Eight: Ephemera

Misguided Fears: The Electronic Surveillance Debate

There is an interesting commercial on television these days, one advertising security software for the personal computer. The message is that one's access to the Internet may be a window attracting prying eyes. To drive the point home, the advert depicts a computer terminal that suddenly becomes a Venetian blind with someone outside looking in. This is reminiscent of the sinister telescreen in Orwell's 1984--a device, ostensibly for receiving government broadcasts, but also used for surveillance. It's a reminder that the information "superhighway" is not a one-way street--that as one uses the latest technology to access a wealth of data, a wealth of data is simultaneously being gathered about the user, then bought and sold as a commodity, like so much frozen orange juice. According to the paranoids, this is the dawning of a new age of super-surveillance where the government, one's employer, or anyone who can afford it, has a previously unheard of capability for spying. Have we embarked upon our own Orwellian nightmare with not one but several Big Brothers watching us, or is this fear blown out of all proportion? Is privacy really a thing of the past? Although there is cause for concern, let me assure the reader that all attempts to impose such social control will fail for two basic reasons: 1) technology--all technology--has its limitations, and 2) human nature cannot be subdued by external means.

The paranoids, I concede, are not entirely wrong and we would all do well to heed their warnings. What kind of developments have raised such alarm? According to Branscomb, there is an "amazing new array of instruments for acquiring, organizing, and assessing information" (1997, p.451) available to anyone willing to pay. These include computer disks, CD-ROMs, digital audio, fax transmissions, bar codes, electronic "smart cards," orbiting satellites for signal distribution, and so on (ibid pp.451-452). Techniques are even being developed to convert one's DNA signature into an electronic code, information which may then be stored and retrieved instantly (Ostman, 1997, p.70). The foundation of these hi-tech capabilities is, of course, the vast computer network that now blankets the globe, all connected via the Internet. The modern computer is the "brain" receiving and processing all this data, and many people feel that it is getting harder and harder to escape. I would point out, however, that these fears and anxieties seem to be focused on the technology itself, more than the people who use it. Before we give in to despair and, like Chicken Little, convince ourselves the sky is falling, one should realize that all technology has its limits. What, then, are those limitations?

First, technology is amoral. That means it is, and always has been, a two-edged sword that can be used for good or evil. The earliest "technological" breakthrough, in prehistoric times, was the control of fire. Fire can heat one's cabin and cook the food. It can power furnaces to make pottery and bricks, smelt copper, tin, and iron, but it can also destroy everything in its path. Similarly, today's technology can be used for the betterment of humankind or to make this world a living hell. The question is, what should we fear--the weapon itself or the one who wields it? Is the perception of a threat the same as a genuine threat? Former TWA reservations agent Harriet Ternipsede, in her testimony before a House subcommittee, blames the use of electronic monitoring for her stress-related illnesses: "During my 30 years I have personally witnessed how my workplace has been turned into an electronic sweatshop by monitoring" (1997, p.446). The contrasting view, provided by an anonymous field representative for the Air Transport Association, holds that electronic monitoring "is not a manipulative or coercive device. On the contrary, [it] is an indispensable means to enhance employee productivity and quality assurance" (ibid p.447). Who are we to believe?

Second, technology is inefficient. Efficiency is here defined as the ratio between energy invested and useful work produced, and that number is always less than 100%. No machine, device, electronic component, or what have you, can be 100% efficient--there is always something lost. Consider, for example, the modern internal combustion engine. One might think that the smoothly running engine in a brand new BMW is highly efficient, but not so. The power source is the petroleum, its energy is released by burning. Yet only 10 to 15% of the energy goes toward propelling the car. The rest, a whopping 85-90% is released as heat and chemical exhaust (Hewitt, Suchocki, and Hewitt, 1994, p.75). So it is with all technology. There may be some things that are very efficient--a capacitor or computer chip, for instance--but the laws of physics prevent absolute efficiency. Otherwise, we would be able to construct a perpetual motion machine, or a car that gets 300 miles per gallon of gas. Regardless of how advanced technology gets, or what purpose it's put to, it is a tremendous drain on our natural resources. Employers may want to stop employee theft through surveillance, but the likelihood is they are paying more for the surveillance (in terms of money, time, manpower, etc.) than the loss by thieving workers. The government may want to track the lives of all its citizens down to the last detail, but the cost of such information-gathering is enormous. The federal government has long been regarded as a paragon of waste and inefficiency. If it were a private corporation, it would have gone out of business long ago.

Third, technology is temporal. Wouldn't it be nice to have a television guaranteed to work for 50 years, 100 years, or forever? Wouldn't it be nice to own a car guaranteed to last a lifetime? We know, however, that cannot be. Everything wears out, breaks down, becomes obsolete. This is especially a problem with computer technology. That brand new PC is obsolete before it's even unpacked and installed. Anyone who maintains a hi-tech network for whatever purpose must continually upgrade and replace the equipment. Even so, it is always a hopeless race against time. Just as the automobile replaced the horse-and-buggy, and the calculator did away with the slide rule, everything we think of today as being state-of-the-art will rapidly become useless junk.

Sooner or later we must realize that our real future lies in the development of human potential itself, not in technology. For all the latest and greatest in electronic capability, schools are still producing 18 year-olds who cannot read, write, or do math at a college level. The point is, human nature is uncontrollable. Does any amount of electronic surveillance actually eliminate employee theft? Probably not--it only increases the number of people who get caught. And there is always a way to defeat the machine. What the paranoids should really fear, then, is not the latest technology but the malevolent will behind it--the will to spy, gather information, and use it against the unwary. As Jeremy Bentham's Panopticon demonstrates, that tendency is nothing new. From the time of Draco in ancient Greece, to Roman Catholicism in medieval Europe, to Stalinist Russia in this century, every attempt to establish totalitarian control has failed. That's because human beings have an irrepressible desire for independence and autonomy--spiritual, cultural, and economic autonomy. Ultimately, the only way to insure that is through political means.

In a sense, George Orwell did us a great disservice by writing and publishing 1984. As much as I admire the book, it fails to reflect reality in one essential way: it doesn't show us Big Brother's society 50 or 100 years down the road, at which time it would have collapsed like Hitler's Third Reich. In Frank Herbert's science fiction masterpiece Dune, there is reference to something called the Butlerian Jihad--a religious crusade that destroyed every computer and thinking machine in the universe, leaving an inviolable commandment: "Thou shalt not make a machine in the likeness of a human mind" (521). Such a crusade, unlikely as it seems, could someday happen if the paranoids are right and Orwell's vision becomes reality. Electronic surveillance is a concern that must be addressed, but there are other, more deadly forces that threaten our liberties--religious fanaticism, for example. This is especially true in Islamic nations. What exactly does the Christian Coalition hope to accomplish in America? A "Christian" government? A theocracy? If fundamentalism becomes enshrined in law, how will the ruling class enforce its doctrines--through the same electronic snooping now being used for secular reasons? What we should fear, therefore, is not the weapon but the enemy who wields it.



