How Microsoft does it

Yesterday, Microsoft announced it had made net income of $5.87 billion in the latest quarter, but had reduced its tax rate from 25% a year ago to 7%. Annualized, that would be about $4 billion incremental in tax avoidance just over the last year. You're probably saying to yourself, "Hey, I'd like to reduce my tax rate by 72% from 2010 to 2011, too! What are some tips from Microsoft on how I could do this?"

In the fine print of Microsoft's July 21, 2011 press release, you can find:

Our effective tax rates for the fourth quarters of fiscal years 2011 and 2010 were approximately 7% and 25%, respectively. Our effective tax rate was lower than the U.S. federal statutory rate primarily due to a higher mix of earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland, Singapore and Puerto Rico, which are subject to lower income tax rates.

Microsoft's tax avoidance strategy wasn't public knowledge until recently. New Is My Business reported on June 7, 2011:

Software giant Microsoft has reportedly been using three jurisdictions where it operates outside the United States — Puerto Rico, Ireland and Singapore — as tax shelters to reduce its federal tax bill, the Financial Times reported. 

The strategy is part of Microsoft tax planning methods, details of which the Washington-based company reluctantly disclosed to the Securities and Exchange Commission in its quarterly report filed last month. That was when the company revealed for the first time that most of the $50.2 billion in cash it has amassed is held in so-called “low-tax regional centers.”

If you are wondering why giant American corporations aren't reinvesting their giant retained earnings in creating American jobs, or at least distributing them to American shareholders as dividends or stock buybacks, well, one reason is because they've declared that they just happened to make most of this cash in certain overseas tax havens. Hence, 84% of Microsoft's $50 billion trove of cash is officially overseas, and can't be repatriated without paying American taxes on it which means that American shareholders can't get it and thus can't pay taxes on their capital gains, either. This kind of tax policy would make sense to Rumplestiltskin, Hetty Green, Silas Marner, and Scrooge McDuck, but it doesn't seem to make much sense to me.

For purposes of tax avoidance, Puerto Rico is considered, by the U.S. government, to be an untouchable foreign tax haven, because it's crucial, as Admiral Mahan explained in the 19th Century, for the U.S. Navy to hold Puerto Rico to protect the approaches to the future Panama Canal from the Kaiser's High Seas Fleet and the new dreadnoughts of the Royal Navy. Or something. The U.S. doesn't actually have any military bases in P.R. these days, nor does it have the Panama Canal, but it still has lots of tax breaks for Puerto Rico.

Microsoft has had presence in Puerto Rico for more than two decades. The eastern town of Humacao is where it operates its only wholly owned manufacturing facility in the world. Out of that plant come the millions of software and game CDs and DVDs ...

Furthermore, the Financial Times also reported that some 62 percent of Microsoft’s international income came from the three aforementioned manufacturing hubs last year, even though the two island nations and Puerto Rico only accounted for 42 percent of the company’s international revenue. 

A May 26, 2011 article in Caribbean Businss by Jose Alvarado Vega gave some details on Microsoft's Puerto Rica operation that helps Microsoft avoid perhaps a billion or two in taxes per year:

Microsoft Humacao plant poised to capture growing software market 

Microsoft's manufacturing plant in Humacao is not only key to the company's regional and global distribution of disk-based gaming and office-computing software, but also is looking forward to Internet-driven, interactive and unified telecommunications media products. More than 90% of all personal computers used throughout the world are run by Microsoft software. Chances are that such software was made and passed quality-control tests at the 123,000-square-foot plant, a continuation of the company's 21 years of innovation-driven manufacturing in Puerto Rico. 

Julián Herencia, general manager of Microsoft Operations Puerto Rico LLC, which runs the plant, said the facility shows Microsoft's long-term trust in the local workforce. ...

The plant, built in 2006, makes 80 million CD and DVD software units a year, and has 185 full-time permanent employees. ...  

Herencia didn't rule out lobbying for moving some research & development, now done entirely at Microsoft's headquarters in Redmond, Wash., to Puerto Rico. [I don't know if the "entirely" done in Redmond part is true, but the point is that Microsoft isn't doing much in Puerto Rico other than having a 185 people replicating CDs, plus the modest sales office in suburban San Juan I mentioned yesterday. Yet, Microsoft has recently started to claim to make several billion dollars in profits annually in Puerto Rico.]

Now, I get it! You see, Microsoft has over 40,000 employees in the state of Washington in the United States. But they don't actually physically burn on to disks the software they develop. Instead, Microsoft, has a manufacturing plant in Puerto Rico employing 185 people that gets credited in Microsoft's books with a lion's share of Microsoft's Western hemisphere revenue and profits. It's making disks that's the really important thing that Microsoft does.

Despite all you've heard about Microsoft being a software company, they are actually a manufacturing company, at least for tax accounting purposes. To the IRS, Microsoft is basically a Puerto Rican, Irish and Singaporean industrial goliath with a money-losing R&D outpost in Redmond, WA.

I'm picking on Microsoft because they are in the news and they are easy to pick on because very few people like Microsoft. But MS barely made the top ten in piling up cash overseas to avoid paying American taxes. Microsoft didn't invent this tax avoidance technique. Judging by how much their tax rate has fallen over the last year, they only recently jump heavily on this bandwagon.

As for Puerto Rico, it's a really odd story. Imperialism has been in bad odor for most of the last century. There are now a couple of hundred independent countries. But, not Puerto Rico, even though it's a much more plausible nation-state than many existing counties. It's an island. They all speak Spanish. Emotionally, Puerto Rico is a nation with its own Olympic team.

But the way it works is that big American corporations and politicians team up to bribe Puerto Ricans via tax breaks for big American interests into staying part of the American empire, all at the expense of average American taxpayers. Any American who would call for kicking Puerto Rico out of America would be branded a racist, so the thought never even crosses anybody's mind.

It's another one of these Hi-Lo teamups against the Middle that have been so successful in recent decades.

A reader writes:

I happen to have a bit of inside knowledge on this one. MS ships blank
disks to their overseas operations, which then burns them onsite for resale
to foreign markets. MS then shows US income for the 10 cents or so the disk
costs, while the "profit", that results from the completed packages is
booked to foreign operations in that country. Pretty slick. 

