America's polity threatened by incomes gap?

History shows that when society advances it does so best when the majority of people enjoy the fruits of economic progress. But can it be said today that the world's leading economy, America, is dangerously ignoring that lesson? Cogent evidence, alas, suggests that it is, but what are the symptoms, dangers, causes and cures? The world has a strong, vested interest, for now, in keeping and hoping that the American economy will remain strong but there is little it can do if weakness within festers like a growing canker threatening to undermine the polity.

The symptoms have been plain for decades and can be summated in the dangerously widening gap between the rich on the one hand and the middle class and poor on the other, a gap that has been accelerating particularly over the last decade. A few stark statistics may concentrate minds. The Forbes List of the 400 wealthiest Americans shows that they have more wealth than half of all Americans combined, while it has been reported that just six of the Walmart heirs have more wealth than one third of all Americans combined. Between 1978 and 2012 the top-earning 1% of Americans' share of the nation's income rose from 7.7% to 19.3%. Put another way, a family in the richest 1% has more than 288 times the wealth of the median family. About 35% of working Americans were earning $25,000 or less and 36% were in the $25,000 - $50,000 bracket.

It is not, however, just a case of the rich pulling away faster but that the poor are worse off in real terms and the middle class have gone nowhere since 1997 and seen inflation-adjusted earnings rise only about 13% since the 1980s. If the Federal minimum wage of $7.25c, set in 2009, (and much lower than many European countries' rates) were raised to $10.70 an hour it would only have compensated for inflation since 1968, so in real terms the low paid have taken a big hit. And it is not as though poor productivity is to blame, for the fact is that productivity has risen about 125% between 1968 and 2010. That means the Federal minimum wage would be $16.93c if it had kept pace with productivity growth. To add salt to the wound, adjusted for inflation Americans' real income has fallen 8% since 2000.

Immense wealth wields immensely disproportionate power, even in democracies, and stretches back to classical times. Left to grow unchecked, it can be socially divisive because like monopolies the plutocrats pulling strings behind the scenes, can and often do act against the public interest. It would be naive to believe that American politicians cannot be disproportionately influenced by the richest 1% of the population, who spend billions of dollars every year lobbying Government to steer new bills through that would be harmful to the public, or prevent other bills so as to maintain the status quo in the Rich's favour. It is, perhaps, a sad reflection on American society that only 40% of the wealthiest Americans support raising the minimum wage and that the Rich's disparate voice in public policy affairs skews the US tax code in favour of the better off.

Why the American model is failing

It must be crest-falling for Americans to look across the Atlantic to Europe to compare their economy with Europe's and what it means for social fairness. At the end of World War 2 America emerged triumphant, militarily and economically. It was the richest nation on Earth with more food and household appliances than it could possibly consume itself, while much of Europe lay in ruins and bankruptcy. Even Britain, although a victorious ally, faced a busted Treasury, significantly degraded infrastructure and interest-bearing debt to America that took about 50 years to pay off. Its only consolation for its costly sacrifice was a moral claim on the world for standing alone for over a year against sinister, vicious Nazi tyranny that threatened to plunge much of the world into unbearable oppression, but morality does not pay the bills. Yet, what do we see today?

Not only do we see the legal minimum wage in most western European countries much higher than in America but much better social security payments and free national health services that would be the envy of Americans. Gross Domestic Product (GDP) per capita is often taken as a guide to national wealth but it says nothing about how the wealth is apportioned. The fact is, many countries, including Britain, have higher earnings per capita for their middle classes than America. So is the American model failing relatively, and if so why and what are the risks?

America's hammered lower and middle classes' relative decline against their European counterparts is evidence for the failure. Inequality of incomes seems to be at least one of the biggest causes, with excessive military spending and staggering tax avoidance, helped by a badly-designed tax code, as runners up. Gross inequality of earnings is disturbing owing to its social implications, which could turn very ugly. Much of America's recent wealth creation has been the illusory kind based on casino-style economics involving much paper shuffling of newly-created financial instruments, like CDOs, to absorb credit-created wealth, rather than creation of tangible goods. The result of the lack of Federal oversight and action in the casino led to the inevitable credit implosion, which this writer warned against in January 2007, for which the innocent poor and middle classes are still paying. The vast profits so created would not be so bad if the money made was invested in job-creating enterprises. Instead, we see much of the profits invested in equities, land and existing real estate, leading to asset bubbles. Worse and more sinister still, the profits made are often secreted in offshore tax havens, where as far as the American economy is concerned it is dead money because the velocity of money circulation is reduced below what it would be.

