All posts by mll4510

Failed State Now It is Failed States

The Coronal Virus and Challenge to Our State Organizations

Part 8

Friday March 13, 2020

 

Month World Virus Cases World Virus Deaths
January 31 10,017 120
February 7 30,000 700
February 14 65,000 1,400
February 21 77,000 2,250
February 28 84,000 3,000
March 6 101,000 3,408
March 13 136,000 5,000

 

Path of the Virus

It continues its expansion across the world. Nations with the best testing and vigorous health procedures have the fewest relative cases. Examples are the city of Hong Kong, Taiwan, South Korea and Singapore. Hardest hit in Europe is Italy with hospitals and intensive care units overwhelmed. Every state in the United States has cases with Washington, California, and New York currently the largest numbers. Most of the cases in Texas are from passengers of cruise ships that have been transferred to Lackland Air Force base in San Antonio. As of Thursday, March 12, 2020, there were over 200 hundred there and 330 have been transferred there since February. Current practice appears to be that if after 14 days of quarantine and there are no symptoms of infection, the person is released.

Many questions remain unanswered.

  • One is the availability and accuracy of tests for infection.
  • Two is what can be done to prevent infection.
  • Three is how long can the virus be present in the body and communicated before symptoms including tests can detect the disease.
  • Four is the duration of the disease.
  • Five is if re-infection can occur.
  • Six is what groups are most susceptible.
  • Seven is the pattern of demand from infection on the hospital network.
  • Eight is what steps will increase the person’s immune system and what specific treatment are available.
  • Nine is the availability of a vaccine.

Economic Issues

A separate consideration apart from the specifics of the virus, prevention and treatment is how this is affecting the community and the economy. The immediate issues are levels of working and trade. Holding one’s job is critical to survival but if one works with others then the risk of acquiring the virus is increased. Providing work conditions that emphasize keeping a distance of perhaps 6 feet from other persons lessens the likelihood of person-to-person transmission. The virus can remain viable on surfaces for several hours; so spraying disinfectants and the use of hand sanitizers are critical components in every work site and in the auto.

An economy needs trade; so purchasing fuel, food, clothing, auto repairs and hardware keeps businesses going and generates sales taxes central to state revenues in Texas.

Economic Consequences

This is the 800-pound gorilla in the room: the economic consequences. While the threat to individual health is large and growing with the burden on the health system sure to hit record levels, economic slowdowns and even seizures are the greatest problem. Texas as the nation’s leading exporting and importing state is starting to feel the consequences greatly. Watch local gasoline prices. When regular gas is below $2.00, problems are coming.

Oil and related exports represent as much as 10% of employment in the state and the Houston and the Permian Basin of West Texas are starting to feel the sharp drop in oil prices and energy consumption first. Manufacturing especially in electronics but also in automobiles and capital equipment is a second large component and is very much in the world model of “just in time” and component outsources to many countries.

Apple and its IPhone are very illustrative. The device is designed in our country. The raw materials are sourced from several other countries. Lithium, a significant component in the battery, is mined in South America and Australia. Chile is the largest source. It is mined and shipped to China, Japan and South Korea where most lithium ion batteries are made. Most of the individual components in the phone are manufactured by a Taiwanese company, Foxconn that uses very low wage labor in dozens of factories in China.

This model of manufacturing just like last week’s example of the production of drugs including antibiotics and vaccines knits together far-flung corners of the world but making the product very susceptible to supply chain breakages from local labor disputes, conflicts between nations, transportation and communication disorders and, in the case of the coronavirus, a disease that closes factories across much of China and then in other countries.[1]

Challenges for State Agencies

State agencies through their lines of contact with Austin and between their fellow agencies will be better informed than many local agencies, groups and businesses. It is important to reach out to local groups including neighbors to keep all better informed and prepared.

This virus has exposed the vulnerability in many dimensions of our current world. The volatility in stock markets around the world and in the major source of energy, oil, in the world illustrates the building panics.

Building organizational and personal resiliency is the critical response. Examining the narrow and precarious source of supply of many health and medical items suggests increasing research and development in Texas to promote more local sources and more redundancy in such critical elements of health and wellbeing!

Broad Economic Indicators of the Impact

Major indicators of economic activity continue to contract. Most central to the Texas economy is the price of oil and it has dropped as low as low as $29 and closed Thursday, March 12, 2020 at $31. Two things are happening. One is factory closings in China and sharp drops in travel particularly by air and thus there is less consumption. Both Russia and Saudi Arabia, major oil producers seem to be increasing production to force higher cost oil frackers out of business. Injecting water and sand into petroleum bearing strata has been an American invention that has increased the nation’s supply of oil and until this year, America was the world’s leading producer. But as a general rule prices below $50 a barrel, makes fracking uneconomic and is leading to a number of oil company failures. Such international competition led to oil price collapses in the 1980’s and 1990’s with severe consequences for much of Texas.

The economic reality for the last two decades is that the American economy has lost much manufacturing to other parts of the globe. While computers, the internet, software such as operating systems, data analysis, drugs, vaccines have mainly been American inventions, the production of many of these have moved off-shore to nations with cheaper labor and fewer environmental restrictions. By some measures such as gross domestic production to stock valuations, stock markets have been heavily overvalued. Some have observed that the coronavirus has served to disturb the euphoria of investors and that stocks have far to fall.

The charts below show closing prices for Texas oil on Thursday March 12, 2020.  Such data are reflective of an economy in decline with sharp drops since February. Oil is a measure that reflects general economic activity over the world.