How do I know this? 'Cause Bill himself told me in a meeting before I
retired from MS in 199X.

My old articles are archived at iSteve.com -- Steve Sailer

Tax amnesty?

From a Washington Post article on Microsoft's quarterly earnings announcement:

Net income in the fiscal period that ended in June rose 30 percent to $5.87 billion, or 69 cents a share, from $4.52 billion, or 51 cents, a year earlier, Redmond, Washington-based Microsoft said in a statement today. That beat the 58-cent estimate of analysts surveyed by Bloomberg. 

Sales rose to $17.4 billion, compared with the $17.2 billion average projection. ... 

Microsoft said its tax rate fell to 7 percent from 25 percent a year earlier because more earnings were taxed at lower rates in Ireland, Singapore and Puerto Rico, Microsoft said. 

“Our effective tax rate was lower than the U.S. federal statutory rate primarily due to a higher mix of earnings taxed at lower rates in foreign jurisdictions,” Microsoft said in the statement.
The rate explains much of the reason why results surpassed predictions, Chief Financial Officer Peter Klein said in an interview.

Can I get my personal income taxed at the rate of some random foreign country? For example, I became a lifetime foreign member of the Ballybunion Golf Club in 1987, so therefore I should be able to take advantage of any tax breaks Ireland happens to be offering, just on general principles. Granted, I've only been back to Ireland once since then, but I bleed green (at tax time, at least). Doesn't Ireland have no income tax on creative artists? I don't think of my works as creative, but my detractors have claimed that, so I think my income should be tax free. (Now that I think about it, that's pretty creative. Creativity at tax evasion ought to count.)

Back in 2004, there was a "tax holiday" that allowed American firms to "repatriate" cash they'd nominally piled up in overseas tax havens without paying American corporate profits tax rates on it. Now, there's apparently $1.2 trillion piled up abroad and American firms are trying to get another tax amnesty.

And exactly how much work does Microsoft actually get done in Puerto Rico? 

Microsoft Building

This building is located in Metro Office  Park, marginal PR Road 2 Guaynabo  is an office complex with 64,000 sq. ft  Class-A office space. Parking is 1,180         . cars. The owner is Muñoz Holding and the Bldg. complex is completed.  Parking is 3/1000 No-Rent including  with office rent. The Office complex  is only for rent. The property is available now.

Somewhat to my surprise, there actually is a five story building in a nice suburb of San Juan with a Microsoft sign on it, but the address on Microsoft's website for Microsoft Puerto Rico ("Suite 5000") suggests that Microsoft doesn't use the whole building, which is owned by somebody else. A real estate agent in Puerto Rico advertises 64,000 square feet of the Microsoft Building for rent, "available now."

Twenty minutes of Googling (or even of Binging) would suggest that Microsoft does not actually "earn" in Puerto Rico (in any reasonable sense of the term) a material portion of the $2 billion or so in profits it's booking every month these days. But, apparently, Microsoft's tax lawyers have persuaded the IRS that they do.

I ought to be able to declare my house The Commonwealth of iSteve and then rent it to Apple as its official global headquarters and all purpose tax haven.

Why does the U.S. government let itself get cheated out of taxes by its own Commonwealth? How much exactly are we bribing Puerto Rico in tax breaks to be part of the American Empire, and why? What is owning Puerto Rico doing for us, anyway? Back in the 1890s, Admiral Mahan suggested grabbing it to guard the approaches to a future Isthmusian Canal, but we don't even own the Panama Canal anymore.

No wonder Puerto Rican independence only gets about 4 percent in referendums, even though Puerto Ricans are happy to cheer for their own national Puerto Rican team in the Olympics:

Puerto Ricans Treat Victory Over U.S. Team Like Gold
August 16, 2004

SAN JUAN, Puerto Rico (AP) - Puerto Ricans celebrated the island's historic 92-73 thumping of the U.S. basketball team at the Olympics, treating the victory like gold. 

Islanders honked horns and waved Puerto Rican flags after Sunday's game, which was only the third Olympic loss for the United States and its first since adding professional players. 

"This is like winning a gold medal," teacher Carmen D. Torres said from the north-coast city of Arecibo. "I expected the Puerto Rican team to play well, but the fact that it defeated the world's greatest team is like a dream. I still don't believe it."

My old articles are archived at iSteve.com -- Steve Sailer

"Nobody knows anything"

Back in 1982, screenwriter William Goldman famously said "Nobody knows anything" about how well movies will perform at the box office. But, a whole lot of smart, hard-working people have worked hard on this question, and the variability has been reduced over time via a number of means. More movies are sequels or remakes. More movies are planned from the beginning to be sequel-amenable. Talent gets locked in for potential sequels at the initial contract stage, with options with escalating payments. 

Movie budgets are secret and the numbers that get into the press are driven by various agendas (e.g., make it sound superstupendous before it comes out, make it sound less ruinous after it flops, etc.) But, you can kind of see money spent on the screen, especially on standardized products like sequels.

All this makes being a suit a slightly more scientific job. The big question becomes: Can you keep milking a particular franchise by constantly upping the budget faster than audience boredom sets in, or do you cash in now and burn your last audience by skimping on budget and time. For example, Jurassic Park III ($93 million budget) was a clear cash-in move: Spielberg handed direction off to somebody else and the film felt like it ended before the super-colossal pterodactyl attack that would have put it over the top. (The low budget parts of JPIII are actually quite good, with William H. Macy and Tea Leoni doing a screwball comedy of remarriage.) Not surprisingly, in the decade since, there hasn't been a Jurassic Park IV.

On the other hand, with Pirates of the Caribbean, they keep spending gigantic amounts hoping to keep the franchise alive. 

We can look at the Harry Potter budgets reported on The-Numbers as an unreliable but at least apples-to-apples comparison to see why the final Harry Potter movie seemed so skimpy. 

