Wednesday: Brain drain?

This article from the NYTimes should get some attention.  It’s about an awards program from the Howard Hughes Medical Institute.  The awards are given to foreign born scientists who study here in the US and then return to their home countries.  The nation with the highest number of recipients this year?  China.:

China’s government has thrown billions in recent years into building a top-notch research establishment, hoping to keep its best scientists working here and lure back those who are abroad.

Now comes a hint that that effort is beginning to pay off.

The Howard Hughes Medical Institute, one of the world’s most prestigious research foundations, announced Tuesday that it washonoring 28 biomedical researchers who studied in the United States and then returned to their home nations. Each will receive a five-year research grant of $650,000.

Seven — more than any other nation — are from China.

“They’re incredibly energetic, extremely smart, highly productive and accomplished,” Robert Tjian, president of the institute, said of the Chinese winners in a telephone interview. The 28 are receiving the institute’s first International Early Career Scientist awards.

This comes as no surprise to those of us who have worked with Chinese scientists.  The cream of the crop came to study here in the last couple of decades and while some of those scientists are simply good, some are really top notch.  This is probably the case with every country’s academic superstars but China has been ferocious about developing their talent.

But here’s where the changes in our American culture are going to bite us in the ass.  It used to be that when Chinese scientists came here, they were reluctant to return home.  Not any more.  And it’s not homesickness that is driving them.  It’s all related to how the money has dried up in research here in the US:

“Young people go where they can flourish the best,” he said. “And those countries have been able to attract young scientists trained in the U.S. to go back.”

“That’s a big hurdle. It used to be that people thought people came here and never went back. But I think now that is starting to change.”

Some of the award winners agreed. “I think it’s very obvious in recent years, and we’re very happy to see that,” Wang Xiaochen, a former doctoral student at the University of Colorado who is now at Beijing’s National Institute of Biological Sciences.

While many if not most Chinese doctoral students who choose to remain in the United States after their studies, she said, in China, “I don’t have to apply for a grant,” while in the United States “the funding situation already is very tough.”

“I think I’d have opportunities, but I’d have to spend a lot of time applying for funding. Here, I don’t have to apply for my own funding. So it’s an easy decision for me,” she said.

This is the common complaint I am hearing.  There’s very little grant money and what there is takes a lot of tedious, time wasting paperwork to acquire.  And then there’s the political aspect of getting grant money.  I would wager to guess that most scientists are not particularly good at the kind of salesmanship that is required to constantly beg for money.  And that’s a problem if you have an area of research that doesn’t respond well to interruptions and postponements.

But it’s not just the academic/government grant area that is suffering.  Small start up biotechs are frequently faced with some stark choices.  Take the example of Alnylam that Derek Lowe of In the Pipeline posted about last week:

The news is that Alnylam, the RNAi company just down the street from where I’m writing, is cutting about a third of its workforce to try to get its best prospects through the clinic. This is a familiar story in the small-pharma world; there’s often money to try to get things through the clinic, or to pay everyone in the earlier-stage R&D – but nowhere near enough money to do both. There are companies that have gone through this stage several times, sometimes rehiring the same people when the money began flowing again.

So, you can have early stage research or clinical trials.  But you can’t have both.  This is really dangerous for Alnylam because if their best prospects get crushed in clinical trials, and this happens a lot, they won’t have much to fall back on because they’ve had to cut back on their R&D staff.  This is just an example of what small biotechs are facing all over the country.  The result is that scientists bounce from job to job, coast to coast.  The pay is not as good as it used to be, benefits are skimpier and when the money runs out in a year or so, you have to find a new job.  Where are you supposed to live?  Can you afford a family if you are living a precariat existence?  And what’s going to happen when you are required to pay health insurance premiums to private insurance companies without any attempt at cost control?  The costs to the individual researcher is going to continue to rise with no stability in their work or domestic life. Is this any way to treat people who take the toughest majors in college?

Once again, I have to caution politicians and CEOs who think this is a good way to run research.  It’s extremely counterproductive.  Research frequently requires long periods of continuous study and work.  There are high start up costs associated with equipment and reagents.  Biotech is not like Silicon Valley because microchips follow predictable physical laws.  Cells do not.  It’s great for China that it’s starting to invest heavily in it’s scientists but it’s still going to take that country many years to figure out how to crank out new discoveries that will pass the FDA’s rigorous safety standards.  It’s hard, hard work even for the brilliant.  And then there are the scientists who did not graduate from prestigious universities.  With the number of discoveries we are making in biology these days, there is more than enough work for all of us but without money, those of us with the ability and inspiration but not the opportunities are wasted.  You never know when one of your well trained staff is going to notice something or makes that extra compound that makes a billion dollars a year.  It happens all of the time and it doesn’t take a Harvard educated PhD to do it.  It does take a place to work, money to pay the bills and sufficient time to run the experiments.

If we don’t start putting money into this country’s scientific human infrastructure, it’s going to be gone.  And don’t anyone buy that crock of BS about companies that want to hire high tech but can’t find educated personnel.  There are about 100,000 of us sitting on our asses right now who can’t get employers to hire us.  As one former colleague said, “They want someone right out of school with 25 years of experience.”  In other words, the MBAs seem to think this is so easy that anyone can do it.  It’s merely a series of tasks that can be pharmed out to any sufficiently trained research labtech at a CRO, right?  Sort of like ordering parts for a car.  They couldn’t be more wrong.

