviewed Mondragon and pans it for lack of complete anarchy, and while worker owned, not completely worker managed, stuck as it is in the real world of capitalist systems.  He does not mention this in his Alternet interview, probably as an MIT professor, Noam criticizing people making real-world compromises might be a bit much.

In any event, as our government disappears into fascist chaos, and after come-what-may, Mondragon is a good example of a phoenix coming up out of the flames, in this instance the Spanish Civil War.

So some elements:

1. Anarchy depends on voluntary association.  Workers voluntarily agreeing to a form of management depends on workers with experience in voluntary associations.  Mondragon was formed by Catholics, already well versed in anarchy, what with their participation in the largest and oldest single organization in the world.  What makes Catholicism unique?  Participation and membership is entirely voluntary.  You aren't going to get anything out of it unless you put into it.  Most organizations fail when they attract people who want more out of it than they will put into it.

2. Small state interference.  Small states can hardly interfere with organizations larger than themselves.  Since Mondragon provides what "the people" want, then state is in no position to promise people more than they are getting now from work.

A perfect example of this in USA is the fact that the state has priced "medical care" out of range for most people, then introduced a scheme to make it more accessible, while raising the cost even more.  It is madness, but possible since the state has such power.  The workers contract doctors and keep the cost low, like Elks, Rotary Club, Sons of Italy and other social societies used to do in USA,  But becoming a empire and going to war wiped out all of these benefits we had as the state replaced society as a provider of goods and services.

3. Customer focus.  Mondragon operates in a state too small to subsidize Mondragon.  Therefore, Mondragon must design and market to customer satisfaction.  And that is the main thing, the customer calls the shots in anarchy.

Most of the article is about education, upon which Chomsky's comments are beneficial.  For my part I've been experimenting in anarchy and education for a dozen years now, over at www.seattleteacherscollege.net.

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Where Pat Buchanan Goes Right

Pat Buchanan has a great article on economic reform, which makes great sense if you believe in the State.  (I don't, but this would be far better than we have.  I do believe in improvement.)  In essence get rid of corporate taxes.

First, every U.S. corporation that had moved abroad in search of lower taxes in recent years would start thinking about coming home and bringing its production and its jobs back to America.Second, that $2 trillion in income U.S. companies have stashed abroad would come roaring back into U.S. institutions.Third, foreign companies would begin to relocate and produce here in America, both to get around the tariff and pay no taxes.Fourth, U.S. producers would see sales soar inside the $17 trillion U.S. market, at the expense of foreigners who would pay a 10-percent admission fee to get into this market, a fraction of what they used to pay in the 19th century.

Read his whole article here...

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Friday, May 31, 2013

Where Patry Goes Wrong on Copyrights

Patry calls himself a centrist on copyrights, and indeed his views are so reasonable that if the law of the land reflected his reasonable arguments then we would unlikely be subject to the extremism that gets people to so dread government.  That an Amish farmer, who people encouraged to sell them raw milk, should be punished for doing so, is crazy extremism.  And that is precisely what any American experiences form the state on any given day.  That 12 year old girls can be sued for downloading a song is madness, but state-enabled madness.

Patry nails the malevolent pro-IPR technique of claiming "IPR as property rights" to establish freedom from state intervention, which is a hallmark of property rights.  And truly, government interference in your property is anathema to a free market and a free people.  There is an internal contradiction in claiming a freedom from state intervention in something the state created for you.  Free marketers could not agree more with Patry on this point. All hail William Patry for elucidating this wicked abuse of the law.

What Patry shows is there is no warrant in law or history for these extreme reactions to human action in relation to laws that are legal constructs made for the benefit of all.  It is only by metaphors of piracy (case of copyrights) and The Plague (in regards to fresh milk) that laws calling for draconian punishments can be written for violations of doubtful statutory law.  Like an enemy, the anti-freedom crowd so demonizes a negligible problem that it is beneficial for a grandstanding politicians to "do something" (beneficial in the sense of financial incentives to the legislator).

