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Graham Corp. cuts payroll

By Billie Owens
Oct 2, 2009, 6:30pm

Roughly 15 people lost good-paying jobs this week at Batavia-based Graham Corp.. The across-the-board cuts were a necessary belt-tightening measure in the midst of a lackluster economy.

That's according to Vice President and Chief Financial Officer Jeff Glajch, who confirmed the rumored layoffs this afternoon.

"I feel sorry for the workers," he said. "But we needed to adjust to the marketplace in this sluggish economy. Things aren't getting worse, but they aren't getting better either."

It's the second round of job cuts this year. Slightly more than 10 percent of the engineering and manufacturing company's workforce was eliminated in January. 

That amounted to about 30 jobs at a time when the company was facing a 40-percent loss in revenue, the CFO said. Nonetheless, in May it received Empire Zone tax incentives.

It is the rare, if not the only, publicly traded company in Batavia, with offices and a production plant at 20 Florence Ave.. It has been in business since World War II.

It engineers and makes vacuum and heat-transfer equipment that has broad applications, from making synthetic fibers, petroleum products, electric power and fertilizer, to processing food, pharmaceuticals, paper and steel. Half its good are sold abroad.

Things were going great guns for Graham by mid-2008, when it made Business Week's list of the fastest-growing small companies.

China and other foreign markets' thirst for oil in 2007-08 created a robust demand for Graham's goods. Orders placed then continued to have a postive impact on the company's finances over the first three fiscal quarters of 2008-09 (the company's fiscal year runs April 1 through March 31).

At its peak, it had more than 300 employees and its stock was trading at a high of $50.98 a share. Its stock closed today at $14.68 a share.

As with other industries, the orders tapered off and the forecast today is a question mark. Looking ahead, the CFO said he hopes there won't be pink slips come December, but "I can't promise anything, we have to wait and see."

Douglas Poole

I really don't believe our economy has settled down. While this is a small number we are still losing jobs. The only sector that has recovered is the large multi-national banks. After they have eliminated as many low level jobs as they can. I will admit I am a Obama fan, but feel cash for clunkers was a joke.
Once again cars are not selling. So it is a one shot help.I don't see it sustaining long term stability.

Oct 2, 2009, 11:32pm Permalink
Beth Kinsley

I was just thinking Dennis that now would be the time to buy. It's not going to stay this low forever. Graham provides goods for many different industries - goods that will always be needed. The economic downturn hurt them but I think they'll come back with a vengeance. I was at an export seminar at GCC a few weeks back and one of their employees gave a very interesting presentation about the company. There's a reason why they've been around so long. My prayers to the employees who lost their jobs. I hope they all get called back soon.

Oct 3, 2009, 10:55am Permalink
darren dewitt

Grahams has lost some really good help this year. I am glad that i still have a job and my heart goes out to those who don't. wheres the stimulus for us?

Oct 4, 2009, 5:46pm Permalink

Mary, I did the math a few years ago.

For one person to afford a small to medium sized house, one car with insurance, filling up the gas tank once a week, and water, electricity, gas, health insurance, including food, basic necessities (shampoo, deodorant, and so on), one pet, and a financial advisor, you're looking at $73,000 to $96,000 a year depending on the area you live in.

Oct 3, 2009, 11:16pm Permalink
Charlie Mallow

Chris, that sounds about right for a middle class life. Keep in mind the average family income is less than half that here. Everyone likes to think of themselves as middle class, the fact is most of us are really the working poor. That doesn't stop us from dreaming that we will be rich one day or fighting against health care, unions or anything else that was designed to help our lot in life. We wouldn't want to be called a "socialist" even though this system has failed the vast majority of us.

Oct 4, 2009, 7:12am Permalink
Lorie Longhany

Good morning, Charlie. I know how you love a good chart and I found a pretty one for you :)…
You hit the nail on the head. The 90% at the bottom believe that they can reach that pinnacle of wealth so they defend the CEO's and the corporations against their own best interests even as the real re-distribution is coming straight out of the middle class and working poor and going right to the top. The average CEO earns 319 times the average worker. In 2005 a CEO earned more in one workday (there are 260 in a year) than an average worker earned in 52 weeks. In 1980 the average CEO earned 31 times more than the workers. Not surprising that the decline of the middle class and massive ascension of CEO's and corporate salaries began with the age of Reaganomics.