So far, the only barrier to having full employment of scientists is that companies want to sit on their cash in the hopes of driving wages down and that government is being incredibly stingy.  You can’t make a life on $37K a year after spending most of your adult life studying.  And some of these companies are creating their own finance problems by locating themselves in the most expensive places in the country to work and live.  But there’s no getting around the fact that research is expensive no matter where you do it and that it takes a long time and investment in people for it to pay off.  Pay us or lose us.

Thursday: Elections have consequences (with a long digression on Jon Huntsman and research in China)

Russians protest election fraud

Vladimir Putin is accusing Hillary Clinton of inciting insurrection.  “Occupy Russia” seems to have taken to the street in protest over fraud in the last election.  Here’s what we’re talking about in case you haven’t already seen it:

Isn’t that amazing?  Looks like punch card optical scan paper ballots are the way to go.

Throngs of young Russians hit the streets in protest.  And who was to blame for this?:

MOSCOW — With opposition groups still furious over parliamentary elections that international observers said were marred by cheating, Prime Minister Vladimir V. Putin on Thursday accused Secretary of State Hillary Rodham Clinton of instigating protests by baselessly criticizing the vote as “dishonest and unfair” and he warned thatRussia needed to protect against “interference” by foreign governments in its internal affairs.

Prime Minister Vladimir V. Putin of Russia spoke in Moscow on Thursday.

Follow@nytimesworld for international breaking news and headlines.

“I looked at the first reaction of our U.S. partners,” Mr. Putin said in remarks to political allies. “The first thing that the secretary of state did was say that they were not honest and not fair, but she had not even yet received the material from the observers.”

“She set the tone for some actors in our country and gave them a signal,” Mr. Putin continued. “They heard the signal and with the support of the U.S. State Department began active work.”

Damn, she’s good.  All she has to do is say it’s “dishonest and unfair” and the entire Russian nation answers to her call.  She’s wild and crazy.  She can’t be stopped.  I’m telling you, if she had been elected as our president, she would have bent Congress to her will, tamed the restless oceans, stopped the planet from spinning on its axis…

Huh?  Oh, she couldn’t stop the DNC from stealing (blatantly on television with no hidden cameras) the Democratic primary away from her and fraudulently awarding delegates from Michigan to a guy who wasn’t even on the ballot?  Well, at least here in the US, we’re not sneaky about our election fraud.

But if anyone would know how it feels to be on the losing end of dishonest and unfair election procedures, it would be Hillary.  So, you know, there’s that.

It’s not like elections have consequences or anything.  After all, the Democratic party loyalists have been telling us for the last three years that Obama and Clinton were indistinguishable from one another.  I’m sure Hillary’s Secretary of Health and Human Services would have overruled her FDA administrator on the sale of the Morning After Pill, just like Kathleen Sebalius did:

The statements from the two camps pretty much stick dryly to issues of whether minors are mature enough to decide such matters. FDA Commissioner Margaret Hamburg said today “there is adequate and reasonable, well-supported, and science-based evidence that Plan B One-Step is safe and effective and should be approved for nonprescription use for all females of child-bearing potential,” but noted that Sebelius had disagreed. Sebelius, in a statement, writes:

“It is common knowledge that there are significant cognitive and behavioral differences between older adolescent girls and the youngest girls of reproductive age. If the application were approved, the product would be available, without prescription, for all girls of reproductive age.”

NPR notes that today’s decision is “likely to prolong a fight that has raged for more than eight years,” so stay tuned.

That’s like saying, “we’re not going to let young, immature females have access to this pill to prevent the them from getting pregnant because they might use it”. And restricting access to Plan B so they end up having to get abortions at their tender young ages, exposing them to a bunch of wild-eyed crazies as they run the gauntlet from the car to the door of the clinic, accomplishes *what*, exactly?  Did you know that some of those crazies take pictures of the patients as they run that gauntlet and then publish those pictures?   Well, that’ll learn’em.  Young girls have to be taught very early that there is no age that is too young to be shamed, humiliated and punished for an infraction that her boyfriend will slide away from scott free.  I guess we should thank Sebelius for affording these girls an opportunity to mature.

I smell incense and old, celibate men with red beanies in this story somewhere.  Or, maybe it’s just more campaigning.  Obama needs the anti-choice vote now, since many women in his own base have his number.  The last thing he needs is a bunch of fundagelicals occupying Walmart’s ‘over the counter’ departments.  Because then, he would have to send out the goon squads to pepperspray them and drag them off to retention facilities where they wouldn’t be able to use the bathroom for hours and hours.  And one of them might have a cell phone and know how to use the video camera.  It would only be fair.  You can’t treat religious fanatics who want to impose their authoritarian worldview on the rest of the country differently than a bunch of non-violent, regular people who are just protesting economic injustice. (go read that link, it will make your blood boil) Some of us might see it as unfair that the fanatically religious are treated with greater consideration and respect. It might start a whole new round of protests and Obama and DHS think they just nailed the lid on the last round of protests.  Better to just let the ban stand.  It’s too messy in an election year.

Hmmmm, elections, fraud, protests.