Current Situation: Coronavirus Disease 2019 (COVID‑19) Outbreak

Newly Issued for First Responders:

https://dshs.texas.gov/coronavirus/ems.aspx

Threats

The Coronal Virus and Challenge to Our State Organizations

Part 7

Friday March 8, 2020

 

Month World Virus Cases World Virus Deaths
January 31 10,017 120
February 7 30,000 700
February 14 65,000 1,400
February 21 77,000 2,250
February 28 84,000 3,000
March 6 101,000 3,408

 

Path of the Virus

The virus (covid-19) has been known since December of 2019 and appears to come from a Chinese city, Wuhan, in the province of Hubei in one of China’s inland more industrial regions. The most frequent explanation is that the virus jumped from an animal, a bat or a pangolin (scaled, anteater-like mammal), to a human in a food store. The virus has spread rapidly in all of China and now appears in over 87 countries. Asia, Europe and North America are the continents with the highest rates of infection. Limited numbers from Africa and Latin America may be more a function of the level of health systems’ capabilities. But covid-19 is far less widespread than the common flu (9 to 45 million cases each year) that has led to over 85,000 deaths this year. Importantly comparisons of it to the common flu raise concerns of the extent of the spread in coming months and the resulting deaths, illnesses, medical costs and broader economic impacts.

In the United States the greatest number of cases are in the states of Washington and California. There are a total of 179 cases. There have been 10 deaths in Washington and 1 in California. 17 states have confirmed cases. Texas has 1 at Lackland Air Force base in San Antonio that was flown there by the Federal government after being evacuated from Asia. One confirmed case was announced in Ft. Bend near Houston and Austin has one potential case as of the first week of March.

Health Threats

This virus is highly contagious with a 2-4% fatality rate as compared to .01% for the seasonal flu. These are grave numbers. It means that if the United States cannot contain the spread of the virus then as high as 4%, 13 million deaths out of a population of 330 million can occur. The world population of nearly 8 billion means the risk of 300 million deaths. The last comparative pandemic was the Spanish Flu of 1918 when a third of the world’s population, 500 million were infected and with a 10% fatality rate resulted in 50 million killed.[1] Without a vaccine to prevent infection or some drug to cure the infection the first order of action is containment including quarantine.

Persons may be infected but without symptoms for a week or more and there is some concern that current tests can miss such infected persons. It is thought that persons can spread the disease before being detected as infected. The virus can live on various surfaces for as much as several days. Some persons seem to be able to be clear of symptoms and then suffer a relapse more serious. There are no persons that appear to have natural immunity and like the annual flu, it could infect millions of persons this year and next.

Economic Consequences

The spread of the virus is rolling back much of the globalization created in the last 4+ decades as well as threating manufacturing, energy and food production and supplies of many things. Perhaps the most immediate problem is the availability of a variety of pharmaceutical items, including masks, antibiotics, medicines and vaccines.

According to US Congressional hearings, something like 80% of present medicines consumed in the United States are produced in China.[2] This includes Chinese companies and foreign drug companies as well as American companies that have outsourced their drug manufacture in joint ventures with Chinese partners. According to Rosemary Gibson[3] of the Hastings Center Bioethics Research Institute, who authored a book in 2018, China Rx, on the theme, the dependency is alarming.

Gibson cites medical newsletters giving the estimate that today some 80% of all pharmaceutical active ingredients in the United States are made in China. “It’s not just the ingredients. It’s also the chemical precursors, the chemical building blocks used to make the active ingredients. We are dependent on China for the chemical building blocks to make a whole category of antibiotics… known as cephalosporins. They are used in the United States thousands of times every day for people with very serious infections.”

The “made in China” drugs today include most antibiotics, birth control pills, blood pressure medicines such as valsartan, blood thinners such as heparin, and various cancer drugs. It includes such common medicines as penicillin, ascorbic acid (Vitamin C), and aspirin. The list also includes medications to treat HIV, Alzheimer’s disease, bipolar disorder, schizophrenia, cancer, depression, and epilepsy, among others. A recent Department of Commerce study found that 97 percent of all antibiotics in the United States came from China.

Few of these drugs are labeled “made in China” as drug companies in the USA are not required to reveal their sourcing. Rosemary Gibson states that the dependency on China for medicines and other health products is so great that, “…if China shut the door tomorrow, within a couple of months, hospitals in the United States would cease to function.” That may not be so far off.

Challenges for State Agencies

For state agencies the first challenge is to deal with the stresses on employees, work with other agencies and businesses struggling with shortages and provide local leadership in conditions as vast as any have seen. State agencies should continuously update employees and those the agencies work with.

Agencies that have substantial general contact with the public such as health, public safety, child and adult protective services, and education may need to equip employees with sanitation equipment such as masks and hand sanitizers. Institutions that house people must especially guard against infections. These steps must be taken in what is appearing to be growing shortages of routine and prescriptive medications as well as sanitizing chemicals, disposable paper products and routine cleaning supplies.

Agencies would be well-advised to anticipate higher levels of absenteeism, developing backup procedures when critical persons are absent, expanding remote and work-from-home capabilities, etc. It might be well in certain areas to encourage workers to stay home. Amazon with its corporate headquarters in Seattle is encouraging many to stay home and work from there for the rest of the month of March.

State agencies through their lines of contact with Austin and between their fellow agencies will be better informed than many local agencies, groups and businesses. It is important to reach out to local groups including neighbors to keep all better informed and prepared.

This virus has exposed the vulnerability in many dimensions of our current world. The volatility in stock markets around the world and in the major source of energy, oil, in the world illustrates the building panics.

Building organizational and personal resiliency is the critical response. Examining the narrow and precarious source of supply of many health and medical items suggests increasing research and development in Texas to promote more local sources and more redundancy in such critical elements of health and wellbeing!