Oct 4, 2009, 9:07am Permalink
John Roach

Democrats have been in charge of Congress most of the time since the 1960's. They have had total control many times under Kennedy, Johnson, Carter, part of Clinton's and now Obama.

Maybe it was Democrat tax policy that has hurt us, like it is now under Patterson here in NY. You have no idea how happy I am going to be when Patterson makes me buy new plates for my car.

Oct 4, 2009, 9:14am Permalink
Charlie Mallow

The propaganda machine that drives the working poor to fight against their own self interests is financed by these corporations. Looking back at it, they have created a modern marvel.

The strongest fight against health care comes from people who already receive the "public" option through their retirement or the working poor who believe the company they work for cares enough not to cut them off. That is a special kind of stupid.

Of course, they have also convinced the working poor that those among us without insurance are lazy and good for nothing. These people are even thought of as less than human.

Oct 4, 2009, 10:00am Permalink
John Roach

Right now, many democrats in Congress seem to be worried about their union base. Some D’s in Congress want to put a tax on their hard won health care policies.

If you have insurance, some of democrats say you should have to pay a tax on it.

Maybe they should allow it to be tax deductable again?

Oct 4, 2009, 9:52am Permalink
Lorie Longhany

John, for affordable health care I would be willing to pay a tax on health care security. Right now my husband and I are paying 31% to the CEO's. What do they deliver by way of health care? Nothing. No care, no equipment, just a middle man with all the power to raise my premiums and deny me care.

It is amazing to watch this video that I've posted below and it proves Charlie's point. Folks that were interviewed at the 9-12 demonstration clearly are uninformed. I'm not saying this applies to all the opposition but many have taken up the battle, yet they really don't have a clue what the battle is even all about. It <b>is</b> a modern marvel to convince people to fight against their own self interest, but fight they are. The woman who carries the sign "Bury Obamacare with Kennedy" makes the pronouncement that medicare should be expanded to more of the population. Does she know what side she's even on?

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Oct 4, 2009, 10:23am Permalink

Charlie, you're entirely right.

Middle class is where you can live decently, as like to call it. While you don't have "everything", you have enough money to afford the basic living and insurance necessities, with a said little money to spare.

Mind you (and I'm glad you said family income), those numbers are for one person. The average family has four people and a family pet. The cost of living decently begins to go up.

Company health insurance policies/contracts that include health insurance for the whole family are extremely useful.

I should end this post by pointing out that I'm not a business major, nor am I a financial officer or advisor. I'm a hardcore computer geek. I like numbers.

Oct 4, 2009, 10:35am Permalink
Howard B. Owens

Lorie wrote: "The average CEO earns 319 times the average worker. In 2005 a CEO earned more in one workday (there are 260 in a year) than an average worker earned in 52 weeks. In 1980 the average CEO earned 31 times more than the workers. Not surprising that the decline of the middle class and massive ascension of CEO's and corporate salaries began with the age of Reaganomics."

To which I say, "So?"

When there was a big union fight in Safeway Corp a few years back, one of the union tactics was to decry the "massive' salary and bonuses the CEO of Safeway received. So I did the math. If you redistributed his salary down to every worker, each Safeway worker would have made an extra $.05 an hour, or a little more than $100 per year. Now we'd all like to have an extra $100, but that isn't going to make on whit's difference in anybody's standard of living. This talk of how much CEOs make is both about redistribution and retribution.

If you took away all those big salaries, it really wouldn't help improve the lives of any of us working poor. It would just take away a lot of the motivation for most people to work hard, especially the entrepreneurs who create jobs.

If you go to any protest populated by masses from either the left and the right you're going to find a lot of ignorant people. That's no big news. Propaganda is all about appealing to emotion, not about facts, and proponents of any cause use propaganda to rally the people who pay less attention to the issues so they can get some popular support.