There is one bright spot this week though.  Hillary’s speech in Geneva on Gay Rights are Human Rights was very well received worldwide. Of course, her State Department has been proactive about this from the minute she took office.  If you really believe it, you need to lead by example, which she has.  But the credit for the policy goes to Obama, who invited an gay rights are *not* human rights preacher to have a prominent role in his inauguration.  Well, this is an election year and he’ll take credit from whomever he can and wherever he can get away with it.  It worked so well in 2008. Did I mention that Hillary previously gave a speech on Women’s rights are Human Rights over a decade ago?  Oh, how quickly we forget that when we have to approve a controversial pill.  Let’s remember that Obama appointed Sebelius.

Speaking of appointments, remember Jon Huntsman?  He’s the Republican that some Democrats say they could reconcile themselves to vote for.  He was appointed as ambassador to China by Barack Obama.  He’s also the wealthy scion of a family who owns a company that makes chemicals.

My tin-foil antenna are twitching.  Be patient because this is going to be long.

It started with the layoffs.  Massive layoffs.  Thousands and thousands of people in the research industry being laid off since 2008.  For example, the company I used to work for, Wyeth, was bought by Pfizer in 2008.  In 2009, Pfizer laid off the vast majority of Wyeth scientists and support staff. 19,000 jobs including every one of my former colleagues.  Gone.  Let’s not pretend that 19,000 people had poor performance reviews.  I know for a fact that most of them were very competent scientists.  A few people that filled  a need in Pfizer’s labs were retained and sent to Groton, CT, where they live in constant anxiety as Pfizer capriciously rejiggers its reorg.  But Pfizer’s is just the most notorious of the recent bunch of layoffs.  There have been many, many others.

Then there were the very clear and unmistakable signs that the pharmaceutical company CEOs and Barack Obama were scratching each other’s backs in 2009.  Maybe they couldn’t get all they wanted from the healthcare insurance reform bill, and they didn’t.  But what if they could get Obama to look the other way while they dismantled research operations in the US and shipped them to China?  Derek Lowe posted yesterday about the last holdout, Merck, finally giving in and laying off scads of scientists (reports vary from 17,000 to 34,000 worldwide with the bulk coming from the US) only to plan to open a new facility in China that will employ 600 people.  There’s a very good reason why the shareholders should look skeptically at this new arrangement but I won’t go into that now.  Suffice it to say that this all about money and not about science.

But to get to the stage where the Mercks and other big pharmas could conduct research in China, there would have to be substantial negotiations and understandings with the Chinese government because it is the entity that can make or break your intellectual property agreements.  And big pharma is all about intellectual property.  They’re so secretive with their data that they don’t even let all of the scientists see it.  It’s strictly “need to know”.  Up until now, China’s research industry has been pretty good at making knock-off drugs based on what’s already published.  It’s a whole different animal when you have to do “first to market” research all on your own with biological systems that insist on doing their own thing.  But shareholders will find out.

Anyway, I found the passage in Barack Obama’s Osawatomie speech about science and research very disturbing.  He only mentioned encouraging “young” people to go into science.  And of course, that would make sense if you think you can raise a whole generation of mini-human calculators who never sleep because they have to finish their overwhelming load of math homework.  What I can’t figure out is how they’re going to turn those kids into scientists.  In China, there’s a certain amount of coercion involved.  You get tested and the government narrows your career choices.  Here, it’s not so easy.  You can force young people to spit out the answer to what is the derivative of sin(x), but you can’t make them like it.  Yes, we have a lot of Chinese scientists here in the US and some of them are brilliant.  Some of them.  Some of them are excellent technicians.  And some of them look like they were horribly miscast.

But back to the “young people” comment in his speech.  That was a tell to the those of displaced research workers. If you listened to Obama and the rest of the “serious people”, you’d think that there was a huge shortage of scientists.  And in some respects, they would be right.  I’ve never worked at a lab that wasn’t under some kind of hiring freeze.  The last lab I worked at had many unoccupied labs and offices.  Beautiful, new facilities with state of the art hoods and workflow and lots of natural light and very few chemists.  We just didn’t hire that many.  Projects were always fighting for the chemists that we had.  This was the result of mergers and re-organizations.  If anyone is curious as to why scientists have been less productive, this is part of the reason.  In the last decade, the shortage has become severe but it’s an artificial shortage.  There are plenty of chemists around.  They’re just out of work.  The chemistry has gone to China.  The chemistry isn’t any easier and the biological systems are the same.  But the workers are cheaper there.

So, we have a generation of scientists in their prime wage earning years sitting around not doing  chemistry.  So, why all of the focus on the young?  Obama has all of the talent he will ever need, including some excellent American trained Chinese scientists, right here, right now.  Do the business leaders really have him convinced that the average American kid can be force fed math and science and then lead a monastic existence because business won’t pay for the expertise?  What planet are they on?  Water seeks the path of least resistance.  Unless our government starts restricting career choices here as well, it’s not going to happen.  I suppose you could send all of the talented kids to college for free so they graduate without debt but if you don’t provide a decent living at the end of those 4, 6, 10 years, you’ll just end up with a lot of miserable drones in the lab instead of bright, creative thinkers whose brains are working optimally because they are doing what they love and they are compensated well for doing what most Americans can’t do.

And then I saw Paul Krugman’s blog post yesterday about how at a debate he had on Tuesday night, one of his fellow debaters made a point that our country was going through an unavoidable deleveraging process:

I continue to find Carmen Reinhart’s fatalist view puzzling. She agrees with me that we’re facing a demand-side problem — but insists that this problem can’t be solved quickly, that we need to go through many years of painful deleveraging that leave millions of potentially productive workers idle.

