Globalization and its Discontents Part 2/1

We will start the long-delayed second part of the “Globalization Review” here on Global Wahrman. These posts will dribble out over the next month or two.  I am not in a hurry and you should not be either. The whole issue is so far over my head (and presumably your head) that it isn't funny.

The point of these posts is to bring to your attention what a layperson can figure out about our government's globalization policies, what the results have been, what the future holds. Unfortunately there is a lot to these different issues of trade policy, taxation, employment, retraining, economic security and so forth. I will make every effort to be brief and to make suggestions for partial solutions or remedies. I think it will become very clear very quickly that our government has not done even a minimally acceptable job on these issues and is at best incompetent but probably worse.

I have no credibility in this area. There is no reason why anyone should listen to a word I say about this. I am not an economist, my degree in Economics is undergraduate and from UCLA. The world of international finance and trade policy is very, very complex. Anything I come up with is likely to be as silly as a layman trying to tell a physicist where really to look for dark matter. It will become clear that I think that there are some politically plausible, sometimes expensive, remedies which will alleviate some of the misery that many Americans are experiencing. But of course it is extremely doubtful that anyone who matters will care what I think, or what you think for that matter.

So why bother? Is this a good use of our time? Your time and my time? If it is, it is only because we are expected in a democracy to be informed citizens.Furthermore, the economic policies of this country have apparently caused a lot of misery and it is incumbent on us to understand where this misery came from, whether it was avoidable or at least predictable, and what might be done about it. In a sense, this is a form of what we used to call "civics".

I have another motivation here as well. There is every reason to think that the American visual effects community was mostly destroyed by foreign subsidies and that our Government did nothing. Is this story true, is it partially true? What was the role of the studios, the production companies, our representatives in Washington, our State Department?

When I started this investigation, I had not been paying much attention to this country's trade policy, or its tax policy, or the issues of labor organization, or to unemployment, or to so many of the issues that I have had to educate myself on.  I knew that unemployment existed and that I was a victim of it, in some sense of that word 'victim', but I did not believe that this was because of structural reasons that our government had put in place, either accidentally or deliberately.  The process of learning about the situation has changed my mind.

There is nothing subtle about what I am going to review for you. It was also a surprise to me how little of it was even new as most of these issues were discussed in great detail in the 19th century. These policies have winners and losers and the results of these types of policies are very well known.

Furthermore, it will be clear that there are straightforward remedies that could certainly alleviate some of the misery experienced in this country. Now, I admit, these remedies will probably not solve all the issues of wealth and other inequality, or restore the lives destroyed by our government's incompetence or greed (whichever you think it is), but these suggestions would certainly make things better. There are those who think that a remedy has to solve all problems or not be tried. I dont agree. I think we can chip away at problems and make a difference now. Realistically of course there is no chance for these suggestions to be implemented, nor am I convinced that these are the best ideas out there, they are merely intended to be examples of the kind of remedies that do exist.

At one point, I had a list of topics that I was going to discuss, but the list was too long and too dreary. I did not want to scare you off.  I wish I could make this more fun. All I can do is make it as brief as possible, and even that wont be easy.

I do have one request. I am a little sensitive because of my station in life and I do not like to be called stupid. If I say something here that you disagree with, fine. Feel free to make a comment that lets me know why you disagree and give me a counterexample. Or just stop reading. That is just fine with me, nobody gives a fuck what I think anyway.

My Platform Should I Run for the Executive Committee of SIGGRAPH

draft

For many years I have attended the national conference of SIGGRAPH and been amazed that as far as I can tell the conference is totally unaware that there is vast unemployment in this field and that those who have managed to continue working have had to move overseas to do so. Yet SIGGRAPH keeps on pushing the field as a sensible one to go into without knowing or caring whether or not these new people will be able support themselves or their families by doing so.

I happen to also believe that computer animation is unusually blessed or cursed with the intangible glamour of the various entertainment industries which acts as a lure to the unwary. (1)  I can tell you that when I made the choices to go into this field I had no idea, no one told me and I did not understand, that I was going into a niche industry and very likely would experience long periods of unemployment.  Had I realized that, I would not have gone into this field. Such a choice would have been completely irresponsible on my part.