Most Americans viscerally recognize that redistribution of wealth is of absolutely no benefit to them. Even if they don't have aspirations to be wealthy CEOs, they know that if there were no rich CEOs, there wouldn't be any jobs.

There have always been rich CEOs, not just since Reagan (ever here of Rockefeller, Morgan, Carnegie, Ford, Hearst?). The system that creates rich CEOs is the same system that makes employment possible, especially the freedom of choice of employment (something they didn't have in the Soviet Union). It's that freedom that makes most work for most us fulfilling. Lorie, would you rather be an art teacher or work in a state-run factory, or maybe only teach the art the beneficent state says you can teach? (BTW: It's an absolute myth that the middle class standard of living has declined. All classes have improved standards of living since Reagan -- not that I'm defending Reagan's economic policies, just stating an observable fact).

Does that mean these particular Americans are misinformed on health care reform? Maybe. Maybe even probably.

But many on the left are misinformed about health care reform, and/or spread misinformation, because health care reform on the left is always painted as an either-or, two-sided-coin choice. Either you're for reform as Obama has painted it, or you're against reform. There's no middle ground. But the fact is, there is ample middle ground, but nobody's talking about it, because the Obama side refuses to acknowledge that there is a better way to pursue health care reform and to ensure some of the alternative voices are heard.

Oct 4, 2009, 11:11am Permalink
Mark Potwora

Charlie said..Of course, they have also convinced the working poor that those among us without insurance are lazy and good for nothing. These people are even thought of as less than human.

Are you telling us you don't have health insurance..And i never heard that those without are lazy and good for nothing..I have heard that some of those without insurance do so because the choose too because they are young and don't feel they need it right now..Lets not forget the numbers that the pro health care people put out there ...47 million uninsured included 17 million its more like 30 million..and of some of that number is by choice..So we have to reinvent the wheel for a few..So who is really misinformed

All this does is make us more dependent on the government...Maybe if they didn't tax people so much they could afford heath care..
Health care needs some new regulations,but we don't need the government selling health care policy's..My car insurance is too high,should there be a public option for that kind of insurance..How many government jobs will that create..

Has anybody come up with how much this public health insurance with cost the average family of 4...Is it 400,600,800 a month ..They make it sound like it will cost nothing.And that somebody's else's tax dollars will pay for it all..

If this is such a great idea the public option why don't states offer it,better yet let cities and towns offer it..I mean if the city covers its employees with health care why not the city taxpayer..You pick up our trash ,so why not give us health care....

Oct 4, 2009, 12:10pm Permalink
John Roach

I am surprised that a democrat wants to tax the health care of union workers who fought hard for good health plans.

If they are taxed just because the union worker now has a plan Obama says is too good, how long before that “good plan” is taken away to make it fair?

Oct 4, 2009, 12:44pm Permalink
Lorie Longhany

Howard, you are using the "Socialist" paint brush when you ask me whether I want to work as an artist or in a state run factory. I believe in, and have benefited from, our free market and both enjoy and am grateful that I can eek out a very modest living doing and sharing with others what I love. But lets get one thing clear our local small businesses have no resemblance to corporations that have run a muck with greed.

Things have changed over the past 30+ years with the middle class dream and I beg anyone to tell me different. I believe that our country benefits from a vibrant middle class and these figures tell a story of a declining middle class. Growing up, I remember the families in my bustling blue collar village that because of union fought for, living wage jobs were able to buy a home, a car, raise their children (sometimes lots of children), take vacations, go to the doctor and dentist, put food on the table, and actually collect a reward after years of dedicated service in the form of a retirement. Most of these households were headed up by one bread winner, too. Imagine that now.