I agree that this is probably what will happen, given the political realities. But surely this is a huge failure of policy, not something we should accept as inevitable. It’s truly bizarre, if you ask me, to say that our economy suffers from too little spending, and that nothing can or should be done to increase that spending.

I happen to agree with Krugman.  There’s no need to do this.  It’s an artificial deleveraging created by the political and business class.  With respect to the research industry, it has to be. The demand for new drugs is certainly there, even if they are ridiculously expensive in this country. If you need it, you find a way to pay for it.  The discovery of new drugs can always be done more cheaply (don’t expect the savings to be passed on to you) but it can’t be done more quickly, not in this day and age when we are learning so much about biological systems and they continue to thwart us.  And business people are all about quick turnaround.  They need something to sell.  Big pharma is going off the patent cliff en masse this year and in the next several years.  The drugs that will be turning generic were discovered in the 90’s.  And right now, as a result of very poor management and mergermania, there’s very little in the pipeline to replace them.  The MBAs can try cracking the whip on Chinese scientists but the rate limiting step is the biological system which tends to stymie the FDA approval process.  You can’t get around that.  Plus, the Chinese need to learn how to do A-Z research and that’s going to take time.  Even if they’re brilliant, learning interdisciplinary problem solving skills takes years to develop.  So, why dismantle your US research apparatus?  Once it’s gone, and the present generation of scientists goes away, you’ll be no better off than the Chinese when the fantasy horde of young American uber scientists takes over.

It seems to me that there is a fundamental misunderstanding of what it takes to do research and that the policy makers have bought into this misunderstanding.  Maybe the MBAs have made presentations with lots of numbers and made it look like a facile thing.  Just up the number of eager young geeks in this country that will work for a pittance and in the meantime, they’ll drink the milkshakes of the Chinese and voile!  Drugs galore.  But to do it, they need the cooperation of the Chinese government.  And that’s where Jon Huntsman comes into the picture.

Obama appoints the scion of a chemical company, who presumably has some inkling of how his industry works since he was raised in the family business.  And off he goes to make sure that what happened to Fellowes business machinery corporation joint venture with China doesn’t happen to Merck.  Do we have any proof?  I welcome any information that readers can send me but I think we can make an educated guess based on past statements and actions of Huntsman.  For example:

Huntsman Money made in China tests Obama’s Envoy’s 2012 Hopes, which features this nugget:

Huntsman Corp.’s revenue in China surged 57 percent from 2009 to 2010 during his ambassadorship, almost two decades after its entrance there, data compiled by Bloomberg shows. Its expansion in the world’s second-largest economy offers a target for rivals when U.S. unemployment is shaping the 2012 presidential race.

“China has become a bigger and bigger issue in recent elections, especially exporting jobs to China,” said John Feehery, a Republican strategist in Washington who isn’t working with any of the presidential campaigns. “If I were an opposition researcher, I would have a field day with this.”

A Republican strategist says this.  But wait!  There’s more:

This is from Huntsman’s own issues pages on his campaign website:

America’s strength lies in our creative class, our entrepreneurial spirit, and in governance wise enough to allow our great companies to compete in the international marketplace. The countries that lead in defining the new trading system will be the countries that benefit the most. If we don’t assume the mantle of leadership, our economy will be relegated to competing in a marketplace defined by our competitors.

And who would those competitors be, Jon?  The US practically owns the pharmaceutical market.

Then there’s this:

Jon Hunstman on China- in his own words:

• On How U.S. Companies can enter the Chinese market:

“I think the first step is getting to know and understand the China market. That means investing time, and it means investing one’s self, as a manager or a corporate leader in the fact you will be doing business together.It means at some level one has to develop a lao pengyou (old friend) relationship, if you will. You’ve got to develop some level of guanxi (interpersonal relationship) as they call it, if you’re to be taken seriously in China.

This takes time and sometimes unwestern-like patience. Regardless of which product you’re looking to sell or market in China, an early step should be to develop relationships and establish yourself as a credible business representative.” (Source: China Daily’sBusiness Weekly on October 22, 2002.)

Jeez, I wonder if he put that on his resumé when he sent it to Obama.

And then:

The Trouble Lurking Offshore for Jon Huntsman

But I’m not worried about Jon Huntsman’s prospects for election.  He hasn’t achieved frontrunner status yet, one of the few Republican candidates who hasn’t.  The irony is thick because if there was ever a politician who would warm the cockles of a businessman’s heart, it would have to be Jon Huntsman.  The problem for rabid Republican voters is that he was appointed by that “socialist” Obama.  And *that*, IMHO, is a problem for Obama.

Because, it is becoming increasingly clear to me that Obama’s passivity at the prospect of losing virtually all of his US research infrastructure is intentional.  This is the policy thing that Krugman was referring to.  It doesn’t have to be this way but Obama is letting it happen on purpose.  The biz guys want to lower their costs.  They could be making a decent profit like they did in the 80s and 90s but those are not the obscene profits they have become used to in the 2000s.  They are unwilling to lower their own expectations so we must lower ours.  They tell Obama that the reason their pipelines are empty is because US scientists are stupid and lazy and he probably believes that.  If you’ve never worked in a lab, you’d have no idea how false and unfair that is.  For one thing, labrats work like dogs.  For another thing, many of those labrats are Chinese.  Many of those Chinese labrats are the cream of the crop who came to study here after Tienammen Square and have no desire to go back to China.  So, in a sense, the biz guys are undercutting their own argument.  If they already have the cream of the Chinese crop, and they still have an empty pipeline, why do they think that going to China is going to help things?  Oh, they’re cheaper there.  Oh, Ok.  Well, alright then, let’s rip research right out of America.  Oh, sure, there will be a generation that will suffer but so what?  In the big scheme of things, a hundred thousand scientists are a drop in the bucket.  The economy will never even miss them.