While there may be no accurate figures on how much has been lost to tax havens, the figures are undeniably staggering, with one estimate suggesting $20 trillion. A large part of that would be accounted for by individual rich persons avoiding tax.* This is not to say that the middle and lower earnings groups are the victims solely of rich people's economic decisions, but it is a significant factor. Much of the lower and middle earnings groups have been hit by changing technology and off-shoring of manufacturing jobs to exploit much cheaper labour costs abroad. That has been a boon for developing economies while keeping down American inflation rates. It has also favourably impacted the American Government's ability to keep interest rates low owing to foreign buying, particularly from China, of US government promissory notes. The pursuit of global trade is the hand maiden of prosperity and prosperity is the surest guarantor of peace, so to that end globalisation of trade has been desirable.

Minimum wage hike will help

 To redress the potentially serious imbalance of incomes, America must act to make the economy fairer and that means tackling wages and the tax system. President Obama's latest call for a $10.10c minimum Federal wage compares with the existing $7.25c set in 2009. While that is topped up by social security payments, such help is also available in most European countries where minimum wage rates are much higher. In fact, the US minimum wage as a percentage of national average pay was only 27% in 2012, lower than any other member of the OECD, except Mexico. The case from the American right is that any rise would be a jobs killer but does experience, particularly elsewhere, support that view?

Evidence undoubtedly shows that minimum wage rises at the State level have caused little, if any, harm to employment. Denmark, for example, has a minimum pay of $20 an hour and yet has been rated as the easiest place to do business for the last three years running. One report  found that by stimulating the economic growth, a minimum wage rise could create jobs, because a worker for one company is the customer of another. Minimum wage workers struggling to make ends meet are more likely to spend in productive ways, thus accelerating the velocity of money in a more beneficial way than the rich would by salting their incomes away in overseas tax havens or simply investing in asset bubbles at home like land and real-estate, an outcome supported my various studies. Even the right-leaning British business journal, The Economist, argues that the minimum wage hike in Britain "has done little or no harm" and "not only has it pushed up pay for the bottom 5% of workers but it also seems to have boosted incomes further up the scale and thus reduced wage inequality." A substantial rise in the Federal minimum wage, therefore, would go far to minimise the risk to social cohesion that gross inequality of incomes poses.

America's economy is deeply mired in Federal Government debt which hangs like a Damoclean sword
over the economy. Arguably, a leading cause in recent years, in particular, is defence spending, which in 2012 soaked up 4.4% of its GDP, or $682 billion (rising to $750 billion in 2013) but as a percentage of total world defence spending it is 39%. This compares with a UK ratio of 2.5%, a country where the minimum wage is much higher than America's. While some US defence spending is useful in creating jobs, especially when export oriented, it seems the case for reducing this burdensome cost is a strong one. Are not these words of the Chinese sage, Sun Tzu, from 2,400 years ago prophetic? "Where the army is prices are high; when prices rise the wealth of the people is exhausted."

The third cause and cure for America's threatening incomes gap must be the issue of tax avoidance. The US tax regime cries out for major reform. A tax code that favours the wealthy over the poor cannot be justified on any grounds, except, perhaps, marginally to encourage entrepreneurial drive. But it is not just the internal tax regime in need of overhaul. International agreement on global tax avoidance is desperately needed to recoup the billions of dollars lost not only to the US Treasury but the whole world. Loopholes in the system not only allow multi-national corporations to use contrived structures legally to avoid corporation tax and sales taxes; it also allows them an unfair advantage over competitors who pay their taxes responsibly. If the vast sums of these multi-nationals were not kept offshore indefinitely then the taxes they would have to pay in the countries where the sales arise would be a welcome boost to growth and social justice. But the solution must be an international one and the time for pussyfooting is over.

*Google my blog: "Corporate tax avoidance threatens your children's future". 
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Is Britain's inventory control lamentable?

Britain's overall logistics practices and performance may lead Europe but when it comes to the key element of stock control: "We are not good at inventory control," opined Mr Zen Yaworsky, director of the British-based Supply Chain Academy.* What that must mean in terms of multi-billion pound losses to the economy one can scarcely imagine but is it a true indictment?

There is, alas, plenty of evidence to suggest that it is. Inventory, for example, has seen off many of Britain's household name retailers and seriously embarrassed many others, leaving them with bare shop shelves, sometimes following installation of a new computerised system that proved disastrous. This is hardly surprising given that 20% of businesses have no Sales and Operational Planning recognizable processes in place, with only 10% having excellent S&OP. Moreover, it does not help when estimated demand for supply chain professionals exceeds supply by six to one. To address that serious imbalance, The Supply Chain Academy, in partnership with Plymouth University, has devised a BSc degree in International Supply Chain Management.