#1 Harry Potter and the Sorcerer's/Philosopher's Stone, 11/2001: $125,000,000 budget -- Off to a good start

#2 Chamber of Secrets, 11/200212 months since the previous release: $100,000,000 -- Only a year and a $100 mil is skimpy for this kind of sure thing; director Chris Columbus retired from the series after the ordeal of getting out two movies in 12 months.

#3 6/2004, Prisoner of Azkaban, 19 months: $130,000,000 -- Everybody goes on and on about what a great job the director Cuaron did, but more money and more time didn't hurt.

#4 Goblet of Fire, 11/2005, 17 months: $150,000,000

#5 Order of the Phoenix, 7/2007, 20 months: $150,000,000

#6 Half-Blood Prince, 7/2009, 24 months: $250,000,000 -- That's a lot of money, fifth most all time according to this list among movies already released; and it's a reasonable amount of time. Guess what, it was highly enjoyable. This revitalized the series and set it up to cash in hugely on the last book.

#7a, Deathly Hallows - Part 1, 11/2010, 16 months, some fraction of $250,000,000 -- The producers decided to spend $250,000,000 on making J.K. Rowling's 7th novel as one long production, but then they decided to release it as two separate movies totaling 276 minutes (compared to #6's 153 minutes). Despite lacking in dramatic action, this one clocked in at 146 minutes. It looked great. They clearly spent a lot per minute, although not quite as much as the previous movie. I think the decision to split #7 into two movies was fine. There were no more skippable subplots and children can't be expected to sit through a 4 hour plus movie. What's not fine is that the producers thought they could make two movies for the same cost and in the same duration as their sixth installment.

#7b Deathly Hallows - Part 2, 7/2011, 8 months, the remainder of the $250,000,000, perhaps not even $100,000,000 if expenditure was proportional to time between releases -- This one is the shortest of all eight movies at 130 minutes, and the long-awaited climactic scene looks weak. Charitably, you can say that the filmmakers ran out time and money to make the finale as good as it should have been. Uncharitably, you can say that this is where they finally cashed in big time.

My old articles are archived at iSteve.com -- Steve Sailer

A not worthwhile Canadian initiative

Canada's population has been steadily growing due to immigration. It's now up to 34 million from 27 million in 1988. Immigrants have, not surprisingly, stayed away from Manitoba and Saskatchewan, while crowding into Toronto, Vancouver, and Montreal. 

Canadian Liberal Party senior statesman Robert Kaplan enthusiastically explains in the Toronto Globe & Mail that tripling the population of Canada would be terrific for Canada's ruling caste.

Fulfilling Laurier's vision: A Canada of 100 million 

We don’t have enough people. The Liberals should stand today for a strategic immigration policy of reaching 100 million by 2100. 

If we become a nation of this size: 

1. Our culture would be less strained to survive. Our arts, books, magazines, newspapers, movies and music, electronic media, with more than triple the producers and consumers would become self-sustaining. They might even become better. Our comedians could be funnier. Our elusive search for definition as Canadians could be realized.

A Canadian = A random foreigner. 

The thinking behind this is that if the population of Canada were 100,000,000, then there would be lots of cool media jobs for funny Canadian Scotsmen and Jews, whose media products would be purchased (mandatorily, under the Canadian Content Quota laws) by the teeming new masses of unfunny Muslim immigrants.

He's a man with a plan!

2. Canadians could better take up our vast opportunities. Domestic markets that justify branch plant operations today could attract Canadian entrepreneurs from the start. We would be a serious stand-alone market. Truncation could be reversed. Foreign capital coming in would be more challenged by growing Canadian domestic capital. We could still welcome foreign investors, but we would give them more of a run for their money, and see our economy benefit.

It's hard to get a billion dollars in Canada, which peeves Canadians with merely a hundred million dollars.

3. On the world stage, our skills at exercising soft power by finding project partners and leading by example could be supplemented by some “hard” power. We could address and solve problems single handedly if we wanted. Our military could be comfortably triple its present size, as could our aid programmes.

Kaplan's view of existing Canadians is kind of like Gen. Douglas Haig's as he was planning the First Battle of the Somme in 1916: Canadians are okay, I guess, but they'd be better if they could provide more cannon  fodder.

Under Kaplan's plan, Canadian political leaders could, just like American leaders, decide, off the top of their heads, to invade or bomb countries they don't like. What's the fun of being a national leader if you don't get to shoot cruise missiles at  countries that annoy you?

4. We Canadians believe we stand for something good in the world, that we have some values and some institutions worth promoting in the interests of international social harmony, peace and prosperity. At 100 million, the world audience might be more alert.

Nobody ever pays attention to America Jr. 

Kaplan then explains that while global warming is all so sad for, say, Bangladeshis, Canada  should do all it in its power to speed it up. It's damn cold in Canada.

Before turning to some conditions of the strategic plank I recommend, two points need to be made. Firstly, Canada’s ecology is changing. We oppose global warming for good reasons and should continue to do so, but we can see it coming, and it brings certain advantages to Canada. We will have much more arable land and a much broader range of foods that we will be able to grow – foods that the world needs. This is already happening. More farmers are needed. Also Northern opportunity is becoming, and has become, viable. Northern waterways are now accessible eight months a year, a window that is increasing. We need cities up there, and people for them.

How's that working out in Siberia, anyway? Is Magnitogorsk a hot real estate market? A commenter responds:

So much for all our empty talk about sustainability and the environment.

Let's bring a bunch of people over from relatively low energy consumption countries and settle them in the frigid Great White North . . . with its need for central heating, long distances, and our addiction to energy consumpton - that ought to be great for that carbon footprint that the Liberals are so concerned about. I guess that greenhouse gases are only bad when its us Albertans who are generating them - everyone else is exempt - especially if they vote Liberal. 

How exactly does this fit with the supposedly "green" side of the Liberal party's platform?

Kaplan continues:

Secondly we should not ignore the growing world population and the growing number of refugees worldwide. It is not inconceivable that world organizations may begin telling us to increase what we now consider to be a generous immigration policy. Today’s limits are stingy for us. We could get ahead of this and gain world respect for doing so. ...