Patry does very well to note that copyrights and patents are not natural law rights, and never recognized so in courts.  He does well to demonstrate they are purely the function of legislatures, and theoretically tuned to the greatest benefit for the greatest number, a utilitarian construct.  He does very well to demonstrate the madness of harsh penalties for immaterial violations.

He notes if and when we find the laws concerning copyright and patents contrary to the common good, we can and do change the copyright and patent laws. As I said yesterday, these laws do not belong to Monsanto or Disney.  The benefits of copyright and patent are not a kind of property right, but a provision by the community for the community.  Very good work, Bill.

But in chapter five give Patry starts going off the rails.  I don't know if he is is confused, uninformed, or being disingenuous.  His argument is so bad I think it must be out of ignorance, because I don't think someone this smart would make an argument this bad.

So Patry demonstrates in law there is no property rights in copyright and patent. Very good, any free marketer would agree, and tell him that.  In chapter five he begins to weave an argument with diverse threads to assert that there is a strain of "free market fundamentalism" that is the heart of copyrights gone bad problem.

Indeed, he cites wikipedia for the definition of free market fundamentalism and reproduces this snippet:
unfettered markets maximize individual freedom, that they are the best means to economic growth and that society should adhere to their ideas of progress.
 So let's sort this out:

1. This is a  fair definition of free markets, although most devotees of the free market simply say "free to contract, free from force or fraud (or both).  So there is a slight straw man argument being built here.

2. The wikipedia entry Patry cites STARTS by saying the term "free market fundamentalism" is pejorative.  Now, is this not precisely the gambit he accuses the bad guys of employing?  Fundamentalism is a bad word in American politics.  This is an ad hominem argument.

3. The wikipedia entry is mostly about the tendentious arguments from both sides over the term.  So he appealed to false authority.

How come?

Next he begins to make assertions such as
"It is economic freedom that permitted ASCAP to threaten to sue the Girl Scouts with a $100,000 fine and up to a year in jail if they sang songs like "Happy Birthday" around the campfire unless they paid a license fee." (page 98)
Now I don't doubt ASCAP took such action.  But since ASCAP's power to do so comes form the state intervening in the free markets on ASCAPs behalf, it is an internal contradiction to blame the free market for government intervention enabling ASCAP abuse.  That is incoherent.

Patry tells us even Keynes denigrated the idea of a property right on patents and copyrights.  Well OK, so he got one right.  Perhaps the point is the god of moderate socialism, the man who recommended his work to Adolf Hitler in the German version of his magnus opus, would not care for a construct of rights where there is none.  Well, so what?  Keynes and free marketers agree there is no property right in copyrights and patents. They probably both agree the sun sets in the West.  This is a red herring argument.

Then Patry tips his hand.  He shifts from arguing copyrights and patents are not property rights and thus  not free from state intervention to property (such as your home, your car, your tools) is not free from state intervention.  He goes on to catalog a litany of current events, economic crimes high and low in recent years, Bush era madness (although Obama era too, but not touched on) which he attributes to a belief that property rights are free from state intervention.

Did you follow that argument?  By making a false claim copyrights and patents are a property right, bad things happen (I agree).   By making a false claim copyrights and patents are a property right, the "bad thing that happens" is people escape their social responsibility inherent in the copyright and patent statutes (I agree).

Then comes the shift in his argument about bad things happening from the false claim being the bad thing, to the property right being the bad thing. According to Patry, by claiming property rights in real estate, tools, personal effects, etc, one escapes their social responsibilities.

Whoa...

1. There is something called property rights, existing in natural law.

2. There is no such thing as a property right in copyright or patents.

3. Yes, people who claim there is a property right in copyright or patents do so for nefarious ends.

What has 2 or 3 to do with 1?  Nothing.

Patry does cite a half dozen leading lights who agree with him that property rights are NOT found in natural law, that property rights are a result of the state, and therefore subject to regulation.  But he cites none of the overwhelming sources who disagree with those few people.  He cites none of the sources that establish property rights as natural rights.