Individual health, organizational effectiveness under increased absenteeism and the impact on the health and hospital system are all one dimension of the impact of this virus. The second impact is upon local, national and world economies. The initial impact is being seen in travel, lodging, restaurant and entertainment industries. In the coming months we will see impacts in manufacturing, sales, housing, mining and energy as a slowing world economy reacts to deaths, illnesses and quarantines. The general value of traded companies as reflected on indices like stock averages or measures of the production and consumption of energy like oil are indicators of the rate of the second dimension. In the coming months if the impact continues, unemployment will rise, tax revenues decline and public fears about general security will rise.

Current Situation: Coronavirus Disease 2019 (COVID‑19) Outbreak

Newly Issued for First Responders:

https://dshs.texas.gov/coronavirus/ems.aspx

How Some Are Coping: https://www.nytimes.com/2020/03/05/business/coronavirus-offices-covid-19.html

https://www.kxan.com/news/coronavirus/texas-2nd-3rd-confirmed-covid-19-cases-announced-in-harris-county/

https://www.dshs.texas.gov/coronavirus/

Broad Economic Indicators of the Impact

[1] https://www.cdc.gov/flu/pandemic-resources/1918-pandemic-h1n1.html

[2] https://www.uscc.gov/sites/default/files/2019-10/July%2031,%202019%20Hearing%20Transcript.pdf

[3] https://www.thehastingscenter.org/team/rosemary-gibson/

Critical Indicator for Economies of Texas and Mexico-Oil

A Threat From China

Texas and The Broader Environment

Written on January 29, 2020

We messaged earlier this week of a report appearing in news media in the Mexican State of Tamaulipas and our border counties in South Texas of the possibility of a professor of molecular biology at a college in Tamaulipas who had traveled to Wuhan, China during the Christmas Holidays to be with family members and who returned to Reynosa from Wuhan via Mexico City. He was hospitalized with symptoms that were characterized as those of the new coronavirus that first appeared in December in Wuhan. China has stopped air, train and automobile traffic to and from Wuhan, a city of 11 million and extended a ban to several other cities now totaling nearly 40 million people. China had great difficulty in 2002-2003 from a related coronavirus-SARS. That outbreak occurred in southern China with over 8,000 cases, 774 deaths and spread to 37 countries. It resulted in a sharp decline in economic activity in China and with its trading partners. China is a far larger economy today. Already stock prices in Chinese companies have dropped this week.

It is too early in this disease outbreak to determine how virulent the disease is and most who have died have been older men with other health conditions. However such viruses can mutate and because of the substantial world trade and travel with China, the world’s second largest economy, the spread of this virus may be greater and more rapid than occurred 17 years ago.

Decline in Economic Activity

There are two direct consequences for Texas. One is that there has already begun a lessening of economic activity in China. Oil, the largest traded commodity is off 10% this week. 5% of Texas trade occurs with China and this is likely to be affected if the disease expands. The city, Wuhan, is compared to Chicago as a manufacturing hub that includes auto and electronic components used by companies in Europe and the United States. China has pushed expansion of trade in much of Latin America and that will affect Mexico where 35% of Texas trade occurs. Texas is America’s leading export state and 1 out of every 14 jobs in Texas is involved in import-export activity.

Virus in Texas

The second direct consequence is the risk of the virus coming into Texas. So far known cases have only been identified in the State of Washington from a man who had come from Wuhan, China. He is in hospital isolation in Seattle. Known cases are in Taiwan, South Vietnam, South Korea, Singapore and Japan. There are reports of cases in Mexico including one in LA from a flight from Mexico City and one on Thursday, January 23, 2020 reported by Houston media in Brazos County from a student at Texas A&M who recently returned from Wuhan, China. If the virus does come to Texas and spreads, it can have a substantial impact on schools, shopping centers, hospitals and office complexes: all where large numbers of people come into contact with each other. None of our agencies would be unaffected and the reality that most agencies have a presence in urban Texas means the risks of transmission are considerable. I would strongly urge all to follow the pattern of this potential epidemic and prepare procedures if it has something of the impact that is starting to be seen in central China.

The map below shows the somewhat circular pattern as the virus spreads from its origin in the large industrial and shipping port city of Wuhan. I think the two most likely vectors into Texas will be universities that have students and faculty that travel to China and companies that have trade relations with China. That will include electronics and agriculture. My University just issued a reminder of travel to areas that might pose dangers to the traveler and included this area of China as a new locale. The posting here:  https://global.utexas.edu/risk/travel/restricted-regions/list

Continuing Disaster

Some History

During the 1980’s and 1990’s I had offices in Mexico City funded by our Federal government to assist Mexico in improving its government organizations as our Survey Research had done in Texas Government. During those years the Texas economy was creating new businesses in electronics such as Texas Instruments, IBM, National Instruments, Advanced Micro Devices, etc. as well as developing many joint manufacturing endeavors along the border with Mexico. The North American Free Trade Agreement was being developed and Washington saw urbanization and modernization in Mexico as strengthening the American economy with very low cost labor in Mexico making manufacturing more competitive with companies in Europe, Japan and South Korea.

Boom Times For Mexico

For my colleagues in the Mexican border cities and Mexico City, it was an exciting time. Mexico had discovered substantial oil deposits in the Gulf of Mexico and coupled with border industrialization, Mexico transformed from an agrarian nation to one largely urbanized and industrialized. Yet by the year 2000 there were two changes that made me uneasy. One was the shift away from a Mexico that was controlled by a single political party, the PRI (Party of the Institutional Revolution) that had governed the nation since 1939. In 2000 Vicente Fox, a PAN (National Action Party) candidate won the Presidency and then in 2006, a second PAN victory was achieved by Felipe Calderon. Whether it was a lessening of political control with the decline of the PRI or simply the opening of Mexico, violence began to markedly increase.