And yet we keep on encouraging young people to go into this field without a hint of caution even though we do not even know the size of the disaster that has already occurred.  I believe that this is both irresponsible and morally wrong.

After years of complaining and trying to figure out how to change things I came to the conclusion that the only way to be heard was to become a member of the Executive Commitee of ACM SIGGRAPH (the EC).  Although the EC is nominally elected by the membership of SIGGRAPH, in reality to be allowed to run for the EC one must be approved by the Nominating Committee and the Committee lost no time making it clear to me that they had no interest in my contribution.

There is however in the By Laws of ACM SIGGRAPH a provision for write-in candidates to be nominated and were I to wish to persevere it would be through this mechanism. Unfortunately, the details of this mechanism are undocumented as far as I can tell, but a friend has done a lot of work and seems to be able to extract the needed information from the relevant people.

Were I to run a write-in campaign for nomination, I would need approximately 70 signatures of people who were both current members of ACM and of SIGGRAPH. Those signatures would have to be on a form that is of yet undefined and whose original is provided on paper, as I currently understand it.

The number of signatures would not have been a problem "back in the day", but now most of the people I know who work or have worked in computer animation are not, to the best of my knowledge, members of SIGGRAPH as SIGGRAPH has worked very hard to make itself completely irrelevant to the production community. It may be one of the ironies of this campaign that I am able to get a dozen or two "new" members for SIGGRAPH as most of the people I know who would support me in this foolish endeavor would have to become members to do so.

Why should you bother to go through this trouble merely to make me eligible to run for a “position at large” on the Executive Committee?  In other words, even if the write-in campaign is successful, I would still have to run for election.  The best answer I can give is to itemize what my platform would be should I run for office and let you decide for yourself.

Let me preface these platform notes by saying that many people I have talked to who are more knowledgeable than I am about how SIGGRAPH at the national level actually works believe that there is either (a) nothing SIGGRAPH can do in any of these areas and/or (b) SIGGRAPH should not even try.

Let me also note that apparently the EC of SIGGRAPH thinks that it is not important that several thousand people (the number is unknown) who were undoubtedly encouraged by SIGGRAPH to make the questionable choice to go into this field. I would be a minority of one on the EC and likely have very little or no influence.

I would however be a voice for the disenfranchised and be certain that their plight was at least discussed at least to some small extent.

So were I to run, I would run on the following platform (certain to be revised).

1. To the extent possible, see to it that the program and events of SIGGRAPH do not encourage people to go into this field without a good understanding of what the possibility of employment in this field is.

2. To the extent possible, attempt to understand what the real employment in the fields associated with SIGGRAPH actually are and what the current unemployment is.

3. To the extent possible, make it possible for those who have dedicated a substantial portion of their career to this field are enabled to attend the national conference. The current rules and procedures do not in any way go far enough to permit this.

4. To the extent possible, make allowances for those who are unemployed or economically challenged have access to the full body of SIGGRAPH publications without fee or at a reduced rate.

5. To the extent possible, address the issues of ageism in computer animation, at least by having reminders at relevant conference events of the illegality of ageism as it applies to employment.

6. To the extent possible, attempt to assess the amount of hardship caused by the off-shoring of computer animation production to other countries and what remedies there may exist for this.

7. In the likely event that no suitable remedies exist for the problem of 6, to the extent possible see what can be done to train members of SIGGRAPH for other fields where employment is possible.

8. To the extent possible, encourage and try to organize outreach programs to try and encourage industry to create jobs that need the skills that computer graphics and animation provides.

A few more points and then we will wrap this up. It is not clear to me that I can afford to be a member of the Executive Committee should I be elected since I am so chronically un- and under-employed. However, we can probably cross that bridge when and if we get there, and something can probably be worked out.

It is equally unclear to me whether my efforts would result in any tangible benefit to anyone and whether or not it would be a good use of my time.

