Daily Archives: September 18, 2011

The War Against The Young: Warning From Italy and Japan

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The war on the young is led “by cadres of elderly men, content to manage decline” and exacerbated by younger generations, who don’t seem to know what’s going on or understand the gravity of the financial situation that will hit them in the future. Luke Johnson, writing in the FT, describes the Italian and Japanese version of this trend.

Neither country has renewed itself because vested interests have failed to take the tough decisions. Their traditional cultures have not caught up with modern lifestyles. The male bureaucrats, policymakers and bankers who run all the important institutions must be forced to take radical steps to unleash the energy and imagination of their young, because in both countries they are very pessimistic. Many cannot obtain the job security and standards of living their parents took for granted. Traditional employees enjoy cast-iron protections, so companies are reluctant to create such positions.  So, only temporary or part-time work is available for most newcomers to the workplace.  Consequently, young Japanese and Italians pursue increasingly cautious lifestyles.  Nearly 80 per cent of unmarried Japanese between the ages of 18 and 35 live with their parents.  The ratio is nearly as high in Italy.

Such unadventurous living means people do not grow up, and do not take risks – such as having children or starting a business. Meanwhile, their parents bask in comfortable retirement, busy consuming their considerable savings.

Both nations are burdened by weak leadership, over-regulation, feeble productivity growth and a lack of economic dynamism – despite plenty of natural ingenuity and ambition. It appears that the vitality of Italy and Japan is being sucked out of their cultures by deteriorating demographics, high taxes, the burden of caring for elderly relatives and a youthful cohort with a diminished sense of self-confidence or optimism.

The war on the young is most intense in countries (and, in the US, industries and states) which have the blue social model deeply embedded in their social institutions. It is an interesting struggle: these days, the young face serious trouble finding employment and will be saddled with debts run up by their elders as they grow up.

The older generations benefited from a kind of escalator system in life.  You step on the escalator after finishing your education and it almost automatically carries you upward in life, with higher pay and higher status until, at retirement, you step off and enjoy a good, level standard of living for the rest of your days.

One of the younger generations’ biggest problems is that many of those escalators don’t work anymore.  In Italy and Japan, companies are reluctant to hire young people on what American universities call “tenure track”; unsure about their future needs and resources they don’t want high cost employees that can’t be fired.  The older workers are too powerful to dislodge — just as in American universities the tenured professors are too powerful to give up tenure.  So younger workers increasingly are hired if at all on temporary contracts, with lower benefits and fewer prospects for promotion.

To succeed today, many young people need to recognize that no job will be waiting for them when they finish studying.  They are going to have to create their own opportunities.  It is a good time for creative entrepreneurs.

The young will not find it easy to strike off on their own, especially as fewer opportunities makes them more risk-averse.  But the examples of Italy and Japan suggest that many young people today face a choice: collective depression about their sorry state of affairs or somehow spurring elder generations to seize and nurture the potential embodied by passionate and hard-working youths everywhere.

Italy and Japan have particularly bad cases of the blues; with relatively small numbers of young people and large ones of older people, the old are not only cunning and entrenched in positions of power: they can still beat the kids in elections.  Politicians reinforce generational privilege rather than acting on the knowledge that, in the end, an economy that doesn’t work for the young is an economy doomed to decline.

What many countries need, and I include the United States, is a real youth movement composed both of younger people and of future oriented oldsters that looks at every political and social question from the standpoint of how does it affect the interests of youth.  This isn’t about convening death panels and cat food commissions for grandma, but it’s about making sure that our institutions and our policies are opening opportunities to the young rather than closing them off.

Original Article

Family firm still struggling, 18 months after Gulf oil spill

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Leslie Bertucci, co-owner of R&D Industries in Harvey, stands in front of the company’s compartmentalized storage tank, designed by her husband and co-owner Dan Ness.

Earlier this month, a flatbed truck lumbered slowly out of the gravel parking lot at R&D Enterprises in Harvey, bearing a huge red-and-yellow storage tank bound for an oil rig in the Gulf of Mexico.

Watching it leave, co-owner Leslie Bertucci raised her camera phone and snapped a couple of pictures of a cherished sight in the last few months: a paying customer.