Growing Violence

The violence was most visible in Juarez, Chihuahua across from El Paso. I was involved in running an extension of our graduate program in 1990 to West Texas and southern New Mexico, and would be in El Paso and often Juarez weekly during that decade. I watched the violence build under President Fox and then accelerate in 2006 as Felipe Calderon became President. President Calderon did not trust Mexican local and state police forces and used the Army and particularly the Navy-Marines to suppress the violent conflicts. In addition to Juarez, there was violence in Nuevo Laredo, Matamoros and Reynosa.

The violence stemmed from two sources. One was conflict between Mexican Federal law enforcement, particularly the Marines with the Army against criminal groups called cartels that sought to control border access (the plazas) into the United States. The second source was conflict between cartels, themselves, for control of the plazas in the border cities. In Juarez it appeared between the local Juarez Cartel and the Sinaloa Cartel from the state of Sinaloa, immediately west of the state of Chihuahua. In Nuevo Laredo it appeared to be between three cartels, the Gulf Cartel, probably the oldest cartel on the border, the Zetas, that had originally been members of the Mexican Army and had initially worked as guards for the Gulf Cartel and the Sinaloa Cartel.

The violence reached a peak in 2010 with Juarez averaging 10 homicides a day. The rate began to decline during the last two years of the Presidency of Calderon and continued to decline for two more years in the term of Enrique Pena Nieto, who was a member of the PRI. The current President is Andres Manual Lopez Obredor known as AMLO, who heads a new liberal party called MORENA or the National Regeneration Movement. The last year, 2018, of Pena Nieto’s term was the most violent in recent history in Mexico and this first year of AMLO’s ending in December will be even more violent. The basic measure, homicides, were 33,341 in 2018 and 2019 will end, if December continues at the current rate, with over 34,000.

Since the year 2,000 Mexico has grown more violent and part of the explanation is the growth of organized crime and for the United States the fact that much of proceeds that support crime in Mexico comes from trafficking of drugs and people by the Cartels into the United States. Texas with the longest border with Mexico is particularly vulnerable.

Recent Events

Four recent events have garnered attention to the violence in Mexico and the power of the Cartels.

  • One is the trial and sentencing in New York of the head of the Sinaloa Cartel, Joaquin “el Chapo” Guzman. The trial has helped detail the wealth and strength of this criminal enterprise based on smuggling drugs into the United States.
  • Two, is the murder south of Arizona and New Mexico of 9 women and children, 3 mothers and their children, the Lebaron family that had dual American and Mexican citizenship and lived in a dairy farming community in northern Chihuahua about 100 miles south of El Paso.
  • Three is the arrest this week in Dallas by Federal officers of Genaro Garcia Luna, who lives in Florida, for receiving funds from the Sinaloa Cartel when he was the ranking Federal law enforcement official in Mexico in the Administrations of Fox and then Calderon!
  • Four is that there are reports that President Fox and members of his family also received payoffs. Payoffs have been said to have gone to the wife of President Pena Nieto as well.

The situation has resulted in the families of the le Baron’s calling for labeling the Cartels as terrorists and causing the same level of military action that is directed at Middle East terrorism. President Trump initially did that but then in discussions with the Mexican President backed off. However two U. S. Senators, Tom Cotton of Arkansas and Ted Cruz of Texas, have filed a bill that represents a movement in this direction.

The bottom line today is:

  • Mexico has rising crime and violence and will set a record for murders this year;
  • Organized crime in Mexico corrupts governments including chief law enforcement officials and Presidents;
  • Mexico’s economy is slowing and now is in recession with no growth;
  • American labor unions and citizens especially in the industrial areas of the United States are demanding trade sanctions against Mexico as NAFTA proved to destroy jobs in our most industrialized regions;
  • Violence across Mexico is starting to negatively affect tourism, one of the largest sources of jobs in Mexico;
  • As Mexico’s problems grow, it is less effective in blocking the flow of immigrants from Central America and elsewhere in the world coming through Mexico to enter the United States.
  • This story from the weekend’s NY Times illustrates the extent to which participation in organized crime is a career path for thousands of young Mexicans: https://www.nytimes.com/2019/12/14/world/americas/sicario-mexico-drug-cartels.html?searchResultPosition=10

Related Readings:

https://www.foxnews.com/world/mexico-homicide-count-gang-violence

https://www.nytimes.com/aponline/2019/12/02/world/americas/ap-lt-mexico-coahuila-gunbattle.html

https://www.npr.org/2019/12/10/786792134/former-top-mexican-security-official-arrested-on-cocaine-trafficking-charges

https://cis.org/Bensman/Bill-Would-Designate-Mexican-Cartels-Something-Other-Terrorists

Visiting 2013

I summarized my book on Mexico with these alternatives in 2013. Alternatives Three and Four below are now in play as President Trump’s statements about Mexico from Tuesday, November 26, 2019 reach world media.

Reprieve
World economy rebounds. Oil prices rise to $200 a barrel, Mexico permits foreign investments and spins off PEMEX which modernizes engineering, refining and exploration. Oil discoveries increase as does production. Corruption is curtailed and profits soar. With job growth fewer young men are lured into the cartels. Situation stabilizes to a significant degree.

Collapse in Progress
Oil plays out in Mexico’s top producing fields, Mexico cedes control over the south and north of the country as the capital is consumed with providing services and order to the 25 million in Mexico City, and 20 million refugees head to the northern cities and the United States. Millions will come to Texas alone. Mexico is a failed state with guerilla bands controlling much of the countryside and several of the larger low-income neighborhoods in Mexico City. Cartels use tactics like narcobloqueos of stealing 18 wheelers and stopping them on streets to create traffic jams and undermine civic trust. Staged attacks on American border cities occur with regular frequency and local police are overwhelmed facing cartels that are better organized, funded and equipped. American border cities are inundated with refugees and violent gangs. Residents in all Texas cities as well as Kansas City, Atlanta, Chicago and most southern Californian cities now like Mexico City fear kidnapping and ransom.