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1. One year SIGGRAPH has a panel celebrating 25 years of Rhythm and Hues.  The next year R&H is out of business, 1000 people are dumped on the street, and SIGGRAPH says nothing. Dreamworks lays off all of their Nothern California studio, but SIGGRAPH does not notice or mention it. Last year, SIGGRAPH had a presentation about 30 years of ILM. Not a word about all the people ILM has laid off as they downsized. A young person attending SIGGRAPH might draw the conclusion that this was a glamourous and rewarding field to be in and that unemployment was not an issue. Pixar is huge, right? It never lays off people, right?

The End of the VFX Community in Los Angeles?

As all historians know, when the final knife goes in and the body slumps to the ground in a pool of blood, the murder victim has in fact been threatened and dying for a very long time.   The final event, the slugs of hot metal that rip through the body, so to speak, are just the final acts of a much more involved process.

For example, the nominal date of the end of the Roman Empire in the west, 476 CE, was in no way the end of the Roman Empire, east or west.  It is just a convenient date used by historians who need to pick a date for the history books and chose one when the city was occupied briefly by a Germanic warlord for failing to pay a ransom.   The empire had certainly ceased to be very effective in the west  long before this, and the senate continued to meet for long after.

So when we review the end of the Los Angeles visual effects community, we may as well pick an arbitrary date, but one that is at least symbolic, just as with the nominal date of the end of the Western Roman Empire.

I propose that this date is last week when Sony Imageworks announced that it was moving its headquarters to Vancouver, Canada.  In fact, there is still going to be some people working at Imageworks in Los Angeles, including Ken Ralston, ASC.  And there are other visual effects companies such as Digital Domain that seem to linger on as well as many of the smaller shops.

In fact, the Sony's announcement, which can be read here in the Hollywood Reporter, is confusing.  Are they moving people from LA to Vancouver? Or are they just not hiring more people in LA and hiring in Vancouver?  It isn't clear.  What I hear indirectly is that they are moving people up north, however, or maybe perhaps they are just expecting people to move up north on their own.   Like I say, it isnt altogether clear.

But we can certainly say that the Los Angeles visual effects community which used to be several thousands of people, is a remnant of itself, never again to be the avant garde of a form of filmmaking that it helped to invent.

Rest in Peace.

Always Look on the Bright Side of Subsidies

Part 3 of a series.

When Brian was nailed to the cross in the 1st century Roman province of Judea, a thief is alleged to have told him to cheer up, and remember to "always look on the bright side of life".

With that thought in mind, lets review some of the effects, or affects as it may be, of international subsidies and tax exemptions on the industry of visual effects and try to find our silver lining. Sure, the American industry has been crushed and there is massive unemployment in this country and misery. But its not all bad. Here are a few ideas I have come up with and submit for your consideration why this might have some "socially positive" aspects.

1. The tax exemptions and subsidies may result in better films.

It is possible that many of these movies that are made under this system are better because of these subsidies and tax exemptions. Often movies want more visual effects than they can afford. With subsidies, which result in a lower price for the effects, it is possible that producers choose to spend the same amount of money as before but get more work for their money. In the rare case where visual effects actually contribute to the quality of the film instead of being merely stupid, this could result in a better film. To the extent that you believe that the cinema has a role to play in our culture and civilization, then certainly having better films is good for all of us.

2. The tax exemptions and subsidies may result in more films.

The same argument as above but elaborated to include that some films which may not be completely financed and would not ordinarily be made, but under this system do get made either because the discount given to effects encourages the investors to believe that the film is less of a risk, or maybe just lowers the cost of the effects element sufficiently to make the entire budget achievable. In any case, under this scenario, we would get some films that otherwise we would not see at all under the free market, and if the films are good, then we all, theoretically, benefit.

3.Through adversity, character and moral fiber is enhanced.

How lucky are the poor for they will inherit the kingdom of heaven!   Of course they will be dead by then, as I understand the way this works, but still its something to look forward to.  They will have an opportunity before that to learn new skills and work in new industries!  This is America so anything could happen.  They could learn to clean out old sewage lines while their wife and children work in under-regulated garment production, showing great initiative by working 12 hours a day 7 days a week for less than minimum wage.  You know, like minority groups in this country have to do.  Their children could drop out of school and help support their parents by programming stupid web pages for the Internet.  Anything could happen because this is America and both initiative and hard work are ALWAYS rewarded, I hear.