I know that the problem is more systemic than the disparity between the top of the food chain and the bottom. I also know that this is not the result of one party, although my party is much more worker friendly than the other one. NAFTA, CAFTA, and globalization have sent those good jobs overseas. But again who's benefited? It's certainly not our local small businesses. I'm talking about corporations that set up their offices offshore to avoid paying taxes and who profit from the exploitation of workers that have no union protection -- like we see in the sweat shops in the Northern Marianas. They benefit from the "Made in the US" label (because they are a US territory) while treating their workers like indentured servants, complete with forced abortions and a flourishing sex trade. This is what Tom DeLay has deemed -- "a petri dish of capitalism." If this petri dish is your idea of a model of capitalism (devoid of regulations and chock full of exploitation) than no, I don't subscribe.

Oct 4, 2009, 3:14pm Permalink
Charlie Mallow

Mark, luckily I have insurance. Last year I would have been able to say I had a 401K match as well. It's pretty clear we can no longer base our retirement on the free market and the hope that companies will continue to contribute. I think those who thought we could do away with Social Security have egg in their face now.

I'm sure that Health Insurance will be the next thing companies will cut to be profitable. We know it won't be CEO pay.

I do know a lot of people including relitives who can not afford health insurance even though they go to work everyday. Young and old suffer because of our current system.

Oct 4, 2009, 2:41pm Permalink
John Roach

If companies left the US to avoid paying taxes as you said, would lowering taxes give them a reason to come back?

If they knew from one year to the next what the rules are going to be, would that help?

Oct 4, 2009, 2:55pm Permalink
Charlie Mallow

Howard, The rise in CEO pay is equal to the rise in greed in corporate America. It has become acceptable to toss your employees away for a small increase in profit. Now it is common place in our corrupt system to bail out these greedy corporations when they fail.

Maybe high corporate taxes are the least of my problems. We need the change we voted for.

Oct 4, 2009, 3:02pm Permalink
John Roach

Since the 1880's, people have been saying that. Yet, this is where people want to come.

As for not bailing out companies, Bush is gone. Tell it to Obama.

Oct 4, 2009, 3:50pm Permalink
Lorie Longhany

John, maybe after a health care reform bill passes, which should reduce the cost of benefits, the corporations will come back. Corporations would certainly benefit from lower employee benefit costs.

Oct 4, 2009, 4:18pm Permalink
John Roach

Hope you're right. But some Democrat plans call for more taxes on the "rich". That includes companies and the eveil CEO's.

But, it's corporate tax rates that have to come down along with the cost of government regulation.

No company that I heard of went overseas becuase of health care cost.

Oct 4, 2009, 4:44pm Permalink
Howard B. Owens

Charlie, there is no rise of greed. Greed is as old as the Bible. It's never changed. Never will.

Lorie, I see an inherent conflict in complaining about CEO compensation and believing in the free market. In a free market you have CEOs making 10, 20, 30, 100 times what their workers make. And if you don't have that, you don't have a free market.

Lorie, what happened to Le Roy has something to do with high taxes and over regulation in New York. Most of the jobs that Le Roy lost, and Genesee County lost, they lost to other states, not China. And in many cases, I'm not even sure it was taxes and regulation -- in many cases, from what I've read, it was companies being sold or merged or the natural course of businesses going out of business, with no new entrepreneurs rising up to replace them. The jobs-going-overseas phenomena didn't start until well after WNY slid into rust belt territory. A big reason so many jobs has gone overseas is the rise of big boxes, which is not entirely a free market event, since chains such as Wal-Mart have received billions in tax incentives to help them grow.

As I've said before, the solution to these problems wont' be found in Washington or Albany. Those bureaucratic capitols only know how to make matters worse. The solution will be found in Le Roy and Batavia and Wellsville and neighborhoods in the Bronx and suburbs of Los Angeles. It's going to consist of getting Federal and State government out of the way, reversing the trend toward subsidizing big chains, and every day people making smarter buying decisions and starting businesses themselves. (turning off the TV and getting more involved locally, would help, too)

The more we put our energies into promotion of national political parties/agendas, and worrying about who has power in Albany or Washington, the further we are from a solution.

Oct 4, 2009, 4:55pm Permalink
John Roach

There is a bit of irony in what you say. I remember when Bill Clinton was still a governor. Other governors didn’t like him because of his great skill in getting companies to move from places like New York to Arkansas for the lower taxes and lower cost of doing business.