American Protectorate
Cartels use hit squads (Mexican sicarios) to attack American law enforcement in border cities on both sides. The United States intervenes with military forces as it has done in Haiti and creates a protectorate for the Mexican Federal government south to Monterrey, Saltillo and Durango. The traditional northern antipathy toward the chilangos of Mexico City grows and a process of tying the northern Mexican states closely to the American Southwest accelerates. Many in northern Mexico openly call for the U. S. to annex them with Monterrey as the capital of the Mexican states seeking admission to the Union. Leftist and nationalistic mobs burn and sack the American Embassy in Mexico City.

Revival of Pax Americana
American economy revives and joint American and Mexican efforts suppress cartel activity with attendant boosts in tourism, maquilas and domestic growth. America sharply reduces illegal drug consumption. Mexico increases its historical ties with Central America and opens the region to the south to economic growth and channels American technological knowhow through all of Latin America. Mexican migration returns to Mexico and both Mexicans and Americans increase investment and ties throughout Latin America.

The Recognition of Mexico as “a Failed State” is starting to catch on.

The brutal murders of 3 young mothers and 6 children in the Mexican state of Sinaloa and near Chihuahua and Arizona and New Mexico has put an American perspective on the horrendous violence being inflicted on all people in Mexico. This editorial commentary from Tuesday’s NY Times is a start of recognition:

It may take an Iraq-style ‘surge’ to save Mexico from the drug-cartel insurgents.

Mexico’s Collapse-The Impact on Texas

The violence that has exploded in the northern state of Sinaloa in late October and Monday, November 6, 2019 that resulted in the murder of at least 9 persons, women and children could signal a collapse of the expectations that Mexicans have had with their new President. Deterioration has increased all year and is accelerating. This paper below is a caution to Texas State Agencies.

This paper examines some aspects of formal organizations including what the success and failures of an organization can mean for a person and a community and a state. Encounters with formal organizations start, typically, with education as early as day care and most employment is in a formal organization. For most Americans, encounters with formal organizations will start with births at a hospital, maybe day care and then elementary school.

Formal organizations are a dominant feature of modern societies. But with the exception of the military until the 20th Century most Americans had little contact with such organizations. Family and the neighborhood were the dominant social features.

For Americans, Europeans, Japanese and South Koreans that has completely changed in the last hundred years. Families in these countries are typically the nuclear family of parents and children without the presence of kin like grandparents, cousins, aunts, etc. Increasingly more persons do not marry or have children or wait into nearly middle age to have a child. Small family size and drops in family formation are the most extreme among these countries in Japan where there have been net population decreases since 2010. Japan permits very little immigration; so it may represent for some nations the future. For the Japanese, more so than these other countries, the formal organization can be the primary social anchor!

Thus the study and functioning of formal organizations is an ever-larger issue in the modern world. Part of the study is how best to construct and operate such important parts, the organization, of our society.

IBM as an example of organization change, survival and success

In the 1970’s I worked with offices IBM (International Business Machines) had in Austin to help them think about organizational designs that would permit their success in creating and selling computers. IBM had its beginnings building mechanical calculators, punch card tabulating machines, cash registers and scales at the start of the 20th Century. By the 1930’s its machines found wide use by many countries when they compiled censuses of their population. Punched cards were used to record data such as on persons and then the cards were run through mechanical tabulating machines where a punched hole in the card would represent some data point such as the age, ethnicity, gender or residence of a person.

By the 1950’s IBM had moved from card sorters/readers of punched cards to computers. Cards as well as electronic typewriters were used to enter data into the computer and then programs were written to count, sum, analyze, map, display and print calculations. The data that had been entered with a typewriter or a card was stored on a tape or rotating disk where it could be read and analyzed and findings printed out. Moving to electronic storage from cards improved speed and flexibility. IBM would sell and maintain these computers, the 360 and 370 were the main ones, as well as renting time to customers.

The company was highly profitable until the beginnings of the 21st Century but the flow of innovation in technology much of which IBM was involved in creating changed the realty of computing. Firms like Xerox, Hewlett Packard, Apple and Tandy-Radio Shack began to sell computers that would fit on a desktop and could be bought for less than $5,000 rather than the millions of dollars that a mainframe computer would cost and filled a large building. Aware of this developing competition, IBM moved a set of its engineers away from his headquarters in New York to Boca Raton, Florida to help IBM think about and then invent a computer that was a radical change from its main frame and that was to create a desktop computer. IBM developed its own brand of desktop machines released in 1981 including from programmable typewriters to desktop computers and the complex programming including, the operating system and various applications.

Then in 2005 IBM then turned from a manufacturer of hardware to a company that focused upon selling computer services. It sold its personal computer business to a Chinese firm, Lenovo. It changed as a company more from an organization that had factories that built computers and related items like disk drives, circuits, storage media to an enterprise that sold services like weather forecasting, health data storage and interpretation, cloud computing and many other services. It changed its business from building and selling computers and related equipment to selling services including from very large computers-super computers and doing research on the leading edge of computing like developing a quantum computer. Such a computer promises to be an advance from current computing as much as the IBM 360 was from the tabulating machines of the 1950’s.

This path of IBM from a manufacturer of calculators and cash registers to a firm that sells complex computer services with a high rate of change and innovation is a useful model of how organizations must change. This is a path that business organizations must follow and so must government agencies. Let’s look at some facts beyond the IBM example that set the stage for why we must work on continuously building our organizations in the State of Texas.