The prerequisite for addressing the inventory control issue is to have enough of the right logistics personnel timely in place and backed by suitable IT systems. Neglect of this, it seems, played a key role in Britain's Ministry of Defence (MOD) losing track of £150 million of battlefield radios, part of the £1.3 billion project Bowman tactical communication system, which provides secure radio, intercom and Internet service. Given the multi-billion pound inventory the MOD must control, such laxity beggars belief, especially as there are serious security issues involved.

Pundits claim that the supply chain is all about inventory. While this is overly simplistic there can be no doubt that it is the most critical part of any big production businesses. Within huge warehouses, for example, the cost of holding stocks can dwarf all other costs combined, especially if much of the stock has to be written off for a variety of reasons or sold at a deep discount. Logistics, with inventory always playing a key role, can even decide the outcome of key battles and wars that change the course of history. As Field Marshal Erwin Rommel remarked: "Before the fighting proper the battle is won or lost by quartermasters." It was a pity for the then German High Command that they lacked Rommel's understanding of logistics. It is no exaggeration to say that Nazi Germany's defeat owed more to logistical problems than anything else.

Inventory control, however, is not just about the present. For it to be truly effective it must also encompass future stock control, and that means forecasting demand, which is where the exercise becomes tricky. There are plenty of stock/demand forecasting programmes on the market, some better than others, but the most effective ones, especially for the food/drinks and clothing industries, are those that react in real time to changes in forecast weather conditions or other germane factors. This is crucially important because a pending heatwave, for example, can send demand for drinks soaring four-fold in a matter of days. Just as it is important to react to pending forces with known consequences quickly so, too, it is critical to forecast more often and forecast quicker, and there is no reason why aspiring to have stock-outs for seasonal goods should be seen as a cardinal sin.

The forecasting element of inventory control becomes more complex still when the entire supply chain is geared to just-in-time (JIT) production and supply. Even if a business has forecast demand accurately, and therefore stock needs, it is of little value if supplies have been disrupted and so fail to arrive in time, leading to lost sales and, perhaps, permanently lost customers. This is precisely what happened following the Japanese tsunami of 2011, which left car and electronics plants around the world idled for want of components, causing multi-billion pound losses in production and profits. The problem was that Japan was a choke point for about 95 products key to these industries and alternative supplies could not be found quickly. JIT-oriented businesses, therefore, must ensure that they have a robust disaster recovery plan in place as part of their inventory control strategy.

Despite these tricky problems, a good stock forecasting programme can typically cut total stocks by a third without harming customer service levels, and in the process achieve paybacks within two weeks. Yet not all businesses need rely much, if at all, on forecasting programmes, and that can apply to certain kinds of grocery retailers. The reason is that the consumer does the forecasting for the supplier shop, but this will only work very well if the sales information gathered on the day is relayed to the shops' regional or national distribution centres (NDCs) by close of business each day to activate the overnight picking for shop replenishment before opening for business the next day. This was the approach the Danish food retailer, Netto, used some 20 years ago with astounding success. All of its 120 shops were EPOS-connected with one NDC so that data on products sold each day was downloaded to the NDC's computer to generate overnight picking and replacement for the next day. None of that, of course, could have been possible without the speed of data transfer that EPOS enabled. Admittedly, Netto had one or two other business model ingredients in its favour, like deliberately restricting its product range to fast movers, and quickly dropping and replacing those fast movers that became slow. The result, as this writer saw at Netto's NDC, was that 90% of all goods stored passed through it every 24 hours. Such rapid replenishment also depended on a fast sortation conveyor capable of sorting thousands of items an hour. It was a business model that came to haunt Britain's giant grocery retailers, as this writer predicted, because Netto, along with other foreign discount rivals like Aldi and Liddle, came to Britain with similar business models and are now taking market share from the leaders.

*www.supplychainacademy.org.uk
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Can Britain afford a world power navy?

In the eyes of Britain's top military brass the legacy of imperial greatness still seems to colour their judgement about the need to maintain a first division world power punch, despite one Ministry of Defence (MOD) remark that Britain was punching above its weight. The fact is that Britain is no longer economically great, in the sense that it can put forth a 1914-style Grand Fleet to keep the world's sea lanes open and play the world's policeman. Two world wars have seen to that.