Oct 4, 2009, 5:14pm Permalink
Douglas Poole

I think the change that has happened is the greed of this new class of CEO's. Even when they were making what would be billions today they felt the need to help their employees. John D. Rockefeller, Andrew Carnegie, J.P. Morgan looked after their workers and also all American citizens. They were the people who started health insurance. Our new class of CEO's were the kids that
beat you up and stole your lunch money.

And while you spout off about the Democrat's being in charge. While they in the White House the Repubilican's have been the majority in the House and Senate for I believe 36 of those years.

This is not just an exercise in futility for me. I stated working full time in high school. Then had the bad luck to receive a tainted blood transfusion. It destroyed my health. We had savings but that goes real quick. All we have left is a house that my wife's Great Grand Father built in 1872. We may lose even that.

And according to conservative logic this is my fault!

Oct 4, 2009, 6:36pm Permalink
John Roach

The Republicans took control of both houses of the Congress during Clinton's term. They lost it in Bush's. That's not 36 years.

For the last 2 years and 10 months,Democrats have been the majority, and we know Bush almost never used the veto. So, while you can blame GWB for all the evils of the world, it rings a bit hollow.

Oct 4, 2009, 7:12pm Permalink
Charlie Mallow

Douglas you’re absolutely right. This new breed of CEO scum grew up watching movies like Wall Street and idolizing guys who outsourced jobs in get rich quick schemes. They are different from the Rockefellers and Carnegies because they destroy, they do not build. The vast majority have not built a new mouse trap, they figured out how to buy and sell people who did. They shuffle wealth; they do not create it (at least here). Howard, if you can’t see a difference in the direction these CEO types have taken and their lust of greed, you are not paying attention.

They rest of you can go back and forth about which party was in power. It’s irrelevant, neither party caught on till it was too late. They both joined in on the bailouts and sold us out.

Oct 4, 2009, 8:03pm Permalink
Bea McManis

Posted by Douglas Poole on October 4, 2009 - 6:36pm

This is not just an exercise in futility for me. I stated working full time in high school. Then had the bad luck to receive a tainted blood transfusion. It destroyed my health. We had savings but that goes real quick. All we have left is a house that my wife's Great Grand Father built in 1872. We may lose even that.

And according to conservative logic this is my fault!

Don't you love that logic. It gets to my last nerve everytime I hear it. Yep, you are right, you chose to be in the situation you are in.

Oct 4, 2009, 8:06pm Permalink
Howard B. Owens

Doug, Rockefeller, et. al didn't start health insurance.

While they all had streaks of magnanimity, they were also commonly reviled as "robber barons" for their alleged greed and exploitation of workers.

Many of today's CEOs are equally magnanimous, from Bill Gates and Steve Jobs to Eric Schmidt and Warren Buffet. All those modern "robber barons" have reputations for treating employees well and giving to various causes.

In any era, there are people of good and people of not-so-good character, and most people are a mixture of both. That's human nature. That's no argument for more government in our lives.

Oct 4, 2009, 8:21pm Permalink
Howard B. Owens

Also, '
And according to conservative logic this is my fault! "

Is not an accurate statement of conservative belief.

The conservative position would be it's not a government problem to solve. That's a big difference.

And not to be indifferent to your difficulties. Just correcting the misstatement of conservative ideology.

Oct 4, 2009, 8:41pm Permalink
Howard B. Owens

I should add, it's not the government problem's to solve outside of the fact that the government screwed up health care in the first place.

Oct 4, 2009, 9:10pm Permalink
Lorie Longhany

I don't know. Pretty discouraging to read the lack of compassion in some of these comments. Douglas makes a comment about his plight and the fact that he may be losing his family home and this is how John responds -

The Republicans took control of both houses of the Congress during Clinton's term. They lost it in Bush's. That's not 36 years.

For the last 2 years and 10 months,Democrats have been the majority, and we know Bush almost never used the veto. So, while you can blame GWB for all the evils of the world, it rings a bit hollow.