Setting A Perspective For Challenges to Texas

In general there are several broad challenges to life in our state. One set of challenges comes from the geographical location of the state. Texas more than any of the 50 states has a unique situation represented by the border with Mexico. The length of the border and the size of cities on both sides are many times those cities along most of the rest of the border in New Mexico, Arizona and California. More than a century and a half ago, Texas was part of Mexico and Texans fought and won a revolution against Mexico even as Mexico fought efforts by Spain and France to keep it a colony.

Significant cultural continuity exists between Texas and Mexico as well as high levels of trade and tourism. But there are complex relations with another nation that no other state must navigate!

Differences Between Texas and Mexico

While having some similarities in history and geography, average incomes, education levels and standards of living are very different and are moving apart in many ways. In 1900 the economies and many of the communities in both Texas and Mexico were similar. Life was mainly in rural areas and small towns. Families were self-sufficient through raising crops and animals for local consumption. Travel, trade and even awareness of the larger world were all quite limited. But individuals and families were less dependent on state and national events. Economies were local and only wars or massive weather events like hurricanes or earthquakes would affect farms and villages.

Railroads, highways, large-scale farming, forestry and ranching began processes to consolidate family farms in Texas and with growing factories, Texas began becoming urbanized. Air travel became frequent. First the telephone and then a variety of broadcast and internet technologies linked communities across the state and to national and international events. Today the state is mainly urban with 90% of the population in a complex from Dallas, west to Ft. Worth, south to Austin then San Antonio, east to Houston and back north to Dallas. Most Texans work in some form of formal organization: factories, refineries, banks, corporate offices, large farms, government agencies and business parks. Solitary workers like a cowhand of old or the self-sufficient family with the woman in the kitchen and the man in the field is the past… more than a hundred years in the past.

Mexico, by comparison, is where Texas was in the 1950’s, early in its process of becoming urbanized and securing jobs in organizations not on farms and ranches. The nation is largely urbanized with about 80% of the population living in large cities like Mexico City with more than 25 million in the City and surrounding towns. However substantial regions in Mexico’s southern states have communities where Spanish is not the first language, paved roads, water and sewage utilities, electricity and telecommunications are primitive. In these regions the dominant social organization is the extended family and the neighborhood.

Mexico has 32 states and additionally its Federal District. The states vary tremendously in terms of education and wealth from north to south. The wealthiest and highest educated state is Nuevo Leon that touches Texas near Laredo. There are 60 different languages spoken mainly, and again, in the southern states and 7% of the 130 million citizens exist on less than 2 dollars a day.[i] Unlike the rural population that had their land to fall back on, the Mexican urban population is highly dependent on daily earnings with the average family having less than the equivalent of 40 dollars in savings. This means holding a job is critical.

Education particularly to the high school level and college is a serious shortcoming in Mexico. Fewer than half the population finish high school and less than a quarter have some college years.

Lack of school attendance is one part of the deficiency in Mexican education. The other parts are the capacity of the educational programs and the preparation of teachers. For university admissions, there have been periods of time when students had to be selected for admission. But there have been other times including a recent decree by the new Mexican President, Lopez Obrador, that everyone that wishes to go to college will be admitted. As in the past courses and majors that require laboratories and equipment are overwhelmed and students do not get appropriate education. The other problem with open admission is inadequate numbers of teachers per students as well as unqualified teachers. Mexican secondary education is unionized and teaching positions are traded and sold rather than persons being selected and promoted on merit.

Mexico is far behind in its institutions and skilled personnel required for the educational preparation for the societies of the 21st Century. While its lower cost labor has provided jobs to manufacturers from America, Europe and Asia, automation offers less costly ways of providing labor in manufacturing and services industries, year after year. Automation is rapidly removing the advantage to manufacturers that low cost labor from Mexico provides.

Population Change In Texas

Texas has grown in population consistently since the 1800’s with its estimated population in 2018 of 28.70 million, up substantially from 25.1 million in 2010. Its annual growth rate of 1.80% ranks 3rd in the nation. Texas has three cities with more than 1 million people: Dallas, Houston and San Antonio, which are in the category of the 10 most populous cities in the nation. Texas continues to become more urbanized. From 2010-2018 Austin was the most rapidly growing city in the nation. Ethnic ratios are changing with Hispanics projected to be the largest ethnic group by 2022. By 2040 the state’s population is expected to be 45 million.

Texas Economy

Texas is the largest exporting state in the nation whose products include electronic and computer gear, agriculture, refined petroleum and chemicals. Texas’ steady population growth creates pressure on the state’s infrastructure of highways, rails, airports, telecommunications, water, energy, health, public safety and education resources. While Texas is the nation’s largest producer and refiner of petroleum, it has, interestingly, achieved leadership in solar and wind energy. It generates the greatest amount of renewable energy in the United States and one Texas city, Georgetown, has its city electrical grid entirely fed by renewable sources. As energy efficiencies improve from lighting to heating to other demands, Texas could meet all of its domestic energy needs with electricity and export that energy as well. How that will affect areas involved in production and refining of petroleum is unclear.

Texas’ Prosperity Dependent on Export Relations, Primarily Mexico

The prosperity but also the safety of Mexico is not simply a border issue. Texas is the nation’s foremost exporting state and Mexico is the largest customer of Texas’ exports. Those exports to Mexico totaled over 109.7 billion dollars in 2018 and helped ensure more than 1 million jobs for Texans. A unique arrangement comes from border factories that do most of the labor-intensive manufacturing activities in Mexico with Mexican employees but the design, direction and some of the more complex manufacturing is done on the Texas side. The in-bond or maquila factories were devised by a Mexican businessman and political leader in Juarez, Jaime Bermudez in the 1980’s, and have transformed the border and much of Mexico’s manufacturing resources to world competitive factories.