This crucial issue, affordability, seems to have been deliberately ignored by Britain's First Sea Lord, Sir George Zambellos, in his opening salvo to argue the case for more funds at the 2015 Defence Review, following the 2010 Strategic Defence and Security Review which froze for at last a decade the navy's ability to operate aircraft carriers armed with fighter jets.

It is not, however, just about affordability. It also brings into question whether costly, vulnerable aircraft carriers and nuclear-powered and armed submarines are still essential in an age when the changing nature of naval warfare and geo-politics suggests they are not.

The nuclear-armed nations, including China, now realise that trade is the handmaiden of prosperity and that prosperity is the surest guarantor of peace. The likelihood, therefore, of going to nuclear war is much less and the arms race has been a salutary lesson of how its burdensome cost can change the coarse of economic and political history -- an example, perhaps, of the law of unintended consequences. When America proposed its 'Star Wars' defence shield Russian realized it could not afford the huge expense of keeping up and so was ushered in detente, the breakup of the Soviet Union and the dissolution of the Comecon countries. Russia had ignored the first law of marketing -- give the people what the people want, not what you think is best for them. The people wanted butter, the Russian government gave them guns. China is now in that situation. The Chinese Government knows it has nothing to fear abroad, militarily speaking, but very much to fear at home from Nature's fury and popular unrest within from ethnic revolts and protests against corruption and environmental disasters, a scenario that helped bring down many a Chinese dynasty in the past.

What this says, therefore, for Britain's nuclear-armed Trident replacement plans is that such a costly programme running into £80-100 billion over its 40-year life span, is overkill, cost-wise, and that much cheaper alternatives are still enough to deter potential aggressors.

The First Sea Lord said the Royal Navy needed a "sensible and credible level of scale" but what is sensible and credible, and perhaps more importantly what is affordable? "Make the Royal Navy 'un-credible' and we cease to be a first division player," he said. His mindset, however, seems to be stuck in imperial times, when the British Empire had many colonies to defend and therefore a more plausible case for maintaining a Grand Fleet. While it is still essential to provide adequately a navy to help keep the sea lanes open, by far the most crucial role it has today, the changing nature of the socio-economic environment no longer warrants aircraft carriers, which are state-on-state warships.

Here is what some of Britain's defence chiefs said back in 2010. The then outgoing Chief of the Defence Staff, Sir Jock Stirrup, argued that pressing ahead with two carriers would skew Britain's defences because of the huge expense, which over 10 years, with running costs and aircraft, would reach about £35 billion, about the size of the black hole already in the incompetent MOD's budget, whose ideas on inventory control were clearly not its forte. Sir Jock added that "the carrier programme is worrying most of all because of its impact on the rest of the Royal Navy, which could see the number of surface ships fall. Another MOD official opined: "Almost everybody in the navy sees the calamity of this, except the people in the top half of the service." Another senior military figure added: "We should never have bought them in the first place. We've got better ways of spreading our money. We could have bought more frigates, more money for cyber, more special forces. It's £5 billion of lost opportunities."

To the point that aircraft carriers look set to follow the battleship into oblivion owing to the changing nature of naval warfare must be added the high risk/high cost ratio of carriers. These capital ships are significantly vulnerable to just a single, long-range missile from China, for example. Just as at the battle of Midway in 1942, which took only 12 bombs to sink four front line carriers, a battle that changed the course of the war in the Pacific, so today it would take only one missile to sink a £3 billion carrier, all its 'planes and the loss of over 1,000 sailors.

Britain can still be a credible nation with a credible navy but it does not have to be, and should not be, at an incredible cost. Just as naval developments change the navy's raison d'etre so, too, do economic developments impact the service and it is the latter that must be given greater heed. Britain's economic condition, while apparently improving, is still weak and its people's simmering discontent is rising. Millions of hard-working people have seen their savings and pensions enfeebled by casino-style economics fuelled by rapacious, irresponsible banks, whom Thomas Jefferson presciently described as "more dangerous than standing armies." Charity run food banks are sprouting up nationwide as social security cutbacks begin to bite. Government under-investment at home is being exposed by the recent flooding, which some sources estimate will cost over £1 billion, while it has been suggested that the Environment Agency is short of £0.5 billion a year to do essential flood defence work. The National Health Service, that most prized asset in a civilized society, is in danger of financial collapse.