We would also probably need to direct some immigrants and commit them to stay somewhere for periods of as much as 10 years. We would do this to hold support for the policy in our “crowded” cities, to satisfy some provinces as to their proportionate place in Confederation and to prepare for the optimum population distribution for our long-term opportunities. The natural preference some immigrants might have to be, for example, near their existing ethnic community in Canada might need to be challenged. Are there potential immigrants willing to accept such conditions? The fact is that there are hundreds of millions of them. Permission to come to Canada could be the greatest event for their family in its history, as it was for most of us. Such immigrants would not be subjected to the isolation of many of our foreparents, where a young couple could be completely alone on the Prairies, miles from other humans for months at a time. With the Internet, Skype, radio and television, there would be a lot to compensate for accepting conditions.

So, the idea is to round up all the new Bangladeshi immigrants each time they sneak back to their cousins' neighborhood in Toronto and send them back to their Gulag encampments in Moose Jaw and Medicine Hat. Yeah, I can see that working out. A commenter responds:

He may envisage forcibly filling Saskatchewan or Inuvik with immigrants, but it would be immediately challenged to the Supreme Court, probably successfully. Thereafter, Toronto's borders and traffic jams, already the continent's worst, would continue to grow. 

Another commenter writes:

Oh Bob, dear Bob,  

Do you really think it's possible to increase the amount of arable land by merely raising the temperature of the air? Ah, if only it were so simple. Vast tracts of the country are covered by the boreal forest, which for the most part sits on a thin layer of acidic soil, which in turn rests on bedrock. Canadian Shield that is, Bob. Good luck getting your plough to penetrate solid granite. Good luck getting wheat or corn to germinate in acidic soil. And even if by some miracle you solve those problems, what happens if climate change makes Canada's climate drier? Ask any Canadian farmer, in the middle of this heat wave, if he'd prefer drier conditions. Anyone for drought, Bob? 

And I see that you also want to build big cities way up north? On permafrost? [They'd sink.] Bob, that's where I stopped reading. That's where I decided that your article is nothing more than a very late April Fools' joke. 

The 321 comments are pretty funny.

My old articles are archived at iSteve.com -- Steve Sailer

Michelle Bachmann's migraines

From the front page of the Washington Post website:

Will Bachmann rise under pressure?

Philip Rucker and Sandhya Somashekhar

Questions that surfaced about her migraines come at a critical juncture for her presidential campaign.

• The Fast Fix: On her migraines

By the way, did you know that Michelle Bachmann suffers from migraines? Just checking ... 

Cough migraines Cough.

Look, I'm all in favor of the intimate health details of anybody who wants to be President being blared everywhere. 

Not that I think the President's health is all that important anymore. It's not like the early 1960s and JFK shows up for a summit conference with Khrushchev all doped up for one of his many ailments and so Khrushchev thinks JFK is a weakling and sets the Cuban Missile Crisis in motion. Thank God we don't live in that world anymore. I think we live in a world more like that of James Garfield. The poor man lingered on his deathbed after being shot on July 2, 1881 until his death on September 19. And we all know the many disastrous consequences that almost ensued from that, such as ... Well, I can't think of any off hand, but there was probably something important involving bimetalism. 

Anyway, my point is that if you want to be President and thus be famous forever (like, say, James Garfield, who had less than 4 months in office before getting shot, but we still all know his name), we, the voters ought to get to know about you. So, I'm all for the press inquiring into every candidate's health. 

But, that mean's every candidate -- not just the ones the media doesn't like -- all the candidates, like JFK and Barack Obama. As you may recall, John McCain released 1100 pages of his medical records, while Barack Obama released a one-page summary. It appears to me from reading Obama's memoirs that the President suffered some sort of mental health problems in the early 1980s and in 2000. Did he seek medical attention? 

Answering those kind of questions is exactly the kind of awareness-raising that running for President ought to entail. My experience going through life is that a whole lot more people than you might think run into mental health problems at various points, and that seeking help sometimes helps. 

For example, one of my readers pointed out to me a few years ago that Obama's account of his depressed mood after losing the 2000 House primary included a phrase common in cognitive behavioral therapy. I found his observation interesting, in part because I had never heard of cognitive behavioral therapy. So, I read up on CBT, a very level-headed form of talk therapy that tries to talk people out of the mental ruts they're stuck in, and it sounds like a good thing, something that could help some number of people, if they ever heard of it (which I, a relatively well-informed 48-year-old, hadn't ... until somebody brought in up in the context of a candidate for the White House)

I have no idea if Obama tried CBT, but, if he did, who better a spokesman for how it can change your life than the President?

But all that sort of thing is off-limits, because he's Obama. 

My old articles are archived at iSteve.com -- Steve Sailer

"Harry Potter and the Deathly Hallows - Part 2"

In terms of complexity, the eighth and final Harry Potter movie is like the other ones, only more so, because they have to bring every distinguished actor in London of a certain age out for an abbreviated final bow in which he contributes a crucial plot point in his character's obscure regional accent using words that nobody has said out loud in 300 years. From my review in Taki's Magazine:

Here’s what it’s like inside a middle-aged mind watching Part 2 as yet another great character actor gets his 15 seconds of fame (I later figured out at home from IMDb.com that this was Gary Oldman reprising his 2004 role as Sirius Black):

Hey, it’s that guy. 

You know, whoshisface, the one nobody can remember, the guy who was Sid Vicious and Lee Harvey Oswald. 

Oh, yeah, of course! That’s Henny Youngman playing Curious Yellow. 

Or something like that. 

What did he just say? 

It sounded like, ‘If there’s a bustle in your hedgerow, don’t be alarmed now; it’s just a spring clean for the May queen.’

But it probably wasn’t. 

Uh-oh, Henny’s gone already. 

Now who’s this?”

But that was all to be expected. What's not expected about this eighth movie was something that nobody else is writing about.

Now, I usually don't make a big deal about whether my thumbs up or thumbs down view on a movie is different from everybody else's thumbs up / thumbs down. There are usually more interesting things to say about a movie than whether you liked it or not. But, in this particular case of the last Harry Potter movie, I'm right and everybody else is wrong, and I can explain why.

Read the whole thing there.

My old articles are archived at iSteve.com -- Steve Sailer

The Harry Potter Effect?