John, while you argue which side lost the house of representatives and who has had the majority someone in our own community commented that because of an illness -- something that's no fault of his own -- he may lose the house he lives in. I guess that part must have just went over your head. After all you had a point to make.

Howard comes back with his correction on Conservative values. So glad that you cleared that up -- makes all the difference.

Douglas, time to pull yourself up by your boot straps....if you still have boots. Good luck with that third generation family home issue.

Oct 4, 2009, 10:16pm Permalink
Howard B. Owens

Lorie, I said quite clearly my comment was not an expression of indifference, but we're having a policy and political discussion here. How is one supposed to respond when somebody brings up their own difficult situation to make a point that you feel needs to be corrected. It's very easy to come after me for lack of compassion, but that isn't really a fair manner of argumentation, is it? Doug clearly has a very difficult situation to deal with, but I feel to see how that is a point in favor of bigger government.

Oct 4, 2009, 10:37pm Permalink
Douglas Poole

I know that it wasn't Rockefeller but Henry Ford. Who was also the man who decided he would pay his employees enough that they could afford to buy his cars. Rockefeller gets a bit more trash dumped on him than he earned.He was by no means a saint. They lived lavishly, but they gave a large chunk for medical research. And found Spelman College (for Afro-American Higher Education) and the University of Chicago. That class gave a lot more back then the CEO of today with the multi-million office makeovers.

Oct 4, 2009, 11:29pm Permalink
Lorie Longhany

Maybe there are times when people should come before policy -- even in a policy discussion. I usually don't make these kinds of judgments -- it was just glaring to me.

Howard, I grew up in LeRoy in the 70's. When I left in '78 to join my husband at his duty station there were still plenty of good paying blue collar jobs. In fact in my family I had a brother and a brother-in-law at Lapp, two brother-in-laws at LeRoy Machine. Even my son spent a summer working at Lapp while attending college. Besides those two fairly large employers there were a host of others -- Hirshman Pohle, BOK Plastics, Moffitt Fan, Lawless Container, Continental Can, and more. Although Jell-O and Union Steel Chest were gone there were plenty that moved in and took their place.

Those good paying jobs were LeRoy's economic engine. At 3:30 when those plants let out the living wage paychecks were cashed and spent in the locally owned bars, restaurants and stores. In the summer my friends and I knew that after a day at the municipal pool, we couldn't get across Gilbert St at 3:30 because of the shift change. We always waited until 4:00 when the traffic died down.

The decline in LeRoy came in the 80's. About the same time as laissez-faire trickle down came into fashion. While it may have been taxes and over regulation, somehow I think that there could be an argument that maybe it was the move toward deregulation and globalization and with it came union busting and stagnating wages.

I'm sure that it comes to no surprise that I agree more with Keynesian economics -- private markets with public regulations rather than the Friedman style of privatizing everything, including: social safety nets, schools, public parks, resources -- everything sold off to the highest bidder in the hunt for profits. No regulations -- no OSHA, no child labor laws, no environmental protections. How'd that Wall St deregulation work out for all of us? With the highly complex derivatives and credit default swaps it's apparent that someone has to guard the hen house from the fox. It isn't socialism to expect living wage jobs. It isn’t socialism to expect that someone is minding the store.

Oct 5, 2009, 1:00am Permalink
Douglas Poole

Very good Lorie. It really is sad to see how Le Roy has declined. When we were married in 1979 my wife was making $12 per hour in manufacturing. Now you have trouble finding a minimum wage job there. This summer she ended up at Darien Lake. There really nothing else left. Over a dozen empty stores. Lots of people are praying for Walmart. Will it ever be built?

Oct 5, 2009, 10:02am Permalink
Richard Gahagan

Why do all dems want to destroy private industry, "evil" CEO's, captialism and the American way? Private business is what made this country great. Major industry has left WNY because of government intervention, over regulation, high union labor costs and excessive taxation. So now all your left with Walmart, Darien Lake, Coffee shops, Pizzerias, and government jobs.