These and many other pressing social issues show the great care needed to balance the Government's call on its public purse to deliver best value for money. The armed forces cannot reasonably plead for special case ring-fencing. Even less can it convince the people to buy sustainable navy notions based on outdated ideas that hark back to imperial times.
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JIT shipping costs face price hike threat

Shipping insurers will have good cause to feel weak-kneed if a Tokyo court case against Mitsubishi Heavy Industries, brought by Mitsui OSK Lines, succeeds and which by extension could force a rethink of just-in-time (JIT) shipping issues. The case concerns the loss of the MOL Comfort container ship in the Arabian sea last July on a voyage from Asia to Europe, the biggest loss in container shipping history. The reason for concern is that a successful claim would far exceed the loss of a ship and its cargo because it could open the floodgates to thousands of other claims related to the 2008-built ship which was loaded with 4,382 containers.

The MOL Comfort was built to a new design , along with six other sister ships in the Mitsui fleet, and Class NK inspection of these found "buckling type deformations" on the bottom shell plates. These ships were the first classified by the Class NK to utilise ultra high strength steel with a yield of 470 MPa (the unit of stress pressure) in the hull structures to reduce the steel weight of the ship by avoiding extreme plate thickness. The sister ships' hulls have now been reinforced to twice the level required by Class NK.

Included in the claim will not only be the cost of strengthening six sister ships made by the same shipbuilder, it will also include all the consequential losses of action having to be taken to fulfil the JIT contracts related to the lost containers. Ordinarily, the loss of even a large cargo ship would not raise eyebrows much but the MOL Comfort loss could prove a huge exception with ramifications far beyond the shipping insurance circles. For a start, Misui will be claiming compensation for the cost of strengthening its six sister ships. On a much greater scale will be the claim for all consequential losses involving action having to be taken to fulfil JIT contracts owing to the lost containers. One Japanese electronics giant, who reportedly lost six containers, had to upgrade its factory output to airfreight the entire replacement stock to Europe at considerable cost or otherwise fail to fulfil its contract. This company would not be alone in doing whatever it took to ensure its supply chain commitment was not broken owing to the MOL Comfort's loss.

Insurers could be in for another shock. Cargo insurance underwriters normally work on the value of a container's contents of around US$50,000 but many of the Comfort's containers would have been packed with high value consumer goods and these would normally be valued at selling price rather than cost price. The Japanese company which lost six containers reportedly valued the contents of each of its containers at $450,000. The cargo losses, therefore, will far exceed the $66 million hull and machinery policy, and the latest estimate for claims points to well over $500 million.

The loss of the Comfort is a warning shot across the bows, for insurers, the shipping lines and their customers. Depending on any future shipping loss claims, it could also force the trend to re-shore outsourced manufacturing to the Far East back to Europe, a trend that is already underway for a host of reasons. The insurance risks will rise, and consequently premiums, because container ships are becoming ever larger, the latest now able to carry over 18,000 TEU 20 ft boxes. There are, of course, economies of scale from growing bigger that would bring down unit shipping costs but the downside would be the crippling losses stemming from sunken leviathans filled with high-value consumer goods which could ultimately run into many billions of pounds in payouts per ship lost.

It would be wrong to finger the causes of Comfort's loss, which in all likelihood may never be known, but as in so many losses at sea there is usually a combination of factors. The weather the Comfort contended with was rough, but not so bad that it should have broken the back of a modern container ship built by a reputable shipping yard. On possible causes the smart money is on the longitudinal stresses  induced by deliberately under-declared container payloads, a practice which shippers routinely refuse to take seriously. Compounding this shame is the very common sloppy container packing practices. Without accurate container payload data and responsible container packing it is impossible for dock cranes to load ships so that they have a safe, loaded profile In this respect the IMO may have cause to regret its decision to water down amendments to SOLAS regulations which would have made container weighing at all ports mandatory. It was a great missed opportunity and, perhaps, a glaring case that when money and safety issues clash it is money that prevails.
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Britain's trawler fishing shame intensifies

Fishing remains the most dangerous occupation but the financial rewards can be high. It reflects badly on the industry, therefore, when exploitation of migrant workers on board, many of them Filipinos, is so bad that it equates with modern day slavery. Back in September 2010 this blog site commented on the scandal of Irish fishing vessels using migrant labour, often without pay, and subject to intimidation, including beatings.* Then, on October 2013, I highlighted slavery in Britain's food supply chain, again involving vulnerable foreign labour cowed by threats and beatings from their gangmasters.