Trade between Mexico, the United States and Canada was significantly expanded with the NAFTA trade agreement that largely eliminated tariffs on products between these three nations. However those relationships are being examined in the context of tariffs being applied by many countries. Part to the success of Donald Trump in the 2016 election was his promises to bring the jobs back to states like Illinois, Ohio, Pennsylvania and Michigan that were the homes or major manufacturing sites of many major American manufacturers including General Motors, Chrysler, Ford, International Harvester, John Deere, Caterpillar, U. S. Steel, General Electric, Motorola, Zenith, Frigidaire, Penn Central and hundreds of other companies that had labor unions that were an if not the bedrock of the Democratic Party. During the campaign and since he has charged many countries and companies with trade practice that abuse the United States as well theft of intellectual property. He pledged in his campaign to bring the jobs back and also to build a wall along the border with Mexico to control trade and immigration. As the list of trading nations on the last page of this paper notes, Texas prosperity is not only in the hands of Texans but people from a number of countries.

Challenges From Mexico-Crime, Corruption, Impunity

Since 2000 Mexico has experienced growing crime and violence in all of its states. The causes are likely a result of traditions in the culture that permit small-scale corruption such as the expectation that a person pays money, the mordida, directly to a police officer when they incur an official contact. The pattern extends to government positions that are purchased or secured through patronage with a strong emphasis on politics being a spoils system. Rather than organizations that operate with fairness and transparency, there are patterns of cronyism, impunity and corruption.

Government corruption was rooted in the colonial system and was a major if not the major reason for Mexico’s three major revolutions in 1810 against Spain, then in 1862 against France and most recently in 1910 against a pattern of dictatorial control from Mexico City. Part of that corruption, today, is organized gangs in Mexico relatively free of Mexican government opposition that bring several types of contraband into Texas and then to other parts of the United States and Canada. The pattern of drug smuggling is not new and goes back almost a hundred years to gangs in Matamoros and Reynosa that brought alcohol to cities like Houston and Galveston during Prohibition in the years from 1920 to 1933. These early Mexican gangs were created by the same opportunities that saw the growth of large scale gangs in Chicago, Detroit, New York City; indeed the cities of the urban north. Much of the alcohol that they in America’s northern cities smuggled came from Canada.

For the past two decades Mexican drug activities via cartels, have been a growing feature of the border with Mexico. Smuggled drugs include cocaine sourced from South America, morphine increasingly grown in poppy fields in western Mexico, marihuana grown throughout Mexico and in the last decade synthetic drugs such as methamphetamines and fentanyl sourced from chemicals from China and brought to the Pacific ports of Mexico. The Drug Enforcement Agency estimated in 2014 the annual volume of illegal drugs is about 100 billion dollars up IH 35 or a variety of routes from McAllen and Brownsville to connect to IH 10 to Houston and then north and east.

The unique challenges Texas faces are of a neighbor with high crime and violence, it cannot control. Mexico reached the highest level ever recorded in 2017 then in 2018 even higher and the first 9 months of 2019 are higher still. Texas is left with urging the United States Federal Government to be more effective in controlling the national border, anticipating events in Mexico and being very watchful of that country and increasingly most of Central America.

Immigration

Immigration has become a prominent topic since 2014 nationally and across the world. Immigration is a characteristic of human societies. In antiquity small human groups would migrate with the weather and available crops and animal resources. As recent as the 1880’s the Comanche Indians would spend summers in the northern plains of Texas near cities like Amarillo, Abilene and western Oklahoma. Then with the winter they would migrate following herds of bison (buffalo) as far south as Saltillo in the southern part of the Mexican state of Coahuila. While some say with a romantic turn of words that immigration is part of America, statements often do not completely reflect the impact of immigration in all nations and certainly in the Americas. North America has seen in the last 15,000 years several immigrations from north to south. About 1200, it is suspected that a drought in the Four Corners area of the western United States created a migration south to the area of today’s Mexico City and those migrants became the Aztec.

A larger immigration was Europeans coming to North America. The impact of Spanish immigration to Mexico led to a drop in the population of the native cultures (American Indians) from 10 million to 1 million in a century. The magnitude was similar in the United States over two centuries. These millions of deaths came primarily from exposure to diseases against which the native populations of North America had no developed immunities. The next cause of the loss of life was the destruction of traditional means of livelihood and the third was from warfare.

Immigration continued to the United States during the 19th and 20th Century with persons coming from China, Ireland, Italy and Poland, but mainly from Europe. There was substantial Mexican immigration during the 1910 Mexican Revolution and various European groups during and after the two World Wars. In the later half of the 20th Century, a pattern developed of seasonal Mexican immigration to work various harvests in the United States with Mexicans sending funds, remittances, back to families in Mexico. The importance of such funds is that they represent the third or fourth largest source of income to Mexico only exceeded by tourism, manufacturing and agricultural exports.

Several changes in labor force issues and immigration began to occur in the 21st Century. A trend that began in the last two decades of the 20th Century was moving labor-intensive activities to low wage countries as we earlier noted. NAFTA was the approach in North America. This caused job losses in many manufacturing communities of the United States and job gains in Mexico. But the advantages of low-cost labor are now being eroded by technologies that required much less labor, particularly low-skilled labor. Manufacturing site decisions have begun to shift to where the market was not where low cost labor was. Moreover, the labor required in these new technologies was not low-cost but highly educated and capable of continuous education and change.