Works Cited

Branscomb, Anne Wells. Who Owns Information? From Privacy to Public Access. 1994. Rpt. in Writing and Reading Across the Curriculum, 6th.ed. Laurence Behrens and Leonard J. Rosen. New York: Longman, 1997. 449-453.

Herbert, Frank. Dune. New York: Berkley, 1977.

Hewitt, Paul, John Suchocki, and Leslie A. Hewitt. Conceptual Physical Science. New York: HarperCollins, 1994.

Ostman, Charles. Total Surveillance. 1995. Rpt. in Writing and Reading Across the Curriculum, 6th.ed. Laurence Behrens and Leonard J. Rosen. New York: Longman, 1997. 69-78.

Ternipsede, Harriet, and the Air Transport Association of America. Testimony before the United States Congress House Subcommittee on Labor-Management Relations. July 23, 1991. Rpt. in Writing and Reading Across the Curriculum, 6th.ed. Laurence Behrens and Leonard J. Rosen. New York: Longman, 1997. 446-448.


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The telescreen received and transmitted simultaneously. Any sound that Winston made, above the level of a very low whisper, would be picked up by it; moreover, so long as he remained within the field of vision which the metal plaque commanded, he could be seen as well as heard. There was of course no way of knowing whether you were being watched at any given moment. How often, or on what system, the Thought Police plugged in on any individual wire was guesswork. It was even conceivable that they watched everybody all the time.—George Orwell, 1984


Electronic Surveillance, Law Enforcement, and the USA Patriot Act

Introduction

You see them everywhere nowadays: video cameras at traffic intersections. These things are geared to work in tandem with the lights—their purpose, purportedly, to snap photos of motorists running red lights. Those light-runners will receive tickets in the mail a week or two later. Of course, it could always be argued, “What’s the difference between a camera taking your picture and a police officer spotting the infraction?” In terms of the end-result, there is no difference. And how many times have we seen someone blatantly run a red light (not just trying to beat the yellow), and wonder, “Where’s a cop when you need one?” With the surveillance cameras in place, the police are always there…watching. I suppose the cameras have other uses, as well.

The fact is surveillance systems are springing up across the United States and their applications go beyond traffic monitoring. According to Parenti, “A survey done last year by the International Association of Chiefs of Police found that 80 percent of police departments use CCTV [closed circuit TV], while another 10 percent are planning to do so” (2002, p.24). In 1998 the New York Civil Liberties Union counted 2397 surveillance cameras in the city, many controlled by police (ibid). In California surveillance systems monitor civic centers in Oakland, San Francisco, and Santa Rosa. Even Virginia Beach uses CCTV to monitor pedestrians on the boardwalk (ibid). While all this raises inevitable questions about expectations of privacy and intrusive governmental power, we might better appreciate the vast range of electronic snooping techniques, all of which are or could soon be aimed at ordinary citizens.

A Shopping List of Surveillance Technologies

Care to purchase your own system? A survey of the latest and greatest can be found in Charles Ostman’s 1995 article “Total Surveillance.” These include: 1) a universal encryption chip that can be placed in every telephone and personal computer so that “the feds can deal with drug smugglers, terrorists, kiddie porn merchants, and other miscreants who use encoded messages” (1997, p.71); 2) intelligent video cameras that do much more than just take pictures; they “recognize faces, motion, and other interesting characteristics” (p.72). The future trend will be toward “content-addressable” imagery that can detect specific items (such as a fugitive’s face) and compare it against a computerized “wanted” poster; 3) biometrics, which is a process of converting biological information into uploadable data, can use fingerprints, retinal scans, voice recognition, and other things to instantly identify anyone. How might this be used? “We can expect intelligent scanning systems will be installed in supermarket checkout lines, lobbies, airports, stores, ATM sites, and so on in the near future” (p.73); 4) satellite surveillance now has the capability of snapping pictures down to two-meter resolution—all from outer space. One U.S. company, Teledesic, has designed a $9 billion global system of 840 geosynchronous orbit satellites, so that “[t]here would be no single area on the planet that could not be ‘seen’ on demand” (p.74); 5) robot spies are unmanned devices, airborne and land-based, that can track an individual or residence from far away. NASA, for example, has the High Altitude Long Endurance (HALE) aircraft that “can stay airborne for days at a time, carrying CCD optical and infrared camera systems” (p.74-75). Modified versions of these things were recently used by the military in Iraq; 6) massively parallel computers are needed to process and store the vast amounts of data generated by all these surveillance devices, and such machines are now being built. According to Ostman, “The Department of Commerce is financing a joint project with Tamarack Storage Devices to develop a photo-refractive holographic data storage system capable of handling hundreds of terabytes…of data for extremely large database processing operations. This is exactly the type of information storage/processing capability required for a nationwide population monitoring system” (ibid); 7) automated voice recognition is a way of maintaining constant surveillance of a person’s phone calls. A “voice profile” is stored in the surveillance system and instantly activated the moment an unsuspecting speaks into the receiver. Telephone companies are making this easier by introducing Asynchronous Transfer Mode (ATM) communications. This means “[v]irtually all communications, including data transmission and business and personal phone calls, will be routed through the same universal communication channel, making the job of listening in much easier” (p.76). All the above, of course, is by no means an exhaustive list of current technologies, but a sampling. Ostman concludes by saying, “For the first time in history, the technology is available to design and implement… a ubiquitous surveillance/monitoring system. The crisis climate created by the media—particularly television ‘news magazines—is being used to mandate this horror. The political will is here and it is being touted as an accepted solution to such problems as crime and illegal immigrants” (p.78). And all of this was six years prior to 9/11—and the Patriot Act.

Impact of the Patriot Act

After the terrorist attacks of September 11th Congress passed the USA Patriot Act, which greatly enhanced the government’s ability to track the movements and communications of all citizens. Not surprisingly, it immediately raised the ire of civil libertarians, for America has a long history of curtailing civil liberties in times of national crisis. According to Kaminer, “John Adams supported the Alien and Sedition Acts, which criminalized opposition to the government (and was used to imprison his political foes); Abraham Lincoln suspended habeas corpus and presided over the arrests of thousands of people for crimes like ‘disloyalty’ (which sometimes consisted of criticizing the president); Woodrow Wilson imprisoned Eugene Debs for speaking out against America's entry into the First World War; Franklin Roosevelt famously and shamefully interned Japanese-Americans during World War II” (2002, p.13). The question is: at what point does legitimate concern for national security turn into blatant political oppression and how might 21st century technologies be used to that end?