Since then the plight of migrant fishermen has worsened, if reports in Britain's Sunday Times are any guide, and there is no reason to suspect otherwise. There is now a wide-scale police investigation into the alleged systematic abuse of migrant fishermen on board Britain's trawlers, many of them scallopers. A probe begun in 2012, involving over 150 police officers scouring the English and Scottish coasts, led to at least 50 suspected victims, mostly Filipinos, being discovered, according to the Serious Organised Crime Agency, and the policeman heading the investigation described that figure as "the tip of the iceberg."

Ten years have passed since the shame of 23 Chinese cockle pickers drowned in Morecambe Bay but the problem of exploited migrant labour has only worsened. Matters may improve when the Modern Slavery Bill is enacted to address the problem but there are no guarantees. It is essential, therefore, that the public should monitor the issue and if little changes then they should consider invoking the ultimate weapon that all boardrooms fear most of all -- concerted, sustained consumer boycott, and the first target should be the scallopers.

It would be a tragedy for all honest fishermen if such action was needed. They have wives and children to support and mortgages to pay and arguably Britain's fishing industry has suffered enough contraction dating back as far as the Icelandic cod wars of the 1970s. But they should remember that it takes only one rotten apple to sour the whole barrel so it is in their best interests to report any suspicious activity involving foreign, migrant fishermen.

Retailers could also help, including top restaurants who sell scallops at huge mark ups. So far, according to the Sunday Times, they have not been cooperative in revealing the names of their dredged scallop suppliers and details of what checks they carried out to ensure workers for those firms are not exploited. Certain TV celebrity chefs with fish restaurants were also uncooperative.

The Filipino authorities could also make a useful contribution to rid the seas of slave-like conditions. The Philippines are by far the largest overseas supplier of merchant seafarers but often the local recruiting agencies trick the potential seamen with adverts for 10-month contracts on container ships paying seven times the average Filipino's monthly income of £126. Job applicants have to pay a £600 deposit and cover their own air fares of about £300. In many cases they would have to borrow the money from the recruiter, with interest, but there would often be no intention of providing work on merchant ships. Instead, migrants would be diverted to work on trawlers once in Britain, where the risks are much higher and life-preserving clothing and equipment not provided. Such a cavalier attitude by skippers would be a blatant breach of Britain's health and safety law.

These local recruiting agencies should be put under 'heavy manners' as Jamaicans would say, including heavy fines and a ban on trading. The same harsh treatment should be meted out to trawler skippers and their owners found guilty of labour abuse, including custodial sentences and forfeiture of vessels.

The problem of migrant labour exploitation on trawlers is a recent one and perhaps would not have arisen so easily, if at all, had their never been the system of no catch, no pay for the fishermen. This has helped to diminish the pool of British trawlermen, even though when catches are good the pay is high. Foreign migrant fishermen, however, would expect a regular, fixed monthly income whether or not there were any worthwhile catches. When catches are poor this could only encourage skippers to refuse pay, a common enough accusation levelled against them, along with beatings and 22 hours work a day. Migrants' passports would also be kept from them, a common ploy used by land-based human traffickers, to prevent escapes and engaging help from the authorities.

The level of deprivation migrant fishermen suffer is painfully long, even stretching to denial of medical help on shore. It beggars belief that pursuit of greed among trawler skippers and owners in a developed, civilized country could exist and thrive through lack of condign punishment. Consumers, especially of scallops, should put the industry under notice to clean out their Augean stables of loathsome practices before there are any more Morecambe Bay tragedies.

* Google my blog: "Ireland's shameful role in migrant fishermen exposed."

Helpful organizations.
www.fishermensmission.org.uk
www.missiontoseafarers.org
www.apostleshipofthesea.org.uk
www.itfglobal.org
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China's migrant sorrows must be addressed

Parting is such sweet sorrow, the saying goes, but it also could be very much more and all of it potentially harmful. Nowhere, perhaps, is this more evident than in China where rapid industrialisation is undermining family bonds with incalculable consequences. It could even encompass retrograde logistics, leading to more environmental degradation and serious health issues.

China is a big country, with most of its industrial regions clustered around coastal cities. Logistically that makes good sense for an export-oriented economy that is also heavily dependent on imports. But the success of that logistics model depends on 262 million migrant workers toiling long hours hundreds of miles away from their family homes and children, left behind for relatives to look after. The primal longing of those parents forced to seek work far from home is beginning to threaten China's socio-economic fabric on an unprecedented scale.

It is estimated that about 157 million mothers and fathers are separated from their children, whom they typically see only once a year for 10 days during the Chinese New Year. Some 80% of those migrants, it seems, feel inadequate, guilt and anxiety. This reflects on their work through lack of commitment to their employers, while nearly 40% report making frequent mistakes on the job. Poor product quality is one of the main reasons cited by foreign customers driving them to re-shore their outsourced manufacturing from the Far East back to their own or nearby countries. Such a trend could have serious repercussions for China.