I went to the Henley Regatta, England's crew racing championship, in late June 1987. It was great -- rich young women wearing hats four feet in diameter. It was like the Ascot Enclosure scene in My Fair Lady come to life, a living cartoon of English toffs at their toffiest. You don't travel to have your stereotypes undermined, you travel to have your stereotypes triumphantly vindicated, and Henley it terrific at that. Also, every so often, some guys row by, in case you are in to that sort of thing.

England has a whole bunch of these kind of Bertie Woosterish sporting / social events in the summer. Lately, they've gotten extremely expensive. Here's a recent article by Harry Mount in The Telegraph:

The Global Elite Has Stolen the English Summer 

... the English summer and social calendar has, in recent years, been quietly – but decisively – globalised and commercialised. The rackety, amateurish, faded charms of high English summer have been replaced by a professionalised, slick operation, supercharged by oceans of international cash. London is the new Rome of the globalised empire, and the English summer has fallen meekly into the imperial line. ... 

For the super-rich, the world isn’t divided into countries any more; just rich and poor parts. And, like swallows, their favoured rich parts in summer are now their English boltholes in the north. England should be proud to welcome them, proud that they have chosen us over Monaco or Biarritz. And even more proud that, rather than live in a globalised bubble, they are fascinated — fixated even — with the echt English events of the summer season. 

... Walk around the City — or Mayfair, natural habitat of the hedge fund — and you enter a new gilded Babel, where international bankers scoop up their billions in English, the international language. Britain now has a Wimbledon economy: we provide the charming venue, and foreigners come over to enjoy themselves on Centre Court. 

... Staggering new fortunes — far greater than those built by medieval English aristocrats, or Victorian English tycoons — have been accumulated across the world in recent decades. The collapse of the Soviet Union produced commodities and utilities empires in the 1990s. In India and China, the booming new market economies have spawned a fresh generation of billionaires. 

But these countries don’t have the right infrastructure for the super-rich: the racecourses, football pitches and tennis courts that host the most famous sporting events in the world, the Palladian country houses, the garden operas, the ancient private schools. England has all these things. And it also has the sort of secure political and economic structure that means the billionaires of Egypt and the troubled Middle East are pouring their billions into Britain. Sixty per cent of homes in London worth over £2.5 million are now owned by foreigners. 

So England has become globalised — but the old-fashioned clichés of typical Englishness have never been so popular. Arsenal, Chelsea, Liverpool and Manchester United have all been snapped up by Russians and Americans with money to burn. Harrods has gone to Qatar’s sovereign wealth fund; the Savoy to the Saudi prince Al-Waleed bin Talal. And here’s another paradox. This tide of foreign money into England, and the English summer season, has revived the ancient institutions and nostalgic rites that many English natives had long ago rejected as over-formal, affected and ever so slightly embarrassing. ... 

But it’s only the juiciest English cherries that the new billionaires pick. The Oval and Lord’s are packed, while county cricket goes to the wall. West End theatre and the opera at Covent Garden thrive, while regional theatres dim their lights for good. As provincial racecourses face bankruptcy, high-end racing has dodged the recession. At last week’s Derby, attendance was up by more than 6,000; hospitality sales soared by 25 per cent, as punters drank 14,000 bottles of champagne, 65,000 pints of lager and 35,000 glasses of Pimm’s. The English summer is no longer ‘sand in the sandwiches, wasps in the tea’ — as John Betjeman described it. It’s caviar on the smoked salmon, bees in the Bollinger. 

The international celebration of Englishness reaches new heights on sports day at the best English private schools. At Eton, the fourth of June now plays host to a United Nations of the richest parents in the world. Gone are the days when prep schools were the last word in austerity chic, when Molesworth warmed his frozen fingers on the only radiator at St Custard’s. Now Russian oligarchs fly in to sports days at Oxfordshire prep schools, landing their choppers on the rugby pitch. Again, though, it’s only the most expensive, ancient and famous English schools that get the moneybags treatment. Many of England’s lesser private schools — those dependent on recession-struck English parents — are closing down or making last-ditch appeals for their survival. Meanwhile the elite schools have never been so flush. In its annual appeal last year, Westminster School sought donations from old boys — including Nick Clegg and, incidentally, myself — for a £12,200 ‘planetarium projector’, a £5,000 ‘ultraviolet-visible spectrophotometer’ and a £25,000 set of theatre lights. 

An educational arms race has escalated among the global elite, who want their children at English schools and American universities. As our state schools plunge down the international league tables, the best English private schools cruise heavenwards into an altogether headier stratosphere. They have morphed into hi-tech luxury hotels, purpose-built to satisfy the new breed of international client. And, while the hedge-funder elite drive up school fees, house prices and the cost of a Wimbledon ticket, the Merchant Ivory vision of an English Arcadia is rigorously maintained: whether it’s strawberries and cream at Wimbledon, the top hat and tails dress code at the Derby, or the shorts, cap and blazer of the prep school uniform, frozen in the 1950s. 

Most of the English, though, have long since fled this gilt-edged wonderland for cheaper climes, like Tenerife and Florida. The English summer has never been so English. It’s just a shame that the English can’t afford it any more.

Was the Harry Potter phenomenon of the last dozen years, with its unapologetic Britophilia, more effect or cause of this trend? If you are some Russian oligarch or Connecticut hedge fund master of the universe, the one person you really fear is your 13-year-old daughter and her ability to ruin your family vacation by pouting and rolling her eyes. So, you tell her you're going to visit the home country of Harry Potter.

My old articles are archived at iSteve.com -- Steve Sailer

In a nutshell

From the NYT, a representative sample of contemporary thought:

School Discipline Study Raises Fresh Questions 

By ALAN SCHWARZ 

Raising new questions about the effectiveness of school discipline, a report scheduled for release on Tuesday found that 31 percent of Texas students were suspended off campus or expelled at least once during their years in middle and high school — at an average of almost four times apiece. 

When also considering less serious infractions punished by in-school suspensions, the rate climbed to nearly 60 percent, according to the study by the Council of State Governments, with one in seven students facing such disciplinary measures at least 11 times. 