The Patriot Act, which is 342 pages in length, makes “both major and minor changes to more than fifteen different statutes. Although many provisions pertain to electronic surveillance matters, many other sections are devoted to money laundering, immigration, and providing for the victims of terrorism” (Lee, 2003, p.371). Electronic surveillance is nothing new, of course. Henderson points out, “Ever since the invention of the wiretap made [it] a reality, the government has justified monitoring certain communications on the grounds that doing so is necessary to properly investigate crime and protect national security” (2002, p.179). It is up to Congress to decide the legality of such matters, and this was made to depend upon the government’s “stated objective.” If the objective was to gather evidence in a criminal investigation, one body of law applied; if the objective was to protect national security, a different body of law applied. Terrorism, however, “proved to be an ‘exception to the general rule’ because both bodies of law governed its investigation” (ibid).

In criminal matters Title III of the Omnibus Crime Control and Safe Streets Act of 1968 (Title III) is the controlling legislation. Wiretapping required a court order based on a finding of probable cause. To obtain a roving wiretap (i.e. authority to conduct surveillance in a series of non-specified sites) the government had to show that the target was attempting to “thwart interception by changing facilities” (ibid). Title III also states that the surveillance target has a legal right to challenge both the probable cause and the conduct of the surveillance prior to it being used as evidence in court.

In national security matters the Foreign Intelligence Surveillance Act (FISA) applies. In the wake of McCarthyism and anti-communist hysteria, FISA was used to spy not only on foreign threats but on Americans with unsavory political views. By the mid 50s, for example, “ ‘J. Edgar Hoover [had] announced to the FBI that the Bureau was authorized to enter private property for the purpose of installing electronic surveillance devices, without regard for surreptitious entry and without prior authorization from the Attorney General.’” (qtd. in Henderson). President Johnson made it even easier to implement warrantless wiretapping, and the Nixon Administration raised it to a whole new level—ultimately resulting in Watergate. Afterward, Congress and the Supreme Court modified FISA, citing a history of abuse, and mandating that warrantless wiretaps be submitted for judicial review.

The Patriot Act did not supplant existing legislation but it did modify it in five “significant” ways: first, it is now easier to use FISA to circumvent Title III. Henderson notes: “This modification has been criticized because it makes it easier for the government to skirt what are supposed to be limitations on permissible domestic surveillance.” Second, FISA courts can authorize roving surveillance (previously they couldn’t). Third, the standard under which FISA pen/trap orders [note: pen registers/trap and trace devices are used to trace incoming and outgoing telephone numbers] can be obtained is lower. Fourth, pen/trap orders now include both wire and electronic communications. Fifth, all pen/trap orders are valid throughout the United States (ibid). Although some aspects of the Patriot Act pose minimal threats to privacy, two provisions are of great concern: “First… facilitating the use of FISA to circumvent Title III…potentially puts nonterrorists at risk of being investigated and prosecuted as terrorists. Second, allowing roving surveillance to be conducted pursuant to FISA may result in the interception of numerous innocent conversations, many of which will involve U.S. persons” (ibid). Even more troubling are such aspects as loss of attorney-client privilege. According to Perrotta, “[Section] 501.3 of the Code of Federal Regulations… allow the government to monitor conversations between attorneys and suspects without notice and without having to obtain a search warrant. The regulations have been defended as a fair and essential tool for helping the government learn of and prevent future terrorist attacks” (2002, p.10). One wonders what other “fair and essential” methods the government might adopt to pry information out of suspected terrorists.

Another area of special concern is enhanced governmental authority to conduct searches and seizures. First, private business records are more vulnerable. The Act “permits the FBI to obtain a court order requiring the production of not just ‘records,’ but ‘any tangible thing (including books, records, papers, documents, and other items) [sought] for an investigation to protect against international terrorism or clandestine intelligence activities.’” (qtd. in Lee). Second, Internet service provider (ISP) records will be more readily available, so that “[t]he result is likely to be a marked increase in subpoenas issued regarding subscribers” (ibid). Third, voicemail is now easier to seize. The Act “removes voicemail from Title III purview and treats it as stored data as opposed to stored wire communications. As a result, it essentially allows police to get voicemail messages with only a search warrant instead of the traditional and more difficult to obtain Title III wiretap order” (ibid). Fourth, the Act circumvents the Cable Communications Privacy Act (Cable Act), which required cable customers be notified when they were under surveillance. The Cable Act “was intended to protect cable subscribers from law enforcement access to information regarding the content of cable programming they view” (ibid). Now, cable customers can be placed under surveillance with no notification whatsoever. Fifth (and this is particularly ominous), the Act authorizes “sneak and peak” searches—i.e. surreptitious entry. This allows federal agents to conduct a legal “black bag job,” with a search warrant, and notify the subject afterward. It permits the government to “ ‘enter a house, apartment or office with a search warrant when the occupant is away, search the property, take photographs and, in some cases, seize physical property and electronic communications and not tell the owner until some time later.’” (qtd. in Lee).

The great fear of the Patriot Act, of course, is that it dramatically increases governmental power. According to Lee, “By enhancing the government's ability to conduct surveillance… this far-reaching legislation severely diminishes critical privacy protections to an ‘unprecedented degree.’” There are also serious Fourth Amendment issues since “many of the new provisions pertaining to telecommunications users and providers are also potentially unconstitutional” and “[a]lthough the Act was designed to address terrorist activity, many of the overly broad provisions may result in surveillance powers applied to large numbers of innocent people” (ibid). And to make matters worse, the Bush Administration believed the Patriot Act didn’t go far enough! In 2002 the government sought even greater powers, which the FISA Court rejected on May 17, and is now under appeal. The American public, it would seem, has reason to fear.

Cause For Alarm

Civil libertarians are part of that old-fashioned breed: believers in the U.S. Constitution—that low-tech, archaic, 18th century document with its troublesome Bill of Rights tacked on at the end. They are especially concerned about privacy rights, implied by the Fourth Amendment’s ban on “unreasonable searches and seizures.” The Framers “…included this protection in the Bill of Rights in response to the common practice of government searches during British rule. British officials could enter and search the homes of Colonists at any time with only general search warrants. The officials often conducted wide searches in order to find those who were guilty of crimes such as avoiding taxes” (Current Events, 2002, p.3). In Olmstead v. United States (1928) Supreme Court Justice Louis D. Brandeis wrote, “The right to be left alone—the most comprehensive of rights, and the right most valued by civilized men. To protect that right, every unjustifiable intrusion by the government upon the privacy of the individual, whatever the means employed, must be a violation of the Fourth Amendment” [277 U.S. 438]. One wonders what Justice Brandeis would make of the following:

Total Information Awareness system—developed by Defense Advanced Research Projects Agency (DARPA)—is a software data-mining tool that “can give U.S. agents fingertip access to government and commercial records from around the world that could fill the Library of Congress more than 50 times” (Swartz, 2003, p.6). To put that in perspective, the Library of Congress has some 18 million books. In a November 14, 2002 column entitled “You Are a Suspect,” William Safire wrote: “Every purchase you make with a credit card ... every website you visit and e-mail you send or receive, every academic grade you receive, every bank deposit you make, every trip you book ... all will go into what the Defense Department describes as `a virtual, centralized grand database.' To this computerized dossier on your private life from commercial sources, add every piece of information that government has about you—your lifetime paper trail plus the latest hidden camera surveillance—and you have the super-snoop's dream: a `Total Information Awareness' about every U.S. citizen” (qtd. in Keuffel, 2003, p.56).
Carnivore and Magic Lantern—tools in the FBI’s cyber-arsenal, the former currently in use, the latter reportedly being developed. Carnivore is the device “law-enforcement personnel have installed at Internet service providers to record e-mail and Web page logs from specific account holders” (Business Week Online, 2001). And, as explained above, this can now be done without notifying the account holders. Magic Lantern, on the other hand, “appears to be several steps beyond Carnivore… [it] quite literally installs itself on a user's computer. The FBI could e-mail this tiny program, disguised as a message from friends or family, to a suspect. The recipient wouldn't even have to open the e-mail to activate the program. As long as it lands in the mailbox, it is capable of sending data logs back to the FBI periodically” (ibid). The purpose of Magic Lantern is to obtain passwords that unlock encryption programs, programs that thwart law enforcement’s ability to uncover criminal activities in cyberspace. Thus far, the actual existence of Magic Lantern remains unconfirmed, but it is the very same technology large corporations currently use to monitor their employee’s computer use.
Natural Language Processing—known as the “Holy Grail” of the intelligence community, it would “enable a computer to comprehend human speech to the extent where suspicious statements can be reliably identified in ordinary spoken discourse” (Sweeny, 2001, p.26). Government contractors specializing in artificial intelligence, such as MITRE, Corp., have received generous grants to develop this sophisticated capability. Once the technology is developed, it “could conceivably be exercised on every voice and data transmission passing through major peering points and Class 4 switches…” then “Combine such a capability with the perfection of insect sized flying robot drones, dubbed nanobots … and the federal government could spy effectively on anyone anywhere and simply deal with all threats to national security directly by force” (ibid). Does this sound like a lot of science fiction? Some computer experts doubt natural language processing can be achieved, others believe it is only a matter of time. The interesting thing is that the federal government has an active role in developing these outlandish capabilities.

In short, the technological capability for intense scrutiny of virtually every U.S. citizen is available, and has been for years. All that’s needed is the governmental will to use it. Some, including Ostman, believe that “will” is already in place: “What do you think is going to be in that secret $350 million National Reconnaissance Organization (NRO) building in Chantilly, VA? Hint: they’re not watching Russia any more” (p.75).

Conclusion

The threat of terrorism is perhaps the greatest challenge the United States has faced since the Civil War. Rivalry with the Soviet Union for world dominance once posed the danger of nuclear annihilation, but terrorism threatens the continuation of constitutionally protected liberty itself. Law enforcement, from local and state police departments, to federal agencies such as the FBI, face the challenge of protecting law-abiding citizens and safeguarding national security, without violating the Constitution they are sworn to protect. We should reflect for a moment on just what that document signifies, other than an arrangement of governmental powers: it decentralizes authority so that no one branch, no one faction, or no one person accumulates too much power. It bans the arbitrary (the word frequently used is “unreasonable”) use of governmental power. Five of the first ten amendments (Fourth, Fifth, Sixth, Seventh, Eighth)—the Bill of Rights—specifically apply to the criminal justice system. Such were the concerns of the Framers. Modern technology, discussed at length above, has provided law enforcement with surveillance tools of such capability that privacy and anonymity could become a thing of the past. Hoover (2002, p.1) outlines four main obstacles facing law enforcement agencies in combating terrorism: technological, logistical, political, and ethical. The latter “include[s] the possibility of racial profiling, the problem of open records legislation and new concerns about infringing on individuals’ privacy and civil rights through new wiretapping laws” (Bennett & Hess, 2004, p.511). What may be efficient concerning law enforcement’s intelligence-gathering efforts could also be highly unethical taking into account the libertarian principles the republic was founded upon. We can only hope that self-restraint underscores the anti-terrorist agenda, and that people like Attorney General John Ashcroft do not destroy the Constitution in the name of saving it.

References

“A Dark Side to the FBI's Magic Lantern; The agency may be developing data-tracking software that can be slipped into a computer without warning -- or a search warrant.” Business Week Online, Nov 27, 2001 pNA.

Bennett, Wayne W. and Karen M. Hess. Management and Supervision in Law Enforcement. 4th ed. Belmont, California: Thomson, 2004.

Cohn, Frederick H., Mohamed Rashid Daoud Al’Owhali, and Tom Perrotta. “Taking on Ashcroft: Attorney for man convicted in embassy bombing wants court to prevent feds from monitoring their talks without warrant.” Daily Business Review (Miami, FL), May 10, 2002 v76 i233 pA10(2).

Henderson, Nathan C. “The Patriot Act's impact on the government's ability to conduct electronic surveillance of ongoing domestic communications.” Duke Law Journal, Oct 2002 v52 i1 p179(31).

Hoover, Larry T. “The Challenges to Local Police Participation in the Homeland Security Effort.” Subject to Debate, October 2002, pp.26-31.

Kaminer, Wendy. “Trading liberty for illusions.” Free Inquiry, Spring 2002 v22 i2 p13(2).

Keuffel, Warren. “The thought police: DARPA's Orwellian Total Information Awareness program will find out all about you--and every other American. How will it interpret this flood of data and what will be done with it?” Software Development, March 2003 v11 i3 p56(1).

Lee, Laurie Thomas. “The USA PATRIOT Act and telecommunications: privacy under attack.” Rutgers Computer & Technology Law Journal, Summer 2003 v29 i2 p371(33).

Olmstead v. United States 277 U.S. 438 (1928).

Ostman, Charles. “Total Surveillance.” Writing and Reading Across the Curriculum. eds. Laurence Behrens and Leonard J. Rosen. New York: Longman, 1997.

Parenti, Christian. “DC's Virtual Panopticon : A CAMERA SYSTEM IN THE NATION'S CAPITAL IS MAKING CIVIL LIBERTARIANS NERVOUS.” The Nation, June 3, 2002 v274 i21 p24.

Swartz, Nikki. “Controversial surveillance system renamed.” (Up front: news, trends & analysis). (Total Information Awareness now Terrorism Information Awareness ) Information Management Journal, July-August 2003 v37 i4 p6(1).