For R&D, this was rain after a drought, a breath of oxygen flowing into a small oilfield supply company that has been gasping for air. The company, which rents modular storage containers and racks to offshore rigs, has managed to stay in business since the Deepwater Horizon exploded last year and radically reshaped deepwater drilling in the Gulf.

But it’s been grueling.

R&D survived a four-month deepwater drilling moratorium that ended in October. Since then, it has been struggling to navigate the re-made regulatory environment that has settled over the Gulf, leaving drilling activity far short of where it was when Deepwater Horizon blew, killing 11 workers.

Bertucci and her husband, Dan Ness, founded R&D 11 years ago in their house in Metairie to manufacture and rent specialized equipment to deepwater drillers. When the moratorium clanged down and the Gulf went quiet, Bertucci said revenue plunged 80 percent almost overnight.

The company survived, in part, by enforcing furious economies, Bertucci said.

The couple slashed their own salaries by 75 percent. Months later they eliminated them entirely, and then began shoveling personal savings into company operations.

Bertucci said they slashed every discretionary nickel, ended their practice of cookouts or gifts for customers, cut off all charitable contributions.

Remarkably, over the course of 18 months, R&D has held on to its small workforce of a dozen or so employees.

“We didn’t lay off anybody but ourselves,” she said.

‘Not a penny

Meanwhile, Bertucci learned that R&D didn’t qualify for compensation from a $20 billion fund that BP established shortly after the spill.

Although the company had contracts in hand, it received no compensation for lost revenue, or for the estimated $144,000 in equipment that went to the bottom of the Gulf with the Deepwater Horizon.

“We haven’t received a penny. Not a penny,” she said.

However, since the spring, business has inched back up, “but it’s excruciating how slow it is.”

“I didn’t think a year and a half ago I’d be excited to have the numbers I have today,” she said. “They’re not great. But they’re creeping back up slowly.”

Bertucci said she and Ness are back on the payroll, but business is still down more than a third of what it was before the oil spill. The day of the BP disaster, Bertucci said her company had equipment on 23 deepwater rigs; today they’re on 12.

If her projections work out, Bertucci expects that next summer the business will be where it was in June of 2010.

Depressed deepwater drilling

On the day BP’s rig blew, 33 deepwater rigs were operating in the Gulf.

Today there are about 34, but only about half are drilling, said Eric Smith, associate director of the Tulane University Energy Institute. The rest are awaiting permits.

Just last week, a joint report by the Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement found that BP, Halliburton, its drilling contractor and Transocean, owner of the Deepwater Horizon, took disastrous shortcuts that led to the blowout of the 18,000-foot Macondo well, killing 11 crew members and spilling nearly 5 million barrels of oil into the Gulf.

Since the relaxation of a moratorium after the spill, Gulf deepwater drillers have been operating in a new environment in which regulators have ordered increased oversight at every stage of oil and gas development, and invited more government agencies to consult and comment on drilling permit applications, Smith said.

The result is that permit applications are significantly backlogged and deepwater drilling remains depressed.

Pleading their cases

In the months since the spill, Bertucci has become a highly visible spokesperson for thousands of small secondary businesses that support — and are supported by — the multi-billion-dollar corporate behemoths in the oil and gas industry.

Bertucci has pleaded the case of small businesses in Washington and before the president’s National Oil Spill Commission in New Orleans. She is the subject of a short pro-business video by the Heritage Foundation and the Institute for Energy Research.

Her message is clear: although the blowout was a disaster, the moratorium was an overreaction, and the post-moratorium regulatory environment has tilted the balance of oversight versus production too far in favor of oversight.

During the slowdown, Bertucci and Ness began looking to other markets for business. In the last few months, they have sought an international technical certification for their tanks and racks so they can bid on deepwater jobs in other regions — especially Brazil, which appears to be the preeminent new deepwater market.

During the darkest days of the moratorium, Bertucci frequently said the company needed to keep a full workforce on hand for the day the moratorium was lifted, for on that day, she believed, R&D would be swept off its feet with customers stampeding back into the Gulf.

It hasn’t worked out that way at all.

“It turned out to be sort of a joke. A joke on us,” she said.

“It was a very cruel joke.”

Bruce Nolan can be reached at bnolan@timespicayune.com or 504.826.3344.

Original Article

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