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Here's to Higher Productivity

In this time of uncertainty, most articles paint a bleak picture of the U.S. economy. "The educated unemployed" (News: Analysis & Commentary, Sept. 30) predicts higher unemployment levels, decreased profits, and weak demand with "no relief in sight." Higher productivity is villainized as an enabler for companies to cut jobs in order to boost profits, particularly in this statement: "If companies can't raise prices, the only way they can boost profits is to cut workers...."

However hopeless the situation seems in the public mind, increased output per worker has resulted in a variety of encouraging indicators. Productivity is up 6% (annualized), but more strikingly, unemployment has decreased while the overall labor force has increased. These numbers suggest that jobs are being created faster than they are being destroyed. In fact, they are being created at a pace that exceeds the rate of lay-offs and new entrance into the labor market combined.

The increase in labor force could undoubtedly be partially attributed to the increase in the average hourly earnings for the same period. Higher real wages are no surprise once one recognizes the strong correlation between productivity and wages, which historically increase and decrease at similar rates and at similar times. Furthermore, an increase in real wages most definitely translates into an increase in aggregate demand as incomes swell.

While my analysis can go into much more depth and perhaps should at least bring up such things as demand elasticities, I just wanted to assert a simple "bullish" outlook arising from the latest labor statistics. Productivity has been a hero, not a villain. Keep up the good work, America!

Joel A. Claghorn

Economist, Industrial Price Div.

Bureau of Labor Statistics

New York To suggest that the Telecommunications Act of 1996 was not given a chance until this year has no basis in fact ("The decision that could reshape telecom," Information Technology, Sept. 30). According to the Federal Communication Commission's latest statistics, competing companies serve 20 million phone lines across the country, approximately 9 million of which are in Verizon Communications' service area.

That didn't happen overnight or even in the past 12 months. Verizon complied with the act from the get-go, spending approximately $5.5 billion over the last five years to open its networks so rivals could compete. And it's not a coincidence that long-distance companies got serious about competing in local markets only when Verizon was allowed to offer long-distance service, jeopardizing their revenue streams. Competition is even more intense beyond traditional wireline services.

If BusinessWeek is hunting for a "scapegoat" for the telecom bust, it need look no further than the absurd policies that force the former Bell companies to resell their lines at rates 60% below cost--discouraging competitors from building their own facilities, sidelining innovation, and sucking the life out of a once-vibrant industry.

No doubt Verizon and its rivals are losing access to competing technologies. But unlike Verizon, many resellers are doomed because they've chosen to ride a competitor's network instead of their own. What this country really needs is a policy that encourages healthy, fair competition among strong companies that put customers and employees first, not themselves. We believe FCC Chairman Michael K. Powell and the Bush Administration are on the right track in establishing such a policy.

Ivan Seidenberg

President and CEO

Verizon Communications

New York "What did Bernie know?" (Information Technology, Sept. 23) states that a large sum in "uncollectible bills--much of it three to seven years past due--was kept on the books, artificially inflating revenue." This is incorrect.

Even if WorldCom had accounted for the noncollectible nature of the accounts receivable, there would have been no effect on revenues. Rather, the write-off would have been either an "allowance for doubtful accounts" (a balance sheet reserve) or bad debts (an expense normally included in selling, general, and administrative costs).

Other than a reversal of a receivable because of an incorrect or fraudulent recording of revenues, writing off a bad receivable has no effect on revenues. The artificial inflation was one of earnings (and ultimately stockholders' equity) and not one of overstating revenues.

Michael Nuremberg

New York "Boeing's big win: It's too soon to crow" (News: Analysis & Commentary, Sept. 30), dealing with Boeing Co.'s recent union and labor dispute, suggests that Airbus Industrie "gets subsidies of various sorts from the European governments that still support it." We would like to clarify this issue.

Airbus is a subsidiary of European Aeronautic Defense & Space (EADS), a publicly traded, market-driven company. Its principal programs, especially the superjumbo A380, are funded through internal investment, the global investor community, and select repayable loans from some European governments. Repayable loans are not subsidies, as they are being repaid fully to their lenders with market-rate interest.

Under the 1992 Bilateral Agreement on Trade in Large Civil Aircraft between the European Union and the U.S., the EU may provide support in repayable loans for up to 33% of total development costs of a civil-aircraft program, in the same way as Boeing is permitted to receive indirect support via NASA or military program research. The EU has confirmed that the support for the Airbus A380 program will indeed be below this maximum figure.

Ralph D. Crosby Jr.

Chairman and CEO

EADS North America

Washington "Unquestionably, public TV is a refuge from mediocrity," writes Joseph Weber in "Public TV's identity crisis" (Media, Sept. 30). And that is exactly why it must survive. The debate over ratings misses the entire point of public television. Admiring classical art may not be all the rage right now. Does that mean we should we dismantle our museums and sell off the paintings?

Ratings are about revenue and profit, which is the goal of most TV. Public television, which has always struggled financially, pursues a different kind of profit--the idea that TV can challenge, uplift, and inspire. At a time when the bottom line is often the sole arbiter of value, America truly needs--to quote my colleague Bill Moyers--"at least one channel whose success is measured not by the numbers who watch but by the imprint left on those who do."

William F. Baker

President, Thirteen/WNET

New York

Your article misstates the circumstances of Maryland Public Television's ambushing of Louis Rukeyser last March. The ratings for Wall $treet Week With Louis Rukeyser had held remarkably solid. There was no week from 1970 until Rukeyser's departure in 2002 when it was not by far the world's most widely watched money program.

As his representative throughout, I can tell you that no suggestions for a "new direction" or for any material changes to the series were ever presented by Maryland Public Television or PBS to Mr. Rukeyser, so he could hardly have been "resistant." MPT had, in fact, already made a secret deal to replace him on the program he had pioneered, written, presented, and sustained for 32 years.

Has this been a successful "new direction" for MPT and its series? A large share of Mr. Rukeyser's unmatched audience, three of the four underwriters and every one of his 22 regular panelists have now followed him to CNBC. In addition, 165 PBS stations have chosen to broadcast his CNBC program, Louis Rukeyser's Wall Street.

Richard Hofstetter

Frankfurt Garbus Kurnit

Klein & Selz PC

New York

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