Sweeney, Dan. “INFORMATION WARFARE : Public networks can be tools of war for either a government or its enemies. Here's what carriers must know about electronic surveillance.” America's Network, Dec 1, 2001 v105 i18 p26.


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Explanations for Subemployment

[Note: The term "subemployment" refers to low-wage, low-status jobs that do not pay enough to keep an American family above the poverty line. These are jobs which are held by "the working poor"--minimum wage or slightly above. Even jobs that pay double the minimum wage ($5.15 per hour currently) may be wholly inadequate--after all, a $10 per hour job only amounts to about $20K annually, thus other sources of income are required: multiple jobs, multiple wage earners, and so on. As high-wage manufacturing jobs disappear in the United States, low-wage jobs seem to take their place, as if filling a vacuum. The overall effect of this problem is that the middle class is on the decline, while the wealthy get wealthier and the poor get poorer. The various explanations pundits offer for this phenomenon include the "Lazy Worker" (people lack good jobs because they're too lazy to work), "Greedy Worker" (good jobs leave the U.S. because labor unions and workers in general demand unreasonably high wages), "Ignorant Worker" (people aren't sufficiently educated to obtain good jobs), "Fate" (if people are in difficult circumstances it's up to them to overcome them; if they don't, it's their own fault), "Demand Side" (insufficient consumer spending causes economic slowdowns, and thus, subemployment), "Supply Side" (international competition causes large corporations to relocate their operations to Third World countries), and the "Dual Labor Market" (instead of one American job market, there are two--one for the affluent and one for the "working poor").]


There are seven major causes of subemployment that might be considered. They are, 1) the lazy worker explanation, 2) the ignorant worker explanation, 3) the greedy worker explanation, 4) the demand side explanation, 5) the supply side explanation, 6) fate as an explanation, and 7) the dual labor market. A word or two about all these explanations as a whole—first, there is at least a grain of truth in each of them. For example, there are a lot of lazy people around who would prefer not to work at all. Similarly, there are great numbers of “ignorant” workers who are ill suited for today’s job market. Each of these explanations is based upon some empirical evidence, and people believe in them for this reason. But are any of these explanations a primary cause of subemployment? That is an altogether different issue. Second, I doubt that any one or two of the explanations listed above is solely responsible for the problem. Any one explanation, taken by itself, seems insufficient to deserve the label of “cause.” Third, there is a lot of complicated interplay between the phenomena of the seven explanations. For instance, lazy workers may also be greedy workers; ignorant workers may contribute to demand side problems; those who take stock in the fate explanation may accept the existence of the dual labor market unquestioningly; and so on. Nevertheless, for the sake of clarity I have arranged the seven in ascending order—from the least likely cause of subemployment to the most likely:


The Lazy Worker Explanation

I list this explanation as “least likely” for several reasons. First, laziness is not confined to the poor, the subemployed, or the unemployed. Even people who have great jobs and are financially well off can be lazy as sin (though such individuals will be a minority). Aristocratic values of Old Europe, for example, considered manual labor degrading and ignoble—putting a moralistic spin on it. To this day upper class Europeans refer to the “working class” with thinly disguised contempt. Second, many of the unemployed are individuals who have chosen crime over legitimate work. It’s not that they’re lazy, just that their energies are devoted to criminal enterprise. Third, work of some kind is essential to our lives for reasons other than economic ones. Those who are unemployed (or severely subemployed) commonly have feelings of frustration, depression, and a diminished sense of self-worth. Many people’s sense of identity comes from what they do for a living. To have one’s livelihood taken away is more a psychological blow than anything else. Therefore, with few exceptions, most people will choose to work if they can.

The most compelling argument for the lazy worker explanation involves the “culture of poverty thesis.” The existence of this culture and its practices infuriates conservatives—exemplified by talk show host Rush Limbaugh—who deeply resent the fact that hard working Americans’ tax dollars go to support people who are too lazy to work (even if those exact words are not used, that’s what they’re saying). Limbaugh is little more than a windbag, of course, but he has a point: anyone who is physically capable of working should work, should they not? The classic culture of poverty seems to be the byproduct of Lyndon B. Johnson’s Great Society program—though it’s a bit unfair to blame LBJ. After all, he didn’t invent poverty. The typical welfare household is headed by a single mother, who has any number of children, each one, usually, by a different father. The more children she has the more she gets from ADC, therefore, having many illegitimate children is encouraged. The transient male serves, essentially, as a stud service. Rent is paid by Section Eight, she gets food stamps, Medicaid, and so on. The upshot is, to give all this up in exchange for a job that pays $5.15 per hour is regarded as suicidal. But that’s not laziness—it’s choosing the best option available.

Statistics summarized in Mishel, Table 5.13, refute the lazy worker explanation. The four categories of “hours worked” are a) No Work, b) 1-999, c) 1000-1999, d) 2000+. The last category is considered full time, the previous three, part time or unemployed. If the lazy worker explanation were true, one would expect the percentages to cluster in the first three (away from full time work), but that’s not the case. From 1979 to 2000, for example, the percentage of people not working at all drops from 41.7% to 34.0%, while the percentage of those working full time increases from 21.4% to 28.4%. Since these statistics refer to those living at or just above poverty level, it is hard to accuse them of laziness.


The Greedy Worker Explanation

There are several problems with the greedy worker explanation. First, American wages have scarcely kept up with the cost of living. Years ago most families subsisted on a single income—usually the male “breadwinners”—while women rarely worked outside the home. These days, that is not an option. Husbands and wives both work while the children go to daycare. Second, there is a curious contradiction between the American consumerist economy, which discourages saving and thrift, which insists that people live beyond their means (i.e. on credit), which is constantly producing new product lines and creating demand through advertising, and the notion of “greedy” workers. Even the government expects people to spend foolishly (as though it were some sort of patriotic duty), but how can you do that with little or no discretionary income? Third, what about the greed of the upper class—specifically CEOs of American corporations? According to Mishel et al, income inequality has been growing rapidly since the 1970s in most rich, industrialized countries (2003, p.413). That means the rich are getting richer, the poor are getting poorer, and the middle class is shrinking. Accordingly, CEO and executive pay increases have “soared” from 1989 to 2000—an average increase of 342% (p.214). In 1965 American CEOs earned 26.0 times more than the average worker; in 1978 the ratio was 36.5, in 1989 71.7. At the end of 2000 it was 310.0 (p.213). What’s more, compared to CEO pay in other countries, American CEOs make about four times more than their foreign counterparts—e.g. 2001 U.S. average: $1,932,580; Canada (next highest): $787,060 (p.216). These are the same people accusing their workers of greed!