4. Relentlessly competitive, they live by the sword and die by the sword

The companies that went under were not always the nicest companies, made up of decent human beings, or anything like that.  These are/were fairly vicious competitors in a field that shows or showed no mercy.  So they got outmaneuvered and destroyed by structural elements beyond their control, but some of that is their responsibility for failing to deal with the political issues.  We should not weep bitter tears for them.  These companies were for the most part not centers of idealism, good will or progressive anything.     Most of them were snake pits of politics to say the least.    

5. The government subsidies may lead to a more stable industry.

Everyone knows that visual effects companies are (or were) flaky.  The studios would brag about how they put their subcontractors out of business.  So why not just use companies that are supported by other people's tax dollars or supported by large corporations?   These companies are likely to be more reliable and they will complain less than the whiny locals.

6. Failure to organize was a strategic mistake and you lost.

The failure of the digital artists to organize and stand up for their rights,  to get the government to pay attention to them the way their British, N. Zealand and Canadian comrades were able to, led inevitably to the doom of the American worker in this industry. See what "not making waves" gets you. To this day the American worker, the so-called "digital artist", still have not organized.  Of course, at this point getting organized probably would not help, but it couldn't hurt.  Compromised, confused,  and unwilling to do the right thing, so now they suffer what the "free market", quote end quote, under Mercantilism (I mean Globalization, excuse me, I must have forgotten), buys them: a one way trip to the unemployment line. (1)

7. Why not emigrate ?

Why not apply for a junior position in England? Sell your house, leave your kids, or uproot them from school, live in a shared, shitty apartment in London.  After spending 20 years of your life working your way up in the field, you are now unemployed and unemployable in an industry that arguably you helped invent.   Why not apply?  What do you have to lose?  You might get the job. Maybe. Probably not, though.

So what is the problem here? Maybe no problem at all. The "free market" (wink wink) just has winners and losers and overall maybe the industry is stronger and the films are better. After all, the government of those three countries are pouring big money into it, putting their wallets where their mouth is so to speak. So if the US of A fails to respond and it screws the little guy, who cares? The big film companies still make money, more money than ever in fact, and if it is at the expense of the worker or of the people who invented the field, well in America that is just too bad.

In Hearts of Darkness by Joseph Conrad, our narrator says to himself, "He wanted no more than justice. No more than justice!"

Grow up, you're in Hollywood now, and this is what we call justice in this town.

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The previous posts in this series are at

Part one: Vast Government Subsidies are as American as Apple Pie
Part two: Recent Events in International Finance and Visual Effects

The Roman Province of Judea

http://en.wikipedia.org/wiki/Judea_(Roman_province)

Always Look on the Bright Side of Life

http://www.youtube.com/watch?v=SJUhlRoBL8M

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Notes:

1. A corollary to this is the failure of "magical thinking".  I have had 20 year professionals in the field tell me with a straight face that studios were going to start giving points of their films to visual effects studios "just because".   Thats just crazy, completely disconnected from reality.  Thats my point, the so called digital artists here, who along with the local production companies are now unemployed, are guilty of the worst kind of magical thinking.

Revised 1/12/2014

Recent Events in International Finance and Visual Effects

This is part two of a series on recent events in the area of international finance and government subsidies that affect the business of visual effects.   This process has been going on for at least 15 years and it has severely affected the existence and survival of visual effects companies.  The events that I describe here, some of them a continuation of older policies and some of them new initiatives, will have a structural impact on the visual effects industry in the world for years to come.