To the product quality issue, however, must now be added a logistics problem. Parental anxiety over their separation from their children accounts for half of the typical 15% annual labour turnover rates in factories, which adds to product quality issues. When surveyed, these parents cited the wish to take better care of their children. The result is that factories are now struggling to keep them adequately staffed and so many factories are relocating to the interior to be closer to their migrant labourers' home towns and therefore an adequate labour pool. That is socially understandable but it means more transport, often over long distances, for finished and semi-fabricated components to ports, either for further manufacturing or export. That has implications for more air pollution in a country where an estimated 500,000 die prematurely from breathing problems.

Such air pollution also seriously hits national output. In Beijing and its environs alone the economy loses between US$19 billion and $39 billion a year owing to the effects of PM 2.5 pollutants. This is not to argue that all production deep inland is logistically harmful in an environmental way. The new rail route from Chongquing that passes through Kazakhstan and Poland to Germany will help companies like HP to slash costs and air pollution. The fact remains, however, that 90% of all foreign trade is sea-borne, the cheapest of all transport modes and least polluting per container moved. There is also still plenty more to go for in cleaning up shipping's foul emissions, particularly sulphur, something now being rectified.

Neglect the children, risk the future

If China's migrant anxieties are not properly addressed then the outlook for their children's future, and ultimately China's social stability, looks grim. Already the estimated 61 million children growing up separated from their parents, making up 20% of China's youth, are dropping out of school in record numbers at very young ages, despite being required to stay in school until 15. A study also shows that sexual abuse by teachers and relatives is also a problem, exacerbated by drug addiction and other criminal behaviour.

These left-behind children usually suffer from trauma and don't do so well ate school. Many parents worry that their children will spend too much time in internet bars exposed to the dark side of the Net. China's greatest asset is its industrious, intelligent people and the people's greatest tool is education. The State, of course, realises this but is some if its actions stymieing its efforts? Many migrants would like to take their children to where the work is but feel there are limits on what kind of life they can give them in the cities. The main culprit is Lukou, the restrictive residency system that means if parents don't have urban residency cards rural children cannot attend city schools without paying exorbitant fees. These fees could be seven times what they would be back in the migrants' inland home towns.

Abolishing lukou could help thwart the build-up of serious social issues. Another is much more direct state investment in education. If money is perceived to be the problem there are solutions. Not least would be the savings that could be made by slashing China's soaring defence bill. Since 2003 China's military budget has soared from $30 billion a year to $120 billion. China has nothing to fear abroad, militarily speaking. The world is too interconnected by trade and finance to make war a feasible hand maiden of foreign policy. This is not to argue that China should not have a military force befitting its size and overseas interests, mindful as it must be of past humiliating defeats over 200 years caused by an ineffective, cohesive defence force. But China should recall the words of one of its illustrious sages, Sun Tzu, 2,400 years ago: "Where the army is prices are high, when prices are high the wealth of the people is exhausted."

If China ever needed an object lesson on how eschewing militarism makes great sense it need look no further than across the China Sea to Japan. Utterly ruined by war in 1945, Japan vowed to abandon militarism for pursuit of trade and succeeded spectacularly at giving the people what they yearned for. China's greatest fears are all internal, neglect of which will only lead to bigger problems. Money spent wisely now on social issues and preparing for inevitable natural disasters, rather than military spending, will likewise satisfy the people's yearnings which they most assuredly deserve. There can be no more potent and truer sign of a great nation in the waiting.
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Warehouses risk energy crisis without changes

Rising energy costs are now so worrying that according to research by Energy Works 98% of those in the UK industrial sector, including warehousing, will not meet their growth targets, while 8% are now considering staff cuts to save money. Just as concerning is that 88% of UK businesses are worried about the security of their energy supply. This follows recent warnings by OFGEM that the UK generating capacity is nearly at full stretch. Given the planned closure of some coal and nuclear power stations, OFGEM is warning that spare capacity could fall from today's 14% level to just 4% in three years, with a risk of 'brown outs' and 'black outs' starting in the winter of 2015-2016. The threat of energy inflation to UK competitiveness is another big worry seen by 90% of UK businesses.