So in chapter five he made a gambit to argue all life is subject to the state.  He reached too far, because that topic is way to big for a chapter, and his argument is poorly constructed even as it is.  If I could spot its falsity, then it is a poorly executed argument indeed.

And in a book dedicated to deploring mischaracterisation as a means to an advantage, it is rather low to ascribe the evil of patents and copyrights to free marketers who in fact will have nothing to do with patents and copyrights.  The problem, the abuses, come from people who believe in patents and copyrights.  Patry himself does believe in copyrights and patents, although to a centrist degree.

I esteem Marxist writers for their unerring assembling of the facts.  Through the first four chapters I marvelled at what Patry wrote, and began to assume he was a Marxist, high praise indeed form me.  But chapter five reveals Patry has his facts on real property wrong, and his categories are confused, so he is no Marxist.

No, he is just another capitalist, the top copyright lawyer to Google, a long time Washington staffer working on the issue of copyrights.  He is making his money off a system that is unsustainable, and will clearly fall apart.  He is blaming the damage done by extremists in his camp on the opponents of his camp.  "Google is OK, he says, because Google is centrist on copyrights.  Movie Industry is bad, because Movie Industry is extreme on copyrights.  Let's blame the people who do not believe in copyrights."  Sorry, Bill, both Google and the Movie Industry believe in copyrights and neither believes in free markets.  Don't blame us.

Chapter five he should have left out.  He undercut the strength of the previous four chapters.  I'll keep readings, and see what I find.

But I will say, the first four chapters alone are well worth the price of the book.

Update:  It occurred to me I should check if my favorite patent attorney, Stephan Kinsella, had reviewed Patry's book, and indeed he did, partially.  Apparently Patry approached Kinsella on the topic, and Kinsella discussed his book with Patry, IP attorney to IP attorney.  Worth a read.

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FBI Distributes Porn

In a Fast and Furious type operation the FBI ran a kiddie porn site to catch kiddie porn users.  This is madness.  There is no supervision of law enforcement, because they know the election function no longer works in USA.  There is no rule of law any more.

A buddy of mine was a cop who spent a while busting porn distribution.  He is pretty sure just seeing the stuff did him a lot of damage.  There are images he cannot ever get out of his head.  He had no effect whatsoever on the business.  People he arrested did a little time and then went back to work.

We need truth commissions.  Immunity from prosecution for anyone who publicly confesses a crime.  Kiddie porn folks, once they have outed themselves, would be free from prosecution.

But not free from the collective sanction of the rest of us.

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Thursday, May 30, 2013

Health Care Reform

A Portland maine doctor has ditched all insurance patients.  All cash now.  He is doing well, just like before medicine was ruined by medicare.
Before the switch, Ciampi had about 2,000 patients. He lost several hundred, he said. Some patients with health coverage, faced with having to seek reimbursement themselves rather than through his office, bristled at the paperwork burden.But the decision to do away with insurance allows Ciampi to practice medicine the way he sees fit, he said. Insurance companies no longer dictate how much he charges. He can offer discounts to patients struggling with their medical bills. He can make house calls.
“I’m freed up to do what I think is right for the patients,” Ciampi said. “If I’m providing them a service that they value, they can pay me, and we cut the insurance out as the middleman and cut out a lot of the expense.”
Gordon Smith, a spokesman for the Maine Medical Association, wasn’t so sure, saying most patients either want to use the insurance they pay for or need to rely on Medicare and Medicaid.