It is probably helpful to recall that it is only since the early 1980's that visual effects has been significant enough to attract government attention.  It was Star Wars (1978) that started the process, but it was sometime in the mid-1980's that the scale of the industry started to increase.  It was the tsunami of shit that came from the digital take-over of visual effects in the early 1990's that increased the scope of visual effects and trendiness thereof such that this industry was seen as a likely subject of tax exemptions and subsidies to increase and control employment within a national film community.  Keep in mind, that at various times over the last 15 years, there have been thousands of people paid roughly $100K / year working in this industry.   Perhaps as many as 5-7 thousand people, although this number is not formally known to the best of my knowledge, and it includes to some extent the people who were working in "feature length computer animation" as distinct from visual effects.  Thus, the real numbers are probably not as high as suggested here, but are very substantial.  We are talking about 1000's of people in the Los Angeles and San Francisco area who have lost their jobs as a result of these subsidies.

So keep in mind as you read about these events that the story did not begin this year, but that all of these events probably have a background and history that I know nothing, or very little, about.   Also, we are relying on the popular press to describe these events and so we can be sure that the information is at best incomplete, if not entirely misleading.

All of these events described below have had or will have a very negative impact on the existence and future of visual effects in this country.  However, every silver lining has a cloud and in another post in this series, I will go over some of the reasons that these subsidies and tax allowances can be seen in a positive light, as long as you have no intention of working in the field in America or to make a living here.  Only a very few people in this country should be expected to work unless they are a visual effects supervisor, if then.

1.  The European Union extends rules on subsidies

The European Union has decided to extend and expand their rules on subsidizing domestic film production. Now up to 50% of a film may be financed by that government. Governments may require that 50 to 80 percent of the subsidized amount be spent within the country. A few months ago, France threatened to boycott talks between the US and the EU until this sector was exempted from the negotiations. In other words, they will not permit discussions with the United States in this area. How that boycott fits in with other international trade agreements on economic subsidies will require more investigation.

Read more:

EU Pleases France, Widens Film Subsidy Rules

Film Subsidies Save as Europe Backs Co-Production Friendly Regulations

2. The UK Special Effects Industry gets a tax relief plan

The UK Government has agreed to change the rules to make it easier for American producers to receive tax credit for work done in the UK. I don't believe these are new subsidies per se, but I think it addresses the issues whereby certain producers were not qualifying for the credits even though they were doing some of the work in the UK. The article in the Guardian seems to think that it is primarily the visual effects sector that will benefit.  The amount of rebate seems to be about 25% reduction in taxes for eligible projects, so the kind of numbers we are talking about here are significant.  See

The Guardian: UK's Special Effects Industry Cheered by Tax Relief Plan

3. Jim Cameron receives large New Zealand subsidy for 'Avatar 2 and 3', will do all visual effects work in New Zealand

The Avatar films are huge and would normally be broken up among many facilities. But now that New Zealand has put in a large chunk of cash, both films in their entirety will have their effects done at WETA in New Zealand, at least as large a project as Lord of The Rings was for them.

Read more here:

NY Times: New Zealand Increases Incentives for 'Avatar' Sequels

Article in the Mirror about Avatar Financing

To these events we need to recall that (a) the ongoing Canadian rebates for work done in their country, up to 40% of the amount spent, (b) Other countries such as India and China have made substantial efforts in this area although not formal subsidies to the best of my knowledge (India has very liberal "intern" laws that allows entire crews to be hired and not paid in order to "get the experience"), China has set up a 2,500 person 3D studio in Beijing in order to educate their own workers), (c) special subsidies by the New Zealand government to the Peter Jackson projects, all of which are major visual effects projects done at WETA in New Zealand.

From the point of view of a film producer, this is all good.  Talking some innocent investor out of their money to help finance a film, especially when they get nothing in return (e.g. no points in the film), is part of the Producer's job.  If New Zealand wants to give Mr. Cameron 500 million dollars over 6 years (or whatever the amount will be) why not ?

These events, which all represent long term structural changes to the "free market", means that in the fiercely competitive visual effects industry, any company that lacks one or more of these advantages will not be able to compete.   Which is exactly what we see today.   Asylum, Rhythm and Hues, VIFX/Video Image, The Orphanage, most of Sony Imageworks not to mention many other smaller companies have gone away.   Others, such as Digital Domain and Tippet, are clearly marginal.

ILM is a bit of a mystery to me.  They seem to be hanging in there, and of course they have the new Star Wars films from their parent company, Disney.