Well, it’s not like I’m ever going to vote for Obama.  But it won’t take too long for my friends to put it all together.  And there goes New Jersey.  Did I ever mention how we have a nasty habit of electing Republican governors here?  Reliable states are only reliable until you impoverish their middle class.  And then those people who you called voters 4 years ago get all angry at the fact that they can’t pay their COBRA and their children are on reduced price lunches and their houses are underwater and they can’t sell and they don’t turn up for you when the election rolls around.  They say, “Fuck him, he’s an incompetent opportunist that sold our jobs to China and ruined our careers.  It can’t get any worse with a Republican because we have nothing left to lose. I’m staying home on election day.”

By the way, since there is nothing in the pipelines and the older drugs are going off patent, expect the costs of generics to start spiking.  You heard it here first.

Elections have consequences.

Tuesday: There’s a shortage of scientists and engineers? Are you crazy??

Obama is pushing for education for high-tech jobs at a new jobs summit:

Cree and other businesses in the innovation hub of Research Triangle Park have a rich academic base to draw from for recruits with the University of North Carolina, Duke and North Carolina State University — the alma mater of Cree’s founders — so nearby, Obama said. As a whole, however, the country is not producing enough talent to fill the high-tech and highly skilled jobs that are available today. “Right now, there are more than four job-seekers for every job opening in America,” Obama said. “But when it comes to science and high-tech fields, the opposite is true. The businesses represented here tell me they’re having a hard time finding high-skilled workers to fill their job openings.”

Is this man *completely* out of touch??  It’s like a George Bush I trip to the supermarket where they have those scanner thingies.  If Research Triangle is having a hard time filling positions, I certainly haven’t heard about it.  Everyone I know, including myself, has either lost their job or is about to lose their job.  There are thousands of well trained, well educated, high-tech professional scientists and engineers out of work right now who could easily relocate.  Their jobs are going to China.  What do companies want more of them for?  They don’t seem willing to retain and pay the ones they already have.

Where has Obama been?

Amgen announces layoffs in Boulder, Colorado

Pfizer lays off 19,000 after merger with Wyeth

Astra-Zeneca plans to layoff 15,000 through 2013

That’s just the tip of the iceberg.  How much more education do you want us to get?  We’re already overeducated.  We’re not allowed to get stale in this business.  And the cuts are not all in sales.  Now, they’re getting to the bone with thousands of high-tech jobs relocating to India and China.  What’s weird about that is that not even China and India with their billions of people have enough high-tech workers to do high-tech research but that isn’t stopping companies from sending our jobs there.  The bottom line is the bottom line.

Want to know where a scientist can make a decent living and do research and where their skills and educations will be valued and rewarded and their jobs protected?  Try countries where the government is willing to intervene or where labor unions are strong.  Like Germany and France.

But don’t roll that old crap about how there aren’t enough of us to those of us in the trenches.  The last thing we need are more unpaid scientists on the job market.

Gasp!

OMG, outsourcing to China has risks!

Found on Susie Madrak’s site, is a story about the risks associated with doing business in a country that is not the US, which she links to with the blurb “For outsourcing CEO’s” (which sounds like a really good idea).  Here is an  example of what can happen to companies that are not careful with their intellectual property when they outsource to China:

“For over three years, this engagement resulted in a very productive relationship, with Shinri manufacturing and shipping our goods to Fellowes’ locations throughout the world,” says James Fellowes, a third-generation chairman and CEO of Fellowes Inc. “Shinri enjoyed a 100 percent-plus return on investment for each of the years and this return on investment was always paid on time.”

But in 2009 everything changed when the leadership of the Chinese company shifted to another Zhou brother. Over the next year, the Chinese company “gradually attempted to usurp control [of our operations] in direct violation of the joint venture agreement,” Fellowes told a recent hearing of the House Foreign Affairs subcommittee on Asia and the Pacific. “Shinri methodically imposed unreasonable requirements on Fellowes in an effort to extort more profit and ultimately control the global shredder business in direct violation of our contract.”

Shinri insisted that Fellowes assign its 100 percent-owned tools to the joint venture. It required that Fellowes assign 100 percent of its engineering capability and its 100-percent owned Chinese sales division to the joint venture. It told Fellowes it must increase its prices immediately by 40 percent. It told Fellowes that it had to unilaterally contribute over $10 million to the joint venture and if it didn’t “then Shinri would close down our operation as the legal representative of the joint venture,” says James Fellowes. “When Fellowes refused these illegal demands Shinri proceeded to destroy our business.”

Starting on August 7, 2010, Shinri started to obstruct shipments of shredders from the factory, forcing the joint venture to stop production. “It placed security guards and trucks at the gates to prevent the entrance of our people, the shipment of our goods and the transfer of our wholly owned assets,” says Fellowes. “They expelled Fellowes’ appointed management personnel at the facility and they illegally detained Fellowes’ injection molded tools. This ultimately led to the bankruptcy of the joint venture.”