The study linked these disciplinary actions to lower rates of graduation and higher rates of later criminal activity and found that minority students were more likely than whites to face the more severe punishments. ... 

In other words, minorities are more likely to get into trouble in school, to get into more severe trouble, to drop out, and to commit crimes after school. Ergo, as the rest of the article explains, white people need to shape up, STAT.

The study, which followed every incoming Texas seventh grader over three years through high school and sometimes beyond, joins a growing body of literature looking at how to balance classroom order with individual student need. 

Several experts said in interviews that the data, covering nearly one million students and mapping each of their school records against any entry in the juvenile justice system, was the most comprehensive on the topic yet. The report did not identify individual districts or schools.

A valuable study could, theoretically, be done comparing the Value Added in test scores of different disciplinary policies. My guess would be that strict order (e.g., KIPP) is most valuable for poor blacks and Hispanics, but a heavy hand eventually turns negative as we ascend the social scale to the most elite white / Asian schools, where progressive educational assumptions about students being self-motivated by curiosity and ambition work fairly well. But, apparently, this kind of analysis wasn't attempted. This article doesn't contain any information on the impact of troublemaking students on their classmates.

The findings are “very much representative of the nation as a whole,” said Russ Skiba, a professor of school psychology at Indiana University who reviewed the study along with several other prominent researchers.

My impression from test scores and imprisonment data is that blacks and Hispanics do better in life in Texas's conservative culture, compared to politically or culturally liberal places like D.C., L.A., and New Orleans.

... Several teachers and administrators in Texas were shocked to learn of the report. 

“That’s astronomical,” said Joe Erhardt, a science teacher at Kingwood Park High School in the Houston suburb of Humble, Tex. “I’m at a loss. 

Doug Otto, superintendent of the Plano Independent School District, said the data showed that “suspensions are a little too easy.” 

Why?

“Once they become automatic, we’ve really hurt that child’s chances to receive a high school diploma,” he added “We’ve got to find ways to keep those kids in school. Don’t get me wrong — we have to provide safe environments for all the other kids. But you have to balance it out and cut down the suspensions and expulsions.”  

Almost 15 percent of students, a vast majority of whom had extensive school disciplinary files, had at least one record in the juvenile justice system, according to the report. 

See, we have to be nicer to the 15% at the expense of the 85%. Why? Because the 15% are a minority while the 85% are a majority. And, as every enlightened person knows, minority rights come before the welfare of the majority, even if, as in this case, the minority is a self-selected minority of juvenile delinquents. Also, the minority of juvenile delinquents also tends to be racial/ethnic minorities, and thus punishing them for the good of majority violates the Prime Directive.

Minority students facing discipline for the first time tended to be given the harsher, out-of-school suspension, rather than in-school suspension, more often than white students, the study said. (The nature of the offenses was not noted.) A disproportionate number of minority students also ended up in alternative classrooms, where some have complained that teachers are often less qualified. 

Are you claiming that the more effective teachers, the ones with more on the ball, tend to be more effective at not getting stuck teaching classrooms full of juvenile delinquents? Next, you'll be telling me that Phil Mickelson's golf swing coach is better than the guys at my local driving range.

“What we really need to do is go in to those districts and see if these really are choices being made,” Mr. Skiba said. “We don’t really know enough about the reasons for African-American and Latino over-representation in school discipline."

I know, teacher! Ask me! Ask me!

"We have enough data to show that it’s more than just poverty and any greater misbehavior.

In other words, whites on free lunches are less trouble than blacks on free lunches. That's a recurrent finding -- that racial gaps in behavior still exist after adjusting for poverty.

The part about not "more than just ... any greater misbehavior" appears to be based on the assumption of racial equality. The article states above that "The nature of the offenses was not noted" so there's no evidence for that assumption.

"My guess is it’s very subtle interactional effects between some teachers and students.” 

It's those vicious white lady racist teachers who don't understand that the black kids go to black churches, which are more energetic than stuffy white churches, as the State Superintendent of Schools in California memorably explained a few years ago.

... While the study found links between school discipline and criminal activity, there is no way to know whether one caused the other.

My default assumption would be that a lack of school discipline is more likely to be causally associated with later criminality, but nobody's asking me.

Educators have long complained that many students, particularly from poor families, arrive in classrooms with problems far beyond academics that they have few tools to control. 

Why not try giving them more tools to control students?

A former alternative-education teacher in Texas, Zeph Capo still remembers the eighth grader who swore at teachers, threw books and pencils, and eventually was suspended and sent into the district’s disciplinary program. Mr. Capo said he did not know whether the student straightened out or slipped further. The study made him only more concerned. 

“Are suspensions the tool to improve student behavior and help them be successful?

I would think that suspending the disruptive students could help the non-disruptive students learn more, but what do I know?

"No, I don’t think that’s the case,” said Mr. Capo, now a vice president of the Houston Federation of Teachers who trains others in classroom management.

In other words, he managed to get the hell away from those little hellions and nows spends his days with other adults in a pleasantly adolescent-free environment. (Teachers are recruited from the ranks of the kids who liked school, so getting a staff job teaching teachers, which is the desired career path of most teachers after a few years on the frontlines, is a pretty stress free job. And the staffers like to keep it that way by discouraging teachers from sending troublemaking students to the office.)

“Sometimes there’s not a lot of choice left but to risk chaos and anarchy in your school. There are potential times when human beings have had it and they drop the hammer, and maybe the hammer crushes too far.”

In other words, the people, teachers and students alike, still stuck in the classroom with these brats should just suffer more in silence rather than send the little monsters to the office for us staffers to deal with. We staffers have important classroom management training Powerpoints to prepare, and therefore can't be interrupted by actual students.

As for the majority of students who aren't incessant troublemakers and might actually learn something if the minority of bad apples were sent away, well, too bad. If they wanted somebody to do a big study of their plight, well, they shouldn't be part of the majority.

My old articles are archived at iSteve.com -- Steve Sailer

The creativity of the old

Although we talk all the time about the young being creative, their obsession with what others think of them tends to make them slaves to social conventions. Indeed, there are things that nobody would even consider inventing until they reach a certain age: about, I would estimate, 87.