Here are some conclusions and questions:

1. The collapse of visual effects in this country is a result of structural changes in the international community which are beyond the ability of any company to deal with.  

2. This collapse has resulted in the unemployment of thousands of people on the West Coast, some of whom have moved to other industries, some have gotten jobs overseas if they could.

3. You should expect this process to continue with more visual effects companies in this country going out of business or moving overseas.

4. Any discussion of unemployment or the "business model being broken" that does not take into account the primary cause of government subsidies and tax exemptions is worthless.

5. Globalization is just Mercantilism by another name.  Our government could do something about this if they cared, but they do not care.

For those of you who believe that there is nothing our country could do to change this situation, please take the time to read any economic history of the last few hundred of years.  There are many things that countries can do in these circumstances, if they care to.

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1. In the early days of computer animation, many of us were not aware that "computer animation" and "visual effects" were completely different industries.  To us it looked nearly the same thing with a tremendous overlap of technologies and skills.  Well, yes and no, but mostly no.   I will write a post on the issues here at some point.  They are not subtle and its an example of how naive some of us were.

Vast Government Subsidies Are as American as Apple Pie

[Do not forget that the VFX Bake Off will be Jan 9 at the usual place and the usual time].

There has been a lot of discussion recently about various government subsidies and tax incentives to filmmakers who do certain kinds of production or post-production work in that country. The country that offers such benefits is in effect co-financing a film with their tax dollars, and in return, sees employment and other benefits brought to a very prestigious industry in their country that might not otherwise be able to compete internationally.

As always, in matters of this type, subsidies are not the sole cause of the situation. None of this would really happen if the industries in the subsidized countries did not demonstrate skill in the areas involved. In many cases, such as the case of the UK and London, there is a long-standing community there that is highly esteemed. Nevertheless, that industry is greatly nurtured and supported by their government's actions on their behalf.

Furthermore, let us not be naive.  This did not just happen.  The local industries have been working with their respective governments to get these advantages.  And can we perhaps suspect that producers and studios have also used their persuasive ways to encourage these governments to shower their beneficence upon them?  Yes, of course they have.  That's their job.  (2)

In the last month or so, three major events have occurred that will likely determine the fate of the motion picture visual effects industries in various nations for the better part of the upcoming decade. All three events are structural and examples of how governments manipulate trade and industry in their perceived national interest.  This is something we, the USA, does whenever it is convenient for us to do so, a topic I will expound upon in an upcoming post.  (1)

The net result over the medium term is that the American effects industry will continue to be destroyed, and that work will pass to three other nations which will develop the technology, employ the people, receive the money, the awards and the careers that come with it.

The issues involved in this matter are far too complicated to put in a single blog post at this time. The best I can do, with my other responsibilities, is to break it into about 5 posts on various topics in this larger subject. The topics will include (a) what has just happened that will set the stage for the next decade, (b) what the effect the actions will have on the domestic visual effects industry, (c) some of the history of international trade and preferential subsidies and other means and (d) the argument will be made that change will only be possible by organizing and working within the political system that exists in this country.

Failure to organize and express our interests politically, which is the current state of things, will result in the destruction of the American industry. Actually that destruction is nearly complete as it is, so the best that could be affected is perhaps a renaissance of those industries.

Without political action, there is not a prayer of success.

Next: Three recent events

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1. But if you want a taste of it, see to what extent our government is involved in the creation and current success of the aerospace industry.  This is not subtle.

2. Their job, generally speaking, is to make money by making entertainment product.  They make money a number of ways, but one way is to lower the costs of any given production.  If someone wants to give money, why not?

A More Personal and Analog Approach to Computer Art

Those of us who worked to create a new art form(s) with computers have been gratified by some of the progress in the creation of computer generated art. But we must also acknowledge that the process of exploration has been uneven, with some areas going from triumph to triumph, and others lying neglected and underappreciated. Sure, it is easy to be enthusiastic about vast expense paid to create impossibly stupid movies with computers which are sequels to impossibly stupid movies that make a half a billion dollars.   Indeed, how could we not celebrate them as clearly they are the very highest form of art that our society could aspire to. And this is shown in the most sincere way we prove these things: by success at generating commerce. Without commerce, some would say, there is no real art.