Fate as an Explanation

The fate explanation of subemployment, in some respects, is less an explanation than an attempt to accept the reality of one’s situation. Historically, what we call “fate” was attributed to mysterious, cosmic forces, and human beings were almost like puppets on strings or players on a stage, unknowingly acting out pre-written parts. Medieval Europeans, concerned about maintaining a caste system, attributed fate to “God’s Will”—as in, kings and nobles were assigned their roles by God, as were peasants and common folk. This thinking began to be challenged during the Renaissance, and later during the Enlightenment. The United States was founded during this period, of course, and the Anything is Possible Credo became very popular. Treating this as a moral principle regarding poverty or subemployment, it has become fashionable in some circles (conservative mostly) to insist that people can overcome poverty if only they try hard enough. To answer this, let me offer the following anecdote: I saw author Michael Moore on C-Span the other day promoting his book “Dude, Where’s My Country?” Moore referred to what he called the Horatio Alger myth—the idea that anyone can go from rags to riches if only they work hard enough. “But the chances of this are one in a million” he said. It has happened, of course. There are self-made millionaires who started with nothing. But the frequency of such occurrences are literally one in a million. The American people have been sold a bill of goods, he said. I think he’s right.

The Ignorant Worker Explanation

Although this is a hot button political issue, the facts do not support the assertion that American workers are under-educated and lacking the skills necessary to succeed in the job market. The most convincing refutation is supplied by Rumberger, who used the GED—spread over six levels—to test the “Education Levels are too Low” thesis. According to his 1976 results, 45% of all jobs required little more than an eighth grade education. Evidently, most job skills are learned on-the-job. Since only 23% of the workforce had eighth grade educations, the remainder of those jobs were filled by the over-qualified—i.e. those with more education than needed. On the other end, 20% of all jobs required some college or a degree, while 32% of the workforce had those credentials. Truth is, in every education-level category (less than high school, high school, some college, bachelor’s degree, advanced degree), there is a surplus of available workers. There are several versions of the ignorant worker explanation, but none of them are very compelling once the facts are uncovered.

The Demand Side Explanation

As we ascend the ladder of explanations here, each successive one becomes more plausible. Explanations that “blame the victim” place lowest on the list, those that blame the economic and social structure place higher. The demand side explanation is the first of the latter, but I still consider it a bit far-fetched. It is based on the assumption of “insatiable demand” for goods and services—an affliction that most people supposedly have. The economy is thus driven by rampant consumerism, as Americans are obsessed with “keeping up with the Joneses.” Problem is, if there is not enough aggregate demand—that is, if the new cars, new houses, new clothes, and latest electronic gadgets are not selling fast enough—a slow down in the business cycle results. This brings on recessions, corporate downsizing, loss of good jobs—and subemployment. Nature abhors a vacuum, it is said, and as good jobs evaporate they are replaced by bad ones. If you think about it, however, the demand side explanation still blames the victim, albeit collectively. It seems to be saying: That’s what you get for saving your money! That’s what you get for having modest demands! That’s what you get for not blowing every cent you make! But this defiance of common sense doesn’t resonate with me very much.

The Dual Labor Market

These last two explanations are the most plausible, in my (non-expert) opinion. The dual labor market as an image depicts not one American economy, but two—one for the haves and one for the have-nots. Although we are not quite to that over-simplified point, modern trends are definitely headed in that direction. The economy as a whole forms a spectrum, and a family’s income may fall anywhere along the scale. Depending on how many children there are, the poverty line is probably in the range of $20,000 to $25,000 per annum (note: this represents the real figure. Official government figures are almost certainly too low). Middle class is usually considered from about $25K to $75K. So long as there is a large and prosperous middle class, the dual labor market theory doesn’t hold much water. Problem is, current trends (mentioned briefly above) are taking large bites out of the middle class. Those who were once on the upper end—such as CEOs and senior executives—are now making salaries above and beyond middle class levels. Those on the lower end (people like me, for instance) may not be losing much ground, but neither are they gaining. And as the cost of living continues to rise, along with minimum wages, the poverty line is snapping at their heels. Slow or stagnating real wage growth—the troubling results shown by Mishel et al—amounts to being pushed back toward poverty. There doesn’t seem to be much the average worker can do about it. Unions have been declining as a significant force in the U.S. for many years. And while I would not discourage anyone from pursuing higher education, there is still that problem of an over-supply of over-qualified workers for the jobs available. Thus, we should take the idea of a dual labor market seriously.

Supply Side Explanations

Throughout most of its history the United States developed, more or less, in isolation. There has always been foreign trade, of course, but the effects on the overall economy were negligible. The two world wars had the effect of transforming the U.S. into a superpower who could no longer afford to be isolated, and an “engine” driving the global economy. Problem is, the American standard of living is much higher than many of its trading partners. Although comparable to other First World nations, it is significantly higher than that of the communist world (what’s left of it), and several magnitudes higher than that of Third World nations. Theoretically, the U.S. is committed to laissez faire—free market trading. This has resulted in trade deficits, especially with Japan, imports dwarfing exports. This has a dampening effect on our domestic economy, the best example being the auto industry. The more foreign cars we sell in the U.S., the harder it is for companies like Ford and General Motors to compete. As the USA opens itself up to unrestricted global trading, with treaties like NAFTA leading the way, another phenomenon is exacerbating the plight of ordinary workers: merger-mania and the rise of multi-national corporations. The deleterious effects of mergers can be controlled within the borders of the United States by the application of anti-trust laws, but beyond U.S. borders the multi-nationals answer only to themselves. Due to high wage demands in the United States (needed to meet the high cost of living), multi-nationals simply relocate their manufacturing operations to countries where labor costs are dirt-cheap. The aggregate effects of these trends, I believe, are the main causes of subemployment. Unrestricted free trade in a global economy is incompatible with such drastic differences between First and Third World standards of living (and their respective wage demands). Something has to give. Unless the American government takes steps to protect labor—by adopting protectionist policies, for example—good jobs will continue to seep away until some sort of equilibrium is achieved with the Third World. Most Americans are unwilling to make that deep of a sacrifice.


The question the U.S. government has to address is this: is unrestricted global trade worth the hardships that are now being inflicted on the American people? How much “good” job loss will the workforce tolerate? Presidents rise or fall on account of economic performance, therefore “information control” is bound to be the wave of the future (as if it isn’t already!). Clinton, Bush, Gore, and all their ilk can brag about how many thousands of jobs were created under their policies, but what you will not hear is how many were low wage, low status jobs that no president would want his son or daughter to have. Can you picture Chelsea Clinton working the drive-through at Burger King? Without some way of regulating multi-national corporations or the damaging effects of trade deficits, these downward trends are bound to continue.



References

Mishel, Lawrence, Jared Bernstein, and Heather Boushey. The State of Working America: 2002/2003. Ithica, NY: IRL Press, 2003.