My 94-year-old father hands me a glass of reddish liquid. "It's a new drink I came up with," he says proudly.

I take a sip. It's ... different. It's a fruit drink, sweet but slightly acidic. The texture is thick, almost pulpy, but slipperier than orange juice. By the time I finish the glass, I'm starting to really like it. 

My dad asks, "Want another glass?"

"Sure. By the way, what is it?" I ask.

"Wine and applesauce."

My old articles are archived at iSteve.com -- Steve Sailer

Why the Chinese aren't good at basketball

With the retirement of 7'6" Yao Ming from the NBA, the Chinese are wondering why there aren't many other world-class Chinese basketball players. From the NYT:

While the United States develops players through an almost Darwinian process of natural selection in youth leagues, high school teams and colleges, China has a rigid, Soviet-inspired state network of athletic schools, coaches and bureaucrats that selects players as early as age 4. 

Yao, the son of exceptionally tall basketball players, 

Yao was, more or less, the result of a successful government breeding experiment at creating a basketball player. His 6'-7" father on the Chinese men's basketball team and 6'-3" mother on the Chinese women's basketball team were repeatedly encouraged to get together by Chinese basketball officials.

was a 5-foot-7 third grader when he was plucked by a local sports school for a life of endless drills geared entirely toward molding him into Olympic material. Every professional Chinese player has a similar body and biography. And yet, before and during the 30-year-old Yao’s reign, China has managed to reach only the Olympic quarterfinals. 

The Chinese government likes to win a lot of different Olympic medals, so they don't invest hugely in winning an expensive basketball medal.

The state recruiting strategy is rife with problems. Officials choose children from across the country based solely on how tall they are. “If height were the determining factor, we would be the best team in the world,” said Li Nan, 32, who works for a Beijing advertising agency and plays basketball in his free time, noting that every member of the national team is 6-9 or taller.

That's tall! Way too tall for a good team, in fact. It would be interesting to see how much average height in China has gone up over the last 40 years.

But youth and height, as any N.B.A. fan knows, do not alone predict victory on the court.

“At age 10, you can’t identify the next Allen Iverson,” Bob Donewald Jr., the American coach of China’s national team, said in a phone interview. Nor the next Derrick Rose, the N.B.A.’s most valuable player last season, who stands 6-3.

No, I think this is more backwards. You can identify quickness very early, but it's a crapshoot how tall a quick 10-year-old will grow. For example, point guard Sebastian Telfair was rated the top 4th grader in the country and went on to be a high school star and an NBA lottery pick straight out of high school and be handed $18 million by a shoe company. But as his 6'2" NBA star cousin Stephon Marbury unkindly pointed out at the peak of Telfairmania in 2004, Telfair stopped growing at 5'-11" and couldn't dunk. So, Telfair has been at best a journeyman in the NBA.

To be an outstanding NBA guard, it's helpful to not be particularly tall when you are young so that you don't coast on the advantages of your height; but then keep growing. The American system just chews up and spits out a vast number of boys who were good young guards, but who never reach NBA height.

“What’s amazing is that in a country of 1.3 billion I can’t find a point guard,” he said. 

A case in point is Shanghai, population 22 million, which picks a maximum of 30 people for its club team. “If you’re not selected, there is no coaching, no practices and no training,” Donewald said. “China is filtering through guys and cutting them off so early there’s no way for them to get better.” ...

Those who do play on public courts are in their 20s or older, Donewald said, reflecting society’s traditionally single-minded focus on education. That means most children spend their days and nights studying for tests, not playing pick-up games in the park or practicing in after-school programs.

So, the reason the Chinese aren't very good at basketball is because they are too busy studying for their math tests.

My old articles are archived at iSteve.com -- Steve Saile

Guardian: The Beckhams have too many children

The Guardian takes time out from whooping the anti-Murdoch brouhaha to address today's most pressing issue:

Beckhams a 'bad example' for families 

With a fourth child, the couple have joined the ranks of the irresponsible, population experts say 

David and Victoria Beckham may have been overjoyed to welcome their new daughter, Harper Seven, last week but, according to a growing group of campaigners, the birth of their fourth child make the couple bad role models and environmentally irresponsible. 

Background for non-Brits: David Beckham was the most famous soccer player of a decade ago. Victoria Beckham was Posh Spice in the Spice Girls. In celebrity wattage, they are roughly the British equivalent of Brad Pitt and Angelina Jolie (although, in contrast, they are married).

In an increasingly chavified England, they are the chief exemplars of the old English idea that celebrities should dress elegantly and often rather formally. (I would guess, off the top of my head, that Mrs. Beckham, who had previously given her husband three sons, wanted to keep having children until she had a little daughter to play dress up with, a common maternal desire.) Beckham's jersey number is 7, hence the middle name.

They appear to be healthy, good-looking, extremely rich, focused (Beckham, for instance is a good but not great natural athlete -- instead, through practice, he made himself the best in the world at bending free kicks [Bend It Like Beckham], a skill rather like a top golfer's), relatively tasteful (by the standards of footballers and pop stars), and have managed to live in the center of the British tabloid maelstrom for quite a few years with only a moderate number of scandals and without melting down under the stress.

In other words, they are likely to have, on average, pretty good genes. The fact that they have been making copies of those genes does not strike me as an occasion for fear and loathing.

As the world's population is due to hit seven billion at some point in the next few days, there is an increasing call for the UK to open a public debate about how many children people have. 

Now the Green MP, Caroline Lucas, has joined other leading environmentalists in calling for the smashing of what TV zoologist Sir David Attenborough has called the "absurd taboo" in discussing family size in the UK. 

Lucas said: "We need to have a far greater public debate about population, whether it focuses on improving family planning or reducing global inequality – and looking again at how we address the strain on our natural resources. The absence of an open and honest discussion about this issue means most people don't give much thought to the scale of global population growth in recent years. In 1930, just one or two generations ago, the world's population stood at around two billion. Today it is around seven billion, and by 2050 it is projected to rise by a third to 9 billion. 