It is easy to celebrate a film and a director who publically dismisses as irrelevant the technologists and artists who made his lead character of his film, in this case a tiger. A director who laughs at them in their misery and impoverishment. It is the fate of these so-called digital artists to suffer as they are worthless scum and anyone can be hired off the street and be trained to do their job. In fact governments spend hundreds of millions of dollars to impoverish and destroy their places of employment so that they may have the glamour of computer animation facilities in their own country. That is only natural and correct. (1)

Since we must acknowledge that doing computer animation as it was traditionally performed is a failure in this country, with a few exceptions, it is time I think to reexamine our roots and look at other forms of expression with computers. For example, a friend of mine, Tom Brigham, sent me an interesting youtube video of an unknown artist (unknown to me) doing an art experiment by applying the power of a neon sign transformer to a former LCD television. Thus the artist experiments with the interface between the analog represented by the voltage from the transformer, with the digital, as represented by the cracked LCD display, in unexpected and creative ways.

All potential practitioners of this process are reminded to be very careful with those high voltage logic probes.

Although the final work is not a success, the process demonstrated by the artist clearly has potential and I hope that many will also experiment with creating new art in this way. Of course, I hope they are very careful with the power transformers, and avoid death by electrocution, which would be unpleasant.

LCD TV vs Neon Sign Transformer

http://www.youtube.com/watch?v=e4VypcXwHLg

Ed Systems on Youtube

http://www.youtube.com/user/Aussie50/featured

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1. Examples of such countries include Canada, the UK, Taiwan, the People's Republic of China and New Zealand.

modified 12/5/2013

VFX, The World Trade Organization and Actionable Subsidies

[in progress]

[Ok Kids, Global Wahrman will now try to dig into the reality of the subsidies and see what the real numbers are, at least up to a point... so take whatever numbers you read here with a grain of salt...]

In a previous post, I itemized the many factors that have lead to the disaster that is computer animation and visual effects in this country.

See The Train Wreck that is Computer Animation Production: A Postmortem

Some of the issues that have caused this situation are fundamental and are unlikely to change in any significant way. For example, to change the business model of the visual effects facility is a noble goal, and has in a certain sense occurred from time to time, but it is very difficult and usually quite temporary. Nor are we likely to see our government do anything about globalization: our govenment gets off on and profits by impoverishing Americans by sending their work overseas. That isnt going to change.

On the other hand, our government belongs to trade organizations designed to see that such things as subsidies from a government to its local industry do not occur. Of course the reality is that they occur all the time, and as an example of this, see the section below about subsidies in Japan. (1)

For those of you who are not up to date on this, here is a fast review of how the subsidies supposedly works.  If you, the filmmaker spends $1.00 in Canada on making your movie, the Canadian government will write you a check at the beginning of production for $0.60. So if you spend $10,000,000, the government will write you a check for $6,000,000. (3)  And in return you actually have to spend that $10,000,000 on certain things in Canada, and there are some restrictions on these things. But in particular, you can use it to buy visual effects as long as most of the people working on those visual effects are either Canadian citizens, or are residents in Canada eligible to work (easy to arrange), and of course the FX company must be in Canada.

Thats a 60% discount. What producer could resist that? The answer is: none. So they take the work to Canada, which in this case usually means Vancouver. There is a similar deal in England, and the work goes to London. In both cases, Vancouver and London, there is a robust and experienced community of companies and workers who are happy and ready to do the work.

There are a few other wrinkles on this situation. There are special specific case subsidies in New Zealand involving WETA and Peter Jackson. And there are other deals in various parts of the world.

The end result has been for American company after company to be unable to compete and go out of business. From the Orphanage, to Asylum, to Digital Domain, to Rhythm and Hues (2), they have gone out of business and when they did, they cited subsidies as a primary cause.

So what is a subsidy? What exactly defines a subsidy?