Oct 5, 2009, 1:58pm Permalink
Lorie Longhany

I don't know any Dem's that want to destroy private industry. In fact I know many Dem's that own and operate their own businesses

I guess to simplify differences by using the classic movie, It's a Wonderful Life -- there are folks that subscribe to Mr Potter's model and those that subscribe to George Bailey's. I happen to think that George Bailey had the better model.

Oct 5, 2009, 10:03pm Permalink
Howard B. Owens

Lorie, the George Baily model is based on altruism and community support. It's pure libertarian localism. It's pure Chicago School economics. In fact, the movie is a morality play of how too much government interference in the market place gives rise the Mr. Potter's of the world.

Oct 5, 2009, 10:25pm Permalink
Lorie Longhany

Chicago School held to the principles of globalization, didn't it? You know the #2 pencil and the "invisible hand" example. George Bailey was about citizenship and community and what was good for the least among us ultimately makes the community stronger. Remember the Martini's, the garlic eaters? They were able to buy their modest home and their family run bar. Somehow I don't see Friedman championing the underclass as George Bailey did. In Pottersville the little corner bar wasn't locally owned it was owned by Potter's bank (the corporation). Is elevating the middle class and the poor to a better quality of life through housing opportunities part of the Chicago school economics plan?

That is surely not what happened when the Chicago boys moved in to set up shop in the Southern Cone -- in fact it was the opposite. Those countries saw prosperity and a healthy middle class under their Developmentalism systems with more of a localism approach. After the coup's the Chicago School's approach brought those countries to their knees with the end result millions of middle class people falling into poverty and homelessness.

I see the Bailey model as the opposite. Maybe Potter lines up with Friedman, but not Bailey.

I just want to add -- I don't pretend to understand economics. I'm sure that you know much more about the Friedman theories of supply and demand and free unfettered markets than I do or even care to. For the most part it just hurts my right brain to even try and figure it all out.

Oct 6, 2009, 12:02am Permalink
Howard B. Owens

George Baily can only exist in a world of free markets. There is nothing contradictory in "George Bailey was about citizenship and community and what was good for the least among us ultimately makes the community stronger" and free markets. Only in a free market is a George Baily truly free to be about altruism. The further you move from a free market, the more it becomes coercion. And in all due respect, Lorie, if you really believed in the George Baily model, could you really advocate tax money going to social services?

And Southern Cone, like Chili?

While the claims of success of the economy there are not without its critics, the data does strongly favor a great deal of success for one of the most free economies in the world. This from Wikipedia:

"Chile's annual growth in per capita real income from 1985 to 1996 averaged 7%, far above the rest of Latin America. Since then the economy has averaged 7-percent annual growth, raising per capita income for Chile's 16-million citizens to more than $10,000 and creating a thriving middle class. This growth stagnated in 1997, with GDP rising by only a small margin between 1997 and 2002.

Developments were very positive with regards to infant mortality and life expectancy - infant mortality rate fell so much that Chile achieved the lowest level of infant mortality in Latin America in the 1980s. Infant mortality rate in Chile fell from 82.2 per 1000 to 19.5 per 1000 from 1970-85. Life expectancy at birth increased from 64.8 years to 68.3 years in the same period and life expectancy at age 1 remained about constant at 68.6 years in the same period.

The economic policies, maintained consistently since the 1980s, have contributed to steady growth and reduced poverty rates by over half. Only 14% percent of the population lives below the poverty line (compared with 31 percent in Brazil and 62 percent in Bolivia)"

So what's more humane, an economy that is less free, with more taxes, more regulation and more social services because more people are taxed out of a chance at a decent livelihood? Or the one that is more free and actually _reduces_ poverty? I vote for the economy that allows people to escape poverty rather than the one that enslaves them to the state.