***If they want to use insurance they can go elsewhere; if they want other people to pay their bills by medicare, then they can go elsewhere, if they want to pay their own bills, then they can go to this doctor.***
Even with the loss of some patients, Ciampi expects his practice to perform just as well financially, if not better, than before he ditched insurance. The new approach will likely attract new patients who are self-employed, lack insurance or have high-deductible plans, he said, because Ciampi has slashed his prices.
“I’ve been able to cut my prices in half because my overhead will be so much less,” he said.
Before, Ciampi charged $160 for an office visit with an existing patient facing one or more complicated health problems. Now, he charges $75.
***Exactly, except Romney-Obamacare will make this where you must buy insurance and you need to pay cash in order ot get good care.  Madness.***

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Amish Threat To Wisconsin

An Amish farmer was convicted of a crime of moving some of his product form one place to another.   He did nothing else wrong, just moved some raw milk.  For this he faces a year in prison and a $10,000 fine.  Why did the jury not simply nullify the state case?
Many mainstream dairies and public-health officials have long warned of raw milk's health concerns and see that, as well as its potential to steal away market share, as threats to the industry. "It's impossible to make an unsafe product safe," said Shawn Pfaff, spokesman for the Wisconsin Safe Milk Coalition, an industry lobbying group opposed to raw-milk sales. "We strongly urge lawmakers to keep it illegal to sell raw milk in Wisconsin to protect the state's $27 billion dairy industry and the public health of its residents."
An amazing internal contradiction, and a gaffe!  (A gaffe is when a politician accidentally tells the truth.)

First the internal contadiction: the spokesperson for the Wisconsin Safe Milk Coalition claims it is impossible to make milk safe.  Wait, what?  If you guys make milk safe (in your biased opinion), how can in not be made safe?  Shawn Pfaff sounds like Charlie Manson at a parole hearing.

The gaffe is the truth: this is about Amish stealing market share from the state's 27 billion dairy industry.  Yes, indeed, big milk and big govt are one.

Big milk cannot win by marketing, so they must win by destroying the Amish.

First they came for the Amish, and I didn't speak out because I was not Amish...  and I have completely been brainwashed that raw milk is dangerous....

Just as the FDA elements put cyanide in Chilean grapes, it is only a matter of time that "inspectors" introduce something nasty into raw milk somewhere.  To protect the food supply we need complete separation of food and state.

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Wednesday, May 29, 2013

Laundering Honey and Economic Recovery

Seems there is a traceability problem with imported honey.  Chinese honey has some sourcing/quality issues, and here an article outlines the facts.
In 2001, Chinese beekeepers experienced an epidemic of the foulbrood disease that ransacked their hives. They fought off the disease with strong animal antibiotics, including chloramphenicol — a carcinogenic antibiotic that’s been banned by the FDA. As recently as 2010, the FDA confiscated $32,000 worth of imported Chinese honey that was contaminated with this drug.
And, get this! The FDA only tests about 5% of imported honey. So who knows how much more of this tainted honey is being smuggled into the U.S.?
I sincerely doubt that 5% figure, I suspect it is less than 1%.  But either way, there is a solution.  And a business opportunity.

The original delusion was that a govt agency could keep us safe.  What makes that delusional is there is not way to replace the vigilance of 350 million Americans with several thousands clerks.

The legal fiction is the importer is the manufacturer.  Who cares what the "honey laundering" process is, the importer is responsible.  But with people believing the FDA assures quality, scam artists have entered the field to prey on a market whose natural defenses have atrophied for delusional dependence of state intervention.

Get rid of the FDA.  Then if anyone suspects bogus honey, let him initiate an private attorney general and prosecute the malefactor.  The FDA can be captured by the bad guys, but try placating a competitor who is losing sales to a scam artists bad honey.  Let the competitors in the honey business bring the weight of the law down on the malefactors.

The tainted honey is far more of a problem for Chinese than for us.  Export USA honey to China, traceable. So this mean an opportunity to export good honey to China.  JV with Chinese honey producers to show them state of the art.  Money to be made there.

A simple fact is the USA economy is built on an unsustainable model we call capitalism.  Free markets can deliver what is necessary and sufficient if we allow them.  So when the USA system comes down, know that there are plenty of better ways available, within our own history, presently available to deal with problems.