According to the World Trade Organization, a subsidy is:

Definition of Subsidy

Unlike the Tokyo Round Subsidies Code, the WTO SCM Agreement contains a definition of the term “subsidy”. The definition contains three basic elements: (i) a financial contribution (ii) by a government or any public body within the territory of a Member (iii) which confers a benefit. All three of these elements must be satisfied in order for a subsidy to exist.

The concept of “financial contribution” was included in the SCM Agreement only after a protracted negotiation. Some Members argued that there could be no subsidy unless there was a charge on the public account. Other Members considered that forms of government intervention that did not involve an expense to the government nevertheless distorted competition and should thus be considered to be subsidies. The SCM Agreement basically adopted the former approach. The Agreement requires a financial contribution and contains a list of the types of measures that represent a financial contribution, e.g., grants, loans, equity infusions, loan guarantees, fiscal incentives, the provision of goods or services, the purchase of goods.

There is a concept known as an "actionable subsidy", and an "actionable subsidy" has what are known as "adverse effects".

Article 5

Adverse Effects

No member should cause, through the use of any subsidy referred to in paragraphs 1 and 2 of Article 1, adverse effects to the interests of other members, i.e.

(a) injury to the domestic industry of another member,
(b) (...)(c) serious prejudice to the industry of another member.

So now we know what is a subsidy, and furthermore what is an actionable subsidy. And I think that the argument could be made that the subsidies that are described above are actionable. So what happens next? Well, next, you have to convince your government that they wish to discuss this matter with the WTO and work through the dispute process. You as an individual, and a trade group or any non-government organization can not do this. Only governments can do this. And all parties must be signatories of the WTO. Well it turns out that Canada, the UK and the USA are signatories of the WTO.

So next, one contacts the State Department. Perhaps. Or perhaps, one contacts one's elected representative, and they contact the State Department. But what if your elected representative is in the pocket of the Studios, and they like the subsidies? That would be sticky, now wouldn't it?

WTO on Subsidies

http://www.wto.org/english/docs_e/legal_e/24-scm.pdf

The dispute process

http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp2_e.htm

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1. The following is from an introduction of an article in Foreign Affairs about subsidies in Japan. The entire essay can be found at the following link (subscription required).

http://www.foreignaffairs.com/articles/69120/herbert-m-bratter/government-subsidies-in-japan

Here is the introduction to the article:

GOVERNMENT subsidies have been a consistent feature of Japanese practice since the country emerged from the feudal system in the eighteen-sixties. Japan's industrial history is singularly unlike that of other countries in that it is not marked by a policy of "laissez faire." Immediately following the restoration of 1867-8, the government set itself the task of industrializing the country, realizing that for this purpose it would have to convert into capitalists and factory workers a nation of knights and retainers. From the first, therefore, the government has exercised a paternal rôle in Japan's economic development. The result has been to make the Japanese people dependent upon the government to a degree unparalleled in other capitalist countries. "Almost any new industry," says a recent writer,[i] "so long as its promoters had some political friends, could secure exemption from taxation, even if no more direct form of subsidy could be obtained."

In starting modern industries it was the government's intention to turn them over to private management and ownership as soon as possible, retaining only a measure of control. In some cases this was done, but not in all. Not only has the government continued to manufacture steel, woolen cloth, and other articles, but it has reserved as state monopolies the trade in salt, tobacco, camphor and ginseng. For the rest, the "westernization" policy has created mammoth corporations, which -- despite their size -- still look to the government for sustenance. Indeed, the list of interests receiving aid in one form or another covers almost the entire field of Japanese economic life. Banking, industry, agriculture, labor, shipping, and shipbuilding, foreign trade, construction, and domestic commerce, all are in receipt of help; hardly any activity of importance or promise is not clamoring for it.

2.  When a production company goes out of business, it is usually due to a number of factors, not just one.  However, in all the cases listed here, foreign subsidies were recognized and publicly stated to be one of the causes, if not a primary cause, of their demise.

3. Its hard to believe that the subsidy is so high, I admit it.  And I have never verified the numbers, but I am trying to now.   It must be less than the reported 60%, that is just too good, I admit it.