James Fellowes immediately flew to Changzhou to meet with Chinese government officials. “They sympathized with our plight but they were either unable or unwilling to force our Chinese partners to open our factory or facilitate a purchase of the joint venture by Fellowes. The cumulative impact of these actions is an economic loss totaling over $100 million to Fellowes.”

Fellowes has recently learned that Shinri is planning to compete directly against it in the shredder business using Fellowes’ custom molding tools “that represent the embodiment of Fellowes’ engineering investment and intellectual property,” says the company

CEO.

The court in China has gotten involved: It has initiated proceedings to liquidate the joint venture and auction the assets “to satisfy the debts of the joint venture” — suppliers who are demanding that unpaid invoices be paid, according to Fellowes. “The sale of Fellowes’ tooling and our finished goods inventory to anyone other than Fellowes would be a direct violation of our intellectual property rights. The immediate release of our tools is of great concern for us today. We have been restricted from these tools for eight months and that has greatly hampered our ability to recover.”

Fellowes wants to bring these tools back to the United States so that it can re-establish a manufacturing operation in Illinois. It is “working around the clock to retool our products and bring up new factories,” says Fellowes. “We hope the U.S. government will act to protect the rights of American companies like ours.”

{{snort!}}  Funny, he doesn’t mention how he hopes the US government will act to protect the rights of American workers.  It’s probably just an oversight.

Who could have predicted?   The Chinese are notorious piraters of entertainment industry copyright protected content. They have a record of hacking Google and the Defense department.  But that hasn’t stopped lots of CEOs from signing up with China for cheap labor covering just about every industry.  In the drug industry, for example, lots of medicinal chemistry jobs have gone to China.  Presumably, the executives are counting on the contracts they signed to keep the Chinese synthetic chemists from becoming too interested in their work.  I wonder if it ever occurs to the outsourcers that the last bunch of analogs they ordered could be held hostage or that the Chinese wouldn’t hesitate to tap the intranets of the intellectual property geniuses in the US to see what those analogs are good for.  Imitation is the highest form of flattery but theft takes less time.  And who could blame them?  Those potential blockbusters are being made in THEIR country by their chemists.  Wouldn’t it be weird if they *didn’t* want a piece of the action?

But it’s even worse than that.  It looks like Shinri got tired of being used as the slave labor by a modern equivalent of the British East India Company and asked to have a bigger share of the engineering aspect of the business.  Say what you will about their motives but Shinri asked for a measley $10M ransom payment.  It’s modest by today’s Dr. Evil standards.  But Fellowes turned them down and has consequently lost $100M in the interim.  How dare a Chinese company get all uppity and start issuing demands.

That’ll learn’em short term thinking MBAs.  ehh, who are we fooling.  These braintrusts probably got raises last year for reducing US labor costs.

Well, now we know such things can happen.  There’s a reason why the business environment in the US was so productive and innovative compared to the rest of the word.  Rules and regulations are intended to keep stuff like this from happening.

Let this be a lesson to the outsourcing CEOs.  Play fair or risk it all.

Wednesday News

Good Morning Conflucians!!

Obviously the news is still mostly about the Arizona tragedy and all the political and social issues being talked about. Let’s take a look at a few articles on the subject to see what’s new there. First as was mentioned yesterday, those crazy Westboro Baptist Church religious nut cases plan to protest the little girls funeral. Just when you thought those people couldn’t be more sick and evil. But heartening is the reaction and the people that plan on protected the family and funeral:

Arizona lawmakers moved quickly Tuesday to try to block protesters from the funeral of 9-year-old shooting victim Christina Green, passing an emergency measure prohibiting protests within 300 feet of any funeral services.

[…]

The actions were prompted by the Westboro Baptist Church, a publicity-seeking Kansas congregation known for demonstrating at the funerals of U.S. soldiers, arguing that their deaths are retribution by God for America’s acceptance of homosexuality. The church announced it would protest Green’s funeral, scheduled for Thursday, because the family is Catholic.

The protest drew instant and unanimous condemnation from Arizonans.

“Protesting or picketing outside the funeral of an innocent victim is despicable,” said House Speaker Kirk Adams. “It’s time to bring Arizona in line with the many other states that protect the sensitivities of victims against groups that use fear and hate to denigrate the lives of Americans.”

Adams sponsored the emergency measure that prohibits people from picketing or protesting within 300 feet of any residence, cemetery, funeral home, church, synagogue or other establishment during or within one hour of a funeral service or burial service.

The House and Senate passed the bill unanimously Tuesday. Gov. Jan Brewer signed the measure Tuesday evening.

If that’s the face of not accepting homosexuality in America, no wonder many in the GOP have been moving in the direction of repealing DADT and being open to gay marriage. Something to think about and understand when it comes to changing the tone and framing of a political/social topic.

Politico has a piece talking about three of the GOP potential campaign frontrunners for 2012 and how they’re fairing through this tragedy. I’ll save you the trouble, Pawlenty wins the day. That is, he comes out more moderate and unscathed. Palin of course is the target of many. And Newt seems to be playing the roll of Rush/Beck trying to drum up the base.

In an interesting op-ed at WaPo, Krauthammer (heads up, warning, winger alert) in addition to the some winger stuff (step carefully), has a few observations about language and symbols in politics:

Finally, the charge that the metaphors used by Palin and others were inciting violence is ridiculous. Everyone uses warlike metaphors in describing politics. When Barack Obama said at a 2008 fundraiser in Philadelphia, “If they bring a knife to the fight, we bring a gun,” he was hardly inciting violence.