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Monsanto Was Just Protecting Their Patents

As Monsanto is under scrutiny after its inscrutable win in the US Supreme Court, the blogosphere is loaded with paid shills arguing pro-Monsanto.  This is an excellent talking point by one of the shills:

Monsanto Was Just Protecting Their Patents

Now, reading William Patry on copyright wars, his book gets into patents as well.  Another one of those "any patent attorney could tell you..." amazing facts is, although the "natural rights" argument for "intellectual" "property" "rights" is widely cited by pro-IPR elements, such a foundation is no where in the law.  "Intellectual" "property" "rights" in the sense of natural rights has been explicitly rejected by courts high and low in USA.  The only basis for "intellectual" "property" "rights" recognized in USA is positive law, a regime fashioned to benefit society.  No court recognizes "intellectual" "property" "rights" as a natural law.

So when a shill says

Monsanto Was Just Protecting Their Patents

The fact is the patents belong to all of us, not Monsanto, they are a creation of the legislature strictly for the benefit of all, not to anyone's detriment.   Patent law can and has, very often, been tweaked or gone though a major overhaul, just as any man-made accommodation in law. To say Monsanto was protecting their patents plays on this natural rights argument which is in fact absent in the law.

If Monsanto gets any benefit from a patent, it is because society has agreed to it, and for no other reason.  If society disagrees, then the patent law is changed, or better, eliminated.  Monsanto has no say in what we as a society as a whole decides for Monsanto.  (Well, of course they can buy regulatory benefits and protections with the tax dollars they get from subsidies.)

Now you know something is wrong when industry leaders sue their customers, like the record industry.  Or worse, when it sues people who are NOT their customer, like Monsanto does.

That the Supreme Court made a special ruling for Monsanto is nothing new.  You can read the Transformation of American Law 1789-1860 by Horwitz and see case by case, the Supreme Court's job is to protect the government against the people' will and to support big government/big business.

That the Supreme Court ruled 9-0 for a special rule unique to Monsanto is merely the latest in a series of rulings you can trace back to 1789.  It is how the USA works.

In fact, if you want an excellent overview of law in USA (as a consumer thereof), I'd recommend Patry's book on Copyrights, and Horwitz's book on law.





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Tuesday, May 28, 2013

The Top Twelve Billionaires in Hong Kong

And that is billionaires in US$.

Interesting list...   of the top twelve -

One made it in utilities, power and light...

Eight made it in property development...

Three made it in apparel...

And one made it in movies...

I know that adds up to 13, but there was a tie for #5...

What is true about all of those areas?  None, except one, involves intellectual property rights.  And in a delightful cosmic pun, the property developers made their billions where no one can own property in Hong Kong (except the Church of England.)

Apparel is notoriously free of intellectual property rights, and so it utilities, but one fellow made it in movies, which of course is in lock-down when it comes to IPR.

Except, not so fast.  That billionaire, the famous Run Run Shaw, is 105 years old.  He made his money back when "piracy" was an accepted business reality.  He just made sure he got the money the "pirates" got by marketing.

This gets to what Bastiat pointed out, benefits unseen.  It is difficult to recommend a change when we who recommend the change cannot tell you what things would look like after the change.  We are reduced to saying "bad things go away, good things emerge."  There is simply no way to predict what free people will yield if given the chance.

But Hong Kong offers a tantalizing glimpse of what could be.  Some elements of America Lost certainly suggest what could have been.  It's not much of a slogan - "Join us, but we have no idea.  Pretty sure it will be better."  On the other hand, in every instance in history, the people with a clear plan (which warrants the violence) always make things worse.

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Women's Dalian Mounted Patrol Under Scrutiny

Slow down... if China ever expects to take a Gold Medal in 3-day eventing, it'll need women who live on horses.  Sure it is just for show, but the competitors from other countries are the super-rich.



Communism may need this ... subsidized women mounted police.    Something delightful about that...

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Monday, May 27, 2013

Mao, Lysenko and Monsanto

Trofim Lysenko was a Soviet fraud whose bogus science led to the deaths of millions.  How can a fraud lead to the death of millions?  When the fraud has state backing.  Lysenko worked in agricultural sciences, and his work is one of those events in history where people stand back and wonder "how could that have happened?'  Well it happens when the power of the state is lent to an idea or person.  This point is missed in the Wikipedia entry on Lysenko, which rather praises him.