Oct 6, 2009, 1:05am Permalink
Lorie Longhany

Yes, Chile and Uruguay and Argentina, but I'm going back to the years of the CIA backed coup in Chile -- the early 70's when Pinochet came to power and the democratically elected government was over thrown to set up the experiment. Why this has intrigued me over the years was a friendship in a high school art class in 1976. Roberto was an exchange student from Chile and within the intimacy of an art class he spent that year telling a few of us the shocking stories of neighbors being disappeared, never to be seen again and the sheer terror of the Pinochet government over the general population.

From Wikipedia -- On 11 September 1973, with active support from the Central Intelligence Agency,[4][5] Pinochet led a coup d'état which put an end to Allende's democratically-elected government and, along with the Navy, Air Force and Carabineros (the national police force), established a military dictatorship. In December 1974, the military junta appointed Pinochet as President by a joint decree, to which Air Force General Gustavo Leigh disagreed.[6] From the beginning, the government implemented measures.[7] According to the 1993 Rettig Report, over 3,200 people were killed,[8] while (according to the controversial 2004 Valech Report) at least 80,000 were incarcerated without trials and 30,000 subjected to torture under Pinochet.[9] Another 200,000 people went into exile, particularly to Argentina and Peru, and applied for political asylum; however, some key individuals were followed in their exile by the DINA secret police, in the framework of Operation Condor, which linked right-wing South American governments together against political opponents.

In 1973, the Chilean economy was deeply hurt by the economic sanctions imposed by the Nixon administration[27] inflation was hundreds of percents, the country had no foreign reserves, and GDP was falling.[28] By mid 1975, the government set forth an economic policy of free-market reforms which attempted to stop inflation and collapse. He declared that he wanted "to make Chile not a nation of proletarians, but a nation of proprietors."[29] To formulate the economic rescue, the government relied on the so-called Chicago Boys.

The economic policies espoused by the Chicago Boys and implemented by the junta initially caused several economic indicators to decline for Chile's lower classes.[30] Between 1973 and 1989 , there were large cuts to incomes and social services. Wages decreased by 8%.[31] Family allowances in 1989 were 28% of what they had been in 1970 and the budgets for education, health and housing had dropped by over 20% on average[31] The junta relied on the middle class, the oligarchy, huge foreign corporations, and foreign loans to maintain itself.[32] Under Pinochet, funding of military and internal defense spending rose 120% from 1974 to 1979.[33] Due to the reduction in public spending, tens of thousands of employees were fired from other state-sector jobs.[33] The oligarchy recovered most of its lost industrial and agricultural holdings, for the junta sold to private buyers most of the industries expropriated by Allende's Popular Unity government. This period saw the expansion of monopolies and widespread speculation.

Financial conglomerates became major beneficiaries of the liberalized economy and the flood of foreign bank loans. Large foreign banks reinstated the credit cycle, as the Junta saw that the basic state obligations, such as resuming payment of principal and interest installments, were honored. International lending organizations such as the World Bank, the IMF, and the Inter-American Development Bank lent vast sums anew.[31] Many foreign multinational corporations such as International Telephone and Telegraph (ITT), Dow Chemical, and Firestone, all expropriated by Allende, returned to Chile.[31] Pinochet's policies eventually led to substantial GDP growth, in contrast to the negative growth seen in the early years of his administration. The upper 20% of income earners ultimately benefited the most from such growth, receiving 85% of the increase.[34] Foreign debt also grew substantially under Pinochet, rising 300% between 1974 and 1988.

While you make great points about the eventual economic success in your comment, I would ask looking back on the human aspect of the coup, was it worth it to change a government from a democracy to a dictatorship? And would it be off base to classify Pinochet's government as a fascist State?

Oct 6, 2009, 5:13pm Permalink
Howard B. Owens

Lorie, however it was implemented -- and I'm a staunch anti-interventionist -- is really beside the point. We can both agree the coup was wrong and evil and inexcusable. That isn't the point. Chili, however it arrived at the point to be a free market experiment, is an example that seems to show that free markets work better than less-free markets. And the discussion is really about what degree of government intervention we want in the economy, not about interventionism. After all, Nixon was clearly was not reading Friedman. He was the president of wage and price controls.

Oct 6, 2009, 5:49pm Permalink

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