Why? Because fighting and warfare are the most routine of political metaphors. And for obvious reasons. Historically speaking, all democratic politics is a sublimation of the ancient route to power – military conquest. That’s why the language persists. That’s why we say without any self-consciousness such things as “battleground states” or “targeting” opponents. Indeed, the very word for an electoral contest – “campaign” – is an appropriation from warfare.

I think the best stab at the politics of this may be Jon Stewart’s clip posted in last nights post. Take a look again if you missed it.

Let’s look at a few other things going on. In news of the doublespeak delicately placed on a dungheap, it appears Obama and the Chamber of Commerce are getting cozy and mending all those faux rifts:

The U.S. Chamber of Commerce signaled Tuesday that its rift with the administration is beginning to ease, just three months after bitterly sparring with the White House during midterm campaigns.

In a speech at the Chamber’s headquarters, directly across the street from the White House, Tom Donohue, the group’s president, said disagreements with the administration have “never been personal.”

He noted “a new tone” at the White House and praised President Obama’s selection of William Daley as his new chief of staff, calling him “a real pro.”

Donohue nonetheless struck a combative note as he vowed to fight for the Chamber’s policy goals this year, which include expanding trade, lowering the federal deficit and curbing regulations it thinks are excessive.

“We will not allow the business community to be intimidated, and we will use every tool at our disposal to challenge those who try to silence our voice,” said Donohue, referring to Democrats’ attempts to force the Chamber, one of the most powerful lobbying groups in Washington, to reveal its donors.

Such kabuki theater. Aren’t you so happy they’re getting along now? Yea.

Meanwhile in real leadership news, SoS Hillary Clinton is the first SoS to go to Yemen in over 20 years:

Hillary Clinton made the first trip by a U.S. Secretary of State to Yemen in 20 years on Tuesday to underline to the Sanaa government the urgency and importance of fighting al Qaeda at its grassroots.

Washington is anxious for Yemen, next door to the world’s top oil exporter, to step up its fight against an al Qaeda wing based in the Arabian peninsula state where militants have attempted ambitious attacks against U.S. and Western targets.

“It’s not enough to have military-to-military relations,” Clinton said before her plane touched down in Yemen’s capital Sanaa, where she was due for talks with President Ali Abdullah Saleh.

“We need to try to broaden the dialogue. We need to have this dialogue with the government,” she added.

This is all part of the massive new workload Hillary has had to take on to repair the damages from the leaked State Department cables. At least we have Hillary doing this work and repairing those relations. I’d hate to think how this work would happen if Joe Biden had the position as he claimed he was offered.

In Illinois news, they are eliminating the death penalty:

After more than a decade of debate over whether the state’s system of capital punishment could ever be fair, state lawmakers voted on Tuesday to end the death penalty in Illinois.

The move, which came only hours before a new group of lawmakers takes office in Springfield on Wednesday, leaves the future of capital punishment to the Democratic governor, Patrick J. Quinn, who has not indicated whether he will sign the legislation. If Mr. Quinn agrees to the ban, Illinois will join 15 other states without capital punishment.

There’s some great news at least. We could use some.

In international monetary news, China is going to open the Yuan for US trade:

State-owned Bank of China Ltd has offered yuan trading to U.S. customers, a sign that Beijing this year may increasingly promote the use of the Chinese currency in major financial centers.

The change at Bank of China announced in a posting dated Dec. 2010 means that customers can trade in yuan in the United States for the first time rather than having to do so in Hong Kong.

The New York branch of China’s fourth-largest bank said it now lets companies and individuals buy and sell the yuan via accounts with its U.S. branches, although U.S. businesses and individuals can also trade the currency through Western banks.

“The authorities are promoting the use of the yuan in international trade and this is another step in that direction and this means we should see the growth of yuan trading in other regional centers across the world,” said Robert Minikin, senior currency strategist at Standard Chartered Bank in Hong Kong.

The move is seen as another small step to redenominate trade in yuan after persuading mainland importers and exporters to reduce settling trade in the U.S. dollar and striking trade settlement agreements with Russia, Brazil and other countries.

Part of the reason behind this is China’s too high exchange reservers. Here’s more on what’s happening:

The thorniest problem in economic relations between the United States and China is getting worse, just as the world’s two biggest economies prepare for a summit next week in Washington.

At issue is the imbalance in their financial relationship. China’s central bank said Tuesday that Beijing’s holdings of foreign cash and securities amount to $2.85 trillion – a jump of 20 percent over the year before – despite Chinese promises to try to balance its trade and investment relations with the United States and other countries.

[…]

Foreign exchange holdings are a broad measure of a nation’s economic links with other countries, reflecting exports and imports, investment and the flow of speculative “hot money” into local markets. Some reserves are helpful, and Asian nations in particular, stung by their financial crises in the 1990s, seek to keep a war chest for times of trouble.

But with China’s foreign currency holdings far exceeding those of any other country, it has been urged by the United States, International Monetary Fund and others to import more, allow its exchange rate to rise in value, and use some of the reserves, for example, to boost the purchasing power of Chinese citizens. Although some recent statistics have shown a move in that direction – the country’s trade surplus has narrowed for the past two years, as China’s imports grew faster than exports – the surge in reserves is a pointed reminder of the difficult questions that still face Hu and Obama.