This has created severe problems for areas of the world with low educational levels. It is most evident in Latin America where the average educational level in Mexico is about the 6th grade and much less in the countries of Central America except for Costa Rica. Poverty is increasing and as well as violence. These are the forces that drive attempts to immigrate to the United States. A generation ago those migrants would have filled low wage jobs in America. But such jobs are disappearing. The immigrant populations now pose heavy and continuous burdens on government services from health to education to safety. The chart below is from the Border Patrol and is a monthly tally of persons caught attempting to enter the United States without official papers and procedures.

 

Current legal immigration levels have risen to 1 million each year. As the chart above indicates we are now seeing a second million attempting to simply enter the United States apart from legal immigration paths. The majority of those numbers are appearing on the Texas border with Mexico.

Summary

These then are among the organizational challenges faced by Texas agencies:

  • Continuous efforts to adapt and use technology to maintain efficiency and effectiveness and responsive to a business and citizen environment that does the same. Technology moves very rapidly and Texas government must keep pace.
  • Adapt to growth and urbanization but with attendant rising costs of living for employees. With the majority of state of Texas employees living in or near Austin and with the cost of housing now among the highest in the state, more and more state employees have to commute as many as 70 miles each way each day to find housing that meets the level of income from a state agency position.
  • Integrate migrants from other parts of the country and immigrants into Texas communities.
  • Address challenges coming from high rates of immigration including high percentages of children, low education and skill levels and health issues.
  • Economic disruption of trade with Mexico. The impact of negotiations around tariffs affect Mexico trade but also trade with Europe and particularly Asia.

Summary

More than any other state, Texas has agencies that promote development and research in the fulfillment of their functions. Organizational assessment and development is a priority in all of state government. This has paid important dividends in making the state more attractive than other regions in the country and created one of the most dynamic economies in the nation. But issues exist both from within the state and from the outside. These are among the major issues:

  • Growing population that will cause rising property prices, road and street congestion, increased demands for health and human services.
  • Increasing demand for skilled high tech workers and concomitant decline in jobs for low educated and trained persons
  • Increasing business sectors that will result in higher wages in the private sector and issues for government salaries.
  • Exposure to world trade with more complex markets and rapid changes in the Texas economy.
  • Concerns about the soundness of major trading partners and issues around tariffs: Here are Annual Percentages of Trade with the major trading partners starting with the largest: Mexico, Canada, China…
  • Mexico              36.9%
  • Canada,               8.7%
  • China                    6.2%
  • Brazil                    3.8%
  • South Korea.    3.7%
  • Japan                   3.4%
  • Netherlands    2.7%
  • Singapore         2.2%
  • Stability of Mexico and Immigration: Illegal immigration attempts are at record levels posing critical issues of safety, congestion, cost and resolution. Creates substantial problems of travel and joint manufacturing and product shipping along the border.

Immigration Caution

Caution One

Each person that comes in will cost taxpayers, with the bulk of the burden at the local level, an average of $8,000 a year for housing, health care, transportation, education, food assistance, etc. Thus the 100,000 that were apprehended in March could cost Americans $800,000,000 for a year if they stay in the U.S. Such a rate enter at the Southwest Border for 12 months will be 1,200,000 immigrants and the cost is over 9 billion dollars.

Caution Two

The State of Texas is now spending 108 billion dollars each year for the total state budget. If the trend of people trying to come into Texas get into Texas then in about a decade the possible costs of the new immigrants will be close to the entire current state budget.

Caution Three

These costs to the taxpayers will be offset a bit by earnings and taxes paid if the immigrants secure jobs. How many are adults and how many are children and what wages they can earn are questions as well. Many of these may not stay in Texas but well over half first come into Texas.

A Warning from Juarez

Having lived in El Paso years ago and enjoyed weekly visits across the border, I have long viewed that city, Juarez, as a window into the neighboring country. However by the year 2005 or so, Juarez changed and when I happened to be in El Paso I no longer drove over. Violence reached a peak in 2010 with a daily average of 10 murders in Juarez. The focus of the murders was war among drug cartels competing to control the routes into El Paso (plazas) for moving drugs and people. There was nearly a decade of declining violence but it rose in 2017, nationally, to the highest level in recent Mexico history. 2018 will end with a daily rate of 3 to 5 murders in Juarez exceeding the 2017 rate.
Violence and its effects will not simply stay south of the border. I wonder how prepared El Paso is for that or how prepared Texas is.

Five killed in shooting at Alamo’s pool hall along border in Juárez, Mexico

Five people were killed in a shooting at a Juárez pool hall during the weekend.

The attack occurred early Saturday at Alamo’s billiards, which is near the Rio Grande in the Bellavista neighborhood west of downtown Juárez.

At about 12:30 a.m., gunmen entered and opened fire inside the pool hall located on Norzagaray boulevard next to Amapolas street, El Mexicano newspaper reported.

There had been no known arrests. The names of those killed had not been disclosed.

The deaths were among 10 homicides, including the deaths of two women, early Saturday, the newspaper reported.

There have been more than 1,100 murders in Juárez this year, according to a tally kept by Channl 44-XHIJ.

More: Mexico’s new president sworn into office, pledges to curb corruption, bring change

In separate development, a new board was formed in Juárez to address the causes of violence as part of the new administration of Mexican President Andres Manuel Lopez Obrador.

The Coordination Board for the Construction of Peace includes development and human rights officials, law enforcement, Federal Police and the Mexican military.

More: 4-year-old El Paso boy unable to walk after shot in Juárez Applebee’s

 Shooting in Juárez restaurant wounds 5 state police officers in Mexico border city

 Juárez bar shootings leave 3 dead, 8 wounded; police increase patrols at nightspots

 

Papers Relating to Mexico's Challenges from Cartel Violence

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