"We live as if we have three planets instead of just one. It is interesting that public figures, environmental groups and NGOs in general have tended to steer away from population to the extent that it's become a taboo issue. The horrific consequences of China's one-child policy and of other draconian efforts to regulate procreation have, for many, rendered discussion of the subject completely unpalatable. Yet as long as an issue remains a taboo subject where no one talks about it, then there's very little chance of finding the solutions we need."

I don't think the taboo in recent years on discussing population growth has much of anything to do with China and has everything to do with whose populations are growing: i.e., people who don't look like the Beckhams. Recall, for example, in all the write-ups about Haiti after the 2010 earthquake how almost everybody, except Jared Diamond and myself, danced around the Haitian population growth problem. Similarly, the U.N. recently issue population projections saying that the population of Nigeria would be over 700 million by the end of the century. You'll notice the deafening silence over that.

It is a view that is being pushed by the UK-based Optimum Population Trust, whose chief executive, Simon Ross, is calling for the government to tackle the UK's high rates of accidental pregnancy and to give child benefits and tax credits only for the first two children.

Because the Beckhams would clearly have had fewer children without the tax breaks.

"That would send a clear signal that the government will support sustainable families, but after that you are on your own," he said. "There is a big issue there, family planning is cheap, yet many people don't use it properly and accidental pregnancy rates are very high. We need to change the incentives to make the environmental case that one or two children are fine but three or four are just being selfish. 

"The Beckhams, and others like London mayor Boris Johnson, are very bad role models with their large families. There's no point in people trying to reduce their carbon emissions and then increasing them 100% by having another child," he said. "England is one of the most densely populated countries in the world and the fastest-growing in population terms in Europe. In 15 years we'll have an extra 10 million people here."

And that is the fault of the Beckhams and the Johnsons? In reality, the cause of Britain's population growth is the I-word that is missing from this article. When poor people immigrate from a poor country to a rich country, one of two things, basically, can happen. Either they assimilate economically, and thus emit more carbon, or they fail to assimilate economically.

Attenborough has attacked the last two UN climate summits in Cancún and Copenhagen for ducking the population issue. Giving the President's Lecture at the Royal Society of Arts in March, he made a passionate speech about how the world's baby-making was damaging the planet and called for every country to have a population policy. "The sooner we stabilise our numbers the sooner we stop running up the down escalator," he said. 

"Fifty years ago there were about 3 billion people on Earth. Now there are almost 7 billion – almost double – and every one of them needing space. There cannot be more people on this Earth than can be fed." 

The population debate has often been overshadowed by what is seen as the disastrous and often inhumane experiment by China, with its notorious one-child policy, and with sensitivity about being seen to criticise birthrates in underdeveloped countries. But campaigners point to the fact that it is the populations of the developed world who use the vast majority of the world's resources.

Lucas said the Green party was not afraid to raise the subject because it was "fundamental" to wellbeing. "The lesson to be learned from China is surely that efforts to curb population growth in a way that restricts individual liberty are dangerous and come at huge human cost," she said. "Policies that focus on increasing access to birth control for all who want it, reducing poverty and inequality, improving food security and tackling environmental degradation are where we should be focusing our attention.

I suspect the Beckhams have adequate access to birth control. In 2010, I called for one of the 10,000 foreign non-governmental charitable organizations operating in Haiti to announce a policy of making Depo-Provera contraceptive shots available for free to any Haitian woman who so requests.

This suggestion did not sweep the media.

Now, I realize that one part of the underlying motivation for this kind of article is driven by concern over the high population growth rates in black Africa and in the more backward parts of the Muslim, Hindu, and Latin worlds. The reasoning at The Guardian might be something like: "We need to do something to persuade people in villages in the hinterland of the Congo to have fewer children, but we can't actually mention the real problem, because we'd be roasted alive as racists, so what we'll do is pick out some rich white family and denounce them, and eventually the message will seep through to villages in the hinterland of the Congo. It's a simple, can't-fail plan!"

Or, I may be giving all too much credit to Guardians for intelligence, and they are simply motivated by the standard Who? Whom? emotions.

My old articles are archived at iSteve.com -- Steve Sailer

Carmageddon

In L.A., you can't talk about the weather because it's boringly nice, so the main subject of small talk that binds people together is complaining about the traffic. So, when it was announced a few months ago that the San Diego Freeway from the San Fernando Valley to West LA was going to be shut over the weekend to knock down part of the Mulholland Bridge as part of widening the freeway, it became an instant source of obsession. Massive traffic jams! Chaos!

So, of course, everybody stayed home and the freeways were empty. It was exactly like the 1984 Olympics in LA, when everybody knew there was going to be Terrorist Attacks! Killer Smog! Giant traffic jams! No parking!

And, so the rest of the world fled Los Angeles, and locals had the place to themselves for two weeks. No smog (which was rare then), and you could drive 80 miles per hour to the Coliseum, where we found a free parking spot on the street ten yards from the new statue of giant naked athletes at the peristyle entrance. (Granted, my friend was driving a 1960s VW Bug and spent 15 minutes parallel parking it into a spot two inches longer than his car, but I have the picture to prove it.)

My old articles are archived at iSteve.com -- Steve Sailer

Why so little diversity on U.S. women's soccer team?

From my new VDARE column:

Female soccer embodies many of the most deeply-held values of white American upper middle class families: gender equality; parental (especially paternal) investment in their children; organized practice instead of play; ambitions for college scholarships; tacit race and class segregation via spending; and chauffeuring … lots and lots of chauffeuring. 

So nobody in the American MSM has been so rude as to point out the remarkable lack of racial and ethnic diversity on the U.S. women’s soccer team. 

Judging from the latest roster—if our World Cup team was the Tea Party, it would be denounced as nativist and racist. Certainly the women’s national soccer team would fail the Equal Employment Opportunity Commission’s notoriously “Four-Fifths Rule” for sniffing out possible “disparate impact” discrimination—discrimination where it doesn’t have to prove intent. 

Yet Google News records no mention by the MSM of the lack of diversity on this lauded squad.

Read the whole thing there.

My old articles are archived at iSteve.com -- Steve Sailer