The paradox is that the means are available to cut the energy bill sharply through modest and often financially incentivized investment and while 51% are aware of energy-efficient LEDs, for example, 87% have yet to make the transition. This is all the more curious because, as the research shows, 72% of industrial firms were loath to install clean technology because they believed the initial outlay was too costly and that lighting suppliers were viewed with suspicion when it came to their claims on energy savings, according to findings by the Britain's Carbon Trust.* The facts, however, belie these sentiments, so what are the facts on warehouse energy-saving investments?

Before looking at energy-saving means, however, a look at how big the cost is should concentrate minds to consider action now, rather than, as in Britain, wait until the Energy Act, 2011, enforces warehouses by 2018 to comply or risk closure because their energy proficiency certificates are at or below F or G ratings.

According to US power outfit, Madison Gas and Electric, energy costs can account for as much as 15% of a warehouse's operating budget. A report by Touchstone Energy estimates this can reach as high as 10% of total revenue. In cold stores the energy bill is typically between 25% and 30%. These estimates, of course, will vary from country to country because energy costs vary widely and not all users will need lots of heating throughout the year.

LED lights show the way

If there is one area of warehouse energy costs that almost invariably causes greatest concern it is lighting, which typically accounts for 70% of total energy consumption. For many years lighting devices like dimmers and sensors activated by personnel movement and daylight changes have helped cut costs but now advances in lighting technology, particularly LEDs, are not only drastically cutting energy costs but also maintenance and repairs, as well as improving light quality and cutting accidents. Poorly distributed light and excessive glare from certain lamps can affect 60-year old forklift drivers far more than 20-year olds because they need six times as much light to discern objects clearly.

So what kind of returns on lighting investment can be expected and what investment incentives are available? A programme of site energy surveys commissioned by the Carbon Trust confirmed that quick returns on no and low-cost actions can often provide cost savings of 10% to 20% with a further 10% to 55% per year savings achievable with simple payback periods ranging from one to six years. This could translate to an annual saving of over £200 million for Britain's warehouse sector. To ease the pain of investment in energy- saving lights, the Carbon Trust offers zero per cent interest loans of up to £100,000 for up to four years and will conduct free site surveys to highlight where savings can be made. Other UK government incentives include the Enhanced Capital Allowances which enable businesses to buy energy-efficient equipment using a 100% rate of tax allowance in the year of purchase, provided the equipment is on the Energy Technology list.

There is, however, an alternative that does not involve any cash investment in LEDs. Energy Works, for example, says any industrial firm can take advantage of their free LED retrofit in return for a percentage of the energy savings made over a typical period of five years.

Given the importance of lighting to warehouse energy costs, any stores lit by 250W or 400W SON or metal halide lighting should be considered for a change, and most warehouses appear to use this form of lighting. If such fittings are replaced with fluorescent T5 luminaires they will not only give a better light output and consume less energy they are also amenable to automated controls, such as PIR motion detectors or daylight controls, without any re-strike concerns. If installed with automated controls, T5 consumption costs could reduce SON energy costs, based on 10 hours a day, five days a week, from £1,120 worth of electricity per year to just £220.

The moral imperative

In ambient warehouses the second highest energy cost after lighting is space heating and the worst place for heat loss is usually the loading bay. This is so because frequent traffic movements by lorries and forklifts encourage an open door policy in all weathers. A simple solution that has been available for several decades is the rapid roll PVC door, to which have recently been added insulated slatted versions moving at up to 3 mt/sec and secure enough as an external security door. Another heat loss area is the loading dock where the air gap between docked lorry and open door is excessive. Inflatable dock shelters would solve that problem. Most leading loading bay equipment suppliers will offer a free energy audit when quoting for equipment, which in many cases would show a door payback period of a year or less.

Quite apart from improving warehouse profitability through energy reduction programmes  there is another, incalculable benefit for all mankind. Britain's warehouse sector is responsible for about 10.2 million tonnes of CO2, or 3% of total UK emissions. Research shows that the sector could potentially achieve a 16% cut in emissions mostly form lighting and heating. All around the world asthma rates are soaring among non-smokers and air pollution is top of the list of usual suspects. Where there is no suspicion, however, is that air pollution is now a leading cause of lung cancer. London's air quality is often much poorer than EU-set safety limits while in China at least 500,00 people die prematurely from air pollution every year. In northern Europe alone an estimated 50,000 a year die from cargo ships' sulphur emissions. There is, therefore, a moral imperative for all to be more energy conscious.

*www.Carbontrust.co.uk
LED manufacturers:
www.ecolightinguk.com
www.ecotroniclighting.com
www.tamlight.co.uk
www.HarvardEng.com (wireless controls)
www.MHAlighting.co.uk
www.energyworks.com
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