Lysenko's theories were extended into China, which led to a most horrible famine.  The Wall Street Journal has an article on a Chinese author who writes of this.
So it was in 1958 as Mao initiated his Great Leap Forward, demanding huge increases in grain and steel production. Peasants were forced to work intolerable hours to meet impossible grain quotas, often employing disastrous agricultural methods inspired by the quack Soviet agronomist Trofim Lysenko. The grain that was produced was shipped to the cities, and even exported abroad, with no allowances made to feed the peasants adequately. Starving peasants were prevented from fleeing their districts to find food. Cannibalism, including parents eating their own children, became commonplace.
Monsanto is USA's Lysenko experiment.

It may seem outrageous to compare Lysenko with Monsanto, since Monsanto actually increases yield and lowers the cost of food, such as it is, to consumers.  But Lysenko had some successes too. That is not the area of clear and present danger.  Like Lysenkoism, Monsanto is heavily subsidized in research, finance and distribution; alternatives to its products face state-backed violence if they manifest.  For example, Monsanto grain fed dairy cows provide milk that is suspicious, while at the same time the law makes raw milk from grass fed beef both illegal and imagined, by school book control, dangerous. Amish get jailed for selling it.

The US Supreme Court recently wrote a Monsanto-specific ruling which makes FrankenFoods the model of agriculture for the land.  Few people understand that all foods are redesigned in some way by hybridization, something quite benign.  Monsanto effects genetic engineering, something quite uncertain.  The game is to genetically engineer say a vegetable whose DNA survives the chemical make-up of the extremely noxious Monsanto product Round-up pesticide.  Not only are you obliged to use the Monsanto grain to yield enough to make enough margin to sell your corn to ADM, you must use Monsanto pesticides to make it all work.  The list of privations from this strategy is amazing for so narrow a field of endeavor.

Here is where the Supreme Court made Monsanto master:  even small farm veggie growers must meet pre-planting to "pin" crops.  Farmers get together and agree as to what will be planted where for wind patterns and bees being what they are, it is very possible for the pollen from one kind of carrot to cross onto another, and the crop yield that season be at variance from what was planted.  Well, when Monsanto DNA shows up in your carrots, you are a criminal for what the winds and bees wrought.

Gregor Mendel explained the benign hybridization and Lysenko took it way too far: if you chill seeds at the beginning of a season, they will grow in cold climes.  And all subsequent seeds will do so as well.  Never mind that the chilled seeds benefit did not happen.  Stalin backed Lysenko, millions died.  Then in China too.

Banking gets into the act by lending at low enough subsidized levels to small farmers to assure at some point they will make a calculation error and lose their farms.  Monsanto wins the land for its product eventually.

We are being set up with Monsanto.  There is no science one way or another regarding the dangers of frankenfoods.  so far it does not look good, but there is plenty to be studied.  The anti-gmo crowd looks to the state to be the arbiter of what is allowed or not allowed, the referee on what science will be funded.  What they are missing is Monsanto and the State are one, unto the Supreme Court.  Even if science were to prove Monsanto products were perfectly benign, the state backed preferences and resultant domination of Monsanto crowds out competition and gives a tiny group around Monsanto the power to direct USA's food, like the Communist parties had, to the starvation of millions.  The problem ain't the genetic engineering, bogus or not.  It is the power concentrated in too few hands.  The problem wasn't Lysenko-ism, the problem was no one could get away from it.

And there is more: criticism of ag products is trending toward criminalization.  Oprah got nailed for criticizing hamburger, but she could afford to beat the beef growers.