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Laissez-faire fails, either as an empirical description of what is or as a normative ideal for what should be, on several grounds. Contrary to classical economics, economies are not self-regulating. History shows that purely private economic forces, left to their own devices, wreak social havoc, distributive injustice, and economic instability, which in turn produce political consequences that are far worse than a preventive dose of economic management. - Robert Kuttner 1996

Protectionist Trade Policies

Since it has been determined that subemployment results from the loss of high wage manufacturing jobs, we now look for ways to curtail the attenuation of America's industrial base. Probably the most obvious solution is the adoption of protectionist trade policies. Conservative politicians are highly critical of such policies and insist upon "unrestricted" trade, yet it should be noted that unrestricted trade is not practiced and never has been. According to Prasch (1999, p.411), the world's trade is in fact closely managed by agreements such as the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT), and by organizations such as the International Monetary Fund (IMF) and the World Trade Organization (WTO), concluding: "The belief that government plays a modest role in a world of free trade is a myth that cannot be abandoned too quickly." I will here examine four aspects of "protectionism": management of capital flows, placement of the tax burden, tariffs, and the use of anti-dumping laws.

Capital Flows: Unrestricted liquidity of capital means that investors--and in international trade this usually connotes foreign investors--can flood a nation's economy with investment capital for short-term gain (as in the New York Stock Exchange). But the problem here is "easy come, easy go"--money that quickly comes in can just as quickly be taken out. Economies that have been destabilized by this practice include Brazil, Russia, South Korea, and Malaysia. Destabilized economies, of course, result in job loss--and subemployment. Although an economy the size of the United States may not suffer the same debilitating effects as that of a third world country, it can be argued that any sudden withdrawal of investment capital will have similar results. In order to prevent this, "New institutions are required to modify the structure and to reduce the quantity of the world's capital flows. Specifically, there needs to be a greater attachment between international capital flows and the projects and nations to which they are attracted... If such an outcome were to be realized, speculative capital movements would be less disruptive to the world's economies. Sudden capital outflows would be less likely to destabilize a country's economic prospects..." (ibid). International agreements (or unilateral laws) should require long term, rather than short term, investment. Multinational corporations will then have much less incentive to move their operations from one country to the next. And this will have the overall effect of protecting labor.

Tax Burden: Mobility of capital has an unseen effect on the placement of the tax burden. That's because taxes can be levied only on factors that are least mobile. Thus, "As capital mobility has increased, the owners of capital have paid an ever-decreasing share of taxes. To shore up declining revenues, countries have been forced to adopt relatively regressive tax schemes..." (ibid). Regressive taxation is what Democrats routinely accuse Republicans of: tax breaks to the wealthy. If the burden of taxation is shifted away from the wealthy then it is placed increasingly on the not-so-wealthy. These "regressive tax schemes" include value-added taxes, user fees, and increases in sales and property taxes (ibid). What this means is, "the tax burden at the federal, state, and local levels is being shifted away from capital and the wealthy and onto private individuals in the middle and lower classes" (ibid). What kind of an effect can this have on the middle and lower classes? In terms of the overall economy, tax reductions have a stimulating effect since they free up money for investment (this is the essential justification for such policies, known in the 1980s as "Reaganomics"). Increasing taxes on the middle class--already suffering from subemployment--is a bit like throwing lead weights on a drowning person. The sensible approach, then, is the restriction of capital mobility, progressive tax rates, and taxation of corporate wealth. [note: corporate taxes need not be burdensome--just comparable to what ordinary citizens pay. American families pay 20%, 25%, 30%, or more as a matter of course. Why then should corporations with billions of dollars in assets be paying 3%, 2%, 1%, or less?]

Tariffs: Tariffs on imported goods are a classic protectionist measure. In the news the last couple of days has been the president's lifting of tariffs on imported steel--a move that is popular in international trade circles but roundly criticized by domestic steel producers and labor unions. These tariffs were scheduled to last three years, but President Bush lifted them after one and a half--purportedly to avoid a trade war with the European Union. It might surprise the average citizen to learn, however, that tariffs once financed the federal government! Prior to the Sixteenth Amendment (which established the IRS), there was NO income tax in the United States. Income taxes were originally a short-term measure to finance World War I, but we've been stuck with them ever since. Before that, the federal government got its money, mainly, through tariffs. Those who oppose protectionist policies are quick to denounce high tariffs, yet there is a contradiction here. The United States still has one of the largest and most lucrative markets in the world, so foreign manufacturers will want to maximize their exports to this country. But to preserve that market the U.S. must maintain its well-compensated work force (ibid). The fact that multinational corporations are moving their operations to countries with cheap labor (Mexico, for example) undermines the "well-compensated" work force. At the same time they want to sell their products here. Prasch explains: "The solution is obvious: charge a 'fee,' in the form of a tariff, to those who wish to sell in this lucrative market but do not wish to contribute to the support of this market by producing their wares here. All firms, American and foreign, if they wish to sell in the American market would now face two choices: they can pay the tariff, or they can relocate here." In other words, a protective tariff compensates for the loss of jobs--i.e. the money corporations save in labor costs are now spent paying high tariffs. International agreements such as GATT drastically reduce these tariffs--from about 40% in 1947 to 3.8% today (Gould and Gruben, 1997, p.7).

Anti-dumping Laws: Anti-dumping laws are another form of protectionism. "Dumping" is the sale of imported goods at prices that are lower than those in the exporting country, or the sale of goods at prices below average costs. According to Gould and Gruben, "Under current U.S. law, any industry can approach the Department of Commerce and the International Trade Commission (ITC) and claim foreigners are pricing exports lower in the United States than at home. The Department of Commerce investigates the case, and the ITC determines whether material injury has occurred. Antidumping duties are imposed when foreign merchandise is sold in the United States for less than 'fair' value. A duty is assessed equal to the amount by which the estimated foreign market value exceeds U.S. price." But the United States, among other nations, has been accused of using anti-dumping laws as a form of disguised protectionism. One criticism involves the use of "price construction" to determine fair market prices when actual market prices are available (ibid). Price construction is an estimate, but one that can easily be manipulated to one's own advantage. For example, if you do not file a tax return with the IRS, what will happen? You will get a letter from the agency that includes an "estimate" of your tax based on income. Problem is, the estimate will not include most legal deductions and will be artificially high--it is a "constructed" tax bill. Similarly, the U.S. has been criticized for under-estimating the fair-market value of imported goods so that it can impose duties. Under new WTO rules, "in constructing fair market value, the arbitrary 8 percent mark-up on total costs for profit and 10 percent mark-up on manufacturing costs for general and administrative expenses are prohibited. The WTO Antidumping Code requires that general and administrative costs and profit be based on the experience of the producer or exporter under investigation. Under amended U.S. law, if such information is unavailable (as may be expected when prices 'must' be constructed), average general and administrative costs and profits of other exporters or producers under investigation, or of other exporters or producers of merchandise in the same general category are to be used" (ibid). One might wonder how any profit-making venture could sell for below costs, even in a foreign market. In many countries (Japan for example), government subsidies compensate for "loss leader" prices. One American company--Wal-Mart--is famous for similarly predatory practices (such that it has been banned from some foreign countries). The operation is simple: when a new store opens up it sells at a loss (with artificially low prices) until small local retailers have been driven out of business. When the competition has been eliminated, prices can be eased back up. This is a domestic form of "dumping." But it is no different from what foreign companies do in their exports to the United States. Newly restrictive WTO policies make it harder for the U.S. to utilize anti-dumping laws to protect American markets (and American labor), but we must ask ourselves if participation in international organizations to such an extent runs counter to U.S. interests. And if we have to resort to "disguised" forms of protectionism, why not just adopt policies that are transparently protectionist?