[…]

The renminbi, also known as the yuan, is considered by a wide range of economists to be undervalued in relation to the dollar, and China keeps tight control of the exchange rate, in part to protect its powerful export industries.

[…]

An administration official, who spoke anonymously because of the sensitivity of discussions between the countries, said that it is an ideal time for China to let its currency float more freely. The lack of progress shows that the country’s export lobby still has the upper hand, the official said.

On the one hand we want China to let the value of the Yuan to float freely and find it’s proper value. On the other hand China wants to keep tight control and wants to start using that tightly controlled money it trade with others instead of the US Dollar. But China has to worry about its US holdings at the same time. And as long as they keep such tight control, it’s less usable as a trade currency. We’re in a strange dance together. But China plays rough. Let’s hope we and other parts of the world are up to the challenge.

In sad news, David Nelson of Ozzie and Harriet fame died. In other sad news, exactly one year ago today the Haiti 7.0 earthquake hit, and they’re still not much better off. But back with a bit of good news, mentioned yesterday, Tom DeLay got sentenced with 3 years of jail time.

That’s a bit of the news. Chime in with what you’re reading.

World in Chaos Open Thread

Brain fog

My brain isn’t working too well this morning, thanks to a nasty head cold. Still I got up as usual and surfed around to see what’s going on in the world. Is it just me, or are things even more chaotic out there than usual? Let’s see…

Robert M. Morgenthau, district attorney of Manhattan has indicted Li Fang Wei, a Chinese businessman, for selling nuclear raw materials to Iran and using U.S. banks such as Bank of America, Citibank and J.P. Morgan Chase to launder the financial transactions. Supposedly the banks were unwitting accessories. Hmmm… why don’t I buy that excuse?

Chinese and Russian “cyberspies” have infiltrated the U.S. electric grid.

Authorities investigating the intrusions have found software tools left behind that could be used to destroy infrastructure components, the senior intelligence official said. He added, “If we go to war with them, they will try to turn them on.”

Officials said water, sewage and other infrastructure systems also were at risk.

Now isn’t that special?

Pirates have captured a U.S. flagged ship and taken 20 American crewmembers hostage off the coast of Somalia.

The container ship, the Maersk Alabama, was carrying thousands of tons of relief aid to the Kenyan port of Mombasa, the company that owns the ship said.

The ship was taken by pirates at about 7:30 a.m. local time, 280 miles southeast of the Somali city of Eyl, a known haven for pirates, a spokesman for the United States Navy said. It is owned and operated by Maersk Line Limited, a United States subsidiary of A.P. Moller – Maersk Group, the Danish shipping giant.

The Maersk Alabama was at least the sixth commercial ship commandeered by pirates this week off the Horn of Africa, one of the most notoriously lawless zones on the high seas, where pirates have been operating with near impunity despite efforts by many nations, including the United States, to intimidate them with naval warship patrols.

The death toll continues to rise after the earthquake in Italy.

At least seven strong shocks hit the region during the night, killing one person and waking people from their sleep in the tent shelters.

The tremors brought down masonry from already damaged buildings and one tremor was felt as far away as Rome.

President Obama has finally returned to Washington, D.C. after his triumphant global tour. Will that help or hurt our economic situation? Will he finally wake up and realize that Geithner and Summers are wrecking our economic system in order to save their rich friends? Or does he already know that and think it’s a good idea? Will Obama’s wooing of Muslims in Turkey make a difference or is it “just words?”

A “turning point,” a “fresh breeze” — even a “light in the darkness.” Arabs and Muslims have been charmed by President Barack Obama’s first venture into the Islamic world.

Obama’s visit to Turkey this week was full of gestures calculated at showing he is a friend to Muslims, like his headliner sound bite that the U.S will never be “at war with Islam” and his mention of the Muslims in his family. Even throwaway lines like a comment that he had to wrap up a town-hall meeting with Turkish students “before the call to prayer” showed he was no stranger to Muslims’ way of life.

To many, the town-hall format for a meeting with students in Istanbul on Tuesday sent a significant message. The sight of a U.S. president being questioned by Muslims was dramatically different from the perception many had of Obama’s predecessor, George W. Bush.

What do you think? And what are you reading/hearing/watching this morning?

Tim Geithner Could Get Some Assistance at Treasury Soon

This is so exciting! Tim Geithner may get some help at the Treasury Department soon. President Obama has just announced three new Treasury appointments. From Reuters a short time ago:

President Barack Obama moved to fill three of the four most senior Treasury Department positions on Monday, including announcing his intent to nominate former department counsel Neal Wolin as deputy Treasury secretary.

Obama also named Lael Brainard, a Brookings economist, as undersecretary of the Treasury for international affairs and said he had decided to keep Stuart Levey as undersecretary of the Treasury for terrorism and financial intelligence.

Wolin and Brainard must be confirmed by the Senate. Levey was confirmed in his post in 2004 and is being asked to remain so does not require reconfirmation.

No word yet on whether they’ve found anyone to answer the telephones yet.

Let’s hope Wolin, Brainard, and Levey’s taxes are all paid up. Timmy really needs some help!

Another piece of news that might not be so good for Timmy and Barack:

There have been rumors and announcements from China about a new reserve currency.

And the IMF has said that it is considering printing hundreds of billions of dollars worth of its own currency.

Today, the two stories came together in a dramatic development. Specifically, the head of China’s central bank proposed making the IMF’s currency the world’s reserve currency, to replace the dollar.

Yikes!

This is an open thread.