Am I saying that Monsanto is organized around an evil plot to starve millions?  No, I am saying like the communist parties, capitalists are quite capable of concentrating so much power in so few hands that mass starvation can result for lack of alternatives, should this tiny cabal make an error, like Stalin's and Mao's crew did.  I am saying that government satraps can and do target political opponents with what tools they have at hand: today the IRS, tomorrow the food supply. In fact, congress recently gave the FDA and USDA new powers to positively secure the food supply chain.  It will be up to clerks to decide what is good or not.  And dissent will be met with IRS selectivity, and the concomitant deniability.  We'll see more public servants pleading the fifth.

Congress will not overturn the Supreme Court ruling.  Science will no longer matter in the debate, one way or another.  No one needs to act, because the activists who are anti-gmo look to the government, which is captured by Monsanto, to solve the problem.  Literally, no one needs to act, Monsanto already has won for their critics will not withdraw their consent to be governed.

Our job now is to keep the family farm alive by patronizing its products.  And chew your food.

Update:  Goodness gracious!  How far China has come since the great famine.  They recently destroyed two shipments of GMO corn from USA for lack of safety clearance.

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Sunday, May 26, 2013

Ocean Freight Lesson

Never Go For Volume, Go For Frequency.  We desire to have the lowest minimum order requirement possible from a supplier, and then cover that minimum order with our customer orders as frequently as we can, ever shortening intervals between minimum orders.  The reverse for exporting is true.

NB: Ocean Freight is almost always charged by volume, the space you take up in the container, and on the ship.

CBM = cubic meter

LCL = less than container load

FCL = full container load

Example:

For lcl we have 2.27 cbm and 100 pounds weight. The shipments is of 100 units of merchandise.  Freight is prox $250.00,  $5000 shipment value, Oakland to Shanghai (link to this page provided below).

*

*
Let’s look at  full 20’ container, which holds approximately 26-28 CBM. In this case the freight is $2050.



*If you note a container can hold 10 times as much as the minimum order.  The minimum is $5000 value, so ten times the volume is ten times the cost of the goods in the 20’ container.  So, a 20 foot would hold $50,000 worth of goods.

LCL   $250 freight for $5000 goods = 5%

FCL 2050 freight $50,000 goods = 4%

It may not seem much expressed as such, but what you often hear is “with a full container you save 20% on freight!” (5% vs 4%)

There are more charges with lcl, such as CFS charges, which are likely to jack up that $250 charge to $420, so let’s compare again:

LCL   $420 freight for $5000 goods = 8.5%

FCL 2050 freight $50,000 goods = 4%

So now the overall charges are more like one-half as much THE RATE with a full container load!

But the error in thinking here is in several areas.

1. $5000 goods and $420 freight equals $5420 C&F cost.

a. This is easier to finance than $52,050 for a full container load.

b. Getting enough orders to cover $5420 in cost is faster than enough orders to cover $52,050 in cost, therefore more likely.

c. Selling through $5420 is faster, and quicker feedback to redesign of each iteration that makes for better sales and quicker turnaround on the next minimum order.

d. Problems are limited to the particular shipment in question, a low cost/value issue.

e. Currency fluctuations are managed easier when the values are lower.

If you are taking a 100% markup, then $5420 is marked up to $10,840. As mentioned above, there are 100 units in this shipment, so they sell for $108.40 each. 

2. $50,000 goods and $2050 freight equals $52040 C&F cost.

$52040 is marked up to $104,080.  There are ten times the units in this shipment, and they sell for $104.08 each.

Do you think, in regards to a specialty item, unique in design, that a price of $104.04 vs $108.40 will make much difference to the specialty store customer, who is looking for new?

It is extremely unlikely. 

In any case, we do not have to guess, we always get enough orders to cover the suppliers minimum before we order, so we can know in advance by the orders we gain.

The extra cost is negligible, and in any event very cheap insurance against buying risky amounts of anything.  An insurance ultimately your customers pay anyway.

But but but...

“The freight on 20’ container costs 80% of a 40’ container ...”

Again, for all ther reasons above, so what? 

Play around with this yourself at

http://tinyurl.com/78sob7t

More on containers: 

http://www.foreign-trade.com/reference/ocean.cfm

email me if you have any questions.

Feel free to forward this by email to three of your friends.