Globalists might contend that the overall wealth of the world's population takes precedence over the United States and its high standard of living. There might indeed be some humanitarian logic to that assertion, but it is politically unfeasible. Citizens of the developed world simply will not stand for a lowering of their standards of living. In the U.S. the one person held most accountable for the economy is the President. Job loss and economic hardship (that is too widespread) will ruin any president politically. Someone who has just been forced into bankruptcy on account of job loss will not want to hear that his or her suffering is helping poor Mexicans or Chinese. In fact, it would be adding insult to injury. And it may not even be true. As we've discussed, companies who offshore their operations to save money on cheap labor will take steps to insure that labor stays cheap. In many foreign countries cheap labor is accompanied by worker exploitation (e.g. child labor, no minimum wage, few if any safety standards). So protectionist policies may even be seen as a moral imperative. Raising the standards of third world countries to be more in line with developed countries seems a more workable approach than the opposite.

References

Gould, David M. and William C. Gruben. : "Will fair trade diminish free trade?" Business Economics, April 1997 v32 n2 p7(7).

Prasch, Robert E. "Developing the principles of a managed trade system." Journal of Economic Issues, June 1999 v33 i2 p411(7).



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Small Business Solution

How is one supposed to know when a proposal that was meant to curb subemployment has been rejected? One way might be by paying attention to current political
rhetoric. For example, during the boom times of the 1980s one constantly heard about the "entrepreneurial spirit" as being part and parcel of the American Way.
President Ronald Reagan was quite a vocal proponent of this view. Author Michael Moore refers to it as the "Horatio Alger myth"--the idea that anyone can go from
rags to riches if only they work hard enough. Americans--according to the myth--are supposed to be rough-hewn individualists capable of limitless self-invention. All this harkens back to the original pioneer spirit--the sort of thinking that characterized the creation of the United States. It is a romantic (if ultimately unrealistic) notion of the American psyche that Reagan--the Great Communicator--successfully conveyed to the nation during his tenure. It was part of his ideology to "get government out of the way" (through deregulation) so that the people could prosper. And prosper they did--for a while. The "entrepreneurial spirit" that Reagan invoked in his speeches corresponds to the Small Business Solution. We can tell that this "solution" has been largely rejected because one does not hear about it anymore. Fact is, America today bears little resemblance to the republic of 200 years ago, and there are thus several problems with the Small Business Solution:

First, it calls into question the very existence of the problem we are trying to resolve: if good jobs are not available, create your own! Go into business for yourself, become an entrepreneur. Another name for it might be "The Unmotivated Worker Explanation"--i.e. people suffer subemployment because they lack the
motivation to create their own wealth. But this thinking is based on the assumption that each individual, without exception, has the wherewithal to be an entrepreneur if they so desire. That is an unrealistic assessment. Entrepreneurialism is a talent that some possess while others do not. Let's face it: not everyone can own their own business. If they did, where would we get hired help from? If you own, say, a hot dog stand, chances are you're going to need at least a few people working for you. Many people, if not most, prefer to work their shifts and go home, leaving the job behind. Small business owners do not always have that luxury.

Second, small businesses cannot afford to provide wages and benefits on the same scale as larger businesses. Thus, it actually contributes to subemployment rather
than alleviating it (re studies by Gordon, Brown, Hamilton, Medoff, Morissette, Loveman and Sengenberger). One reason may be the profit margin. Even if there is a
comparable profit margin across the board--say 8%--the meaning of this is vastly different for small business than big business. An 8% annual profit for small
business might be just a few thousand dollars, but for a large business it could be millions, even billions. If your corporation is making millions in profits per annum, it is possible to better compensate your work force. What of the argument that small businesses tend to become large businesses? Again we invoke the Horatio Alger myth--occasionally it happens, most of the time it doesn't. Many major corporations started small--Microsoft began in Bill Gates' garage; McDonalds began as a single hamburger stand; 7-11 began as an ice-retailer in Texas. But these are all exceptional, one in a thousand cases. The notion that literally anyone (and by extension, any business) can reap vast rewards is patently false.

Third, small businesses, especially successful ones, are increasingly becoming satellites of large businesses, either through franchise agreements or as contractors.
For example, it is entirely possible to purchase a franchise of Kentucky Fried Chicken, Burger King, Pizza Hut, or just about any fast food place. These things are notorious as sources of subemployment. Technically, you may be a small business owner, but you are trading on the basis of a famous brand name. As for contractors, they stay in business by under-bidding the competition. If contract labor and services were not substantially cheaper, large businesses would have no incentive to downsize or outsource. The fact that they do supports the argument that contractors work for less. And this can only result in more subemployment, not less.

Fourth, what of truly independent small businesses? These things tend to be what we might call "frivolous" enterprises: hair salons, manicure shops, antiques dealers, specialty shops, and so on. They exist on the basis of discretionary spending. There are a couple of problems here: a) in most cases discretionary spending (which is what the government seems to expect) takes away from savings rates, and America has far lower rates of savings than other industrial nations. This means there is less money for investment. We cannot eliminate ALL discretionary spending, of course (nor should we), but it should be reined in somewhat. A less extravagant
and wasteful society will ultimately be a more prosperous one; b) "frivolous" enterprises are fundamentally unstable. In a recession or a depression, these things will be the first to go. It's like the biblical parable of building one's house on sand: soon as a storm comes the house is swept away. One is much better off building on a more solid foundation--that is, in a relatively "recession-proof" business.

During a time of social upheaval and political realignment--such as the Reagan Revolution of the '80s--the Small Business Solution must have seemed like a viable option. But it did not survive the first years of the G. H. W. Bush Administration--a fact that helped make Mr. Bush a one-term president. We now consider it a
proposal that has been rejected, based, as it was, on a host of false assumptions.